Morrell v. Secretary of State for Work and Pensions  UKSSCSC CIS_5140_2001 (11 April 2003)
Morrell v. Secretary of State for Work and Pensions  EWCA Civ 526
Mr. E. Jacobs CIS/5140/2002
CA (Thorpe, Sedley LJJ, Richards J)
Income – whether a loan is income - whether overpayments in consequence of misrepresentation
The claimant was in receipt of income support between June 1995 and August 1999. For much of that period she received regular sums of money from her mother, either paid to her towards rent and living expenses or paid directly to her landlord for rent. The amounts were paid by way of loan, to be reimbursed when her circumstances improved. During this period she completed four review forms on which she replied "no" to the question: "Does anyone pay money to someone else on your behalf?". In 1997 and 1999 she gave the local authority information about the loans received to date and they in turn informed the Benefits Agency, but no action was taken by the Benefits Agency on either occasion. Later in 1999 her entitlement to income support ceased because she moved in with her fiancé. In 2000 the Benefits Agency decided that benefit had been overpaid and was recoverable for two periods: the first starting from the week after receipt of the review form in September 1995 and terminating when the Benefits Agency were notified of the loans in 1997 and the second starting from the week after receipt of the review form in 1998 and terminating when the Benefits Agency were again notified of the loans in 1999. The claimant appealed, arguing that the loans were not income and that, even if they were, any overpayments were not recoverable as they were not caused by the claimant's misrepresentation. The tribunal rejected both arguments, as did the Commissioner.
The claimant appealed to the Court of Appeal.
Held, dismissing the appeal, that:
- following Leeves v. Adjudication Officer, "income" should be given its ordinary and natural meaning and the fact that a payment is a loan and therefore subject to a repayment obligation does not necessarily give it a different character. It was necessary to look at the nature of the repayment obligation (paras. 31-33);
- the Commissioner was correct to conclude that the loans received by the claimant from her mother were income, as there was no certain and immediate obligation to repay (paras. 33 and 37);
- the Court left open the question of whether an element of recurrence or regularity was essential for a loan to count as income (paras. 35-36);
- the department were entitled to rely on the information in a review form as an up-to-date and accurate statement of a claimant's circumstances, regardless of any information they may have received in the past. The overpayments were caused at least in part by the claimant's misrepresentations on the forms and were therefore recoverable (paras. 44-47).
DECISION OF THE SOCIAL SECURITY COMMISSIONER
The appeal to the Commissioner
The history of the case
Did the claimant receive income?
"I expect to be reimbursed gradually as her problems decrease."
The interpretation of the questions on the review form
Date: 25 April 2002
(signed) Edward Jacobs
The claimant appealed to the Court of Appeal. The decision of the Court of Appeal follows.
DECISION OF THE COURT OF APPEAL
Philip Coppel (instructed by Messrs. Withers of London EC4M 7EG) appeared for the appellant.
Miss Elisabeth Laing (instructed by Department for Work & Pensions Legal Services) appeared for the respondent.
"1. Having considered all the evidence in the papers, together with [Commissioners' decisions] R(SB) 9/85 and R(SB) 3/90. The Tribunal accepts that the Appellant misrepresented the material fact that she was receiving an income from a third party when completing review forms on 14.9.95, 24.10.95, 27.4.98, and 6.1.99.
2. The Tribunal does not accept that it was reasonable for Ms. Morrell to believe that 'no' was the correct answer to the question asking if anyone paid money to someone else on her behalf. Clearly the Appellant's mother was paying the full amount of her rent. The Tribunal find that this positive and deliberate action (R(SB) 9/85) resulted in Income Support being paid which would not have been paid but for the misrepresentation.
3. The Tribunal also find that there was a period during which official error caused overpayment to be made but this was followed by a further period of misrepresentation notwithstanding the earlier disclosure (R(SB) 3/90).
4. The Tribunal to the issue before it accepted the provisions of various Acts and Regulations referred to by the Adjudication Officer in his submissions as relevant."
"7. The tribunal found that the loans made by the claimant's mother were income. It was entitled to make that finding.
8. A loan is not necessarily income. It may be no more than a one off payment or one of a few instalments. That explains why a student's loan has to be treated as income in the legislation and why paragraph 30 of Schedule 9 to the Income Support (General) Regulations 1987 uses the word 'payment'.
9. Whether the claimant is receiving income has to be judged by reference to the normal meaning of that word.
9.1 It obviously means money, or the equivalent, that is coming to the claimant. It need not come directly to the claimant. It is sufficient if it is paid to someone else on her behalf. So, it does not matter whether her mother paid the money to her or paid it for convenience to the landlord.
9.2 A further requirement is that it must be recurring. In this case it was paid regularly each month for a number of years.
9.3 Also in this case, its payment was predictable and the amount was known or ascertainable in advance. Those are not, perhaps, essential features of income. But they reinforce the classification of the mother's payments as such.
'I expect to be reimbursed gradually as her problems decrease'."
"14. I reject that argument. The flaw in it is obvious. The failure by the Department to act on the information in 1997 was a mistake. It broke the chain of causation when it was received, but when the claimant repeated her misrepresentation on later review forms, she again became one of the causes of the overpayment.
