England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
IH THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
Upper Tribunal Judge Jacobs
CG/1239/2008

		Royal Courts of Justice Strand, London, WC2A 2LL
		14/12/2009

Lord Justice Goldring :

1. Carer's allowance (formerly Invalid Care Allowance) is a non-income related benefit. It is a condition of eligibility that the carer is "not gainfully employed." Whether a person is gainfully employed is assessed by reference to his earnings. If he earns, or is deemed to earn, above a given amount, he is treated as gainfully employed and not eligible for benefit. On 25 November 2008, Judge Jacobs (then a commissioner) sitting in the Upper Tribunal, upholding the decisions of the Respondent and the Social Security Appeal Tribunal, held that for the purposes of the applicable regulation, namely 6(2)(a) of the Social Security Benefit (Computation of Earnings) Regulations 1996 ("the 1996 Regulations"), accrued holiday pay paid on the termination of Mr. Cotton's employment constituted "earnings of the same kind" as ordinary pay. In consequence, Mr Cotton's entitlement to carer's allowance did not begin, as he suggested, on 25 December 2006, but began on 29 January 2007. The issue in this appeal is whether the judge's construction of regulation 6(2)(a) was correct.

The legislation

The Social Security Contributions and Benefits Act 1992

2. By section 70 of Social Security Contributions and Benefits Act 1992:

"(1)     A person shall be entitled to [a carer's allowance] for any day on which he is engaged in caring for a severely disabled person if—

…(b)  he is not gainfully employed …

(8) Regulations may prescribe the circumstances in which a person is or is not to be treated for the purposes of this section … as gainfully employed …"

3. By section 3(2) :

"For the purposes of this… Act…—

(a) the amount of a person's earnings for any period; or

(b) the amount of his earnings to be treated as comprised in any payment made to him or for his benefit,

shall be calculated or estimated in such manner and on such basis as may be prescribed …"

The Social Security (Invalid Care Allowance) Regulations 1976 ("the 1976 Regulations")

4. By regulation 8(1) of the Social Security (Invalid Care Allowance) Regulations 1976 ("the 1976 Regulations"):

"For the purposes of section 70(1)(b) of the Contributions and Benefits Act (condition of a person being entitled to a carer's allowance for any day that he is not gainfully employed) a person shall not be treated as gainfully employed on any day in a week unless his earnings in the immediately preceding week have exceeded [£84, the prescribed level in 2006/2007; as of 1 October 2007 the level is £95] and, subject to paragraph (2) of this regulation, shall be treated as gainfully employed on every day in a week if his earnings in the immediately preceding week have exceeded [£84]."

The 1996 Regulations

5. These regulations are made under (among other enabling provisions) section 3(2) of the 1992 Act. By regulation 3:

"(1)     For the purposes of Parts II to V…of the [1992 Act] and of any regulations made thereunder which relate to benefit under those Parts of that Act or regulations, the earnings of a claimant shall be calculated by determining in accordance with these Regulations the weekly amount of his earnings..."

6. By regulation 6:

"(1)     Earnings derived from employment as an employed earner shall be calculated or estimated over a period determined in accordance with the following paragraphs and at a weekly amount determined in accordance with regulation 8 (calculation of weekly amount of earnings).

(2)     Subject to paragraphs (3) and (5) to (8), the period over which a payment is to be taken into account—

(a)     in a case where it is payable in respect of a period, shall be a period equal to a benefit week or such number of benefit weeks as comprise the period commencing on the date on which earnings are treated as paid under regulation 7 (date on which earnings are treated as paid) and ending on the day before the date on which earnings of the same kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j)) and from the same source would, or would if the employment was continuing, next be treated as paid under that regulation;

(b)     in any other case, shall be a period equal to such number of weeks as is equal to the number (less any fraction of a whole number) calculated in accordance with the formula—

P divided by (Q + R)

where—

P is the net earnings;

Q is the amount of the relevant earnings limit plus one penny; and

R is the total of the sums which would fall to be disregarded or deducted as appropriate under regulation 10(2) or (3) (calculation of net earnings of employed earners),

and that period shall begin on the date on which the payment is treated as paid under regulation 7 (date on which earnings are treated as paid).

