UK Social Security and Child Support Commissioners' Decisions

 


[2006] UKSSCSC CH_2959_2006 (21 December 2006)

CH/2959/2006

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Decision

1. The decision of the tribunal given on 16 May 2006 is erroneous in law. I therefore allow the appeal and set aside the tribunal's decision. I remit the case for rehearing by a differently constituted tribunal.

Nature of appeal

2. This is an appeal by the claimant against the reserved decision of the tribunal that the claimant was not liable and was not to be treated as liable to make payments in respect of a dwelling which he occupied as his home. The effect of the decision was that the tribunal upheld the decision of the respondent local authority ("the Council") made on 19 July 2005 that the claimant was not entitled to housing benefit. The appeal is brought with the leave of a Commissioner and is supported by the Council, albeit on different grounds.

Factual background

3. The claimant is a married man. After his marriage he and his wife first lived together in Pakistan but in 2000 returned to England and lived together with their first child and the claimant's parents in the latter's house (to which I shall refer as No.23). After about a year the claimant's wife and the child moved to a two bedroom house because she found it difficult living with her husband's parents. The claimant stayed with his parents. In 2005 as a result, the claimant says, of a number of family problems, the claimant and his wife arranged to move to No 20 in the same street as his parents' house. No 20 had been acquired by one of the claimant's brothers (to whom I shall refer as "A") in November 2002 and A at all material times was the registered owner of No 20. It appears that before the claimant, his wife and children moved into No. 20, it had been occupied by another brother of the claimant (to whom I shall refer to as "MI" ) and his family. On leaving No. 20, it appears that MI and his family first moved to a four bedroom house owned by another brother and after a short time went to live with his parents at No. 23.
4. On 20 April 2005 the claimant, his wife and now two children moved into No. 20. On 26 April 2005 the claimant and his wife jointly claimed housing benefit. In their claim form they stated that their landlord was their brother, MI, whose address was given as the four bedroom house referred to above, and that they paid him rent of £110.00 a week under a tenancy running from 20 April 2005 to 20 May 2005. The claimant declared in the claim form that benefit should be paid directly to his landlord and MI signed the landlord's declaration.
5. It appears from the terms of the Council's decision of 19 July 2005 (p 53) that the claimant and his wife were awarded housing benefit, although the awarding decision is not on the file. Whatever the position, the Council continued to seek further information about the tenancy from both the claimant and MI. The claimant in a statement made on 25 May 2005, stated, amongst other things, that he had a rent book which recorded the rent to be paid; that he had determined the amount of the rent after telephoning Nottingham Rent Advice; and that he was in arrears of rent. MI in a statement dated 28 June 2005 stated that the registered owner of No 20 , his brother A, lived in Dubai and that he, MI, had been acting as A's agent since November 2002; that he was in the process of purchasing the house from A, had paid 80% of its value, and considered himself to be the owner; that No. 20 had always been rented; and that it had been let to his brother because the previous tenants had left, he was looking to rent it out and his brother was looking for somewhere to rent.
6. By letter dated 19 July 2005 the Council informed the claimant of its decision that having regard to regulation 7 (l) of The Housing Benefits Regulations 1987 ("the 1987 Regulations") the claimant's award of housing benefit was withdrawn because it was satisfied that the liability had been created to take advantage of the housing benefit scheme. It set out its reasons for this decision in the letter, which, in summary, were that he could have avoided the liability (which he could not meet without housing benefit) by living with his family in the two bedroom house which his wife formerly occupied with the two children and which was adequate for his present needs. On 18 August 2005 this decision was reconsidered but not changed. The Council, however, gave different reasons for its decision: namely, in effect that No. 23 was adequate for the needs of him and his family; and that the four bedroom property owned by another brother and once occupied by MI, and which was now vacant, was also suitable for his needs.
7. On 25 August 2005 the claimant asked for the decision to be reconsidered again and in support provided medical and other evidence to show why it was appropriate to rent No 20. By letter dated 20 September 2005 the Council notified the claimant that it had reconsidered but not changed its earlier decision. In its letter the Council set out a new reason for its decision: namely that the claimant was not liable to pay rent to the registered owner, A, and that MI had no right to grant occupation. The letter also set out further reasons why the Council considered that, if there was a liability, that liability had been contrived.
8. On 21 September 2005 the claimant requested a further reconsideration in support of which, amongst other things, he stated that MI had a document from A permitting the former to let the property. On 6 October 2005 MI provided the document. It was dated 10 September 2002 and purported to be signed by A. It authorised MI to act as agent/landlord for the purpose of renting No. 20. By letter dated 17 October 2005 the Council informed the claimant that it had reconsidered but again not changed its decision. In explanation the Council stated, amongst other things, that the document of 10 September 2002 that was not up to date and that it was not persuaded that A's signature was genuine. On 1 November 2005 the claimant appealed against the decision of 19 July 2005.

