This decision has been reproduced in plain text only. If you wish to submit a copy of a decision as part of an appeal, please download a Word copy from the link below.
(Secretary of State for Work and Pensions v Doyle  EWCA Civ 466)
CA (Waller and Sedley LJJ and Sir Christopher Staughton)
Income - calculation of exempt earnings for entitlement to incapacity benefit - whether Computation of Earnings Regulations apply
The claimant was in receipt of incapacity benefit and had an income from student lodgers. Regulation 16 of the Social Security (Incapacity for Work) (General) Regulations 1995 provided that a claimant should be treated as capable of work, and therefore not entitled to incapacity benefit, on each day of every week during which he does any work, subject to exemptions set out in regulation 17. The claimant appealed to the Commissioner against the decision of an appeal tribunal that her earnings from self-employment exceeded the limit for exempt work set out in regulation 17. The Commissioner calculated the claimant’s earnings on a week-by-week basis rather than averaged over a one-year (or shorter) period as would have been required by the Social Security Benefit (Computation of Earnings) Regulations 1996. He held that the Computation Regulations did not govern the calculation of the claimant’s earnings, since those regulations were for the calculation of earnings for the purposes of Parts II to V of the Social Security Contributions and Benefits Act 1992 and regulations made under those parts of that Act and it was Part XIIA of the 1992 Act that provided for regulations to be made concerning capacity for work and under which the Incapacity for Work Regulations were made. The Secretary of State appealed to the Court of Appeal, arguing that the Computation Regulations applied.
Held, allowing the appeal, that:
It is Part II of the 1992 Act which by section 30A sets out incapacity for work as the essential ground of entitlement to incapacity benefit, while Part XIIA simply provides for the making of provision ancillary to Part II, and so the Computation Regulations apply to calculations for the purpose of that entitlement (paragraph 15).
DECISION OF THE COURT OF APEAL
Mr Martin Chamberlain (instructed by the Solicitor, Department for Work and Pensions) appeared on behalf of the appellant.
Mr Desmond Rutledge (instructed by Pierce Glynn) appeared on behalf of the respondent.
LORD JUSTICE SEDLEY:
1. The purpose of this appeal, brought by the Secretary of State, is to secure a ruling on the correct method of computing earnings when deciding entitlement to incapacity benefit (IB). The Secretary of State contends that the method is dictated by the Social Security Benefit (Computation of Earnings) Regulations 1996 (SI 1996/2745) (the Computation Regulations).
2. On Mrs Doyle’s appeal against the decision of an appeal tribunal that her earnings from self-employment were such that she was legally capable of work, the Commissioner (Mr R J C Angus) held that neither the Computation Regulations nor any other statutory regime governed the calculation. The form his decision took was that Mrs Doyle’s appeal succeeded to the extent that his own decision was to be substituted for that of the tribunal. Its substance was that she was disentitled to IB for eight weeks of 2002, with the implication that she was entitled to it for the remainder of the period from February to December 2002. On the footing that it was therefore the Secretary of State who had lost, the Commissioner granted him permission to appeal to this court.
3. A person who, like Mrs Doyle, is otherwise entitled to IB becomes disqualified if she is capable of work. The Social Security (Incapacity for Work) Act 1994 (the 1994 Act)
(a) inserted into Part II of the Social Security Contributions and Benefits Act 1992 (the 1992 Act) sections 30A to 30E, which make the gateway provision that only a person who is incapable of work is entitled to IB, and
(b) inserted into the same Act sections 171 A–G, forming a new Part XIIA, which governs the determination of incapacity for work and empowers the Secretary of State to make regulations for the purpose.
4. The regulations made pursuant to this power – the Social Security (Incapacity for Work) (General) Regulations 1995 (SI 1995/311) (the IFW Regs) – set out detailed provisions which include an exemption of earnings up to a fixed amount from work done “on the advice of a doctor”. The Secretary of State had supported Mrs Doyle’s appeal to the Commissioner against the tribunal’s finding that her doctor’s subsequent approval did not amount to such advice. The Commissioner accepted that it did.
