UK Social Security and Child Support Commissioners' Decisions

 
R(H) 1/03

Mr E. Jacobs CH/0627/2002

12.7.02

Housing benefit – liability to make payments in respect of a dwelling – whether tenancy on a commercial basis - findings of fact

The claimant moved from rented accommodation into accommodation owned by her brother. She claimed housing benefit in respect of the payments she agreed to make to her brother. Benefit was refused and the claimant appealed to a tribunal. The tribunal concluded from its findings of fact taken cumulatively that the tenancy was not on a commercial basis and therefore she fell to be treated as not liable to make payments in respect of the dwelling (regulation 7(1)(a) Housing Benefit (General) Regulations). On appeal to the Commissioner it was argued on behalf of the claimant that the tribunal had failed to explain the basis of its decision, and in particular had not made it clear which of its findings of fact had weighed most heavily in favour of the decision that the arrangement was not on a commercial basis.

Held, dismissing the appeal, that:

1. regulation 7 presupposed that there was a genuine legal liability to make payments in respect of the dwelling. Otherwise there was no entitlement by virtue of regulation 6. A case under regulation 7 must be considered on the basis that there was an arrangement that created a legal liability for payment (para. 19);
   
2. the proper approach for an appeal tribunal was to investigate and determine the facts material to the issue and then determine as a question of "compound fact" whether as a matter of the proper use of language the arrangement was not on a commercial basis, applying the principles established by the authorities (para. 20-22);
   
3. in applying those principles (summarised by the Commissioner in paragraphs 10-14), the tribunal must not reason by analogy from the reported cases and must consider the individual facts of each case in the context of all the others (para. 22);
   
4. it followed that, if a tribunal had made sufficient findings of the constituent facts, there may be little more that it could usefully say to explain its findings of compound fact (para. 23);
   
5. the grounds of appeal in the present case were therefore misconceived, as the tribunal had made sufficient findings of the constituent facts, and had not misdirected itself as to the law (para. 28-29).
   
DECISION OF THE SOCIAL SECURITY COMMISSIONER
6. My decision is that the decision of the Stockport appeal tribunal, held on 28 September 2001 under reference U/40/125/2001/01509, is not erroneous in point of law.

The appeal to the Commissioner

7. This is an appeal to a Commissioner against the decision of the appeal tribunal brought with my leave. The appellant is the claimant for housing benefit. The respondent is the Stockport Metropolitan Borough Council. The respondent does not support the appeal.

The issues

8. These are the bare facts of this case. The claimant moved from her rented accommodation into accommodation owned by her brother. He says that he had bought the property with a view to his marriage and was prepared to let it to the claimant as he could trust her to look after it. She claimed housing benefit in respect of the payments she agreed to make to her brother. It was refused.
9. The claimant exercised her right of appeal, but the appeal tribunal dismissed the appeal. The full statement of its decision covers just over 4 typed pages. More than 2½ of them contain the tribunal's findings of what I call constituent facts, its analysis of them and its explanation for its finding of compound fact that the arrangement between the claimant and her brother was not on a commercial basis. It ends with this paragraph:

"Some of the above points are of more significance than others. The cumulative effect of all of them leads me to conclude that taken as a whole [the claimant's] tenancy of [the dwelling] is not on a commercial basis. The appeal fails."

10. Leave to appeal was sought on the ground that the tribunal's reasons are inadequate. They criticise the passage I have quoted on the ground that it leaves unclear the basis on which the tribunal made its decision. In particular, it is argued that:

"It is not clear which of the points referred to were deemed to have weighed more heavily in favour of the non-commercial decision."

and:

"the more or less pertinent points are not indicated".

11. A district chairman refused leave, commenting:

"The statement explains carefully and comprehensively all the reasons for the tribunal's decision and explains that the weight of the total is greater than each of them taken individually. Had the statement said that some of the reasons were accepted and some not, there might have been some substance in the complaint that the appellant does not understand why the tribunal came to its decision, but the statement makes clear that all the reasons are material. The tribunal is not obliged to list them in order of cogency."

12. I granted leave on the ground that the tribunal may have concentrated on motivation rather than on the basis of the arrangement.

The legislation

13. The bare facts I have stated and the grounds on which leave to appeal was sought and granted raise the proper interpretation and application of regulation 7(1)(a) of the Housing Benefit (General) Regulations 1987:

"(1) A person who is liable to make payments in respect of a dwelling shall be treated as if he were not so liable where–

(a) the tenancy or other arrangement pursuant to which he occupies the dwelling is not on a commercial basis".

Paragraph (1A) is also relevant, although no specific issue arises on it in this case:

"(1A) In determining whether a tenancy or other arrangement pursuant to which a person occupies a dwelling is not on a commercial basis regard shall be had inter alia to whether the terms upon which the person occupies the dwelling include terms which are not enforceable in law."

