[2024] UKUT 131 (AAC)

Was the claimant ‘doing work’ for the purposes of regulation 40(1) of the ESA Regulations 2008 (and so to be treated as not being entitled to ESA) when he was buying and selling bikes? Put simply like that – and that is the way the question is posed by regulation 40 – then it admits of only one answer: yes, he was. ‘Work’ is an ordinary word of the English language and whether a person ‘does work’ is ultimately a question of fact and degree. So a claimant who sells a single tricycle that their child has outgrown in a one-off garage sale is not engaged in ‘work’ in any meaningful sense. But a claimant who has a turn-over in the order of £30,000 a year in buying and selling stolen bikes at markets is doing ‘work’ just as much as the proprietor of a legitimate second-hand bike shop ‘does work’, albeit the latter may well generate much less of a profit. Taken together, the various activities involved in sourcing bikes, negotiating prices for purchases and sales, carrying out any necessary repairs and dealing with customers all constitute ‘work’. Those activities are essentially the same irrespective of whether the bikes in question are stolen or lawfully acquired. I therefore agree with Mr Castle, subject to one necessary proviso, that ‘work’ must be given a meaning that includes both legal and illegal activity for the purposes of the ESA scheme. The proviso is that the activity in question must still be capable of being characterised as a form of ‘work’. So, for example, a pickpocket is not doing ‘work’ (although in principle their illicit takings would presumably count for the purposes of the ESA means test as income other than earnings).

The interpretation of ‘work’ as including illegal activity is supported by the way the term is used and defined in the ESA scheme. Thus, the deeming rule in regulation 40(1) – that “a claimant is to be treated as not entitled to an employment and support allowance in any week in which that claimant does work” – is made subject to regulation 40(2). This paragraph lists various activities which do not count as ‘work’ for the purposes of regulation 40(1), such as work as a councillor (regulation 40(2)(a)). However, there is no exclusion in regulation 40(2) for work that involves criminal activity. More significantly still, ‘work’ itself is defined by regulation 40(7) as meaning (emphasis added) “any work which a claimant does, whether or not that claimant undertakes it in expectation of payment”. There is, accordingly, no suggestion in the legislation that the term ‘work’ necessarily excludes any work that involves criminal activity. On the contrary, all the indications are that ‘work’ carries a broad meaning.

The broad meaning attributed to ‘work’ is likewise reflected in the expansive definition of ‘employment’ within the ESA scheme as meaning “any trade, business, profession, office or vocation”. In particular, a self-employed earner is someone who is gainfully ‘employed’ other than under a contract of service (and so the term ‘employed’ is not a synonym for ‘salaried’: see paragraph 19 above). Furthermore, a self-employed earner’s earnings include “any remuneration or profit derived from an employment”. It follows that income consisting of any profit or remuneration from any trade, business, profession, office or vocation made otherwise than under a contract of service is to be counted as part of a self-employed earner’s income for the purposes of the ESA means test. That being so, it would make no sense for ‘work’ to constitute a narrower category of activity than income-generating ‘employment’. On the contrary, and given the respective statutory definitions, ‘work’ must be at least as broad a category of endeavour as ‘employment’.

In this context it is also relevant that the revenue case law shows that the concept of a ‘trade’ is not limited to legitimate activities. Notably, the High Court in Inland Revenue Commissioners v Aken [1988] STC 69 was tasked with considering whether profits from prostitution – which may be immoral but is not itself illegal – were subject to income tax. Piers Ashworth QC, sitting as a Deputy Judge of the High Court, ruled (albeit strictly obiter) as follows (in a passage which was not questioned, and was by implication approved, in the Court of Appeal’s decision in the same case: [1990] 1 WLR 1374):

