CG/645/2008

DECISION OF THE SOCIAL SECURITY COMMISSIONER
  
The decision of the Social Security Commissioner

1.		This appeal succeeds.  The decision of the Birkenhead appeal tribunal dated 30 August 2007 under file reference 062/07/00624 is erroneous in point of law.  I therefore set the tribunal’s decision aside.  I am not in a position as Social Security Commissioner to substitute my own decision on the merits, as there are still unresolved factual issues.  I must therefore send the case back for rehearing before a fresh tribunal.  The new tribunal should have regard to my directions in paragraph 71 below.  There are also directions there for the claimant, the Secretary of State and the Tribunals Service.

2.		I must also emphasise at the outset that the fact that this appeal to the Commissioner has succeeded should not be taken as any indication as to the outcome of the rehearing by the new tribunal.  The new tribunal may end up coming to the same decision as the previous tribunal, namely to disallow the claimant’s appeal.  Alternatively, the new tribunal may take a different view to the first tribunal and allow the appeal.  It is for the new tribunal to decide which option applies, depending on the view it takes of the applicable law and the relevant facts and providing it makes proper findings of fact and gives adequate reasons for its decision.  I express no view myself either way.

The issues in this appeal

3.	This is by any reckoning an unusual case.  At one level the issue in the appeal is straightforward: is the claimant liable to repay an overpayment of carer’s allowance because she had failed to disclose that her earnings from her part-time employment were above the material weekly limits at all relevant times?

4.	On another level, the central issue in the appeal is far more complex and goes back a stage: what actually were her “earnings” from that employment?  The reason for this complexity is because of the particular circumstances in which the claimant worked.  The claimant’s case – and her account was broadly accepted by the tribunal – was that although she received a weekly sum in excess of the carer’s allowance limit from her employer, she paid 50% of that sum to a fellow worker who was “off the books”.  The tribunal, however, concluded that she was under no obligation to do so and that the full amount represented her earnings for the purposes of the carer’s allowance weekly earnings limit.

The background to this appeal 

5.	The claimant was awarded what was then invalid carer’s allowance (ICA), now carer’s allowance, with effect from 27 September 1999. In August 2002 the claimant was sent a carer’s allowance review form.  This asked whether any of certain listed changes had happened in the 2 years preceding the date on the letter (3 August 2002).  These changes included whether “you started work as an employed earner or self-employed person”.  Moreover “if you have already told us that you are working, you must tell us if your earnings have increased…”.  The claimant completed and returned the form, reporting that “none of the changes listed have happened” (docs 6-7).
6.	In October 2002 the relevant Department for Work and Pensions (DWP) office received notification from the office dealing with National Insurance records that the claimant had paid some primary Class 1 contributions – and so had been in paid employment (docs 10-12).  These printouts are known as RD23s.  Their date of receipt was 23 October 2002.

7.	In June 2004 – and there is no explanation on file for the inordinate delay – the DWP then requested copies of the income tax end of year summaries (P14s).  The 1999/2000 P14 (doc 14) suggested that the claimant had been employed by the Payroll Services division of the local authority and paid a total of £2,984.80 (gross) in that tax year.  The 2001/02 P14 (doc 17) showed gross earnings of £5,642 for that tax year.  

8.	I stress here that the P14 is at best presumptive evidence of the identity of the employer.  It is certainly evidence of payment of wages subject to the PAYE system.  But it cannot be conclusive evidence as to the true identity of the employer – that is a matter of contract law, not revenue law.

9.	In October 2004 the claimant returned a further review form stating that she was working as a receptionist for a training company and had started that work in June 2003 and had first been paid in July 2003 (docs 20-23).  This statement was confirmed by her employer (docs 24-29).

10.	Shortly afterwards the DWP then went back to the local authority for further details of the claimant’s employment.  The council confirmed that the claimant had worked from 18 October 1999 to 26 July 2002 and that at the time of leaving her gross weekly wage was £109.20 less tax and national insurance of £4.12 (docs 30-36).  In the 2002/03 tax year the weekly earnings limit for carer’s allowance was £75.

