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You are here: BAILII >> Databases >> Upper Tribunal (Administrative Appeals Chamber) >> AL v Secretary of State (IB) [2013] UKUT 476 (AAC) (20 September 2013) URL: http://www.bailii.org/uk/cases/UKUT/AAC/2013/476.html Cite as: [2013] UKUT 476 (AAC) |
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IN THE UPPER TRIBUNAL Case No. CIB/162/2012
ADMINISTRATIVE APPEALS CHAMBER
Before Judge Nicholas Paines QC
Decision: The decision of the First-tier Tribunal involved an error of law. I set it aside and remit the case to the First-tier Tribunal for redetermination in accordance with this decision. The tribunal may but need not be differently constituted.
REASONS FOR DECISION
1. The claimant, who has a number of disabilities, claimed incapacity benefit, with effect from 30 November 2006, during a period of aggravation of his disability; the claim form was completed on the basis of information given by him by telephone on 13 November and subsequently signed by him on 12 December Pages 463-478). On pages 464-465 he gave information about his employment, stating correctly that owing to disability he was not working at his job (which was being kept open for him) and was no longer receiving any pay. On page 471 he answered ‘no’ to the question ‘Do you receive any other money from any source?’ The claimant received incapacity benefit from 30 November 2006 to 14 January 2008 (after which he ceased to be incapable of work and returned to his job), pursuant to a decision dated 14 December 2006. He received incapacity benefit again in a further period of incapacity for work from 22 October 2008 to 9 July 2009, pursuant to a decision dated 24 February 2009.
2. As a result of information received from an unspecified source, a fraud investigation was launched and the claimant was interviewed under caution in April 2009. On 2 July 2009 a DWP decision-maker revised the award decisions of 14 December 2006 and 24 February 2009, finding that the claimant had worked as a self-employed car dealer between 19 June 2006 and 17 July 2007 (pages 444-445); the consequences were that he was (a) not entitled to incapacity benefit from the outset of the first claim period until 17 July 2007 because he was doing non-exempt work and (b) was consequently only entitled to incapacity benefit at the short term rate during the remainder of the first claim period and during the second claim period (apart from the first three days).
3. On 10 July 2009 a decision-maker decided that the overpayments were recoverable on the basis that the claimant had failed to disclose that he was in self-employment on, or as soon a practicable after, the commencement of each claim period on 30 November 2006 and 22 October 2008. The overpayments were calculated as £3,551.27 in the first claim period and £1,337.16 in the second period.
4. The claimant appealed; the decision was reconsidered but not changed. The case came before the First-tier Tribunal on 28 November 2011. Unfortunately the claimant was unable to attend owing to illness; he was represented by Mr Andy Malik, who told the tribunal that the claimant wished the proceedings to go ahead. It was accepted on his behalf that he had engaged in trading in cars. Mr Malik sensibly did not object to the overpayment decisions being amended to refer to misrepresentation rather than non-disclosure.
5. The tribunal had before it some accounts that had been prepared on the claimant’s behalf, apparently for tax purposes. The first set of accounts covered the period from 26 June 2006 to 5 April 2007 and showed a net profit of £14,674; the second set covered the period from 6 April 2007 to 19 July 2007. The Secretary of State’s representative calculated that the weekly average profit over 41 weeks from June 2006 to April 2007 was £357.90 and the weekly average profit over 15 weeks from April to July 2007 was £454.60.
6. The tribunal found that, in answering ‘no’ to the question on the claim form about ‘other money from any source’, the claimant had misrepresented the fact that he was earning income from buying and selling cars. They had a list (page 64) of 25 cars bought and sold between June 2006 and July 2007 at an aggregate profit of some £44,000. It appears that the claimant never owned more than one of the vehicles at a time, but had bought and sold at least four vehicles by the end of November 2006, the most recent sales being on 31 October and 10 November (that being three days before the claim by telephone); he bought a further car in December 2006 and sold it in January 2007.
7. Rejecting a submission that the question on the claim form was too vague, the tribunal found that the claimant was carrying on business as a motor dealer and, in answering that he had no money coming in from other sources “took positive and deliberate action to misrepresent the true facts”. The untrue statement resulted in the payment of benefit to which the claimant was not entitled and the sums set out in the overpayment decisions were recoverable.
