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[2006] UKSSCSC CH_2121_2006 (13 November 2006)

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The claimant's appeal to the Commissioner is allowed. The decision of the Oxford appeal tribunal dated 10 February 2006 is erroneous in point of law, for the reason given below, and I set it aside. The case is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraph 7 below (Child Support, Pensions and Social Security Act 2000, Schedule 7, paragraph 8(5)(c)).
2. On the view that I take of this appeal, I can deal with the facts very briefly. As the circumstances will have to be re-examined afresh by a new appeal tribunal, the less I say about them the better. The background as set out by the appeal tribunal of 10 February 2006 was this:

"The appellant is a severely disabled young woman [date of birth 23 December 1979] who with her disabled sister has been housed by her parents, at considerable sacrifice, in a bungalow constructed in the garden of the family home. The tribunal accepts that the bungalow was the default option because social services could not find appropriate accommodation for either of the girls.

The tribunal also fully accepts that the bungalow was built in reliance [on] an express assertion that Housing Benefit could be claimed. The girls' father took early redundancy and accepted a significant actuarial deduction on his pension to release capital and borrowed from family to build the bungalow."

The arrangement agreed with social services was that they would fund the cost of the care provided for the sister, by an organisation called Style Acre, but not the cost of the accommodation provided by their father as the landlord. However, when the sisters came to claim housing benefit from 4 April 2005 their claims were disallowed, by decisions dated 11 August 2005. For the period from 4 April 2005 to 16 June 2005 the reason was that they had not moved in to the accommodation, so were not entitled as not occupying the property. From 17 June 2005 the reason was that there was not a liability to pay rent in accordance with regulation 6 of the Housing Benefit (General) Regulations 1987.

3. The claimant and her sister appealed. The local authority's written submission to the appeal tribunal was that that they were to be treated as not liable to make payments in respect of a dwelling under regulation 7(1)(l) of the Housing Benefit Regulations:

"(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 in 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 [Social Security Contributions and Benefits Act 1992]."

I do not need to go into the nature of the arrangements that the local authority regarded as supporting that conclusion.

4. Both the sisters, their father and various representatives attended the hearing on 10 February 2006. The appeal tribunal, "with a heavy heart", dismissed the appeal. The statement of reasons included the following:

"The difficulty the tribunal has is with regard to either of the girl's capacity to understand what has been contracted for. It is clear on the case law that the level of understanding is not high but having seen both girls, hearing from one, and been advised that their care package, excluding accommodation costs, the tribunal is satisfied that the girls are so limited that they have no inkling of the concept of an agreement and a liability. Having seen the girls on entry the tribunal directly raised the issue of capacity and there was no request for an adjournment despite the local authority not having raised the issue. If there is in existence already evidence to indicate that the appellant had that level of capacity clearly there must be an application to have this decision set aside on grounds of a missing document. If evidence is obtained to indicate that this conclusion is incorrect then there must be an application to have the decision superseded.

In consequence the tribunal concluded that there could not be a liability under regulation 6 because the claimant was not able to enter into even a voidable contract."

The reference to case law seems, from the record of proceedings, to have been to Commissioner's decision CH/663/2003, in which Mr Commissioner Henty noted that the claimant in that case was incapable of managing his own affairs, so that the tenancy agreement would have been avoidable at his suit, but not void until it was so avoided. Unless and until that was done, the claimant taking the benefit of the accommodation was subject to the burden of liability for the rent. The appeal tribunal appears, though, to have decided on the basis that there was some lower minimum level of understanding in a party to a transaction that would make it void from the outset.

5. The claimant now appeals against the appeal tribunal's decision with my leave, after a history of confused applications to set aside. When granting leave, I said this:

"It is ... arguable that the appeal tribunal applied wrong principles of law as to the effects of incapacity to make a contract on the ground of lack of understanding of the nature of the transaction. My provisional understanding of the authorities on the law of England and Wales is that even if a party to a contract does lack sufficient understanding to have capacity and the other party knows that, the contract is not void, but is merely voidable at the option of the affected party. There is no minimum level of understanding below which a contract is void. On that basis, on the facts found by the appeal tribunal, since the claimant did not wish to avoid the tenancy, there would have been a legal liability to make payments under regulation 6 of the Housing Benefit (General) Regulations 1987. The relevant case-law includes Commissioners' decisions CH/663/2003, R(IS) 17/94, CIS/195/1991 and CIS/754/1991 (all available on the Commissioners' website as well as from other sources), plus R v Barrow Borough Council, ex parte Catnach, unreported 3 September 1997 (mentioned in Findlay et al), Hart v O'Connor [1985] AC 1000 and Imperial Loan Co Ltd v Stone [1892] 1 QB 599."

6. In its submission dated 24 August 2006, the local authority agreed that the appeal tribunal was wrong in law to conclude that the sisters were not able to enter into even a voidable contract and did not contest the appeal on that basis. It saw little merit in a rehearing on the application of regulation 6 of the Housing Benefit Regulations and invited the Commissioner to substitute a decision for that of the appeal tribunal. However, the local authority, not having appealed against the rejection of its regulation 7 arguments (that the appeal tribunal of 10 February 2006 indicated would have been its conclusion if it had been necessary to consider those arguments), wanted to "reserve its position" on a possible late application for leave to appeal on those grounds. That would be a legal impossibility. For one thing, there can only be an appeal against an appeal tribunal's decision, not against what the appeal tribunal would have decided if it had not decided on the ground actually relied on. And second, once a Commissioner has set aside an appeal tribunal's decision on appeal it ceases to exist. However, the outcome that I consider proper, as was put forward by the claimant's representative, Ms Drohan of Oxfordshire Welfare Rights, in her reply dated 27 September 2006, does not deprive the local authority of the opportunity to rely on its regulation 7 arguments. That is to remit the appeal against the decision of 11 August 2005 for rehearing by a new appeal tribunal.
7. Accordingly, I set aside the appeal tribunal's decision as erroneous in point of law and refer the claimant's appeal against the local authority's decision of 11 August 2005 to a differently constituted appeal tribunal for determination in accordance with the following directions. There must (subject to any action as mentioned in paragraph 8 below) be a complete rehearing, in conjunction with the rehearing directed in CH/2122/2006, on the evidence produced and submissions made to the new appeal tribunal, which will not be bound by any findings made or conclusions expressed by the appeal tribunal of 10 February 2006. The principles of law as to the effects of incapacity summarised above must be applied. The local authority may rely on the written submissions already made about the effect of regulation 7(1)(l) of the Housing Benefit Regulations. The claimant's representatives must be prepared to meet that case, unless prior to the rehearing the local authority has put in a further written submission seeking to rely on any other provisions of the Regulations or other rules of law. As I have had no submissions on regulation 7, I give no directions of law about its interpretation. The evaluation of all the evidence will be entirely a matter for the judgment of the new appeal tribunal. The decision on the facts in this case is still open.
8. Despite what I have written in the previous paragraph, I would urge the local authority to think carefully about the views expressed by the highly experienced chairman of the appeal tribunal of 10 February 2006 about the "contrived tenancy" issue. I remind the local authority of the power in regulation 4(1)(c) of the Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001 to revise, at any time, a decision which is under appeal to an appeal tribunal, when the appeal has not yet been determined.

(Signed) J Mesher

Commissioner

Date: 13 November 2006