UK Social Security and Child Support Commissioners' Decisions

 


[2007] UKSSCSC CH_136_2007 (23 August 2007)

CH 136, 141, 142, and 145 2007

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. I dismiss all the appeals. For the reasons below, the decisions of the tribunal are not wrong in law.
2. This is a joint decision about four appeals ("these appeals") heard together by the tribunal and later by me. One of these appeals (CH 136 2007) was selected as the lead case for full argument. I refer to the appellant and tenant in that appeal as B. Permission to appeal was granted by me on the grounds of appeal submitted for the appellants.
3. I held a case management hearing as well as a full hearing of these appeals. I did so because of issues that arose about the identities of the parties and those who were representing them in these appeals. Nathalie Lieven QC, instructed by Lewis Silkin, solicitors, represented the appellants. Alison Meacher of counsel, instructed by the Solicitor to Harlow District Council ("the Council"), represented the Council. Rebecca Vink of counsel, instructed by the Solicitor to the Department for Work and Pensions represented the Secretary of State for Work and Pensions.

REASONS FOR THIS DECISION

The issues in dispute

4. These appeals concern the nature of the tenancies held by B and three other tenants of accommodation within a dwelling house in the Council's area. I call that house "No 33". The appeals to the tribunal also concerned the housing benefit claims and tenancies of two tenants in an adjoining dwelling house ("No 35"). The tribunal gave a single lengthy decision about the appeals by all six tenants. Only the tenants of No 33 appeal to the Commissioner in these appeals so I am directly concerned only with the parts of the tribunal decision relevant to them. This decision therefore does not directly affect the tribunal decision as it relates to the tenants of No 35.
5. The Council refused housing benefit to B and all five other tenants of both No 33 and No 35. The decisions to refuse followed extensive discussions between the Council and others about the arrangements at No 33 and No 35. Initially the Council assessed B's liability for rent at No 33 as £140.64 a week. On further consideration the Council refused B's claim on 1 02 2005. It gave two reasons for this refusal as alternatives:

"1) The LA is satisfied that [B's] liability to make payments in respect of [No 33] was created to take advantage of the Housing Benefit scheme.

In such circumstances, regulations 6 and 7(1)(l) of the Housing Benefit (General) Regulations 1987, as amended, require that [B] is treated

as if he were not liable to make payments for [No 33].

In the alternative:

2) [B's] rent shall be subject to the rent restriction rules as provided

by the version of regulation 11 of the housing Benefit (General)

Regulations 1987, as amended, in existence as at July 2004."

Similar decisions were taken for each of the other tenants' claims for both No 33 and No 35.

6. It was not disputed that a local authority is entitled to take decisions in the alternative provided that it makes those decisions clear. It is in my view better practice for a Council to do this if possible rather than leave important matters undecided that may need deciding before an award of benefit can be made. If there is an appeal, it is obviously better to have the disputes dealt with at the same time. As to clarity, the Council's decisions are exemplary in their precision.
7. The tribunal dismissed all the appeals before it. The decision in B's appeal is

"the appeal is dismissed and the decision dated 1/2/05 is confirmed".

Miss Lieven QC, for the appellants in these appeals, argued only against the decision of the Council on the first of the alternatives. This relates to the application of regulation 7(1)(l) of the Housing Benefit (General) Regulations 1987 ("the HB Regulations"). Miss Lieven accepted that were she to succeed on these appeals, nonetheless the Council's alternative decision under regulation 11 of the HB Regulations still remained in effect to limit the awards of housing benefit. In other words, she did not contest the decision of the tribunal that all six tenancies were within the rent restriction (or "capping") provisions of regulation 11 of the HB Regulations. Put another way, the dwellings occupied by the tenants of both No 33 and No 35 were not "exempt accommodation" as defined in regulation 10(6) (savings provision) of the Housing Benefit (General) Amendment Regulations 1995 ("Regulation 10(6)").

8. The primary focus of this decision is therefore whether B and the other tenants of No 33 are to be treated as not liable to make payments in respect of No 33 by reason of regulations 6 and 7 of the HB Regulations.

The facts

9. In January 2004 Rivendell Lake Housing Association Ltd, a company limited by guarantee, ("RLHA") approached the Council to discuss proposed claims for housing benefit in the Council's area. This led to a meeting involving a meeting between representatives of RLHA, the Council, and Home Farm Trust Ltd ("HFT"). HFT was at that time providing care services to the appellants. The tribunal described HFT as "a highly reputable national organisation dedicated to assisting people with learning difficulties". The appellants are all individuals within the scope of HFT's primary concerns. This meeting was followed by a letter from RLHA containing what were described as indicative housing benefit claims. They were not specific claims. The tribunal found that the Council officials present considered that this meeting concerned proposals dealing with both No 33 and No 35. It also found that this meeting took place some time after the first steps that the tribunal considered to be relevant in what it termed the "project".
10. On 4 06 2004 a company registered in Jersey under the name of Supported Living Ltd ("SLL Jersey") purchased the freehold of No 33 for £465,000. Its address is given as care of Hextalls, 28 Leman Street, London E1 8ER. There was confusion at an early stage in these appeals between this company and a company of the same name registered in England and Wales. The tribunal also commented on the names and other issues about the existence of the two companies. After specific enquiry I am satisfied that only the Jersey company is relevant to these appeals and that mention of the English company by the appellant's solicitors when applying for leave to appeal was a genuine error. But I can understand why the Council was concerned about possible implications suggested by the erroneous mention of the English company at that stage in these appeals.
11. The papers contain a copy of a "Management Agreement – Support/Care Provider Relationship" stated as made between RLHA as the first party, SLL Jersey as the second party and HFT as the third party. The copy in the papers bears the following on the front sheet: " DATED _____________________2005." Inconsistently, at its head it has the typed date "30^th day of June 2004". The copy in the papers is signed for RLHA by Ross Beedle and for HFT by Peter Needham. It is not signed for SLL Jersey.
12. On 8 07 2004 SLL Jersey agreed a lease of No 33 to RLHA with effect from 4 06 2004 to 9 10 2033 ("the Lease"). The copy in the papers was executed as a deed by Ross Beedle and Tony Leatherbarrow for RLHA. The lease defines the approved use of the premises by the tenants as "use as a residential dwelling house for the provision of accommodation for a person or persons with physical mental or learning disabilities." The rent liability is:

"From and including 4^th June 2004 up to and including 3^rd June 2005 the sum of

£56,586.39 per annum and thereafter subject to an upward review as hereinafter

provided."