11.	In February 2005 the DWP then asked for further details of the claimant’s earnings.  The local authority payroll department confirmed that the weekly earnings had exceeded the annual earnings limits from 1999 (docs 37-42), and enclosed a print-out of the payroll extract from October 1999 through to August 2002 (docs 43-67).  This describes the claimant’s “basic daily” amount in July 2002 as £109.20, but presumably this must actually mean “basic weekly”.

12.	In September 2005 the training company confirmed that the claimant’s earnings since starting with them in July 2003 had exceeded the relevant weekly limits (docs 68-74).

The Secretary of State’s decisions

13.		Eventually, on 13 January 2006 – over three years after the DWP had first been informed that the claimant had been in employment – a decision maker made a supersession decision disallowing benefit (doc 86).  It appears – but is by no means clear – that it purports to disallow ICA/carer’s allowance from 01/11/1999 to 11/08/2002 and continuously from 04/08/2003 because the claimant’s earnings from the two jobs had exceeded the relevant weekly limits at all times.  I call this the disentitlement decision.  

14.	It is by no means clear how this disentitlement decision was communicated to the claimant.  There is no copy of any letter on file.  However, 	it was evidently communicated in some form, as there is a telephone note on file of a conversation with the claimant dated 22 February 2006 (doc 87).

15.	On 3 August 2006 a further decision was made.  This decision was to the effect that the claimant had been overpaid £14,710.30 in carer’s allowance for the period from 01/11/1999 to 14/08/2005.  It was further decided that the overpayment was recoverable on the basis of the claimant’s failure to disclose her part-time earnings.  I call this the first overpayment decision.

16.	The claimant sought the advice of a welfare rights representative and lodged an appeal against the first overpayment decision (doc 2), denying any liability for any overpayment and asserting that she was entitled to the benefit throughout the period in question.

17.	Following the appeal, a different decision-maker revisited the first overpayment decision.  She issued a new decision on 24 October 2006 (doc 104), revising the overpayment decision of 3 August 2006.  I call this the second overpayment decision.  The new decision was that there had been an overpayment of £9,018.50 for the period from 01/11/1999 to 11/08/2002, which was recoverable from the claimant.  However, the decision maker also ruled that a further overpayment of £5,748.55 for the period from 04/08/2003 to 14/08/2005 was not recoverable from the claimant.  This was because “the material fact was known on 3.10.02” (this was a misprint for 23.10.02).

18.	In fact the material fact known in October 2002 was that the claimant had been in employment for a period up until 2002.  By definition the fact that the claimant started another job in July 2003 could not have been known at that stage. But that issue was not before the tribunal.

19.	The claimant then appealed against the second overpayment decision (doc 1), stating again that there had been no overpayment and that any overpayment was an “official overpayment” and not recoverable from her.

The claimant’s appeal to the tribunal

20.	The claimant’s appeal was heard by a legally qualified panel member on 30 August 2007 at Birkenhead.  The claimant attended with her representative.  The DWP also sent a presenting officer.  The claimant was also accompanied by a witness, Mr L, who had been her manager between 1999 and 2002.  The claimant submitted a written statement by Mr L dated 25 August 2007, a few days before the hearing.  Obviously the presenting officer had not seen this before the day of the hearing, but there was no request from him for an adjournment.

21.	Mr L’s written statement was to the effect that between 1999 and 2002 he had been chief executive of a training project supported by various public funds and financially managed by the local authority.  He declared that “during this period I employed [the claimant] and [her friend] on a job share basis as catering staff for the benefit of the trainees.” He added that under the rules governing public funding he could not employ either woman as a caterer.  He had therefore registered the claimant as a trainee to access the funding, and paid her the total amount for the job share on the basis that she had then paid her friend 50% of the earnings.	

22.	He added that he also recalled a conversation with the claimant in which “she expressed concern as to her earning capacity which was approximately £70 and all financial arrangements at all times took this into account”.  I note that the tribunal made no findings on this point.	