The issues
8. The claimant appeals with permission given by Judge Powell. His grounds of appeal initially were:
(1) that the tribunal did not give adequate reasons for its finding of misrepresentation “when, at the date of claim, the respondent had sufficient knowledge that the claimant was self-employed”;
(2) that the finding that the claimant made a misrepresentation was erroneous in law because (a) the law required the claimant to know that a representation was untrue, whereas the claimant had believed his trading activity was a hobby and not a business, (b) there was no evidence of “positive and deliberate action to misrepresent the true facts”, which was inconsistent with his responses in interview and (c) there was no evidence that the claimant had received money on 30 November 2006, the starting date of the first claim period (page 693); and
(3) that the Secretary of State had not been entitled to take the revision decision under regulation 3(5)(c)(ii) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, because that provision required the Secretary of State to be satisfied that a claimant had known of the existence and relevance of the misrepresented or undisclosed fact (page 696).
9. Judge Powell directed a submission from the Secretary of State on whether permission should be granted. The Secretary of State opposed permission. In his submission in response, the claimant’s representative rejected the Secretary of State’s analysis as inadequate and added further grounds:
(4) that the entitlement decision relating to the first claim period could not be revised with effect from a date earlier than 24 September 2007 because, prior to that date, regulation 3(5)(c) of the Decisions and Appeals Regulations had only permitted revision for error in an incapacity determination, which was not this case; and
(5) that no misrepresentation had been made or proved in respect of the second claim.
10. Judge Powell granted permission and directed a submission from the Secretary of State on the appeal.
11. The Secretary of State’s submission resisted ground (2) on the basis that the tribunal was entitled to find that the claimant’s answer on the claim form did not reflect his genuine belief and that the finding of positive and deliberate action to misrepresent the true facts was not perverse and was a matter for inference rather than evidence; on the tribunal’s findings that the claimant believed he had an ongoing business, the correct answer to the question on the claim form was ‘yes’. The Secretary of State did not deal explicitly with grounds (1) or (3).
12. The Secretary of State said he understood ground (4) as being that the entitlement decision could not be revised under regulation 3(5)(c) of the Decisions and Appeals Regulations because the finding that the claimant was not working was not an incapacity determination; the Secretary of State agreed, but submitted that, in consequence, the award could be revised under regulation 3(5)(b).
13. The Secretary of State initially agreed with ground (5) on a basis that he no longer adopts. I deal with his position on the second claim period below. In addition, the Secretary of State’s submission raised a further ground:
(6) that the tribunal had erred in law by assuming that the claimant’s earnings were the weekly average of the profits disclosed in the accounts.
He requested that the decision be set aside on that ground and the case remitted to the First-tier Tribunal.
14. A further submission from the claimant’s representative concurred with that suggestion but invited the Upper Tribunal to direct the First-tier Tribunal that regulation 3(5)(b) of the Decisions and Appeals Regulations could not apply retrospectively to periods before it was amended in September 2007, by analogy with the reasoning of a three-judge panel of the Upper Tribunal in Secretary of State v JL (DLA) [2011] UKUT 293 (AAC).
(i) whether regulation 3(5) of the Decisions and Appeals Regulations 1999 only permits the claimant’s entitlement decision to be revised with effect for periods after 23 September 2007 for the reasons advanced by the claimant’s representative;
(ii) the amount of any overpayment of incapacity benefit to the claimant in the second claim period and the grounds upon which it is recoverable;
(iii) how the First-tier Tribunal should have approached the computation of the claimant’s earnings; and
(iv) whether the Upper Tribunal should re-make the decision pursuant to section 12(1)(b) of the Tribunals, Courts and Enforcement Act 2007.
(a) that regulation 3(5)(c) applied to the award decision insofar as it was based on a personal capability assessment, since the finding that the claimant was incapable of work in accordance with the assessment was made in ignorance of the fact that he was engaged in non-exempt work; that was a fact in relation to the claimant’s incapacity determination because, if it had been known, the personal capability assessment would not have been carried out.; or, if that was wrong
(b) that regulation 3(5)(b) applied because the words inserted into it between 1999 and 2007, excluding its application to decisions where there had been an incapacity determination, were only intended to apply to cases in which the error or ignorance related to a fact material to the incapacity determination, and should be so interpreted; or
(c) that the current version of regulation 3(5) applies retrospectively to decisions in relation to periods before 24 September 2007.
17. With regard to the second claim period (issue (ii)), the Secretary of State’s submission was that the overpayment in this period – which consisted of payment for the first three days and payment at the long-term rate – arose from the fact that the linking rules in regulation 13A of the Social Security (Incapacity for Work) (General) Regulations 1995 had been applied, on the mistaken basis that the claimant had been entitled to incapacity benefit for more than 196 days in the first claim period. It therefore arose from the Secretary of State’s ignorance of the claimant’s working (and consequently being deemed not incapable of work) in the early part of that period, which was a consequence of the claimant’s misrepresentation on the claim form, and it was recoverable.
