Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/530/2015

ADMINISTRATIVE APPEALS CHAMBER

 

Before Judge Mark

 

Decision:  The appeal is dismissed.

 

 

REASONS FOR DECISION

 

1. I note that, although no directions have been issued to her, JH, the claimant’s sister and landlord, is also a party to this appeal as she was added as a party before the First-tier Tribunal and made written representations opposing the claimant’s appeal.  As I am dismissing the appeal, and the appeal is against the result she sought before the First-tier Tribunal, there is no need for her to be invited to make any submissions.  The claimant has indicated that it is for the Upper Tribunal to decide whether an oral hearing is needed and that he would attend to answer questions if appropriate.  The appeal here is on points of law only and I do not consider that an oral hearing is called for.

 

2. The appeal is brought with the permission of an Upper Tribunal Judge from a decision of the First-tier Tribunal dated 9 September 2014.  That decision dismissed the claimant’s appeal from a decision of the Respondent council dated 25 November 2013 that from 28 October 2013 payments of housing benefit would no longer be paid to the claimant but would be paid to a firm of estate agents, FB.  FB had been appointed by JH as her agents to collect rent on a flat which she had let to the claimant.  The decision notice describes FB as the landlord, which is incorrect.  It was the landlord’s agent to receive the rent, but nothing turns on that error.

 

3. The decision was made under regulation 95(1)(b) of the Housing Benefit Regulations 2006 in respect of housing benefit which had been awarded to the claimant.  Regulation 95(1)(b) provides that, subject to exceptions which do not apply in this case, a payment of rent allowance shall be made to a landlord where the person entitled to the allowance is in arrears of an amount equivalent to 8 weeks or more of the amount he is liable to pay his landlord as rent, except where it is in the overriding interest of the claimant  not to make direct payments to the landlord.

 

4.  The claimant had been living abroad for many years.  He returned to England in the spring of 2013 and was homeless.  He stayed for some months with his sister, JH, and her husband at their home.  JH also owned a flat which she let out to tenants.  In August 2013 it was let to a tenant under a tenancy which was due to expire on 4 October 2013.  Late in August the tenant was seen to be vacating the flat.  There would appear to have been discussions between the tenant and JH and the evidence suggests that the tenant may have accepted that she continued to be liable for the rent until 4 October and to have agreed to repairs and improvements being carried out at the flat by JH during the residue of her lease.

 

5. JH and the claimant appear to have decided that JH would let the flat to the claimant for the same rent as that tenant had been paying and that the claimant, who was on jobseeker’s allowance, would claim housing benefit, which it was anticipated would cover most if not all of the rent.  There was also the possibility of a discretionary housing payment being sought by the claimant, if needed to cover the full rent.  As the claimant had no other means of paying any rent, it was important that housing benefit should be obtained by him.

 

6. The claimant then prepared, and he and JH signed, a tenancy agreement in relation to the flat.  It is dated 29 August 2013 and is stated to be a tenancy of the flat for a term certain of 6 months commencing on 1 September 2013 at a rent of £450 per month payable in advance by equal monthly payments.  It provides for the first such payment to be made on the date of signing of the agreement, although it never seems to have been the intention of the parties that any payment should be made before housing benefit had been sought and obtained.  It then goes on to provide for subsequent payments to be made “on the ……. day of each month”.  The form used was a standard form for an unfurnished assured shorthold tenancy.  Given the start date of the tenancy on 1 September 2013, and in the absence of any other date being specified for payment of subsequent monthly rental, other than that it was to be paid in advance, I consider that it was to be paid by the last day of each calendar month in respect of the following month.

 

7. The claimant then claimed housing benefit from the council on the following day, submitting a copy of the agreement in support of his claim.  The claim form, also dated 29 August 2013, states that he was to move into the property on 1 September 2013, and it explained the relationship between the claimant and JH.  It claimed benefit from 1 September 2013.  By a decision dated 5 September 2013, the claimant was awarded housing benefit of £90.80 per week from 1 September 2013 payable monthly.  He was also awarded council tax benefit.  By letter to the council dated 8 September 2013, the claimant confirmed that he moved into the property on 1 September 2013.  I also note that in a telephone attendance note of the council dated 14 October 2013 (file p.58) JH is stated to have told the council that the claimant moved in on 2 September 2015 with his furniture but because of problems in the kitchen he had had to stay with her and her husband while the kitchen was fixed and had then gone back to the flat on 20 September.

