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
ADMINISTRATIVE COURT
SIR GEORGE NEWMAN
CO/7684/2007

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/12/2008

Lord Justice Mummery :

Introductory

1. This appeal is about the purpose and scope of discretionary housing payments (DHPs). It is the first time that the courts have had to consider the operation of the DHP regime. The particular issue is whether local authorities may exercise their power to make DHPs by paying arrears of rent, if the applicant is currently in receipt of full housing benefit and council tax benefit.
2. We are grateful for the expert assistance of both counsel, who have guided the court through the dense details of subordinate legislation. In this judgment I shall attempt to explain as simply as possible how the DHP regime works in general and how it applies to this case.

Background

3. Since 18 October 2004 Ms Natasha Gargett has been an assured tenant of 7 McCormick House, St Martin's Estate, Tulse Hill, London SW2. Her landlord is the St Martin's Community Partnership (the landlord.) She is a 24 year old single mother with 5 children.
4. At the start of her tenancy her weekly rent was £82.57. The current weekly rent is £99.33. In April 2005 and April 2006 there were rent increases. Neither the landlord nor Ms Gargett informed the London Borough of Lambeth (the Council) of the increases. That is one of the reasons why she fell into arrears with the rent to the tune of almost £3,800. As the Council was not notified about the rent increases and did not have all the necessary information to calculate the correct amount of housing benefit, Ms Gargett has not had her full housing benefit entitlement. There was a shortfall between the increased rent, which she was liable to pay, and the housing benefit, which was in fact paid to the landlord. Hence her application to the Council for a DHP to cover the rent arrears. (I will avoid the word "maximum" in respect of housing benefit, as that word is used in the relevant legislation in a technical sense that is irrelevant to this appeal).
5. The landlord brought possession proceedings against Ms Gargett in the Lambeth County Court. A consent order was made suspending the possession order on terms. Ms Gargett is currently entitled to full housing benefit, which is paid directly to the landlord 4 weeks in arrears. She is also entitled to council tax benefit.
6. Ms Gargett's case is quite simply that, in addition to her entitlement to those benefits, she requires further financial assistance to meet "housing costs" in the form of her rent arrears. She contends that the Council has a discretion to make a DHP to her for that purpose. The Council asserts that it has no discretion to do so.
7. The dispute arose when, on 27 July 2007, she applied to the Council for a DHP. She asked for a lump sum to pay the rent arrears. It is common ground that DHPs are in the discretion of local authorities. The essence of the scheme is straightforward. DHPs are made out of an annual budget, which must not be exceeded. The payments may be made to applicants in receipt of housing benefit or council tax benefit or both. The local authority must consider whether the applicant needs "further assistance" with "housing costs," which include rent. The payments may be made to applicants over and above their usual housing and council tax benefits. They are usually paid 4 weekly at the same time as housing and council tax benefits. DHPs are, however, subject to limits on the amount payable. In particular the payment must not exceed the "eligible rent" as calculated in accordance with the detailed regulations. There are also specified circumstances in which DHPs are not payable at all.
8. By letter dated 21 August 2007 (referring to an earlier letter of 2 August which cannot be found), the Council refused Ms Gargett's application. It did so primarily on the ground that it had no discretion to make her a payment, as she was in receipt of full housing benefit and council tax benefit. (Other reasons given in the decision letter are no longer relevant to this appeal and I say no more about them.)
9. On 4 September 2007 Ms Gargett issued an application for judicial review of the Council's decision. She alleged that the Council had misdirected itself in construing the relevant regulations governing DHPs so as "to fetter its discretion" to make the DHP for which she had applied. It had failed to have regard to her circumstances.
10. On 8 April 2008 Sir George Newman, sitting as a Deputy High Court Judge, dismissed the application for judicial review. Permission to appeal was refused by him and by this court on a paper application
11. On a renewed application for permission to appeal on 8 July 2008 I adjourned the application to the full court with the appeal to follow immediately if permission is granted.
12. The application turns on the construction and application of the Discretionary Financial Assistance Regulations 2001 (the 2001 Regulations). The exercise of discretion is the subject of guidance, which was originally set out in a document produced by the Department of Social Security, the predecessor of the Department of Work & Pensions. Updated guidance was issued in March 2008

