Cornerstone on Social Housing Fraud – 2nd Edition now published

“A serious abuse of public housing resources for personal gain”

These were the words of a district judge concluding his judgment yesterday (3 June 2021) in a sub-letting possession case brought by a housing association. Regrettably such cases are not unusual and this blog has considered sub-letting matters previously.

However, I thought it might be helpful to highlight a few issues that stood out in this case which may assist and inform those dealing with similar cases.

Firstly, significant evidence requires, in most instances, a rebuttal / explanation. For example here, why were there padlocks on the internal room doors? Why did one of the occupants found at the property by the association describe the defendant’s claimed bedroom as a storage room? Why did the electoral roll evidence obtained by way of the credit reference report show multiple people registered there in the last 10 years or so, and often for long periods? Who were they? Why did the defendant’s bank accounts show so many cash payments into her account over the years?

The absence of clear (or any) answers to these matters in the pleaded case or witness evidence is significant. The attempt to “fill the gap” during cross examination may make matters even worse (and did here).

Secondly, sometimes you need to step back and see the bigger picture. A 2nd witness statement by the defendant served less than a week before trial is undoubtedly frustrating and should not have been necessary so late but what is to be served by opposing its submission? That is not to say there will never be a good reason – e.g. it raises new matters you would have wished to investigate – but where it largely says more of the same (e.g. my bills always went to the demised premises’ address) opposition to its admission can appear churlish, insecure and unattractive. In this instance it actually helped the association’s case because they could say that the defendant had failed even at that late stage to provide sufficient responses to the evidence seemingly against her.

Thirdly, your evidence may not have a knock-out point but that is not fatal to the case. Indeed my skeleton argument said as much: “It may be argued on behalf of the first defendant that individually none of the pieces of information provide conclusive proof of any sub-letting”. To paraphrase the district judge’s more artistic position on this, “Individually all of the above may not be enough but put all the pieces together and it beats with a single rhythm”. See also Lord Justice Mummery’s remarks in Lambeth LBC v Vandra [2006] H.L.R. 19 at para. 13:

“There was no direct evidence, it is true, but there was sufficient evidence from which a reasonable inference could be made about a state of affairs in which a number of people were paying to live in Miss Vandra’s flat and were in fact living there.”

Fourthly, remember that not every question in cross examination is designed to “catch the witness out”, though you may well be laying the trail. For example, it had been said that one of the occupants found at the premises was the defendant’s sister. A little time was spent at the start of the cross examination of the defendant asking her to explain her family set up. It became clear by that point that the said occupant was not after all her sister, and the other person found with her was not a family member as claimed.

Lastly, often one of the most compelling features of a case is what is not there more than what is. Why was there nothing (email, letter, statement, etc) from those persons found at the premises? Why was there nothing from the defendant’s adult children who apparently sometimes stayed there? Why was there nothing from the husband (not least to refute the notion that his wife lived with him)? Why was there nothing from the neighbours who surely after 26 years of the defendant apparently living at the premises could have confirmed as much? Don’t forget to consider and use authorities such as Wisniewski v Central Manchester Health Authority [1998] PIQR P324 where Brooke LJ considered the court’s ability to draw adverse inferences from the absence or silence of a witness (that can of course go both ways).

Conclusion
The district judge had little hesitation in finding that there had been a sub-letting of the whole of the premises, and that the notice to quit had brought the remaining common law tenancy to an end at its expiry. Even had it have been only of part the district judge indicated that he would have made an outright order – this was not the case for a second chance.

As well as the “usual orders” an unlawful profit order in the sum of £145,177.89 was made against the defendant based on estimated figures of the rents received by her over many years.

Finally, I must pay particular tribute to association’s counter fraud specialist, Raj Vine, and the intelligence officer Magnus Lærke-Hall for their fantastic and crucial work without which there could have been no successful outcome. As always, I was also served by excellent solicitors, this time in the form of Katrina Robinson and, before her, Victoria Smith of Capsticks.

“Cornerstone on Social Housing Fraud” 2nd Edition

Judgment obtained by fraud?

On 24 February 2021 the Court of Appeal handed down judgment in Dale v Banga and others [2021] EWCA Civ 240. The opening paragraph of the (main) judgment of Lady Justice Asplin makes it clear what the issue in the appeal was:

“This appeal raises the question of what the appeal court should do when fresh evidence is adduced after a trial which allegedly shows that the judgment below was obtained by fraud, the conduct relied upon being that of a witness and of a party to the action which took place after the events in issue, and is unrelated to the issues which were before the court. In particular, it raises the following questions: whether the fresh evidence (permission to rely upon it having already been granted) is capable of establishing that the Respondents misled the judge at trial by asserting that a letter of revocation in relation to a will had been duly attested; if so, whether the question of whether the judge was misled (the fraud issue) should be referred to the lower court to be determined or should be the subject of a separate action; and, if it is determined that the lower court was misled by fraud, whether a previous will should be admitted to probate on the basis of the original judge’s obiter dicta.”

