In the first decision ([2011] UKUT 144 AAC), Judge Mark held that it did not [we discussed that decision here NL].  It was a void agreement because EM’s dad clearly knew that she lacked capacity (citing Hart v O’Connor [1985] AC 1000).

However, in somewhat dramatic fashion, Judge Mark returned to the matter ([2012] UKUT 12 (AAC) – not on BAILI yet but we have seen the judgment thanks to a friend of the blog)  in accordance with Rule 45(1)(a), Tribunal Procedure (Upper Tribunal) Rules 2008, which enabled him to re-open the decision if he had overlooked a legislative provision or binding authority which could have a material effect on the decision.  At this hearing EM brought an entirely new ground to the table, so to speak: contracts for necessaries, either under section 7, Mental Capacity Act 1995 or the common law position as exemplified by In Re Rhodes (1890) 44 Ch D 94.  And he also had the redoubtable Nathalie Lieven QC and David Blundell acting for EM (presumably pro bono, although this isn’t stated).

Although Judge Mark was in some doubt as to whether section 7 covered this matter (is the provision of accommodation “goods and services”?), he held rightly that the common law would cover this matter if the provision of this accommodation was a necessary.  Wychavon argued that it wasn’t necessary because EM had previously lived in the garage and could do so again; but, as Judge Mark pointed out, that flew in the face of the evidence which had been accepted by the judge in the first tier tribunal and was in some respects uncontested.

As Judge Mark points out, HB is not only payable where a person is liable for rent but in respect of payments for the dwelling which is occupied as a home, and EM was so liable.  Wychavon submitted that such matters were best dealt with through the Court of Protection.  Judge Mark agreed but was also right in saying that such applications take many months and, pending that application, a person without capacity should not be left without necessaries.

There is a parting salvo because it was clear that the issue here was not between EM and Wychavon but between Wychavon and Worcestershire CC, which had effectively passed the matter on: “It is very unfortunate if that is the case, and if this series of appeals at public expense has been made necessary because of arguments between different authorities as to from whose budget essential provision should be made”.

This is a decision of the Supreme Court. It considers the issue of whether deductions in respect of Social Fund Loan repayments and overpaid benefits can continue to be made after the making of a DRO during the moratorium period of 1 year after which time the debt will be written off. It also tidies up the existing law and introduces coherence which both parties sought.

Mrs. Payne had received a Social Fund loan of £843 in September 2007. In August 2009 she obtained a DRO listing the SF loan as a qualifying loan. On being informed of this the Secretary of State started to make deductions. Mrs. Cooper was determined to have been overpaid benefit and in December 2009 the Sec of State began making deductions from her ongoing benefit entitlement. In January 2010 she obtained a DRO listing the overpayment as a qualifying debt. The Sec of State continued to recover the overpayment.

The Supreme Court held that the Secretary of State for Work and Pensions cannot recoup loans and overpayments during the moratorium of a Debt Relief Order. (This is for the 1 year period after a DRO has been made). After that time the debt is written off for good.

The judgments of Cranston J in the High Court and the Court of Appeal were upheld. Further – the Supreme Court ruled that recovery of overpayments and Social Fund Loans from debtors should be brought into line. Henceforth bankruptcies shall not be treated differently from Debt Relief Orders. The cases of R V Secretary of State for Social Security ex p Taylor and Chapman [1997] BPIR 505 where it was held that deductions can continue to be made between the making of a bankruptcy order and the bankrupt’s discharge from bankruptcy were said to be wrongly decided. The case of R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327 [2008] 1 WLR 564 where it was held that once a bankrupt is discharged the liability to repay the Secretary of State is also discharged was said to be rightly decided.

The headline is that just shy of 800,000 properties nationally (including Scotland) will cease to be affordable, though there is considerable variation across areas and even across London boroughs. There is a projected national shortfall for the first time between HB claimants in the private sector and the number of affordable properties on the market.

Some of the results are very disturbing. Westminster has a projected shortfall of some 5,300 properties, Newham some 6,300 and Enfield some 12,000. Merseyside is short of 9,000 affordable properties and Birmingham 11,500.

I presume that this is based on existing rents. If landlords do reduce rents – as devoutly wished by the DCLG – then of course the picture will change. However, in areas of high demand (and for rented accommodation that includes much of the country) it seems unlikely that this will happen. Whatever happens, the next 12 months at least are going to be very difficult for a lot of people.

A new proposal, announced by the eminently sane and reasonable Councillor Phillipa Roe, is that from April 2013, Westminster are to maintain a naughty and nice list and to use it for awarding or withholding Council Tax Benefit.

we believe that potentially linking council tax benefit to certain levels of behaviour is a sensible and fair way forward that rewards those that play an active part in their community whilst cracking down on those that misbehave or break the law

Yes, they’ll know if you’ve been bad or good, so be good for goodness sake.