The hearing before the tribunal and the reasons for its decision

9. After an earlier adjournment, the appeal was the subject of an oral hearing on 11 May 2005. Both the claimant and the Council were represented. The claimant and MI gave oral evidence on oath. In addition to the oral evidence, the claimant put before tribunal a copy of his rent book which on its face confirmed the nature of the tenancy the claimant contended existed, and a further letter from A dated 28 March 2006 which stated, amongst other things, that he had put MI in charge of "running" No. 20 and that because MI had been using his personal funds to "keep up payments" MI was the owner and A would be transferring the property into MI's name. The claimant's representative in written and oral submissions contended, amongst other things, that for the purposes of regulation 6 of the 1987 Regulations what mattered was whether there was a legal liability to pay rent to MI, and the question of whether MI had the right to let the property was not relevant to that issue. His representative submitted that the position was analogous to the decision in Governors of Peabody Donation Fund v Higgins [1983] 1 WLR 1091]where it was held that an assignment of a lease in breach of a covenant not to assign validly assigned the lease to the assignee, albeit that the landlord could proceed against the assignee for forfeiture. The Council also put in three written submissions in which it, in summary, maintained its position, including that there was no legally enforceable agreement because there was no reliable evidence to show that MI had the right to let the property.
10. The tribunal reserved its decision until 16 May 2006 when it incorporated its decision in a statement of reasons. The tribunal determined the appeal on the basis of the application of regulation 6 and did not make any findings in relation to regulation 7 on the ground that it had no application as the claimant failed to establish that he was to be treated as liable to make payments under regulation 6.
11. The heart of the tribunal's reasoning can be found in paragraph 25 of its statement where it stated:-

"26. To create legal relations the parties have to have the ability to do what they are trying to do. In the absence of clear evidence that [MI] was and is the agent of [A] he has no more right or ability to enter into a contract for the renting out of the property belonging to [A] than any other member of the public…..The tribunal was satisfied MI had no authority to deal with the property belonging to [A]. He had no legal ability to enter into any contract for the renting out of that property. It was not possible for him to enter into any legal relations with any person with regard to No. 20. Consequently there can be no legal liability to make payments in respect of No.20"

12. It is to be noted that the tribunal did not make any other findings as to the nature and terms of the arrangements between MI and the claimant in relation to No. 20.

Grounds of appeal and submissions

13. The claimant's representative in his grounds of appeal submitted, in summary, that the tribunal had erred in law by misdirecting itself that liability for the purposes of regulation 6 could not be established where the landlord had no right to grant a tenancy, and by failing to explain in its statement why it had rejected the argument to this effect.
14. The Commissioner in granting leave to appeal gave these reasons for doing so:-

" The tribunal based its decision on whether the [claimant]s ] brother had authority to let the premises to the [claimant]. It concluded that he did not and that therefore the [claimant] had no liability to pay rent. This does not accord with decision of the House of Lords in Bruton v London & Quadrant Housing Trust [1999] 3WLR 150. The tribunal did not make adequate findings of fact overall on the other relevant issues."

15. The Council in its submissions contended that the tribunal erred in law by failing to make adequate findings and give adequate reasons, in particular by failing to deal at all with the issues relation to regulation 7. It maintains its position in relation to regulation 6 that the claimant was not liable to pay, but does not address the decision of the House of Lords in Bruton.

The relevant law

16. Section 130 (1) of the Social Security Contributions and Benefits Act 1992 ("the 1992 Act") provides, so far as material :-

"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;…..