18. In response on issue (i), Mr Tim Samuel, instructed by Mr Malik, does not agree that the Secretary of State’s ignorance of the claimant’s self-employment related to an incapacity determination; he further submits that the preconditions for reading words into the previous version of regulation 3(5)(b) are not met and that there is no sufficiently clear indication that the current version of regulation 3(5) is intended to have retrospective effect. He says nothing in response to the Secretary of State’s submission on issue (ii).
19. With regard to issue (iii), the Secretary of State’s submissions as to how the tribunal ought to have applied the Incapacity for Work (General) Regulations have also not been contested on behalf of the claimant. Nor is it disputed that (to the extent I uphold the conclusion that recoverable overpayments were otherwise made) I should remit the case to the First-tier Tribunal. I agree with that course; I shall return to this at the end of my decision.
My decision
Grounds (1) and (2)
20. I reject the claimant’s ground 1. If it refers to the date of the 2006 claim, I see no basis for the assertion that the Secretary of State had sufficient knowledge that the claimant was self-employed. By the date of the 2008 claim, the claimant was no longer self-employed.
21. I am also unpersuaded by ground 2, for the reasons given by the Secretary of State. The question that the claimant answered negatively on 13 November 2006, subsequently confirming his answer on 14 December, was simply ‘Do you receive any other money from any source?’ ‘Other money’ meant money not already disclosed elsewhere on the form. The claimant had by 13 November received money from the sale of four cars and the tribunal were entitled to find that he expected to receive more money from the sale of cars, as he went on to do. The buying and selling of cars was a source of money and the claimant was in the course of receiving money from that source; the tribunal was entitled to conclude that the claimant knew or believed this. The fact that he did not receive such money on any particular date is irrelevant, as is whether or not the activity was, as he implausibly described it, a ‘hobby’. His denial that he received money from another source must have been knowingly inaccurate and therefore a misrepresentation.
Grounds (3) and (4)
22. Grounds 3 and (4) are inter-related and the issues relating to the application of regulation 3(5) to periods prior to 24 September 2007 have been further argued in the recent submissions. I shall deal with those submissions now, first setting out the legislative and case-law background.
23. As originally drafted, regulation 3(5) provided as follows:
A decision of the Secretary of State
(a) which arose from an official error; or
(b) where the decision was made in ignorance of, or was based upon a mistake as to, some material fact and as a result of that ignorance or of mistake as to that fact, the decision was more advantageous to the claimant than it would otherwise have been but for that ignorance or mistake,
may be revised at any time by the Secretary of State.
A decision of the Secretary of State …
(a) which arose from an official error; or
(b) except in the case of … an incapacity benefit decision where there has been an incapacity determination (whether before or after the decision) where the decision was made in ignorance of, or was based upon a mistake as to, some material fact and as a result of that ignorance or of mistake as to that fact, the decision was more advantageous to the claimant than it would otherwise have been but for that ignorance or mistake,
(c) where the decision is … an incapacity benefit decision where there has been an incapacity determination (whether before or after the decision) which was made in ignorance of, or was based upon a mistake as to, some material fact in relation to … the incapacity determination, and
(i) as a result of that ignorance or of mistake as to that fact, the decision was more advantageous to the claimant than it would otherwise have been but for that ignorance or mistake and,
(ii) the Secretary of State is satisfied that at the time the decision was made the claimant or payee knew or could reasonably have been expected to know of the fact in question and that it was relevant to the decision,
may be revised at any time by the Secretary of State.
25. The amendments were made before regulation 3 came into force in respect of incapacity benefit. The Explanatory Note to the Amendment Regulations said that the relevant amending regulation
… amends regulation 3(5) as regards decisions on disability or incapacity related benefits. Revision can take place on grounds connected with the claimant’s condition if the claimant or recipient of the benefit knew or could reasonably be expected to know of the fact and that it was relevant to the original decision.
26. The effect of the regulation as originally drafted would have been that a decision could have been revised on the basis of ignorance of or mistake as to any fact, where the decision had been more advantageous as a result. The amendment made in 1999 introduced a different régime for mistakes relevant to an incapacity determination. Decisions where there had been an incapacity determination were (on the face of it at least) taken completely out of regulation 3(5)(b) by the words I have italicised at paragraph 24 above. The new subparagraph (c) applied to such decisions, but only permitted decisions that were more advantageous as a result of mistake or ignorance relating to a fact ‘in relation to’ the incapacity determination to be revised, and only if the claimant or payee knew or should have known of the fact and its relevance.