 

8. Matters did not go smoothly.  It would appear that, although it was intended that the claimant should move into the flat, JH and her husband did not intend that he should move in before the expiry of the previous lease on 4 October 2013.  Thus by email of 29 September 2013 to the claimant, JH alleged that the claimant had moved in against the wishes of herself and her husband and that while the previous tenant had allowed alterations to be made during her tenancy “she was quite put out when she saw we had moved in your furniture.”  Again, by email of 2 October 2013 JH wrote to the claimant that he was not supposed to move into the house until 5 October when the existing tenant’s contract expired, and that the start date of the new tenancy turned out to be 25 September 2013.  This is inconsistent with what she is subsequently said to have told the council on 14 October (see paragraph 7 above).

 

9. JH also appears from other correspondence to have changed her mind at least temporarily about the tenancy and to have wanted to sell the flat and her husband appears to have been complaining about the absence of the initial rent payment due on 29 August 2015.  I also note from p.132 of the file that the claimant stated that most of what was agreed between himself and JH “was verbal and never committed to writing”.

 

10. It appears to me that there are matters here which the council may wish to investigate.  This is particularly so if the claimant did not move in until 25 September 2013, and had not been intended to move in until 5 October 2013, despite his assurance that he had moved in on 1 September 2013.

 

11. It is unnecessary, however, for me, or the First-tier Tribunal, to try to resolve these issues on this appeal as the award of housing benefit was made on the basis that the agreement was genuine and that the claimant did move in on 1 September 2013.  It is also apparent, for the reasons given below, that even if the claimant only became liable for rent from 25 September 2013, he was in arrears by more than 8 weeks by the date of the decision under appeal, 25 November 2013.

 

12. What in fact happened was that £736.17 in housing benefit was paid to the claimant covering the period up to 27 October 2013, but he never paid any rent to JH.  He gave several reasons why he was not paying anything.  One was that he had left personal belongings at the home of JH, where he had previously been living, and she had refused to return them.  Another was that there were problems with the electricity and with work done at the flat which, in effect, involved some breach of her obligations as his landlord.  He also questioned whether any rent could be due, or was due, in respect of the period to 4 October 2013.  There were also issues whether the rent was due in advance as provided in the tenancy agreement or in arrears as and when housing benefit was paid.

 

13. Partly because of the deteriorating situation between them and partly perhaps because she was going with her husband on a cruise, JH then appointed FB to act as her agent in relation to the property and notified the council and the claimant.  FB then asked for rent to be paid directly to it and by a decision dated 25 November 2013 the council determined that from 28 October 2013 payments would be made to FB with the first payment covering the period from 28 October 2013 to 30 November 2013 being issued by 30 November 2013.

 

14. This appears to have incensed the claimant, who wrote to the council by letter dated 30 November 2013 withdrawing his application for housing benefit with immediate effect.  This was actioned and it was also pointed out that his claim for housing benefit had already been suspended on 30 September 2013 because a third party had advised that there was no tenancy agreement in place.

 

15. The claimant appealed the decision to pay the housing benefit to FB on a number of grounds to which I shall return.  The tribunal added JH as a party as she was clearly going to be affected by the decision.  At the subsequent hearing, some months after submissions had been received from JH, the tribunal concluded that the claimant was more than 8 weeks in arrears with his rent and that he had not satisfied the burden of proving that it was in his overriding interest not to pay rent to the landlord.  The claimant sought to have the decision of the tribunal set aside on the grounds that he had wrongly been refused an adjournment and that there was bias on the part of the tribunal in favour of JH because she was a magistrate.  That application was refused and the claimant was refused permission to appeal.

 

16. The claimant then sought permission to appeal from the Upper Tribunal.  Permission was granted in essence because the Upper Tribunal Judge considered it arguable (1) whether the claimant had a liability to pay rent before 5 October 2013 when the previous tenancy expired and (2) whether the tribunal erred in law in relation to its findings as to the claimant’s claim to set off damages claimed by him against rent and whether an adjournment ought to have been given to enable the claimant to adduce further documents concerning this claim.

 

17. Somewhat unhelpfully, the council has failed to make any representations on these points and has confined itself to saying that the decision under appeal should be upheld, but further submissions were made by the claimant.

