1. Housing benefit is a statutory means-tested benefit the purpose of which is
to assist persons of limited means with their obligations to pay rent in
respect of residential tenancies. The present regime is derived from Part V11
of the Social Services Contributions and Benefit's Act 1992. The scheme is
administered by local housing authorities. Much of the statutory framework is
to be found in subordinate legislation, most notably the Housing Benefit
(General) Regulations 1987 (as amended). Subject to a means test, the scheme
provides that housing benefit may be paid by reference to a tenant's "eligible
rent": regulation 10(1) and (3). By regulation 10(6A):
"In no case shall the amount of a person's
eligible rent.....exceed the amount of the maximum
rent."
The concept of a maximum rent is a device to combat abuse. As Sir Thomas
Bingham MR said in Regina v. Housing Benefit Review Board, ex parte
Gibson (1993) 25 HLR 487, at p 490:
"It is evident that the scheme is directed to two possible abuses. The first
is that a recipient of housing benefit may live in an unnecessarily luxurious
and therefore expensive dwelling house. The second is that a landlord may
charge more than the market rate to a recipient of housing benefit, both of
those abuses stemming from the fact the prudence which activates the ordinary
citizen may cease to do so if there is a belief that public funds will pay
whatever the recipient of housing benefit may choose to require."
The valuation function is carried out by rent officers for whom the Rent
Service is responsible, pursuant to section 122 of the Housing Act 1996. The
crucial provisions prescribing their tasks are to be found in the Rent Officers
(Housing Benefit Functions) Order 1997. By Article 6 of that Order, where a
local authority applies to a rent officer for a determination in respect of a
tenancy of a dwelling, the rent officer must make the determination in
accordance with Part I of Schedule I of the Order. The provisions of Part I
lie at the heart of this case and it is necessary to set them out in some
detail. They relate to a number of different concepts. The first is
"significantly high rents". By paragraph 1:
"(1) The rent officer shall determine whether, in his opinion, the rent
payable under the tenancy of the dwelling at the relevant time is
significantly higher than the rent which the landlord might reasonably have
been expected to obtain under the tenancy at that time.
(2)If the rent officer determines under sub-paragraph (1) that the rent is
significantly higher, the rent officer shall also determine the rent which the
landlord might reasonably have been expected to obtain under the tenancy at the
relevant time.
(3) When making a determination under this paragraph, the rent officer shall
have regard to the level of rent under similar tenancies of similar dwellings
in the locality (or as similar as regards tenancy, dwelling and locality as is
reasonably practicable) and shall assume that no one who would have been
entitled to housing benefit had sought or is seeking the tenancy."
The second concern is with the size of the dwelling relative to the occupiers.
Paragraph 2 provides:
"(1) The rent officer shall determine whether the dwelling, at the relevant
time, exceeds the size criteria for the occupiers.
(2) If the rent officer determines that the dwelling exceeds the size
criteria, the rent officer shall also determine the rent which a landlord might
reasonably have been expected to obtain, at the relevant time, for a tenancy
which is
(a) similar to the tenancy of the dwelling;
(b) on the same terms other than the term relating to the amount of rent;
and
(c) of a dwelling which is in the same locality as the dwelling, but which
(i) accords with the size criteria for the occupiers;
(ii) is in a reasonable state of repair; and
(iii) corresponds in other respects, in the rent officer's opinion, as
closely as is reasonably practicable to the dwelling."
Paragraph 3 is concerned with "exceptionally high rents". It provides:
"(1) The rent officer shall determine whether, in his opinion, the rent
payable for the tenancy of the dwelling at the relevant time is exceptionally
high."
If the rent officer determines that the rent is exceptionally high, he must
determine the highest rent which is not an exceptionally high rent and which a
landlord might reasonably have been expected to obtain at the relevant time for
an assured tenancy of a dwelling which:
"(a) is in the same locality as the dwelling;
(b) has the same number of bedrooms and rooms suitable for living in as the
dwelling (or, where the dwelling exceeds the size criteria for the occupiers,
accords with the size criteria); and
(c) it is in a reasonable state of repair."
(Paragraph 3(3)).
