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	UK Social Security and Child Support Commissioners' Decisions
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[2008] UKSSCSC CH_2491_2007 (03 March 2008)

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1. My decision is given under paragraph 8 of Schedule 7 to the Child Support, Pensions and Social Security Act 2000:

The decision of the Hereford appeal tribunal under reference 036/06/00226, held on 2 and 5 February 2007 and 4 April 2007, is not erroneous in point of law.

REASONS
2. This is the lead case for 24 appeals concerning claimants living in the same accommodation. I give my reasons in this case and short decisions in the other cases adopting my reasoning here. In order to preserve the claimant's anonymity, I refer to the place where they live and the organisation that provides them with their accommodation as well as counselling and support services as 'the House'.

Representation

3. Before me, both parties have been represented by counsel: Mr Stephen Knafler for the claimants and Ms Lorna Findlay for the local authority. They both attended an oral hearing on 25 February 2008 and I am grateful to them for their written and oral arguments.

The issue in context

4. It is a legitimate concern of government, both central and local, to ensure that payments are made from the appropriate budgets and only on the conditions and in the circumstances authorised by those budgets. In the case of social security benefits, those conditions and circumstances are defined by legislation. It is the function of the adjudicating authorities to police those boundaries by ensuring that the legislation is correctly interpreted and applied.
5. Housing benefit was introduced by section 20 of the Social Security Act 1986, which has been consolidated by section 130 of the Social Security Contributions and Benefits Act 1992. The essence of housing benefit is captured by section 130(1)(a):

'(1) A person is entitled to housing benefit if-

(a) he is liable to make payments in respect of a dwelling in Great Britain which he occupies as his home'.

The payments made by claimants may include charges for some services provided to them, but these are policed by the legislative controls over service charges to ensure that they relate to the dwelling. See regulation 12(1)(e) and (3)(b) of, and paragraph 1 of Schedule 1 to, the Housing Benefit Regulations 2006. One of the ineligible charges is 'in respect of general counselling or of any other support services' (paragraph 1(f)).

6. In 1998, the Court of Appeal decided that the original version of paragraph 1(f) (in Schedule 1 to the Housing Benefit (General) Regulations 1987) had been interpreted too broadly by local authorities – R v Housing Benefit Review Board for Swansea, ex parte Littler (1998) 48 BMLR 24. That led to what was described in Parliament as a crisis in community care provision. The Government's immediate response was section 69 of the Social Security Act 1998, which validated decisions previously made. The Government's long-term response was to introduce, from 1 April 2003, the Supporting People programme under the authority of section 93 of the Local Government Act 2000 in order to provide for counselling and other support services.
7. These cases raise the issue of the interrelationship between the Supporting People programme and the provision of housing benefit. There is no attempt by the House to charge the claimants for the counselling and support it provides, still less to recover the cost of those services through housing benefit. However, the incorporation of the House's house rules into the licences raises the issue whether the licences under which the claimants occupy their accommodation are on a commercial basis.

The legislation

8. Section 137(2) provides:

'(2) Regulations may make provision for the purposes of this Part of this Act-

…

(i) for treating any person who is liable to make payments in respect of a dwelling as if he were not so liable'.

9. Regulation 9(1) of the Housing Benefit Regulations 2006 is made under that authority:

'(1) A person who is liable to make payments in respect of a dwelling shall be treated as if he were not so liable where-

(a) the tenancy or other agreement pursuant to which he occupies the dwelling is not on a commercial basis;

…

(2) In determining whether a tenancy or other agreement pursuant to which a person occupies a dwelling is not on a commercial basis regard shall be had inter alia to whether the terms upon which the person occupies the dwelling include terms which are not enforceable in law.'

The House

10. The House is a charity which is registered as a company. It is associated with a church. The object of the charity is 'to promote the advancement of the Christian religion throughout the United Kingdom and abroad through the provision of residential and non-residential support for the needy, in particular those disadvantaged or liable to be disadvantaged by the consequences of mistreatment, with particular reference to substance-based and emotional abuse.' The claimants occupy their accommodation under licences, which incorporate the detailed rules under which they are housed and provided with appropriate counselling and support. Those rules were devised to implement the House's operation of its Supporting People contract. They happen to reflect the Christian faith of the House, but all providers will have some philosophy, religious or otherwise, on which they seek to assist people affected by 'substance-based and emotional abuse.' The claimants no doubt chose the House as a provider likely to assist them with their problems and did so knowing the philosophy on which it operated.
11. I should record that no one has criticised the standard of the assistance provided to the claimants. The issue is purely one of the interpretation and application of the legislation.
12. The House was at the relevant time, but no longer, accepted as a Designated Service under the Supporting People scheme. The effect was that its funding under the scheme could not be stopped without the consent of the Secretary of State. The subsequent loss of status is of no significance to anything I have to decide.

