Upper Tribunal (Administrative Appeals Chamber)

 

 

THE UPPER TRIBUNAL

 

ADMINISTRATIVE APPEALS CHAMBER

 

DECISION OF THE UPPER TRIBUNAL JUDGE

 

Before: The Honourable Lord Brailsford

D J May QC and A J Gamble

 

Attendances:

 

 

For the Appellant: (Glasgow City Council): Mr J Bryce, Advocate, instructed by

Mr D Mair, Solicitor accompanied by Ms E Chalmers, Appeals Manager, both of Glasgow City Council.

 

First Respondent: (Claimant): Mr C Orr, Welfare Rights Officer, Glasgow City Council

 

Second Respondent: (Secretary of State): Mr S Collins, Advocate instructed by Ms K Mulligan of the Office of the Solicitor to the Advocate General.

 

The appeal by Glasgow City Council is allowed.

 

The decision of the Glasgow First-tier Tribunal of 8 February 2010 is set aside.

 

The case is remitted to the First-tier Tribunal (Social Entitlement Chamber) for redetermination by a freshly constituted tribunal in accordance with the directions set out in paragraph 13 of the reasons.

 

REASONS FOR DECISION

 

 

1. The claimant applied for housing benefit in respect of the tenancy of a property in Glasgow on 25 March 2008 declaring in his application that his mother was his landlord.  That application was refused by Glasgow City Council (the Council) on 1 July 2008 on the ground that the claimant’s tenancy was not on a commercial basis. 

 

2. The claimant appealed against the Council’s decision.  That decision was thereupon reconsidered by the Council but left unaltered.  The appeal thus proceeded.  A hearing was scheduled for 26 February 2009 but that was postponed on 2 February 2009.  Thereafter the case was heard by a tribunal on 30 March 2009 which allowed the appeal by holding that the claimant’s tenancy was on a commercial basis.

 

 

 

 

3. The Council applied for permission to appeal against the tribunal decision of 30 March 2009.  On 15 June 2009, in response to that application, a District Tribunal Judge reviewed and set aside that decision as erroneous in law and remitted the case for reconsideration by a new tribunal.  The case was once again postponed on 3 August 2009.  It then proceeded to a rehearing on 8 February 2010.  The tribunal held on that date allowed the appeal.  They did so on the basis that the claimant lacked capacity to contract and was liable under the common law doctrine of recompense to make payments to his mother in respect of his dwelling.

 

4. The Council now appeal with the permission of a District Tribunal Judge.  The Registrar granted an oral hearing of the appeal at the request of the claimant’s representative.  Upper Tribunal Judge Gamble thereafter directed that the Secretary of State be joined to this appeal as the second respondent.  After consideration of the written submissions lodged on behalf of the Secretary of State, Upper Tribunal Judge Gamble then adjourned a hearing set for 1 September 2010.  Thereafter, because of the importance of the issues arising in this appeal, a three judge panel, chaired by Lord Brailsford, was directed to determine it and to conduct the oral hearing.  That hearing was fixed for 19 July 2011. 

 

5. The oral hearing took place before us on the above date.  On that occasion representation was as narrated above.  We are grateful to Mr Bryce, Mr Orr and Mr Collins for their helpful contributions to the discussion.

 

6. We formed the view on a consideration of the written submissions for all parties that the key matter at issue in this appeal was the correct test to be applied to the issue of the claimant’s legal capacity to enter the contracts of lease material to his application for housing benefit.  We thus requested the parties’ representatives to address us only on that point in their oral submissions.

 

7. As narrated in paragraph 3 above, the tribunal of 8 February 2010 held that the claimant lacked capacity to enter a contract of lease.  In their statement of reasons, on document 153, they find in finding of fact 5 that:

 

“(the claimant) has been troubled by mental illness of which a major symptom is depression since his final years at school.  A firm diagnosis, of Asperger’s syndrome has only very recently been made.”

 

They then went on to find in finding of fact 10 on document 154 that:

 

“(the claimant) was at the times of signing the tenancy agreement and of the application for housing benefit incapable of managing his own affairs.  He was incapax.”

 

 

 

 

 

 

 

They explained the evidence upon which they based finding of fact 10 in the fifth paragraph in their reasons for decision on documents 154-155.  However, the key point is that in finding of fact 10 the legal test used by the tribunal to determine the claimant’s capacity to enter a contract of lease was that of a general incapability of managing his own affairs.  Having concluded that that test was met they went on to hold that he was incapax. 

 

8. The application of a test of a general incapacity to manage one’s own affairs in a case like the present is supported by paragraph 23 of the Appendix to R(IS)17/94 a decision of a Tribunal of Commissioners in an appeal relating to the severe disability premium in income support.  In the above paragraph that tribunal put matters thus:

 

“23. It will be necessary in any particular case such as the present for the adjudicating authorities first to consider the extent of a claimant’s mental disability and to determine whether that person is so mentally incapacitated that he is “incapax”  as understood in Scots law.  We did not suggest, of course, the full investigation required for the appointment of a curator bonis but an impression must be formed upon a broad view of the claimant’s condition as to whether he can properly give meaningful and useful directions in regard to such funds and other arrangements as might be called “his affairs”.  If a claimant is held properly to be able to give such directions then the normal law of contract will have to be considered to see what, if any, arrangement, actual or implied, is to be held to be in place, bearing in mind that it is not normal to expect enforceable legal relationships to be established in such a domestic situation.  We should add that in some “appointee” cases incapacity may be expressly conceded in which event it will be enough that the concession be recorded.”