Construction of 2001 Regulations

13. The 2001 Regulations were made under powers conferred by section 69 of the Child Support, Pensions and Social Security Act 2000. They introduced DHPs by identifying the persons to whom DHPs may be made (Reg 2), specifying particular circumstances in which DHPs may not be made (Reg 3), limiting the amount of the DHP that may be made to the concept of "eligible rent", as used in the Housing Benefit Regulations (Reg 4), conferring a discretion as to the period for or in respect of which DHPs may be made (Reg 5) and prescribing the form, manner and procedure for claims (Reg 6).
14. The reader of this judgment does not need to know the detailed wording of each regulation. They are fully set out in the judgment below: [2008] EWHC 663 (Admin). For the purposes of this appeal only the precise wording of Regulations 2 and 4 is important. As for the other regulations it was clear by the close of the valuable discussions with counsel that the scope of the dispute had narrowed considerably. It is possible to state, with reasonable confidence and brevity, some preliminary propositions about the scope and purpose of the 2001 Regulations and how they operate in practice.

(1) The applicant must be a person who is entitled to housing benefit or council tax benefit or both. Ms Gargett satisfies that requirement of Regulation 2.

(2) Regulation 2(1)(b) also provides that applicants must appear to the Council "to require some further assistance (in addition to the benefits to which they are entitled), in order to meet housing costs." Thus DHPs are not simply benefits payments available to applicants at the Council's discretion. "Further assistance" presupposes that the applicant is already in receipt of other benefits and that "further" benefits are required to meet specified liabilities of the applicant i.e. "housing costs." The Council submits – and this is controversial – that as a matter of construction this clause requires that there should be a continuing shortfall between the benefits which the appellant is currently receiving and the housing costs which she is currently incurring (up to the eligible rent then applying).

(3) "Housing costs" are not defined by the 2001 Regulations. It is, however, rightly accepted by the Council that a claim for a DHP to pay the applicant's arrears of rent is not included in the lengthy list of liabilities that are expressly disallowed for further financial assistance by Regulation 3 (a) to (l). As a matter of ordinary English usage arrears of rent, carrying with them the risk of repossession, are capable of being "housing costs" within the 2001 Regulations.

(4) Under Regulation 5 the Council has a very wide discretion to restrict the period for or in respect of which DHPs may be made. It is accepted by the Council that that period may be either a past period or a future period. If it is for a past period, the DHP may take the form of a lump sum payment.

15. I now turn to regulation 4, as amended. It sets a limit on the amount of the DHP that may be made. Although the intended purpose of the Regulation is plain enough, it is not easy to take in its full effect on a first reading. This is not necessarily a failure on the part of the draughtsman. It is often easier to criticise the draughtsman with the benefit of hindsight than it is positively to improve upon his efforts to put complex instructions into plain language. The Regulation provides -

"4 The amount of a discretionary housing payment (if calculated as a weekly sum) shall not exceed, in a case where the need for further financial assistance arises as a consequence of the liability to make

(a) periodical payments in respect of the dwelling which a person occupies as his home, other than payments in respect of council tax, an amount equal to the amount of the aggregate of the payments specified in-

(i) regulation 12(1) of the Housing Benefit Regulations less the aggregate of the amounts referred to in regulations 12(3) (b)(i) to (iii) of those Regulations, calculated on a weekly basis in accordance with regulations 80 and 81 of those Regulations; or

(ii) regulation 12(1) of the Housing Benefit (State Pension Credit ) Regulations less the aggregate of the amounts referred to in regulations 12(3)(b)(i) to (iii) of those Regulations, calculated on a weekly basis in accordance with regulations 61 and 62 of those Regulations; or

(b) payments in respect of council tax, an amount equal to the weekly amount of council tax liability of that person calculated on a weekly basis."