27. A similar change was made by the 1999 Amending Regulations to regulation 7 of the Decisions and Appeals Regulations, dealing with the effective date of a supersession decision taken on grounds of a change in circumstances where the new decision is less advantageous to a claimant than the decision being superseded. In regulation 7(2)(c) of the Regulations as originally drafted the supersession decision took effect from the date on which the new circumstances were relevant to the computation of the claimant’s benefit. The 1999 Amending Regulations replaced the original wording with new wording similar to that introduced into regulation 3(5)(b) and contained in regulation 3(5)(c).
28. Regulation 7(2)(c) as so amended applied to decisions superseding an earlier decision, adversely to the claimant, on the grounds of a change in circumstances; it provided that such a decision took effect from the date that the change in circumstances ought to have been notified, but before 10 April 2006 it only applied to changes in circumstances relevant to a disability or incapacity determination (which I shall call ‘medical’ changes in circumstances).
29. In CIB/763/2004 Judge Turnbull held that the new wording only covered ‘medical’ changes in circumstances that were relevant to those determinations, so that there was no provision allowing a supersession decision on the grounds of a disadvantageous change in non-medical circumstances to take effect from the date of the change in circumstances. Supersession could only take effect from the date of the new decision, in accordance with the general rule in the Social Security Act 1998, even where the claimant had known of the change in circumstances and failed to report it.
30. In response to that decision, regulation 7(2)(c) was amended again, by the Social Security and Child Support (Decisions and Appeals) Amendment (No 2) Regulations 2006, so as to introduce a new subparagraph dealing with non-medical changes in circumstances and providing that the supersession took effect from the date of the change in circumstances. Nothing was done at that time to regulation 3(5).
31. Regulation 3(5) was later amended, by the Social Security (Miscellaneous Amendments) Regulations 2007, with effect from 24 September 2007. The words in regulation 3(5)(b) that I have italicised were replaced by the words “except in a case where to which subparagraph (c) or (d) applies”. Subparagraph (c) was left unchanged, but a new subparagraph (d) applied
(d) where the decision is … an incapacity benefit decision which was made in ignorance of, or was based upon a mistake as to, some material fact not in relation to the … incapacity determination embodied in or necessary to … the incapacity benefit decision and as a result of that ignorance or of mistake as to that fact, the decision was more advantageous to the claimant than it would otherwise have been but for that ignorance or mistake
32. The Explanatory Memorandum to the 2007 Amending Regulations said
In April 2006 an amendment was made to the Decisions and Appeals Regulations to provide that the effective date of an adverse non-medical change of circumstances on … incapacity benefit is the date of the change itself. This amendment was required because the Social Security Commissioners had decided that the existing regulations only allowed a non-medical change to be effective from the date of the superseding decision itself rather than the date of change. This meant that potential overpayments were missed. This was not the policy intention and so the amendment was made.
We did not make the same change for revision, that is, where a decision is changed from its original date. We should have done so because it is possible that someone may have misrepresented their non-medical circumstances from the outset of their claim. The amendment closes this loophole.
33. In Secretary of State v JL (DLA) [2011] UKUT 293 (AAC) a three-judge panel considered the amendments that had been made to regulation 7(2)(c). The change in circumstances in that case was that the claimant moved into a care home in 2000, with the effect that the care component of his disability living allowance was not (as a matter of law) payable to him from then until the regulations governing its payability changed in October 2003. The move was not notified to the DWP; in consequence, it was not until November 2006 that the Secretary of State purported to supersede an earlier decision by a decision that the care component was not payable from 2000; the period in issue was between 2000 and 2003, since from 6 October 2003 the component was (the Upper Tribunal found) payable to him and supersession was not appropriate in relation to the period from that date onwards.
34. The three judge panel noted that, as the law on supersession decisions stood until regulation 7(2)(c) was amended in April 2006, any supersession decision to the effect that the care component was not payable following the move to the care home could only have taken effect from the date of the decision. That was because the move to the care home was not a fact relevant to the claimant’s disability determination. By the time the supersession decision was taken in November 2006, the new subparagraph that I have referred to had been introduced into regulation 7(2)(c).
