[2024] UKUT 131 (AAC)

Mr Castle, for the Secretary of State, made three introductory points. The first was that on any ordinary reading the activity of selling bikes in a market amounted to ‘work’. For example, the claimant could have a pitch next door to someone buying and selling legitimately-acquired bikes in the same market. That neighbouring stall-holder would be excluded from entitlement to ESA because he was in ‘work’. Why then, asked Mr Castle, should criminality entitle the claimant to ESA? The illegality of the claimant’s trade was irrelevant, as the statutory scheme included illegal ‘work’. Mr Castle’s second point (in truth a variant on his first) was that, as he put it in his oral submissions, “work was work and income was income and too much of either meant an individual lost the right to ESA” – the scheme applied equally and alike to both law-abiding and criminal claimants. Third, there is “a general and fundamental principle of public policy that a person should not be entitled to take advantage of his own criminal acts to create rights to which a Court should then give effect” (Best v Chief Land Registrar [2014] EWHC 1370 (Admin) at [44] per Ouseley J). This principle of public policy could yield to competing public policy interests, but none such arose in the present context.

Turning specifically to Ground 1, Mr Castle advanced three principal submissions. First, as regards the overriding statutory purpose, ESA “is primarily provided for those who cannot work or who are on the borderlines due to some disability or past episode in their lives” (Alhashem v Secretary of State for Work and Pensions [2016] EWCA Civ 395 at [42]). Accordingly, claimants qualify if they cannot work and so they lose entitlement if they are either assessed as being fit for work (or rather as not having limited capability for work) or actually working (see regulation 40). Work is in effect a proxy for ability to participate in the labour market and the legality (or otherwise) of selling bikes is irrelevant to making that determination. Secondly, Mr Castle stressed the wide legislative definition of ‘employment’ so as to include a ‘trade’, and it was perfectly possible to have an illegal trade. The Secretary of State was not normalising illegality but rather refusing to make an exception for a criminal trade. Thirdly, and lastly, Mr Castle relied on the revenue case law and in particular Inland Revenue Commissioners v Aken [1988] STC 69, where it was held that a trade did not cease to be a trade simply because it was unlawful.

Mr Yetman, for the claimant, argued that the FTT had correctly interpreted ‘work’ and ‘income’ so as to exclude criminal activity and made five main points by way of response. First, he contended there was no absolute principle of law that disentitled a criminal claimant from qualifying for ESA. Moreover, Best v Chief Land Registrar [2014] EWHC 1370 (Admin) was on all fours with the present case and so supported the claimant’s submissions. Second, Mr Yetman submitted that the FTT’s findings of fact were unassailable and its interpretation was entirely consistent with the statutory purpose of the ESA scheme. Third, the FTT’s reading was consistent with the meaning of relevant terms in the SSCBA 1992 and WRA 2007 as well as the ESA Regulations 2008. Whether applying a literal meaning or a purposive approach, the statutory terminology was all aligned with work being carried out in a lawful workplace. Fourth, Mr Yetman argued that the Secretary of State’s reading cut across the common law principle of illegality, in that treating legal and illegal conduct as equivalent would in effect fasten contractual duties and obligations on illegal agreements (cf Okedina v Chikale [2019] EWCA Civ 1393; [2019] ICR 1635 at [12]). Finally, Inland Revenue Commissioners v Aken [1988] STC 69 was decided under the Taxes Management Act 1970, a wholly separate legislative regime. The FTT’s approach, he argued, was consistent with the Court of Appeal’s 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, where it had been held that ‘professional’ gamblers were not engaged in a trade for the purpose of being assessed on their earnings as a self-employed earner in the context of the child maintenance scheme.