CH/663/2003

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	The appeal is dismissed.

2.	This is an appeal with leave granted by the Chairman from the decision of an appeal tribunal dated 15.8.2002 dismissing the claimant’s appeal from the decision of the local authority (the respondent) that Housing Benefit was not payable to the claimant because (a) he did not satisfy the requirements of section 130(1)(a) SSC&BA 1992 – liability to pay rent; and (b) the provisions of reg 7(1)(a) of the General Regulations 1987 would apply – occupation not on a commercial basis.  

3.	At the request of the Solicitors then acting for the claimant, I ordered an oral hearing which I held on 4.8.2003.  At the hearing, the claimant was represented by Mr Peter Godden – Kent from an association called, Independent Living Advocacy (Essex), and the local authority by Mr Wisbey of their Appeals Office.  I am grateful to them both for their assistance.  I have also had further submissions from Mr Godden Kent dated 4.9.2003 (157/161), which further assist.

4.	Before considering the main substantive issues, there had been made on behalf of the claimant a submission that the tribunal ought to have adjourned, bearing in mind that an oral hearing had been requested, but Mr Godden Kent told me at the hearing that that submission was not now being pursued.  It certainly seemed to me that anything which would have been put to the tribunal may equally be put to me now.

5.	The claimant’s mother (to whom I shall refer as “Mrs N”) had lived at 35 Melba Court, a flat with which the claimant was obviously familiar.  Mrs N moved to 21 Melba Court and the claimant moved into 35 on, I think, 1.10.01 (85).  A discretionary trust was set up on 30.4.01 (47-53) with a nominal trust fund of £100, of which the settlor was Mrs N and the trustees Mrs N and another son.  It is a standard form of discretionary settlement under which the beneficiaries are the children and remoter issue of the settlor, which, of course, includes the claimant.   The trustees became the registered owners of 25 Melba Court, being registered with title absolute at HM Land Registry on 31.8.2001 under title No. EX485973 (68/73).  There is an outstanding charge in favour of Ipswich Building Society, and the sums advanced thereunder provided the necessary finance for the acquisition by the Trustees of No. 35.  Interest has, of course, to be paid under the charge.  There is then a Tenancy Agreement dated 16.8.2001 (36/39, purporting to grant by the Trustees to the claimant a tenancy for a term of 12 months from 16.8.2001 at the rent of £225 per month.  This rent, I have been told, has been assessed by the rent officer as a fair rent.  It is certainly not a nominal amount. 

6.	A claim for housing benefit was made and refused.  As to the rent paid, Mrs N stated in her statement read out to me at the hearing:

	“Due to Social Security benefit delays [the claimant] was unable to pay rent for the first six months of the tenancy.  Since benefits payments began, he has been making regular payments.  This is indicated in his building society book into which his benefits are paid.  This goes directly to the [N] Family Trust Account at the Ipswich Building Society.”

7.	The local authority refused the claim on the two grounds I have indicated above viz the claimant is not “liable to make payments in respect of a dwelling in Great Britain which he occupies as his home”, and the tenancy under which he occupies 35 is not on a commercial basis.

8.	The first difficulty is that the claimant is incapable of managing his affairs.  He did not sign the tenancy agreement.  And, in my Direction of 6.8.2003, I raised a question as to whether it was void since it prima facie did not comply with section 2(3) Law and Property (Miscellaneous Provisions) Act 1989.   In his submissions on behalf of the local authority dated 8.9.2003 (156), Mr Wisbey doubts whether that section is relevant since the tenancy agreement in this case created itself an immediate interest in land, and not an executory interest.  The tenancy agreement had a commencement date of 16 August 2001 and was dated 16 August 2001, when it was signed by the trustees of the Trust.  Accordingly, it is submitted that section 53 LPA 1925 applies which enables an interest of land to be created by writing signed by the person creating or conveying the same.  I accept that submission.  My point was a red herring.