35. The position was therefore that, before 10 April 2006, the claimant had had the benefit of a DLA decision to the effect that DLA was payable to him, and consequently a right to its payment, that could not have been taken away retrospectively. In a case like his, where the change in circumstances had occurred before 10 April 2006 but the consequent supersession decision was taken after that date, there were two possible interpretations of 7(2)(c) as it stood from that date onwards: a supersession decision taken under the amended provision applied either (a) from the date of the change in circumstances (in that case, in 2000) or (b) from when the new regulation 7(2)(c) came into force (10 April 2006).
The parties’ submissions
38. For the Secretary of State, Mr Wayne Spencer makes the three submissions I have referred to in paragraph 16 above. His first argument is that, on a correct analysis, this was a case of ignorance as to a material fact “in relation to a disability determination” falling under regulation 3(5)(c). He assumes, (I am sure correctly) that the claimant will initially have been treated as incapable of work on the basis of medical certificates pursuant to regulation 28 of the Incapacity for Work (General) Regulations and subsequently have been assessed as incapable of work in accordance with the personal capability assessment pursuant to regulation 24 – all in ignorance of the fact that he was working and thus to be treated under regulation 16 as capable of work on each day of any week in which he did work, even if he was otherwise incapable of work for the purposes of regulations 24 or 28.
39. Mr Spencer goes on to submit that, if the Secretary of State had known that the claimant was working, he would not have caused the claimant to be assessed under the personal capability assessment or decided that the claimant was incapable of work in accordance with that assessment. The fact of which the Secretary of State was ignorant was therefore a fact “in relation to” a disability determination within regulation 3(5)(c).
40. In response, Mr Samuel refers to the definition of an incapacity determination in regulation 7A and to the Explanatory Note that I have quoted in paragraph 32 above; he submits that the facts referred to in regulation 3(5)(c) do not extend to non-medical conditions precedent to entitlement to incapacity benefit.
41. I agree. Regulation 3(5)(c) is clumsily drafted, but on the only sensible reading of it for present purposes it applies where the decision under revision is an ‘incapacity benefit decision’ (as defined) where there has been an ‘incapacity determination’ (as defined) made in ignorance of based on a mistake as to some material fact in relation to the incapacity determination. The definitions are in regulation 7A, which defines an incapacity benefit decision (so far as presently relevant) as a decision to award a relevant benefit, embodied in or necessary to which is a decision that a person is or is to be treated as incapable of work. An incapacity determination is a determination whether a person is incapable of work in accordance with the personal capability assessment or is to be treated as incapable of work under regulation 10 (severe condition) or 27 (exceptional circumstances).
42. The structure of regulation 3(5)(c) requires the incapacity determination to have been made in ignorance of or mistake as to some fact, and the mistaken or unknown fact has to be ‘in relation to’ the incapacity determination. Here the unknown fact – that the claimant was working – was a fact that related to the decision to award incapacity benefit (the ‘incapacity benefit decision’, as defined) in that it was relevant to the claimant’s entitlement to the award. Mr Spencer argues that it related to the incapacity determination on the grounds that the determination would not have been made if the Secretary of State had known the fact. Mr Samuel rightly points out that, on this interpretation, regulation 3(5)(c) applies to any condition precedent to entitlement, such as satisfaction of the conditions as to age or residence. I agree with Mr Samuel that a ‘fact in relation to’ an incapacity determination means a fact relevant to the outcome of that determination and does not extend to a fact relevant to whether the determination is made or not.
43. It follows that the revision decision here does not fall within regulation 3(5)(c) and I do not need to consider the claimant’s ground (3) any further.
44. Secondly, Mr Spencer submits that revision is possible under regulation 3(5)(b) since the words of exclusion inserted by the 1999 Amendment Regulations clearly went further than intended. The intention, he submits, was to protect claimants against revision (and subsequent recovery of over-payments) on the basis of mistake or ignorance about a fact as to their medical condition, by introducing in such cases the additional requirement of knowledge on the claimant’s part that the Amendment Regulations introduced in regulation 3(5)(c)(ii). It was only cases of mistake or ignorance about medical facts that were intended to be excluded from regulation 3(5)(b) and covered by the new regulation 3(5)(c).
45. Mr Spencer submits that the admittedly steep conditions set by the case-law for reading words into a legislative provision are met here. Given that medical or non-medical mistakes to which the claimant has not contributed can be revised under regulation 3(5)(a), the likelihood that the Amendment Regulations intended to insulate claimants from revision for non-medical mistakes (or, as Mr Spencer graphically put it ‘to retain entitlement to their ill-gotten gains in respect of the whole period down to when the hidden truth of their circumstances happened to be brought to light’) is, he colourfully puts it, ‘indistinguishable from zero’.