16. That is a complicated sentence. In the copy of the regulation in the authorities bundle it is 16 lines long. Its subordinate clauses cross refer to the detail in other regulations dealing with Housing Benefit. I would not award it the top prize in a competition for Plain English. The best way to tackle this type of provision is the well tried technique of "divide and conquer." This task has been eased by common ground between counsel on a key point, which was in dispute below. It has made our task easier than the judge's was.
17. Mr Knafler, who is counsel for Ms Gargett, did not appear in the court below. He accepts that the limit imposed by Regulation 4 applies to a DHP whether it takes the form of a lump sum payment for the past, such as for rent arrears, or a weekly payment for the future. The contention that the words in parenthesis in the opening lines-"(if calculated as a weekly sum)"- meant that the limit only applied to DHPs paid as a weekly sum is not pursued. It is agreed that those words refer to the calculation of DHP, not to the payment of it.
18. In practice this means that, once the Council has exercised its wide discretion under Regulation 5 to determine the past or future period in respect of which a DHP may be restricted, that period must then be divided into weeks for the purpose of calculating the amount of the DHP as a weekly sum. The amount of the DHP so calculated must not exceed the amount which Regulation 4 then specified in a case where, as here, the need for further financial assistance arises as a consequence of the liability to make periodical payments in respect of a dwelling which a person occupies as his home. Ms Gargett's need arises in consequence of her liability to pay rent to her landlord for the accommodation occupied by her as her home.
19. The contentious issue is how to identify the limit, which the amount of a DHP so calculated must not exceed. The Council contends that the DHP discretion cannot be exercised by the Council to pay Ms Gargett's arrears of rent which have accumulated in the past, as she is now being paid full housing benefit and council tax.
20. In my judgment, the 2001 Regulations do not expressly place such a limit on the Council's discretion to pay DHPs. Nor, in my view, is it possible to construe Regulations 2(1)(b) and 4 to impose the limit for which the Council contends.
21. Let us take the remaining part of Regulation 4 in steps. The first step is to note that the amount which the DHP must not exceed is "an amount equal to the amount of the aggregate of the payments specified in regulation 12 (1) of the Housing Benefit Regulations."
22. The second step to go to the Housing Benefit Regulations 2006 in order to ascertain the amount of the aggregate of the payments specified in Regulation 12 (1). The relevant specified periodical payments which Ms Gargett is liable to make in respect of the dwelling which she occupies as her home include "payments of, or by way of, rent": see Regulation 12(1)(a) of the 2006 Regulations. That expression is wide enough to cover arrears of rent, even in a case where the rent increase has not been notified to the Council. Even if the rent increase has not been notified, the increased amount of rent is a payment which Ms Gargett was under a liability to make to the landlord under the terms of her tenancy agreement.
23. The third step is to note that the rental payments which Ms Gargett was liable to make are "Subject to the following provisions of this regulation" : see the opening words of Regulation 12(1). The following provisions of that regulation to which it is subject contain Regulation 12(3) under which the all- important "eligible rent" is ascertained for housing benefit purposes.
24. The fourth step is to ascertain the amount of the person's "eligible rent" in accordance with Regulation 12(3)(b) (i) to (iii), as expressly directed by Regulation 4 of the 2001 Regulations. This involves deducting payments of liabilities for water and sewerage charges and payments of specified service charges from the aggregated payment of rent in order to arrive at the amount of the person's "eligible rent."
25. I should explain that, although the amount of housing benefits already received for the relevant period is not expressly specified as a deduction in 12 (3) (b) (i) to (iii), it is accepted by Mr Knafler that, by virtue of the provisions in Regulation 2 of the 2001 Regulations that DHPs that are "further financial assistance" with "housing costs", housing benefits already paid for past housing costs must also be deducted. That is implicit in the purpose for which DHPs may be made. Otherwise, the applicant would be receiving DHPs for housing costs that have already been met by past payment of housing benefits. It would not be a case of a need for "further" financial assistance to meet "housing costs."
26. The fifth and final step is to go to regulations 80 and 81 which provide for the averaging out of rental payments so as to produce a weekly figure to enable the housing benefit calculations to be made. No particular point arises on those regulations in this case.

The judgment

27. It follows from the above analysis of the operation of the 2001 Regulations that I am unable to agree with the judgment of Sir George Newman (sitting as a Deputy High Court Judge) on 8 April 2008 that Ms Gargett's claim for judicial review should be dismissed.
28. I agree with the judge that the discretion conferred on the Council to make a DHP is restricted by the limit set under regulation 4 (see paragraph 12 of his judgment). I also agree that he was right to reject the principal contention made to him, but abandoned in this court, that the Council had power to make a DHP which was outside the limit set by Regulation 4. That contention proceeded on the erroneous basis that the limit in Regulation 4 did not apply to a lump sum for arrears of rent.
29. The point at which I differ from the judge is in his rejection of the alternative argument advanced below that, even if Regulation 4 applied, it only capped the amount of DHP by reference to the payments in Regulation 12(1) of the Housing Benefit Regulations falling due during the period over which the arrears occurred minus the amounts of the deductions directed by regulation 12 (3)(b)(i) to (iii).The judge concluded that

