Compensation Orders – an introduction

We have reported on a number of social housing fraud convictions in this blog, and along with unlawful profit and costs orders the court may consider making a compensation order . For example, a £45,000 compensation order was made in a sub-letting case reported in the Islington Gazette (and here) in April 2018.

In the same month,  a former housing officer was ordered to pay £20,000 to his erstwhile employers, after receiving a 3-year sentence in 2016 “after admitting fraud offences relating to social housing applications and job references”.

When it comes to profits from a housing fraud, if a person is convicted of an offence under either sections 1 or 2 of the Prevention of Social Fraud Act 2013 the court must decide whether to make an unlawful profit order. An unlawful profit order can be made instead of or in addition to an order under the court’s sentencing powers (see section 4(1) and (2) of the 2013 Act).

If a court decides not to make an unlawful profit order, section 4(4) of the 2013 Act states that it must give reasons for that decision when passing sentence.  

As for questions of loss and compensation orders, the criminal court must consider this in any case where personal injury, loss or damage has resulted from the offence, and the court must also (as with the unlawful profit order) give reasons if it decides not to order compensation.

And so section 130 of the Powers of Criminal Courts (Sentencing) Act 2000 provides:

“(1) A court by or before which a person is convicted of an offence, instead of or in addition to dealing with him in any other way, may, on application or otherwise, make an order (in this Act referred to as a “compensation order”) requiring him—
(a) to pay compensation for any personal injury, loss or damage resulting from that offence or any other offence which is taken into consideration by the court in determining sentence; or
(b) to make payments for funeral expenses or bereavement in respect of a death resulting from any such offence, other than a death due to an accident arising out of the presence of a motor vehicle on a road;
but this is subject to the following provisions of this section and to section 131 below.”

There are some salient points to remember about such orders:

1. They are ordered by the criminal courts following a conviction, and in a housing fraud case may be made, for example, where the local authority ‘victim’ has been put to the expense of putting a household in temporary  accommodation because the defendant has wrongly been allocated housing due to their misrepresentation.

2. No upper limit applies to those aged 18 or over (see s. 131 of the 2000 Act, which limits the amount to no more than £5000) though the amount of loss to the victim, such as the social landlord, is the matter being compensated. Continue reading “Compensation Orders – an introduction”

Fraud cases in the courts

The last few months have seen a number of reported cases which, though not directly concerning matters concerning housing on their facts, do explain some important cause of action, evidential and procedural issues that are referable to this blog’s focus on social housing fraud. 4 of those cases are described below.

Use of evidence in civil proceedings for criminal prosecution

In Gilani v Saddiq & Ors [2018] EWHC 3084 (Ch) the claimant applied for permission to use documents disclosed by the defendants in that civil claim as evidence for a private prosecution he had brought against the first and second defendants on charges of fraud arising out of the same matters that had given rise to the civil claim (though that claim had not pleaded fraud).

CPR r. 31.22 provides:

(1) A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where –

(a) the document has been read to or by the court, or referred to, at a hearing which has been held in public;

(b) the court gives permission; or

(c) the party who disclosed the document and the person to whom the document belongs agree.

(2) The court may make an order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to, at a hearing which has been held in public.

(3) An application for such an order may be made –

(a) by a party; or

(b) by any person to whom the document belongs.

(4) For the purpose of this rule, an Electronic Documents Questionnaire which has been completed and served by another party pursuant to Practice Direction 31B is to be treated as if it is a document which has been disclosed.

Lord Justice Aldous declared in Smithkline Beecham Plc v Generics (UK) Ltd [2003] EWCA Civ 1109 at [37]:

“The most important consideration must be the interest of justice which involves considering the interest of the party seeking to use the documents and that of the party protected by the CPR 31.22 order. As Lord Oliver said each case will depend upon its own facts.”