The review dates are defined as each anniversary of the commencement date (4^th June 2004).

Rent review is provided for in clauses 2 and 6 of the Lease. They are drafted in full commercial detail. In summary they provide for a pre-agreed rent increase for each year of the term of the Lease of the amount by which the previous year's rent should be increased to match the increase in the "all items" Retail Prices Index for the year plus one per cent. There is no other rent break or review in the 30 year tenancy created by the lease.

13. On 12 07 2004 RLHA agreed an assured tenancy agreement with B ("the Tenancy Agreement"). The Tenancy Agreement was signed by B, by an authorised signatory on behalf of B, and by someone on behalf of RLHA. It grants a tenancy of one room on the ground floor of No 33 to B at a rent of £381.47 a week to 31 03 2005. This is stated as consisting of a net rent of £350.50 a week, together with £20.04 for "landlords duty of care" and £10.93 for service charges. There is a detailed schedule of the costs, entitled a "rent calculator" that gives a specific itemised justification of each of these three sums.
14. On 14 07 2004 B made a claim for housing benefit and council tax benefit to the Council. The claim form states that the accommodation is not supported accommodation and that there are no charges in the rent for general counselling and support. It states that B is in receipt of disability living allowance and severe disablement allowance, and that a named person is receiving care allowance for B. The claim is countersigned by the same authorised signatory as the Tenancy Agreement. She identifies herself as a care provider service manager. She was the person who represented HFT at the meeting with RLHA and the Council in January 2004. B requested that the benefit be paid direct to RLHA, and the form is countersigned by the same person for RLHA as the person who signed the Tenancy Agreement.
15. On 8 10 2004 Ross Beedle of RLHA wrote a detailed letter to the Council about the failure to pay housing benefit in respect of the tenancies of B and the other tenants. By way of an indirect reply, the Council wrote to B on 22 10 2004 stating that his housing benefit

was initially assessed at £140.64 a week. After further correspondence and meetings, the Council issued its decision (as set out above) on 1 02 2005. This was followed by more correspondence including a request for, and provision of, an explanation of the decision. B authorised both RLHA and HFT to act for him in the matter. On 22 03 2005 the Council provided full reasons for its decision to B. Besides justifying the decisions it took in the alternative, this also raised a possible third issue that the agreement between B and RLHA might give rise to questions of legal enforceability. That issue was not pursued before the tribunal.

16. The parties maintained their respective positions and the matter was passed to the appeal tribunal. At that time B and the other tenants were represented by counsel and by the solicitors instructed to act for them by HFT. Neither B nor any of the other tenants took any active personal role in the conduct of the appeal, and it is fair to say that no one expected them to do so. HFT also made it plain in correspondence that none of the tenants had appointees.

The tribunal proceedings

17. The tribunal conducted the proceedings with necessary formality, issuing case management directions. A lengthy witness statement was filed for the Council by the officer who took the housing benefit decisions under appeal for the Council. There was also a witness statement by one of the Council's appeals officers. A formal skeleton argument was also filed for the Council. A witness statement prepared in an informal manner was filed by Ross Beedle of RLHA for the Appellants. There were also witness statements in proper form from officers of HFT and from one of the tenants other than B.
18. The appellants were represented by Daniel Kolinsky of counsel. The Council was represented by Alison Meacher of counsel (who also represented the Council before me). The tribunal conducted a lengthy oral hearing of the appeals over three days, 23, 24 and 30 03 2006. It is clear both from the length of the record of proceedings and the timings in it that the tribunal sat for an extremely long time on those days. It rose (save for necessary short adjournments during the day) over 12 hours after it started on the second day. I was told by counsel that this was because a witness refused to attend on any later date and so was heard in full on the second day. The tribunal sat again on 30 03 2006, again sitting for another extremely long day. As the tribunal itself noted, "a large number of voluminous documents were introduced during the hearing despite attempts to ensure advanced detailed disclosure". The tribunal record of proceedings records adjournments to receive and copy documents.
19. With hindsight, it is clear that the appeals should have been listed for hearing over a full week. I stress that because it is important to take full account of the extent of the argument before, and the examination and cross-examination of evidence conducted at, the hearing by the tribunal in assessing the extent to which points about the adequacy of the tribunal decision should carry weight in an appeal on points of law to a Commissioner. I also comment below on the adequacy of the rules under which an appeal tribunal sits when deciding, as here, complicated multi-party appeals involving large sums of money and difficult questions of fact and law. (The amounts of housing benefit originally in dispute exceeded £40,000 for each of the four appellants in this appeal, with similar sums for the other two tenants appealing before the tribunal, to which council tax benefit could also be added).