23.	The chairman kept a clear and full Record of Proceedings (docs 126-129). This reported Mr L’s evidence, which was to the same effect as his written statement.  He added the following information: (i) there was no written contract of employment; (ii) the council was “custodian of the money”; (iii) he had to demonstrate an “outcome” for trainees, which he could do for the claimant but not her friend; (iv) the friend had no staff number; (v) the claimant’s salary was subject to tax and National Insurance. The claimant added (not surprisingly) that she paid her friend her 50% share in cash and had no [written] proof of that.

24.	The tribunal’s decision was to disallow the appeal and confirm the Secretary of State’s decision of 24 October 2006 (the second overpayment decision).  So the tribunal agreed that the overpayment of £9,018.50 was recoverable.  The tribunal added by way of short explanation on the decision notice: “The earnings in question are paid to the appellant alone.  However, she agreed to pay half her earnings to a friend who worked with her.  Her decision did not change the nature or the amount of the earnings paid to the appellant herself by [the local authority].”

The tribunal’s reasoning

25.	The chairman later issued a Statement of Reasons expanding on the decision notice.  In summary, the chairman noted that earnings included any remuneration or profit derived from an employment, citing Vandyk v Minister of Pensions and National Insurance [1955] 1 QB 29.  In short, the chairman concluded that the claimant’s earnings had exceeded the relevant weekly limits at all times, that the claimant had failed to disclose this fact and that the resulting overpayment was recoverable.

26.	The central passage in the tribunal’s reasoning is paragraph 7 of its reasons:

“In the present case there is no contract of service between the employer and [the friend].  Mr L (as chief executive of the [training project] for which [the claimant] worked) did not, by his own admission, have the ‘means or mode’ of employing both [the claimant and her friend] as catering staff.  The only contract of service is with [the claimant].  [The friend] was paid by an informal arrangement with [the claimant] only.  There were no legal obligations or rights as between [the friend] and Mr L.  The earnings paid to [the claimant] belonged to her, and she had the right to pay them out as she wished.”

The grounds of appeal and submissions to the Commissioner

27.	The claimant’s representative sets out various grounds of appeal in correspondence.  They can be summarised as follows (docs 136-137 and 141).  First, the tribunal failed to make proper findings of fact and provide adequate reasons – in particular, there was clear evidence that Mr L employed both the claimant and her friend, but the tribunal found that only the claimant had a contract of employment with Mr L.  Second, the claimant was the innocent victim of a fraud perpetrated by her employer.  I merely add as regards the second ground that that may or may not have been the case, but it has no direct impact on either the fact of any overpayment or its recoverability in law.

28.	The District Chairman who heard the appeal refused permission to appeal to the Social Security Commissioner.  Mr Commissioner Lloyd-Davies granted leave to appeal on the basis that it was at least arguable that half the moneys that the claimant received were impressed with a trust or obligation in favour of her friend and co-worker.

29.	The Secretary of State’s representative now involved in the appeal argues that the tribunal decision is not wrong in law and that the appeal to the Commissioner should be dismissed.  The Secretary of State’s representative raises various doubts about the written and oral evidence of Mr L, suggesting that there are various inconsistencies (or rather a degree of implausibility) in that evidence.  He contends that Mr L’s evidence “is not factually accurate”.  In his submission, the claimant was employed by the local authority and received an income from that employed earner’s employment that took her over the relevant weekly limit and that is the end of the matter. 

30.	I am not persuaded by the arguments of the Secretary of State’s representative, who is really seeking to undermine the credibility of Mr L.  However, the tribunal largely accepted the broad thrust (if not all) of Mr L’s evidence – namely, that there was some sort of a jobshare arrangement in place.  The Secretary of State’s representative also fails to engage fully with the point made by Mr Commissioner Lloyd-Davies in granting leave.

Why the tribunal’s decision is wrong in law

31.	In my judgment the tribunal’s decision is wrong in law in at least two respects.  First, there are inadequate findings of fact.  In paragraph 1 of the Statement of Reasons it is stated that the claimant worked for the local authority between 1999 and 2002.  In paragraph 2 Mr L’s evidence is recorded to the effect that he (not the local authority) employed the claimant and her friend.  In paragraph 7 the implication is that Mr L was the claimant’s employer.