Similarly, for the purpose of determining whether a rent is an exceptionally
high rent, the rent officer must have regard to the levels of rent under
assured tenancies of dwellings which:
"(a) are in the same locality as the dwelling (or
in as similar a locality as is reasonably practicable);
and
(b) have the same number of bedrooms and rooms suitable for living in as the
dwelling (or, in a case where the dwelling exceeds the size criteria for the
occupiers, accord with the size criteria)."
(Paragraph 3 (4)).
2. The fourth concept, and the crucial one in this case, is that of "local
reference rents". Paragraph 4 is in the following terms:
"(1) The rent officer shall make a
determination of a local reference rent in accordance with the formula -
R = H + L
2
where -
R is the local reference rent;
H is the highest rent, in the rent officer's
opinion, -
(a) which a landlord might
reasonably have been expected to obtain, at the relevant time, for an
assured tenancy of a dwelling which meets the criteria in sub-paragraph (2);
and
(b)which is not an exceptionally high rent; and
L is the lowest rent, in the rent officer's opinion , -
(a) which a landlord might reasonably have been expected to obtain, at the
relevant time, for an assured tenancy of a dwelling which meets the criteria in
sub-paragraph (2); and
(b) which is not an exceptionally low rent.
(2) The criteria are -
(a) that the dwelling under the
assured tenancy -
(i) is in the same locality as the dwelling;
(ii) is in a reasonable state of repair; and
(iii) has the same number of bedrooms and rooms suitable for living in as
the dwelling (or, in a case where the dwelling exceeds the size criteria for
the occupiers, accords with the size criteria);
....."
Sub-paragraph (2)(b) is not relevant for present purposes. In addition, there
is a fifth concept, that of "single room rents", which is not applicable in the
present case but which is structurally similar to paragraph 4 and uses the same
criterion of "in the same locality": paragraph 5(2)(a).
3. In addition to determinations under article 3 and Schedule 1, a rent
officer may be required by a local authority to carry out a redetermination
pursuant to article 4 and Schedule 3, in which case the Schedule 1 concepts are
applicable, together with a requirement that the rent officer making the
redetermination "shall seek and have regard to the advice of one or two other
rent officers in relation to the redetermination": Schedule 3, paragraphs 1 and
2.
4. The present case relates to four applications for judicial review by
tenants who live in the area for which Stockport Metropolitan Borough Council
("the Council") is the local housing authority. In each case the claimant is a
private sector tenant who is eligible for housing benefit. Each made a claim
for the benefit. In each case (1) the Council referred the matter to the Rent
Service which undertook the determination; (2) the determination was that the
local reference rent was lower than the contractual rent (in some cases
determinations were also made under the size and "high rent" criteria); (3) the
claimant sought, through the Council, a redetermination which was adverse to
the Claimant; (4) the Rent Service carried out and notified a redetermination;
and (5) the Council acted upon the redetermination (as it was obliged to do)
and reduced the amount of the eligible rent. The issue in each case is whether
the rent officers properly directed themselves in the discharge of their
functions under the 1997 Order in the ascertainment of the "local reference
rent". The particular dispute relates to the meaning of "in the same locality"
in paragraph 4 (2)(a)(i). The way in which it arises is apparent from a brief
summary of the facts of each case.
Catherine Dinsdale
5. Ms Dinsdale and her two children lived in a three-bedroomed semi-detached
house at 53 Clarendon Road, Hazel Grove, Stockport, pursuant to an assured
shorthold tenancy agreement which stipulated the contractual rent to be
£100 per week. Prior to taking the tenancy, she had requested a
pre-tenancy determination as is permitted under regulation 12A of the 1987
Regulations. It determined a maximum rent for housing benefit purposes to be
£100 per week which was not a "significantly high rent". Under the
regulation, that protected her for twelve months. However, in April 1999,
almost a year after the commencement of the tenancy, the Rent Service
determined the local reference rent to be £81 per week. In due course,
she required the Council to seek a redetermination and on 4 February 2000 the
redetermination produced the same local reference rent of £81 per week.
The redetermination letter described the location of the property as:
"a fairly good residential area, convenient for
shopping and commercial services in Hazel Grove. The immediate vicinity is
very similar to properties built in the 1930's."
