Cornerstone on Social Housing Fraud

We are a week away from the International Fraud Awareness Week – which starts on 12 November 2023 – and the excellent Tenancy Fraud Forum has produced a flyer for all social landlords to use in order “to highlight the enormous negative effect that tenancy fraud has on the social housing sector”.

There is space at the top of the flyer where social landlords can add their logo and they can contact the Forum at admin@tenancyfraudforum.org.uk if they want help to do so.

The flyer can also be downloaded from the Forum’s website at https://lnkd.in/erbH7pNE.

Introduction
My articles for this blog are hopefully of interest to the readers but sometimes may also serve, to be honest, as a reminder to myself of a recent case and prompt to carefully read the judgment. Such is the case with the 5 July 2023 judgment in Yao Bekoe v London Borough of Islington [2023] EWHC 1668 (KB).

This was a claim for misuse of private information and later breach of rights under the (pre-Brexit) General Data Protection Regulation (“GDPR”). The latter issue concerned a data subject access request (“DSAR”) sent by Mr Bekoe, and especially delays in providing a response .

The misuse of private information claim arose out of possession proceedings in respect of a property owned by Mr Bekoe’s neighbour (Mrs Sobesto, now deceased). The London Borough of Islington (“the Council”) had previously been appointed deputy for her after Mrs Sobesto had moved into a care home, and had concerns about Mr Bekoe letting out Mrs Sobesto’s property.

Mr Bekoe said that “he had an informal arrangement with Mrs Sobesto and her family whereby he managed and let out flats in the Property on her behalf with the income being intended to help pay for her care”.

Before looking at how the court dealt with the claims, its treatment of the witness evidence, actual or missing, has an importance and relevance beyond the 4 corners of the case.

Witness evidence

Neither of the Council’s witnesses had any personal knowledge of the facts underlying the two claims, and the legal file related to the earlier possession claim had likely been destroyed.

The Judgment of DHCJ Susie Alegre includes a helpful section on evidence and inferences (see my earlier blog on this issue from September 2021):

“19.The general rule concerning the evidence of witnesses is set out at CPR r.32.2. 

“32.2—(1) The general rule is that any fact which needs to be proved by the evidence of witnesses is to be proved—(a)at trial, by their oral evidence given in public; and (b)at any other hearing, by their evidence in writing.” 

20.The commentary on the rule in White Book 2023, 32.2.1 at pg. 1017 says:

“Traditionally, the law applicable in England and Wales has placed greatest weight on evidence given by witnesses in open court on oath or affirmation under examination by the parties. Rule 32.2(1)(a) restates the general principle in relation to the most important part of the civil process, the trial. The rule applies only to evidence as to matters of fact.”

21. In Active Media Services Inc v Burmester Duncker & Joly GmbH & Co KG [2021] EWHC 232 (Comm) (Calver J), at [299]-[311], the Court summarised the applicable principles regarding a court’s ability to draw adverse inferences from the absence of evidence before the court. In relation to the claimant company’s failure to call relevant witnesses Calver J referred to the observations of Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] P.I.Q.R P324, including that “(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.”

22. In relation to the destruction of evidence, Calver J referred to the observations of HHJ Simon Brown QC in Earles v Barclays Bank [2009] EWHC 2500, at [31]: “In cases where there is a deliberate void of evidence, such negativity can be used as a weapon in adversarial litigation to fill the evidential gap and so establish a positive case.”

23. In summarising the application of the principles in Active Media Services Inc at [311], Calver J held:

“that the court is entitled in such a case, depending upon the particular facts, to draw adverse inferences as to (i) what the destroyed documents are likely to have shown on the issue on question, and (ii) the evidence that the witnesses are likely to have given on the issue in question but which was withheld, without the need for some other supporting evidence being adduced by the innocent party on that issue.”

24. In Vardy v Rooney [2022] EWHC 2017 (QB); [2023] E.M.L.R. 1, the Court held that it could draw adverse inferences on the basis that the wrongdoer has “parted with relevant evidence”, under the principle in Armorie v Delamirie.”

