Inner House declares ‘Sword of Damocles’ contractual term unlawful: GLC Public Interest Litigation Unit

A homeowner involved in a legal dispute with a Scottish local authority has won his appeal after arguing the council acted beyond its powers in imposing a condition to an award of grant assistance, which required homeowners to pay their share of the cost of repairs by the time the final account for works was issued or lose all grant assistance.

Judges in the Inner House of the Court of Session allowed an appeal by a homeowner, who argued that Glasgow City Council, in imposing a “pre-payment condition” as a term of grant assistance, acted ultra vires of its powers in terms of Part 2 of the Housing (Scotland) Act 2006. Lord Malcolm and Lord Glennie heard that the homeowner co-owned a flat in Govanhill, Glasgow, with his wife.

Following a survey of properties in the area, in April 2011 the council served a work notice on the owners of the flats stating that their tenement building in Langside Road was in “disrepair” and that certain repair works required to be carried out to put right a number of defects.

For the petitioner solicitor advocate Mike Dailly argued that there was nothing in Part 2 of the 2006 Act relating to the provision of grants which allowed the council to impose a “pre-payment condition” as a condition of a grant, failing compliance with which the grant would be revoked. Such a condition was “contrary to the policy objective” of part 2 and was not mentioned in the council's policy statement on assistance.  It was argued that as the council had made a decision to award the petitioner a 75% grant for the cost of repairs, it could not be withdrawn on the basis of the imposition of a condition which was ultra vires.

On behalf of the council, Gavin MacColl Q.C submitted that the pre-payment condition of the grant was intra vires, being permitted in terms of sections 74(4) and 81(1)(d) of the Act, and that it was imposed for a relating to Part of the Act - to encourage people to pay their share of the cost of repairs. However, the appeal judges ruled that the pre-condition did not fairly or reasonably relate to the grant and that it “goes well beyond what is legitimate”.

The judges also observed that it seemed to be “counter-intuitive” that an individual who had been found to be eligible for a mean-tested grant of 75% of the costs of the work should have the availability of that grant made subject to a condition with which he would “almost certainly find it difficult, if not impossible, to comply”.

Rt Hon Lord Glennie

Delivering the opinion of the court, Lord Glennie said: “It may be intended as a kind of sword of Damocles, hanging over the owner of the property to encourage him to pay the sum due from him for his share of the cost of the repairs. But, if activated, the effect goes much wider than enforcing payment of the sums already due; it takes away the whole of his grant.  

“The grant itself, and the threat to withhold it if the non-grant part of the cost is not paid in full and on time, is being used as a lever, a stick, to encourage payment by the owner of the part of the repair cost which he already is under an obligation to pay. This is not a condition which is attached to the grant for the purposes of the grant – to make sure that it is properly applied, that the work is carried out satisfactorily, or whatever".  

"It is attached to the grant for the purpose of ensuring payment of other sums which are and have always been the responsibility of the owner of the property. In those circumstances we consider that the pre-condition goes much further than is justified in terms of the Act. It is ultra vires the council.”

Inner House declares ‘Sword of Damocles’ contractual term unlawful: GLC Public Interest Litigation Unit