Quite where the funds to maintain such a list would come from is not clear. One suspects funding limitations would militate against checking it twice. No pouting now!

In SS, the issue arose because the first tier tribunal signally failed to approach the proceedings in the correct way in the absence of the Claimant.  It simply rubber-stamped the decision of the local authority without exercising its inquisitorial function properly or at all.  As Wikeley J pithily observed,

The First-tier Tribunal appears to have lost sight of those basic principles [concerning revision and supersession decisions] in this case.  I am not convinced that the local authority’s staff ever had proper sight of them.  The tribunal simply adopted wholesale the summary of facts as presented by the local authority’s decision maker …, as being “not … facts in dispute”.  Yet they clearly were in dispute in several important respects.

The disputes were substantial and material from the Appellant’s perspective and the local authority’s case had been “confused from the outset” ([14]) and actually, as the facts suggest, got worse with decision-making processes which were “at best obscure” ([27]).  Wikeley J remitted the matter back to a different first tier tribunal, in the absence of full evidence enabling him to make a decision there and then, but with the ringing words that, where the decision-making process has been so far defective or non-existent that there has never been a valid basis for a determination against the Appellant, in an extreme case the whole process can be held to be abortive and the appeal summarily allowed.

In MB, the matter was slightly more complicated because of the underlying allegations of fraud on the part of the Appellant, but the issues are interesting and important.  In essence, the Appellant was the legal owner of a property in Ireland and the first tier tribunal had found that the ownership of that property placed her outside the capital rules for entitlement to HB.  They had done so, however, without considering the laws of Ireland regarding beneficial ownership, or indeed without really applying any law about beneficial ownership as far as I could see it.  MB, who began as a litigant in person and was refused leave to appeal as such, was subsequently granted permission and was successful after the intervention of the Free Representation Unit, and it is right to point out that she was represented by Giles Robertson (FRU’s Treasurer), who did (by the account of Wikeley J, for it is he again) a fantastic job.

Mr Robertson demonstrated that the law on beneficial ownership was different in Ireland to England and Wales, and that it was unclear whether MB had any or what entitlement to the property in equity.  The key point, though, was that it was Irish law which was required to be applied in the circumstances.  As regards whether her interest was worth more than £25k, the first tier tribunal had also failed to apply Reg 48, regarding the valuation of capital held outside the UK.  He was also successful on another ground which was that the first tier tribunal had simply accepted statements as to MB’s income from two “accountants”, although that evidence was suggested by MB to have been provided for different purposes (to get a tenancy), without considering the contrary evidence of MB herself.  Although Wikeley J had regarded this submission as “unattrative”, Mr Robertson made the (wonderful) point that the argument was “advanced not because of its beauty but because of its truth” ([47]; it’s worth reporting that just for the sake of its brilliance).  The first tier tribunal hadn’t given any reasoning as to why it supported those statements over MB’s and was, therefore, flawed.

Mr Robertson was, however, unsuccessful on an evidential point of significance.  The local authority’s position was that MB was the legal owner of the Irish property; it was for her to disprove her entitlement.  Wikeley J agreed, although this required MB to prove a negative, ie non-ownership.  However, the point was that “a claimant must to the best of his or her ability give such information to the [local authority] as he reasonably can, in default of which a contrary inference can always be drawn” (Kerr v Department for Social Development [2004] UKHL 23, [63], Baroness Hale, citing CIS/5321/1998).

I’ll leave it there but suffice to say that things aren’t looking good for MB, and one might suspect that she will need to have Mr Robertson on speed dial.

And finally, we have MR, which is the odd one out being a decision of Paines J, but it seems to me to be of some significance in relation to resettlement of offenders.  The significant question was which rule was to be applied where the claimant had been recalled to prison to serve the remainder of a sentence and was on remand for another alleged offence.  Reg 7(13) of the HB rules applies to an absence which is unlikely to exceed 13 weeks where the person intends to return to the dwelling.  Reg 7(16)-(17) disapply that rule in the case of a person detained in custody on remand, where the rule is that the period of absence must not exceed 52 weeks.  Paines J held, after receiving submissions from the Secretary of State, that the latter rule applied to MR as he was unable to read the regulations in any other way ([20]).

This is a case which turns very much on its facts and as far as the Income Support claimant is concerned, turned out badly.

