R (Heffernan) v Rent Service
| Jurisdiction | England & Wales |
| Judge | LORD HOPE OF CRAIGHEAD,LORD SCOTT OF FOSCOTE,LORD RODGER OF EARLSFERRY,LORD WALKER OF GESTINGTHORPE,LORD NEUBERGER OF ABBOTSBURY |
| Judgment Date | 30 July 2008 |
| Neutral Citation | [2008] UKHL 58 |
| Date | 30 July 2008 |
| Court | House of Lords |
[2008] UKHL 58
HOUSE OF LORDS
Appellate Committee
Lord Hope of Craighead
Lord Scott of Foscote
Lord Rodger of Earlsferry
Lord Walker of Gestingthorpe
Lord Neuberger of Abbotsbury
Appellant:
Richard Drabble QC
Jamie Burton
(Instructed by Irwin Mitchell)
Respondents:
David Pannick QC
James Strachan
(Instructed by Treasury Solicitors)
My Lords,
I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Neuberger of Abbotsbury. I agree with it, and for the reasons he gives I would allow the appeal and make the order that he proposes.
The exercise which is contemplated by para 4 of Schedule 1 to the Rent Officers (Housing Benefit Functions) Order 1997 (1997 SI/1984), as amended by the Rent Officers (Housing Benefit Functions) (Amendment) Order 2001 (2001 SI/3561), leaves much to the judgment of the rent officer. But, as its rather complex formula indicates, the area within which that judgment is to be exercised is not unlimited. It follows that, if his decision is challenged, the rent officer must be in a position to show that he has conducted the exercise in the way that is required by the paragraph.
The principle of valuation which the rent officer is asked to apply requires him to make an assessment based on a comparison with the rents payable for dwellings that are, on a carefully framed hypothesis, comparable with that which the beneficiary occupies. In order to arrive at a local reference rent by applying the formula which para 4(1) of Schedule 1 sets out he must be in possession of a sufficient basket of rents to form a judgment as to the highest and lowest rents that it envisages. The criteria that a dwelling must satisfy for its rent to be put in the basket are set out in para 4(2). Three assumptions must be made, two of which no doubt are familiar to every rent officer: its state of repair and the number of its bedrooms and rooms suitable for living in. It is the third assumption, as to the locality, that gives rise to difficulty. The rules that must be applied to determine the area of the locality are set out in para 4(6).
The essential difference between the approach of the Court of Appeal and that which I would favour lies in the extent to which the rent officer is restrained in his determination of the area which constitutes the locality. The basic purpose of the scheme remains the same as that which Sir Thomas Bingham MR described in R (Gibson) v The Housing Benefit Review Board for East Devon (1993) 25 HLR 487. The balance that he described is to be found in the determination of the highest and lowest rents for the purposes of the formula used to arrive at the cap that is imposed by the local reference rent (LRR). The cap must not be set at such a low level as to make it impossible for the occupier of the dwelling to find any other accommodation to which he could be expected to move at the level of rent payable. The amendments contained in the 2001 Order were made in response to the decision of the Court of Appeal in R (Saadat) v The Rent Service [2002] HLR 613; [2001] EWCA Civ 1559. It is plain that they exclude any consideration of the demographic restraint to which Sedley LJ referred in Saadat, para 13. But they continue to place a geographical restraint on the extent of the area within which the dwellings are to be found whose rents are to be placed in the basket before the rent officer makes his judgment as to the LRR according to the formula.
As Pill LJ said in para 35 of his judgment in the Court of Appeal, the requirement in para 4(6)(a) that the area must comprise two or more neighbourhoods imposes a minimum requirement but it does not suggest a maximum: [2007] EWCA Civ 544, para 35. He thought that para 4(6)(b) did not favour a narrow geographic restriction. I would, with respect, differ from him on this point. His approach reflects the advice that an area may be made up of a city and its immediate area which is to be found in the circulars. It invites a broad geographical approach which is, no doubt, the most convenient one to adopt. But in my opinion it is the wrong approach. It starts the exercise at the wrong end. Para 4(6)(a) does indeed impose a minimum requirement of two neighbourhoods. The fact that it starts with such a low number is in itself quite significant. It indicates that a combination of two will do. It suggests that the addition of any more neighbourhoods must be justified. The addition of a neighbourhood will be justified if the rent officer considers that the variety of types of residential properties and tenancies is insufficient to enable him to determine the highest and lowest rents for the purposes of the formula: para 4(6)(c). Arriving at an appropriate figure for those rents is, after all, the aim of the entire exercise.