In Bekoe v Islington the DHCJ found (emphasis added):

“52.There is no dispute that the Defendant accessed the private information sometime in July 2015 and shared it, both within the organisation and with the County Court in the Possession Claim. Mr. Cunliffe repeatedly put forward the argument that the access was based on LBI’s duty to Mrs Sobesto and was an enquiry under Section 42 of the Care Act 2014, but no evidence was adduced by the Defendant to back up these submissions. Nor was any evidence adduced to back up submissions related to contact with the police beyond the reporting in November 2014 which resulted in no action by Islington Police.

53.The Defendant said that the officers involved in the Possession Claim and in earlier engagements with Mr Bekoe in relation to the Property and the Court of Protection proceedings have all left the Council. But in their absence, no evidence was brought to show how an enquiry under Section 42 of the Care Act would normally be carried out; and there was no evidence as to what actually happened on this occasion. Indeed, the only evidence of contact with the police was reference to the report in November 2014 which resulted in Islington Police taking no action. In light of the observations of Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] P.I.Q.R P324, I conclude from the absence of witnesses from the relevant departments who might have material evidence on the process for making an enquiry under Section 42 of the Care Act, that there was no evidence to support this defence.”

Misuse of private information

Returning to the claims, misuse of private information is a tort under common law. Information is private for the purposes of this tort if the person in question has a reasonable expectation of privacy in respect of it. If so, the question is whether that expectation is outweighed by a countervailing interest: ZXC v Bloomberg LP [2022] UKSC 5, [2022] AC 1158, [43]-[62]26.

The private information in issue here included (a) the account number and sort code of several of Mr Bekoe’s bank accounts, and (b) mortgage accounts and mortgage balances providing a snapshot of his general financial affairs at the time of the possession proceedings.

That private information had been provided by the Council to the County Court in the possession proceedings without, Mr Bekoe said, any legal basis.

Although there was a disclosure order in the possession proceedings for some of the same documents, the court found that “the financial information accessed by LBI went far beyond that which would have been necessary to demonstrate payments made or received in relation to the Property”, and that his private information had been accessed by the Council before the August 2015 disclosure order.

Ultimately therefore, the DHCJ determined at para. 56 of the judgment “that the Defendant did misuse private information belonging to Mr Bekoe by accessing details relating to a collection of bank accounts and mortgage accounts associated with Mr Bekoe (and others) in July 2015 without lawful authority”.

GDPR

As for the GDPR claim, there was little real argument that this was made out by reason of the delays, the likelihood of missing information and breaches of security of personal data – articles 5, 12 and 15:

Article 5(1) provides:

“Personal data shall be:(a)

processed lawfully, fairly and in a transparent manner in relation to the data subject (‘lawfulness, fairness and transparency’);

….(f)

processed in a manner that ensures appropriate security of the personal data, including protection against unauthorised or unlawful processing and against accidental loss, destruction or damage, using appropriate technical or organisational measures (‘integrity and confidentiality’).”

Article 12(3) provides

“The controller shall provide information on action taken on a request under Articles 15 to 22 to the data subject without undue delay and in any event within one month of receipt of the request.”31.

Article 15(1) provides: 

“The data subject shall have the right to obtain from the controller confirmation as to whether or not personal data concerning him or her are being processed, and, where that is the case, access to the personal data and the following information:(a)

the purposes of the processing;(b)

the categories of personal data concerned;

…”

Article 15(3) provides: 

“The controller shall provide a copy of the personal data undergoing processing. For any further copies requested by the data subject, the controller may charge a reasonable fee based on administrative costs. Where the data subject makes the request by electronic means, and unless otherwise requested by the data subject, the information shall be provided in a commonly used electronic form.”

Quantum

Mr Beko was awarded £6000 for the misuse of private information and breaches of the GDPR by the Council. This included aggravated damages because of the (para. 69 of the Judgment):

“Repeated failure to disclose key information, disclosure at the final hour, two working days before the trial, and the absence of any clear evidence to support or substantiate Defence submissions relating to alleged fraud have clearly aggravated the distress caused to the Claimant.”

Conclusion

It will be noted that in the misuse of private information case, the DHCJ held at para. 54:

“The argument that Mr Bekoe’s privacy rights under Article 8 ECHR must be balanced against the late Mrs Sobesto’s property rights under Article 1 Protocol 1 ECHR must also fail in the absence of evidence for a clear legal basis for accessing the information.”

