Secretary of State for Work and Pensions v Tolley

Where a person receiving the care component of disability living allowance moves permanently to another EU member state, Regulation No 1408/71 may prevent a domestic residence condition from terminating the benefit. The answer depends on whether the benefit is an invalidity benefit, which is exportable under article 10, or a cash sickness benefit governed by Title III.

Existing authority did not resolve whether an economically inactive person insured against old age remained an “employed person” for the sickness-benefit provisions, or how article 13(2)(f) interacted with the United Kingdom provisions in annex VI. Those questions required a preliminary ruling from the Court of Justice of the European Union.

Mrs Tolley received the care component of disability living allowance indefinitely. After she moved permanently from the United Kingdom to Spain, the Secretary of State decided that the domestic residence condition ended her entitlement.

The First-tier Tribunal upheld her appeal under article 10 of Council Regulation (EC) No 1408/71. The Upper Tribunal reached the same result on the basis that she was an “employed person” insured against the risk of old age and fell within article 22: [2012] UKUT 282 (AAC). The Court of Appeal dismissed the Secretary of State’s appeal: [2013] EWCA Civ 1471.

The Supreme Court had to consider the classification and exportability of the benefit, the legislation applicable under article 13(2)(f), and whether the broad EU definition of an employed person applied to an economically inactive claimant under articles 19 to 22.

1. The questions were referred to the Court of Justice of the European Union. Lady Hale, with whom Lord Clarke, Lord Reed, Lord Toulson and Lord Hodge agreed, delivered the unanimous judgment. The Supreme Court did not finally determine the Secretary of State’s appeal.

2. Although the matter had not been argued, the principled classification of the care component of disability living allowance would be as an invalidity benefit under Council Regulation (EC) No 1408/71. Article 10 would then make the benefit freely exportable. The long-term character of the payment and its connection with permanent disability resembled invalidity and old-age benefits more closely than short-term sickness benefits. Income replacement was not an essential feature of an invalidity benefit.

3. If the benefit remained classified as a cash sickness benefit, the existing authorities did not determine whether the broad definition of “employed person” applied under Title III to someone who had ceased all occupational activity. Those authorities had not considered the distinction drawn by the specific provisions between employed or self-employed persons and unemployed persons. The Court therefore referred whether the broad definition applied under articles 19 to 22 and, if so, whether article 19 or article 22 permitted export of the benefit.

4. Article 13(2)(f), concerning applicable legislation, logically preceded consideration of articles 19 to 22. Mrs Tolley had ceased to be subject to United Kingdom legislation governing disability living allowance because she no longer resided in Great Britain, but she remained insured under United Kingdom legislation against old age. It was unresolved whether the cessation contemplated by article 13(2)(f) concerned all of a member state’s social security legislation or only the legislation governing the benefit in question.

5. Further questions arose about Points 19 and 20 of the United Kingdom entry in annex VI. The Court referred whether Point 19(c) concerned actual receipt of, or entitlement to, the benefit and whether Point 20 required, or merely permitted, the United Kingdom to apply Chapter 1 of Title III. It also referred whether article 22(1)(b) prevented a national residence condition from defeating entitlement following a transfer of residence.

• United Kingdom Supreme Court: The court unanimously referred questions of EU law to the Court of Justice of the European Union and did not finally determine the appeal: [2015] UKSC 55.
• Court of Appeal: The Secretary of State’s appeal was dismissed. The court considered itself bound by its earlier decision in Commissioners for Her Majesty’s Revenue and Customs v Ruas: [2013] EWCA Civ 1471.
• Upper Tribunal: The tribunal held, on different reasoning from the First-tier Tribunal, that Mrs Tolley remained entitled to the benefit under article 22: [2012] UKUT 282 (AAC).
• First-tier Tribunal: Mrs Tolley’s appeal was allowed on the basis that article 10 preserved her entitlement.