Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/171/2011

ADMINISTRATIVE APPEALS CHAMBER

Before Judge Mark

Decision:  The appeal is allowed.  I set aside the decision of the tribunal and substitute my own decision dismissing the claimant’s appeal from the decision of the local authority made on 26 May 2009 that the claimant was not entitled to housing benefit.

REASONS FOR DECISION

1.     The claimant was born in June 1991.  Sadly, she is profoundly physically and mentally disabled and has apparently been so disabled from birth.  Her parents have gone to great lengths to care for her as best as they can and have had a home specially constructed for her.  This has severely stretched their financial resources.  She has round the clock carers.  Her parents have stated that they could not afford to continue providing this home unless they could receive rent from their daughter to offset the mortgage payments they are having to make in respect of it.

2.     The present application is based on a tenancy agreement dated 26 February 2009 expressed to be between the claimant’s father and the claimant in which the father is described as the landlord and the claimant as the tenant.  It is expressed to be for an indefinite term from 20 December 2008 at a rent of £694.98 per month.  It is signed by the father as landlord, but in the space for the claimant’s signature it is stated that the claimant “is profoundly disabled and cannot communicate at all.”  Except insofar as she can communicate emotions, that statement is borne out by the other evidence in the file. 

3.     Although in February 2010 an order was made in the Court of Protection giving her mother power to act in certain respects on behalf of the claimant, there was no such power in place before that.  The result was that there was nobody with power to contract on behalf of the claimant before that time.

4.     A tenancy agreement requires two parties – the landlord and the tenant.  Here the claimant was not, and was incapable of being, a party to any agreement.  Regardless of her capacity to consent, she could not and did not communicate any agreement to the tenancy and I infer that she could never have been asked to.  There simply was no such agreement, and therefore no liability to pay rent.

5.     The tribunal dealt with this issue as follows:

“[The representative of the local authority] put forward the rather technical arguments that the tenancy agreement was not signed by [the claimant] and “without a signature, there is no acceptance to the contract from the appellant, making the said contract invalid”.  This is clearly not correct.  There is absolutely no doubt that a party can enter into a legally binding contract to make payments in respect of their occupation of a dwelling, without anything at all being reduced to writing….  The real issue is whether [the claimant’s parents], either together or individually could bind [the claimant], make her subject to the terms and conditions of the contract.  I have no doubt that the answer to this is yet, subject to the contract being voidable.  [The claimant] accepted the benefits of the contract, namely occupying the property as her home, and therefore was subject to the obligation, that is to pay rent.  Notwithstanding her lack of capacity, she was bound by the terms and conditions of the contract, and the contract was voidable and not void.  I rely upon Commissioner (as he was then) J Mesher’s decision in CH/2121/2006.  It cannot possibly be a correct statement of the law that a person under a disability can never take advantage of the terms of a contract.  The contract is voidable but not void.  [The claimant] was liable to make payments in respect of a dwelling in Great Britain which she occupied as her home.”

6.     I agree that the absence of a signature is not by itself fatal if there is in fact an oral agreement or a contract to be inferred from all the facts.  I also agree that the real issue is whether the parents could bind the claimant.  The problem is that they had no such power without the authority of the Court of Protection, which they did not have.  Even the order obtained in February 2010, apart from being after the date of the decision under appeal, is prospective and not retrospective in operation.

7.     It appears to me that Commissioner Mesher’s decision in CH/2121/2006, and that of Commissioner Henty in CH/663/2003, must have proceeded on the basis that there was in each case a contract. In Hart v O’Connor, [1985] AC 1000, the rules as to mental capacity to contract were reviewed by the Privy Council and at pp.1018-1019, Lord Brightman, in delivering the reasons of their Lordships for allowing the appeal in that case stated the development of the law to have been as follows:

“The original rule at law, and still the rule in Scotland, was that a contract with a person of unsound mind was void, because there could be no consensus ad idem.  This was later qualified by a rule that a person could not plead his own unsoundness of mind in order to avoid a contract he had made.  This in turn gave way to a further rule that such a plea was permissible if it could be shown that the other contracting party knew of the insanity.”

8.     I take this to mean that even if on the face of it there has been a contract, it is void if the one contracting party knew that the other contracting party lacked sufficient mental capacity to reach such an agreement, because the first contracting party would have been aware that the other party was not consenting to the agreement.  I have some difficulty in seeing how, in CH/2121/2006, the parents, with whom the contract was said to have been made, could have failed to be aware of the inability of their children to consent in the light of the finding of the tribunal that the claimants were so limited that they had no inkling of the concept of an agreement and a liability, but at least the claimants in that case were able to attend the hearing and communicate to a degree.  There may have been facts in those cases which may have justified the conclusion that there was some form of voidable agreement but that is plainly not the case here.

9.     In the present case, the absence of any agreement is manifest.  So too it cannot be said, as it was in CH/663/2003, that the claimant has taken the benefit of the agreement and must therefore pay the rent.  The claimant has no knowledge or understanding of any purported basis on which she is staying at her home, or of any change of that basis when her father signed the purported agreement.

10. I conclude therefore that she had no liability to pay rent by reason of a document to which she was not a party and of which she had no knowledge or means of knowledge.  Nor is there any other basis on which any liability for rent could be imposed on her prior to the date of the decision.  I have considered whether it might be said that she has some liability to pay some sum for her occupation under one of the other bases set out in paragraph 12 of the Housing Benefit Regulations 2006, but can find none.  The same problems in respect of her capacity apply to any liability to pay a licence fee and she is plainly not a trespasser who could be liable for mesne profits.

11. In those circumstances, it is unnecessary for me to address the other arguments raised by the local authority beyond indicating that I am unimpressed by them and would have been disposed to dismiss the appeal but for the absence of any liability for rent due to the absence of any agreement.  There seem to me to have been good commercial reasons for the parents to let the claimant’s home to her at a rent if they could, the dwelling was not the same dwelling as her parents, the tenancy, had there been one, would have been a proper one at a proper rent and I agree with the tribunal that it was not contrived.  The parents appear to have borrowed to build the annex on the understanding with the local authority that a letting of it to their daughter would enable her to obtain housing benefit, and it appears to me that, following a decision taken on this basis to borrow, build and let, a reasonable letting would be commercial and would not be a contrivance to take advantage of the housing benefit scheme.

12. It may be that, with the authority of the Court of Protection, the claimant’s mother could now enter into a similar tenancy agreement on her behalf on the basis of which the claimant would be entitled to apply for housing benefit, although her mother may wish to consider whether any further authority is needed from the Court of Protection for her to enter into a contract from which she and her husband would benefit.  It is even possible that with the agreement of her mother on her behalf the claimant has been occupying the annex on the terms of the tenancy agreement since her mother became entitled to act for her in February 2010.  There may well be therefore a basis for a future application for housing benefit but it cannot assist the claimant in respect of the claim in this case made long before her mother was authorised to act and at a time when there was clearly no tenancy agreement.

(signed) Michael Mark

Judge of the Upper Tribunal

29 March 2011