It referred to the local reference rent as:
"the general level of rent in your area with the
number of rooms you can claim benefit for."
In the local reference rent formula, the high rent was £100, the low rent
£62 and the midpoint £81. Ms. Dinsdale's housing benefit was reduced
to that figure and, apart from a period for which she received an exceptional
hardship payment (a period which is limited by regulation) the effect was an
accumulation of arrears until she left the property with arrears in the region
of £800.
The rent officer who carried out the redetermination, Mr Cannon, described his
approach in this way:
"In redetermining the local reference rent I considered seventy one pieces of
evidence extracted from the database relating to tenancies at rents ranging
from £125 per week to £55 per week. After excluding those items
where I considered the rent to be exceptionally high and exceptionally low, the
range which remained was between £100 and £62. The midpoint between
those figures is £81 and this was the figure at which I redetermined the
local reference rent."
No one disputes that method of calculation. The issue at the heart of the case
(and this is so with the other three cases as well) is whether the
redetermining officer took the correct "locality" when considering dwellings
"in the same locality" in paragraph 4(2)(a)(i). Mr Cannon says:
"The locality used in determining the local reference rent comprised those
parts of the Stockport MBC area incorporating Bramhall, Cheadle Hulme,
Compstall, Gatley, Hazel Grove, Heald Green, Heaton Mersey, Heaton Moor, High
Lane, Marple Bridge, Woodford and Romiley."
In other words, the whole of the Stockport MBC area, which covers an extensive
part of the south side of Greater Manchester. It has a population in the
region of 300,000. It was described in Profiling Stockport, a
1997 report, as:
"may not generally be seen as deprived, but is a borough of great inequality.
It contains neighbourhoods at both extremes of the advantaged/disadvantaged
spectrum."
The case for the claimant is that it was an error to take the whole of the
Stockport MBC area as being "the same locality". It should have taken the
locality of Hazel Grove alone.
7. Having rehearsed Ms Dinsdale's case in some detail, I can describe the
other three cases more briefly.
Caroline Wilson
8. Ms Wilson and her son live in a two-bedroomed semi-detached house at 31
Edward Avenue, Bredbury, Stockport under an assured shorthold tenancy with a
contractual rent of £90 per week. Initially, she received housing benefit
of £85 per week in line with a pre-tenancy determination. In due course
this was reduced to £75 per week when a rent officer determined that to be
the local reference rent for such a property. A subsequent redetermination
produced the same figure.
Mr Cannon was again the redetermining officer. In the redetermination notice
he stated:
"Location: The property is situated in the Bredbury district of
Stockport in a fairly good residential area convenient for shopping and
commercial services in Bredbury and also Stockport town centre."
As to rents, he said:
"Having considered the market evidence for similar accommodation let on
similar terms in the locality. I am of the opinion that the referred rent of
£90 per week is reasonable for this property in this locality...The local
reference rent is the general level of rent in your area with the number of
rooms you can claim benefit for."
He found the high rent to be £95, the low rent £55 and, consequently,
the local reference rent to be £75.
9. Ms Wilson has been unable to cope with the shortfall of £15 per week
and the rent has fallen into arrears. Her case is the same as Ms Dinsdale's,
substituting Bredbury for Hazel Grove as "the same locality", whereas Mr Cannon
again focused on the whole of the area of Stockport MBC.
Barbara Shaw
10. Mrs Shaw lives alone at 39 Fairford Way, Reddish, Stockport. That is a
three-bedroomed house owned by her daughter. Mrs Shaw is an assured shorthold
tenant at a rent of £433.33 per month (£99.99 per week). Until
September 1999 she was receiving housing benefit of £84.26 per week. In
June 1999 a rent officer determined the local reference rent for such a
property to be £286 per month, a figure that was confirmed on
redetermination in April 2000. The redetermining officer was Mr Fearon. Under
the heading "Location", he said:
"The property is situated in a good residential area off Reddish Road...There
are a variety of shops on the main road and further away in Stockport and
Reddish."