9.	In the claimant’s submission at 125/128, emphasis is put on the fact that a contract of a person who is incapable of managing his own affairs is not void, but avoidable, and the authorities cited are the Barrow Council ex p. Contach, which was an application for judicial review, refused on 3.9.96.  More importantly is I think The Imperial Loan Co v. Stone (C.A.) 1892 21QB599, the headnote of which runs,

	“Where a defendant in an action of contract sets up the defence that he was insane when the contract was made, he must in order to succeed in this defence show that at the time of the contract his insanity was known to the plaintiff”.

It is quite clear, in this case, that the other parties to the tenancy agreement knew that the claimant was incapable of managing his affairs and, therefore, the tenancy agreement would, in my judgment, have been avoidable at the suit of the claimant.  But it is not void until avoided.  But there are difficulties about that in this case since for reasons I do not fully understand, (though apparently solely administrative) the Court of Protection will not make such appointment.  I need not explore that matter further.

10	It seems to me therefore that, unless and until the tenancy agreement is avoided, the claimant occupies 25 Melba Court as tenant of the Trustees, and, if he takes the benefit of the agreement, he must also under general equitable rules accept its burden – see e.g. Halsall v. Brizzell 1957 Ch. 169.  Although the origin of the rule is, per Upjohn J, at p.182 to be found thus:

“It is ancient law that a man cannot take the benefit under a deed without subscribing to the obligations thereunder”, I cannot see that it should make any difference that the Tenancy Agreement, in this case, is only in writing and not made by deed.  Its effect is precisely the same of creating a legal estate in the claimant:  accordingly if he wishes to take the benefit, which clearly he does, he must take the burden thereunder.

In my judgment, therefore, the claimant is liable to make payments in respect of the flat the purposes of s.130(a) SSC&BA 1992.

11.	The question now arises whether the claimant’s occupation is on a commercial basis for the purposes of regulation 7(1)(a).  Some authority as to what is meant by “on a commercial basis” can be found in R v. Poole B.C. ex p. Ross 1996 28HLR 351, where the headnote runs:

	“(3)	The mere continuance for seventeen years of a stable relationship between two people who are not partners could not establish the rental agreement between them was ‘other than on a commercial basis’.

	“(5)	An element of friendship cannot make a commercial arrangement or agreement non-commercial; it cannot be the intention of the regulations that a tenant who becomes good friends with his landlady but continues to lead an independent life ceases to be eligible for housing benefit…”

That is but small guidance.  More assistance can be gleaned from the judgment of Blackburne v. J in R v. Sheffield ex p. Smith (and associated cases) 1996 28 HLR36.  That case concerned membership of an Association called the Jesus Fellowship Church and New Creation Christian Community.  The background can be used fully summarised at p.41:

	“The objects and procedures are determined by the covering authority and include declarations that all items purchased from the funds of the common purse, other than consumables and items of a strictly personal nature, together with all surpluses arising from time to time are held in trust for the Trust.  A statement of the common purse objects and procedures in evidence before me states that common purses are the means by which members of the community house families pool incomes meet personal and corporate expenses from the pool and donate any surplus to the Trust.  It states that all income of all common purse members must be paid into the common purse as soon as it is received, that members must seek to maximise their income (including claiming all available social security and other benefits) and make sure they receive what they are actually entitled to and that they must, in any case, provide the common purse with sufficient income to cover their own and any dependant’s living costs…”

The question arose as to whether the occupation by the claimants in those cases was on a commercial basis.  At p.54, the learned Judge stated

“Here the test is whether the tenancy or other agreement i.e. the arrangement under which the payer claiming benefit resides with the payee is “on a commercial basis”.  I can see no reason why, in considering whether that test is satisfied, it is proper only to consider the amount payable for the accommodation and why the other terms to the tenancy or other agreement must be ignored.  The exercise, as it seems to me is, as Mr Howell and Mr Straker submitted, to look at the arrangement as a whole and to ask whether it is on a commercial basis and not simply, as Mr Newman invites me to do, to consider whether the rent or other sum is on a commercial basis.  Mr Howell and Mr Straker went on to submit that was the question which each review board correctly asked itself.  They also submitted that the fact that the expression “commercial” (which is an ordinary English word) is not defined (unlike so many other expressions in the regulations) is precisely because the framers of the regulations have left it to those who have to apply the regulation to determine whether, in any particular case, the test of commerciality is satisfied and it is only when the Court is driven to conclude that the review board, properly directing itself on the law, could not reasonably have reached the conclusion it did that the Court should interfere with the decision reached.”