17. Regulation 6 (1) of the 1987 Regulations provides, so as material:-

"Subject to regulation 7….the following persons shall be treated as if they were liable to make payments in respect of a dwelling-

(a) the person who is liable to make those payments….."

18. Although liable is not defined by the 1992 Act or by the 1987 regulations, it is well settled that it connotes a legal liability and that such a liability will include a liability arising under a valid contract: see R v Rugby BC HBRB ex p Harrison [1994] 28 HLR 36 at 48/9 and R v Stratford-upon-Avon HBRB ex p White [1998] 31 HLR 126. The three key ingredients of a valid contract are: (1) sufficiently complete and certain agreement; (2) adequate consideration; and (3) an intention to create legal relations : see 27^th edition of Chitty on Contracts paras 2.001, 2.080; 2.099; 2.105 et seq; and 3.001 et sq.
19. In the context of contracts relating to the occupation of land, the contract may, and often will, also create an estate binding third parties. However, it does not follow that because a contract does not create an estate, that the contract ceases to have effect. In Bruton supra, the House of Lords was concerned with whether an agreement between a housing trust, who had been granted a licence by the owner of the premises to use those premises for temporary accommodation for homeless people, and an occupier of a flat within these premises constituted a licence or a tenancy. In allowing an appeal from the decision of the Court of Appeal that the agreement was a licence, Lord Hoffman, with whom the other law lords expressly agreed, addressed one of the arguments on which the majority of the Court of Appeal had relied – that the trust did not have an estate in the land such as to enable it to grant a lease – in this way:-

" In the leading majority judgment, Millett LJ said [1998] Q.B. 834, 845 that an agreement could not be a lease unless it had a further characteristic, namely that it created a legal estate in the land which "binds the whole world". If, as in this case, the grantor had no legal estate, the agreement could not create one and therefore did not qualify as a lease. The only exception was the case in which the grantor was estopped from denying that he could not create a legal estate. In that case, a "tenancy by estoppel" came into existence. But an estoppel depends upon the grantor having purported to grant a lease and in this case the trust had not done so. It had made clear that it was only purporting to grant a licence….

I must respectfully disagree at three critical points in the argument.

First, the term "lease: or "tenancy" describes a relationship between two parties who are designated landlord and tenant. It is not concerned with the question of whether the agreement creates an estate or other proprietary interest which may be binding upon third parties. A lease may, and usually does, create a proprietary interest called a leasehold estate or, technically, a "term of years absolute". This will depend upon whether the landlord had an interest out of which he could grant it. Nemo dat quod non habet. But it is the fact that the agreement is a lease which creates the proprietary interest. It is putting the cart before the horse to say whether the agreement is a lease depends upon whether it creates a proprietary interest.

[Counsel for the trust] relied on a dictum of Denning LJ in Lewisham Borough Council v Roberts [1949] " KB 608 where the question was whether the council, exercising delegated requisitioning powers under the Emergency Powers (Defence) Act 1939, was entitled to possession of a house. Denning LJ said , at p. 622:

'it is necessary to consider the nature of the power to requisition land. It is only a power to take possession of land. It is not a power to acquire any estate or interest in any land… Once possession is taken the crown can exercise all powers incident to possession, such as to licence other people to use the premises .. but it cannot grant a lease, or create any legal interest in the land in favour of any other person, because it has itself no estate in the land out of which to carve any interest.'

It seems to me that Denning LJ was focussing on the question of whether the Crown could create a legal interest in the land which would be binding upon third parties and said, correctly, that the Crown could not create such an interest without having an estate of its own. It is true that he said the Crown 'could not grant a lease' and this could be read to mean that the absence of a legal estate prevented the Crown from entering into the relationship of landlord and tenant. But I do not think that this is what he had in mind……

Secondly, I think that Millett LJ may have been misled by the ancient phrase 'tenancy by estoppel' into thinking that it described an agreement which would not otherwise be a lease or tenancy but which was treated as being one by virtue of estoppel. In fact, as the authorities show, it is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel. The estoppel arises when one or other of the parties wants to deny one of the ordinary incidents or obligations of the tenancy on the ground that the landlord has no legal estate. The basis of the estoppel is that having entered into the agreement which constitutes a lease or tenancy he cannot repudiate that incident or obligation……."