People misusing Council properties are being offered a one-off opportunity to #DoTheRightThing & return keys without criminal proceedings during February. The campaign is also encouraging anyone who suspects housing fraud to email fraud@scambs.gov.uk https://t.co/tY8ioasOKg

— South Cambridgeshire (@SouthCambs) January 17, 2023

The issue
There has rightly been much publicity recently in the housing, legal and indeed wider press about the recent Norwich Pharmacal order obtained by the Royal Borough of Kensington & Chelsea (“RBKC”). As RBKC’s own press release explained:

“In a major victory against social housing tenancy fraud, Kensington and Chelsea Council has worked with Airbnb to unlock critical information that can be used in future legal action or criminal proceedings against alleged fraudsters.  

The collaboration will see Airbnb Payments UK share payments data with the Council for two estates in North Kensington to help crack down on illegal short-term lets.

The data sharing, which will take place under a court order due to GDPR requirements, will provide the Council with payment evidence of social housing properties identified as being potentially listed as holiday and short-term lets. This will allow the Council to take enforcement steps having obtained the evidence.

The order was agreed by Airbnb and Kensington and Chelsea as part of the Council’s efforts to crackdown on the number of illegally sublet Council-owned properties, as the Council aims to free up homes for individuals and families on the housing waiting list.” 

Previous articles
I wrote about the issue of short-term lets and sub-letting 3 years ago on this blog.

What are Norwich Pharmacal orders?
In EUI Ltd v UK Vodaphone [2021] EWCA Civ 1771 Lord Justice Baker explained Norwich Pharmacal orders and when they can be applied for:

“1. This is an appeal against a judge’s refusal to order disclosure of information under the principle in Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133. 

2. The principle was summarised by Lord Reid at page 173:

“if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.”

3. In Mitsui & Co Ld. v Nexen Petroleum UK Ltd [2005] EWHC 625 (Ch), [2005] 2 All ER 511, Lightman J at paragraph 21 summarised the components of the principle in these terms:

“The three conditions to be satisfied for the court to exercise the power to order Norwich Pharmacal relief are:

i) a wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer;

ii) there must be the need for an order to enable action to be brought against the ultimate wrongdoer; and

iii) the person against whom the order is sought must: (a) be mixed up in so as to have facilitated the wrongdoing; and (b) be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued.”

4. The power to order disclosure in such circumstances does not extend, however, to “mere witnesses”. This limit on the jurisdiction was recognised by Lord Reid in Norwich Pharmacal at page 174:

“But that does not mean, as the appellants contend, that discovery will be ordered against anyone who can give information as to the identity of a wrongdoer. There is absolutely no authority for that. A person injured in a road accident might know that a bystander had taken the number of the car which ran him down and have no other means of tracing the driver. Or a person might know that a particular person is in possession of a libellous letter which he has good reason to believe defames him but the author of which he cannot discover. I am satisfied that it would not be proper in either case to order discovery in order that the person who has suffered damage might be able to find and sue the wrongdoer. Neither authority, principle nor public policy would justify that.”

5. The crucial question, therefore, is whether the defendant to the claim for information is more than a “mere witness” or “bystander”. In Various Claimants v News Group Newspapers Ltd (No.2) [2013] EWHC 2119 (Ch), [2014] Ch 400, Mann J observed (at paragraph 52) that participation or facilitation was not the sole test. He continued:

“It is true that the traditional formulation of the test is in such terms, but that is because those are the usual circumstances in which someone becomes something beyond a mere witness. On the facts of the cases where orders were made, the respondent was usually in that position. In my view the answer to the question lies in recognising that what the cases are doing is contrasting two things – the mere witness on the one hand, and the person who is not a mere witness on the other. On the cases the latter class is generally described in terms of participation/facilitation, as though that were the opposite of being a mere witness. But the real analysis lies in appreciating that the courts are holding not that those factors are indeed the other side of a dichotomy, but that those factors prevent the respondent from being a mere witness. Once that is recognised then it becomes relevant to consider whether there are other facts, short of participation/facilitation, which could prevent a person from being a mere witness.”

The question (paragraph 54) was therefore whether the defendant

“is a mere witness (or metaphorical bystander) or whether its engagement with the wrong is such as to make it more than a mere witness and therefore susceptible to the court’s jurisdiction to order Norwich Pharmacal disclosure.”