46. In response Mr Samuel submits that the case-law on which Mr Spencer relies deals with situations where legislation falls short of achieving the legislator’s evident intention. The legislator’s intention of protecting claimants in cases of medical mistakes was, he points out, achieved. The case-law does not, he submits, extend to rectifying other unintended consequences of a piece of legislation.
47. In my judgment this debate is only of indirect relevance to the issues I have to decide. At the time the decision under appeal was taken the version of regulation 3(5) resulting from the 2007 amendments was in force. The over-wide words of exclusion from regulation 3(5)(b) had been deleted and a power to revise in the claimant’s case had clearly been conferred by regulation 3(5)(d). The question of what the true interpretation of regulation 3(5)(b) was before 2007 could only be relevant to whether regulation 3(5)(d) should be given retrospective effect (issue (iii) in paragraph 15 above), to which I now turn.
48. I have already summarised the facts and the outcome of JL v Secretary of State for Work and Pensions. It is important to note that the issue as seen by the three-judge panel was not whether regulation 7(2)(c) had retrospective effect in the sense of whether or not it applied to the supersession of a decision taken before the 2006 amendment; they accepted that it did. The issue was whether the supersession could have effect prior to the date of the 2006 amendment. They held that it could not. The issue that JL throws up in the present case is likewise not that of whether a decision taken before 24 September 2007 can be revised under regulation 3(5)(d), but whether the revision of such a decision can have effect before that date.
50. In response Mr Samuel submits, accurately, that the language of the relevant amending regulation and of the 2007 Amendment Regulations as a whole contains no indication as to any point in time from which revision under regulation 3(5)(d) shall take effect. Explanatory Notes, he says, cannot be looked at for any purpose beyond that of understanding the context in which an enactment is set, and in any case the Explanatory Notes here say nothing about the point either. In that respect the position is the same as with the 2006 Amendment Regulations considered in JL, which the three-judge panel construed as not indicating a retrospective effect. As to unfairness, he points out that retrospective application of regulation 3(5)(d) would deprive the claimant of the immunity that he enjoyed up until 23 September 2007 from having his award removed other than prospectively. That, he says, is a feature common to this case and JL, and one that the three-judge panel had regarded as sufficient to exclude a retrospective interpretation of the provision in that case, the second aspect of unfairness in JL being a subordinate point. He excluded any argument to the effect that the new provision was a fairer one than the old as having been rejected as irrelevant in JL.
51. In my direction to the parties I pointed out that while the second aspect of unfairness found in JL, to which I have referred in paragraphs 36 and 37 above, does not arise in the present case, the first does. I suggested to them that, though the JL decision does not say in terms that the first aspect of unfairness identified by the judges was sufficient on its own to exclude what I have called interpretation (a), paragraph 117 seemed to suggest a conclusion that it was. I am still of that view. I do not consider that the distinction, drawn by Mr Spencer, that I have referred to in paragraph 49 affects the applicability to this case of the conclusion reached in JL. I therefore consider that I am bound by JL to hold that revision under regulation 3(5)(d) with effect from a date earlier than 24 September 2007 would create an unfairness so as to bring into play the presumption that legislate does not operate retrospectively in the absence of clear words providing for that result, and that there is not such wording here.
52. ‘Retrospectivity’ in this context means altering the legal consequences of things done (or not done) in the past. In JL the thing not done was that claimant’s (continuing) failure to notify the DWP that he had moved into a care home. Until the 2007 amendment, the consequence in law of that failure was that payment of his DLA could at any time be superseded prospectively but not as regards any past period. The 2006 Amendment Regulations substituted a regime under which, on the face of it, JL’s DLA could be superseded with effect from 2000. That would be an alteration of the legal consequences of JL’s past failure.
53. In the present case, the thing done in the past was the claimant’s misrepresentation as to his income. As with JL, its legal effect in the period prior to 24 September 2007 was that his award could be superseded prospectively but there was (subject to Mr Spencer’s point on the true construction of regulation 3(5)(b), to which I shall return) no machinery pursuant to which it could either revised or superseded as regards any past period. The 2007 Amendment Regulations substitute a régime under which, on the face of it, his award could be removed with effect from when it was made. As in JL, that brings the presumption against retrospectivity into play. The silence of the Amendment Regulations as to the date from which revisions under regulation 3(5)(d) may take effect means that they are to be construed as only permitting revision with effect from the date of its introduction.