32.	Assuming the claimant was indeed employed, there are really only two possibilities.  One is that local authority employed her, and that Mr L was simply the agent and project manager for the local authority.  There was no evidence to support this latter point.  The second is that the claimant was employed by the training project of which Mr L was chief executive, and the local authority was simply the conduit for payment.  This was Mr L’s evidence.  The tribunal’s decision does not make it clear which it finds to be the case.

33.	Secondly, there are inadequate reasons.  A key part of the tribunal’s decision concerns its treatment of the position of the claimant’s friend and co-worker.  Mr L’s clear evidence, in writing and in person, was that he (as chief executive) employed both the claimant and her friend on a jobshare basis.  He conceded there were no written contracts of employment.  The tribunal ruled that the only contract of employment was between the claimant and Mr L, and that there was no legal relationship between the friend and Mr L.  As the claimant’s representative rightly points out, a contract of employment itself need not be in writing (although employees have statutory rights to receive written statements of their terms of employment).  It is unclear how the tribunal reached the conclusion that it did about the friend’s lack of any legal status vis-à-vis Mr L and the training project.

34.	I therefore conclude that the tribunal’s decision is erroneous in point of law.  I must therefore set that decision aside (Social Security Act 1998, s.14(8)).  I am not in a position on the evidence on file to determine the matter myself.  I accordingly have no option but to send the matter back for rehearing before a differently constituted appeal tribunal (Social Security Act 1998, s.14(8)(b)).  The new tribunal must undertake a fresh hearing of the claimant’s appeal, having regard to the guidance and the directions that follow.  The unusual and complex nature of this case means that this guidance and these directions regrettably require some detailed explanation.

The question of jurisdiction

35.	The first issue that arises is one of jurisdiction.  The initial disentitlement decision was taken in January 2006.  It is by no means clear that any appeal was lodged against that decision at the time – doubtless because the claimant was at that stage unaware of the full consequences of that decision.  Formally, the tribunal regarded itself as dealing with an appeal against the second overpayment decision – yet in reality its focus was almost exclusively on the issue of entitlement and whether there had been an overpayment, not on whether that overpayment was recoverable.  

36.	In fact the only mention of the recoverability of the overpayment in the tribunal’s Statement of Reasons was the single sentence that “The overpayment is recoverable as the appellant failed to disclose her increased earnings”.  This in itself amounts to a further error of law, as it exhibits a failure to find sufficient facts and give adequate reasons as regards the alleged failure to disclose.

37.	The jurisdictional problem is more apparent than real.  It is plain beyond any doubt from the two letters of appeal submitted on behalf of the claimant that she was contesting both the disentitlement decision and the overpayment decisions(s).  In any event a tribunal dealing with the recoverability aspect can examine the facts relating to the alleged overpayment itself (see e.g. the decisions of Commissioner Mesher in CA/2650/2006, paragraphs 16-17, and CIB/2762/2007, paragraph 22).

The contractual arrangements under which the claimant was employed

38.	The second issue that arises goes to the merits of the dispute and in particular the true nature of the arrangements between Mr L, the claimant and her friend.  The tribunal needs to get to the bottom of this by finding the relevant facts and applying the appropriate legal principles.  

39.	I suggested above that the tribunal was faced with a binary choice – the claimant was employed either by the training project or by the local authority – and had failed to make it clear which it had decided was the case.  The position may in fact be more complex than that.  In finding its facts the new tribunal must be careful to distinguish between the legal relationship between employer and employee and the funding arrangements between the training project and the local authority. The new tribunal should consider at least the following four possibilities.  There may be others, but I hope not.

Option 1: the local authority employed the claimant alone

40.	Option 1 is that the local authority employed the claimant alone and that Mr L was simply “the middle man”.  At present the best evidence to support this option is that the local authority’s name appears on the payroll as the employer.  But, as indicated above, this is indicative rather than conclusive.  The difficulty with this option is that it is in conflict with Mr L’s evidence that he (or rather the training project) was the employer and that the local authority were simply a conduit for payment.  Moreover, local authorities tend to have proper practices in place to ensure that their employees are given written statements of their contractual terms and conditions, but there is no evidence that this happened.