This is an issue which this blog has previously dealt with.

The “fresh evidence” concerned the discovery that one of the two attesting witnesses to the letter had been sent to prison for fraud offences, and Mr Banga himself had been indicted with attempting to pervert the course of justice (though no evidence was offered at trial and he was acquitted):

“7…It is alleged, nevertheless, that it is incontrovertible that Mr Banga had sought to pervert the course of justice by the production of false invoices. 

8. Mr Brennan, on behalf of Mrs Dale, submits that if the fresh evidence had been available to be adduced at trial it would have entirely changed the way in which the judge approached the question of the proper attestation of the Letter and his conclusion in that regard. It is said that the fresh evidence: undermines Mr Arif’s credibility as a witness of fact (as to the attestation of the Letter); supports the conclusion that Mr Arif and Mr Banga are sufficiently dishonest to have attempted to deceive the court about the circumstances in which the Letter was signed by the attesting witnesses and even that it was a forgery and was produced on another occasion; made Mr Arif the obvious person to have been chosen to assist in attempting to deceive the court; and gave Mr Arif an obvious motive to assist Mr Banga and his family.”

Coming back to Asplin LJ’s judgment, she explained what would be necessary to allow for a set aside of the final judgment:

  • It is not sufficient that the evidence given below can now be proved to have been mistaken.
  • It is not sufficient that a witness committed perjury.
  • “It is necessary that the judgment was obtained by fraud and that the fraud was that of a party to the action or was at least suborned by or knowingly relied upon by that party” (27).
  • There are two options then available – a new action to set aside the judgment (as preferred by the Court of Appeal – Salekipour v Parmer [2018] QB 833) or an appeal against the original order as in the present case, alleging that the judgment upon which it is based was obtained by fraud (39-41).

As for the test on appeal:

“42…It seems to me that it is necessary to decide whether the new evidence is capable of showing that the judge was deliberately misled by the Respondents and that the judgment may have been obtained by fraud. It must be sufficient to justify pleading a case of fraud. It must be capable of showing that there was conscious and deliberate dishonesty which was causative of the judgment being obtained in the terms it was. The conscious and deliberate dishonesty must be that of a party to the action, or was at least suborned by or knowingly relied upon by a party.

43. Secondly, if that threshold test is satisfied, the court must determine whether on the facts and in the circumstances of the particular case, it is appropriate that the fraud issue should be remitted or otherwise dealt with within the same proceedings. There is no question but that the appeal court has power to “refer any claim or issue for determination by the lower court”: CPR 52.20(2)(b). The question is whether the discretion to do so should be exercised. It is not possible to list the matters which will be relevant to the exercise of that discretion because they inevitably depend on the circumstances.”

Ultimately, the court declined to remit the issue of fraud to the lower court and dismissed the appeal:

“45. Unlike in Noble v Owens, the new evidence is of allegedly similar fact and bad character. It does not go directly to the central matters of fact before the judge. It requires inferences to be drawn based upon the alleged lack of credibility of the witnesses who gave evidence before him and their alleged propensities. It is tangential. Furthermore, all of the conduct from which it is said that the inferences should be drawn post-dates the alleged attestation of the Letter.”

Cases cited in judgment:

Odyssey Re (London) Ltd & Ors v OIC Run Off Limited & Ors [2000] EWCA Civ 71

Cinpres Gas Injection Ltd v Melea Ltd [2008] EWCA Civ 9

Takhar v Gracefield Developments Ltd & Ors [2020] AC 450

Royal Bank of Scotland plc v Highland Financial Partners lp [2013] 1 CLC 596

Noble v Owens [2010] EWCA Civ 224, [2010] 1 WLR 2491

Salekipour v Parmar [2017] EWCA Civ 2141, [2018] QB 833

The (current) notice periods for “fraud” possession actions under Covid-19

Introduction
This is a short article on the notice provisions for possession actions relying on:

  1. A notice to quit – where sub-letting / parting with possession of the whole is alleged, and/or it is said that the tenant(s) was not living at the demised premises as their only or principal home at the time the notice expired.
  2. A notice seeking possession – where it is alleged that tenant(s) were granted the tenancy because of a false statement (i.e. grounds 5 or 17 of Schedule 2 to the Housing Acts 1985 or 1988 respectively).

Notices to quit
The “easy” part of the explanation is that notices to quit have never been reformed by reason of the pandemic under the Coronavirus Act 2020 or otherwise save so far as concerns Rent Act tenancies. That remains the case.