54. Mr Spencer’s point on the interpretation of regulation 3(5)(b) in its old form needs to be considered at this stage; that is because, if Mr Spencer is right, there is no retrospectivity because the 2007 Amendment Regulations merely express what was already implicitly the legal position on a true construction of the then regulation 3(5)(b). I therefore deal with it now.
55. Mr Spencer cited various authorities on the power of courts to add, omit or substitute words in a legislative provision. Of these, the leading case is Inco Europe v First Choice Distribution [2000] 1 WLR 586, in which Lord Nicholls said
It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words….
This power is confined to plain cases of drafting mistakes. The courts are ever mindful that their constitutional role in this field is interpretative. They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature. So the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed. The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see Lord Diplock in Jones v. Wrotham Park Settled Estates [1980] A.C. 74, 105. In the present case these three conditions are fulfilled.
Sometimes, even when these conditions are met, the court may find itself inhibited from interpreting the statutory provision in accordance with what it is satisfied was the underlying intention of Parliament. The alteration in language may be too far-reaching. In Western Bank Ltd. v. Schindler [1977] Ch 1, 18, Scarman L.J. observed that the insertion must not be too big, or too much at variance with the language used by the legislature. Or the subject matter may call for a strict interpretation of the statutory language, as in penal legislation….
56. I do not agree with Mr Samuel that the operation of the principle is confined to cases where the legislator has not achieved his purpose. The Inco Europe case itself is an example of words being read into a provision in order to prevent it producing unintended consequences going beyond the intended purpose. In that case the literal effect of a provision in the Arbitration Act 1996 which amended the Senior Courts Act 1981 was to abolish all appeals to the Court of Appeal in respect of arbitrations, when it was clear from the context that the intention was limited to updating the 1981 Act in the light of the replacement of the Arbitration Act 1979 by the new Act of 1996, so that the 1981 Act would reflect those restrictions upon litigation and appeals that were contained in the 1996 Act. The Court of Appeal read into the ineptly amended provision words referring to those sections of the 1996 Act that contained such restrictions.
57. I am reasonably confident that the intended purpose of the 1999 Amendment Regulations was to give the additional protection conferred by the amended regulation 3(5)(c) to claimants in cases of error or ignorance of medical facts and that the draftsman neither intended to abolish all revision in cases of non-medical facts nor realised that his wording had that effect. The case is not, however, as clear as Inco Europe, where there were numerous indications in the structure and wording of the old and new legislation that wholesale repeal of the pre-existing rights of appeal was not intended. Mr Spencer’s case on the 1999 amendment of regulation 3(5) really rests on the proposition that the literal effect of what was written was not sensible, but that does not exclude the possibility that the draftsman nevertheless intended it, perhaps because (as Mr Spencer suggests) he overlooked the possibility of a non-medical error of fact. If that is the true analysis, then accepting Mr Spencer’s argument would amount not to giving effect to the draftsman’s intention, but rather to giving effect to a different intention on the grounds that it would have been an more sensible intention to pursue.
58. Even if I were ‘abundantly sure’ (as Lord Nicholls put it) that the draftsman intended to retain revision for non-medical errors, that would not necessarily be sufficient to enable me to construe the former regulation 3(5)(b) in that way. It is clear from what Lord Nicholls said that the satisfaction of his three numbered conditions is a necessary, but not a sufficient, precondition for the reading in of words. He is explicit that the court must not cross the line (sometimes difficult to draw, as Scarman LJ pointed out in the Western Bank case to which Lord Nicholls referred) between interpretation and judicial legislation.
59. I consider that inserting words so as to create a mechanism for revision of decisions affected by error or ignorance as to non-medical fact would amount to judicial legislation, for a number of reasons. The main one is that I would be creating something that never existed before the Amendment Regulations of 2007. The 1999 Amendment Regulations amended the original Decisions and Appeals Regulations before they came into force in respect of incapacity benefit. This is not therefore a case like Inco Europe, where various rights of appeal to the Court of Appeal in arbitration cases had existed and the court read in the words necessary to prevent their unintended abolition. It is at best a case where the legislator had intended to create a régime of revision on grounds of non-medical ignorance or error but frustrated his own intention by a badly drafted amendment before the intention had come to fruition. If I were to read in words here I would not be merely avoiding an unintended demise; I would be legislating to set up a régime that the legislator had never created, on the grounds that I considered that he intended to.
60. Secondly, I consider that the necessary insertion would be, in Scarman LJ’s words, ‘too big’ because of the scale of the mechanism I would be creating, as well as too much at variance with the language used.
