Housing Fraud Training

Monday, 9 July 2018 sees the roll-out, starting in London, of a “Misuse of Social Housing Tenancies” programme, organised by MBL Seminars Ltd and presented by Andy Lane.  There are also courses planned in 2018 for:

  • Bristol – 13 September
  • Leeds – 18 September
  • Cambridge – 17 October

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[Andy presenting an earlier course at Cornerstone Barristers on public law
defences to possession claims]

Recent activity against social housing fraud

The last fortnight has shown no sign of any let-up in the successful efforts of many local housing authorities and housing associations to tackle pro-actively detected incidences of social housing fraud.  Below are just a three examples of this ongoing effort:

 

“Only or principal home” and an outright order for possession

Possession Claim

I acted for a local authority today in a possession claim brought against one of its secure tenants because of alleged breaches of tenancy.  The terms of the tenancy agreement in issue were:

  1. You must use the property as your only or principal home.
  2. You must not leave the property for more than a single period of 21 days without informing us in advance in writing with details of how we can gain access to the property during the period of absence. You must also tell us in writing when you anticipate returning to the property and the reason for your absence. If you do not inform us, we may treat you as having parted with possession of the property and take action to repossess it.

Of course the first term replicates the Housing Act 1985 (“the Act”) where section 79(1) provides that a secure tenancy only remains as such for so long as the landlord and tenant conditions are met. The latter is provided for at section 81:

“The tenant condition is that the tenant is an individual and occupies the dwelling-house as his only or principal home; or, where the tenancy is a joint tenancy, that each of the joint tenants is an individual and at least one of them occupies the dwelling-house as his only or principal home.”

The factual basis of claim 

The tenant had from February 2013 to early 2017 obtained and undertook employment in a food take-away shop some 50 miles away from her authority flat (“the flat”), with accommodation being provided above the shop.  Her son was placed in a school in the county where the work was located rather than where the flat was.

She maintained that she visited and stayed at the flat on a regular basis, and at least once a week as a minimum, though this was disputed by the hearsay evidence of three neighbours and, more significantly, meter records in respect of the water, gas and electricity accounts for the flat which showed little, and for some periods no, usage.

She did though ensure that the rent and council tax was paid, and did not sub-let all or part of the flat at any time.

In 2016 the tenant submitted an application for the right to buy the flat, and some time afterwards the local authority received information that she had not been living there.  Detailed investigations were undertaken though by the time the notice to quit, which had thereafter been served, had expired it was not disputed that the tenant had moved with her family back into the flat such that the notice was of no effect.

Possession proceedings were issued following service of a notice seeking possession and the authority relied on (discretionary) Ground 1 of Schedule 2 to the Act:

“Rent lawfully due from the tenant has not been paid or an obligation of the tenancy has been broken or not performed.” (emphasis added)

 

Relevant Case-law

There are numerous cases surrounding the whole question and meaning of ‘only or principal home’ though the court focused on three.

In Islington Borough Council v Boyle [2011] EWCA Civ 1450; [2012] PTSR 1093 the Master of the Rolls set down the relevant principles to consider when addressing the this concept:

“55 I summarised the propositions to be derived from those and other cases in Amoah v Barking and Dagenham London Borough Council (2001) 82 P & CR DG12 . In the light of the submissions in the present case, and further reflection, I would summarise as follows the relevant principles to be applied in determining whether a tenant continues to occupy a dwelling as his or her home, for the purposes of the 1985 Act, despite living elsewhere. First, absence by the tenant from the dwelling may be sufficiently continuous or lengthy or combined with other circumstances as to compel the inference that, on the face of it, the tenant has ceased to occupy the dwelling as his or her home.In every case, the question is one of fact and degree. Secondly, assuming the circumstances of absence are such as to give rise to that inference: (1) the onus is on the tenant to rebut the presumption that his or her occupation of the dwelling as a home has ceased; (2) in order to rebut the presumption the tenant must have an intention to return; (3) while there is no set limit to the length of absence and no requirement that the intention must be to return by a specific date or within a finite period, the tenant must be able to demonstrate a “practical possibility” or “a real possibility” of the fulfilment of the intention to return within a reasonable time; and (4) the tenant must also show that his or her inward intention is accompanied by some formal, outward and visible sign of the intention to return, which sign must be sufficiently substantial and permanent and otherwise such that in all the circumstances it is adequate to rebut the presumption that the tenant, by being physically absent from the premises, has ceased to be in occupation of it. Thirdly, two homes cases, that is to say where the tenant has another property in which he or she voluntarily takes up full-time residence, must be viewed with particular care in order to assess whether the tenant has ceased to occupy as a home the place where he or she formerly lived. Fourthly, whether or not a tenant has ceased to occupy premises as his or her home is a question of fact. In the absence of an error of law, the trial judge’s findings of primary fact cannot be overturned on appeal unless they were perverse, in the sense that they exceeded the generous ambit within which reasonable disagreement about the conclusions to be drawn from the evidence is possible; but the appeal court may in an appropriate case substitute its own inferences drawn from those primary facts.” (emphasis added)

He went on to consider the “two homes cases” later in his judgment:

“65 In the light of the cases, I would summarise as follows the principles (in some cases reflecting those in para 55 above) which apply to the identification of which of two or more homes of the tenant is or was the tenant’s principal home. First, the length or other circumstances of the tenant’s absence may raise the inference that the dwelling which is the subject of the proceedings ceased to be the tenant’s principal home so as to cast on the tenant the burden of proving the contrary. Secondly, in order to rebut that presumption, it is not sufficient for the tenant to prove that at the material time it was his or her subjective intention and belief that the dwelling remained the principal home. The objective facts must bear out the reality of that belief and intention both in the sense that the intention and belief are or were genuinely held and also that the intention and belief themselves reflect reality. The reason for the absence, the length and other circumstances of the absence and (where relevant) the anticipated future duration of the absence, as well as statements and conduct of the tenant, will all be relevant to that objective assessment. Thirdly, the court’s focus is on the enduring intention of the tenant, which, depending on the circumstances, may not be displaced by fleeting changes of mind. Fourthly, the issue is one of fact to be determined in the light of the evidence as a whole, and in respect of which the trial judge’s findings of primary fact can only be overturned on appeal if they were perverse in the sense that I have mentioned earlier; but the appeal court may in an appropriate case substitute its own inferences drawn from those primary facts.” (emphasis again added).

The defendant’s representative played special regard to Crawley BC v Sawyer [1988] 20 HLR 98.  The court in this case held that there was no material difference between occupying premises as a “home” and occupying them as a “residence”. It was a case in which for a period of about a year a secure tenant had gone to live with his girlfriend and had thereafter returned to the property. During that period he had paid rent and rates, visited the property once a month and at some stage had spent a week back there. His evidence was that he had not abandoned the property and had had every intention of returning to it. The trial judge found that, even during that period of about a year, the property had remained, if not his only home, at least his “principal home” for the purpose of section 81 and so the local authority was not entitled to possession of it. The Court of Appeal held that the trial judge had been entitled on the evidence to take the view that the tenant had been living with his girlfriend only on a temporary basis and that, indeed, his principal home remained the property during that period. At p. 102 Parker LJ said:

“Going through the whole thread of these matters is the common principle that, in order to occupy premises as a home, first, there must be signs of occupation – that is to say, there must be furniture and so forth so that the house can be occupied as a home – and, secondly, there must be an intention, if not physically present, to return to it.”

 

Lord Justice Lewison confirmed in Havering LBC v Dove and another [2017] EWCA Civ 156; [2017] PTSR 1233 that the “Boyle principles” applied as much to a case where the subject property was not “fully used” as to a case of abandonment:

“22 In my judgment these principles are engaged not only where the tenant is absent from the property in the sense of not being physically present at all. They are also engaged where the tenant ceases to occupy the property as his or her only or main home even if he or she continues to occupy it as a home; as, for example, where what had once been the tenant’s only home becomes no more than a weekend or holiday home. Moreover the question of an intention to return (which often features in these cases) is in reality an intention to revert to a previous pattern of existence…”

Judgment

The court found that the authority had proven breaches of both tenancy terms relied upon.  In particular, the tenant had not rebutted the presumption that her occupation of the flat had ceased, and did not have the requisite intention to return there within a reasonable time.