Notices seeking possession
The notice seeking possession route is more complicated and I have chaired a recent webinar on the subject with four colleagues from Cornerstone Barristers. I have also produced a table of the changes but you can also of course check the amended notice sections of the Housing Acts and/or the Regulations themselves.

To remind ourselves of the wording of ground 5 / ground 17:

“The tenant is the person, or one of the persons, to whom the tenancy was granted and the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by —

(a)the tenant, or

(b)a person acting at the tenant’s instigation.”

The Coronavirus Act 2020, Schedule 29 had changed the usual 14-days (assured tenancies) and 28-days (secure tenancies) notice period to 3 months and now this temporary amendment has itself been amended by the Coronavirus Act 2020 (Residential Tenancies: Protection from Eviction) (Amendment) (England) Regulations 2020 from 29 August 2020 to 31 March 2021.

The effect is that:

  1. Ground 5 requires 28-days notice so long as it is not joined by any other grounds other than 1, 2ZA and/or 2A (so long as with 1 at least 6 months rent is unpaid at the date of service). Also Ground 2 (no period) and section 84A (28 days (periodic) / 1 month (fixed term)) Schedule 29 changes have been suspended and these can include any other ground.
  2. Ground 17 requires 14-days notice so long as it is not joined by any other grounds other than 14A and/or 14ZA. Also Ground 7A (28 days (periodic) / 1 month (fixed term)) and Ground 14 (no period) Schedule 29 changes have been suspended and these can include any other ground.

Pre-action conduct and committal – a “practice note”

In Jet 2 Holidays Ltd v Hughes [2020] 1 WLR 844 the Court of Appeal held that:

  1. CPR r 32.14, the provision which provides for committal proceedings against a person if they make, or cause to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth, did not confer jurisdiction to bring committal proceedings in respect of a witness statement that had been made before the commencement of proceedings.
  2. However, if a statement made before the commencement of proceedings interfered with the due administration of justice the court would be able to exercise its inherent power to commit for contempt in respect of it.
  3. Since pre-action protocols were now an integral and highly important part of litigation architecture, a dishonest witness statement made before the commencement of proceedings in purported compliance with a pre-action protocol was capable of interfering with the due administration of justice, even though, following a challenge by the prospective defendant to the truth of the statement, proceedings for substantive relief were never issued.
  4. The witness statements in the present case were closely connected to the administration of justice and, if false, interfered with it, thus giving rise to jurisdiction to commit the defendants for contempt.
  5. However, on a true construction of CPR r 81.13(2) , the witness statements had been made “otherwise than in connection with any proceedings”, which phrase referred to proceedings commenced before the contempt was committed.
  6. Therefore, the application for permission to make a committal application should have been made to the Administrative Court, but that procedural defect would be waived, pursuant to paragraph 16.2 of CPR Practice Direction 81, and permission would be granted.
  7. That, further, since the new witness statements fell within CPR r 32.14 and there was a clear public interest in the bringing of contempt proceedings in respect of them, the claimant would be granted permission to amend its claim form to add the new grounds of contempt.

In the judgment of the court it was said:

“50. It is not satisfactory that false statements made in witness statements served before the commencement of proceedings in purported compliance with a PAP fall outside CPR r 32.14 . Nor is it satisfactory or convenient that any application for permission to bring contempt proceedings for such false statements must always be made to the Administrative Court pursuant to CPR r 81.13(2) . It is highly desirable, therefore, that the possibility of contempt in relation to such statements should be expressly addressed in the Civil Procedure Rules and a practice direction.”

A few months later, on the 16 July 2020, the 122nd amendment to the CPR was produced and included an amendment to the Practice Direction: Pre-Action Conduct and Protocols with effect from 1 October 2020:

“In paragraph 2, at the end insert “A person who knowingly makes a false statement in a pre-action protocol letter or other document prepared in anticipation of legal proceedings may be subject to proceedings for contempt of court.”.”

Pre-action letters are important in sub-letting, allocation fraud, etc cases where a possession claim or other proceedings are being contemplated and are usually expressly made pursuant to Part 3 of the Pre-action Protocol for Possession Claims by Social Landlords.

This may appear to take them outside of the amended Practice Direction, which says at paragraph 2:

“This Practice Direction applies to disputes where no pre-action protocol approved by the Master of the Rolls applies.”

but a proper reading of this practice direction must rather demonstrate that the amendment will apply even if a pre-action protocol operates.

It follows that it would be good practice from 1 October 2020 to include a warning in pre-action correspondence that false statements may lead to contempt proceedings.