The parties to these appeals

20. Before turning to an analysis of the tribunal decision I must deal with an issue that exercised the Council considerably in these appeals, and which caused me to issue directions specifically to clarify the position of the tenants.
21. B and the other tenants were represented before the tribunal by the legal team appointed for them by HFT. The application to appeal to the Commissioner came from SLL Jersey. (It originally came from a company registered as Supported Living Ltd in England and Wales but, as noted above, I am satisfied that that was an error by the solicitors currently acting for B and the other appellants.) SLL Jersey are the owners of No 33 and therefore the head landlords of that dwelling. The Council questioned their authority to represent their sub-tenants in place of the original representation by the company responsible for providing care to those subtenants.
22. I was shown a county court consent order under which the tenants provided authority for their housing benefit appeals to be conducted by SLL Jersey, among others. Nonetheless I caused enquiries to be made to confirm for myself that the tenants and HFT did consent to the new representatives replacing HFT's legal team. I am satisfied that they are properly appointed as the representatives. Of course, the new representatives may have their own reasons for wishing to pursue this appeal. But they, the tenants, and HFT are all faced with one consequence of a problem that also affected the approach of the tribunal, namely the inability of the tribunal to add extra parties to appeals.
23. Much of the caselaw on regulation 7 of the HB Regulations is by way of decisions of the Administrative Court and the Court of Appeal on appeal from it. The caselaw therefore derives from applications made by any party in a position to apply for judicial review of the decision of the former Housing Benefit Review Boards. For example, in R v Manchester City Council ex parte Baragrove [1991] 23 HLR 337 the applicants were a large property management company. The focus of the Divisional Court in that decision was on the actions of the City Council as a housing benefit authority and not on the terms of a specific tenancy.
24. An appeal tribunal dealing with a housing benefit case is more constrained. Its procedures are governed by Schedule 7 to the Child Support, Pensions and Social Security Act 2000 ("the 2000 Act"), the Social Security and Child Support (Decisions and Appeals)

Regulations 1999, and the Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001 ("the 2001 Regulations"). Schedule 7, paragraph 6(3) of the 2000 Act gives a right of appeal against a decision on housing benefit to any person affected by that decision. But regulation 3 of the 2001 Regulations confines this in such a way as to limit the rights of appeal of landlords. They are to be treated as persons affected only if the decision under appeal is about an overpayment or about the direct payment of benefit to the landlord.

25. A point was taken before the Court of Appeal in Baragrove that the applicants did not have sufficient interest in making the application for judicial review. Stuart-Smith LJ dealt with the point expressly. He concluded after full discussion that in many cases the landlord would not have sufficient interest. But in some cases, including that case, there will be sufficient interest. In that case it was because the decision of that council "directly affects the rents receivable by the applicants" (see 23 HLR at 347). I did not hear argument on this point, but it is at least strongly arguable that Baragrove Ltd could not have been a party to an appeal against Manchester City Council before an appeal tribunal under the current legislation on the same point as it took in that case. The direct effect on its receipt of rent would not be enough to bring it within the scope of the provisions defining parties to tribunal appeals. Similarly, RLHA could not appeal directly against the decision taken by the Council refusing B's claim. (It is perhaps arguable that SLL Jersey would have had no sufficient interest as head landlord even under the Baragrove test given the fully commercial terms of the lease between SLL Jersey and RLHA). That is important when considering how to apply decisions such as Baragrove to the different judicial context of these appeals.
26. The tribunal also faces another limitation. Its powers are the same as an appeal tribunal hearing any social security appeal. It has no power to join additional parties either of its own motion or on application. Nor does it have power to admit any third party as a party to the proceedings at an oral hearing. Even if it had wanted to do so, it had no jurisdiction to add RLHA or SLL Jersey as parties to the appeal before it. They can take part in an appeal only as representatives of, or by their officers as witnesses for, a tenant claiming benefit or the local authority. Any conflict of interests between the tenant and the landlords – and any landlords of or financers to those landlords – must be dealt with otherwise than in the tribunal proceedings.
27. The Council was concerned that the case being put to the Commissioner was not the tenants' case but rather the case for the superior landlords. A Commissioner does have the power denied to an appeal tribunal to open proceedings to others. There is a specific power for the Secretary of State to be a party, and the Secretary of State exercised that power at my invitation in these appeals. I also caused enquiries to be made as to whether HFT or others wished to take part in the proceedings before me separately from the representation of B and the other tenants by the superior landlord. Having received replies from those enquiries, I was and remain satisfied that B and the other tenants are represented before me by properly authorised representatives. I am also fully satisfied, as indeed I would expect to be when someone is represented by lawyers of the calibre of the tenants' legal representatives in this appeal, that the tenants' case is being conducted entirely properly. There is therefore no ground on which I consider that I should exercise the power to invite or direct additional parties.
28. The tribunal was not in that position. If and in so far as it felt it had the duty to consider critically the actions of a third party on the evidence before it, then it was constrained to do so without being able to offer the third party what might be seen as the basic right in legal proceedings of defending or explaining itself. I must consider the tribunal decision with those important limitations in mind. In particular, I take no further the arguments put to me that the tribunal should have adjourned to receive other evidence if it was concerned about factual issues related entirely to third parties. Nor can the tribunal be criticised because it did not hear from any third party.

The tribunal decision

29. The tribunal, as noted, confirmed the decisions of the Council in respect of all the tenants of both No 33 and No 35.
30. The tribunal defined the scope of its decision as follows:

"The tribunal considered whether it should deal with the issue of whether the project constituted exempt accommodation and outwith of the current maximum rent provisions of regulation 11 prior to considering if this project in whole or part was caught by regulation 7(1)(l). The tribunal concluded that it could determine that matter without deciding definitively the exempt property issue (although later in this statement it explains why id does not consider the project is exempt accommodation).

Although Mr Kolinsky invited the tribunal to consider the matter in relation to each building. The decision before the tribunal was whether the appellant's rent as an occupant of the Project, doubtlessly ably run and administered by HFT, as a whole fell foul of regulation 7(1)(l). The tribunal does not have a declaratory jurisdiction whereby it can say if there were certain changes then there would be entitlement.