Those were issues of “fact and degree” of course and perhaps of more interest was the court’s treatment of the nature of breach.  The authority had stressed it represented a serious misuse of social housing more in line with sub-letting and obtaining a tenancy by false representation cases than, say, rent arrears and anti-social behaviour complaints.  The court accepted this submission.

There was evidence before the court that there were over 1000 people waiting for a 2-bedroom property on the authority’s allocation scheme, at a cost of over £9000 per year for each household. Though the tenant had not immediately profited from her actions, as a secure tenant she would enjoy the right to buy and a significant benefit in the form of the statutory discounts available.

The court therefore determined that it was not only reasonable to make a possession order but that such an order should be made outright, along with the usual costs order.

Lessons Learnt

Taking too much from any case in this area of law is fraught with caveats and warnings.  Factual circumstances, evidence available and produced, and the inherent vagaries of the county court mean that cases such as this perhaps at best demonstrate what may be possible in the right circumstances.

The local authority investigations were here of the highest order, and the caution interview undertaken with regard to the right to buy application of special assistance (for example, it confirmed that the tenant knew what her obligations were under the tenancy with regard to use of the flat, and highlighted discrepancies in her accounts of how many times she visited the flat in the disputed 4-year period).

In the right case, evidence of the impact of a property effectively “lying empty” is helpful, such as a landlord’s pressing housing requirements in relation to would-be tenants, as is consideration of the cost of investigations.

Like a false representation ground, there is often little (or, at least, limited) point in suspending any order for possession on this Ground, but today’s case does demonstrate that even where a notice to quit route to possession is not available possession action may still be appropriate and successful.

Fraudulent Misrepresentation damages award

I am extremely grateful to Robert Brown, a well-known and highly regarded barrister at Arden Chambers, for alerting me to a case he was involved in recently concerning a damages claim for fraudulent misrepresentation.

In essence, the defendant had applied to the claimant local authority for housing assistance in 2003.  In 2009 he was offered a tenancy of a flat and signed a declaration confirming that his housing circumstances had not changed since he had first applied, and that he had no other accommodation to live in.

That was clearly wrong as he had in fact purchased a house in 2005 and when this was discovered many years later he was prosecuted under the Fraud Act 2006. In 2015, he pleaded guilty to five offences, including an offence of fraud by false representation contrary to Fraud Act 2006, s.2, and was then sentenced to 16 months’ imprisonment.

The local authority thereafter started a civil action to recover damages of £69,842.64 for the defendant’s fraudulent misrepresentation. Importantly and appropriately, this sum was based on the estimated cost of securing one unit of temporary accommodation for other applicants for housing during the period in which the defendant was the tenant of the flat.

After a trial in the County Court at Central London, HHJ Saggerson found for the local authority and ordered the defendant to pay damages of £69,842.64 (whilst also holding rent payments made could not be taken into account as a credit by the defendant as these were payable by whoever occupied the property).  He was also ordered to pay the local authority’s costs, which were summarily assessed.

The Judge rejected challenges to the claim based, for example, on causation and remoteness of damage, though doubted whether the original pleading of breach of contract as the cause of action was sustainable.  He had though no doubt that the amended statement of case introducing a fraudulent misrepresentation claim was clearly made out.

Needless to say, great credit must go to the local authority and Robert in pursuing this claim to such a successful conclusion and demonstrating that one measure of damages for allocation fraud could be the cost of continuing to accommodate a nominal household who might otherwise have been nominated to the disputed accommodation.


As mentioned at the head of this article, I am very grateful to Robert and Arden Chambers for alerting me to this case, and would welcome similar examples of social housing fraud in the courts from other barristers and solicitors. 

