Malekout v Secretary of State for Work & Pensions

This appeal concerns the construction to be placed on part of the regulations dealing with income support, The Income Support (General) Regulations 1987 (“the 1987 Regulations”). It comes by way of appeal on a point of law from the decision of a social security commissioner, Mrs A Ramsey, dated 1 September 2008. By that decision the commissioner determined that certain payments were received by the appellant as income and were not within the categories of payments to be disregarded for the purposes of assessing entitlement to income support and the amount thereof.

I begin with the legal framework. The entitlement to income support derives from section 124 of the Social Security Contributions and Benefits Act 1992. Section 136(4) provides that a person’s income in respect of a week should be calculated in accordance with prescribed rules. Those rules are the 1987 Regulations. In broad terms, a person’s income has to fall below a certain level for him or her to be entitled to income support and even if he so qualifies the amount of income support payable depends upon his income. By regulation 40(1), income, other than earnings, is defined as the gross income, but in ascertaining that any sum specified in schedule 9 is to be disregarded.

Schedule 9 is at the heart of this appeal. It sets out a number of categories of sums which are to be disregarded. Amongst those specified are certain types of pension payments, such as a war disablement pension to a certain extent, or a war widow’s pension: see paragraph 16(1). But it is paragraph 15 which is relied upon by the appellant in the present case. Subject to certain exceptions which do not arise here there is to be disregarded “any relevant payment made or due to be made at regular intervals”: paragraph 15(1). What is meant by “relevant payment” is then defined by paragraph 15(5A). It states as follows:

“In this paragraph, ‘relevant payment’ means –

(a)

a charitable payment;

(b)

a voluntary payment;

(c)

a payment (not falling within sub-paragraph (a) or (b) above) from a trust whose funds are derived from a payment made in consequence of any personal injury to the claimant;

(d)

a payment under an annuity purchased –

(i)

pursuant to any agreement or court order to make payments to claimant; or

(ii)

from funds derived from payment made,

in consequence of any personal injury to the claimant; or

(e)

a payment (not falling within sub-paragraphs (a) to (d) above) received by virtue of any agreement or court order to make payments to the claimant in consequence of any personal injury to the claimant.”

It is subparagraph (e) which is now relied upon by the appellant. He was a dental surgeon who was employed by the National Health Service. He suffered a neck injury in 1987, eventually leading to his early retirement on medical grounds in 1990. The injury was attributable to his employment. He was, at the time of his retirement, in his mid-30s. It seems that he claimed and was awarded permanent injury benefits under the appropriate regulations. It took until 1997 and a consent order in judicial review proceedings to establish that he was so entitled, and it took yet more judicial review proceedings to enable some of the benefits to be quantified (see R (Malekout) v Secretary of State for Health [2004] EWHC 2879 (Admin)); but the payment in issue in the present proceedings are different. They are described in the advice payments to the appellant as “pension”, and it seems that they are indeed an early occupational retirement pension pursuant to the National Health Service Pension Scheme Regulations 1995. The social security commissioner appears to have taken the view that it would make no difference to the outcome of the present proceedings whichever of these two bases was the true one. Certainly that is the Secretary of State’s position on this appeal.

The commissioner had to determine some issues which are no longer live ones before this court. But on the argument under subparagraph (e) of Regulation 15(5A) she concluded that the payments were not made to the appellant as a form of compensation for personal injury. She regarded that subparagraph as relating to sums paid as a result of a court order or in effect an agreed settlement, where there was a liability to make the payment as a consequence of personal injury and not when they were pension payments, albeit in respect of the early retirement because of ill health or personal injury. The appellant challenges that outcome. On his behalf Mr Berry submits that paragraph 15(5A)(e)is satisfied and consequently these payments should be disregarded. He argues that they fall within the words “received by virtue of any agreement” in the subparagraph because the appellant had a contract of employment with the National Health Service and it is under that agreement that he is entitled to the pension for early retirement. That is because the National Health Service Pension Scheme and the regulations governing it are to be read into his contract of employment.

Moreover, the pension is paid because he suffered personal injury and so argues Mr Berry it is paid “in consequence of any personal injury” -- the remaining words of the subparagraph. Those words only govern, it is said, the payment, and do not limit the timing of the agreement or court order under which they are made. Mr Berry argues that subparagraph (e) does not specify when the agreement has to be made, and consequently the agreement can precede the personal injury. He accepts that generally the court order being referred to there would come after the personal injury, although he has hypothesised one exception to that. But he argues in any event that the word “agreement” is not so constrained. He adds that the appellant’s position is different from that of those receiving a war disablement pension and the like, because his entitlement is a contractual one and therefore did not need to be separately identified as something to be disregarded in this schedule.

For the Secretary of State Ms Hannett in her written argument contends that the thrust of paragraph 5A, especially sub-paragraphs (c) to (e), is to exclude payments made to a claimant as a result of a tortious claim for personal injury. In that context subparagraph (e), relied on by the appellant, is really a fall-back provision to deal with those payments and damages for personal injury which fall outside the scope of the previous subparagraphs. That, it is argued, is what the commissioner had in mind in using the word “compensation” in her decision. Therefore, argues Ms Hannett, the proper construction of subparagraph (e) is that it is the agreement or court order which is “in consequence of any personal injury” and which therefore has to postdate the personal injury. There is no basis to distinguish between the timing of the agreement and the timing of the court order; both must postdate the personal injury.

For my part, I have to say that the 1987 Regulations are, as not infrequently with statutory instruments, not as well drafted as they might be, but in my view the Secretary of State’s approach is the correct one. The meaning of the word “agreement” cannot be ascertained by treating it in isolation. It has to be read in context.

Two elements of that context are important. The first is, as Ms Hannett has argued, the preceding subparagraphs. Those seem to me, particularly (c) and (d), to relate very much to the situation where the claimant has been injured and the consequential damages are put into a trust or used to purchase an annuity -- a not uncommon occurrence. That suggests that sub-paragraph (e) is there in order to deal with the situation where a similar payment is made, but not via a trust or an annuity. The second piece of context which matters is the phrase in which the word “agreement” appears. It is “agreement or court order”. That does not, to my mind, indicate an agreement predating the personal injury, but an agreement which is reached instead of a court order after the injury has occurred. The contract of employment does not seem to be the sort of agreement indicated by that phrase. Such an interpretation is supported by the rest of the schedule. Where certain pensions are to be disregarded the schedule says so. A normal occupational pension received on retirement does not fall to be disregarded, as the appellant accepts. I cannot see any rational basis for why an earlier retirement pension, for reasons of personal injury, should be, in the absence of express provision, disregarded. After all, the earlier retirement pension is, subject to some adjustments, the normal retirement pension according to the Pension Scheme Regulation 1995, but one which is paid earlier than normal.

Indeed, it might be being paid only a year or two before normal retirement age. Yet, on the appellant’s construction, the receipts are to be ignored for income support purposes, whereas a colleague who retired one or two years later and received normal occupational retirement pension would not so benefit. I can see no logic in that. The respondent is, in my view, right in saying that the agreement itself which gives rise to the payments must be one which is made “in consequence of” personal injury and post-date it. In other words, it is not just the payments but also the agreement or court order which is identified and governed by the phrase “in consequence of any personal injury”. The court order is clearly one made after the personal injury. The same is true of the word “agreement” which precedes the words “court order”. Consequently, I conclude that the commissioner came to the right conclusion. These payments to the appellant are not to be disregarded under this schedule for income support purposes and for these reasons I would dismiss this appeal.

I agree.

I also agree.