11. Having examined "the market rental evidence for similar houses in the
area", he concluded that the market rent for the property was £410 per
month. He then applied the size criteria and decided, unsurprisingly, that a
smaller house was appropriate, the market rent for which would be £368 per
month. However, the local reference rent for such a property, having regard to
"rent levels across the whole area" in respect of the same size criteria, was
£286 per month. Thus, the claimant's case is that "the same locality"
means the Reddish area, whereas Mr Fearon erroneously took it to be the area of
Stockport MBC.
Safina Saadat
12. Ms Saadat lives with her three children at 4 Hastings Close, Cheadle Hulme,
Stockport. She is an assured shorthold tenant with a contractual rent of
£520 per month which was later increased to £600 per month as a
result of improvements carried out by the landlord. It is a three-bedroomed
property. A pre-tenancy determination had assessed the local reference rent at
£520 per month but, following the period of protection, a rent officer
determined it at £364 per month and Mr Fearon came to the same figure on
redetermination. In the notice he described the location thus:
13. "The property is situated in a good residential area which is reflected in
the high capital value of houses locally...There are a number of good schools
in the area and it is well-served by shops and services in Cheadle Hulme
centre."
He was satisfied that "£600 per month does not exceed a market rent for
this locality", but came to a local reference rent of £364 per month after
looking at "rent levels across the whole area" for similar properties. The
battle lines are therefore drawn in the same way, Ms Saadat contending for
Cheadle Hulme as "the same locality" as against Mr Fearon's choice of the
entire area of Stockport MBC.
14. Before leaving the basic facts of the four cases, I should add that they
have another common feature in that each of the claimants states (and it is not
contradicted) that it is simply not possible to obtain an equivalent property
in the locality for which they respectively contend in relation to the local
reference rent.
15. I now turn to the submissions.
The case for the Claimants
16. On behalf of the claimants, Mr Luba QC made a number of submissions which I
summarise as follows. First, the word "locality" is not defined in the
Order or in the Regulations or the 1992 Act. It must therefore bear its
ordinary meaning and not a technical meaning. Secondly, its ordinary
meaning is the local neighbourhood, area or district in which the property is
situated which may or may not be coextensive with a postal or administrative
area. It is where a resident would identify if asked: "Where do you live?" or
where those letting property identify in relation to an available property.
The identification in such cases would be, for example, "Hazel Grove" rather
than "Stockport". Thirdly, in each of the four cases the redetermining
officer was able to identify the appropriate locality in precisely this way
under the heading "Location". Fourthly, the Rent Service adopts that
approach when applying paragraphs 1, 2 and 3 of Schedule 1. Accordingly, it is
inconsistent to give a different meaning to "locality" when applying paragraph
4. Moreover, the Service's database uses the criteria of postcode or address
in relation to location. Fifthly, the argument in favour of consistency
is supported by the fact that where the Schedule is intended to refer to a
different type of geographic area, it uses appropriately different language.
Thus, in paragraph 11, which deals with "indicative rent levels", which are
monthly collations, the geographic criterion is "the area of the local
authority" (para. 11(2)(a)). Sixthly, the contemporaneous policy
documentation does not point to "locality" being used in different senses in
the different paragraphs of Schedule 1. Seventhly, it is no part of the
policy of housing benefit to disperse claimants to the cheapest areas but that
is the inevitable consequence of giving "locality" the meaning for which the
Rent Service contends.
The case for the Rent Service
17. I now turn to Mr Fetherstonhaugh's submissions. First, the word
"locality" is not the subject of statutory definition and, accordingly, it is
for the Rent Service to select an area in each case, having regard to the
ordinary meaning of the word and the purpose of paragraph 4. Secondly,
the selection of the area is only challengeable on public law grounds.
Thirdly, rent officers have for many years applied the word "locality"
when carrying out their historic functions under section 70 of the Rent Act
1977. That is a similar function to that which the same rent officers now have
to carry out in relation to paragraph 4 of Schedule 1 in connection with
housing benefit. The approach adopted by the redetermining officers in the
present case was consistent with the authorities on section 70 of the 1977 Act
(and its predecessor): Metropolitan Property Holdings Limited v.