14. As this is one of the first cases on this provision to come before Commissioners, I have covered in some detail the proper approach to take on appeal to an appeal tribunal and to a Commissioner.

The authorities

15. The predecessor to regulation 7(1)(a) was considered in four reported judicial review cases.
16. R v. Rugby Borough Council Housing Benefits Review Board, ex parte Harrison and R v. Daventry District Council Housing Benefits Review Board, ex parte Bodden were two of three cases heard together by Mr. Justice Blackburne and reported in (1994) 28 Housing Law Reports 36, especially at pages 54 and 55. These cases concerned members of the Jesus Fellowship Community Church who lived together in a community house and shared a common purse. All income went into that purse and all living expenses were paid from it. The surplus went into a trust that could be used for a variety of purposes connected with the Church. The Review Boards decided that the arrangements were not on a commercial basis. It was held that the Review Boards were entitled to reach that conclusion.
17. R v. Sutton London Borough Council, ex parte Partridge was heard by Mr. Justice Laws and reported in (1994) 28 Housing Law Reports 315, especially at pages 319 and 320. This case concerned a claimant who went to live with an elderly relative. He agreed to pay a rent and offered her money, but she declined to accept until his entitlement to housing benefit was finally settled. The Review Board decided that the arrangement was not on a commercial basis. It was held that the Review Board had not made findings of fact about the nature of the arrangement to support its decision.
18. R v. Poole Borough Council, ex parte Ross was heard by Mr. Justice Sedley and reported in (1995) 28 Housing Law Reports 351, especially at pages 358 and 359. This case concerned a claimant who had had a joint secure tenancy with a lady. She left and acquired a property under a shared ownership scheme. In order to stay together, he went to live with her, paying towards her rent. The Review Board decided that the arrangement was not on a commercial basis. It was held that the Review Board had not approached the issue correctly.
19. The words "on a commercial basis" were considered in a number of Commissioners' decisions on the severe disability premium in income support. They are conveniently collected in the decision of the Tribunal of Commissioners in R(IS) 11/98, paragraphs 6 to13. The facts of those cases were often very different from those likely to arise in housing benefit cases. The context is also different. So, some of the comments in them may depend on the nature of the facts and the legal context. They may not be applicable in this context. However, the cases are relevant as authorities on some principles that are generally applicable.

The principles that emerge from the authorities

20. There is limited scope for analysis of the words "on a commercial basis". The authorities have milked most of what can be said, although history may prove me wrong in believing that there is little more that can usefully be added. The following principles emerge. They cover the policy, interpretation and application of the provision.
21. As to the general policy of the provision:
22. 1. The purpose of the provision is to prevent abuse of the housing benefit scheme. It excludes from entitlement a category of cases which by their very nature are capable of being an abuse of the housing benefit scheme.
23. 2. It must be construed and applied consistently with that purpose. But decision-makers must take great care not to exclude claimants whose arrangements are both genuine and necessary.
24. 3. The provision excludes the truly personal arrangement that is presented as a legal agreement or liability.
25. 4. The burden is not on the claimant to show that the arrangement was on a commercial basis.
26. As to the interpretation of the provision:
27. 1. "Commercial" is an ordinary English word that does not need to be defined.
28. 2. Whether an arrangement is not on a commercial basis is a question of fact.
29. 3. It is necessary to consider not only the amount payable for the dwelling, but all the terms of the arrangement.
30. As to the application of the provision:
31. 1. Bad faith is not a necessary ingredient.
32. 2. The whole nature of the arrangement must be considered. That includes all the terms and the whole relationship between the parties so far as it concerns the occupation of the dwelling.
33. 3. The amount payable is not the only consideration.
34. 4. An arrangement may still not be on a commercial basis despite the presence of a financial element that is more than minimal.
35. 5. A long-term stable relationship between the parties does not necessarily show there was not a commercial basis. Nor does friendship.
36. 6. The test that must be applied is one of dominant purpose of the arrangement. The issue is: is the tribunal satisfied on the balance of probabilities that the principal basis on which the arrangement was made was not a commercial one?
37. 7. In appropriate circumstances, it is necessary to consider: (a) the owner's need for rent; (b) the claimant's need for accommodation; and (c) the history of previous arrangements between the parties.

The proper approach for tribunals

Distinction between regulation 6 and regulation 7 issues

38. Regulation 7 presupposes that there is a genuine legal liability to make payments in respect of the dwelling. If there is no liability, there is no entitlement by virtue of regulation 6. A case under regulation 7 must be considered on that basis. It must start with the fact that there is an arrangement that creates a legal liability for payment.