15. In holding that the claimant was one of the causes of the overpayment for 1998 to 1999, the tribunal relied on the decision of Mr Commissioner Goodman in R(SB) 3/90. The Secretary of State submits that that decision does not apply, because it only decided that disclosure on an earlier claim form is irrelevant if the claimant repeats a misrepresentation on a later claim. The Secretary of State then argues that the overpayment for 1998 to 1999 was not recoverable, because the review forms were all completed on the same claim.
16. The Secretary of State's submission correctly identifies the facts of R(SB) 3/90. But I do not accept that the principle is limited as the Secretary of State submits. The claimant was required to complete a review form in order to provide an up-to-date and accurate statement of her circumstances. When it was received, the Department was entitled to rely on it as precisely that. In so far as it reported something different from what the Department had previously been told, the Department was entitled to rely on it as being the most recent statement. Even if Mr. Commissioner Goodman's decision is not authority for that proposition, it can nonetheless be derived from basic principle. It is, after all, not necessary that the claimant should be the sole cause of the overpayment: see the decision of the Court of Appeal in Duggan v. Chief Adjudication Officer, reported with R(SB) 13/89.
17. So, I reject the Secretary of State's arguments (a) that the tribunal went wrong in law on the second period of overpayment and (b) that that overpayment is not recoverable."
16. In relation to the final issue, the adequacy of the tribunal's reasons, the Commissioner held:
"18. The tribunal's reasons for decision were very short given the detailed arguments put by the claimant's legal representative. The claimant was entitled to better reasons. The issue for me is: are the reasons adequate? The answer is: yes, but only just. Even if they were inadequate, the tribunal came to the correct decision in law. If I had found its decision wrong in law for containing inadequate reasons, I would nonetheless have substituted my own decision in the same terms."
(1) Whether the loans were income
"(1) Capital which is payable by instalments which are outstanding on–
(a) the first day in respect of which income support is payable or the date of the determination of the claim, whichever is earlier; or
(b) in the case of a supersession the date of that supersession,
shall be treated as income if the aggregate of the instalments outstanding and the amount of the claimant's capital otherwise calculated in accordance with Chapter VI of this Part exceeds £8,000 …
(2) Any payment received under an annuity shall be treated as income.
25. Miss Laing, for the Secretary of State, submits that there is no general rule that loans are to be treated as capital. Whether they are capital or income is a mixed question of fact and law in every case. Payments received on a periodical, recurring basis and available to meet recurrent expenditure are to be regarded as income. The fact that they are repayable does not deprive them of their character as income unless there is a certain and immediate obligation to repay them. She cites Leeves v. Chief Adjudication Officer  ELR 90, R v. Bolton Supplementary Benefits Appeal Tribunal, ex parte Fordham  1 All ER 50 and R v. Supplementary Benefits Commission, ex parte Singer  1 WLR 713. She submits that if one looks at the relevant factors in the present case, the payments can be seen to have the character of income. Nothing turns on the fact that the 1987 Regulations make specific provision for certain loans that are or might be capital to be treated as income.
26. The appropriate starting point for consideration of those rival submissions is Leeves, since it is a recent decision of this court on the same regulatory scheme and is closely in point. The case concerned a mature student who had been awarded income support and was also in receipt of a student grant. On 27 April 1995 he abandoned his course. The local education authority was entitled to terminate the grant award if satisfied that he had abandoned his course. He had also been required to give an undertaking that where payments made to him by the authority exceeded the grant payable he would, if called upon to do so, repay the excess. Some time after 27 April he was informed orally by the authority that he would have to repay the apportioned balance of his student grant, but it was not until 24 May that the authority wrote to him formally terminating his grant, requesting repayment of the relevant part of the grant and enclosing an invoice for immediate payment. In the meantime, on 9 May, an adjudication officer had decided that he was no longer a student but that his grant nevertheless fell to be taken into account as income.
"… Thus, the question of whether, as at the date of their notional payment, the weekly sums are income in the hands of the claimant, falls to be decided on the basis of ordinary notions as to the nature of income.
In that respect I consider that, in the absence of statutory definition to the contrary, or some compelling contrary indication arising from the scheme of the Act, (a) monies received by way of grant towards maintenance which are not repayable are plainly in the nature of income (other than earnings) whereas (b) monies accruing, or required to be treated as received or accruing, under a certain obligation of immediate repayment (i.e. an equivalent debt) do not amount to income. … Thus, the question to be determined is whether, at the time of the original adjudication, the claimant was under a certain and immediate liability to repay in respect of the notional weekly payments to be taken into account" (page 98B-D).
"In my view, it can properly be said that, when the payment was made on 15 November, it was a resource for each of the next four weeks, that is until the next payment was made on 15 December. It remained income, albeit that there was an obligation to repay at some future date when the strike was over. It remained as a resource for each of the next four weeks. It started as a resource for each of those four weeks, and the fact of a strike with a consequential obligation to repay at some future date did not alter the fact that it was a resource for each of the four weeks."