It has to look at this project as it was between date of claim and date of decision. The claims were based on being a resident in the project rather than part of it. (The staff "sleep in" provision is in No 33 but the occupants of No 35 are covered by this facility.)"

31. Despite the terms used in this passage, I am satisfied that later in its lengthy statement of reasons the tribunal dealt fully with the question of excessive rent and the application of regulation 11 of the HB Regulations as an alternative decision, finding for the Council. Its hesitancy here appears to be because it found for the Council on the regulation 7(1)(l) decision so in its view rendering a decision on the other point strictly unnecessary. In my view the tribunal rightly decided both parts of the alternative decisions. The appellants did not dispute before me that part of the tribunal's decision or the power of the tribunal to decide it. Were I to agree the appellants' appeal now before me, that part of the Council's decision and therefore of the tribunal's decision would have continuing effect subject only to a further appeal from my decision.

A single project?

32. The other point that is clear from this initial scoping part of the tribunal's reasons is that it formed the view that it was looking at what it termed "the project" as a whole, and that it was not looking separately at each tenancy or at arrangements for No 33 as separate from No 35. But I have only the appeals about No 33 before me, and a strong argument that the issues related to No 35 are not relevant to No 33. It is therefore important to identify why the tribunal regarded the appeals as concerning a single project and also to consider if the tribunal's approach was one it was permitted to take in law.
33. The tribunal drew on the evidence from the hearing and documents to start its chronology of events some time before the facts recorded above. In its view the story started the year before. It found that the project started when HFT needed to find new funding to improve or replace accommodation for people with learning difficulties at a home elsewhere in England. The tribunal records that HFT held a "beauty parade" to look for financers for its developments in May 2003 and that RLHA was at that parade. It notes that RLHA was incorporated a matter of days before that beauty parade. Apparently by coincidence, HFT was approached at that time by individuals and a family trust about both No 35 and an individual who needed substantial care and who lived at No 35.
34. The tribunal formed the view that the initiative for the project involving both No 33 and No 35 came from HFT. Nonetheless, it recognised that the funding arrangements for the purchase and adaptation of No 33 were separate from those for No 35. But it also identified what it clearly regarded as cross-over features between the two properties at several stages of the project. In particular, it found that the specific proposals for a project for No 33 and No 35 together formed part of the solution to HFT's problems following from the difficulties at the other home and that this approach emerged after the individuals who approached HFT about No 35 drew the attention of HFT to the fact that No 33 was for sale. This was in August 2003. The tribunal also found that HFT staff "looked at the two properties and identified its potential as a single site". HFT also identified two residents at its other location who could be accommodated there.
35. The tribunal went on to identify what it saw as other common features between the arrangements for acquiring and using the two separate houses. These included the fact that Bosworth Klein Properties Ltd, the company that took part in the acquisition of No 35, shared common premises with the company that provided what was described as "mezzanine finance" for the acquisition of No 33. This was Hamilton Corporate Finance Ltd, whose name appeared on the front page of the lease of No 33 from SLL Jersey to RLHA. The tribunal further found that Bosworth Klein Properties Ltd was incorporated at a time when officers of RLHA were aware of the possibility of a project at No 33 and No 35 and that the then director of RLHA, Mr Beedle, was one of the four shareholders in Bosworth Klein Properties Ltd, with a 25 per cent personal shareholding. It also found, expressly rejecting the evidence of Mr Beedle, that director, that RLHA was not involved in identifying either No 33 and No 35 or prospective tenants for those properties. In other words, the tribunal expressly found on direct evidence, including that of Mr Beedle, that he was not only director of RLHA but was also was also a significant part owner of the company that was RLHA's landlord of No 35, and also that "the project" came into existence separately from the involvement of RLHA as intermediate landlord of both No 33 and No 35.
36. The tribunal further considered the financing of No 35, and then the financing of No 33. As part of its findings on No 33 it made a number of comments that were strongly criticised by Miss Lieven QC. In particular, the tribunal found that SLL Jersey received funding from a named German bank. It comments:

"No credible explanation was apparent as to why the housing association [RLHA]

could not have borrowed directly from the German bank."

37. The tribunal concluded its survey of events relating to No 33 with a comment on the terms of the lease of No 33 allowing SLL Jersey to stand in the shoes of RLHA "for the transfer of all the housing associations assets pursuant to clause 8 of the lease but the lease did not have a clause 8." The tribunal is correct in observing that there is no clause 8. It will be a matter for consideration as a point of law whether that renders the power of attorney in the first schedule to the lease invalid. But I see no relevance in that point to this decision save in that if effective the arrangement emphasises the commercial nature of the agreements between SLL Jersey and RLHA.
38. The tribunal then turned to the decisions and arguments before it. It noted that the Council regarded the project as a single project. Miss Meacher took that view firmly in argument before the tribunal. By contrast, Mr Kolinsky argued that the tribunal should consider whether No 33 would be viable in its own right. Mr Kolinsky also tried to disown the evidence of Mr Beedle. The tribunal clearly accepted Miss Meacher's arguments.

Regulation 7(1)(l)

39. The test to be applied by the Council and tribunal is drawn from regulations 6 and 7 of the HB Regulations. The relevant provisions are:

"6 Circumstances in which a person is to be treated as liable to make payments in respect of a dwelling

(1) Subject to regulation 7 … the following persons are to be treated as if they were liable to make payments in respect of a dwelling …

7 Circumstances in which a person is to be treated as not liable to make payments in respect of a dwelling

(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 -

…

(l) in a case to which the preceding sub-paragraphs do not apply, the appropriate authority is satisfied that the liability was created to take advantage of the housing benefit scheme established under part VII of the Contributions and Benefits Act."