5. This left the question of Mrs Doyle’s earnings. The weekly limit beyond which IB was lost was £60.50 at the material time; it is now £81.00. It is common ground that the limit is not a penalty for working while drawing IB: it is designed to encourage people on IB, acting on medical advice, to return to the world of work. It follows that claimants need so far as practicable to know in any working week whether their earnings are going to render them ineligible for IB.
6. Mrs Doyle had an income from student lodgers for whom she shopped, cooked and cleaned. The tribunal had made only a perfunctory finding about it because they considered that the claim fell at the “doctor’s advice” hurdle. But it was an adverse finding, and the Commissioner had granted Mrs Doyle leave to appeal against it on the ground of inadequate reasons, a ground which again the Secretary of State supported and the Commissioner upheld. Accordingly, having decided that there was no obstacle in relation to medical advice, the Commissioner went on to make his own computation of Mrs Doyle’s earnings. He concluded, first, that the Computation Regulations, which required an average to be taken, did not apply; and secondly, that Mrs Doyle’s net weekly earnings had been such that she was to be treated as capable of work only in the eight weeks of 2002 in which her net earnings had exceeded the limit set by regulation 17 of the IFW Regs.
7. We do not know what entitlement, if any, the Secretary of State’s computation would have produced, but the Commissioner’s calculation was permissible only if he was at liberty to compute Mrs Doyle’s net earnings week by week. The Secretary of State’s case is that he was not, because the calculation is governed by the Computation Regulations, which by regulation 11 require the net weekly earnings of self-employed claimants to be averaged over a one-year period or such shorter period as circumstances may dictate. There is no need for this court to embark upon the regime in any more detail. What matters is whether it applied.
8. The Commissioner put his reasons for holding that it did not apply in a single closely-reasoned paragraph:
“12. I do not agree that the Computations of Earnings Regulations are relevant although, in fairness to the Secretary of State’s representative, I have to admit that it took me longer to arrive at that conclusion than it takes to state it or explain it. Regulation 3 of the Computation Regulations provides that those regulations are for the calculation of earnings for the purposes of Parts II to V of the Social Security Contributions and Benefits Act and the regulations made under those parts of that Act but the Incapacity for Work (General) Regulations are made under and for the purposes of Part XIIA of the 1992 Act. The preamble to the Computation Regulations invokes none of the regulation making powers enacted in Part XIIA of the Act. Moreover the averaging of earnings as required by the Computation Regulations is inconsistent with the purpose of regulation 17(2) of the Incapacity for Work (General) Regulations which is to enact a number of hours of work and a level of actual earnings which if exceeded in any particular week excludes the work done by the claimant in that week from provisos (a) and (b) to regulation 16(1) with the result that in that week the claimant, by virtue of having worked, is not incapable of work even although the work is medically approved. As was explained in CIB/4090/1999 the question of whether or not a claimant satisfies the regulation 17(2)(a) and (b) conditions for exemption from the regulation 16(1) rule that a claimant is not incapable of work in any week in which he does not work must be decided on the basis of the amount earned in each week in question and not by averaging his earnings over a period within which that week falls. It seems to me that averaging as required by the Computation Regulations could produce the result that a claimant whose earnings from otherwise exempt work exceeded the regulation 17(2)(a) limit in several weeks of the year would still be entitled to Benefit in those weeks while another claimant whose earnings in a few untypical weeks substantially exceeded the limit would be disqualified throughout the year. There are, therefore, in my view no enacted rules for the calculation of earnings for the purposes of regulation 17(2)(a) of the Incapacity for Work (General) Regulations. CIB/502/2000 was concerned with a claimant’s entitlement to an increase in Incapacity Benefit in respect of his dependant spouse which is legislated for in Part IV of the 1992 Act.”
9. The contrary case put by Martin Chamberlain on behalf of the Secretary of State not only accepts but takes its stand on the consequences which drove the Commissioner in the opposite direction. It is precisely because someone who is earning steadily above the limit would be able, on the Commissioner’s approach, to draw IB in any week in which his earnings happened to fall below it that averaging, he argues, is a proper solution. But it is also inescapable that, as the Commissioner says, averaging can give a claimant a windfall of IB for weeks when his earnings are above the limit, or deprive him altogether of benefit for weeks in which he earns nothing. Neither system is in my judgment so odd or unreasonable that the court needs to strain against it. Each has a measure of fairness in its favour and a measure of anomaly against it. The single question is whether, as a matter of statutory construction, the Computation Regulations determine the choice between them.