In the Gilani case itself HHJ Cooke considered the relevant authorities and explained the judicial discretion thus at [21]:

“The discretion is thus a general one, to be exercised in the interests of justice in all the circumstances of the case, having particular regard to the fact that documents are disclosed under compulsion and are prima facie to be kept confidential and used only for the purpose of the proceedings so that some good reason has to be shown for permitting any other use, but this does not mean that the grant of permission is rare or exceptional if a proper purpose is shown, and use in other proceedings such as criminal proceedings brought in the public interest may be such a purpose. The court must be satisfied there is no injustice to the party compelled to give disclosure.”

before concluding that [31]

“In the circumstances, in my judgment the grant of permission would not cause any injustice whatever to any of the defendants. Even if it could be maintained that it was in some way unjust to the Saddiq brothers that the prosecution case against them is strengthened by production of documents disclosed by them, that is a result which they brought upon themselves by opposing the application to stay the civil proceedings, and indeed expressly assented to in the course of that opposition. The grant of permission would not prevent them from pursuing an argument to similar effect before the criminal court; if they do so that will be a matter for the criminal court to determine.”

This decision was largely based on 5 factors:

  1. The considerable public importance in facilitating the effective prosecution of serious crimes such as fraud” – paragraph 22.
  2. The prosecutor “has the duty to lay before the criminal court all the evidence relevant to the offences charged, and would be hindered in doing so if evidence that would otherwise be relevant has to be withheld because this court refused permission.” – paragraph 23.
  3. There were no issues concerning the privilege against self-incrimination – paragraph 24.
  4. There was no injustice to the defendants in granting permission, indeed they had opposed the claimant’s application for a stay of the civil proceedings pending the outcome of the criminal prosecution – paragraphs 25 to 29.
  5. It cannot be said that use of the documents in criminal proceedings is in any respect an “improper” purpose – paragraph 30.

 

Pleading dishonesty/fraud

In Canary Riverside Estate Management Ltd v Circus Apartments Ltd [2018] EWHC 1376 (Ch) Master Shuman was faced with a CPR r. 3.4(2) application by the defendant in a breach of Lease claim to strike out paragraph 9 of the Reply in which the claimant had made an allegation of dishonesty against the defendant.

The Master referred to the said paragraph 9 in this way:

“In the claimant’s reply it is also alleged that contrary to the defendant’s case that it has granted 45 separate underleases to Bridgestreet each for a term of 3 years and each containing a landlord “put option” only the defendant has entered into an unconditional agreement with Bridgestreet to underlet the Property for a term of 10 years. This is squarely an allegation of dishonesty.”

and in considering the law at paragraphs 10 to 19 of the judgment the Master established:

  1. There was no factual basis alleged to plead the dishonesty – paragraph 11.
  2. You cannot plead a fresh cause of action in a Reply – paragraph 11, 16PD para. 9.2.
  3. A strike out application should be made as soon as possible – paragraph 13.
  4. Where it is intended that there be an allegation that a fraud or dishonesty has been committed, you must allege it and you must prove it with sufficient particulars – paragraphs 15, 17; Three Rivers District Council v Bank of England [2001] UKHL 16; [2001] 2 All ER 513 at [55, 184-6]
  5. The pleading party must have a proper basis for making an allegation of dishonesty in their pleading – paragraph 16; Three Rivers District Council v Bank of England [2001] UKHL 16; [2001] 2 All ER 513 at [160].
  6. Mr Justice Flaux said in Jsc Bank of Moscow v Vladimir Abramovich Kekhman & ors [2015] EWHC 3073 at [20]:

“The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact “which tilts the balance and justifies an inference of dishonesty”. At the interlocutory stage, when the court is considering whether the plea of fraud is a proper one or whether to strike it out, the court is not concerned with whether the evidence at trial will or will not establish fraud but only with whether facts are pleaded which would justify the plea of fraud. If the plea is justified, then the case must go forward to trial and assessment of whether the evidence justifies the inference is a matter for the trial judge.”

Counsel for the (ultimately successful) defendant set out the relevant principles thus (paragraph 19 of the judgment):

(1) The hope that something may turn up during cross-examination of a witness at trial does not suffice.

(2) The allegation of fraud must not be equivocal.

(3) There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.

(4) At an interim stage the court is only considering whether the facts as pleaded would justify the plea of fraud.