40. This test has been the subject of much litigation. But it does not assist on the first that arises in these appeals. Was the tribunal acting within its powers in concluding that the evidence of the arrangements with regard to No 35 was relevant to its view of the arrangements with regard to No 33? Undoubtedly it did take that view. And undoubtedly it took a strongly adverse view about part of the arrangements about No 35. But those arrangements did not in strict legal form directly involve either B and the other tenants of No 33 nor SLL Jersey, although the tribunal clearly concluded that RLHA as intermediate landlord was directly involved in the arrangements for No 35, as was Mr Beedle. In arguments before me, Miss Lieven assumed that No 33 could and should be looked at separately from No 35, while Miss Meacher maintained her view that there was on the evidence a single project. Miss Vink had no views on the point.
41. Regulation 7(1)(l) refers only to the creation of the liability to make payments. It does not take into account events beyond that time. In Baragrove the Court of Appeal looked at arrangements involving the landlord. As Stuart-Smith LJ commented in that case, "the tenants were of course ready to go along with it". That appears to be the position here, certainly as far as the current stage of these appeals. The tribunal expressly exempted B and the other tenants from any adverse conclusions about the arrangements made. It also exempted HFT from any similar adverse comments. It clearly found HFT to have been involved in the arrangements. Its criticisms were focussed on RLHA as the landlord and the financial arrangements and structures involved in the separate purchases of No 33 and No 35.
42. The original approach to the Council was made in connection with both No 33 and No 35. These were seen by HFT as a single project, and were developed at the level of delivery as a single project. As noted, the tribunal expressly found that this predated the involvement of RLHA. But RLHA became the common immediate landlord. And there was a common use of the properties by RLHA and the service providers together in providing the necessary support to the tenants. All those were in place at the time when B's liability to make payments was created. So they are all relevant to the nature of the arrangements created for B's tenancy.
43. Was the Council, and then the tribunal, entitled to look at the evidence about the history of the project as a whole up to the time when the liability was created? In my judgment that is essentially a question of fact. The authorities, including Baragrove, clearly show that the decision maker is entitled to look beyond and behind the specific tenancy agreement that gives rise to the specific housing benefit claim when considering regulation 7(1)(l). In considering the question, the tribunal may look at any relevant evidence about the circumstances leading up to and resulting in the creation of the tenancy. The question whether the tribunal could and should approach the decision on B's application by taking into account the project as a whole, and not simply the specific arrangements at No 33 relating to B's tenancy, therefore depends on the evidence before it. How, on that evidence, did the liability come to be created? The tribunal examined that question in detail and its conclusion is clear. It considered the matter to be a single project.
44. I conclude that on the findings it made, and for which it had evidence, the tribunal was entitled both in law and in fact to have regard to the project as a whole in reaching a decision about B's tenancy of No 33 and about each of the other five tenancies in No 33 and No 35, and also that it was appropriate for the appeals to be heard together. It was therefore entitled to have regard to all relevant evidence about those aspects of the project that included the arrangements for No 35 as well as those for No 33, and the project as a whole, in forming a view about whether regulation 7(1)(l) applied to B's tenancy. While I agree with Miss Lieven that the issue before the tribunal was whether there was evidence upon which it could conclude properly that there was a contrived tenancy in respect of No 33, I do not agree that it is evidence about No 33 only that is relevant to that conclusion. The tribunal took a view that it was fully entitled to take in looking at the project as a whole and the interlinkings between different parts of the project.

Was the project created to take advantage of the housing benefit scheme?

45. I now turn to Miss Lieven's second issue, namely whether the tribunal proceeded on the basis of no evidence, or whether its reasoning was inadequate for the conclusions it reached on contrivance. Before analysing the tribunal's findings and reasons I must set out and consider the arguments put before me by all parties about the nature of the test being operated by the tribunal in these appeals. The relevant terms of the test in regulations 6 and 7 of the HB Regulations are set out above.
46. Miss Lieven argued that attention must first be given to the nature of the liability that was created before considering the nature of the events constituting the creation. She argued that the scope of "exempt accommodation" under Regulation 10(6) was in point on this. That illustrated a deliberate policy by the Secretary of State to make housing benefit available to those needing special facilities where those facilities were provided by a housing association or similar body. The appellants in these appeals were all disadvantaged individuals needing care and support. They had been selected for the project with that in mind and that selection process simply furthered the statutory scheme as set out in Regulation 10(6) and regulation 11 of the HB Regulations.
47. She drew on the Court of Appeal decisions in R v Stratford upon Avon DC ex p White, 31 HLR 126 and Baragrove to identify how the test in regulation 7(1)(l) is to be applied to tenancies of that kind. In White Peter Gibson LJ commented of the phrase "created to take advantage":

"whilst in one sense the liability to pay rent was created to take advantage of the housing benefit scheme, I cannot believe that it was intended that housing benefit should be denied on that ground. The answer, in my opinion, lies in giving the words "take advantage" its common meaning of avail oneself unfairly or improperly".

It is common ground that the test in regulation 7(1)(l) should, in the light of this authority, be read as meaning "created to take advantage unfairly or improperly."

