In which circumstances can a local housing authority (‘LHA’) rely on its own breach of duty to escape its contractual obligations?
Not in those of the recent decision of Charles Terence Estates Limited v Cornwall Council  EWCA Civ 1439 in which a LHA sought to argue that its predecessors had acted ultra vires in failing to have regard to market rents when agreeing a lease of residential accommodation with a private party.
The background. Under Part VII of the Housing Act 1996 LHAs are under statutory duties to secure accommodation for the unintentionally homeless in priority need. Two district councils entered into an agreement with CTE in which CTE purchased identified properties, leased them to the district councils, which then sublet or licensed them to their client groups, including those in priority need.
When Cornwall, as the new unitary authority, took over their rights and liabilities, it stopped paying rent to CTE, yet continued to occupy and use the premises. Cornwall’s defence to an action for unpaid rent included that its predecessors had breached fiduciary duties owed to their council taxpayers with the result that the leases were ultra vires and void. By invoking its predecessors' lack of capacity, Cornwall was attempting to rid itself of what it considered to be bad bargains.
Cranston J dismissed the claim. However, LJs Maurice Kay, Moore-Bick and Etherton in allowing CTE’s appeal on the issue of fiduciary duty, set out that the following was relevant:
Philippa Seal / 1st Dec 2012
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