England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CROWN OFFICE LIST
(Mr Justice Laws)

		Royal Courts of Justice
		24th January 2000

1. MR. JUSTICE SCOTT BAKER: This is an appeal by permission of this court from a decision of Laws J (as he then was) on 14 December 1998. He refused the appellant judicial review of a decision of the South Ribble Borough Council and Housing Benefit Review Board ("the Review Board") of 3 February 1998. The Review Board had rejected the appellant's claim for housing benefit. Before the judge the appellant appeared in person. Before this court he has been represented by Mr. Watkinson.
2. The appellant's claim for housing benefit has something of a history. It was first made on 2 September 1994 in respect of Micklewood, Dean Lane, Samlesbury, Preston. He said in his claim that his claim for income support was being processed at the Blackburn office. The Council's housing benefit officer made a routine visit to the property which the appellant claimed to be renting for £575 per month. The officer suspected fraud and asked the Council's fraud investigation officer to investigate, which he did. On 19 September 1994 he interviewed the appellant and recommended that housing benefit be refused. On 18 October 1994 the appellant was told that his claim for housing benefit had been refused on the ground that he had made false representations to obtain it. The matter was further considered by the Council on 15 November 1994, who confirmed the refusal. There followed some correspondence from his solicitors, but then a long gap before he telephoned the Council in July 1995, wanting to know why his housing benefit had not been paid. It turned out that he had left the property in February 1995 but had neglected to tell the Council. He was told that his previous claim had been refused and that he had not appealed. In November 1995 he made a complaint to the Ombudsman who asked the Council for their comments. Included in the details of the complaint sent to the Council were documents suggesting that he was in receipt of income support during the relevant period, which the Council had not previously seen. Also on the four occasions that the Council had checked with the Benefits Agency, they had been told that the appellant was not receiving income support. By a letter of 30 January 1996 the Council was told that he was on income support during the relevant period. The Council therefore decided to review his claim, giving him with it a right of appeal. In those circumstances, the Ombudsman did not pursue the complaint. On 15 February 1996 his claim was reviewed on the basis that he had been on income support, but the claim was dismissed. The appellant appealed. He attended at the appeal and gave evidence but his appeal was rejected. That was on 2 May 1996. On 7 August 1996 he sought judicial review of that decision. On 4 July 1997 the decision was quashed by the High Court because the reasons that had been given at the appeal hearing were inadequate.
3. There followed a rehearing before a differently constituted Review Board on 3 February 1998. Once again the claim was rejected. There was a further application for judicial review. It is against the decision of Laws J, on that occasion refusing judicial review, that this appeal is made.
4. The Review Board's findings of fact were as follows:

"1. On 2 September 1994 Mr. B Hamilton lodged a claim for Housing and Council Tax Benefit in respect of Micklewood, Dean Lane, Samlesbury.

2. In his claim he indicated that he had lodged a claim for income support at the Blackburn Benefits Agency Office and that the claim was being processed.

3. Mr. B Hamilton also indicated in his claim that he had no bank or building society accounts or personal savings.

4. Having heard the evidence of the Council's Benefit Inquiry Unit the Board considers that Mr Hamilton's lifestyle was inconsistent with that of a benefit claimant.

5. The Board considers that Mr. Hamilton had obtained the tenancy by falsely representing himself to the landlord as a wealthy international businessman who was a doctor of engineering.

6. The Board considers that Mr Hamilton had resources which he had not declared to the Benefits Agency, thus rendering his claim for income support fraudulent.

7. The Council refused Housing and Council Tax Benefit on the grounds that Mr Hamilton was not entitled to benefit because he had assets which were undisclosed to the Benefits Agency."

5. The Board's reasons for refusing the appellant's request for housing benefit were as follows:

"1. The Board considers that Mr. B Hamilton's income support claim was invalid in that it had been obtained by fraudulent means. This in turn would render invalid his application for housing benefit.

2. The Board in particular takes account of Mr Hamilton's false statements to his landlord alleging that he was a doctor of engineering; his agreement to pay his rent by standing order and yet he subsequently denied he had a bank account; his high rent payments of £635 per month plus an initial cash advance of £1905 despite being on income support; and the large number of electrical products belonging to him and stored in the shed.

3. The Board considers that he has provided insufficient evidence in a number of respects. In particular with regard to the alleged loan he received from Graham Jones of £7,300. The Board considers he has provided insufficient evidence about how this money was advanced and whether such monies were declared to the Benefits Agency. In general the Board does not think that Mr Hamilton has provided enough evidence about his income; also that he has not provided evidence to substantiate his claim that he had no bank account."