(3)     Where earnings not of the same kind are derived from the same source and the periods in respect of which those earnings would, but for this paragraph, fall to be taken into account overlap, wholly or partly, those earnings shall be taken into account over a period —

(a)     equal to the aggregate length of those periods, and

(b)     beginning with the earliest date on which any part of those earnings would otherwise be treated as paid under regulation 7 (date on which earnings are treated as paid).

(4)     In a case to which paragraph (3) applies, earnings under regulation 9 (earnings of employed earners) shall be taken into account in the following order of priority—

(a)     earnings normally derived from the employment;

(b)     any payment to which paragraph (1)(b) or (c) of that regulation applies;

(c)     any payment to which paragraph (1)(i) of that regulation applies;

(d)     any payment to which paragraph (1)(d) of that regulation applies…"

7. By regulation 7(b):

"Earnings to which regulation 6…applies shall be treated as paid…-

…(b)…'on the first day of the benefit week in which the payment is due to be paid'.

8. By regulation 8:

"For the purposes of regulation 6 (calculation of earnings of employed earners)…where the period in respect of which a payment is made-

(a) does not exceed a week, the weekly amount shall be the amount of that payment;

(b) exceeds a week, the weekly amount shall be determined…"

9. By regulation 9:

"(1)     …"earnings", in the case of employment as an employed earner, means any remuneration or profit derived from that employment and includes—

(a)     any bonus or commission;

(b)     any payment in lieu of remuneration except any periodic sum paid to a claimant on account of the termination of his employment by reason of redundancy;

(c)     any payment in lieu of notice;

(d)     any holiday pay except any payable more than four weeks after the termination or interruption of employment…".

The facts

10. Mr Cotton retired on 30 November 2006. His last day of work was 21 November 2006. Under his contract he was to be paid on the 18^th of each month. That fell on a Saturday in November 2006, and so he was paid on 17 November. That final payment consisted of £1,542.28 net wages and £498.27 net holiday pay (representing pay in lieu of his annual holiday entitlement for the period January to November 2006). He made a claim for carer's allowance to take effect from 1 December 2006. The Secretary of State allowed the claim from 29 January 2007, but refused it for the period 1 December 2006 to 28 January 2007.
11. Mr Cotton appealed. The Social Security Appeal Tribunal confirmed the decision of the Secretary of State. By its statement of reasons of 6 January 2008 it said it was bound by a previous decision of Mr Commissioner Turnbull (ref. CG/4172/2001) to treat Mr Cotton's holiday pay as "earnings of the same kind" as payment of ordinary wages for the purposes of reg. 6(2)(a). On that basis, Mr Cotton's entitlement to carer's allowance did not begin until 29 January 2007.

The decision of the Upper Tribunal

12. The judge considered whether the decision of Mr Commissioner Turnbull was correct. Mr Richards, on behalf of Mr. Cotton, contended that it was not; that on a true construction of reg. 6(2)(a) holiday pay was not 'earnings of the same kind' as ordinary pay.
13. The judge began his judgment by apologising for the time he had taken to write it. He observed that his only excuse was that he was trying to understand the operation of regulations 6 to 9 of the 1996 Regulations. As he put it:

"…I have decided that was too ambitious a task. The way those provisions operate is not entirely clear and they would benefit from being reconsidered, if not redrafted."

14. Those are sentiments with which I completely agree.
15. The judge set out parts of Commissioner Turnbull's decision. The decision, as relevant to the present case, may be summarised in the following way.

(1) Holiday pay was a payment "payable in respect of a period" under regulation 6(2)(a). Regulation 6(2)(b) did not apply. Both appellant and respondent submit that is right. For reasons which will become apparent, I too have come to that view.

(2) As the words of regulation 6(2)(a) make clear, it was necessary to identify the period over which a payment was to be taken into account. The start date of that period was the first day of the benefit week in which the payment was due to be made: see regulation 7(b).

