Upper Tribunal (Administrative Appeals Chamber)

DECISION OF THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

The claimant's appeal to the Upper Tribunal is disallowed. Although the decision of the Newcastle upon Tyne appeal tribunal dated 9 September 2008 involved errors on a point of law, for the reasons explained below, it is not appropriate to set it aside because the result was the only one open to the appeal tribunal in law (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a)).

REASONS FOR DECISION

1. The claimant (date of birth, 8 November 1967) was born in Italy, but lived in the United Kingdom from 1978, working and paying national insurance contributions in tax years 1986/87 to 1988/89. He then lived in the USA for 10 years before returning to Italy. He worked for a short period in Italy, but apparently only accumulated 12 weeks’ social security contributions. On 22 August 2002 he was notified by the Agrigento office of the Istituto Nazionale della Previdenza Sociale (INPS) of the award of “assistenza quale Invalido Parziale, categoria INVCIV” with effect from 1 June 2001. The actual award seems to have been made by the Prefect of Agrigento on 18 July 2002 in a document that has been translated twice on pages 44 and 45 on behalf of the Pensions Service, but did not appear in the original in the papers before the appeal tribunal or before the Upper Tribunal. That document referred to the claimant being under 65, registered in the Provincial list of the disabled, his working capacity having been accepted as reduced by 75% and (making the best guesses from the two translations, neither of which seems to have taken account of specialised social security and legal language) having no income or an income lower than a specified level. It also referred to Law no 118 of 30 March 1971.

2. The claimant contacted the UK authorities in December 2004 indicating that he wished to claim UK invalidity benefit on the basis of his work here. Eventually, the claim made through the Italian authorities on 12 December 2006 was transmitted to the UK authorities in June 2007. That was properly treated in practical terms as a claim for long-term incapacity benefit. That was proper because there was no doubt that the claimant could not qualify for any kind of UK incapacity benefit under the terms of the UK legislation alone. As is explained in more detail in Commissioner’s decision R(IB) 1/02, entitlement to long-term incapacity benefit follows on 364 days’ entitlement to short-term incapacity benefit in the same period of incapacity for work. There is a contribution test for entitlement to short-term incapacity benefit which requires, among other things, payment or crediting of contributions in the last two complete tax years before the year in which the period of incapacity for work started. Thus here, even if the period of incapacity for work were treated as starting in June 2001, the claimant’s last UK national insurance contributions in 1988/89 were far too far in the past to help him. Thus, on purely UK law, the claimant could not qualify for short-term incapacity benefit and could therefore never move on to long-term incapacity benefit. He could only get anywhere with the assistance of European Union law and, in particular, Council Regulation (EC) No 1408/71 on the co-ordination of social security. For reasons again explained in more detail in R(IB) 1/02, there was nothing in Regulation No 1408/71 that could help any qualification for short-term incapacity benefit, a “sickness benefit” within the structure of the Regulation. Italy, the state of his last employment and his current residence, was the “competent state” for purposes of payment of sickness benefit. Thus, the only practical possibility was that, under Article 40(3)(a) of the Regulation, payment of “cash sickness benefit” or “invalidity benefit” in Italy could count as if it were UK short-term incapacity benefit for the purposes of the 364 days’ qualification for long-term incapacity benefit.

3. The decision given on 25 February 2008 was that the claimant was not entitled to UK incapacity benefit from 1 January 2000 under the UK rules summarised above and had not received sickness benefit or invalidity benefit in Italy. The claimant appealed, saying (understandably) that he had been receiving benefits in Italy since 1 June 2001. The Secretary of State’s written submission to the appeal tribunal sought to explain the position described above, with copious references to the provisions of Regulation No 1408/71, but simply asserted that the Italian Civil Invalidity Benefit could not be accepted as an Italian sickness benefit or the equivalent.

4. There was an oral hearing of the appeal, although the claimant was never expected to attend. A presenting officer for the Secretary of State did attend and produced a copy of Annex IIa to Regulation No 1408/71, in which “special non-contributory benefits” are listed for the purposes of Article 10a. The entry for Italy included:

“pensions and allowances for the civilian disabled or invalids (Laws No 118 of 30 March 1974, No 18 of 11 February 1980 and No 508 of 23 November 1988”

According to the chairman’s record of proceedings, the presenting officer submitted that that showed that the Italian benefit received by the claimant was not a contributory benefit and was therefore not akin to incapacity benefit.

5. The appeal tribunal disallowed the appeal. It accepted what it understood to be the submission for the Secretary of State, saying in the statement of reasons that Annex IIa:

“showed that Italian invalidity benefit is not a contributory benefit and is therefore not a claim for incapacity benefit. The appellant is not helped by Article 10 which deals with the export of benefits because Article [10a] says there is no protection for this benefit in terms of export.”

The statement concluded that there was no evidence to support the claimant’s contention that he had received the appropriate type of benefit from the Italian authorities to allow him to claim incapacity benefit successfully in this country.