Mrs. M. was the divorced wife left in occupation of the matrimonial home. Her husband had first acquired the home without a mortgage for the sum of £69,950 in 1987. 15 years later he took out a borrowing charged on the property in the sum of £114,000. In the ancillary relief proceedings in 2007, Mrs M agreed to indemnify her husband against this borrowing for the transfer of the home to her. She was at that time claiming Income Support. She was unable to obtain the necessary re-finance to release her husband from his liability but continued paying the contractual monthly instalment.  In December 2008 she applied for this housing cost to be taken into account as part of her Income Support claim. The Decision Maker refused. Her appeal to the First Tier Tribunal (Social Entitlement Chamber) was allowed.  The Secretary of State’s appeal to the Upper Tribunal was refused. The Secretary of State appealed to the Court of Appeal.

Their decision turns on the interpretation of paragraph 15 of Schedule 3 of the Income Support (General) Regulations SI 1987/1967 (ISGR). This provides at (1) that:- “A loan qualifies under this paragraph [for housing costs] where the loan was taken out to defray monies applied for any of the following purposes – (a) acquiring an interest in the dwelling occupied as the home.” Paragraph 4(2)  of Schedule 3 provides that a loan which would otherwise qualify under paragraph 15 “shall not so qualify where the loan was incurred during the relevant period”. [ie. while the person was entitled to Income Support]. The Court of Appeal asked itself 2 questions:- Was the loan taken out to acquire an interest in the home or to pay off another loan that was taken out for that purpose and if so, was that loan incurred before 2003 (when Mrs. M. was not entitled to Income Support).

The Court found that the loan for which Mrs. M. was liable remained her husband’s loan. Therefore she had not taken it out to acquire an interest in the dwelling. They considered she had not taken it over either and that even if she had, this would be an unacceptable extension of the wording in paragraph 15(1). Further, they were not prepared to draw a distinction between “taking out” the loan and incurring the loan so that even if she had “succeeded in establishing that she had taken out the loan at the time of the ancillary relief proceedings ….. she would necessarily have incurred it whilst she was on income support and paragraph 4(2) would have disqualified her from benefit.”

This is one of the few cases on this area of law to have reached the Court of Appeal. For Mrs. M. reliance was placed on AH v Secretary of State for Work and Pensions [2010] UKUT 353 (AC) but the Court found that concerned refinancing permitted under 4(6) insofar as it does not exceed the original borrowing. In the Court’s words: “There is little even tangentially relevant authority on any of the issues that arise for our determination… “. 

The Observer noted that a debate in the Lords on the Welfare Reform Bill gave rise to the prospect of the return of the window tax.  The glorious proposals to cut the benefits of under-occupiers, so that they have to find a less commodious garrett, gives rise to the question of what constitutes a bedroom for the purposes of under-occupation. Lord Foulkes asked Lord Freud, the minister, whether “a boxroom with a skylight that did not open would be considered a bedroom”. Lord Freud replied that ”Boxrooms without opening windows normally would not count as bedrooms.”

As Lord Foulkes noted, for £20 per week, some tenants may be tempted “to board up their windows, as some owners used to do when there were window taxes”. Lord Freud, apparently not stroking a white cat at the time, replied that the Government would work to stop people taking such action. One can only presume that benefit fraud departments will be checking up on the presence of opening windows, hidden behind plasterboard and faded posters of David Cameron declaring the NHS to be safe in his hands.

Meanwhile Kenneth Clarke, a distinctly 18th Century figure himself, in the style of Gillray or perhaps Rowlandson, has tabled an amendment to the LASPO bill introducing the new crime of trespassing to a residential building with intent to live there. The amendment is here – NC26. Later the same day, the MoJ released the response to the consultation on changes to the law on squatting. The response is here [pdf].

The amendment covers trespass to a residential building, including a temporary or moveable structure, where residential is defined as “designed or adapted, before the time of entry, for use as a place to live”. The offence is not committed by anyone holding over at the end of a lease or licence, but, as David Smith noted, would potentially be committed by anyone who was invited to stay by someone holding over at the end of a lease or licence. The maximum penalty is 51 weeks, up from the current 6 months for breach of the Criminal Law Act 1977 provisions. There is also a fine of up to £5,000.

The definition of residential building should exclude the concerns that Gypsies and Travellers had about criminalising parking up in the environs of a building (car park, yard etc.) and this would not generally catch occupations by protestors or sit-ins by workers, unless part of the building was residential.

However, this remains a considerable extension of the law that had only criminalised a refusal to leave a property where it was effectively occupied already or was shortly to be.

