Social housing fraud and ‘dishonesty’
Richard Hanstock produced an excellent e-flash on Wednesday of this week concerning the high profile judgment of the Supreme Court, Ivey v Genting Casinos t/a Crockfords  UKSC 67. The legal significance of that case was not the somewhat prurient insight into the world of high-stakes gambling, but rather the Court’s approach to the question of ‘dishonesty’. For over 30 years even the most errant law student would have been able to answer that the ‘correct’ approach to this concept was the two-stage ‘Ghosh test’, following on from the Court of Appeal’s Judgment in R v Ghosh  QB 1053:
(1) Would the defendant’s behaviour be regarded as dishonest by the ordinary standards of reasonable and honest people? If yes,
(2) Was the defendant aware that his conduct was dishonest and would be regarded as dishonest by reasonable and honest people?
Whilst the Supreme Court was concerned in Ivey with the Gambling Act 2005, it will be immediately apparent that this is an issue that resonates in the social housing fraud arena. For example, the Fraud Act 2006, under which one may see prosecutions for right to buy or shared ownership fraud, has the concept of dishonesty at the heart of the offences created therein:
“(1) A person is in breach of this section if he– (a) dishonestly makes a false representation…”
[Section 2 – fraud by false representation]
“A person is in breach of this section if he– (a) dishonestly fails to disclose to another person information which he is under a legal duty to disclose…”
[Section 3 – fraud by failing to disclose information]
“(1) A person is in breach of this section if he– (a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person, (b) dishonestly abuses that position…”
[Section 4 – Fraud by abuse of position]
Of more common usage amongst the social housing sector perhaps, the more serious offence created by sections 1 and 2 of the Prevention of Social Housing Fraud Act 2013 provides that this offence may be committed if:
(a) dishonestly and in breach of an express or implied term of the tenancy, the tenant sub-lets or parts with possession of—
(i) the whole of the dwelling-house, or
(ii) part of the dwelling-house without the landlord’s written consent, and
(b) the tenant ceases to occupy the dwelling-house as the tenant’s only or principal home.
(this is the section 1(2) wording concerning secure tenancies – for assured tenancies section 2(2) makes no mention of a sub-letting or parting with possession of part of the dwelling-house being “without the landlord’s consent”).
In most instances the ‘Ghosh test’ has not presented an insurmountable hurdle providing that evidence of, say, the sub-letting complained of is sufficiently compelling. But there could be times when prosecution is discouraged where, say, the tenant genuinely feels that they have done nothing wrong, nothing dishonest.
For example, they move out of their one-bedroom housing association flat but allow someone to live in the premises, though do not demand any money for the same (and perhaps have no further dealings with the premises). Or, as happened in one civil possession claim, the tenant ‘temporarily’ left her home in order to look after, she said, her sick mother and sub-let her flat at a market rent (with a deposit) to someone answering an advert.
It is therefore significant that Lord Hughes, in giving the judgment of the Court, rejected the need for or sense of the second part of the ‘Ghosh test’ but rather re-affirmed the proper approach at [62; 74] by reference to Lord Hoffman’s analysis in Barlow Clowes International Ltd v Eurotrust International Ltd  UKPC 37;  1 WLR 1476:
“Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree.”
It would be wrong to portray this judgment as a ‘game-changer’ in the social housing fraud field, significant though it undoubtedly is, but it does enable both those charged with prosecution responsibilities and those wishing to make representations on the degree of culpability for, say, a submission on reasonableness in a civil false statement ground 5/17 case to proceed with greater confidence as to either the essential elements of the offence in issue or content of submissions.
Andy Lane is the editor of the Cornerstone Housing Newsletter and specialises in the fields of social housing and public law.