The appeal to the Upper Tribunal

6. The claimant now appeals to the Administrative Appeals Chamber of the Upper Tribunal with my permission. It can only be concluded that the appeal tribunal made errors of law that were material to its decision. First, the explanation set out in the previous paragraph, even with the various typing mistakes tidied up, was I am afraid unacceptably garbled. The claimant could not possibly have understood from the statement why it was that the appeal tribunal had decided against him. Although I do not know exactly how the presenting officer put the case to the appeal tribunal, the submission must have been along the lines that because the Italian benefit that the claimant had been awarded was listed in Annex IIa, it had to be regarded as a “special non-contributory benefit” and therefore not a social security benefit in the form of sickness benefit or invalidity benefit, the categories of social security benefit and special non-contributory benefit within Regulation No 1408/71 being mutually exclusive. Those categories are important for the purposes of whether benefits are “exportable”, ie payable to claimants resident in a Member State other than the state making payment. Invalidity benefits are exportable under Article 10 and sickness benefits are exportable under other provisions, but under Article 10a(1) special non-contributory benefits are payable only in the state of residence. However, in the context of the present case, reference to those articles was no more than a red herring, because no question of exportability arose. Then the relevance of Annex IIa was not simply to show that the Italian benefit was not a contributory benefit. Many non-contributory benefits are social security benefits for the purposes of Regulation No 1408/71. The crucial question was whether the benefit was “special”, so that it had necessarily to fall outside the category of social security. The statement of reasons did not get close to setting out even that bare outline of the Secretary of State’s position.

7. Second, if (which I reject below) the listing of the benefit in Annex IIa was conclusive of its status as a special non-contributory benefit, there was a breach of the principles of natural justice and of the right to a fair trial in that the claimant was given no opportunity to seek advice about or to provide additional evidence or argument in response to the new point that had been raised on 9 September 2008. Annex IIa had not been mentioned in the Secretary of State’s written submission to the appeal tribunal or in any other papers produced in advance of the hearing. There was a case to be made in law against giving a conclusive effect to the listing in Annex IIa and the claimant might in addition have been able to come forward with some more evidence clarifying the nature of the benefit he had been awarded. That point is reinforced by the fact that the award translated at pages 44 and 45 referred to Law no 118 of 30 March 1971, whereas the entry in Section J(b) of Annex IIa referred to Law no 118 of 30 March 1974 (the date is the same in the Italian language version). Thus, it was not entirely open and shut that the benefit awarded to the claimant was the same as that listed in Annex IIa (although it now appears from the Secretary of State’s submission dated 3 December 2009 that it was a misprint in Annex IIa).

8. I must therefore go on to decide whether as a matter of law the Italian benefit awarded to the claimant was either a cash sickness benefit or an invalidity benefit for the purposes of Article 40(3)(a). In the submission of 3 December 2009, the representative of the Secretary of State maintained the position that the listing in Annex IIa, once corrected for the clear printing error, had to be regarded as valid and that national courts have no jurisdiction to declare acts of Community institutions invalid. That is true, but it does not meet the point, acknowledged in the submission, that the European Court of Justice (ECJ) has clearly decided in Jauch v Pensionsversicherungsanstalt der Arbeiter (Case C-215/99) [2001] ECR I-1901 that listing of a benefit in Annex IIa is not conclusive of its status as a special non-contributory benefit for the purposes of Regulation No 1408/71, but that it must be asked whether the character of the benefit in question satisfies the conditions of Article 4(2a) as in force at the relevant time, in particular the conditions that the benefit be both non-contributory and special. That position was confirmed in Leclere and Deaconescu v Caisse nationale des prestations familiales (Case C-43/99) [2001] ECR I-4265 and Hosse v Land Salzburg (Case C-286/03) [2006] ECR I-1771, and approved implicitly but clearly in Commission of the European Communities v European Parliament and Council of the European Union, Case C-299/05 [2007] ECR I-8695 by the reference in paragraph 71 of the judgment to "the post-Jauch legal context". A conclusion by a national court that a particular benefit listed in Annex IIa is not actually a special non-contributory benefit is not a finding that Annex IIa is invalid to that extent and is not inhibited by the principles as to jurisdiction relied on by the Secretary of State.

9. In the present case there appears to be no doubt (although ideally a good deal more evidence would have been provided about the structure of the Italian social security system) that the civil invalidity benefit awarded to the claimant with effect from 1 June 2001 was non-contributory. The award translated on pages 44 and 45 made no reference to the satisfaction of any contribution conditions and the Italian contributions recorded on the E205 at page 15 appear to be too few to lead to any entitlement to Italian contributory benefits (confirmed I think by the answers on page 4 of the E204 (page 20)). The references to the benefit being in the nature of assistance (see the award and the email of 7 October 2009 from INPS (pages 110 and 108)) strongly suggest a non-contributory benefit.

10. The question under Article 4(2a), there being also no doubt that the benefit provided supplementary or substitute cover against a risk covered by a branch of social security mentioned in Article 4(1) (invalidity or sickness), is therefore whether the benefit is special. It does not matter whether or not the benefit is regarded as having been properly listed in Annex IIa, because that is only a requirement when Article 10a is being applied. On the question of whether a benefit is special, without going into all the case-law, the principle accepted is that the purpose of the benefit is decisive and must be:

“either [to] replace or supplement a social security benefit and be by its nature social assistance justified on economic and social grounds and fixed by legislation setting objective criteria.”