6. The sole issue before the judge and before this court is whether it is open to a Housing Benefit Review Board to make a finding that the current award of income support on which a housing benefit claim is based is vitiated by fraud. Was the Review Board entitled to go behind the award of income support, on the basis that the award had been fraudulently obtained? If the Review Board is fixed with the award of income support, regardless of whether or not it was obtained by fraud, then it would make no difference whether or not the applicant had been fraudulent and, indeed, however obviously fraudulent he might have been.
7. I turn to the legislation. Section 130(1) of the Social Security Contributions and Benefits Act 1992 provides:

"A person is entitled to housing benefit if -

(a) he is liable to make payments in respect of a dwelling in Great Britain which he occupies as his home;

(b) there is an appropriate maximum housing benefit in his case; and

(c) either -

(i) he has no income or his income does not exceed the applicable amount."

8. It is unnecessary to read further. It was not disputed that the appellant complied with (a) and (b). Also it was common ground that, once it is shown that a claimant is in receipt of income support, he is, at any rate on the face of it, entitled to maximum housing benefit. Regulation 2 of the Housing Benefit (General) Regulations 1987 defines a person on income support as a person lawfully in receipt of income support.
9. Laws J held that the scheme of the legislation is such that claims for housing benefit are allowed in circumstances where the claimant lawfully fulfils the statutory criteria, i.e. for the purposes of this case the appellant must be lawfully in receipt of income support, and the definition should be read in that way. Income support obtained by fraud is not a lawful fulfilment of that criteria. Accordingly, the Review Board was right in concluding that the appellant was not entitled to housing benefit. It should be made clear that Laws J was using the word "lawfully" in the sense of not fraudulently or dishonestly. The contrary argument, as the judge pointed out, runs thus. Because receipt of income support is treated by the regulations as an axiom upon which entitlement to housing benefit arises, the Review Board, in administering the scheme, cannot go behind the axiom. That is for another court, tribunal or decision-making body to deal with. The reasoning underlying the way the respondent says the legislation works is that a claimant in receipt of income support, entitled to housing benefit, will already have had a detailed income and capital assessment for the purposes of ascertaining entitlement to income support. By definition, income support claimants have been assessed as having capital worth less than the relevant capital figure and income less than the applicable amount. So there is no need to carry out again the detailed assessment exercise of their income and capital to determine entitlement to housing benefit. But where fraud has underlain the income support assessment the reasoning no longer applies. The income support assessment is no longer a valid and reliable basis for the housing benefit claim. As Miss Stockley for the respondent points out, this is particularly so where fraud only becomes apparent after the award of income support.
10. Mr. Watkinson, in his persuasive argument on behalf of the appellant, accepts that the Review Board is not debarred from considering fraud in all cases, but only where there has already been an award of income support on which the entitlement to housing benefit depends. There might, for example, be an issue of fraud arising under section 130(1)(a) about the appellant's liability to make payments in respect of a house he occupies as his home. It would be appropriate for the Review Board to resolve that. On the face of it, it would seem to me to be odd if the Review Board, when considering entitlement to housing benefit, is entitled and has to consider fraud in some cases but not in others. If Mr. Watkinson's contentions are right, what should the Review Board do if it believes that the entitlement to income support was obtained by fraud? In an extreme case the applicant may have admitted it. In other cases the belief may be based on less strong grounds. The answer, says Mr Watkinson, is that the Board should refer the matter back to the Department of Social Security where the relevant inquiry can be made, followed, if needs be, by the appropriate appeal procedures. In the meantime, the difficulty is that, if Mr. Watkinson's argument is right, then the appellant is entitled to housing benefit and should be paid it.
11. Mr. Watkinson sought to get round this by invoking regulation 95(4A) of the 1987 Regulations. This provides:

"Where an authority has evidence (other than such evidence as has been considered by an adjudication officer) which raises a reasonable doubt as to the amount of a person's income or capital for the purposes of his entitlement to income support or an income based job seeker's allowance and as a consequence it gives rise to a question as to his entitlement to housing benefit, the authority may withhold payment of housing benefit in whole or in part pending the determination of the income support or an income based job seeker's allowance question by an adjudication officer and pending the authority's review under regulation 79."