 

The above dicta were followed and applied with specific regard to housing benefit entitlement in paragraph 6 of CSH/05/09, document 117.  It should be noted that the arguments presented in the present appeal were not presented in CSH/05/09. 

 

9. The representatives of all three parties concurred in submitting that the test of incapacity laid down in paragraph 23 of the Appendix to R(IS)17/94 and paragraph 6 of CSH/05/09 and followed by the tribunal in this case was no longer correct.  It represented, in their submission, what was described as “old law”, applying an all or nothing approach to incapacity.  Rather, it was submitted, the tribunal judge should have applied the “new law” test of a transaction by transaction approach.  Matters were well and succinctly put in paragraph 13 of document 200, the written submissions made on behalf of the Secretary of State, to which Mr Collins strongly adhered in his oral presentation.  The tribunal should have addressed the individual claimant’s specific capacity in particular circumstances, for a particular purpose and at a particular time, i.e. his capacity to enter into the contracts of lease dated 1 August 2007 and 2 February 2008 which were the basis of his housing benefit claim of 25 March 2008.  (He sought backdating of his claim to 1 August 2007 – see his claim form at page 19).  Their failure to address that precise question was an error of law.

 

 

10. We agree with the above submissions.  We hold that a transaction by transaction approach to deciding legal capacity to contract represents the current common law of Scotland.  We consider that the law is correctly stated by Professor W McBryde in Contract (Third Edition) paragraph 3-46 where he puts matters thus:

 

 

“The issue is primarily one of fact.  There must have been a mental (or physical) defect which rendered the contracting party incapable of understanding what was being done so that there was no consent to that contract.  (Our italics).  A person’s ability to understand or consent to other types of acts, or other contracts, is not the test, although evidence of surrounding circumstances is always relevant.  The question of capacity will be decided on medical evidence and evidence of behaviour.”

 

The above statement of the law is consistent with the legislative approach taken in The Adults with Incapacity (Scotland) Act 2000 relating to the appointment of guardians.   The transaction by transaction approach described above by Professor McBryde should be followed by decision makers and tribunals faced with an issue of a claimant’s legal capacity to contract. Paragraph 23 of the Appendix to R(IS)17/94 and paragraph 6 of CSH/05/09, insofar as it follows the contents of paragraph 23, no longer represent good law and should not be followed. The tribunal’s application of a test of the claimant’s general incapability of managing his own affairs was an error of law on their part. 

 

11. For the sake of completeness, we also specifically accept the submission of Mr Collins that it is not at all appropriate to base a conclusion of incapacity to contract (following the transaction by transaction approach) on a concession made by parties, especially by parties with an interest.  In that regard also paragraph 23 of the Common Appendix to R(IS)17/94 should not be followed.  We also accept his submission that there is a presumption in favour of capacity and that that presumption can only be overcome by independent and informed evidence.  In addition, we agree with Mr Collins that the appointment of an appointee for benefit purposes is by no means conclusive on an issue of incapacity to contract and is only an adminicle of evidence on that question.

 

12. We hold that it is appropriate for us to exercise our discretion by setting aside the tribunal’s decision on the ground of the error of law identified in paragraphs 9-10 above.  It is inappropriate for us to remake that decision as that requires a detailed fact finding exercise much better carried out by the First-tier Tribunal. We thus remit the case to a freshly constituted tribunal for reconsideration in accordance with the directions given in paragraph 13 below.

 

 

 

 

 

 

 

 

 

 

13. Those directions are as follows:

 

(a) The first question before the new tribunal is whether the claimant had specific capacity to enter the contracts of lease dated 1 August 2007 and 2 February 2008, i.e. at those dates was he capable of understanding the effect of an agreement by which he received the right to occupy the accommodation specified in that agreement in exchange for payment of the rent also specified therein.

 

(b) They should determine the above question on the basis of all of the available evidence, bearing in mind the necessity for independent and informed evidence in relation to the question of incapacity.  They must not proceed to determine the claimant’s incapacity on the basis of a concession.  Those representing the claimant should carefully consider the obtaining and lodging of medical evidence specifically directed to the question specified in sub-paragraph (a) above before the rehearing takes place.

 

(c) If the claimant is held to have lacked capacity to enter either or both the contracts of lease dated 1 August 2007 and 2 February 2008 then the contract or contracts he lacked capacity to enter must be regarded as void at common law.

 

(d) Whatever the decision on the question of capacity, all other relevant issues arising under regulations 8 and 9 of the Housing Benefit Regulations 2006 remain at large before the tribunal and should be determined by them in their decision.

 

14. The appeal by the Council succeeds.  The decision of the tribunal is set aside.  The merits of the case are for redetermination by the new tribunal applying our directions in paragraph 13 above.

 

 

(Signed)

THE HONOURABLE LORD BRAILSFORD

D J MAY QC

A J GAMBLE

Judges of the Upper Tribunal

Date: 20 July 2011