48. Miss Lieven argued, following the same approach as that of Mr Kolinsky before the tribunal, that Baragrove was quite different to these appeals. These appeals are not cases where the landlords targeted vulnerable tenants. The accommodation provided was special accommodation. The choice of the tenants was fully consistent with the approach of Regulation 10(6).
49. Miss Meacher prefaced her argument by a reminder that the appellants had not appealed against the decision of the tribunal that Regulation 10(6) did apply to the tenancies and that they were not within the definition of exempt accommodation. She rested her approach on the submission that the purpose of Regulation 10(6) is to cater for tenants whose rent is higher than normal because of the additional cost of providing the tenants with care, support and supervision. It was not to provide landlords with additional funds to meet the costs of using the commercial market to finance purchase of accommodation. She submitted that Baragrove is the leading authority on this point and that it applied directly to these appeals. It was clearly open to the Council and the tribunal to look at the funding arrangements. They were not only entitled but also required to consider whether the landlord or some third party had manipulated the funding arrangements in such as way that it could rightly be said that the tenancies were created to take improper advantage of the housing benefit scheme. Baragrove is directly in point on this.
50. Miss Vink, for the Secretary of State, also supported the approach taken by the Council and the tribunal, but she did so on a slightly wider ground that Miss Meacher. In her view it did not have to be shown that the facts were the same as those in Baragrove. That was not the only situation in which the regulation would apply. What was important was the approach of the Court of Appeal in that case. Nor was it necessary to make a finding of improper conduct verging on bad faith for the test to be met. In her view the tribunal had applied the language of the regulation properly to the facts and reached a conclusion that was not wrong in law.

The tribunal's application of the test

51. Baragrove was the only authority to which the tribunal made express reference in its reasons, although several other decisions of the courts and Commissioners are in the papers. On those other authorities, the tribunal commented that they were "both informative and useful but none were on this specific and what appears to be a somewhat unique point". Of Baragrove the tribunal commented:

"The tribunal had the advantage of receiving detailed submissions by both counsel on the decision … That was a case concerning a letting agency that specifically advertised for people from vulnerable groups and charged them excessive rents knowing that they would be difficult to limit under the Housing Benefit scheme. Manchester's decision that the tenancies had been established to exploit the scheme was upheld in the Divisional Court. The DWP guidance in its HB/CTB guidance at 3C.00 issued on April 2002 states that the decision has wider application than the narrow facts of the case. Miss Meacher argued that the Baragrove approach should be adopted and Mr Kolinsky argued that the facts were so different that it would be wholly inappropriate. Namely there was no targeting of clients because the housing association was invited by HFT to establish a project and that is what it has done. The tribunal should not be distracted by Mr Beedle and his multi-layered involvement in the project."

52. The tribunal's conclusion, absorbing the White test as well as Baragrove, was:

"In this case a vulnerable group of tenants and their potential eligibility for escaping the maximum rent provisions were identified as a means of taking advantage of (abusing) the housing benefit scheme. In consequence the tribunal was satisfied that regulation 7(1)(l) was correctly applied in each of the appellants' cases.

In essence the tribunal concluded that a local authority was entitled to look behind the rent charged and consider the trading structure involved and if alerted to the risk of abuse it was entitled to apply regulation 7(i)(l) as it has done in this case."

53. It is clear from this that the tribunal identified the test to be applied accurately. It was right that it needed to look for some abuse. It was right in concluding that it and the Council could look behind the precise terms of the tenancy to the structure behind it to identify any abuse. And it was right, if it so found on the facts, to apply the approach of the Court of Appeal in Baragrove as to targetting to these appeals. I agree with Miss Meacher that it did look at that issue and make relevant findings.
54. Miss Lieven also criticised the findings made by the tribunal about the tenancies as made without evidence. She particularly criticised the following passage in the tribunal's findings. The passage follows the tribunal's comments on the caselaw and in particular on Baragrove although it does not flow directly from the preceding passage. Rather, I read it as a reflection on the case as a whole. It also encompasses findings of fact:

"… [the tribunal] has had ample time to consider and reflect on this case and there is one aspect that remains inescapable and that is the distinct odour of secret profit. With respect to No 35 it is abundantly clear that Bosworth Klein Properties Ltd was set up as a device to enable the rent of the property to be inflated from the fixed long terms peppercorn rent of £1 a year that the prior resident appellant's family trust required to the index linked £22,500 rent charge to [RLHA]. Despite the denials of Mr Beedle there is no other explanation given the timing of the company's establishment, the indisputable overlap of principal players, the truly gargantuan uplift in the annual rent and the complete absence of any plausible alternative explanation. With regards to No 33 it is clear that the vendors asking price but there was no plausible explanation as to why [RLHA] could not have raised the month from the German Bank directly given the bank's willingness to lend to Renaissance. The tribunal was given no explanation as to whether the money was raised at Eurozone rates which were lower at the time or UK interest rates but whichever rate was charged the agreed index linked rental of retail price increase plus a 1% annual uplift apparently locked into housing benefit, not subject to Rent Office control, made it appear a sound investment. Despite the absence of direct evidence but given the evidence of the involvement of Mr Beedle with Bosworth Klein Properties Ltd and No 35 the tribunal was satisfied that SLL Jersey was a front and that there was no apparent reason why [RLHA] could not have raised money directly from the German bank, which had clearly been prepared to lend into this sector with Renaissance which Mr Beedle and others had been linked with. The tribunal was therefore satisfied that the financial arrangements that created Bosworth Klein Properties as superior landlord or No 35 and SLL Jersey as the superior landlord of No 33 were devices with the intent of taking an undisclosed (secret) profit by granting tenancies upon the basis that the rental was not going to be restricted by regulation 11.

The question remains whether the setting up of a mechanism to inflate apparent cost to enable the taking of an undisclosed profit is enough to run foul of regulation 7(1)(l). Is it any different to having very astute accountants who ensure that minimum tax is paid? In the case of No 35 is it a matter for the trustees and in the case of No 33 for the fiscal and regulatory authorities as opposed to the local authority?