Option 2: the training project employed the claimant alone

41.	Another possibility (which the tribunal seems to have accepted) is that the training project was actually the claimant’s employer and that payment was simply channelled through the local authority’s payroll section.  This is consistent with Mr L’s evidence.  If the tribunal decide that Mr L or his training project was the claimant’s employer, it must then consider whether the training project employed only the claimant (Option 2) or whether the project did indeed employ both the claimant and her friend on a jobshare basis (Option 3).

42.	There are two ways in which the tribunal might arrive at the conclusion that Option 2 applies.  The tribunal might decide that there was some sort of informal jobsharing arrangement in place, but that for some reason (which it should explain) there was no contract of employment between the training project and the claimant’s friend.  In reaching a decision on that point, the tribunal must be careful to make the distinction between the employer/employee relationship and the training project/local authority funding arrangement.  It must also bear in mind that a contract of employment need not be in writing.  

43.	There is an alternative route to deciding that Option 2 is correct.  This appears to be the argument that is now advanced by the Secretary of State’s representative, namely that the account of the jobshare is itself inherently implausible and there was never any such arrangement.   If that is the case, then the whole story has been manufactured in order to assist the claimant’s case.  The new tribunal, of course, is not bound by any findings of the old tribunal. It will therefore have to form its own view on the credibility of the evidence from the claimant and from Mr L.  It will doubtless bear in mind that Mr L was effectively giving evidence against his own interests, and it is hard to see why he should do that unless he was indeed giving an accurate and truthful account.

44.	The claimant’s friend was not at the hearing.  According to the claimant’s representative, the friend had moved away from the area and could not be traced.  It may be, however, that the Secretary of State may be able to locate her before the next hearing and either take a statement from her or ask her to give evidence herself at the rehearing.

Option 3: the training project employed the claimant and her friend as a jobshare

45.	Alternatively, the tribunal may conclude that Option 3 applies and that both the claimant and her friend were indeed employed by the training project on a jobshare basis.  The mere fact that only the claimant was paid through the local authority payroll does not of itself negate such a conclusion.  If this is the conclusion, the tribunal will need to satisfy itself that the terms of the contract were sufficiently certain.  A range of matters will need to be explored.  What was the hourly rate? How many hours was each supposed to work?  Did they work together or at different times?  What happened if one was sick or on holiday?  Were they both employed over the same period?  What happened to the moneys paid once the claimant started receiving tax credit in July 2002 (see doc 67)? 

46.	There is, of course, an implied common law contractual duty on the employer to pay wages to an employee.  If a jobshare is to be found, what was the nature of the contract as between the training project and the claimant and also as between the training project and the friend?  Was the liability sufficiently certain in amount?  What if the friend had not received her share from the claimant?  Would she have had any redress against the training project?  There may, of course, have been an implied term in the oral contract of employment between Mr L and the claimant that she would pay 50% of all moneys she received direct to her friend.  So one possible answer to the last question is that the friend might in principle have had a claim for unpaid wages against the employer, who would in turn have a separate claim in contract against the claimant for breach of the implied term that she would pay over half of the moneys received to the friend.

47.	If the tribunal concludes that the jobshare model applied, and that this was disguised by designating the claimant as a trainee, a further question arises.  Was such a jobshare contract arrangement illegal and unenforceable, given the funding arrangements?  The usual problem with illegal contracts is that both the employer and the employee are seeking to defraud the tax authorities, and the question then is whether either party can sue on the contract.  This is not the case here.  There is no suggestion that the arrangement was set up to perpetrate a fraud on the DWP or HMRC, not least as the claimant paid income tax and National Insurance contributions on the pay.  At worst she may arguably have been paying too much by way of tax and contributions and her friend (possibly) not paying enough.  But it might also have been the case that in fact both of them would have been below the relevant thresholds for liability for tax and national insurance.

48.	If a jobshare is found to be the true construction, it is hard to see how that the contract of employment itself could be found to be illegal and void.  It was a perfectly legal arrangement in itself (the employment of catering staff).  At worst there might be an element of possible collateral illegality in terms of the funding arrangements between the training project and the local authority.  But that is an issue between those two agencies and does not directly involve the claimant (and her friend) – by analogy with e.g. S and U Stores Ltd v Lee [1969] 1 W.L.R. 626.

