Council cannot pay interest on housing benefit

LAW REPORT v 11 January 1996

Regina v Kensington and Chelsea Royal Borough Council, ex parte Brandt; Queen's Bench Division (Mr Justice Dyson); 15 December 1995

A local authority who has lawfully withheld payments of housing benefit has no power to arrange for the withheld payments to be placed in an interest-bearing account pending payment out.

Mr Justice Dyson dismissed an application by Nicholas Brandt for judicial review of the council's refusal to transfer his housing benefits into an interest-bearing account.

The council paid the applicant housing benefit in respect of his tenancy until a dispute arose between the applicant and his landlord. Payment of rent was refused by the landlord and the council withheld payments pending the resolution of the dispute. The landlord brought proceedings against the applicant for possession and mesne profits with interest. The applicant did not have the funds to pay interest if awarded.

The council contended it had no power to pay the withheld benefit into an interest-bearing account. Under the Social Security Administration Act 1992 housing benefit, which was funded mostly by the Government, was paid to the council each month on the basis of its half-yearly estimates of expected payouts. Each year a sample of cases was studied and, if the council had overclaimed, its funding was reduced by a proportion which could be fairly drastic. No claim could be made for the applicant during his dispute and, if made, could reduce the council's funding.

The applicant contended the object of the housing benefit scheme was to ensure that needy persons did not fall into debt with their landlords and that the establishment of an interest-bearing account facilitated or was incidental or conducive to the council's discharge of its function in the scheme within section 111 of the Local Government Act 1972.

Jan Luba (Wainwright & Cummins) for the applicant; James Findlay (Council Solicitor) for the council.

Mr Justice Dyson said that the statutory provisions which governed the administration of housing benefit schemes were very detailed. Parliament intended to define the power in relation to its administration with considerable precision. The council impliedly had power to maintain and operate banking arrangements for payment out of benefit and do other administrative acts.

However payments of sums of money to or on behalf of claimants stood on an altogether different footing from the performance of administrative acts. Payment of interest would not have been regarded as incidental to the powers and duties conferred by the benefit legislation. Payments into a specially designated account had potentially adverse financial consequences to the council. Such a power was not impliedly authorised by the 1992 Act. Therefore even if the power did fall within section 111 it would be ultra vires for the council to exercise it.

The question under section 111 was whether payment of interest on benefit withheld facilitated or was conducive or incidental to the payment of housing benefit. The answer was clearly no. Payment of interest did not assist the payment of benefit. Section 111 did not come into play unless the power facilitated or was conducive to the discharge of the function of administering the housing benefit scheme. It was insufficient to show that the power might benefit the claimant for whose benefit the function was discharged. Section 111 did not avail the applicant.

The award of statutory interest was in the discretion of the court. Where rent was tendered to a landlord by a tenant in receipt of housing benefit, and where as a result housing benefit was withheld, and the tenant did not have the means to pay interest on the arrears of rent, his Lordship would be surprised if a court would grant statutory interest to the landlord.

The council did not have power to pay or to provide for the payment of interest on housing benefit.