The consultation response, which is supposed to justify this amendment, is a confused affair, right from Crispin Blunt’s foreword, where after noting that it is already an offence to continue to occupy someone’s home, he promotes the amendment in these terms “But the offence will provide greater protection in circumstances where the harm caused is the greatest – squatting in someone’s home. This behaviour is unacceptable and must be stopped”. Mr Blunt should perhaps have read the response first. In particular the parts pointing out that failure to enforce existing powers by the police was a problem reported in landlords/property owners responses, see Q.19. In addition delays in court timetables and in bailiffs’ appointments were raised by these respondents. This is, of course, a funding issue that is only going to get worse.

The Metropolitan Police, on behalf of ACPO, opposed any change to the current law, while admitting that, well, maybe a bit of training on CLA 1977 wouldn’t go amiss for officers.

The equality impact assessment accompanying the consultation response also concedes that, even after this whole exercise, the MoJ have no real idea about the scale of the problem, or how far it is a problem. They estimate between “200 to 2100 criminal squatting cases in residential property” per annum. That is a broad range, equating to ‘dunno’.

The equality impact assessment notes that, on the basis of the reports prepared for Crisis and others, the proposal would impact disproportionately on the young and the disabled. But, well, tough.

Rather touchingly, the Magistrates Association were particularly concerned about Girl Guides stranded on mountains in bad weather and sought to ensure that any proposals wouldn’t criminalise them for sheltering in a building without permission. The Mags were right to be concerned as  the MoJ acknowledge at page 37 that Girl Guides sheltering in a residential building will indeed be caught. Perhaps optimistically, the MoJ hopes that the property owner wouldn’t make a complaint in such circumstances, as the MoJ wasn’t willing to entertain a ‘reasonable excuse’ exemption. That certainly has the smack of the 18th Century, criminalising storm tossed children seeking shelter on the mountainside.

But as so often these days, Deterrence is the sole rationale. The fact that deterrence relies on enforcement, and there is nothing that suggests this would be enforced any more vigorously than s.7 CLA 1977, appears to have escaped our lawmakers. Concerns that a large proportion of squatters are homeless, that there is a shortage of housing and that there are some 700,000 properties left vacant in England are countered with:

Through the Homelessness Ministerial Working Group, the Department for Communities and Local Government, Ministry of Justice and Home Office will work together to ensure that any local enforcement against squatting is carried out in partnership with local homelessness services to mitigate against an associated increase in rough sleeping.

And

The Government wants to increase the number of empty homes that are brought back into use as a sustainable way of increasing the overall supply of housing, and to reduce the perception of neglect that can blight neighbourhoods. Reducing the number of empty homes will also help to reduce incidence of squatting. That is why we have announced £100m capital funding within the Affordable Homes programme to tackle problematic empty homes – that is properties that are likely to remain empty without extra direct financial assistance from government. This programme will deliver at least 3,300 affordable homes by March 2015, as well as engaging local communities in dealing with empty homes in their area.

So, 3,300 homes by 2015 – if that comes off. If the upper estimate of 2100 cases per year is right, that is 6300 people homeless by 2015. A shortfall of 3,000. Not, of course, counting the existing waiting millions.

Oh and there will be a housing strategy shortly.

Crisis and Squash are opposing the amendment as criminalising vulnerable homeless people. See here and here.

Maybe something more 19th Century might be appropriate to finish with. Doré, perhaps. After all, Network Rail did want squatting to railway viaduct arches criminalised in its response to the consultation.

In R(CPAG) v Secretary of State for Work and Pensions [2011] EWHC 2616 (Admin), CPAG challenged two of the new rules – relating to the maximum weekly caps, and the reduction of the maximum size in accommodation eligible for hb (from five to four bedrooms) – on the grounds that the first was ultra vires; the second that DWP had failed to fulfil his general equality obligations under the Race Relations Act 1976 and Sex Discrimination Act 1975; and third, that as regards both, the DWP had failed to comply with its general equality duty under the 1976 Act.  CPAG was unsuccessful on all grounds.

The evidence of the DWP was that the aim of the changes was to reduce public expenditure and to stem the tide in expenditure on HB, caused in part by increases in private sector rents (ed note – remember John Patten in 1987 saying that HB could “take the strain”?).  The particular reason for the changes was to reduce private sector HB cases and “remove some of the very high rates that have been payable in London”.  It was accepted that the measures under challenge were exclusively directed at London.