The local authority's decisions

13. Some of the decisions under appeal were made on claims, others were given on supersession. Nothing turns on the difference. The local authority accepted that the claimants had a genuine liability for rent and that there was an intention to create legal relations between the parties. However, it decided that the licenses were either not on a commercial basis or created to take advantage of the housing benefit scheme (regulation 9(1)(a) and (l) of the Housing Benefit Regulations 2006).
14. There had been previous housing benefit appeals concerning the House, but they related to different issues and are not relevant to anything I have to decide.

The tribunal's decisions and reasoning

15. The claimants exercised their right of appeal to an appeal tribunal, but the tribunal dismissed their appeals. It decided that their licenses were not on a commercial basis. It was not necessary to decide if they were created to take advantage of the scheme.
16. The chairman provided a detailed and structured full statement of her tribunal's decision. After some introductory paragraphs, she set out the background to the church, the company and the House together with some information about funding. She then identified the issues as being whether the licence agreements were on a commercial basis or created to take advantage of the housing benefit scheme. This was followed by a discussion of the confusion over the use of the correct name for the company and the validity of powers of attorney given by the residents. Next came a detailed consideration of the terms of the licence agreements and the house rules that were incorporated into them. These rules included provision for: (i) limiting the amount of money the residents could carry; (ii) tidiness, hygiene, correspondence, avoidance of negative talk and separation of the sexes; (iii) the schedule of meals, chores and classes; (iv) the counselling and religious aspects of the support provided; (v) unaccompanied excursions and visits; (vi) discipline and suspension; and (vii) the obligation on residents to leave the county and return to their home town on leaving the house.
17. Before coming to the particular circumstances of the cases, the chairman then set out an analysis of the law, including decisions by the Commissioners and the courts. Knowing that she would be allowing the appeals on the basis of commerciality, she dealt only with regulation 9(1)(a) and (2). She then gave an extended discussion of how those principles of law applied to the cases. She listed factors indicating commerciality and those against, and discussed the significance of the Supporting People funding before concluding that the licences were not on a commercial basis.
18. It is unfair to attempt to summarise the chairman's reasons, which cover 12 pages, but I believe it is fair to say that her conclusion was particularly influenced by two considerations: (i) the detailed and stringent life-style conditions imposed on residents; and (ii) the powers given to the House, which went beyond those that are normal for a commercial transaction and even for supported accommodation.

Mr Knafler's argument

19. I base myself around counsels' arguments at the oral hearing. However, in dealing with them I bear in mind the written observations on the appeal that were made in advance of the hearing.
20. Mr Knafler began by arguing that the tribunal went wrong by misdirecting itself on a material matter and by failing to give adequate reasons. However, as his argument developed, it was based essentially on a misdirection in law, with inadequate reasons being an alternative way of making the same points. That is clear from his citation of a passage from the speech of Lord Brown in South Bucks District Council v Porter (No 2) [2004] 1 WLR 1953:

'36. … The reasoning must not give rise to a substantial doubt as to whether the decision-maker erred in law, for example by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds. …'

21. Commerciality is a notoriously imprecise and difficult concept. Commissioners, like the courts before them, have refrained from any attempt at a general definition. Mr Knafler argued that 'commercial basis' was wide and that any form of commercial basis was sufficient. Early in his argument, he classified the cases in which an arrangement had been found not to have a commercial basis as involving personal, charity or religious elements. Towards the end of his argument, he sought to bring those together as cases in which there had been some form of personal rather than commercial content.
22. Mr Knafler focused on paragraph 32 of the chairman's full statement of her tribunal's decision. She wrote that 'the predominant purpose and the principal basis of the agreements is not just to provide accommodation for rent, with safeguards for landlord and licensee, accompanied by support, but to provide a "cure", and a radical change of lifestyle, with the aspiration that the licensee will also adopt the Christian religion.' Mr Knafler accepted that that was correct except for the words 'and the principal basis'. He argued that this was wrong. The House's Supporting People contract was on a commercial basis, that this had led to the licences, which were essentially normal licences, and that they too were therefore commercial.
23. Mr Knafler also referred to paragraph 20, in which the chairman wrote that 'There seems to be no reason in principle why a licence should not be more strictly drawn or contain unusual terms if it aims to assist in the proper running of premises occupied by a particular group of people especially if they tend to have problems which require special measures.' He argued that it was wrong in law to limit the terms of a licence on a commercial basis to matters relating to the proper running of the premises.

