This was a decision by the Social Security Commissioner allowing an appeal by the claimants against the decision of the Oxford appeal tribunal. The appellant was a severely disabled woman who had been accommodated with her disabled sister in a bungalow constructed by her father in the family garden as Social Services were unable to find appropriate accommodation for either girl. The bungalow was built in reliance on an express assertion that Housing Benefit could be claimed. The arrangement agreed with Social Services was that they would fund the cost of the care provided for the sister but not the cost of the accommodation provided by their father, the landlord. However when the sisters came to claim housing benefit (covering the period before they moved into the bungalow) their claims were disallowed. Firstly on the basis that, for a short period, they had not occupied the property and therefore they had no liability to pay rent in accordance with Regulation 6 of the Housing Benefit (General) Regulations 1987. Thereafter the Local Authority argued that they were to be treated as not liable to make payments in respect of a dwelling under Regulation 7(1) (1) of the Housing Benefit Regulations, because it was felt that they had contrived to take on liability for the rent in order to ‘take advantage’ of the Housing Benefit scheme.
In dismissing their appeal the Oxford tribunal commented that neither girl had the capacity to make a legally binding agreement or undertake a liability. In the absence of any evidence to the contrary before it, the tribunal reluctantly dismissed their appeal. It concluded that there could be no liability because the claimants were not able to enter a contract, not even a voidable one.
The Commissioner, when granting leave for this appeal had said that the tribunal had applied the wrong principles of law as to the effects of incapacity to make a contract on the ground of lack of understanding of the nature of the transaction. It seemed that the tribunal had applied some lower minimum level of understanding in a party to a transaction that would make it void from the outset. This contention was wrong in law. Even if a party to a contract lacks sufficient understanding of the matter in question and the other party knows that, the contract is not void, but voidable at the option of the affected party. R v Barrow Borough Council ex parte Catnach (1997) applied. Therefore it is for the incapacitated person, or their representative, to apply to have the contract avoided. Until they do so, or if they choose not to do so, the contract is valid.
Accordingly the Commissioner set aside the tribunal’s decision as erroneous in point of law and ordered a re-hearing by a differently constituted appeal tribunal with a direction that it should not be bound by any findings made by the original appeals tribunal and the principles of law as to the effects of incapacity be applied as summarised in this decision.