As regards the first ground, the basis for the challenge was that the caps were ultra vires because they countered the purposes of HB.    The purposes were set out by CPAG’s counsel in rather over-blown form, if I’m honest (which was in part the undoing of this ground), as “the statutory purpose of the housing benefit scheme is to contribute to rental costs in such a way that claimants are not made homeless through inability to pay their rent.  It follows that the amounts of housing benefit fixed under the scheme must be set at levels that enable the statutory purpose to be met.  Since rents vary across the country it also follows that the levels of benefit must be set by reference to local rents so that claimants can actually retain or secure accommodation that is or ought to be reasonably available to them” ([23]).  It was said that the new regs were against that purpose because the cap was set with regard to the overall affordability of HB; in some areas of central London, claimants are priced out; and national caps are inconsistent with the Broad Rental Market Area/Local Housing Allowance rules.  The caps were inconsistent with the statutory schemes.

Supperstone J disagreed fundamentally with the description of purpose: “The purpose of the scheme is to assist claimants with rent, while also protecting the public purse.” ([36])  The balance struck by the rules are not “designed to produce homelessness” and nor will ” require a radical deterioration in … a person’s residential circumstances” ([38]).  Section 122, Housing Act 1996 enables an order to be made which makes different provision for different/ areas/classes of case/cases but there is no requirement for such differences, and no express requirement for HB to be set at a level that fully covers any claimant’s actual housing costs in any area.

Grounds 2 and 3 were taken together as in sum they concern the (well-travelled) territory of “due regard” to the need to eliminate discrimination and promote equality on which we have commented previously (see, in particular, R(Baker) v SoS for Work and Pensions [2008] EWCA Civ 141 and R(Brown) and SoS for Work and Pensions [2008] EWHC 3158 (Admin), esp the six factors at [89]-[96]).  There then followed a discussion of the legislative process, including the original Equality Impact Assessment conducted by DWP, the Social Security Advisory Committee’s (condemnatory) consideration of the draft SIs and the government’s response, and noted that research has been commissioned on the impact of the measures with specific reference to the homeless, BME households, and families with children.

The key point made by CPAG was that the EIA was based on the Family resources Survey without explanation and that “Impact assessments must contain sufficient information to enable a public authority to show it has paid due regard to the duty and identify methods for mitigating or avoiding adverse impact” ([57]).  CPAG’s own assessment was based on a different dataset – the Annual Population Survey, which had a larger sample size and was more pinpoint in analysis of smaller groups within the population (ethnic minorities).  This dataset (and I make no apologies for the lengthy summary of the conclusions drawn from CPAG’s witness statement):

shows that any reforms to housing benefits that affect only large families with four or more children are therefore twice as likely to affect ethnic minority households than white British households.

7. It also shows that even if you correct for the over representation of ethnic minorities in the housing benefit claimant population (ethnic minorities make up 19% of households claiming housing benefit but are 14% of households at large), they are still more likely to be affected by the proposed 4 bedroom cap than White British households.  Ethnic minorities make up 19% of households claiming housing benefit, but 30% of households claimants with four or more children, who will most likely be affected by the cap.  Ethnic minority households claiming housing benefit are 1.6 times more likely than White British households who are claiming housing benefit to be affected by this cap.

The DWP disagreed that this dataset was better than the one it used because CPAG’s dataset was not designed with HB claimants in mind but was part of the labour force survey.  Their response to CPAG’s survey was that only 11 out of 960 LHA rates are affected

… and many areas of London, including areas with high concentrations of ethnic minority households, are untouched by the weekly caps.  It is not possible to say whether the areas of London affected by the caps are areas with the highest concentrations of ethnic minority households receiving Housing Benefit under Local Housing Allowance rules.  Moreover, the weekly caps have most impact (in terms of numbers) on one and two bedroom properties so, in this context, the size of the household is not a relevant factor.

They note that there was no robust data regarding BME claimants and neither CPAG nor their assessment “… has been able to quantify accurately the level of impact on ethnic minority groups”.  That seems to me to be a quite stunning concession of the adequacy of the data underpinning any form of impact assessment concerning equalities.  But they argued that there were mitigation tools, such as discretionary housing payments, support and advice, as well as a “stakeholder strategy and communications plan” ([67]).  As regards the discretionary housing payments, Counsel for CPAG (Martin Westgate, who did a really fantastic job here and overall) argued that Westminster Council had already commented that such payments would only cover a small number of affected households.

Supperstone J rejected these grounds as well.  In essence, the SoS “was well aware of his equality duties and paid specific regard to them”.  It was not the role of the court to decide between different datasets, which were technical decisions unless they were “unreasonable or perverse”.  Even so, DWP had proper regard to the relevant datasets and the equality impact assessment had sufficient information to discharge the duties ([75]).  Further the SoS had considered and responded to criticisms during the legislative process and did enough to have regard to the information in the assessments ([76]).   Supperstone J was “also satisfied that the Defendant was entitled on the basis of the information available to conclude that the measures ‘may’ impact on ethnic minority groups disproportionately” ([76]).