"15. …..Whilst back payments are within the discretion of a local authority, the calculation under regulation 4 is concerned with the present shortfall. [My emphasis.] DHPs are available to assist tenants and others to remain in their accommodation by enabling them to afford the periodic rent (also some back dating based on a weekly analysis) and to make up shortfalls in certain cases, for example in the case of non-dependant deductions."

30. On that approach the judge held that the Council had no power to make the payment claimed by Ms Gargett. There was no present shortfall in Ms Gargett's housing benefits as she was currently receiving it in full. It followed, in the judge's view, that the Council had not erred in law in its construction of the 2001 Regulations or in the reasons it gave in its letter of 21 August 2007 for saying that it had no discretion to pay DHPs for Ms Gargett's rent arrears.
31. In his concise submission for the Council Mr Andrew Lane supported the judge's reasoning on this point. He stressed that DHPs are intended to help people having difficulty with meeting current rent liabilities. They were not intended to be a panacea for all rent arrears problems or a substitute for housing benefit awards that cannot be obtained through the usual route. They are intended to cover shortfalls and presuppose that there is a shortfall between the current weekly eligible rent and current housing benefit. He accepted that a DHP could include an amount in respect of a past shortfall, but only where there is also a currently occurring shortfall. It followed, in his submission, that, if a DHP is not payable for a current period because the eligible rent is being covered by a full housing benefit award, then a periodic or lump sum payment in respect of a past period cannot be made. In such a case there was nothing in the way of shortfall to backdate.
32. For the reasons given above in the analysis of the 2001 Regulations the limit placed on DHPs by Regulation 4 does not prevent the Council from exercising its discretion to make DHPs for past housing costs (arrears of rent) on the ground that the applicant is currently receiving full housing benefit. The Council misconstrued the 2001 Regulations by giving the fact that she was already in receipt of full housing benefit as the reason why it had no discretion to grant Ms Gargett's application for DHPs.

Result

33. I would grant permission to appeal, allow the appeal, set aside the order of the Administrative Court, quash the decision of the council in the letter of 21 August 2007 as being based on an erroneous construction of the 2001 Regulations and order the Council to pay Ms Gargett's costs of the appeal and below to be subject to a detailed assessment. It will now be for the Council to consider afresh Ms Gargett's application for DHP to discharge her rent arrears on the basis that it does have a discretion to make DHPs for arrears of rent, even though Ms Gargett was currently receiving full housing and council tax benefits at the date of the application.

Lord Justice Wall :


 


34. I have had the advantage of reading Mummery LJ's judgment in draft. I find myself in complete agreement with it, and for the reasons he gives I would grant permission to appeal, allow this appeal, and make the orders which he identifies in paragraph 33 of his judgment.
35. I am in no doubt that the council has the discretion to make a DHP or DHPs by way of a lump sum payment or lump sum payments to the appellant, and that the council misdirected itself in its decision letter 21 August 2007 when it held that it had no such discretion. Quite how the council now exercises its discretion is, of course, a matter for it. There is, however, no suggestion in the evidence before us that the appellant was at fault in allowing arrears of rent to accumulate. We were told at the bar that it was commonplace for landlords, whose tenants' rents were paid through housing benefit, to fail to advise their tenants of rent rises. It is the tenant's responsibility to advise the housing benefit department of rent increases.
36. Equally, it seems to me, the appellant cannot be criticised for either ignorance or incomprehension of the statutory regime In my view it remains an apparently non-eradicable blemish on our operation of the rule of law that the poorest and most disadvantaged in our society remain subject to regulations which are complex, obscure and, to many, simply incomprehensible.
37. I am, however, able to express with confidence the view set out in the first sentence of the preceding paragraph both because of the clarity with which the case was argued in this court, and because of Mummery LJ's exemplary analysis of the relevant statutory provisions. I would also like to express my sympathy for the judge, who did not have the benefit of the argument afforded to us in this court.

Lord Justice Toulson:

38. I agree with both judgments.