Option 4: the claimant was an independent contractor and so self-employed

49.	Option 4 is one that has not been canvassed in this case so far.  The tribunal should remember that it must look to the realities of the matter and not the labels attached by the parties.  The fourth possibility is that Mr L engaged the claimant as an independent self-employed contractor to provide catering services for a weekly fee.  If so, the claimant was self-employed and she would be at perfect liberty to sub-contract some of that work to her friend.  In that event her earnings would have to be assessed on a self-employed basis and so with more generous provision for the expenses that she incurred.

50.	As indicated, the labels used by the parties cannot be conclusive.  So the mere fact that Mr L regarded himself as employing the claimant as an employee (and that the claimant saw it that way) does not determine the matter, nor does the deduction of tax and contributions through the payroll.  The underlying realities must be considered.  However, the tribunal might well conclude that the degree of control and direction exercised by the training provider over the claimant and her friend were inconsistent with the claimant having self-employed status.

What were the claimant’s earnings?

51.	The third issue for the tribunal is to determine, once it has resolved the nature of the contractual arrangements, is exactly what the claimant’s earnings were.  As the tribunal rightly noted, a claimant is entitled to carer’s allowance if she is “not gainfully employed” (Social Security Contributions and Benefits Act (SSCBA) 1992, section 70(1)(b)).  However, since April 2001 a person is not to be treated as gainfully employed “on any day in a week unless [her] earnings in the immediately preceding week have exceeded an amount equal to the lower earnings limit in force” (Social Security (Invalid Care Allowance) Regulations 1976 (SI 1976/409), reg. 8(1)).  Conversely she shall be treated as gainfully employed if her earnings exceed that limit.

52.	Before April 2001 regulation 8(1) was phrased rather differently and by reference to specific weekly limits, stipulated directly in that regulation.  Whatever the mechanism, those weekly earnings limits are not in dispute: before April 2001 it was £50 a week, and since then, for the years in question, it has been £72 (2001/02), £75 (2002/03) and £77 (2003/04).   The question then is: what are “earnings”?

53.	The primary definition of “earnings” is that the term “includes any remuneration or profit derived from an employment” (SSSCBA 1992, s.3(1)(a)).  On the face of it this is a very broad term (see e.g. Commissioners’ decisions R(SB) 2/86 and R(SB) 21/86).  Having found that the claimant’s friend had no contract of employment in this case, the tribunal concluded that the whole of the money paid to the claimant were her “earnings”, as “she had the right to pay them out as she wished”.

54.	The tribunal did not refer to the Social Security (Computation of Earnings) Regulations 1996, which further define the calculation of earnings for these purposes.  This is a comprehensive code, adopting many of the rules which used to apply just to means-tested benefits (see R(IB) 7/03 at para. 31).  Regulation 3(1) of the 1996 Regulations declares that for the purposes of carer’s allowance and certain other benefits “the earnings of a claimant shall be calculated by determining in accordance with these Regulations the weekly amount of his earnings”. Furthermore, “The amount of a claimant’s earnings for any period shall be the whole of those earnings (including any earnings which he is treated as possessing under regulation 4 (notional earnings)) except in so far as regulations 10 and 13 provide that certain sums shall be disregarded or deducted as appropriate” (regulation 3(2)).

55.	The key provision is then regulation 9(1), which reinforces section 3 of the SSCBA 1992.  This states that “‘earnings’, in the case of employment as an employed earner, means any remuneration or profit derived from that employment” and includes various elements such as bonuses, commission and holiday pay.  This broad definition is subject to regulation 9(2) and 9(3).  Regulation 9(2) can have no application here, but regulation 9(3) is worthy of note:

“(3)  ‘Earnings’ shall not include any payment in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment.”

56.	Regulation 10(1) then declares that for the purposes of regulation 3 the claimant’s earnings are her net earnings, which “shall be calculated by taking into account the gross earnings of the claimant from that employment” less tax and national insurance contributions (regulation 10(4)).

