London Borough of Haringey v Hines

A finding of fraud requires proof of the particular dishonesty alleged. Where a party accused of fraud gives evidence, fairness ordinarily requires the allegation to be pleaded and put squarely in cross-examination.

For deceit based on an implied representation of continuing entitlement to exercise a statutory right to buy, the authority had to prove knowledge that the statutory condition had ceased to be satisfied and an intention to mislead, or recklessness. Proof that the condition had objectively ceased to be satisfied, and that the witness later lied about her residence, did not establish that mental state.

An appellate court should not entertain a new alternative misrepresentation case where it was not pursued at trial and its fair determination would require evidence that was never adduced.

A former secure tenant purchased a long lease of her flat from the London Borough of Haringey under the right-to-buy provisions of the Housing Act 1985. The county court found that, before completion, another property had become her principal home. She had therefore ceased to be a secure tenant and was no longer entitled to complete the purchase.

The county court nevertheless held that the lease was valid. It found the tenant liable in deceit and awarded the authority £38,000, representing the statutory discount, with interest. The tenant appealed against the finding of fraud and the damages award. The authority cross-appealed concerning the validity or rescission of the lease and the amount of damages.

The principal issue was whether the evidence and conduct of the trial justified finding that the tenant had dishonestly misrepresented her continuing entitlement to buy when she accepted the authority’s terms on 16 May 2002.

1. The tenant’s appeal was allowed and the authority’s claim was dismissed. The pleaded deceit case depended upon the communication of 16 May 2002. Haringey had to prove that the tenant knew the flat had to remain her only or principal home, knew that this condition was no longer satisfied, and intended dishonestly to conceal the change so that the transaction would proceed, or was reckless about her entitlement. The county court made no findings establishing those matters: paras [29], [34]–[38], [42].

2. The finding that another property had objectively and subjectively become the tenant’s principal home did not establish that she understood the legal consequence or dishonestly intended to mislead Haringey. Her later lies about where she had lived were not a substitute for proof of the particular fraud alleged: paras [33]–[38].

3. It is a basic requirement of fairness that a fraud allegation against a party who gives evidence be put specifically in cross-examination. Haringey never put its pleaded deceit case to the tenant. She therefore had no proper opportunity to answer it, and the judge lacked the evidential foundation needed to find fraud. The court adopted the principles discussed in Abbey Forwarding Ltd (in liquidation) v Hone and others [2010] EWHC 2029 (Ch), Vogon International Ltd v The Serious Fraud Office [2004] EWCA Civ 104 and Dempster v HMRC [2008] STC 2079: paras [38]–[42].

4. The authority’s proposed alternative claim under section 2(1) of the Misrepresentation Act 1967 could not be raised for the first time on appeal. It had not been pursued at trial, was tacitly abandoned after the first draft judgment, and had not been included in an appellant’s or respondent’s notice. Its fair resolution might have required evidence about the tenant’s state of mind and the statutory saving proviso: paras [48]–[58].

5. The cross-appeal was dismissed. The court would not declare the registered lease void while leaving the registered lease and charges intact, particularly when rectification had neither been claimed nor sought against the affected chargees. The rescission and increased-damages grounds were abandoned or became academic after reversal of the deceit finding: paras [43]–[47], [60].

1. Court of Appeal (Civil Division): By [2010] EWCA Civ 1111, unanimously allowed Ms Hines’s appeal, set aside Judge Yelton’s order, dismissed Haringey’s claim and dismissed Haringey’s cross-appeal.

2. Cambridge County Court: His Honour Judge Yelton held that Ms Hines had ceased to occupy the flat as her only or principal home before completion. He upheld the lease, found her liable in deceit, awarded £38,000 plus interest, and ordered her to pay 80% of Haringey’s costs.