Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/171/2011

ADMINISTRATIVE APPEALS CHAMBER

 

Before Judge Mark

 

Decision:  1. In accordance with my powers under section 10 of the Tribunals, Courts and Enforcement Act 2007 and rules 45(1)(a) and 46 of the Tribunal Procedure (Upper Tribunal) Rules 2008, having reviewed my decision dated 31 March 2011, I set aside that decision and re-decide the matter as set out below.

2.  I set aside the decision of the tribunal and substitute my own decision that the claimant is liable to make payments in respect of the provision to her of her home, such accommodation being necessary for her despite the absence of any contractual obligation to make such payments, the obligation arising either at common law or under section 7 of the Mental Capacity Act 2005.  The amount of her obligation is equivalent to the rent provided under the purported tenancy agreement prepared on behalf of her parents. 

3.  The claim is not affected by regulation 9 of the Housing Benefit Regulations 2006.

4.  The matter is remitted to the Respondent local authority to calculate the claimant’s entitlement accordingly.

 

REASONS FOR DECISION

 

1.     The claimant was born in June 1991.  Sadly, she is profoundly physically and mentally disabled and has apparently been so disabled from birth.  Her parents have gone to great lengths to care for her as best as they can and have had a home specially constructed for her.  This has severely stretched their financial resources.  She has round the clock carers.  Her parents have stated that they could not afford to continue providing this home unless they could receive rent from their daughter to offset the mortgage payments they are having to make in respect of it.

 

2.     The claimant applied for housing benefit on the basis of a tenancy agreement dated 26 February 2009 expressed to be between the claimant’s father and the claimant in which the father is described as the landlord and the claimant as the tenant.  It is expressed to be for an indefinite term from 20 December 2008 at a rent of £694.98 per month.  It is signed by the father as landlord, but in the space for the claimant’s signature it is stated that the claimant “is profoundly disabled and cannot communicate at all.”  Except insofar as she can communicate emotions, that statement is borne out by the other evidence in the file. 

 

3.     Although in February 2010 an order was made in the Court of Protection giving her mother power to act in certain respects on behalf of the claimant, there was no such power in place before that.  The result was that there was nobody with power to contract on behalf of the claimant before that time.

 

4.     A tenancy agreement requires two parties – the landlord and the tenant.  Here the claimant was not, and was incapable of being, a party to any agreement.  Regardless of her capacity to consent, she could not and did not communicate any agreement to the tenancy and I infer that she could never have been asked to.  There simply was no such agreement, and therefore no liability to pay rent.

 

5.     The tribunal, Judge Rhead, dealt with this issue as follows:

 

“[The representative of the local authority] put forward the rather technical arguments that the tenancy agreement was not signed by [the claimant] and “without a signature, there is no acceptance to the contract from the appellant, making the said contract invalid”.  This is clearly not correct.  There is absolutely no doubt that a party can enter into a legally binding contract to make payments in respect of their occupation of a dwelling, without anything at all being reduced to writing….  The real issue is whether [the claimant’s parents], either together or individually could bind [the claimant], make her subject to the terms and conditions of the contract.  I have no doubt that the answer to this is yet, subject to the contract being voidable.  [The claimant] accepted the benefits of the contract, namely occupying the property as her home, and therefore was subject to the obligation, that is to pay rent.  Notwithstanding her lack of capacity, she was bound by the terms and conditions of the contract, and the contract was voidable and not void.  I rely upon Commissioner (as he was then) J Mesher’s decision in CH/2121/2006.  It cannot possibly be a correct statement of the law that a person under a disability can never take advantage of the terms of a contract.  The contract is voidable but not void.  [The claimant] was liable to make payments in respect of a dwelling in Great Britain which she occupied as her home.”

 

6.     I agree that the absence of a signature is not by itself fatal if there is in fact an oral agreement or a contract to be inferred from all the facts.  I also agree that the real issue is whether the parents could bind the claimant.  The problem is that they had no such power without the authority of the Court of Protection, which they did not have.  Even the order obtained in February 2010, apart from being after the date of the decision under appeal, is prospective and not retrospective in operation.

 

7.     It appears to me that Commissioner Mesher’s decision in CH/2121/2006, and that of Commissioner Henty in CH/663/2003, must have proceeded on the basis that there was in each case a contract. In Hart v O’Connor, [1985] AC 1000, the rules as to mental capacity to contract were reviewed by the Privy Council and at pp.1018-1019, Lord Brightman, in delivering the reasons of their Lordships for allowing the appeal in that case stated the development of the law to have been as follows:

 

“The original rule at law, and still the rule in Scotland, was that a contract with a person of unsound mind was void, because there could be no consensus ad idem.  This was later qualified by a rule that a person could not plead his own unsoundness of mind in order to avoid a contract he had made.  This in turn gave way to a further rule that such a plea was permissible if it could be shown that the other contracting party knew of the insanity.”