I also adopt the approach of the Advocate-General in paragraph 85 of her Opinion in Case C-299/05:

"85. Contrary to the view taken by the Council and the United Kingdom Government, the Commission correctly observes that a benefit - irrespective of the scope of discretion involved - only displays social assistance features if its grant depends on financial need. Otherwise, social assistance cannot be distinguished from other social security benefits. Typically, the latter provide cover for specific needs arising by way of other personal circumstances without taking claimants' income into account."

11. In the present case, it is clear from the award, confirmed by the INPS email of 7 October 2009 (although the English translation again seems not to be geared to the specialist legal language), that it was a condition of entitlement that the claimant had either no or a modest income and the amount of the benefit appears to be designed to guarantee a minimum income. Those features, combined with the identification of the benefit as in the nature of assistance, demonstrate that the benefit has sufficient features of social assistance to come within the category of special non-contributory benefit under Article 4(2a).

12. On the other hand, there is also a line of ECJ authority that, especially as Article 4(2a) was before its amendment with effect from 5 May 2005, one should start with the question of whether a particular benefit is a social security benefit as defined in Article 4(1), so that it is only if the answer is no that it can be considered whether it is a special non-contributory benefit under Article 4(2a). As recently as September 2008 in Petersen v Arbeitsmarktservice Niederösterreich (Case C-228/07) [2008] ECR I-0000, this formula, as used in essence over many years, was repeated in paragraph 19 of the judgment (omitting case references):

“According to settled case-law, a benefit may be regarded as a social security benefit in so far as it is granted, without any individual and discretionary assessment of personal needs, on the basis of a legally defined position and relates to one of the risks expressly listed in Article 4(1) of Regulation No 1408/71.”

In that formula “personal needs” means “financial needs” (paragraph 69 of the Opinion of the Advocate General in Hosse and paragraph 32 of the judgment in Kersbergen-Lap and Dams-Schipper v Raad van Bestuur van het Uitvoeringsinstituut Werknemersverzekeringen (Case C-154/05) [2006] ECR I-6249). The existence of that line of authority creates a difficulty of interpretation. A benefit relating to an Article 4(1) risk may well be means-tested, so as to display social assistance features (suggesting falling within the meaning of special non-contributory benefit), yet have statutorily defined rules that do not involve any discretionary assessment of financial need (suggesting falling within the meaning of social security benefit). It is possible that that difficulty may be resolved when the answers are eventually given by the ECJ in the recent reference in Bartlett, Gonzalez Ramos and Taylor v Secretary of State for Work and Pensions (Case C-537/09). However, I do not think it right to defer the present case when there is by no means a guarantee that the answers in that case will be of any help here. I should express a conclusion.

13. The repeated use of the formula set out in the previous paragraph has been made in cases where any difference between social assistance features in the form of means-testing or a guarantee of a minimum subsistence income or otherwise and individual and discretionary assessments of financial need was not relevant. In cases where the difference might have been relevant, such as Skalka v Sozialversicherungsanstalt der gewerblichen Wirtschaft (Case C-160/02) [2004] ECR I-5613, Kersbergen-Lap and, in particular, Perez Naranjo v Caisse régionale d'assurance maladie (CRAM) Nord-Picardie (Case C-265/05) [2007] ECR I-347, the formula has not been invoked and the Court has started by examining the nature of the benefit in question by reference to the criteria in Article 4(2a). In my judgment, that approach must therefore in the present state of the authorities be given precedence. I note that that accords with the approach of Judge White in his very recent decision in the Upper Tribunal in EC v Secretary of State for Work and Pensions (SPC) [2010] UKUT 95 (AAC), where he followed the decisions just mentioned in deciding that British state pension credit is a special non-contributory benefit.

14. Accordingly, the reasoning in paragraph 10 above has to prevail. The claimant’s assistenza quale Invalido Parziale, categoria INVCIV (civil invalidity benefit) is a special non-contributory benefit and therefore cannot be a social security benefit in the form either of an invalidity benefit or a sickness benefit. The receipt of that benefit then cannot count as receipt of a cash sickness benefit or invalidity benefit under Article 40(3)(a) that would have to be accepted for the purposes of the UK test of 364 days’ entitlement to short-term incapacity benefit to qualify for long-term incapacity benefit. Thus, the only conclusion open in law to the appeal tribunal of 9 September 2008 was to confirm the decision that the claimant was not entitled to incapacity benefit and to disallow his appeal.

15. In those circumstances, it would be empty exercise to set aside the appeal tribunal’s decision, because of the extent of the errors of law involved in its decision, and substitute a decision having exactly the same practical effect. Accordingly, I exercise the power in section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007 not to set the appeal tribunal’s decision aside even though it involved errors of law. The claimant’s appeal to the Upper Tribunal is disallowed.

(Signed on original): J Mesher

Judge of the Upper Tribunal

Date: 14 April 2010