12. This provision was not in the 1987 regulations as originally drawn but was introduced later. Being procedural, it has, argues Mr. Watkinson, retrospective effect. Since it was in force by February 1998, when the Review Board finally considered this case, it could have been utilized. But I accept Miss Stockley's submission that this provision is not directed towards fraud at all. It is directed to the coming into existence of fresh evidence as to the amount of an applicant's income or capital. It therefore seems to me that there is a real risk that, if the Review Board cannot consider fraud, but has to refer the question back to the Department of Social Security, payments of housing benefit may be paid in the meantime that will never be recovered. It is one thing to say that a man must repay what he has been paid as a consequence of his fraud. It is another to recover it in practice.
13. There was considerable reference during the argument to questions of over-payment. The judge drew attention to section 75 of the Act, which provides for recovery of any housing benefit determined in accordance with the regulations that has been paid in excess of entitlement. Regulation 98 of the 1987 Regulations defines an over-payment as an amount paid by way of housing benefit to which there was no entitlement under the regulations. Regulation 99 provides that any such over-payment shall be recoverable, save where the over- payment was caused by official error. Regulation 101 refers to the circumstances where an over-payment arises in consequence of a misrepresentation or a failure to disclose a material fact, whether fraudulent or otherwise, and indicates that such over-payment is recoverable from the person making the misrepresentation or failing to disclose the material fact. Sections 111A and 112 of the Social Security Administration Act 1992 creates statutory offences of making dishonest or false representations to obtain benefit, the former section being inserted into the Act in 1997 with the specific intention of combating benefit fraud. If the issue of fraud was not relevant to the Review Board's considerations, then an applicant would remain entitled to housing benefit even if he had committed a criminal offence in seeking to obtain it.
14. These provisions, in my judgment, show quite clearly that Parliament did not intend a recipient of housing benefit to profit from his fraud or misrepresentation. Also, if Mr. Watkinson's construction is correct, the appellant was entitled to the housing benefit under the regulations, and therefore by definition there was no over-payment and therefore nothing to be recovered.
15. The appellant relies on the decision of Kennedy J (as he then was) in R v Housing Benefits Review Board of Penwith District Council, ex parte Menear (1990) 24 HLR 115. That case concerned section 20(7) of the Social Security Act 1986 which was in identical terms to section 130 of the Social Security Contributions and Benefits Act 1992. The applicant was a 68 year old woman in poor health. In April 1989 her 79 year old friend moved in from nearby to look after her. She applied to the Department of Social Security for income support. This was refused on the grounds that the two of them were cohabiting. In December 1989 the decision was reversed, it being concluded that they were not cohabiting but living together for mutual support. Meanwhile the applicant applied for housing benefit, which was refused on the basis that they were an unmarried couple and that therefore the applicant had no separate entitlement to housing benefit. She sought judicial review of the decision on the basis that, because she was on income support, she satisfied section 20(7) of the Social Security Act 1986. She succeeded. The relevant submissions on her behalf were in summary as follows:

"1. When [she] applied for housing benefit she was on income support.

2. Her capital therefore had to be disregarded.

4. [she] satisfies the requirements of section 7(a) and section 7(b) and as she is on income support she must also satisfy the requirements of section 7(c)(i).

5. Therefore she is entitled to housing benefit at the maximum rate."

16. Her counsel accepted that if that was right there would be occasions when a local authority, responsible for the administration of housing benefit, would be fettered by a decision of the Department of Social Security in relation to income support, but submitted that that was not surprising for a number of reasons: (1) because in relation to income support there is a sophisticated adjudication system, with guidance available from a chief adjudication officer, and a statutory right of appeal to the Court of Appeal; (2) because housing benefit is heavily subsidized by the Department of Social Security; (3) because under Regulation 9(1) of the Housing Benefit Regulations 1985, which were the preceding regulations to those of 1987, where the Secretary of State certified a claimant to be entitled to supplementary benefit, that claimant had to be treated as eligible to receive housing benefit. So what was being submitted was in accordance with the pattern as it existed before the 1987 regulations came into effect. The judge added that, if there was no interlinking between the decisions in relation to income support and housing benefit, there might be curious results, and that to some extent interlinking was to be expected because they were two types of income related benefit that came into existence under the same statute. Admittedly, one was concerned primarily with income and the other with housing, but section 20(7)(c) spelt out that income was relevant to any inquiry as to the need for support in relation to housing. The judge therefore accepted the applicant's interpretation of the statute and concluded that the Review Board concerned itself with a question, the amount of capital of an assumed member of the applicant's family who was living with her, which should have been treated as hers and disregarded, which, in the circumstances, it was unnecessary to consider.
17. In my judgment, there is no doubting the correctness of the decision. There was no fraud in that case. The entitlement to income support was unimpeachable. That case is no authority for the proposition that a fraudulently obtained entitlement to income support carries with it an entitlement to housing benefit.
18. We were referred to a number of authorities dealing with the effect of fraud. In Lazarus Estates v Beasley [1956] 1 QB 702,712, Denning L.J. (as he then was) said this:
19. ""No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever."
20. Mr. Watkinson's response to this was that there is a good machinery for unravelling any fraud through the legislation dealing with income support, and that any person is entitled to apply for a review (see sections 25 and 26 of the Social Security Administration Act 1992). In summary, his case is (1) that, on a reading of the regulations without any implication of the word "lawful", the appellant was clearly entitled to housing benefit; (2) there is no necessity to imply the word "lawful" in order to make the regulations or the empowering Act work. We were referred to two other authorities with regard to the effect of fraud. Mr. Watkinson sought to distinguish both of these. Miss Stockley relied on the words of Lord Scarman in R v London Borough of Barnet, Ex parte Shah [1983] AC 309,343. He said:

"If a man's presence in a particular place or country is unlawful, eg in breach of the immigration laws, he cannot rely on his unlawful residence as constituting ordinary residence.... But even without this guidance, I would conclude that it was wrong in principle that a man could rely on his own unlawful act to secure an advantage which could have been obtained if he had acted lawfully."