 

I note in passing that the rule in Scotland appears to have been applied recently in Glasgow City Council v AL (HB) [2011] UKUT 354 (AAC), where it was also held that the question of capacity to enter a particular contract was to be determined by reference to all the available evidence on a transaction by transaction approach.

 

8.     At [1985] AC 1000, at p.1027G-H, Lord Brightman also stated

 

“To sum the matter up, in the opinion of their Lordships, the validity of a contract entered into by a lunatic who is ostensibly sane is to be judged by the same standards as a contract by a person of sound mind…”

 

9.     It is plain that Hart v O’Connor was not concerned with a case where a person had a mental disability so severe that they were incapable of relevant communication at all.  I have some difficulty in seeing how, in CH/2121/2006, the parents, with whom the contract was said to have been made, could have failed to be aware of the inability of their children to consent in the light of the finding of the tribunal that the claimants were so limited that they had no inkling of the concept of an agreement and a liability, but at least the claimants in that case were able to attend the hearing and communicate to a degree.  There may have been facts in those cases which may have justified the conclusion that there was some form of voidable agreement but that is plainly not the case here.

 

10. In the present case, the absence of any agreement is manifest.  So too it cannot be said, as it was in CH/663/2003, that the claimant has taken the benefit of the agreement and must therefore pay the rent.  The claimant has no knowledge or understanding of any purported basis on which she is staying at her home, or of any change of that basis when her father signed the purported agreement.

 

11. I conclude therefore that she had no liability to pay rent by reason of a document to which she was not a party and of which she had no knowledge or means of knowledge, any more than a person of full mental capacity would be bound by such a document.  In my decision dated 31 March 2011, I further concluded that there was no other basis on which any liability for rent could be imposed on her prior to the date of the decision.  I considered whether it might be said that she had some liability to pay some sum for her occupation under one of the other bases set out in paragraph 12 of the Housing Benefit Regulations 2006, but could find none.  The same problems in respect of her capacity applied to any liability to pay a licence fee and she was plainly not a trespasser who could be liable for mesne profits.

 

12. In those circumstances, when giving my earlier decision, it was unnecessary for me to address the other arguments raised by the local authority beyond indicating that I was unimpressed by them and would have been disposed to dismiss the appeal but for the absence of any liability for rent due to the absence of any agreement.  There seemed to me to have been good commercial reasons for the parents to let the claimant’s home to her at a rent if they could, the dwelling was not the same dwelling as her parents, the tenancy, had there been one, would have been a proper one at a proper rent and I agreed with the tribunal that it was not contrived.  The parents borrowed to build the annex on the reasonable understanding that a letting of it to their daughter would enable her to obtain housing benefit, and it appears to me that, following a decision taken on this basis to borrow, build and let, a reasonable letting would be commercial and would not be a contrivance to take advantage of the housing benefit scheme.

 

13. I further pointed out that, with the authority of the Court of Protection, the claimant’s mother could now enter into a similar tenancy agreement on her behalf on the basis of which the claimant would be entitled to apply for housing benefit, although her mother may wish to consider whether any further authority was needed from the Court of Protection for her to enter into a contract from which she and her husband would benefit.  It was even possible that with the agreement of her mother on her behalf the claimant has been occupying the annex on the terms of the tenancy agreement since her mother became entitled to act for her in February 2010.   

 

14. Following that decision, the claimant sought permission to appeal on two grounds.  The first was that I was wrong in deciding that there was no contract.  I still see no merit in that contention for the reasons I have given.  The second was that I had failed to consider her liability to pay a reasonable sum in respect of her occupation of the property by virtue of the provisions of section 7 of the Mental Capacity Act 2005. This section provides as follows:

 

“7. Payment for necessary goods and services

 

(1)   If necessary goods or services are supplied to a person who lacks capacity to contract for the supply, he must pay a reasonable price for them.

(2)   “Necessary” means suitable to a person’s condition in life and to his actual requirements when the goods or services are supplied.”

 

15. Until receipt of the application for permission to appeal from my decision was received, no reference had been made by anybody either before me or before the first-tier tribunal to the law relating to necessaries and, as a result it had been overlooked.  Rule 45(1)(a) of the Tribunal Procedure (Upper Tribunal) Rules 2008 permits me to review my decision in accordance with rule 46 if, when making my decision, I had overlooked a legislative provision or binding authority which could have had a material effect on the decision.  Section 7 of the Mental Capacity Act clearly fell within that category.  I therefore decided to review my decision and gave directions for submissions accordingly.