In my opinion para 4(6)(b) imposes a geographical control on the extent of the area within which the variety referred to in para 4(6)(c) is to be found. The result of its application may be wide or narrow in terms of geography according to the circumstances. This will depend on the judgment of the rent officer. He must however apply the criterion mentioned in para 4(6)(b) to every neighbourhood which he wishes to add to the one where the dwelling is situated. The only rents which can be added to his basket are those for dwellings which are to be found within a neighbourhood which satisfies this criterion. Those for premises in a neighbourhood which fails to satisfy it must be discarded. The protection that the system provides against unfairness to the beneficiary is ensured by the application of para 4(6)(b) to every neighbourhood that the rent officer needs to include, in addition to the beneficiary's own neighbourhood, for the purposes of the formula.
My Lords,
Having had the advantage of reading in draft the opinions of my noble and learned friends Lord Hope of Craighead and Lord Neuberger of Abbotsbury I would allow this appeal for the reasons they give with which I am in full agreement.
My Lords,
Those who live in rented accommodation but have little or no income are entitled to a means-tested housing benefit. Whatever the amount of the rent which they pay, however, they are not entitled to receive more by way of benefit than the "local reference rent" (LRR). The LRR is the mean between the highest and lowest rent which a landlord might reasonably have been expected to obtain for an assured tenancy of a similar dwelling, in a reasonable state of repair, "in the same locality": para 4(1) and (2) of Part I of Schedule 1 to the Rent Officers (Housing Benefit Functions) Order 1997 ("the 1997 Order"). The issue in the present appeal turns on the interpretation of the definition of "locality" in para 4(6) in that Schedule. The definition was inserted by article 2(5) of the Rent Officers (Housing Benefit Functions) (Amendment) Order 2001.
Although a new system of local housing allowances based on "broad rental market areas" is replacing housing benefit, the definition of those areas is largely similar to the definition of "locality". The point in dispute is therefore one of continuing importance.
At the conclusion of the hearing I was inclined to favour a construction of para 4(6) along the lines of Lord Neuberger's. On further consideration, however, I have come to the view that it introduces too many elements which are not to be found in the text. In explaining my view, I gratefully adopt Lord Neuberger's outline of the legislation and of the facts of the present case. In discussing rents, I assume that all the other requirements of the scheme are met.
As Lord Neuberger points out, before the decision of the Court of Appeal in R (Saadat) v Rent Service [2002] HLR 613; [2001] EWCA 1559 the Rent Service had developed a working definition of the term "locality", which appeared in paras 4 and 5 of Schedule 1 but was not defined. In particular, the Rent Service regarded a "locality" as being a "broad geographical area". The Court of Appeal interpreted the term differently, however. The purpose of the amendments made by the 2001 Order was to restore the previous working definition. Against that background, it would scarcely be surprising if the language of the amended legislation were apt to describe a broad area - especially since similar wording is used in the definition of "broad rental market area" inserted into article 2(1) of the Rent Officers (Housing Benefit Functions) Order 1997 by para 4 of Part I of Schedule 3A to the Rent Officers (Housing Benefit Functions) (Local Housing Allowance) Amendment Order 2003.
Para 4(6) of Part I of Schedule 1 to the 1997 Order provides:
"For the purposes of this paragraph and paragraph 5 'locality' means an area—
(a) comprising two or more neighbourhoods, including the neighbourhood where the dwelling is situated, each neighbourhood adjoining at least one other in the area;
(b) within which a tenant of the dwelling could reasonably be expected to live having regard to facilities and services for the purposes of health, education, recreation, personal banking and shopping which are in or accessible from the neighbourhood of the dwelling, taking account of the distance of travel, by public and private transport, to and from facilities and services of the same type and similar standard; and
(c) containing residential premises of a variety of types, and including such premises held on a variety of tenancies."
While a literal interpretation of a legislative provision may have to give way to broader considerations, the best place to start is with the text. Indeed, rather unusually, at...
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