The Master ultimate found in favour of the application on the following primary grounds:

“34. I accept Mr Rainey QC’s submissions at paragraph 34 of his skeleton argument that, against the background of the 9 July 2015 agreement and the 45 under lettings, the fact that a junior employee of Bridge Street who was in sales said that he understood that position to be that Bridgestreet have the building for another 10 years is wholly insufficient to tilt the balance and to justify an inference that the defendant is dishonestly concealing an unconditional agreement to grant a lease of the whole of the Property to Bridgestreet for a term of 10 years. It does not come close. I accept that the statement by the employee is equivocal and equally consistent with an honest belief that Bridgestreet could remain in the Property for 10 years.

35. As to the other evidence relied on by the claimant in the witness statements put before me, this is not pleaded. However for completeness I have considered that evidence. I note that in relation to Mr Wallace he has refused to provide a witness statement to the claimant. In relation to the attendance note I consider that when Mr Wallace said that he had been told by either Mr Beck or Mr Rands that Bridgestreet had the property for 10 years that is explicable on the same basis as the email of 29 July 2015, that Bridgestreet were confident that they would be in the Property for the next 10 years. It was certainly in the defendant’s commercial interests for the underleases to be renewed. In relation to the email about the term “3+3+3+ 1 =10” I fail to see how this is evidence supporting the claimant’s contention that the defendant is dishonest. It demonstrates the mechanics of the agreement between the defendant and Bridgestreet and specifically refers to the fact that the defendant is awaiting the consent of the claimant which would alter these mechanics and therefore provide a single term of 10 years rather than a multiple of different terms adding up to 10 years.

36. So again I go back to paragraph 9 of the reply and that the claimant’s pleaded case hinges on the one email from Mr Wallace, a junior employee in sales writing an informal email to a potential client. I do not see how this email can be said to tilt the balance and justify an inference of dishonesty. I accept Mr Rainey QC’s submissions that this email is wholly insufficient to tilt the balance and wholly insufficient to mount a case that the defendant is dishonestly concealing a 10 year agreement for lease.”

 

Vicarious liability for fraudulent misrepresentation

In Winter v Hockley Mint Ltd [2018] EWCA Civ 2480 the Court of Appeal was faced with an appeal against a damages award of £531,803.98 made for vicarious liability for fraudulent misrepresentations made to the respondent company.

The Court only had to consider the first of four grounds – the Judge applied the wrong legal test in determining that Mr Winter was vicariously liable for the deceit of Mr Ramsden, and should have applied the test that a principal is only liable for the fraudulent misrepresentations of his or her agent where those misrepresentations were made within the scope of the agent’s actual or apparent authority – because they found in the appellant’s favour and remitted for re-hearing and determination the issue of Mr Winter’s vicarious liability on the grounds of Mr Ramsden’s ostensible authority.

In particular, the Judge did not apply the correct legal test in reaching his conclusion that Mr Winter was vicariously liable for Mr Ramsden’s deception of Hockley Mint, the test being:

“36. Lloyd v Grace, Smith & Co [1912] AC 716 concerned the liability of the defendant firm of solicitors for the conveyancing fraud of their managing clerk, who conducted the conveyancing business of the firm without supervision. One of the issues was whether it was a defence that the fraud was committed, not for the benefit of the firm, but for the benefit of the managing clerk. The firm contended that Barwick v English Joint Stock Bank (1867) LR 2 EX 259 was authority for the proposition that a principal was not liable for the fraud of his agent unless the fraud was committed for the benefit of the principal.

37. Lord Macnaghten, with whose speech Earl Loreburn and Lord Atkinson agreed, said (at 735-6) that the true principle to be derived from Barwick was that an innocent principal was civilly responsible for the fraud of his authorised agent, acting within his authority, to the same extent as if it was his own fraud. Lord Macnaghten did not consider separately actual authority, on the one hand, and apparent or ostensible authority, on the other hand. He said (at 736), for example, that the expressions “acting within his authority”, “acting in the course of his employment”, and “acting within the scope of his agency” meant one and the same thing, and that it was not easy to define with exactitude what was meant by those expressions. This reflects the fact that the case was decided at an early stage in the development of the jurisprudence on ostensible authority and on the difference between actual authority, on the one hand, and ostensible authority, on the other hand, as was described much later in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, esp at 502-3 (Diplock LJ).”