Finegold [1975] 1 WLR 349; Palmer v. Peabody Trust [1975]
1 QB 604; Queensway Association v. Chiltern, Thames and Eastern Rent
Assessment Committee (1999) 31 HLR 945. Fourthly, there is good
reason for the word "locality" being given a different meaning in, say
paragraph 1 of Schedule 1, where the concern is with the market rent for a
particular dwelling. The rent of a dwelling in a very different socio-economic
position would be of no assistance. Fifthly, the contemporaneous policy
documentation is consistent with, or certainly not contrary to, the approach
taken.
Conclusion
18. It is axiomatic that the word "locality", not being the subject of
statutory definition, must be given its ordinary meaning and that the primary
task of giving meaning to it in any particular case falls upon the Rent
Service, subject to judicial review. In this regard, the judgment of Richards
J in the Queensway case is instructive. Having referred to the
concept of "locality" as "elusive", (albeit in the context of section 70(2) of
the Rent Act), he continued (at p. 963):
"...it would in my view be wrong for the court to define (or redefine) the
expression or its content by prescribing particular geographical or similar
tests, such as 'an area within reasonable commuting distance' of the subject
property, and the courts have indeed been astute to avoid that approach. As
the court emphasised in Finegold and Palmer v. Peabody
Trust, the choice of area is a matter for the committee, which should
not be tied to any particular formula. What is important is that, in
approaching their task, the committee should have clearly in mind, and should
direct themselves by reference to, the purpose of section 70(2) and should
choose an area which in their judgment is sufficiently large to give effect to
that purpose. If they direct themselves correctly, then the court will
intervene only if their choice is 'manifestly wrong'...or, to express the same
point in conventional Wednesbury terms, if it is one to which no
reasonable committee could have come."
In my judgment, it is appropriate to approach the present case in the same
way.
19. The Queensway case is of assistance in another way. It
illustrates that it is possible for the same word - "locality" - to require
different approaches to interpretation within different subsections of the same
section. Section 70 of the Rent Act was concerned with the determination of
fair rents in the private residential sector. Subsection (1) relates to the
assessment of a fair rent under a regulated tenancy of a dwelling house, having
regard to various factors including its locality. Subsection 2 is in the form
of an assumption of an absence of a significant scarcity of dwellings in the
locality. Plainly the purpose of the exercise as between the two subsections
is different and, as Richards J observed (ibid), relying on the same
authorities, the concept of "locality" in subsection (2) "will generally be a
much larger area than the "locality" relevant to the assessment of market rent
under [subsection (1)]." It seems to me that there is scope for a similarly
differential approach between, say, paragraph 1 and paragraph 4 of Schedule 1
in the present case.
20. With the assistance of both counsel, I have been taken through a trawl of
the policy documentation, including the Report by the Social Services Advisory
Committee and the statement of the Secretary of State dated June 1995. The
support which Mr Fetherstonhaugh sought to derive from it is to some extent
dissipated by the fact that, as Mr Luba pointed out, the Secretary of State
appears to have adopted a flawed approach to the authorities on section 70 of
the Rent Act. All in all, I consider that this document and the subsequent
Departmental Circular HB/CTB A29/95 which gave guidance to housing benefit
staff do not significantly advance the arguments of either side. I am wholly
satisfied that they do not fortify the challenge which the claimants seek to
mount.
21. In the final analysis this is a Wednesbury challenge. The drafting
of the Order may be imperfect, but I do not consider that the construction
points skilfully advanced on behalf of the claimants are, separately or
cumulatively, correct. The question is whether the choice of the whole area of
the Stockport MBC as the locality for the purposes of paragraph 4 was
reasonable in the Wednesbury sense or "plainly wrong". If it were the
case that the housing benefit scheme came with a policy, express or implied,
that it had as one of its purposes the avoidance of the concentration of
housing benefit recipients in particular types of area, it would be difficult
to justify the choice of the entire Stockport MBC area in the present case.
However, it seems to me that the policy is neutral on such matters. It does
not seek to engage in social engineering either by concentrating or dispersing
recipients. It uses "locality" in a sense that is deliberately flexible. In
the circumstances, I cannot conclude that the approach of the Rent Service in
the present case was "plainly wrong". The explanations provided by Mr Cannon
and Mr Fearon in their witness statements are not unreasonable The application
for judicial review therefore fails.