The relevance of the facts of reported cases

39. I have deliberately referred to the facts of the cases in the most general terms. It is relevant for tribunals to consider them in order to gain a feel for the sorts of arrangements that are and are not "on a commercial basis". However, what the tribunal must not do is reason by analogy from the facts of reported cases. None of the cases actually decides whether or not an arrangement was on a commercial basis. At most they decide that the decision-maker was entitled to come to the decision that it did or that it did not approach the issue correctly. More importantly, the facts of each case must be considered as a whole. A slight difference in the facts can affect considerably the basis of an arrangement. The proper approach for an appeal tribunal is: (a) to investigate and determine the facts material to the issue; and then (b) determine whether as a matter of the proper use of language the arrangement was not on a commercial basis; applying in doing so (c) the principles established by the authorities.

Investigation of the facts

40. Whether or not an arrangement is on a commercial basis is, in the useful phrase of Jessel MR in Erichsen v. Last (1881) 8 Queen's Bench Division 414 at page 416, "a compound fact made up of a variety of things." The proper approach to that type of fact is to begin by finding the constituent facts. The tribunal must begin with an investigation into all aspects of the arrangement on which the claim is based. The authorities indicate in general terms the subject matter for the inquiry. They also give some more detailed suggestions that may be relevant in particular types of case. Having made its inquiry, the tribunal must make and record findings of constituent fact on all relevant matters. Those findings provide the foundation for a finding on the compound fact: was the arrangement on a commercial basis?

Analysis

41. The tribunal must analyse the constituent facts of the case as a composite whole. The significance of each factor cannot be considered in isolation. Each must be considered in the context of all the others. An overall view must be taken. This has an impact on the explanation for a decision that it is possible to give to a claimant and on the approach that the Commissioners take on appeal on error of law.

Explanation and adequacy of reasons

42. A claimant is entitled to some explanation of why the tribunal came to the conclusion that it did. There is a limit to the extent that this is possible, because the mental process of making the finding is subconscious. Although the constituent facts and their significance can be isolated and discussed, the final conclusion is based on the complex interaction of factors and impressions that a decision-maker cannot explain. If the tribunal has made proper findings of the constituent facts, there may be little more that can usefully be said to explain the finding of compound fact. At best, it may be possible to identify some of the constituent facts that have particularly figured in the tribunal's deliberation and conclusion, and to explain how and why the tribunal analysed their significance. It may also be appropriate to refer to matters that were particularly emphasised in argument.

On appeal to a Commissioner

43. An appeal to a Commissioner lies on error of law: paragraph 8(1) of Schedule 7 to the Child Support, Pensions and Social Security Act 2000. It is a question of fact whether the arrangement was on a commercial basis. So, there will be an error of law if the "decision was unreasonable in the sense that no tribunal acquainted with the ordinary use of language could reasonably reach that decision": see the speech of Lord Reid in Brutus v. Cozens [1972] 2 All England Law Reports 1297 at page 1299.
44. The approach taken on appeal recognises that there is scope for difference of view: see the judgment of Lord Justice Asquith in Bellenden v. Satterthwaite [1948] 1 All England Law Reports 343 at page 345. The tribunal's decision will not be wrong merely because the Commissioner would have come to a different conclusion: see the speech of the Lord Chancellor, Viscount Simon, in Charles Osenton and Co v. Johnston [1941] 2 All England Law Reports 245 at page 250. The issue for the Commissioner is: was the tribunal entitled to reach the conclusion that it did on the facts that it did?
45. There will, of course, be an error of law if the tribunal misdirected itself in law, failed to investigate sufficiently or did not make adequate findings of constituent fact. The tribunal's reasons must also be adequate, within the limits that I have explained.
46. One argument that will not find favour with the Commissioners is to isolate comments made by tribunals on individual constituent facts and argue that the tribunal attached the wrong significance to them. Many of those facts, taken in isolation, may be neutral or equivocal in their significance. It is always possible to point to a different significance that could have been attached to some, or all, of those facts. But that does not identify a flaw in the tribunal's reasoning. It is an unavoidable feature of the nature of the issue.

Conclusion

47. The final paragraph of the tribunal's statement of reasons accurately sets out the nature of the issue that the tribunal had to determine. The grounds on which leave to appeal was sought were misconceived in that they misunderstood the nature of a finding of compound fact. I agree with everything that the district chairman wrote in refusing leave to appeal.
48. The chairman's record of proceedings shows that the tribunal carried out a proper investigation into the facts and explored their significance with the parties. The tribunal made findings on every relevant constituent fact. Its analysis of each of those individual facts shows that it did not misdirect itself in law either in the interpretation of regulation 7(1)(a) or in its application of it. On re-reading the statement, which I have now done several times, I am satisfied that any references to motivation were appropriate in their context and do not show that the tribunal misdirected itself.
49. I dismiss the appeal.

Date: 12 July 2003

(signed) Edward Jacobs Commissioner