Cotton v Secretary of State for Works and Pensions

For carer’s allowance, accrued holiday pay paid on termination is a payment payable in respect of a period. It therefore falls within regulation 6(2)(a) of the Social Security Benefit (Computation of Earnings) Regulations 1996, rather than the residual rule in regulation 6(2)(b).

In regulation 6(2)(a), “earnings of the same kind” means periodic earnings, not earnings of the same category listed in regulation 9. The attribution period begins in the benefit week when payment is due and ends before the next ordinary pay day. The same words may bear a different meaning elsewhere in the statutory scheme where their function and context differ.

Mr Cotton retired on 30 November 2006. His final payment, made on 17 November, included ordinary wages and accrued holiday pay for untaken leave. He claimed carer’s allowance from 1 December 2006.

The Secretary of State allowed the claim from 29 January 2007 but refused it for the earlier period. The Social Security Appeal Tribunal upheld that decision, treating the holiday pay as earnings of the same kind as ordinary wages. The Upper Tribunal, Judge Jacobs, in CG/1239/2008, upheld the decision on 25 November 2008.

The central issue was whether accrued holiday pay was payable in respect of a period under regulation 6(2)(a), and how “earnings of the same kind” should be construed.

The appeal was dismissed. Laws LJ agreed with the reasons given by Goldring LJ. Wilson LJ agreed with the result but preferred a more radical alternative analysis.

1. Goldring LJ held that accrued holiday pay was a payment payable in respect of a period. The Court of Appeal’s decision in Chief Supplementary Benefit Officer v Cunningham [1985] ICR 660 was binding on that point. The payment therefore fell within regulation 6(2)(a), not regulation 6(2)(b).
2. The scheme of the Social Security Benefit (Computation of Earnings) Regulations 1996 was considered as a whole. Regulation 9 identifies earnings, regulation 7 fixes the date on which they are treated as paid, regulation 6 determines the attribution period, and regulation 8 converts the result into a weekly amount.
3. Regulation 6(2)(a) contains a deeming mechanism. For periodic earnings, the relevant period begins on the first day of the benefit week in which payment is due and ends on the day before the next payment of ordinary earnings from the same source, or the date on which such payment would have been made if employment had continued. The period is not tied to the actual length of the period for which the particular payment accrued.
4. In regulation 6(2)(a), “earnings of the same kind” refers to periodic earnings to which that paragraph applies. It does not require a comparison between the different categories of payment listed in regulation 9. The phrase can therefore perform a different function in regulation 6(3) and (4), where the context concerns different types of earnings and aggregation or priority. The ordinary principles of statutory construction are powerful aids, but they are not immutable rules where a uniform construction would frustrate the statutory purpose or produce an unworkable scheme.
5. Wilson LJ considered that the phrase “of the same kind” in regulation 6(2)(a) had no sensible meaning in context and should be eliminated, relying on Stone v Corporation of Yeovil (1876) 1 CPD 691. He also relied on Lowsley v Forbes [1999] 1 AC 329 for the proposition that the regulation-maker should be taken to have had regard to an earlier judicial construction. That alternative reasoning was not adopted by the majority.

The Upper Tribunal’s decision was therefore upheld and Mr Cotton’s entitlement began on 29 January 2007.

• Court of Appeal (Civil Division). On 14 December 2009, dismissed the appeal and upheld the Upper Tribunal’s conclusion that accrued holiday pay was governed by regulation 6(2)(a) of the Social Security Benefit (Computation of Earnings) Regulations 1996, [2009] EWCA Civ 1333.
• Upper Tribunal. Judge Jacobs, in CG/1239/2008, upheld the decisions below on 25 November 2008 and held that holiday pay was earnings of the same kind as ordinary pay.
• Social Security Appeal Tribunal. Confirmed the Secretary of State’s decision and considered itself bound by Mr Commissioner Turnbull’s decision in CG/4172/2001.
• Secretary of State. Allowed the claim from 29 January 2007 but refused carer’s allowance for the period from 1 December 2006 to 28 January 2007.