57.	In my view there is a common thread running through the definitions in section 3 of SSCBA 1992 and the 1996 Regulations.  That is, however expansively one defines “earnings”, the earnings in question must still be the earnings of the individual in question. Thus “any remuneration or profit derived from an employment” must mean derived from the claimant’s employment, not from someone else’s employment.	

58.	Likewise, regulation 9(1) declares that “‘earnings’, in the case of employment as an employed earner, means any remuneration or profit derived from that employment” (emphasis added).  Similarly in regulation 10, the starting point is “the gross earnings of the claimant from that employment” (again, emphasis added).  

59.	I also derive some further support for this argument from the decision of Mr Commissioner Mesher in R(IB) 7/03.  There the Commissioner concluded that “the general structure of the provisions for employed earners in the 1996 Computation of Earnings Regulations establishes a context which shows that what are to be taken into account are payments actually received, not entitlements which have not resulted in payments” (paragraph 32).  The issue there was whether what counted were actual earnings or the contractual entitlement to earnings by virtue of the National Minimum Wage Act 1998.  Although the Commissioner observes that “what are to be taken into account are payments actually received”, it is clear from that context that he means payments actually received for service rendered under that person’s own contract of employment.   This is why it is vital for the new tribunal to find the necessary facts and form a view as to which of Options 1 to 4 above applies.  

The claimant’s earnings under Options 1 or 2

60.	If the tribunal finds on the facts that either Option 1 or 2 was the case, then there can be no dispute but that the totality of the moneys received through the pay-packet were the claimant’s “earnings” – subject to any deductions permitted by the 1996 Regulations. 

The claimant’s earnings under Option 3

61.	If, however, the tribunal finds that Option 3 applies – namely that the training project employed both the claimant and her friend on a jobshare basis – then the position is more complex.  One way of looking at the legal arrangements in place would be to consider whether some form of implied trust had been imposed in respect of 50% of the moneys received via the local authority.  On balance, and notwithstanding the basis on which leave to appeal was granted, I take the view that this is an unnecessarily esoteric way of analysing the situation.

62.	If the tribunal finds that Option 3 applies, then in my view the tribunal should follow the employment law approach and look to the reality or the substance of the arrangement and not the form.  If there was a genuine jobshare, then the reality is that the claimant’s remuneration or profit must refer solely to the moneys received in relation to her employment, not the employment of her friend.  If that is the case, then the claimant is merely the conduit for the payment to the friend of 50% of the money, just as the local authority is merely the conduit for the transfer of salary from the training project to its trainees and employees.  I emphasise, however, that the tribunal will need to be careful in its fact-finding to determine precisely what the underlying contractual arrangement was.  In doing so, the tribunal should not be distracted by whether, for example, this was a proper use of public funding for training schemes.

63.	The tribunal might conceivably take a slightly different route to the same conclusion if it finds that there was a genuine jobshare.  If, contrary to my suggestions above, the tribunal consider that the phrasing of section 3 and the 1996 Regulations is so wide that it in principle includes the entirety of the money paid over, one more possibility must be explored.  In that situation, the tribunal would have to consider whether the 50% paid to the friend amounted to “any payment in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment” within the meaning of regulation 9(3).

The claimant’s earnings under Option 4

64.	Finally, should the tribunal decide that actually this is a case of self-employment, rather than employment, then of course the tribunal will have to determine how her earnings are to be calculated under the rules governing self-employment.  In that situation regard must be had to regulations 11-14 of the 1996 Regulations.

Carer’s allowance and the WEEKLY earnings limit rule

65.	Whatever conclusion the tribunal reaches, it will also need to make specific findings about the claimant’s earnings for particular periods.  It may need to set out the principles to be applied and for the necessary calculations to be performed by the Secretary of State.  In particular, it must note that the earnings limit must be applied on a week-by-week basis and not cumulatively across the tax year (see regulation 8(1) of the 1976 Regulations).

66.	This distinction may well have significant practical consequences for the calculation of any overpayment of carer’s allowance in this case.  An example will illustrate the point.  For the tax year 2001/02, the weekly earnings limit was £72.  According at least to the P14 (doc 17), the claimant’s gross earnings for that year were £5,642, from which was deducted tax of £110.20 and National Insurance of £114.64, leaving a net annual figure of £5,417.16. This would give a weekly average earnings figure of some £104, well over the limit.  Of course, if 50% of this was paid to the friend under a binding obligation, then the claimant’s weekly earnings would actually be in the order of £52, and under the limit.   

