Minter v Kingston Upon Hull City Council

For means-tested social-security schemes, a payment is classified as income or capital by its true characteristics in the recipient's hands, considered within the relevant legislative scheme. The purpose of the payment is decisive. The parties' label, whether compensation is paid as one lump sum or periodically, and its size or accumulation do not alter that character. A settlement compensating an employee for wages lost through historic equal-pay breaches is earnings or remuneration derived from employment, and therefore income, under the Housing Benefit Regulations 2006 and Jobseeker's Allowance Regulations 1996.

Two part-time local-authority employees received one-off payments connected with settlements of equal-pay claims. Miss Minter received £4,768.55 and faced retrospective recovery of housing benefit. Miss Potter received 10 per cent of a proposed £7,216.36 settlement while her claim remained unresolved, and the payment was assessed for income-based jobseeker's allowance.

First-tier Tribunal decisions were appealed to the Upper Tribunal. Judge Howell QC held Miss Minter's payment to be income in [2010] UKUT 234 (AAC). Judge Jacobs held Miss Potter's payment to be income in [2010] UKUT 90 (AAC). The central issue before the Court of Appeal was whether the payments were income or capital under the relevant regulations.

Thomas LJ gave the leading judgment. Elias LJ and Hallett LJ agreed. Both appeals were dismissed.

1. The classification of a payment as income or capital must be determined by identifying its true characteristics in the recipient's hands, in the context of the particular social-security scheme. The parties' description of the payment has no legal effect. The court must examine why the payment was made.
2. The form and amount of payment are immaterial to that inquiry. A lump sum is not treated differently merely because it could have been paid periodically. Nor does its size, or the fact that it accumulated over a prolonged period, alter its character. The court applied the approach in R v National Insurance Commissioner ex parte Stratton [1979] ICR 209 and the related reasoning in R(SB) 21/86.
3. Miss Minter's payment represented compensation for wages underpaid during employment because of breaches of the Equal Pay Act 1970 and related equal-pay obligations. Under the Housing Benefit Regulations 2006, it was remuneration derived from employment, or alternatively payment in lieu of remuneration, within Regulation 35. If necessary, Regulation 41(3) also treated the earnings as income. The court applied the ordinary and natural meaning of income discussed in Morrell v Secretary of State for Work and Pensions [2003] EWCA Civ 526 and the employment-derived profit reasoning in Hochstauser v Mayes [1959] Ch D 22.
4. The conclusion for Miss Potter was the same under the Jobseeker's Allowance Regulations 1996. Her payment on account represented lost wages and was earnings within Regulation 98. It was not excluded by Regulation 98(2). Alternatively, Regulation 104(4) applied.
5. The court considered EM v London Borough of Waltham Forest [2009] UKUT 245 (AAC). It was unnecessary to decide whether the payment in that case had the same true characteristic or whether the settlements could properly be distinguished. The court nevertheless questioned the proposition that, once the true characteristic of a payment is identified, the statutory scheme need not be considered.

The decisions of the Upper Tribunal were upheld and both appeals were dismissed.

• Court of Appeal (Civil Division): dismissed both appeals and upheld the Upper Tribunal decisions in [2011] EWCA Civ 1155.
• Upper Tribunal (Administrative Appeals Chamber): Judge Howell QC allowed Kingston upon Hull City Council's appeal and held Miss Minter's payment to be income in [2010] UKUT 234 (AAC). Judge Jacobs allowed the Secretary of State's appeal and held Miss Potter's payment to be income in [2010] UKUT 90 (AAC).
• First-tier Tribunal: in Miss Minter's case, the payment was income but the overpayment was held non-recoverable on an issue not pursued before the Court of Appeal. In Miss Potter's case, the payment was held not to be income under Regulation 98.