"I consider that, on the position as it stood prior to 24 May 1995, the adjudication officer was correct in deciding that the grant fell to be treated as income of the claimant. Such potential obligation to repay as existed following abandonment did not give rise to an immediate liability. The power of the Hampshire County Council [to require repayment] under regulation 15 of the 1993 regulations could not be exercised before consultation with the education authority and in any event was framed in discretionary terms. While in this case there was no substantial reason to doubt that the discretion to call for repayment would be exercised, it was not clear how long it would be before the claimant was called on to repay, nor was it certain precisely what sum or over what period he would be required to pay. The wording of the undertaking appears to have been framed to reflect that position ('such sum as may be determined by the County Treasurer to have been paid') and did not in my view itself create a certain and immediate (i.e. crystallised) obligation of payment of the kind which [counsel for the claimant] concedes he must demonstrate.
On the other hand, it seems plain to me that, following demand made by the Hampshire County Council in its letter of 24 May , at which point the claimant became under an obligation of immediate repayment in respect of his grant, that part of the claimant's grant required to be taken into account over the weeks which followed under reg. 29 thereby lost its character of 'income' on any ordinary understanding of the word" (page 100D-G).
31. In my judgment the issue in the present case can and should be decided by applying the guidance in Leeves. "Income" should be given its ordinary and natural meaning. The 1992 Act and the 1987 Regulations do not define it and there is no need to embark upon the elusive quest for a definition. There is nothing in the statutory scheme, including the various deeming provisions whereby certain capital is to be treated as income and vice versa, to compel any departure from the ordinary and natural meaning, though the statutory context, with its focus on weekly amounts available to meet outgoings, may help to inform the answer in a doubtful case.
"We believe that all the draftsman of the regulations was concerned to secure was that receipts which would in a colloquial sense, be regarded as part of a person's income, should not escape from consideration in the assessment of legal aid entitlement by reason only that they were receivable qua 'benefits and privileges' and not by legal right. An example which springs to mind is a periodic allowance made by a parent to an adult son, other than under covenant, to provide for or assist in the son's maintenance.
The essential feature, in our judgment, of receipts by way of income is that they display an element of periodic recurrence. Income cannot include ad hoc receipts. …
Beyond stating this general principle of discrimination it is unnecessary and probably undesirable for the court to go further in considering the broad categories of gifts and loans. Some gifts are clearly capable of forming part of a person's income. It is difficult to visualise a basis for the periodically recurrent receipt of loans to qualify as income, which is likely to be encountered in practice, but it is certainly unnecessary to decide in the present case that loans per se cannot in any circumstances be received as income" (page 717).
(2) Whether overpayments were made in consequence of misrepresentations
"Where it is determined that, whether fraudulently or otherwise, any person has misrepresented, or failed to disclose, any material fact and in consequence of the misrepresentation or failure–
(a) a payment has been made in respect of a benefit to which this section applies …
the Secretary of State shall be entitled to recover the amount of any payment which he would not have made … but for the misrepresentation or failure to disclose."
"The wrong assumption by the Adjudication Officer may in certain circumstances have been a cause of the overpayment, but it does not follow that it was the sole cause. As a matter of common-sense, which questions of causation always are, if one poses the question: did the failure of the claimant to disclose the fact that his wife was in receipt of unemployment benefit have as at least one of its consequences the overpayment of the supplementary benefit?, the only reasonable answer that one can give is 'yes'. … It may be, as I have said, that there were two causes of the consequence at the time I have outlined, but certainly one of the causes was the failure of the claimant … to disclose a material fact."
46. For the same reason the misrepresentations on the appellant's review forms could properly be considered to be a cause of the overpayments, so that the overpayments were made "in consequence" of the misrepresentations, even if a further cause was a failure on the part of the Benefits Centre to take due account of the information provided by the local authority.
47. In my judgment, therefore, the Commissioner was correct to find that the appeal tribunal had not erred in law in relation to causation.
(3) The adequacy of the appeal tribunal's reasons
50. It is true that the appeal tribunal did not deal with the question whether the loans were income. That issue, however, was not raised in terms on the appeal. The submissions made by the appellant to the tribunal in respect of each period of overpayment were (i) that there was no misrepresentation because the question "Does anyone pay money to someone else on your behalf?" was not directed to loans, or could reasonably be interpreted in that way; and (ii) that if there was a misrepresentation, payments were not made in consequence of it. The tribunal's reasons set out its conclusions on both aspects of those submissions. There was no failure to deal with a principal controversial issue.
51. The reasons given for the tribunal's decision on the issues before it were very thin. The Commissioner was right to make the critical comments he did. Nevertheless I would support his view that the reasons were just about adequate. The central issues were issues of law and there was no material dispute of fact on which specific findings were required. Sufficient was said in the decision to enable the parties to know where they stood and to mount effective arguments on the further appeal to the Commissioner.
Order: Appeal dismissed; Appellant to pay Respondent's costs of the appeal, such costs to be assessed if not agreed; Application to appeal to House of Lords refused.
(Order does not form part of the approved judgment)