MR FETHERSTONHAUGH: My Lord, I am most obliged. My Lord, I think,
subject to anything my learned friend may say, that costs should follow the
event, and I would ask for the claimants to pay the respondents' costs. My
Lord, I gather they all have legal aid of some sort or another. I hesitate
behind the form of words 'like the usual costs order in those circumstances'
but, my Lord, I really have to because I have not checked. I think the usual
pools order which was made in the past does not apply now?
MR JUSTICE MAURICE KAY: That is right.
MR FETHERSTONHAUGH: My Lord, perhaps if your Lordship will allow me to
formulate a minute, and I will make sure that the correct formula is put down
on that?
MR JUSTICE MAURICE KAY: Yes. The new formula involves the words
"adjourned generally" or something, does it not?
MR FETHERSTONHAUGH: My Lord, indeed, it is something like that.
MR JUSTICE MAURICE KAY: It has the same effect. Well, Mr Luba, as far
as that is concerned?
MR LUBA: As far as that is concerned, my Lord, my learned friend is
quite right that would be the usual order against the legally-aided, to use
the old terminology, but it is a little unusual for such an order to be sought
where the respondent is one of the central government departments, because
obviously the money is coming, if it comes at all, from persons funded by
another central government department.
MR JUSTICE MAURICE KAY: It is not at all unusual for a central
government
department to be given such an order.
MR LUBA: Well, my Lord, it certainly is not the case one usually
experiences where the central government department is the Home Department.
But, my Lord, I do not resist my learned friend's application. It is the
proper order to follow, if my Lord finds that it is right that costs be paid by
the applicant.
MR JUSTICE MAURICE KAY: Yes, I do.
MR LUBA: My Lord, may I have a direction for a community legal service
assessment?
MR JUSTICE MAURICE KAY: Undoubtedly. You may have four.
MR LUBA: Thank you, my Lord. I will assist my learned friend, if I may
be so
bold as to suggest that, in the preparation of his minute on the question of
the correct formulation for postponing the assessment of the liability of costs
of the applicant to respondent?
MR JUSTICE MAURICE KAY: Yes.
MR LUBA: My Lord, I am obliged. My Lord, my other application is not
intended to be in any way impertinent, my Lord an application for permission
to appeal which, in any event, is a matter with which my Lord should be
concerned at this stage.
My Lord I do say, for reasons which I will take very briefly my Lord, that
this is a case fit for permission. Firstly, my Lord, the issue in this case
has not previously been considered at appellant level. That is the first
point. The second point, my Lord, is that the point in issue is one of general
public importance. This is a matter of concern not only to these individual
claimants but to all claimants on benefit. It is also a matter of concern to
all rent officer officials and to all the local authorities who administer
them, and also to three government departments: the Treasury, social security,
and also to those who are responsible for housing policy in DTR.
My Lord, the third reason is that this a matter of pure statutory
construction, we say. I hear that my Lord has dealt with it on a
Wednesbury basis, with respect, my Lord readily understands we have
tried to put it on a rather different basis, which is a construction basis. We
say, my Lord, there is an underlying issue of construction here, which is
whether the schedule requires the word to have the same meaning in each of the
paragraphs my Lord has mentioned.
My Lord, I would like to think that had my learned friend been on his feet
making this sort of application, I would have had to acknowledge that all of
those principles were right. My Lord, in those circumstances I ask my Lord to
give permission to appeal.
MR FETHERSTONHAUGH: My Lord, that very wittily put, my learned
friend has to come within the bounds of Part 52.3, and that is to say either
to convince your Lordship that the appeal would have a real prospect of
success.
My Lord, on that can I say, with respect, that your Lordship's judgment
sounded to me, at any rate, firm and convincing and your Lordship may well
think the contrary that there is no real prospect of success. If that is
right, then my learned friend has to fall back on some other compelling reason
why the appeal should be heard. My Lord, in my submission, there is nothing
which my learned friend has said which remotely brings the case into that
category. So, my Lord, I would resist the application.
MR JUSTICE MAURICE KAY: You may have permission to appeal.
MR LUBA: I am very much obliged, my Lord.
MR JUSTICE MAURICE KAY: Thank you all very much.
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