21. This passage, argues Miss Stockley, is support for the proposition that it is wrong in principle to allow a person to rely on his own unlawful act to secure an advantage.
22. The other case was R v Secretary of State for the Home Department, ex parte Puttick [1981] 1 QB 767. The applicant in that case was known as as Astrid Proll. She wished to change his citizenship from German to British. While on bail for serious criminal offences in Germany, she came to this country using a false passport. On the basis of that passport she was given leave to enter. Then, by means of fraud and perjury and using the same false name, she married a bachelor called Puttick. Then she tried to obtain registration as a citizen of the United Kingdom. The Secretary of State refused. She sought judicial review of his decision. Her claim failed, notwithstanding her marriage was valid. Donaldson L.J. at page 775 cited Fry L.J. in Cleaver's case [1892] 1 QB 147,146:

"It appears to me that no system of jurisprudence can with reason include amongst the rights which it enforces rights directly resulting to the person asserting them from the crime of that person."

23. Then Lord Atkin in Beresford v Royal Insurance Co Ltd [1938] AC 586, 598:

"I think that the principle is that a man is not to be allowed to have recourse to a court of justice to claim a benefit from his crime whether under a contract or a gift. No doubt the rule pays regard to the fact that to hold otherwise would in some cases offer an inducement to crime or remove a restraint to crime, and that its effect is to act as a deterrent to crime. But apart from these considerations the absolute rule is that the courts will not recognise a benefit to a criminal from his crime."

24. Then Donaldson L.J. said at page 775H:

"Parliament can never have intended that a woman should be entitled to claim registration as a citizen of the United Kingdom and Colonies on the basis of a marriage achieved only by the commission of serious crime."

25. Forbes J, in a concurring judgment at page 777G:

"I therefore have no doubt that it was her fraud and forgery which directly obtained for her the entitlement she now seeks to enforce and that she cannot claim that entitlement without relying on her own criminality."

26. Mr. Watkinson sought to distinguish both these authorities. In Shah, he says that the issue was the meaning to be attributed to the expression "ordinary residence". Scarman LJ's words were not material to the decision. Also, there was no other vehicle for determining the meaning of "ordinary residence". In the present case there was another mechanism for investigating fraud. He makes the same point about the decision in Puttick, that there was no alternative route by which the appropriate result could be achieved.
27. Having considered these submissions and the authorities, my conclusion is as follows. There are two reasons why this appeal should fail. First, it accords both with commonsense and the intention and structure of the legislation, that where, as here, entitlement to housing benefit is dependent on receipt of income support, that income support must have been lawfully obtained; that is, lawfully in the sense of neither by fraud, nor dishonestly. Secondly, the principle apparent from cases such as Shah dictates that legislation should not be so construed as to enable a man to profit from his own fraud. I would therefore dismiss the appeal.
28. LORD JUSTICE ROBERT WALKER: I agree.
29. LORD JUSTICE HENRY: I also agree. The appeal will be dismissed.
30. Order: Appeal dismissed; order nisi against legal aid fund with nil contribution; legal aid taxation.
(Order not part of the judgment of the court)
PROCEEDINGS AFTER JUDGMENT
31. MISS STOCKLEY: I make an application for the respondent's costs of the appeal. It has been brought of his volition. There is no reason why the taxpayers should have to meet the costs of it.
32. LORD JUSTICE HENRY: Is the appellant legally aided? MISS STOCKLEY: I am asking for costs against the appellant.
33. LORD JUSTICE HENRY: Not from the Board?
34. MISS STOCKLEY: Yes, from the Legal Aid Board.
35. MR. WATKINSON: He is legally aided with a nil contribution. I would anticipate a section 18, in which case I would anticipate that your Lordships will make a determination as to liability.
36. LORD JUSTICE HENRY: We will determine it as nil.
37. MR. WATKINSON: An order nisi against the Legal Aid Board.
38. LORD JUSTICE HENRY: We will make the usual order nisi against the Legal Aid Board under section 18 of the Legal Aid Act 1988. Legal aid taxation.
39. MR. WATKINSON: When you come to revise the judgment, my Lord, when reading the definition of "persons on income support" in regulation 2, inserted the word "lawfully" in that definition. That is the point at issue. I ask that that be borne in mind when my Lord comes to revise the judgment.