67.	However, carer’s allowance does not work on an annual basis but a weekly basis.  For example, it appears from the payroll records that there were no payments of any earnings for tax weeks 38 and 39, over the Christmas break (see doc 62).  In other weeks the net pay appears to be in the order of £104 a week, which will bring the claimant within or outside the scope of the earnings limit, depending on the view taken by the tribunal of the nature of the arrangement.  There may be other weeks where even on the assumption that there was a jobshare, 50% of the earnings might still have exceeded the limit.

The recoverability of any overpayment of carer’s allowance

68.	Finally, the tribunal will have to address the issue of the recoverability of the overpayment properly.  The DWP has put the case on the basis of a failure to disclose a material fact (namely that the claimant started work late in 1999 and that her earnings increased over time), applying section 71 of the Social Security Administration Act 1992.  Section 71, however, does not impose a duty of disclosure itself; that is to be found in regulation 32 of the Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968).

69.	This will be familiar territory for the tribunal.  The tribunal must consider the potential application of regulation 32(1) of the 1987 Regulations until May 2003 and regulation 32(1), (1A) and (1B) for periods thereafter.  As the Tribunal of Commissioner held in R(IS) 9/06, and upheld by the Court of Appeal as B v Secretary of State for Work and Pensions [2005] EWCA Civ 929); “Two distinct duties to disclose arose from regulation 32(1) prior to the recent amendment (and now arise from regulation 32(1), (1A) and (1B)), namely (a) a duty to furnish information and evidence pursuant to a request from the Secretary of State, and (b) a duty to notify the Secretary of State of any change of circumstance which the claimant might reasonably be expected to know might affect the right to benefit” (paragraph 46(2)).

70.	In deciding how these principles apply, the tribunal will obviously have to make careful findings of fact.  It will have regard to the written documentation on the appeal file.  It will also form a view on the claimant’s evidence at the first hearing that she was very upset because “I have always rung up dept. about everything” (doc 129).  	

The Commissioner’s directions for the rehearing

71.	My directions for the rehearing are as follows.  These are all subject to any further directions issued by a District Chairman of the Tribunals Service:

Directions to the claimant

(1)	The claimant, through her representative, should confirm in writing to the Secretary of State the name and last known address of her friend as named in the tribunal decision.

Directions to the Secretary of State

(2)	The Secretary of State should undertake enquiries to establish the current whereabouts of the claimant’s friend so named in the tribunal decision and if possible obtain a statement from her.

(3)	The Secretary of State should obtain for inclusion in the appeal papers a copy of the claimant’s application for working families’ tax credit (WFTC) which appears to have resulted in an award of WFTC with effect from July 2002 (see docs 67 and 75).

(4)	The Secretary of State should arrange for a presenting officer to attend the new hearing of the appeal and for that presenting officer to have with them the full file in relation to both entitlement and overpayments decisions relating to carer’s allowance for the claimant.

Directions to the Tribunals Service

(5)	The case file for the appeal should be placed before a District Chairman for consideration of any further case management directions.

Directions to the new tribunal

(6)	Taking into account the guidance above, the tribunal must make the necessary findings of fact to determine the following fundamental questions:

(I)	On what basis was the claimant employed between 1999 and 2002.  Was it Option 1, 2, 3 or 4?  Or some other option?
(II)	Depending on the answer to (I), what were the claimant’s “earnings” at all material times? (This may require remitting the details of the actual calculations to the Secretary of State, subject to clear directions.)
(III)	Depending on the answer to (II), has there been any overpayment of carer’s allowance for any relevant period?
(IV)	If so, has the claimant failed to disclose any material fact that has caused that overpayment, bearing in mind the test under section 71 of the Social Security Administration Act 1992 and the requirements under regulation 32 of the 1987 Regulations?

72.	My decision is therefore as set out at paragraph 1 above.

	(signed on the original)		N J Wikeley
			Deputy Commissioner

								11 July 2008