(3) "Considerably more difficulty" arose with the end date and the words, "earnings of the same kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j)) and from the same source would, or would if the employment was continuing, next be treated as paid under that regulation." "Earnings of the same kind" could not be restricted to holiday pay. As holiday pay was only paid once, there would be no end date. It was only possible to identify an end date if ordinary salary was treated as "earnings of the same kind" as holiday pay. In other words, the end date would be the day before the ordinary salary was next payable.

(4) The commissioner identified a problem with that analysis. As he put it:

"The problem presented…by Regs 6(3) and (4) is that it is plain that, for the purpose of those provisions, holiday pay is treated as being not "of the same kind" as earnings normally derived from employment."

(5) He finally concluded that there was no alternative but to construe the phrase "earnings of the same kind" as having a different meaning in regulation 6(2)(a) from that which it has in 6(3) and (4).

16. Mr. Richards submitted to the judge, as he has to us, that the wording of the regulation did not require an end date to be identified. It was possible to read "a period equal to a benefit week or such number of benefit weeks as comprise…" disjunctively. Application of relevant principles of statutory interpretation showed it was necessary so to read the subparagraph.
17. His argument was succinctly summarised by the Judge in the following way: [35]-[36]

"There are three principles of interpretation that are relevant: (i) legislation must be interpreted as a whole; (ii) the same words should, if possible, be given the same meaning wherever they appear; (iii) words are not used for no purpose.

Applying those principles produced this result. As it was impossible to identify any end date for a period of accrued holiday pay, it was impossible to fix a 'number of benefit weeks' for regulation 6(2)(a). Accordingly, the proper course was to attribute them to 'a benefit week."

18. The Judge rejected the argument. First, he did not think that a disjunctive reading of regulation 6(2)(a) accorded with a natural reading of the paragraph. The natural break came after the words "or such number of benefit weeks." A natural meaning was expressed by reading the words "a period equal to a benefit week or such number of benefit weeks" as "a period equal to such benefit week(s)." Second, the drafting did not accord with a reading of the regulation in the way suggested by Mr. Richards. Third, while on the facts of Mr. Cotton's case application of Mr. Richard's analysis would produce a sensible outcome, in many cases it would not. It would mean that if several weeks' holiday entitlement were saved up, it would all be attributed to one benefit week.
19. The judge also observed that if left to his own devices he would have been tempted to decide that accrued holiday pay was not paid in respect of a period; that regulation 6(2)(b) applied.

Payment in respect of a period

20. In Chief Supplementary Benefit Officer v Cunningham [1985] ICR 660, this court was concerned with the respondent's entitlement to supplementary benefit. Regulation 9 of the Supplementary Benefit (Resources) Regulations 1981 provided that:

"Earnings and other income shall be calculated on a weekly basis and…payments shall be attributable as follows:

(a)…a payment of income shall be taken into account-

(i) where it is payable in respect of a period, for a period equal to the length of that period…"

21. Lord Justice Waller, in a judgment with which Lords Justices Cumming-Bruce and Oliver agreed, said [665B] that:

"…each of the payments in this case was in respect of a period, i.e. 14 days [pay in arrears], one day's holiday pay and seven weeks [pay] in lieu of notice…"

22. Lord Justice Oliver said [668A] that:

"The payment which he received was…clearly "in respect of a period," that is to say, a period of nine weeks and one day which can…be broken down into two weeks…one day (the holiday pay) and the seven weeks…"

23. As Mr. Richards and Mr. Forsdick on behalf of the Secretary of State both submit, it is to be presumed that when the term "payment…payable in respect of a period" was used in the 1996 regulations it was intended to bear the meaning previously elucidated by this court in Cunningham. Moreover, as they both submit, this was "payment…in respect of a period." It was a payment which reflected the accrued period of those days' holiday which Mr. Cotton had not taken at the time he retired.
24. In short, this was a regulation 6(2)(a) case.