Ms Findlay's argument

24. Ms Findlay argued that the chairman's reasons had to be read as a whole. When so read, they were careful and well thought out. The concept of commerciality had to be interpreted in the context of the housing benefit scheme. The chairman had accepted that a commercially-based licence could have elements of support. She had not discounted the significance of the Supporting People contract. She had been entitled to look beyond the terms of the licence and decide that in the context of this case the arrangement was not on a commercial basis.

Analysis

25. I accept Ms Findlay's argument. The tribunal was entitled to find as it did on the evidence before it and did not misdirect itself on the law.
26. The chairman's statement must be read as a whole. It is clear that she accepted that an arrangement could be commercial even if it involved support or rehabilitation. She focused on the particular circumstances of the arrangements in these cases and decided that they were not on a commercial basis. She listed the particularly significant factors that she took into account. She classified them as being for a commercial basis, against or neutral. She then considered the circumstances as a whole and reached her conclusion. I find that her analysis was rational. I cannot see that she overlooked any relevant consideration or that she took into account anything that was irrelevant. Her approach to the issue of commercial basis was correct in principle and it is impossible to say that she was plainly wrong in her conclusion.
27. The chairman did not proceed on the basis that agreements that were primarily for rehabilitation could not be on a commercial basis. Nor did she misdirect herself that rehabilitation services cannot be provided on a commercial basis. Those arguments are impossible to maintain in the light of paragraphs 20 to 22 of the statement. She properly enquired whether the House provided rehabilitation services on a commercial basis and decided that it did not.
28. The chairman could not allow the contract to dictate its decision. To do so would have allowed it to override the legislation governing entitlement to housing benefit. She was right to say that the Supporting People contract did not require the House to provide the regime established under its rules. The contract set out objectives, not means. The latter were left to the provider and are contained in the house rules. The features that she isolated as of particular significance went further than anything required by the contract. Just to take one example, the requirement that the claimant must leave the county of Herefordshire and return home on leaving the House. This may be explained, as Mr Knafler told me, by the funding arrangement and the fact that the House was taking clients from outside the county. But it is certainly an unusual term and unenforceable in law, a factor relevant under regulation 9(2).
29. The Supporting People contract certainly did not have the effect that any form of support provided to a claimant must inevitably be compatible with an award of housing benefit.
30. The contract did not require the House to operate all the terms that it did. Nor did it require it to add the religious element that was present. The fact that the House was making a genuine attempt to implement the contract was not determinative of, or even relevant to, the commercial basis issue. Even if the terms had been dictated by the contract, that was not relevant. What was relevant was whether the terms imposed were on a commercial basis. It may have been a matter of judgment for the House how best to implement its obligations under the contract, but the tribunal had to apply the law on commercial basis. It did not have to allow the House a margin of appreciation for its decision on what it should do. I accept that the House was genuinely trying to discharge its contractual obligations. But that does not mean that its attempt resulted in an arrangement that was on a commercial basis.
31. The chairman was entitled to rely on her own knowledge and assessment of what was normal or required in an arrangement for support services. Tribunals have had jurisdiction in housing benefit appeals for some years now. I know that the chairman has been a salaried district chairman throughout that time and, indeed, for some years before. I do not know her personal experience before her appointment, but during the time that she has held housing benefit jurisdiction she has had ample time to become familiar with a wide range of different provisions for accommodation.
32. Finally, as to paragraph 20, the powers normally taken by landlords were relevant in showing what was typical of an arrangement on a commercial basis.

Conclusion

33. Whether an arrangement is on a commercial basis is a matter of fact and judgment for the tribunal. I have to approach an appeal on an error of law on the basis that the tribunal did not go wrong in law if it was entitled to make the decision that it did. It is not for me to consider what decision I would have made had I heard the appeal on the facts. The chairman has given detailed reasons for her decision. They are cogent and rational. I can find no error of law in the way she approached making her decision and her conclusion was certainly one that she was entitled to reach. The essence of the appeal is that the tribunal failed to take proper account of the Supporting People contract. I disagree. Mr Knafler has sought to make too much of the significance of that contract.
34. I dismiss the appeal.

Signed on original on 3 March 2008

Edward Jacobs Commissioner