61. It also seems to me that, to the extent that the submission has merit, it is one that could (and on that basis should) have been made to the three-judge panel in JL. The problematic wording in the then regulation 7(2)(c)(iii) is similar to that in regulation 3(5)(b) and the argument in relation to it would have been much the same as is now pursued. Indeed, the argument might have been stronger in the case of regulation 7(2)(c), where the result being contended for would be merely a different provision as to the effective date of a form of decision (viz supersession) that was in any event available for the category of case in issue. Accepting Mr Spencer’s submission in the present case would imply that the three-judge panel were or might have been in error in not dealing with the JL case in the same way, which would sit awkwardly with my duty to follow three-judge panel decisions. Even if I had accepted Mr Spencer’s argument I would have followed JL, leaving it to the Secretary of State to take the matter up in the Court of Appeal, if so advised.
Ground (5)
62. There are two further matters covered by Mr Spencer’s submission that Mr Samuel has not commented on. First, as regards ground (5), the Secretary of State no longer suggests that there was any fresh misrepresentation or non-disclosure at the time of the second claim. His position is that the claimant was paid incapacity benefit in the second claim period at the long term rate, and without the three day waiting period, in the mistaken belief that the second claim period could be linked to the first pursuant to regulation 13A of the Incapacity for Work (General) Regulations. It seems to be common ground that the claimant was paid incapacity benefit in that fashion, so I shall assume that he was accepted as satisfying all the relevant requirements of regulation 13A. One of them is that he “was incapable of work for a period of incapacity of work of more than 196 days in his immediate past period of incapacity of for work”.
63. Mr Spencer submits that, on the facts as now known, the claimant was only incapable of work in the first claim period between 18 July 2007 (when he ceased the car dealing activity) and 14 January 2008 (after which he ceased to be incapable of work and returned to his employment); this means that he cannot satisfy the 196 day requirement, as that period is less than 196 days. The over-payment in the second claim period resulted, like that in the first, from the original misrepresentation as to the claimant’s other income.
64. That seems to me to be correct in principle, subject to one qualification which I discuss next. I do not consider that the fact that the Secretary of State can only revise the award with effect from 24 September 2007 affects the fact that the claimant was not in truth incapable of work, within the meaning of the legislation, in weeks in which he pursued the car dealing activity.
65. The qualification is that there may be weeks prior to 18 July 2007 in which the claimant did not engage in car dealing. If so, it seems to me that such weeks would form part of the relevant period of incapacity for work, assuming that they were not separated by more than eight weeks, and could enlarge the period to 196 days or more (though the First-tier Tribunal are not obliged to accept this as correct if they are persuaded that there is something I have missed).
Ground (6)
66. This brings me on to the final point dealt with by Mr Spencer: the computation of the claimant’s earnings. I agree with Mr Spencer that the tribunal needed (a) to consider whether the claimant did work that was not de minimis in each of the weeks prior to 18 July 2007 and (b) to calculate the claimant’s earnings in any such week in accordance with the Social Security Benefit (Computation of Earnings) Regulations 1996. As to the de minimis issue I respectfully agree with Judge Wikeley in paragraphs 22 and 23 of CIB/6777/1999. Incapacity benefit is an income replacement benefit and the policy underlying regulations 16 and 17 of the Incapacity for Work (General) Regulations is that it is not available to those who, despite their condition, demonstrate that they are in fact able to support themselves through employment or self-employment, with certain forms of working being nevertheless disregarded. One of those is work for less than 16 hours per week yielding earnings of less than a specified level. If the claimant’s car dealing yielded earnings above the specified level, the possible fact that it may have involved relatively non-strenuous activities such as arranging transactions by telephone would not compel a conclusion that the activities were de minimis.
67. Having read Mr Spencer’s submissions as to the factual enquiries involved at this stage of the case, I no longer take my previous provisional view that it is appropriate for the Upper Tribunal to remake the decision. I decide that the decision of the First-tier Tribunal involved an error of law in that they revised of the claimant’s award in respect of a period commencing earlier than 24 September 2007 and in that they did not consider whether the claimant did work that was not de minimis in each of the weeks prior to 18 July 2007 or calculate the claimant’s earnings in accordance with the Computation of Earnings Regulations. I remit the case to the First-tier Tribunal because I consider it will be much more economical for the remaining issues to be dealt with at a venue local to the claimant by First-tier Tribunal members who will be accustomed to fact-finding in these areas.
68. On pages 814 to 816 the Secretary of State makes some suggestions as to directions that might be given. I shall leave it to the District Tribunal Judge to consider those and make such directions as he or she considers appropriate.
Judge Nicholas Paines QC