The argument and my conclusion

25. Mr. Richards, in attractively argued submissions, relied, as he did before the judge, upon three well known principles of legislative construction. First, legislation must be construed as a whole. Second, where a legislative instrument uses the same words in different places, the starting point is that they bear the same meaning. Third, legislation is presumed not to use words to no purpose. Although he rightly drew the court's attention to the appropriate authorities, it is not necessary for me to do so.
26. On that basis Mr. Richards submitted that the interpretation of "earnings of the same kind" in regulation 6(2)(a) must be informed by what is said in 6(3) and 6(4). It is implicit in 6(3) that the different ways in which a person can receive earnings from his employment under regulation 9 differ one from the other. As 6(3) says in terms, they are not "earnings of the same kind." Regulation 6(3) requires that such different earnings be aggregated. Regulation 6(4) sets out the priority between them. It cannot be, submitted Mr. Richards, that for the purposes of regulation 6(2)(a) holiday pay and salary are "earnings of the same kind," whereas for the purposes of regulation 6(3) and 6(4) they are not. The same meaning should be applied throughout the regulations.
27. It must further be presumed, he submits, that the words "of the same kind," in regulation 6(2)(a) have a purpose. They would not unless they distinguish between the different types of employment earnings set out in regulation 9.
28. Moreover, having regard to the provision that under regulation 6(2)(a) "earnings of the same kind" excludes "earnings of the kind mentioned at regulation 9(1)(a) to (j)," it would be surprising, as Mr. Commissioner Turnbull observed, if under regulation 6(2)(a), a holiday payment were treated as "of the same kind" as ordinary pay, where the relevant payment is of holiday pay, but not where it is of ordinary pay.
29. Mr. Richards did not accept the judge's rejection of the disjunctive interpretation of regulation 6(2)(a) contrary to a natural reading of the regulation. Having regard to the two limbs of the regulation and the use of the word "or," he submitted it was possible to read the two limbs disjunctively without doing linguistic or structural violence. That would result in a consistent meaning being attached throughout the regulation to the words, "earnings of the same kind." It would give meaning to the words "earnings of the same kind" in 6(2)(a) It would avoid the difficulties referred to by Mr. Commissioner Turnbull.
30. As it seems to me (as Mr. Forsdick submitted) the function of the 1996 Regulations is firstly to identify what counts as earnings. Regulation 9 does that. Secondly, they attribute those earnings to a particular week or weeks. Regulation 7 determines the date on which the earnings are treated as paid. Regulation 6 determines the period over which they are to be attributed. Thirdly, regulation 8 converts the earnings into weekly amounts in order to determine whether the earnings threshold (laid down in regulation 8(1) of the 1976 Regulations) has been exceeded.
31. The range of possible earnings in regulation 9 is wide. Many different kinds of periodic earnings are encompassed. Some may be paid at regular intervals. Some may be one off (as in the present case). The regulations have to provide a workable means of assessing and attributing this wide range of periodic earnings to the many different circumstances which can arise as simply as possible.
32. An assessment of the beginning of the period is straightforward. The same cannot be said of the assessment of the end. To ascertain that would in many cases be difficult or impossible. That is why, as I conclude, a deeming provision was necessary. It results in a scheme which imposes a general rule under which all regulation 9 earnings payable in respect of a period are treated as payable for a period starting with the first day of the benefit week in which they are paid and ending on the day before the next payment of ordinary earnings (the next pay day). That deemed end date is not tied to the actual length of the period in respect of which any particular payment was made.
33. I turn to the wording of regulation 6(2)(a).
34. Absent the exclusionary words in parenthesis, all periodic earnings would be "earnings of the same kind." It seems to me Mr. Forsdick was right when he submitted that the phrase "of the same kind" is intended to distinguish those earnings to which regulation 6(2)(a) applies, in other words, those paid in respect of a period, and those other kinds of earnings to which regulation 6(2)(b) applies. Whilst the distinction may be implicit and the words unnecessary, it does seems to me the draughtsman probably inserted them to emphasise that it is in respect of periodic payments that regulation 6(2)(a) applies. While by no means straightforward, such an interpretation gives meaning to all the words of regulation 6(2)(a). It does not deprive the words in parenthesis of any function. It results in a workable scheme which fulfils the statutory purpose of the legislation. It does not result in the sort of surprising consequences that Mr. Richards' disjunctive reading leads to. It is consistent with a natural and ordinary reading of the regulation as the judge found.
35. In other words, when read as a whole, the regulation comes to this:

"…the period over which a payment [of any of the earnings derived from employment as an employed earner in regulation 9] is to be taken into account:

(a) in a case where [the payment of those earnings] is payable in respect of a period, shall be a period equal to a benefit week[s]…as comprise the period commencing [on the first day of the benefit week in which the payment is due to be paid] under regulation 7… and ending on the day before the date on which earnings of the same kind [namely those payable in respect of a period] (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j) [namely all periodic earnings apart from ordinary pay] and from the same source would, or would if the employment was continuing, next be treated as paid under…regulation [7],[ namely the next ordinary pay day])"

36. Such a reading of the provision is relatively straightforward. It can consistently be applied to many different situations. It achieves the object of this part of the legislation. While, as is inevitable in legislation such as this, there will be winners and losers, it avoids the possibility of an uncovenanted windfall in the event of (for example) a substantial payment reflecting several months' accrued holiday pay only being taken into account in respect of one week.
37. Whilst the principles of statutory construction relied upon by Mr. Richards are powerful aids to construction, they are not immutable rules. If applied here they would, as it seems to me, frustrate and not give effect to the purpose of this legislation. A differential construction is in the circumstances justified.
38. While it may be unfortunate that the words "earnings not of the same kind" may bear a different meaning for the purposes of regulation 6(3) than "earnings of the same kind" in regulation 6(2)(a), the context in which the words are used in each regulation is somewhat different. The words in parenthesis in regulation 6(2)(a) are absent in regulation 6(3). Moreover, the words as used in regulation 6(2)(a) are performing an essentially different function from those in regulation 6(3) (taken in conjunction with regulation 6(4)).
39. While any statutory scheme should be understood as a whole, this cannot lead to the immutable rule that the same words used in the same legislation necessarily have the same meaning.
40. In short, in spite of the opacity of the language, I have come to the view that this is a deeming provision which seeks to make relatively simple the assessment of the end date when a periodic payment is made which does not consist of ordinary pay.
41. In the circumstances therefore, I would dismiss this appeal.

Lord Justice Wilson:

42. I agree with my Lords that the appeal should be dismissed but I would have preferred us to travel down a route to dismissal more radical than that which they both favour.
43. The problem lies in the decision of this court in Chief Supplementary Benefit Officer v. Cunningham [1985] ICR 660 that holiday pay is payable "in respect of a period". In our case Mr Cotton was entitled to take a number of days by way of holiday for the period from January to November 2006; to be paid during those days taken by way of holiday; and, were he to fail to take that number of days by way of holiday, to be paid extra for such days as he did not take. In the event he took all save seven of the days which he was entitled to take. So he was entitled to be paid extra for seven days, viz to "holiday pay". At first blush one might without difficulty subscribe to the proposition that Mr Cotton's holiday pay was payable in respect of a period, viz seven days. But, on further reflection, which seven days? The seven days of holiday were never taken; those seven days have never dawned. The concept of seven days might perhaps be regarded as no more than a necessary theoretical constituent of the computation of Mr Cotton's holiday pay. Goldring LJ, at [22] above, has set out the statement of Oliver LJ in Cunningham, at 668A, but, in the interests of economy, he has omitted words which, for me, carry some interest. Oliver LJ stated that the breakdown of the "period" of nine weeks and one day was "into two weeks then past, one day (the holiday pay) and the seven weeks then starting" (my emphasis). Oliver LJ felt able to ascribe the arrears of pay to a period, namely of two weeks immediately prior to the date of termination of the employment; felt able to ascribe the pay in lieu of notice to a period, namely of seven weeks immediately thereafter; but – for obvious reasons – did not feel able to make any analogous ascription of the holiday pay.
44. Arguable though all this might otherwise have been, we are bound by the decision in Cunningham that holiday pay is payable in respect of a period. In making the regulations of 1996 the Secretary of State must be taken to have had regard to that decision: Lowsley v. Forbes [1999] 1 AC 329 at 340 F-G, per Lord Lloyd of Berwick. The result is that the ostensibly convenient conclusion that Mr Cotton's case falls into Regulation 6(2)(b) is foreclosed; and his case is thrown down into the terminological mine-field of Regulation 6(2)(a).
45. Appearing pro bono for Mr Cotton, Mr Richards treated us to an alpha presentation. But, like my colleagues, I cannot subscribe to his disjunctive argument to the effect that, if every such part of Regulation 6(2)(a) as succeeds the word "or" (where first used) cannot sensibly be applied to it (or, to use his word, shoehorned into it), the case of a payment in respect of a period must be governed by the words which precede it. The argument ascribes to the word "or" the function of imposing a divorce between the preceding words "a period equal to a benefit week" and the succeeding words "such number of benefit weeks as …" which the grammar cannot sustain.
46. Regulation 6(2)(a) defines the period over which Mr Cotton's holiday pay is to be taken into account. It is a period equal to a benefit week or such number of benefit weeks as comprise the period commencing on a specified date and ending on a day before a specified date. There is no difficulty in identifying the date on which the period commences. The difficulty is in identifying the date the day before which it ends. I will depart from strict accuracy by calling that date the end date. It is "the date on which earnings of the kind (excluding earnings of the kind mentioned at regulation 9(1)(a) to (j)) … would if the employment was continuing, next be treated as paid".
47. Regulation 9(1) specifies, at (a) to (j), ten different kinds of earnings other than wages and salary. The fourth, at (d), is holiday pay. Regulation 6(3) speaks of "earnings not of the same kind" and provides that, when the periods in respect of which such earnings would otherwise overlap, they should instead be aggregated. Unsurprisingly it is agreed that, for the purpose of Regulation 6(3), Mr Cotton's wages and his holiday pay were earnings not "of the same kind" so its provision against overlapping would apply. Mr Forsdick has to contend, however, that, in Regulation 6(2)(a), the words "of the same kind" have an entirely different meaning. He has to do so because otherwise, in relation to holiday pay and the other nine kinds of earnings specified in Regulation 9(1), no end date could be identified for the purposes of Regulation 6(2)(a): for earnings of those ten kinds are excluded by the words in parenthesis from being taken into account in the identification of the end date.
48. Mr Forsdick's argument is therefore that the words "earnings of the same kind" in Regulation 6(2)(a) mean "earnings payable in respect of a period". Thus, in that Mr Cotton's holiday pay and his wages were both earnings in respect of a period, the end date in his case is (says Mr Forsdick) to be identified by reference to the date on which his wages would, if his employment had continued, next be treated as paid.
49. One must of course do everything one can to make sense of the four words "of the same kind" in Regulation 6(2)(a). But Mr Forsdick asks too much of me. Had it not found favour with my colleagues, I would have described his argument as arrant nonsense. He contends for a meaning of the four words in the subparagraph entirely different from what is agreed to be their meaning when they are repeated in the paragraph which immediately follows it. Indeed the words within Regulation 6(2)(a) itself which immediately follow the four words, namely the words in parenthesis, make plain that the subparagraph is addressing different kinds of earnings in the same way in which, by its specification of ten different kinds, Regulation 9(1) addresses them. Instead, according to Mr Forsdick, the four words, when found in Regulation 6(2)(a), mean only earnings "payable in respect of a period". But whether earnings are of the same kind and whether they are payable in respect of a period are totally different questions. The draftsman of the subparagraph was perfectly capable of repeating the words "payable in respect of a period" if he had wished to do so. But he chose four words which not only are entirely different but which, both naturally and, in particular in the context of the regulation as a whole, mean something entirely different.
50. "It is a canon of construction that, if it be possible, effect must be given to every word of an Act of Parliament or other document; but that, if there be a word or a phrase therein to which no sensible meaning can be given, it must be eliminated." So said Brett J. in Stone v. Corporation of Yeovil (1876) 1 CPD 691 at 701. My view is that no sensible meaning can be given to the phrase "of the same kind" in Regulation 6(2)(a) and that it should be eliminated.

Laws LJ.

51. I have had the advantage of reading the judgments of my Lords Wilson and Goldring LJJ. I agree that this appeal should be dismissed for the reasons given by Goldring LJ.