Mr Yetman sought, in his fifth and final submission, to distinguish Aken on the basis that it concerns the application of theTaxes Management Act 1970, a wholly separate statutory regime underpinned by very different policy considerations. The difficulty with that submission lies in the Court of Appeal decisions in Hakki v Secretary of State for Work and Pensions [2014] EWCA Civ 530 and French v Secretary of State for Work and Pensions [2018] EWCA Civ 470. In both cases the Court of Appeal in effect ruled that the revenue law jurisprudence on what constituted a trade was equally applicable to assessing liability under the child maintenance scheme. Thus, in Hakki the Court defined the question before it as “whether Mr Hakki had sufficient organisation in relation to his poker playing to constitute a trade in the sense that the word is used in the tax cases” (at [19]). The Court was even more explicit in French: “For the purposes of a child support maintenance assessment, the scope of self-employed earnings is the same as it is for the assessment of welfare benefits and income tax” (at [20(i)]). It follows that there is no satisfactory answer to the proposition that the claimant in the present case was engaged in a trade, albeit one tainted by illegality.

The other four overarching submissions advanced by Mr Yetman in support of the FTT’s decision fare no better, notwithstanding the combination of both the elegance and vigour with which they were put forward.

The first was that there was no absolute principle of law that disentitled a criminal claimant from qualifying for ESA and that Best v Chief Land Registrar [2014] EWHC 1370 (Admin) and [2015] EWCA Civ 17 was on all fours with the present case. In Best the Court of Appeal held that an illegal squatter (thereby committing a criminal offence under the Legal Aid, Sentencing and Punishment of Offenders Act 2012) could nonetheless claim title to a residential property based on adverse possession (under the Land Registration Act 2002). I do not consider the two situations (the illegal squatter and the stolen bike handler) are properly analogous, not least as there was a clear competing public interest in play in Best, namely the underlying purpose of the law of adverse possession. In the instant case there is no such competing public interest such as to bypass the ’work’ and ‘income’ requirements of the ESA scheme.

The second submission was that the FTT’s findings of fact were unassailable and its interpretation of the legislation was entirely consistent with the statutory purpose of the ESA scheme. I take those points in reverse order. The FTT’s approach was inconsistent with the purpose of ESA for the reasons identified both above and further below in relation to Ground 2. The FTT’s fact-finding was also deficient. There is, for example, an inherent contradiction between the finding that the claimant “ was not selling the ‘odd’ stolen bicycle, but rather had some £30K passing between his accounts between October 2014 to October 2015” (statement of reasons at [11]) and the conclusion that “he was not fit to do anything other than to feed his addiction, He was not fit to work” (statement of reasons at [13]). As Mr Castle argued, the claimant may well have been mired in a cycle of addiction but what he did to feed that addiction was ‘work’. The FTT misdirected itself by focussing exclusively on the claimant’s impairment when considering whether what he was doing was ‘doing work’.

Third, the FTT’s reading was said to be consistent with the meaning of the relevant terminology in the SSCBA 1992 and WRA 2007, as well as in the ESA Regulations 2008, which all aligned ‘work’ with work being carried out in a lawful workplace. I reject this submission essentially for the reasons set out above. It was not for the Secretary of State to show that illegal work was included within the scope of the statutory definition of ‘work’. Rather, it was for the claimant to demonstrate that illegal work was necessarily excluded from its scope. However, Mr Yetman’s arguments necessarily involved putting a gloss on the statutory language to avoid what Mr Castle accurately characterised as “the brick wall of the deeming provisions”.

Mr Yetman’s fourth submission was that the Secretary of State’s reading cut across the common law principle of illegality and involved fastening contractual duties and obligations on illegal agreements. Both counsel advanced erudite albeit competing submissions on the nature and effect of the common law principle involved in the enforcement of illegal contracts. However, I need not rehearse those submissions here for the simple reason that the Secretary of State’s decisions that the claimant was in ‘work’ and generating a considerable ‘income’ has no wider repercussions as to the enforceability of the contracts involved.

For all those reasons I conclude that the Secretary of State has made good Ground 1.