10. As to this, Mr Chamberlain’s case is that the Computation Regulations are to be treated as made for the purposes of the IB regime notwithstanding that their rubric does not invoke Part XIIA of the 1992 Act, the part which actually provides for regulations to be made concerning the capacity of IB claimants for work and under which the IFW Regs are made. What he founds upon is the fact that regulation 3 of the Computation Regulations provides (with emphasis added):
“For the purposes of Parts II to V ... of the  Act ... the earnings of a claimant shall be calculated by determining in accordance with these Regulations the weekly amount of his earnings.”
11. It is Part II of the 1992 Act, as amended by the 1994 Act, which by section 30A sets out the essential ground of entitlement to IB – incapacity for work. Part XIIA simply makes, or rather provides for the making of, provision ancillary to Part II. It follows, submits Mr Chamberlain, that regulation 3 answers the question: the purpose of determining whether a claimant is entitled to IB is a purpose prescribed by Part II, and regulation 3 says that that purpose is to be carried out, where it involves computation, in accordance with the Computation Regulations.
12. This seems to me Mr Chamberlain’s single point of anchorage. His argument from anomaly is, as I have said, no stronger than the opposing argument from equal and opposite anomalies. His submission that the Secretary of State cannot have left a void of the kind that the Commissioner took himself to be filling assumes the very thing that it remains to prove. His submission that Mr Commissioner Levenson in CIB/4090/1999 was following, not departing from, the Computation Regulations in adopting a weekly calculation may well be right but does not advance his case. Lastly, recognising an element of desperation in his fallback argument that even if the Computation Regulations do not on their face apply, the decision in Inco Europe Ltd v First Choice Distribution  1 WLR 586, 592 requires or enables the court to treat them as if they did apply, Mr Chamberlain has wisely abandoned it.
13. Desmond Rutledge, coming into the case at a late stage for Mrs Doyle, has been handicapped by uncertainty as to whether she will do better by averaging than by the week. The same is probably true of a good many IB claimants. It has meant that Mr Rutledge’s argument has been limited, not unhelpfully, to pointing out some of the potential anomalies which attend the Secretary of State’s interpretation of the scheme. He has also drawn attention to the arguably onerous detail about income and outgoings which the Department demands in order to compute average earnings from self-employment.
14. None of these things, however, affects the bald question of law which we have to answer. The need for a reasonable degree of certainty, on which both parties agree, may affect it. But on the claimant’s side there is the inescapable fact that, at least for the self-employed, even a week-by-week calculation may be fraught with uncertainties, for example about the apportionment of overheads. And on the Secretary of State’s side there is the uncomfortable fact that regulation 13(11) of his own Computation Regulations permits him, in the interests of accuracy, to assess any chosen item on a different periodic basis from that prescribed by regulation 11. The reality is that certainty is going to be elusive on either interpretation.
15. In this situation there is, in my judgment, nothing to controvert Mr Chamberlain’s short submission that the entitlement to IB is found in Part II of the Social Security Contributions and Benefits Act 1992, and that regulation 3 of the Computation Regulations requires any calculation of earnings for the purposes of that entitlement to be calculated in accordance with those regulations, which expressly require averaging. The reasons given by Mr Commissioner Angus for taking a contrary view mistakenly, in my respectful judgment, relate the Computation Regulations to the IFW Regs: the latter are, as he says, made largely for the purposes of Part X11A of the 1992 Act, but the express purpose of the former is to give effect not to them but to Parts II to V of the Act. Once this point is reached, neither the policy considerations nor the anomalies which influenced the Commissioner (though I do not happen to share all his misgivings about them) have any bearing.
16. I would accordingly allow this appeal and remit Mrs Doyle’s appeal from the appeal tribunal to the Commissioner to be determined in accordance with the judgment of this court.
SIR CHRISTOPHER STAUGHTON:
17. I agree.
LORD JUSTICE WALLER:
18. I also agree.
Order: Appeal allowed. The appeal be remitted to the Commissioner for determination. No order for costs. Order for a detailed assessment of the respondent’s Community Legal Services costs given.
Order does not form part of the approved judgment