Social Housing Fraud in the Courts

Tort of Deceit claim dismissed

Damages for loss in a tort of deceit claim are not an especially common remedy in social housing fraud cases, despite the facts often, prima facie at least, satisfying the necessary requirements (not least in right to buy or grant of tenancy scenarios) and the landlord being caused financial loss by reason of the tenant’s or some other party’s fraudulent misrepresentations.  See Haringey LBC v Hines [2010] EWCA Civ 1111, [2011] HLR 6 for one such (albeit failed) example.

“Cornerstone on Social Housing Fraud” described the necessary requirements for such a claim in deceit and a recent High Court authority has usefully re-stated the relevant principles and may be of interest to those facing fraudulent misrepresentation cases.

On 26 March 2018 Mr Justice Soole dismissed a claim for damages arising from a failed investment of £1.25 million in Oxford Healthcare Solutions Ltd. The claimant alleged that her investments were procured by the fraudulent misrepresentations of the defendant, but the court rejected both her tort of deceit claim, and the alternative damages claim brought on the basis of breaches of warranty and other contractual terms.

But as noted above, the basic law relating to the tort of deceit was helpfully set out at paragraphs 173 to 183 of the Soole J’s judgment in Barley v Muir [2018] EWHC 619 (QB):

  1. A claimant must establish that there was (a) a representation, and (b) that representation was false, and also (c) was dishonestly made, and finally that (d) it was intended to be relied on: AIC Ltd v ITS Testing Services (UK) Ltd [2006] EWCA Civ 1601, [2007] 1 All ER (Comm) 667 at para. 251 per Rix LJ.
  2. The dishonest representation must be clearly identified, distinctly alleged and as distinctly proved: AIC at para. 254, and Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400.
  3. The standard of proof is the civil standard: Re B [2009] 1 AC 11 at para. 13 per Lord Hoffmann.
  4. The representation must be one of fact.  A statement of opinion will not suffice unless the deceit is in the fact that the opinion was not, or not honestly, held or in some further implicit dishonest misrepresentation of fact to be derived from the statement of opinion: AIC at para. 255.
  5. A representation by a professional person in a position where he would be expected to have significantly greater knowledge of the facts represented then did the representee will or may carry an implied representation that the representor or has reasonable grounds for making the statement: Barings plc (in liquidation) v Coopers & Lybrand [2002] EWHC 461 (Ch), [2002] 2 BCLC 410 at paras. 50 to 52.
  6. Whether any and if so what representation has been made has to be ‘judged objectively according to the impact that whatever is said may be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee’…The reference to the characteristics of the representee is important. The court may regard a sophisticated commercial party who was told that no representations are being made to him quite differently than it would a consumer. In the case of an express statement, ‘the court has to consider what a reasonable person would have understood from the words used in the context in which they were used’… The answer to that question may depend on the nature and content of the statement, the context in which it was made, the characteristics of the maker and of the person to whom it was made, and the relationship between them’: Raiffesen Zentralbank Osterreich v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) at paras. 80 to 82 per Christopher Clarke J.
  7. As to implied representations, the court has to perform a similar task except that it has to consider what a reasonable person would have inferred was being implicitly represented by the representor’s words and conduct in their context : Raiffeisen at para. 83.
  8. As to falsity, it is not necessary for what was said to be entirely correct, provided it is substantially correct, and the difference between what is represented and what is actually correct would not have been likely to induce a reasonable person in the position of the claimant to enter into the contract. The claimant must show that the difference between what was represented and the truth would have been likely to induce a reasonable person in its position to enter into the contract: Raiffensen at para. 149.
  9. As to dishonesty, fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false” : Derry v. Peek (1889) 14 App Cas 337 at 374; see AIC at para. 256.
  10. As to recklessness, ‘Not caring, in that context, did not mean not taking care, it meant indifference to the truth, the moral obliquity of which consists in a wilful disregard of the importance of truth…’ : Angus v. Clifford [1891] 2 Ch 449 at 471; see also AIC at para. 257.
  11. As to intent, it is possible to be fraudulent even by means of an ambiguous statement, but in such a case it is essential that the representor should have intended the statement to be understood in the sense in which it is understood by the claimant…or should have deliberately used the ambiguity for the purpose of deceiving him and succeeded in doing so: AIC at para.253; see also Goose v. Sandford [2001] Lloyd’s Rep PN 189 at para. 41.
  12. As to inducement/reliance, the misrepresentation need not be the sole or predominant cause of entering the contract. It is sufficient if it is one of the inducing causes : Ross River v. Cambridge City Football Club [2007] EWHC 2115 (Ch) at [200].