 

16. I held an oral hearing today at which Ms Nathalie Lieven QC and Mr. David Blundell appeared for the claimant and Ms Meesha Patel and Ms Michelle Aucock appeared for the local authority.  I am grateful to them for both their oral and written submissions.

 

17. The law as to the supply of necessaries was originally developed at common law.  In relation to the sale of goods, it was subsequently codified, first in the Sale of Goods Act 1893 and later in the Sale of Goods Act 1979.  Section 7 of the Mental Capacity Act 2005 was a further codification of the common law. 

 

18. The common law position is conveniently dealt with by the Court of Appeal in In re Rhodes, Rhodes v Rhodes, (1890) 44 Ch D 94.  In that case a lady, described there as being of unsound mind, was confined for many years in an asylum at a cost of £140 a year.  Her income was under £96 a year, and this income was used, first by her brother, and after his death by her nephew as her brother’s executor, in part payment of the £140.  The balance was met first by her brother, and after his death, by the nephew and other members of her family.  No claim was ever made against her in respect of this balance during her life, nor was any proper account kept.  After her death they sought to recover the sums paid by them from her estate.

 

19. The Court of Appeal concluded that the provision of the accommodation in the asylum was a necessary and that in appropriate circumstances the lady could have come under an obligation implied by law to repay the balance.  There was no suggestion that any claim lay against either the brother or the nephew for using her income in part payment, although this was obviously done without her consent.  The members of the Court of Appeal all emphasised that the obligation to repay did not arise by way of implied contract.  As put by Cotton LJ at p.105 “whenever necessaries are supplied to a person who by reason of disability cannot himself contract, the law implies an obligation on the part of such person to pay for such necessaries out of his own property… But, then, although there may be an implied obligation on the part of the lunatic, the necessaries must be supplied under circumstances which would justify the Court in implying an obligation to repay the money spent upon them.”

 

20. In relation to the question whether the provision of the accommodation was a necessary and whether an obligation to repay could be implied, Cotton LJ said this;

 

“I have no difficulty as to the question of the expenditure being for necessaries, for the law is well established that when the necessaries supplied are suitable to the position in life of the lunatic an implied obligation to pay for them out of his money will arise.

…

But we must look at the facts of the case in order to see whether the payments for the lunatic were made with the intention of constituting thereby a debt against the lunatic’s estate.” (pp.105-106)

 

21. Lindley LJ stated at pp.106-107:

 

“I think the facts are in favour of the money having been reasonably and properly expended for necessaries.  Against that it is said that the lady might have been supported at an expense which her own income would have been sufficient to meet; but as in the case of a claim made for necessaries against the estate of an infant, the claimant is not always bound to shew that he sent the infant to the cheapest school that could be found, so, in this case, the fact that some cheaper place of residence might possibly have been found for this lady is not necessarily an answer to this claim, assuming that it can be made….

 

Now in order to raise an obligation to repay, the money must have been expended with the intention on the part of the person providing it that it should be repaid.”

 

22. The judgment of Lopes LJ was to the same effect.  At p.108, he states

 

“If a person finds necessaries for a lunatic, and intends to be repaid for so doing, and to constitute a debt against the lunatic, I do not doubt that the law implies an obligation on the part of the lunatic’s estate to repay the amount spent on such necessaries.”

 

He continues at p.109:

 

“The question what are necessaries must always be considered with reference to the reasonable requirements of the lunatic, having regard to the station in life and means of the person in question.”

 

23.  I also note that in volume 1 of the 30^th edition of Chitty on Contracts, at paragraph 8-008, necessary lodging is regarded as clearly a necessary for which a minor is liable.  The same principle must apply in this respect to anybody who does not have capacity to contract.

 

24. Before me, the local authority abandoned many of the arguments that it had previously put forward in disputing entitlement to housing benefit.  Ms Patel expressly, and rightly, disclaimed any further reliance on paragraph 9 of the Housing Benefit Regulations 2006.  This was unsurprising, as there is now a written tenancy agreement entered into with the authority of the Court of Protection and housing benefit is being paid in respect of the rent payable under that agreement.  Ms Patel also accepted that the rent provided for under the purported agreement of February 2009 was a reasonable sum for the accommodation provided to the claimant.

 

25. The local authority submitted, however, that the claimant’s living arrangements were not “necessary” because she had never previously lived independently in this way.  The accommodation which would have been necessary would have been the accommodation provided for her by her parents within their home in a converted garage where she stayed at weekends and sometimes for longer when returning home previously from the care home where she had been living, and where she had lived until her current accommodation had been completed.