 

The terms of the tenancy

18. The claimant was in receipt of housing benefit on the basis of his own evidence to the council that he was a tenant under the agreement of 29 August 2013, that the lease commenced on 1 September 2013 and that he went into occupation on 1 September 2013.  It is open to him to explain that certain terms were waived, and I see no reason not to suppose that the provision for payment of rent in advance was waived as it is clear that everybody was acting on the basis that, at least initially, most of the rent would come from housing benefit paid in arrears. 

 

19. What he could not do, unless a claim was made against him by the previous tenant, was to challenge his landlord’s title to grant him the tenancy.  It is well established that if a landlord lets a tenant into possession under a lease, then, so long as the tenant remains in possession undisturbed by any adverse claim, the tenant cannot dispute the landlord’s title (Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580 at p.596 per Lord Denning).  I therefore reject his arguments based on the alleged illegality of the letting.  They are not arguments he is entitled to raise.  The previous tenant did nothing to challenge his presence in the flat and any dealings between JH and those tenants are irrelevant to this case.

 

20. If, which is unclear, despite the representations made to the council, the claimant did not in fact go to live at the property until 25 September and this was by arrangement with the landlord, then there may have been a further waiver in respect of rent otherwise due before that date, which, as it was not notified to the council, would have meant that he was overpaid housing benefit for September.  He would, however, have received housing benefit for September by 30 September and would have been liable at that point to pay at least that sum in respect of the rent due for the four weeks of the tenancy from 25 September 2013.  I note in this respect that he wrote to JH on 28 October 2013 (file p.82) stating that he had £404 in his bank account, largely  made up by the housing benefit payment, which was the rent for September.

 

21. He would then have been liable to account for the next housing benefit payment received at the end of October in respect of the following four weeks.  On that basis he had failed to pay anything in respect of the first 8 weeks of the tenancy.  I see no reason in those circumstances why any concessions made by the landlord in respect of waiting for payment of housing benefit, or of agreeing to accept whatever he could get as housing benefit and any discretionary payments, before insisting on payment of rent should have continued to apply and they were plainly withdrawn.  He was therefore liable to pay rent in advance.  Even on the basis that the tenancy was only to be treated as starting on 25 September, by the date of the decision, 25 November 2013, almost 9 weeks had elapsed and no rent had been paid.

 

22. Subject therefore to the claimant’s contentions on set off, which I consider below, on any footing he was over 8 weeks in arrears with his rent.

 

Set-off

23. There are three forms of set-off which may be relied on in appropriate cases where rent is claimed.  The first is not strictly set-off at all.  Where a tenant carries out works of repair which are the responsibility of the landlord, the tenant has the right to treat reasonable expenditure as made on account of rent, including future rent payable to that landlord (Lee Parker v Izzet [1971] 3 AER 1099).  This is an old common law right which preceded the earliest statutes permitting set-off.

 

24. Secondly other quantified or quantifiable claims against the landlord can be set off in litigation under section 13 of the Debtors Relief Act 1729.  As explained by the House of Lords in Stein v Blake [1996] AC 243, at p.251B-D:

 

“Legal set­off does not affect the substantive rights of the parties against each other, at any rate until both causes of action have been merged in a judgment of the court. It addresses questions of procedure and cash-flow. As a matter of procedure, it enables a defendant to require his cross-claim (even if based upon a wholly different subject-matter) be tried together with the plaintiff's claim instead of having to be the subject of a separate action. In this way it ensures that judgment will be given simultaneously on claim and cross-claim and thereby relieves the defendant from having to find the cash to satisfy a judgment in favour of the plaintiff (or, in the 18th century, go to a debtor's prison) before his cross-claim has been determined.”

 

25. As the substantive rights are not affected before judgment of a court, it is plain that the rent remains outstanding and that the cross-claim is simply a factor (often a very strong factor) in deciding whether, for the purposes of regulation 95(1)(b) it is in the overriding interests of the claimant not to make direct payments to the landlord.

 

26. Finally, there is the right of equitable set-off.  This is where the cross-claim arises directly out of the relationship of landlord and tenant or out of an agreement for the lease or otherwise where there is a sufficiently close connection with the transaction giving rise to the cross-claim for the equity of set off to arise (British Anziani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1980] QB 137).  Again, as explained by Buxton LJ in Smith v Muscat [2003] EWCA Civ 962, at paragraph 44, equitable set-off “is and is only one that operates as an incident of litigation. Such a set-off is merely a sub-species of counterclaim: see the analysis of Slade LJ in the National Westminster Bank case, [1993] 1 WLR at p 76 E-G. It is a special and privileged type of cross-claim because it operates in the litigation to extinguish the claim and prevent its original establishment, rather than to provide a sum to be balanced off against the claim once established.”