55. The "steam of consciousness" approach of the tribunal in this part of its decision is helpful in showing how the tribunal approached its decision making. But it is a dense text and requires considerable deconstruction in order to identify if the tribunal, in adopting this approach, went beyond the limits of the evidence before it, or reached a conclusion on its findings of fact that it failed to explain adequately.
56. Miss Lieven's strongest criticisms were aimed at the tribunal's comments about SLL Jersey. In making those comments, she felt required to explain some background issues. I accept from her - though I emphasise this was not before the tribunal in any form - that SLL Jersey was not a "front" in that it was and is an independent party in the project. I also accept that SLL Jersey was not aware at the time of issues put to the tribunal about some of the arrangements, particularly with regard to No 35, that involved Mr Beedle. And I note that she contends strongly that the tribunal could not rationally have concluded that there was no "plausible" reason why RLHA had to raise money through SLL Jersey rather than directly from the German Bank.
57. Miss Meacher robustly defended the tribunal in its confirmation of the Council's decision. Miss Vink was content to make general comments only and not join in the contest on specific findings.
58. The tribunal noted that it did not have any direct evidence on the points made about SLL Jersey. It was drawing inferences from the evidence it did have, including evidence of which it was strongly critical. Two questions arise at this stage accepting, as I do accept from Miss Lieven, that SLL Jersey was not a "front" in the sense that it was not a creation of RLHA or otherwise a shell and that it was not involved in the activities of its tenant RLHA, or its tenant's tenants, beyond the formal legal arrangements on the record. The first of the questions is whether the tribunal made findings for which it had evidence. The second and crucial question is whether any findings made without evidence played such a part in its reasoning process that the decision of the tribunal as a whole is called into question.
59. In approaching those questions at the appellate level, I am concerned only with errors of law. I take as accepted fact those parts of the decisions of the tribunal that have not been subject to appeal. My starting point is therefore to note that the findings about No 35 have not been challenged. Nor have I seen or heard any challenge to the conclusions formed by the tribunal about the involvement of RLHA and Mr Beedle in the project as a whole or any part of it.
60. What I termed the stream of consciousness shows that the tribunal reached its conclusions by reference to several different aspects of the project as a whole as well as its application in the two separate properties. It also strongly illustrates that it did not rely on any specific "killer" facts in so doing. Indeed, the advantage of its "stream of consciousness" approach is precisely that it illustrates that the tribunal took an overall view that took account of, and put weight on, a range of factors.
61. Key among those were the conduct of RLHA and of Mr Beedle. The reasons make clear that its thinking was strongly influenced by the way in which the purchase of No 35 was structured. That thinking and the criticisms of the tribunal based on that thinking have not been challenged. I have the benefit of having read the full and lengthy record of proceedings of the tribunal. I am not surprised, having done so, that this aspect of its decision was not challenged. And I am not surprised that the tribunal was strongly influenced by the conclusions it drew on this aspect of the appeals. I have already agreed that the tribunal was fully entitled to regard the project as a whole in assessing the individual tenancies. And I have already noted that RLHA was an essential part of both the project as a whole and each of the separate tenancies. I can therefore see no reason why, as a matter of law, the tribunal's thinking about all the tenancies should not be influenced by those findings.
62. Another set of considerations that clearly influenced the tribunal strongly was the effect of the specific terms of the leases to B and the other appellants. These were long leases with high and ever-increasing rent liabilities imposed on the tenants. There were clearly arguments before the tribunal about how the precise rent levels were reached, and the tribunal had full evidence on this. While that may, depending on other considerations, show full justification for the rents set at the start of the agreement, I consider that the tribunal was justified in looking at the agreements as a whole, and putting weight on the length of the terms and the automatic escalation of rent, year on year, above the rate of inflation without a break. The Council had highlighted some of these issues in its own approach, so the points were ones of which the parties had notice. The tribunal was not offered evidence that RLHA had entered these arrangements in accordance with usual commercial practice. But even if that evidence was produced, it does not follow that the commerciality of part of the project justifies non-commerciality in other parts.
63. The tribunal also took into account its view of the application of Baragrove to the facts. All the tenants of No 33 were tenants who had no obvious way of paying their rents (or council tax) save through the direct funding by the Council drawing on public and local funds. In that context, the tribunal could and did find that the project as a whole was aimed, and could within its own financial terms only be aimed, at tenants who had that access to funds. Ordinary tenants would not need all the facilities that those tenants were paying for, even if otherwise the rents were market rents. I can see no error of law in the tribunal taking that issue fully into account as well.
64. With specific regard to SLL Jersey, the tribunal found that its insertion in the process was "unnecessary" and was "an intentional device to covertly squeeze a large hidden and secret profit". It is clear to me that in so far as the tribunal regarded SLL Jersey in respect of No 33 in the same light as the other intermediate landlord in respect of No 35, then it was going beyond the evidence before it. But at the same time the tribunal was entitled to conclude that the way in which the project as a whole was structured, with RLHA using an intervening level of landlord between it and the separate sellers of No 33 and No 35, was questionable. I do not consider that it was entitled thereby to criticise SLL Jersey as a party to any "secret profit". If that it what it meant by saying that SLL Jersey was a "front" then I consider it had no evidence on which to conclude that SLL Jersey was other than a third party providing finance at arm's length. But if it meant that neither SLL Jersey nor any other intermediate was necessary, but was used – perhaps entirely unwittingly - by others to provide some sort of commercial face to a part of the total structure that they wished to create, then the tribunal did have evidence for that. It is that approach that I draw from the thoughts of the tribunal set out above. The tribunal was entitled to look at the way in which RLHA set about financing the purchase of both the project properties as entirely relevant to any views taken about the project as a whole and also of its parts and the individual tenancies created within the project.
65. Miss Lieven focussed particular attention on the finding by the tribunal that there was no "plausible" explanation for RLHA not having raised finance from the German bank, or elsewhere, directly rather than through SLL Jersey. The tribunal, in passages quoted above, used alternative phrases to describe its views about the indirect approach to buying and financing the purchases of the two properties adopted by RLHA. While it used "plausible" as its comment about the involvement of SLL Jersey at one place in its reasons, the term used in the lengthy passage cited above is "apparent". That is a different matter given the accepted absence of direct evidence on which the tribunal commented. The use of the different phrases shows an unfortunate lack of clarity but it also suggests that the tribunal's thinking was less clearcut on this issue than Miss Lieven argued. The tribunal heard evidence at length from Mr Beedle and others about the way in which the purchase of both properties were arranged. It had before it all the documentation that the then representatives of the appellants thought appropriate ahead of the hearing to explain those arrangements. While I accept Miss Lieven's argument to the extent that I can think of a number of plausible reasons why, in the abstract, RLHA might have gone through SLL Jersey to the commercial money markets to finance No 33 and not direct to the commercial banks, I do not consider that as a matter of law I can say that the tribunal was wrong in concluding on the facts in these appeals that there was no apparent reason – that is, no good reason that appeared from the evidence – why RLHA went separately and indirectly about the process of buying the two properties tied up in its project. Nor do I consider that comment necessarily to be a criticism of SLL Jersey as the chosen intermediary for one of the properties. Nor do I consider that I should find the tribunal to have erred in law simply because it used these alternative phrases. They must both be read in the context of the tribunal record as a whole.
66. Miss Lieven also subjected a number of other aspects of the tribunal's findings and reasons to close forensic examination. But I do not consider it necessary to reach a conclusion in these appeals to follow further through the deconstruction of the tribunal's decision or the arguments put by Miss Meacher against that deconstruction. I am left with the view that, taken in total isolation, there is good ground for some of the criticisms made before me in the name of B and the other appellants by counsel in respect of the findings about SLL Jersey.