The peculiar – and personal – nature of the rights of occupation, lead the learned Judge to hold that the arrangements were not “on a commercial basis”, agreeing with the determination of the Review Board.  In this case, I would note that the tribunal expressly decided that the claimant’s residence in the flat was not on a commercial basis.  

12.	It seems to me that the circumstances of this case are not so dissimilar from the circumstances in ex p. Smith.  Accordingly, I should hold that the same principles apply and the tribunal came to a conclusion with which I should not interfere.

It seems to me that which the rent payable may have been a commercial rent in that it has been set as the fair rent, nevertheless the arrangement looked at as a whole is one which is essentially and strictly personal to, and set up for the sole reason of benefiting, the claimant and the claimant alone.  It was not an arrangement which would be offered on the open market, or to anyone else other than the claimant.  I am not saying that there was anything improper in it or that it was a device simply to obtain housing benefit, which Mr Wisbey before me expressly denied was the local authority’s case.  However, Mr Godden-Kent said he had reason to doubt that but, in view of what I have decided, I do not think I need say anything more on this particular topic.  The backgrounds in this case and ex p. Smith case are not too dissimilar.  To my mind, not only does the term “on a commercial basis” connote a financially justifiable relationship, but also, as important, some generality as to who may take the benefit, and not merely an arrangement exclusively, as in the circumstances of this case, set up for the particular benefit of a particular claimant.  It would never have been contemplated except to benefit the claimant.  For instance, in such an expression as “in the commercial world”, the identity of the client is generally irrelevant:  the trader is usually only too happy to deal with anyone – the world at large – subject of course to the usual considerations of financial standing.  I therefore, conclude that the arrangement was not on a commercial basis.  Accordingly the claimant is disentitled from housing benefit.

13.	Finally, in his submissions to me of 4.9.2003 (157/161) Mr Godden-Kent prays in aid Article 8 of the Human Right Convention which provides:

	“1.	Everyone has the right to respect for his private and family life his home and his correspondence.  

	2.	There should no interference by public authority with the exercise of this right except such as is in accordance with the law and is necessary democratic society in the interests of national security, public safety or the economic well being of the country…”

In Marckx v. Belgium 1979 2 EHRR 330 (para 31) the Court explained that:

	“The object of the Article is essentially that of protecting the individual against arbitrary interference by the public authority.  Nevertheless, it does not merely compel the State to abstain from such interference:  in addition to this primarily negative undertaking, there may be positive obligations inherent in an effective ‘respect’ for family life.”

And in Botta v. Italy 1998 26 EHRR 241 at 257/8 the Court made the following general observation:

	“There may be positive obligations inherent in effective respect for private or family life.  These obligations involve the adoption of measures designed to secure respect for private life even in the sphere of the relations of individuals between themselves.  However, the concept of respect is not precisely defined.  In order to determine whether such obligations exist, regard must be had for the fair balance that has to be struck between the general interest and the interests of the individual while the State has, in any event, a margin of appreciation.”

14.	It seems to me to be fairly plain that in effect the right to payment of housing benefit is not “a right to respect for …. his home”, and, even if it were, limitations on the right to housing benefit were necessary for the economic well being of the Country. If it were otherwise, arguments could be put forward that, for instance, it was against the human rights of an individual to pay Council Tax.  That would be farcical.  In reaching this conclusion, I am fortified by the decision of Mr Commissioner Levenson in CIS/4320/2001 and the authorities cited therein.  

15.	The appeal is accordingly dismissed.

	(Signed)	J M Henty
		Commissioner

	(Date)	24 November 2003