This may be one not to appeal (strategically) but it will be interesting to see whether CPAG do.  What the case does demonstrate is that, to the extent that the effects of the changes can be predicted, they are likely to have a disproportionate impact in certain areas and on certain groups in those areas, and all for a saving of £1 billion from a £22 billion hb bill.  Personally, I think it’s a disgrace, but the process doesn’t seem impeachable.

Forgive the length of this note, but this seems to be a significant case with potentially far-reaching ramifications.  The judgment of Cranston J (in my view) is mostly spot-on and hugely learned (see well below for an appreciation).  It will be interesting to see whether this case goes further – my insider information is less than clear on the prospects of an appeal.  For what it’s worth, my view is that an appeal would likely be unsuccessful but important in providing clearer lines about the fiduciary duty and capacity issues discussed below, as well as about the housing revenue account.

Background

LSVT of an entire stock poses many problems for local authorities and the transfer association after the transfer has taken place.  What seemed perfectly reasonable at the time of transfer can dissipate into acrimony.  There are many practical questions once transfer has taken place, not least of which is the mechanism and/or provider through which accommodation can be offered to vulnerable homeless applicants in satisfaction of duties under Part 7, Housing Act 1996.  In 2002/3, that problem was exacerbated by central government edicts about the use (or non-use) of bed and breakfast accommodation for families.  This is what faced Penwith DC and Restormel BC, in which anybody who has been to Penzance, St Austell or the Eden Project will know has a plenitude of b&b accommodation.  (As regards the former, I remember articles in the late, much lamented Roof magazine back in the early 1990s about problems between the LA and transfer HA.)

The arrangements

Fortunately, those authorities were approached by a private company, Charles Terence Estates Ltd (CTE) and its sister company, Providers of Accommodation and Support Limited (PAS).  The companies were offering to take over and/or do up accommodation which would be leased back to the local authority for use as accommodation for such households on a 25 year term with a break clause after 10 years.   They were also offering to provide move-on accommodation (on which more below).  There were some differences in approach by the different local authorities, Restormel jumped into the arrangement; Penwith appeared more circumspect at the outset with a pilot but the “pilot” was soon followed by the full agreement being put into place.  CTE were also given £350k by each of the councils.  The mechanism through which that £350k was given is important.  Restormel appear to have used their general powers to make a grant of the money either for the purchase and rehabilitation of the temporary accommodation or for the purchase and provision of move-on accommodation, although that accommodation was never provided.  Penwith paid the money by way of loan from its private sector renewal fund under its published policy, “homesafe”, although the proper forms were never completed (and an attempt at retrospective changes to the policy to accommodate it never formally completed), and the money was used to provide the temporary accommodation.  In both cases, the £350k was to be repaid by CTE (Restormel) or written off (Penwith) if the agreements lasted more than 10 years.  Penwith also made a grant of £750k to CTE drawn from its second homes council tax fund.

Now this summary does little justice to the jejeune approach of the councils to the use of their formal powers.  This is laid bare in the forensic judgment of Cranston J and bears reading by any local authority officer and member concerned with their proper roles.  In very brief summary, it was shambolic (misinformation, incorrect appreciation of the effect of the agreements on the statutory obligations [my favourites is the report to Penwith's resource committee which mentioned the Housing Grants and Construction Act 1996 even though this had been repealed in 2003 - others will found much of delight in the wreckage of these reports], and one could go on; the critique particularly of Penwith is at [87]-[88])).  What was driving the councils, though, was the concern about the escalating costs of b&b as well as the government targets.

Penwith rather belatedly reviewed the scheme by way of risk assessment, the Audit Commission became involved – amazingly, the District Auditor said that he was satisfied with the council’s approach but that it should have been more explicit about why it didn’t tender, should have referred to the relevant financial regs, and should have explained these points to the Members but that the reports “have been transparent and sufficient enough for members to ask relevant questions of the scheme”. Penwith also asked a consultant to prepare a report after concerns were raised by Members and officers.  The consultant “conducted an internal, and to my mind cursory” review which lead to an email of less than a page (!).  More of this below.

In anticipation of the shift to unitary status – hence Cornwall Council’s involvement – a report was commissioned on the relationship between CTE/PAS and Restormel/Penwith.  The reporter noted that Bournemouth, another council which had entered into similar relationships, had a break clause of three months: “Surely, wrote [the reviewer], one of the two councils’ auditors or lawyers would have questioned the length of the leases?” ([51]).