Housing fraud in the Courts – 6 recent cases

Housing fraud and Covid 19

Introduction

The circumstances arising from the current pandemic have led to many pressing practical issues for social landlords and tenants alike. Much of the focus has been, quite rightly, on matters surrounding homelessness and rent, but in the housing fraud field the particular concerns can be identified in 3 broad topics:

1. Investigations.

2. Service of notices.

3. Court proceedings.

This short post considers the current state of play in these 3 areas, with the obvious caveat that matters are constantly changing, and what a social landlord can still do.

Investigations

One of the obvious impacts on ongoing and proposed fraud investigations is that staff numbers are inevitably reduced, and tenants and other potential witnesses are similarly unavailable.

Even if health is not an issue the government policy of self isolation means that, for example, caution interviews are unlikely to go ahead and home visits are going to be effected in the same way. They have have generally been suspended, and anecdotally some staff temporarily redeployed.

  • Pre-action (protocol) letters can still be drafted and sent.
  • information can still be obtained from third parties, such as banks and fuel suppliers, in the usual way – see for example The Prevention of Social Housing Fraud (Power to Require Information) (England) Regulations 2014/899.
  • E-mail and telephone/video conferencing can be used in place of direct face to face interview where appropriate.
Notices

The much lauded legislative attempt to restrict possession actions in the courts for a period because of Covid 19, the Coronavirus Act 2020 (section 81, Schedule 29), does not change or restrict the services of notice to quit on secure or assured periodic tenants, though there may be questions of proof of service (though personal or even hand-delivery service should not be required given that most tenancy agreements provide for service by post).

Schedule 29 does though change the process with regard to notices seeking possession – at least when served during the initial period of 26 March to 30 September 2020 – and requires 3 months notice to be given. This will therefore effect in particular:

  • Ground 5 Sch 2 Housing Act 1985/Ground 17 Sch 2 Housing Act 1988 (false statement) notices seeking possession.
  • Ground 1 Sch 2 Housing Act 1985/Ground 12 Sch 2 Housing Act 1988 (breach of tenancy) notices seeking possession.
  • Introductory tenancy section 128 notices.
  • Flexible tenancy section 107D notices.

The Schedule 29 reforms do not impact upon notices served prior to 26 March 2020 and they therefore remain valid (assuming they otherwise were), and are capable of being relied upon in possession proceedings.

Possession proceedings

There is no restriction at all on the issue of possession proceedings, save for the obvious practical hurdles in the current circumstances (e.g. signing the statement of truth, though see the electronic signature provisions in CPR r. 5.3 and PD5A), albeit all such proceedings are stayed during the 90 day period starting from 27 March 2020 by reason of the new Practice Direction 51Z:

1. This practice direction is made under rule 51.2 of the Civil Procedure Rules (“CPR”). It is intended to assess modifications to the rules and Practice Directions that may be necessary during the Coronavirus pandemic and the need to ensure that the administration of justice, including the enforcement of orders, is carried out so as not to endanger public health. As such it makes provision to stay proceedings for, and to enforce, possession. It ceases to have effect on 30 October 2020.

2. All proceedings for possession brought under CPR Part 55 and all proceedings seeking to enforce an order for possession by a warrant or writ of possession are stayed for a period of 90 days from the date this Direction comes into force.

3. For the avoidance of doubt, claims for injunctive relief are not subject to the stay in paragraph 2.

HMCTS’ daily operational summary of 3 April 2020 provided that injunctions, a remedy often used in shared ownership sub-letting scenarios, are a priority 1 case (work that must be done), though does go on to say in a separate bullet point immediately following “emphasis must be on those with a real time element (such as post-termination employment restrictions), noise or interference with property”. Other noteworthy matters to take from the summary are that enforcement work involving bailiffs/sheriffs is not a priority or even recorded as work that could be done (Priority 2), multi-track trials are priority if the parties agree the trial is urgent and fast-track trials are only priority 2 and, again, even then only if the parties agree the trial is urgent.

In summary therefore:

  • Possession claims can still be issued as before, but they will thereafter be stayed.
  • Notices to quit in sub-letting/parting with possession of the whole and only or principal home cases are not effected by the temporary changes brought in by the Coronavirus Act 2020.
  • Notices seeking possession are, conversely, effected though not if served prior to the aforementioned changes.
  • Injunction claims are still available though in a fraud context are unlikely to be seen as a priority.
Criminal cases

The operational summary says in respect of magistrates’ courts that they are only covering urgent work (not, therefore, including fraud trials such as under the Prevention of Social Housing Fraud Act 2013).

Similarly, Crown Courts are said to be covering only urgent work.

Conclusion

As noted in the Introduction, we are living through uncertain and ever-changing times. It is entirely understandable that social landlords presently have different priorities but insofar as fraud remains relevant work can still continue albeit there are obvious restrictions and will be inevitable delays.