In Barley, as indicated above, the claim in deceit was on the facts dismissed

“196. In my judgment this claim is quite untenable

First, there is no suggestion nor any basis to conclude that any of the statements referred to was untrue. On the contrary, as the evidence shows and I accept, they were honest and truthful accounts of the business opportunities which OHS was exploring.

Secondly, the matters to which they related were each no more and no less than ‘business opportunities’ which OHS was duly pursuing. Such opportunities would only have ‘value’ in the event that they developed into a commercial relationship.

Thirdly, and in consequence, there is nothing in the identified texts and information to give rise to the alleged implication that OHS was ‘an active company engaged in revenue generating and/or valuable business’ (POC para.22). On the contrary, the only implication was that OHS was actively pursuing a range of business opportunities in the hope that one or more of these might result in valuable business and the generation of revenue. This includes the Quest e-mail of 10 October 2011 which contained no misleading inference.

Fourthly, Mr/Mrs Barley knew long before October 2012 that the Lloyds and Quest joint ventures had failed.

Fifthly, and in consequence, I do not accept that Mrs Barley’s further investment was induced by any representation from Mr Muir. In this respect I also do not accept Ms den Besten’s further or alternative argument that the second investment was induced by the matters relied on as Initial Misrepresentations. This follows from my earlier findings. The statements made by Mr Muir in September 2011 did not influence her decision to exercise the option to make a further investment.”

“Succession” and pre-May 11 2000 tenancies

Introduction

I recently completed a trial in which I was acting for a private registered provider of social housing in a possession claim brought following the death of the tenant.  The second defendant (eventually) accepted he had no statutory succession rights but wanted to rely on a term of the tenancy agreement which effectively committed the landlord to the grant of a tenancy of that (or some other) property to a family member who had been living at the property with the tenant at the time of the latter’s death and for the 12 months immediately preceding that time.

Lack of Evidence

This blog has talked previously about the issues surrounding lack of evidence in cases where there is not a credible reason for the same.  Here, despite claiming to have moved into the property with his brother and lived there ever since, the second defendant produced no clear documentary of his residence there during the relevant 12-month period, limited documentary evidence of residence there at all since the start of the tenancy and no witnesses save for family members in support of his position.

The trial judge concluded therefore that though she was prepared to accepted there was the necessary familial relationship (half brothers), she made a finding that the second defendant did not reside at the property during the required 12-month period.

Underlying legal problem

That was enough of course to defeat the defence and enable the making of a possession order.

This article does not however focus on the evidential deficiencies referred to above but rather the question of enforceability of the tenancy agreement’s extension of “succession” rights (strictly speaking it was rather a commitment to grant a fresh tenancy in defined circumstances) had the pre-conditions been satisfied.

The real objection to allowing such a grant of a new tenancy were largely factual on the part of the landlord – i.e. it wasn’t entirely clear that the second defendant was sufficiently related to the tenant and, in any event, he had not provided satisfactory evidence to meet the residence requirement – but as a means of protecting its position there was, legally, an even greater obstacle facing the second defendant.

In short, even if he otherwise satisfied the conditions for a grant of a fresh tenancy how could he enforce the term in a contract (i.e. the tenancy agreement) to which he was not a party?

Privity and Enforceability of Tenancy Agreement

Even a student of law more concerned with getting an improvement on his best 9-ball break in snooker than his studies (I was young), and opting for a cursory glance at ‘Nutshells on Contract Law’, would appreciate that the second defendant was lacking one of the essential legal requirements for the enforceability of a contractual term.  The need for “privity of contract”.  He was not a party to it and so, ostensibly, could not enforce it.