 

26. As Ms Lieven pointed out, this contention is contradicted both by the findings of Judge Rhead and by the uncontested evidence of the claimant’s father, which Judge Rhead had also accepted.  Having concluded that her parents had no alternative but to move her from the care home (a finding which is unchallenged) he pointed out that the parents were supported by Worcestershire County Council Social Services Department in their decision to carry out the work to the annex to provide more suitable accommodation than the garage provided for the claimant and her (up to 3) carers who would need to reside with her.  As the claimant’s father explained in his written evidence at pp.293-6 of the file) they had converted the garage to accommodate the claimant on her returns from the school where she was living on the basis that one of her parents would then sleep with her at night.  It was not suitable to accommodate the claimant permanently and could not accommodate her carers.  Had it been suitable, they would not have incurred the significant cost of building and adapting the annex.  The agreement with Helping Hands, which provided the carers also expressly provided that the carers must have their own bedrooms, and this was not possible in the garage.

 

27. Bearing in mind the absence of any suitable available accommodation elsewhere, I am satisfied that the accommodation provided in the adapted annex was reasonably necessary having regard to the claimant’s needs and resources, and it is also clear on the evidence and the findings of Judge Rhead that it was provided on the clear understanding that regular rental payments would be required in respect of it, which would be funded from housing benefit.  That understanding was clearly encouraged by Worcestershire County Council Social Services Department. 

 

28. I am in some doubt whether “services” in section 7 of the Mental Capacity Act 2005 is wide enough to cover the provision of accommodation, but I have no doubt that insofar as it is not wide enough, the common law rules as to necessaries survive and that the provision of accommodation is an obvious necessary.  In this case the accommodation was provided in circumstances which leave me in no doubt that it was provided with the intention that the claimant should pay for it with the assistance of housing benefit.  I have no difficulty therefore in implying such an obligation on the part of the claimant.

 

29. To be entitled to housing benefit, the claimant does not have to be liable for rent as such.  It is sufficient under section 130 of the Social Security Contributions and Benefits Act 1992 that she is liable to make payments in respect of the dwelling which she occupies as her home, an expression that is repeated in the 2006 Regulations.  For the reasons given, she did have such a liability at the relevant time.

 

30. I reject the submission of the local authority in its skeleton argument on this review that section 7 of the Mental Capacity Act 2005 does not extend to long term decisions concerning such matters as care and liability to pay rent.  Section 7 is not concerned with the liability to pay rent, it is concerned with a liability to pay a reasonable sum in respect of accommodation in appropriate cases.  Neither section 7 nor the common law imposed on her any liability under the terms of any putative tenancy agreement, whether for rent or under any repairing or other covenants.  So far as long term decisions are concerned, it is clear that suitable accommodation is a necessary at common law, and I see no reason why, so long as it being provided, either accommodation or any other necessary should be excluded from either the common law requirements or those of the 2005 Act, whichever is applicable.

 

31. The suggestion by the local authority that such matters ought to be dealt with through the Court of Protection may well be appropriate in many cases, and was adopted in the present case, but that does not mean that pending the hearing of any application, which currently takes many months, a person without capacity should be left without necessaries, including accommodation, which can only be supplied in the confidence that they will be paid for.  Nor does it mean that if, as will normally be the case, nobody does bring the matter before the Court of Protection, a person under disability will at any stage be able to deny liability for a reasonable sum in appropriate circumstances when necessaries are provided to that person.

 

32. It follows that as Judge Rhead was in error of law in basing his decision on contract, I set aside his decision, but for the reasons given, I am satisfied that the claimant was under an obligation to her parents to pay a reasonable sum for her accommodation and it is common ground that that sum was equal to the rent provided for in the putative tenancy agreement of February 2009.  I therefore substitute my decision to that effect and remit the matter to the local authority to calculate the claimant’s entitlement to benefit accordingly.

 

33. I further note that if the original decision of the local authority had stood, and as a result the claimant had been unable to continue to live in the annex, one local authority or another would have come under a duty to provide her with suitable accommodation under section 21 of the National Assistance Act 1948, and if, as apparently here, she had no, or little, capital or income, that accommodation would have to be provided free of charge.  I was told that one of the problems here was that the relevant authority with that duty was not the Respondent.  It is very unfortunate if that is the case, and if this series of appeals at public expense has been made necessary because of arguments between different authorities as to from whose budget essential provision should be made.

 

 

(signed) Michael Mark

Judge of the Upper Tribunal

 

6 January 2012