But on all other aspects of the appeals and of its proceedings and reasons the tribunal clearly had more than adequate evidence and grounds on which to confirm the decisions of the Council and also that it identified more than adequate grounds in its findings and reasons.

67. Were SLL Jersey itself a party before me and also before the tribunal, then there would be an obvious direct focus for the criticisms of the tribunal's criticism of it. But SLL Jersey was not a party to the proceedings before the tribunal. And no criticism has been made by anyone before me about the tribunal's findings about the parties or witnesses who were in front of it. Nor does the tribunal's decision apply directly to SLL Jersey so that it can in its own name appear before me as an appellant. It is therefore not party to, or bound by, the decision of the tribunal in any way.

Did the tribunal make a material error?

68. The only remaining question is therefore whether the tribunal, in its criticisms of a third party recorded expressly as made without direct evidence, committed an error or errors of law such as to undermine the validity of the decision it did take about the parties and witnesses who were before it. The tribunal's views about SLL Jersey were ambiguous in more ways than one. I read them essentially as criticisms of others not of SLL Jersey. But even if I accept for the sake of argument the more adverse view of the comments taken by Miss Lieven it does not follow that they undermine the decision of the tribunal about the parties before it to such an extent that I am required to set it aside for error of law.
69. The key test is whether the tribunal has transgressed to the extent that I should find it erroneous in law as a whole. That test was recently formulated in R (Iran) v Secretary of State for the Home Department [2005] EWCA Civ 982. The judgment of the Court of Appeal, at paragraph 9, set out guidance intended for those hearing immigration appeals but with much wider significance in my view. In respect of the usual grounds for appeal about perversity, failure to give adequate reasons, and reliance on irrelevant matters, it repeated that each of these tests is to be judged with reference to "a matter or matters material to the outcome".
70. Were the findings of the tribunal with regard to SLL jersey "material to the outcome"? SLL Jersey gave no evidence to the tribunal either directly or through any officer. It was not a party to the proceedings. The tribunal could not and did not make any adverse finding about credibility or reliability about SLL Jersey because SLL Jersey was not before it. The main criticised conclusion of the tribunal was that it recorded finding that SLL Jersey was a "front". By that I take the tribunal to be saying that it took the view that it was either a creation of no independent importance or that it was used wittingly or otherwise as an intermediary in a transaction essentially involving others. Was that material to the outcome of the appeals? On balance, I consider not. As I have emphasised, these were complicated multi-faceted appeals. They were decided on the balance of probabilities. The tribunal identified more than enough reasons to dismiss the appeals against the Council's decision without any reference to SLL Jersey. The Council itself took no view about SLL Jersey that put the involvement of SLL Jersey in issue before the tribunal. The tribunal could and did make adverse findings about evidence that was before it, and its conclusions about the involvement of SLL Jersey and other third parties stemmed from that evidence. It considered all the evidence that was properly before it and it heard all the parties that were properly before it at length. It applied the right test in law to the questions before it. It reached a conclusion for which it had evidence, and it adequately explained its conclusions.
71. I therefore dismiss the appeals.
72. The parties invited me, if I decided to allow the appeals, to redetermine the appeals myself. With that in mind I take the liberty of commenting on the merits of these appeals as I see them. Had I been asked to determine the appeals again on all the evidence and taking into account Miss Lieven's comments, I would have confirmed the decisions of the Council. I consider that the Council not only reached decisions that were justifiable in law but that on the evidence it was right to look at the project as a whole. Indeed, I do not see on the evidence how No 33 and No 35 could properly be looked at separately. The Council was also right to reach the decisions it did about the tenancies being contrived. This is regardless of the specific nature of the involvement of SLL Jersey. Even if I assume (not having heard evidence) that one part of this multi-part project can be shown to be a robust commercial deal at arm's length, that does not remove the non-commercial and abusive aspects of other parts of the project nor does it convert the project into something uncontrived.

David Williams

Commissioner

23 08 2007