 

27. Again, therefore, even if there is an equitable set-off available to the claimant in the present case, it does not mean that it reduces the outstanding rent except after it has been raised and dealt with in litigation in answer to a claim for rent.  In relation to regulation 95(1)(b), it is only a factor to be considered in considering the overriding interest of the claimant, the weight of which needed to be considered by the tribunal.

 

28. I would add for completeness that the right of set-off may be excluded by clear words in the tenancy agreement.  A provision for payment of rent without any deduction or set-off is sufficiently clear for this purpose (Electricity Supply Nominees Ltd v IAF Group plc [1993] 1 WLR 1059) but the words “without any deduction” are not sufficiently clear (Connaught Restaurants v Indoor Leisure Ltd [1994] 1 WLR 501).  It has been said to be unclear whether the Unfair Terms in Consumer Contracts Regulations (SI1999/2083) might apply to such a provision.  In the present case, there is no attempt in the tenancy agreement to exclude equitable set-off.

 

The claimant’s cross-claims

29. The main claim is that JH has failed to return to him his belongings which he left in her home when he went to the flat.  The belongings appear to be clothing and possibly furniture.  He indicated in correspondence that he would pay the rent, or at least the housing benefit element of it, once they had been returned to him.  There is nothing in this claim.  There is nothing to impose any duty on JH to return the belongings and she made it clear repeatedly that he was free to come and collect them if he wished (file, pp.190-194).  As she put it in email correspondence with the claimant, she was not obliged to provide him with a taxi service.

 

30. Secondly it is said (file pp.125-6) that after the tenancy was entered into, JH’s husband removed both the electric fire from the living room and the door between the living room and the kitchen from its hinges, making the house far colder than it should be and difficult to retain heat.  His finances did not permit any increased use of the central heating JH had refused to provide his personal belongings which included warm winter clothing.  The kitchen also remained unfinished 10 weeks into the tenancy.  I note that the very lengthy email including these matters is dated 30 November 2013, or 13 weeks after 1 September 2013.

 

31. It is plain from the claimant’s email of 28 September 2013 (p.114) that the arrangements between himself and JH included his permitting some renovations to the flat while he was there, that he felt it was being done too quickly and that, although commenting that the kitchen was not finished, he did not want any further work doing until they had arranged a simple written schedule.  A further email dated 2 October 2013 from the claimant to JH confirms that he wanted a schedule of work (p.132) and led to the response that the problem was that he had moved in before 5 October when he was supposed to move in, an assertion that once again contradicts the terms of the tenancy agreement.  What happened after that in relation to the repairs is unclear.

 

32. I can see nothing in this which makes it in his overriding interest to have paid to him rent which he was plainly proposing to withhold for no good reason.  He was already holding £736.17 benefit, and if he genuinely thought he had a claim in respect of the condition of the property or for extra heating costs, he could have used something out of that sum to pay for any extra heating costs and sought to set those payments off against the rent.  While the tribunal may not have given adequate reasons for its decision that he had not established that it was in his overriding interest not to make direct payments to the landlord, that was the only conclusion it could have come to on the evidence.

 

33. Issues have been raised by the claimant as to how he came to be refused discretionary further payments by the council.  They are not the subject of this appeal and I do not deal with them, although I note that on appeal a further sum of £171.48 was paid to the claimant by the council as discretionary payments in respect of the period from September to November 2013.

 

34. I am unable to see any basis for the allegation of bias against the tribunal.  The fact that JH is a local magistrate would not reasonably be seen as prejudicing the tribunal in her favour.

 

35. The various complaints against JH and how she dealt with the council do not affect the point that no rent had been paid by the claimant to her and there was every likelihood that, without any legal justification, he would continue to retain further payments of housing benefit and not pay any rent if the benefit continued to be paid to him.  There was also no basis to set aside the tribunal’s decision.  The claimant had had JH’s written submissions well ahead of the hearing date and had had ample opportunity to respond to them, and produce relevant correspondence, if he wished before the hearing. 

 

 

 

 

 

 

 

(Signed) Michael Mark

Judge of the Upper Tribunal

 

 

 

Date 8 July 2015