6. The distinction can be illustrated by the decision in Norwich Pharmacal itself. An order for disclosure was made against the Commissioners of Customs and Excise to obtain the names and addresses of importers of a chemical compound which, it was thought, was being brought into this country in breach of patents. Lord Reid explained why an order for disclosure was justified in law in these terms (at page 174):

“From the moment when they enter the port until the time when the consignee obtains clearance and removes the goods, they are under the control of the Customs in the sense that the Customs authorities can prevent their movement or specify the places where they are to be put, and in the event of their having any suspicions they have full powers to examine or test the goods. When they are satis?ed and the appropriate duty has been paid the consignee or his agent is authorised to remove the goods. No doubt the respondents are never in possession of the goods, but they do have considerable control of them during the period from entry into the port until removal by the consignee. And the goods cannot get into the hands of the consignee until the respondents have taken a number of steps and have released them.”

Similarly in  Various Claimants v News Group Newspapers Ltd (No.2), in which the claimants were seeking to bring proceedings against the proprietor of a national newspaper for phone hacking, an order was made against the Metropolitan Police for disclosure of information relating to the hacking which they had acquired in the course of an investigation.” (Emphasis added in bold)

Further guidance

The solicitors advising RBKC, Pinsent Masons, have not only explained their role in this important case but have also helpfully provided an excellent and comprehensive updated guide on obtaining Norwich Pharmacal orders.

I wrote recently about the position of a judgment which is later discovered to have been procured by fraud. Mr Justice Leech had cause to consider such a potential (but not, ultimately, actual) case in Tinkler v Esken Ltd [2022] EWHC 1375 (Ch) (and thank you to Arun Chauhan for alerting me to this judgment in one of his posts on LinkedIn):

“5. Mr Tinkler now invokes the court’s jurisdiction to set aside the Judgment for fraud on the grounds that individual witnesses (whose conduct can be attributed to SGL) deliberately failed to disclose documents (or destroyed them) and that they gave false evidence at the Trial.”

Paragraphs 11 to 35 of the judgment are especially interesting in re-affirming the correct approach:

“11. It was common ground that one party is entitled to have a judgment set aside for fraud if three limbs or conditions are satisfied: first, the successful party (or someone for whom it must take responsibility) committed conscious and deliberate dishonesty (“Limb 1“); secondly, the dishonest conduct was material to the original decision (“Limb 2“); and, thirdly, there was new evidence before the Court (which was either not given or not disclosed in the earlier proceedings) (“Limb 3“). The principal issues between the parties were the test for materiality under the Limb 2 and the way in which the Court should approach new evidence deployed under Limb 3.”

The analysis that followed on each of these limbs in this section of a long judgment is worth a read.

The Court also reminded itself of some particular features when dealing with allegations of fraud:

“36. Mr Leiper also made a number of general points about the trial of fraud claims. He reminded me that although the standard of proof was the civil standard, the Court should take account of the fact that fraud is inherently improbable. In Bank St Petersburg PJSC v Arkhangelsky [2020] 4 WLR 5 Males LJ summarised the approach which the Court should take at [117]:

“In general it is legitimate and conventional, and a fair starting point, that fraud and dishonesty are inherently improbable, such that cogent evidence is required for their proof. But that is because, other things being equal, people do not usually act dishonestly, and it can be no more than a starting point. Ultimately, the only question is whether it has been proved that the occurrence of the fact in issue, in this case dishonesty in the realisation of the assets, was more probable than not.”

37. Mr Leiper also reminded me that proof of fraud requires cogent evidence which must be commensurate with the seriousness of the conduct: see JSC BTA Bank v Ablyazov [2013] EWHC 510 (Comm) at [37] (Teare J). He submitted that where the Court was being invited to draw an inference of dishonesty from primary facts the Court must be satisfied that “an inference of dishonesty is more likely than one of innocence or negligence”: see JSC Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm) (Flaux J). In the present case, Mr Tinkler alleges both perjury and the deliberate destruction and non-disclosure of documents. I accept that cogent evidence is required before those allegations can be found to be proved.”

The claim to set aside the judgement for fraud was ultimately dismissed.