And now, here’s the rub: the costs of the leases of the properties entered into by the council.  How did they work them out?  They appear to have worked out the maximum amount of housing benefit payable, deducted an amount of around £50 per week, and that was it.  Thus, CTE got £120 pw for each of the properties grossed up to an annual figure.  The Penwith consultant’s review noted as follows:

Regarding the discrepancy between the £120 per week rent paid to CTE, and the £175 per week the council charged residents in the single person accommodation, i.e. £55, Mr Lee concluded that this was relatively straightforward because it was comparable to the management fee of £52 the council charged on private sector leases.  It was based on the estimated cost of agent’s fees, voids, bad debts, repairs and general housing services and its legality was not in doubt.  [47]

The issues

After Cornwall took over, it stopped paying the rents on the basis of its reviewer’s report.  There was another rather crucial issue – changes to HB regulations meant that the calculations of the rent might be out of whack and what was to be done if a household were not entitled to HB?  Amazingly, little thought had been given to this risk when the agreements were entered into by Penwith (if the word “jejeune” covers anything, it covers this!), although Restormel did have a provision.

In this action, CTE claimed arrears and the council defended on both private (mistake) and public law grounds (practically all of them).

Mistake

The defence of mistake was clearly a non-starter.  Everybody knew what they were doing, but Cornwall had a rather interesting proposition.  Penwith and Restormel had no housing revenue accounts (“HRA”) after their LSVTs, and the mistake was said to be that the agreements with CTE should have been run through an HRA as well as the fact that the residents would be eligible for HB to meet the rents for which they were liable.  Cranston J dismissed this defence on the basis that CTE had no knowledge of the HRA requirement, and Penwith/Restormel had not made a mistake: “None of the reports to the councils’ committees mention the HRA.  If there was any mistake it was attributable to the fault of the councils, who ought to have known about HRA requirements” ([56]).  As regards HB, the agreements were not predicated on the availability of HB and it was not sufficiently vital to avoid the contracts; indeed, even if an occupier was not eligible, Cornwall would have to find the rent from somewhere else in its budget.  These agreements were also commercial so reg 9(1) did not apply.

Public Law

On the public law grounds, the starting point (of course) is that burden is extremely high when a public authority is seeking to avoid a contract lawfully entered into on public law grounds.  The balance is between protecting commercial contracting and the policy that public bodies must act lawfully.  There were three grounds raised: capacity; fiduciary duties; and discretionary decision-making.  If you want the punch line now, then it’s that Penwith/Restormel were held to have breached their fiduciary duties.  But the rest of the judgment will be just as significant to LSVT local authorities concerned by the impact of this judgment (and there may well be quite a few of them).

Capacity

There were two points taken here: the first was about the HRA; the second was about the grants/loans.  On the first, the argument for Cornwall was that, although the councils clearly had the power to take the leases, the councils had to run the leases through their HRA – the argument was that rent cannot lawfully be paid if no HRA is kept, and an HRA is a prerequisite of the lawful exercise of powers to take leases over 10 years.  Cranston J’s position was that this argument was incorrect because the HRA does not operate at the level of individual transactions with a debit value as that value can be made good from elsewhere.  I’m not sure that I necessarily follow (ie agree with) that argument but the second point he made was that the leases were with CTE not individual tenants and entry into those leases did not require an HRA and the council’s subsequent use of the properties was not relevant to that exercise.  Thus, no HRA needed.  Again, I’m not convinced that one can unbundle the transaction in that way but a key point for future reference is as follows:

The fact that 25 year leases cannot be accounted for outside the HRA does not render performance of the contracts between CTE and Cornwall Council impossible, or different in quality to any degree.  It may simply mean that Cornwall Council must operate an HRA, and if necessary charge no more than local area reference rents. ([70], my emphasis)

As regards the grants and loans made to CTE, Penwith’s Homesafe loan to CTE of £350k was unlawful.  Not only had the proper procedures not been complied with but also CTE did not qualify for such a loan anyway.  Restormel was protected because the Cabinet Committee had authorised the grant.

Fiduciary duties

Cornwall had success here.  After a summary of the authorities (Bromley LBC v GLC [1983] 1 AC 768, the ‘fares fair’ case, and Hazell v Hammersmith and Fulham LBC [1992] 2 AC 1), Cranston J understood that local authorities have a fiduciary duty to their council tax payers which included a duty to deploy its financial resources to best advantage, not necessarily thriftlessly, but by balancing its duties to its taxpayers against its other duties.  There then followed a discussion of the open market value of these properties, an imponderable because (on CTE’s case) these were unlike “ordinary” private rentals, there were no comparables, and the level of HB personal subsidy was set at the standard rate which “should be treated as a carefully considered assessment of the amount which, in each area, it would reasonably be expected to cost to provide accommodation for this group” ([77]).