20. In Lambeth London BC v Kay [2006] 4 All ER 128 the House of Lords was concerned with further litigation relating to the occupiers of the building the subject of Bruton. The issue in Kay was whether the appellants who had also been granted a tenancy of their flat by the trust when the trust was only a licensee of the local authority owner became the tenants of the local authority after the local authority had terminated a lease to the trust which had been granted after the creation of the relevant tenancy. Whilst the precise reasons which the House gave for holding that the appellants had not become the tenants of the local authority are not relevant to this appeal, Lord Scott in his speech at p 176 paragraph 144 referred to an analogous situation which illustrates the principle applied in Bruton:-

" An analogous situation would arise if a person not the owner of land but in adverse possession of it were to grant a tenancy of the land to another. As between grantor and grantee there would be a valid 'non-estate'' tenancy. But unless and until the adverse possession had continued for the requisite 12 years the tenancy would not bind the true owner of the land. An agreement by the adverse possessor to deliver up the land to the true owner would not affect the rights of the tenant against him, but equally could not turn the tenant into the true owner's tenant or give the tenant any rights against the true owner."

21. Although Bruton was concerned with a narrower issue – whether the agreement in that case amounted to a tenancy or licence- and Kay also was primarily concerned with a different issue, it is clear from the speech of Lord Hoffman in Bruton and of Lord Scott in Kay that an agreement to grant a tenancy remains valid and effective as between the parties to the agreement even though the landlord did not have the power to grant an estate on interest which was binding on third parties.

Error of law

22. Although I have much sympathy with the difficult task faced by the tribunal in this case and appreciate that the most relevant legal authorities were not cited to it, I accept the submission of behalf of the claimant, and agree with the view expressed by the Commissioner in granting leave, that the tribunal erred in law by misdirecting itself that there could be no valid agreement creating a liability to make payments where the grantor had no power to let the property. Bruton and Kay establish that a party who does not have an interest in land such as to enable him to grant a leasehold estate or tenancy in favour of another party can nevertheless enter into a tenancy agreement with another party which is valid and effective between the parties to the agreement, albeit that the agreement will not be effective to create an interest or estate in land binding on third parties, including the registered owner of the relevant land. Whilst Bruton and Kay were concerned with cases where the landlord could not create an estate because he was only a licensee of the owner of the legal interest, in my judgement the principle in those cases apply equally to circumstances, as found by the tribunal in this case, where MI had no authority from the registered owner to let the premises. Thus, assuming that there was an otherwise valid agreement between MI and the claimants, such an agreement would be as binding and effective as between these parties, notwithstanding it could not confer on the claimants an interest or estate binding A. The tribunal in holding otherwise erred in law.
23. As a result of its misdirection, the tribunal failed to make adequate findings in relation to the issue as to whether at the date of the decision there was a valid agreement between MI and the claimants by which the claimants were liable to make payments in respect of No. 20.

Remission to the tribunal

24. I have no alternative but to remit the case for rehearing because, if it were found that the claimant satisfied the requirements of regulation 6 (about which I express no view), it would be necessary to investigate the issues in relation to regulation 7 on which no findings at all have been made and it is not expedient for me to make findings because I am not in a position to appraise the oral evidence given to the tribunal.
25. The new tribunal will have to consider all the issues afresh. In relation to regulation 6 the tribunal will have to investigate, make appropriate findings and determine whether a valid agreement in the sense explained in paragraph 18 above existed at the relevant time and gave rise to a liability to make payments in respect of No. 20. If the tribunal were to conclude that MI was not acting as the agent of A in relation to the relevant arrangements by which the claimants occupied No. 20 (as to which I express no view), it does not follow for the reasons explained above that a valid agreement could not have been reached. However, if it is concluded that it was known to both parties to the alleged agreement that MI was not in a position to enter into an agreement, that could be relevant to the question of whether the parties intended to enter into a legal relationship.
26. If it is concluded that the claimants fall within regulation 6, it will be essential to investigate, make findings and determine the issues arising in relation to regulation 7. But even if the tribunal were to find that the claimant falls outwith regulation 6, it would still be desirable, albeit on the basis of an assumption that regulation 6 is satisfied, to investigate the regulation 7 issues in case the matter is taken further.

(signed on the original) Christopher Whybrow QC

Deputy Commissioner

21 December 2006