Haringey London Borough Council v Hines

Housing Act 1985 – Right to buy – Requirement that tenant exercising right occupy property as only or principal residence – Respondents granting lease of flat to appellant pursuant to right to buy – Respondents subsequently claiming appellant obtaining lease by fraudulent misrepresentation as to her continued residence at flat as only or main residence – Whether evidence justifying finding of deceit by appellant – Appeal allowed – Cross-appeal dismissedThe appellant was a secure tenant of a flat let to her by the respondent council and was also their employee. In December 2001, she gave notice to exercise her right to buy the flat under Part V of the Housing Act 1985. In February 2002, she wrote to the respondents’ personnel department informing it that she would be going on maternity leave and that her payroll slips should be sent to her home address, which she gave as that of her partner. In May 2002, she responded to an offer letter from the respondents by returning a form confirming that she wanted to proceed with her right to buy. In October 2002, the respondent granted a long lease of the flat to the appellant for a price of £42,000, reflecting a discount of £38,000 from the market value of £80,000. In late 2003, the appellant and her partner separated and she returned to the flat, although she subsequently vacated and sublet it.In 2008, following investigations into suspected housing benefit fraud by the appellant, the respondents reached the view that, from March 2002, she had no longer been a secure tenant occupying the flat as her “only or principal home”, within section 81 of the 1985 Act, such that she had not been entitled to complete the right-to-buy purchase. They brought proceedings for rescission of the lease or a declaration that it was ultra vires and void together with damages for fraudulent misrepresentation based on the contents of the May 2002 form.The judge found for the respondents on the issue of fraud and awarded damages of £38,000, plus interest, for common law deceit, representing the amount of the discount. However, he refused to declare the lease void, holding that although it fell outside Part V of the 1985 Act, it was valid under sections 32 and 44. He further held that the lease could not be rescinded for misrepresentation inducing a contract, since, on the authority of Rushton v Worcester City Council [2001] EWCA Civ 367; [2002] HLR 9, it was not a contract.The appellant appealed against the award of damages and the finding of fraud. The respondents cross-appealed on the amount of damages and on an issue, which they later abandoned, as to the judge’s refusal to declare the lease void.Held: The appeal was allowed; the cross-appeal was dismissed.(1) To succeed in their pleaded case of deceit, the respondents needed to establish that the appellant, in the May 2002 form, had dishonestly represented that she was still occupying the flat as her only or principal home even though she knew that she was not, and had deliberately concealed that fact from the respondents with the intention of misleading them into continuing with the transaction. During the trial, the respondents had not cross-examined the appellant on that issue. That was a serious omission. It was a basic principle of fairness that a party accused of fraud, and called as a witness, should have the particular alleged fraud specifically put to her so that she could answer it: Abbey Forwarding Ltd (in liquidation) v Hone [2010] EWHC 2029 (Ch) applied. Without putting their case of fraud to the appellant and obtaining her answer to it, the respondents had no realistic prospect of establishing that case.Moreover, the judge had not made findings on the matters of which he needed to be satisfied to establish a case of deceit, namely that, as at May 2002, the appellant: (i) knew, as a matter of law, that the flat had to remain her only or principal home throughout the right-to-buy process; (ii) knew that by then it was not; and (iii) dishonestly intended her acceptance of the respondents’ offered terms to mislead them so that she could acquire an interest in the flat to which she was no longer entitled. The judge had made no finding as to the untruthfulness of the appellant’s assertions that, at the relevant time, she still regarded the flat as her main home. He had not resolved the question of why, if the appellant had intended to deceive the respondents, she had had no qualms about informing them, in connection with her maternity leave, of her move to her partner’s address and giving that to them as her address. Accordingly, the judge’s finding of fraud against the appellant or his award of damages in respect of it could not be justified.(2) The respondents had rightly abandoned their challenge to the refusal to declare the lease void. Even if they could establish that the lease was void, a declaration to that effect would be worthless unless the court could, in consequence, to rectify the registered title of the flat so as to extinguish the lease. Since the respondents had not claimed rectification, and had not joined or even given notice of the proceedings to the existing chargees of the flat and the sublessee, the court could not order rectification. It would be unjust for the court to make a declaration of voidness in respect of a registered lease while leaving the leases and charges intact, since this was likely to raise questions as to the soundness of those leases and produce a recipe for unwarranted trouble in the future.Ali Reza Sinai (instructed by Attwaters, of Harlow) appeared for the appellant; Nicholas Grundy (instructed by the legal department of Haringey London Borough Council) appeared for the respondents.Sally Dobson, barrister