Cranston J disagreed, however, because “the crucial point is that the councils never had regard to what was the market rent for the various properties leased from CTE” (again !, [79]).  the rents had been fixed before the properties had been bought/developed and the figure arrived at was based on the maximum sum available to the councils through rent rebate subsidy: “the rent was formulaic, fixed even before the properties were identified and purchased.  The £120 figure was simply multiplied by the number of bed spaces to produce the weekly, and ultimately the yearly, rent for each property” ([79]).  In failing to have regard to the market rent, the councils had breached their fiduciary duties.

Discretionary decision-making

This ground concerned improper purposes, irrelevant considerations, failure to take into account relevant considerations, and irrationality.  Let me give a flavour of the claim on improper purposes because, in a way, it summarises the problems which the councils had unwittingly entered into (and also the irrelevant considerations):

The improper purposes were said to be to abuse of the housing benefit system by determining rents under the leases with CTE and under the agreements with residents by reference to housing benefit rates; to charge excessive rents to licensees; to pay excessive rents to CTE; to pay such rents to CTE notwithstanding the absence of any adjustment provision for housing benefit changes in the Penwith leases and a provision in the Restormel leases which is virtually worthless; and to pay such rents on the basis that they would contribute to financing move-on accommodation when there was no contractual obligation upon CTE to provide such accommodation and no provision for the repayment of rents if it were not provided. ([82])

It is important to note that these points were disposed of shortly by Cranston J as of no substance, although the provision of move-on accommodation was conceded by CTE: “Foolishly, neither Restormel nor Penwith made the provision of move on accommodation a contractual commitment on CTE’s part.  There was not even an incentive in the leases or funding agreements with CTE to live up to the aspiration it set itself.” ([84])  That absence of provision suggested that this was not a significant part of the bargain between the parties.  If you’ll forgive a summary of Cranston J’s view of this sub-ground, it is that the reports just about passed muster and all significant relevant matters had been taken into account.  Irrationality didn’t advance the case any further.

Outcome

The leases were of no effect and Cornwall had a restitutionary claim for repayment of the rents.  CTE defended that on the basis of the restitutionary defence of change of position (cue fond memories of being taught CoP by the late, great Peter Birks, who put up with my hangover state at his Thursday 9am classes; RIP).  CTE’s change of position defence was successful – they had acted in good faith and could not be taken to doubt the councils’ decision-making procedures which were of no interest to them; and it did not matter that CTE had changed its position before it received the monies.  The equitable outcome was this:

[S]since the councils have had the benefit they were supposed to under the terms of the leases it is proper that the level of rent payable in respect of Cornwall’s occupation should be the amount that was agreed.  As for the Penwith £350,000 loans, the equitable outcome is that CTE should repay them in due course in accordance with the terms and conditions of the relevant loan agreements. ([99])

Cranston J: An appreciation

Ross Cranston is a former academic and I would suggest to anybody with sufficient interest to read his magisterial tome, Legal Foundations of the Welfare State.  OK, he was involved with the Blair government as an MP and Solicitor General, but (in my view) he is one of the outstanding High Court Judges.  He certainly demonstrated that accolade in this case.  He weaves a comprehensible survey of basic legal principles with academic work (referring, for example, to the great Law and Administration by Carol Harlow and Rick Rawlings – one could say that’s the LSE connection, but I’m charitable), and deals with the almost impenetrable HRA provisions with aplomb (although I’m not totally convinced correctly).  The point about fiduciary duties is potentially far-reaching and may well cause a few LAs to be just a little concerned.

A person who is no longer working shall not cease to be treated as a worker for the purpose of paragraph (1)(b) if – (a) he is temporarily unable to work as the result of an illness or accident.

So, if you are otherwise ineligible and not a worker, but temporarily unable to work due to illness/incapacity, you are treated as a worker and, therefore, eligible.  In Samin v Westminster CC, Central London CC (July 2011), Mr Samin worked for a short period, was then on JSA and was then treated for PTSD from 2007, from when he was unable to work.  Westminster found him not eligible, as we understand it, because he didn’t fall within Reg 6(2)(a) on the basis that he was not ill when he gave up work and because his illness was not temporary.  HHJ Mitchell quashed that decision, finding that Reg 6(2) operates when a person is no longer working, ie if the illness happens after the applicant lost his job and even if the illness was unrelated to his work; and that he was bound by the decision in FB v Secretary of State for Work  [2010] UKUT 447 (IAC) to find that temporary in para (a) meant not permanent.  This is the first time that FB has been applied to a homelessness eligibility decision, as foreshadowed by the suggestions in our note of its significance for housing and benefits.  But it’s “only” a County Court decision, so don’t get too excited.