Armagas Ltd v Mundogas Ltd [1986] AC 717 “is binding authority of the House of Lords that, where a claimant has suffered loss in reliance on the deceit of an agent, the principal is vicariously liable if, but only if, the deceitful conduct of the agent was within his or her actual or ostensible authority” (paragraph 48).

More particularly, the Judge went wrong as follows:

“63. The analysis of the Judge did not identify or address the essential ingredients of vicarious liability of a principal for the deceit of his agent as required by Armagas: a holding out or representation by the principal to the claimant, intended to be and in fact acted upon by the claimant, that the agent had authority to do what he or she did, including acts falling within the usual scope of the agent’s ostensible authority. Instead, he applied a broad principle of fairness and a test of “sufficiently close connection” derived from Lister and Dubai Aluminium. Those cases, however, did not concern a reliance based tort, and were not about the ostensible authority of an agent or employee as a result of a holding out by the principal or employer. They concerned the ordinary course of employment (in Lister) and the ordinary course of a firm’s business (in Dubai Aluminium). That is why Armagas was not mentioned in any of the speeches in either case, and why Lord Nicholls in Lister said (at [30]) that in that case and in the other cases he cited there was no question of reliance or holding out, and why Lord Nicholls in Dubai Aluminium said (at [28]) that he left aside cases where the wronged party was defrauded by an employee acting within the scope of his apparent authority. In short, the first ground of appeal is correct in stating that the Judge applied the wrong test.”

 

Judgments obtained by fraud

This issue was recently considered by the Court of Appeal in Terry v BCS Corporate Acceptances Ltd & Ors [2018] EWCA Civ 2422, where the defendant failed in his appeal, having unsuccessfully applied to strike out the claimant’s claims post default judgment.

The Court of Appeal set out the correct procedures that should have been followed at paragraphs 25 to 40 of Hamblen LJ’s judgment:

  1. The primary means of doing so was by bringing a fresh action seeking the equitable relief of setting aside the judgment – paragraph 26; see Flower v Lloyd [1877] 6 Ch D 297; Hip Foong Hong v H Neotia & Company [1918] AC 888.
  2. In order to succeed in setting aside the judgment it will be necessary not only to prove the alleged fraud but also that it involved “conscious and deliberate dishonesty” and that it was “material” to the decision reached – paragraph 35; Royal Bank of Scotland Plc v Highland Financial Partners LP & Others [2013] EWCA Civ 328 at [106].
  3. The Court preferred the test of materiality set out in in Hamilton v Al Fayed (No 2) [2001] EMLR 14 at [34]:

    “Where it is clearly established by fresh evidence that the court was deliberately deceived in relation to the credibility of a witness, a fresh trial will be ordered where there is a real danger that this affected the outcome of the trial.”

  4. There might be special reasons for departing from this “established practice” in certain cases, but, if so, “the necessity for stating the particulars of the fraud and the burden of proof are no whit abated and all the strict rules of evidence apply”: paragraphs 27, 29;  Jonesco v Beard [1930] AC 298 at [201].
  5. The other established means of challenging a judgment obtained by fraud is by appealing and seeking to adduce fresh evidence in accordance with the conditions laid down in Ladd v Marshall [1954] 1 WLR 1489, that is the evidence (1) could not have been obtained with reasonable diligence for use at the trial; (2) is such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) is apparently credible, though it need not be incontrovertible – paragraph 31.
  6. The tensions between the appeal/set aside approaches was explained by Lord Justice Hamblen in this way:

’32. In Noble v Owens the Court of Appeal considered the tension between the Ladd v Marshall line of cases, which involve an appeal and a retrial without proof of fraud, and the Jonesco line of cases, which involve a fresh action being brought to prove the fraud.  This tension was described by Smith LJ in the following terms at [16]:

“16. It appears to me that there is an inconsistency between the two lines of authority upon which the opposing parties to this appeal rely. On the one hand there is Ladd v Marshall [1954] 1 WLR 1489 which suggests that, where fresh evidence is properly admitted and it appears to the court that it might, if admitted, have had an important effect on the trial, the right course is to send the case back for retrial. That should be done, apparently even if the new evidence suggests that a deceit was practised on the court below: see Hamilton v Al Fayed [2001] EMLR 394. On the other hand, Jonesco v Beard [1930] AC 298 suggests that, where it is alleged that there was deceit in the court below, the proper course is to leave the aggrieved party to commence a new action, save where the Court of Appeal either determines the issue of fraud itself—in effect where it is admitted—or the evidence is incontrovertible. How are these two lines of authority to be reconciled?”

33. Smith LJ, with whom Elias LJ agreed, answered this question as follows at [27]:

“In my judgment, the true principle of law is derived from Jonesco v Beard and is that, where fresh evidence is adduced in the Court of Appeal tending to show that the judge at first instance was deliberately misled, the court will only allow the appeal and order a retrial where the fraud is either admitted or the evidence of it is incontrovertible. In any other case, the issue of fraud must be determined before the judgment of the court below can be set aside.””

 

Unless the fraud is admitted or the evidence of it is incontrovertible, the issue of fraud should therefore be both properly particularised and proved.  This would usually require a fresh action, although if the appeal route is adopted the trial of the fraud issue could be referred to a High Court judge pursuant to CPR 52.20(2)(b) (see Noble v Owens [2010] EWCA Civ 224, [2010] 1 WLR 2491):

(2) The appeal court has power to—

(b) refer any claim or issue for determination by the lower court

It will also be necessary to establish that the evidence which is relied upon to establish the fraud could not with reasonable diligence have been obtained for the trial (the “reasonable diligence condition”) – paragraph 39; Takhar v Gracefield Developments Ltd [2017] EWCA Civ 147, [2018] Ch 1.  It is to be noted, however, that an appeal against this decision has recently been heard in the Supreme Court.

The wrong procedure was therefore followed by the defendant and the court had no jurisdiction to strike out a claim post-judgment.

The Court also found that there were no grounds to support any application to set aside judgment under CPR r. 3.1(7)  (insofar as the actual application could be treated as such):

75. In summary, the circumstances in which CPR 3.1(7) can be relied upon to vary or revoke an interim order are limited.  Normally, it will require a material change of circumstances since the order was made, or the facts on which the original decision was made being misstated.  General considerations such as these will not, however, justify varying or revoking a final order.  The circumstances in which that will be done are likely to be very rare given the importance of finality.  An example is provided by cases involving possession orders made when the defendant did not attend the hearing where CPR 39.3 may be relied upon by analogy – see Hackney London Borough Council v  Findlay [2011] EWCA Civ 8, [2011] HLR 15.  Another example is the use of powers akin to CPR 3.1(7) to vary or revoke financial orders made in family proceedings in relation to which there is a duty of full and frank disclosure and the court retains jurisdiction – see, for example, Sharland v Sharland [2015] UKSC 60, [2016] AC 871 and Gohil v Gohil (No 2) [2015] UKSC 61, [2016] AC 849.

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

IMG_0538

[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

Cornerstone Barristers launch blog

On 15 February 2018 Cornerstone Barristers formally launched this social housing fraud blog…we are looking forward to hearing from contributions and ideas from across the sector.

Official Book Launch held

On Monday, 5 February 2018 Cornerstone Barristers hosted the official book launch for “Cornerstone on Social Housing Fraud”. Katrina Robinson MBE, Chair of the Tenancy Fraud Forum, opened the event and spoke of the need for greater understanding of the impact of social housing fraud, and the need to take effective action against it.

She was followed by the author of the book, Andy Lane, who had a lot of people to thank!

The event was well attended by barristers, solicitors, housing officers and Andy’s family.

The book is available from Bloomsbury Professional:

https://www.bloomsburyprofessional.com/uk/cornerstone-on-social-housing-fraud-9781526502032/