That may seem unfair, or at least unfortunate, where a contract or part of it had the express purpose of conferring a benefit on a third party.  That third party however could not without more, at common law at least, sue for breach of contract or press for specific performance of the relevant term.

Contracts (Rights of Third Parties) Act 1999 (“the Act”)

That “without more” is clearly the Act.

Acting upon the recommendations, with some amendments, of the Law Commission in its Report on Privity of Contract: Contracts for the Benefit of Third Parties, Law Com No 242 (1996), the Act was passed and received Royal Assent on 11 November 1999.

To cite from it’s explanatory notes:

“4. The Act sets out the circumstances in which a third party is to have a right to enforce a term of the contract (section 1), the situations in which such a term may be varied or rescinded (section 2) and the defences available to the promisor when the third party seeks to enforce the term (section 3). It makes it clear that section 1 does not affect the promisee’s rights, or any rights that the third party may have which are independent of the Act (sections 4  and 7(1)). The Act does not apply to certain contracts (whether wholly or partially) (section 6).”

This would seem ideal to assist the second defendant in seeking to enforce his brother’s tenancy agreement if required, section 1 being very clear that:

“(1) Subject to the provisions of this Act, a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if—

(a) the contract expressly provides that he may, or

(b) subject to subsection (2), the term purports to confer a benefit on him.

(2) Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.

(3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.

(4) This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.” (emphasis added)

However, the problem for him would have arisen from the provisions of section 10 of the Act:

“(2) This Act comes into force on the day on which it is passed but, subject to subsection (3), does not apply in relation to a contract entered into before the end of the period of six months beginning with that day.” (emphasis added)

Application of the Act

In the case I was dealing with the assured tenancy post-stock transfer had commenced in the summer of 1999, before 11 May 2000 (and indeed before the passing of the Act).  It followed that the term providing for the grant of a fresh tenancy would not have been enforceable, at least under the Act, by the second defendant.

Public Law & estoppel

That is not to say that in the right case and on the right facts there might not be any public law argument available to defeat the possession claim, not least legitimate expectation of course, but that broadly would depend upon there being some sort of clear representation being made to the would-be “successor” as to their rights post-tenant’s death and the treatment of them by the landlord.

There may equally on the facts, which were not present here, be an estoppel argument such as was found in Daejan Properties Ltd v Mahoney (1996) 28 HLR 498 and allowed the defendant to defeat the possession claim and be treated as a successor even though that, in law, was not possible.

Succession

Amendments to the succession provisions of both the Housing Act 1985 (section 86A (England) – secure tenancies) and Housing Act 1988 (section 17 – assured tenancies) brought in by sections 160 and 161 of the Localism Act 2011 respectively could conceivably help such third parties as they allow, in the right circumstances, for clauses in tenancy agreements extending succession rights beyond spouses and civil partners to be treated as a statutory succession.

In fact had the deceased tenant enjoyed a secure tenancy then, given that it was a pre-1 April 2012 tenancy,  his brother would been entitled to a statutory succession if the family and residence requirements had been satisfied.

However, the Localism Act changes only apply to those tenancies granted on or after 1 April 2012: sections 160(6) and 161(7) of the 2011 Act.  There is a provision at section 120 and Schedule 8 to the Housing & Planning Act 2016 to remove that restriction in so far as it concerns secure, introductory and demoted tenancies but this has, to date, not been brought into force.

This is why the second defendant had to accept there could be no statutory succession.

Conclusion

It perhaps goes without saying that it would, to use my words at trial, an “unattractive” argument to rely on a lack of legal enforceability to defeat an otherwise valid claim to specific performance of a tenancy agreement but:

(a) It does give the landlord some added flexibility if, for reasons unconnected with the “succession” provision, it does not wish to allow the third party to remain in the property as a tenant (e.g. under-occupation, behaviour, changed policies since insertion of term, etc).

(b) It may assist a costs argument.

This claim demonstrated not only the importance of evidence, and the importance of relevant arguments as to its unexplained absence, but also the need for a proper understanding of the law in this area in order to hone a party’s statement of case accordingly.

[There were also Ground 7 issues which, I am sure, will form the basis of a later post]