Morrell v Secretary of State for Work and Pensions

For income support, income bears its ordinary and natural meaning. A loan is not invariably capital. Regular payments made to meet recurrent living expenses may be income even though repayable. A repayment obligation prevents that conclusion only where it is certain and immediate.

Under section 71(1) of the Social Security Administration Act 1992, a claimant’s material misrepresentation need only be a cause of overpayment. The department’s failure to act on earlier information may be an additional cause, but does not displace the causal effect of a later false review form.

The appellant received income support while her mother made regular monthly loan payments towards her rent and living costs. On four review forms the appellant answered negatively when asked whether anyone paid money to another person on her behalf.

An appeal tribunal upheld recovery of two periods of overpayment. A Social Security Commissioner upheld that decision, holding that the loans were income, that the misrepresentations caused the overpayments, and that the tribunal’s sparse reasons were just adequate. The appellant appealed to the Court of Appeal.

The central issues were whether the family loans were income, whether the overpayments were made in consequence of the false answers, and whether the tribunal had adequately explained its decision.

Appeal dismissed unanimously. Richards J gave the principal judgment. Sedley LJ agreed. Thorpe LJ also agreed, stressing that family loans used through regular instalments to meet ordinary outgoings may properly be classified as income.

1. “Income” in the income-support scheme has its ordinary and natural meaning. Neither the absence of a statutory definition nor the regulations’ specific treatment of some loans creates a general rule that loans are capital. The reasoning in Leeves v Chief Adjudication Officer [1999] ELR 90 applied: a receipt subject to a certain and immediate obligation of equivalent repayment is not income, but a contingent or future repayment obligation does not alter the receipt’s character.

   The mother’s regular payments were made to meet rent and living expenses. Their repayment was deferred until the appellant’s circumstances improved or she obtained work, and might never arise. They were therefore income. The weekly, means-tested purpose of the scheme reinforced that conclusion.

2. Section 71(1) of the Social Security Administration Act 1992 required the Secretary of State to establish that the overpayments were made in consequence of a material misrepresentation. The department was entitled to regard each review form as the claimant’s current and accurate statement of circumstances. The false answers were accordingly a cause of the payments, notwithstanding earlier information held by the department and possible official error.

   The misrepresentation need not be the sole cause. The reasoning in Duggan v Chief Adjudication Officer, reported with R(SB) 13/89, supported that common-sense approach to causation.

3. The tribunal’s reasons were thin and deserved criticism, but were just adequate. The issue whether the loans were income had not been raised before it as a principal issue, and its reasons enabled the parties to understand the outcome and appeal effectively. In any event, the Commissioner had fully reasoned the relevant issues and would have substituted the same decision.

Richards J additionally observed that the reasoning would appear to permit recovery for the whole period of repeated misrepresentations. That observation was unnecessary because recovery had been claimed only for the two specified periods.

• Court of Appeal (Civil Division): dismissed the appellant’s appeal: [2003] EWCA Civ 526.
• Social Security Commissioner: on 25 April 2002, upheld the appeal tribunal’s decision in its entirety.
• Appeal tribunal: on 30 July 2001, dismissed the appeal against recovery of income-support overpayments.