Leeves v. Chief Adjudication Officer

Factual and Procedural Background

This opinion concerns an appeal by the Chief Adjudication Officer and the Secretary of State for Social Security against a decision of the Social Security Commissioner regarding the treatment of a student grant in assessing income support entitlement. The claimant, a former student who abandoned his course mid-term, received and spent a student grant for the entire term before abandoning the course. The local education authority subsequently demanded repayment of the grant portion attributable to the period after abandonment.

The claimant sought income support, arguing that the grant should not be treated as income after abandonment due to the repayment obligation. The Adjudication Officer initially treated the grant as income for the whole term, denying income support. The claimant appealed, and the Social Security Appeal Tribunal upheld this treatment. The claimant further appealed to the Social Security Commissioner, who allowed the appeal, holding that the portion of the grant relating to the post-abandonment period was held on constructive trust and should not be treated as income. The appellants challenged this decision in the Court of Appeal.

Legal Issues Presented

1. Whether the remainder of the student grant, payable for a term but relating to a period after the claimant abandoned his course, was impressed with a constructive trust in favor of the local education authority, thus excluding it from the claimant's income for income support purposes.
2. Whether monies subject to an immediate obligation of repayment should be treated as "income" under the Social Security Contributions and Benefits Act 1992 and the Income Support (General) Regulations 1987.
3. Whether the portion of the grant relating to the period after the claimant was invoiced for repayment (24 May 1995) lost its character as income from that date for the purpose of calculating income support entitlement.
4. Whether the effect specifically provided in the amending regulation (SI 1997 No. 65) was implicit in the 1987 Regulations prior to amendment.

Arguments of the Parties

Appellant's Arguments

• The claimant ceased to be a student on abandonment, so Chapter VIII of the 1987 Regulations, which applies to students, no longer applied.
• The grant, having been received and spent before the relevant week, could not be treated as income for that week unless the provisions of Chapters II to VI permitted it.
• Regulations 29 and 40 impose no limitation on the concept of "income" or "gross income," which should include any income by way of grant.
• Lump sum payments such as grants are to be apportioned over the period for which they are paid and treated as weekly income accordingly.
• Any obligation to repay the grant should be disregarded, relying on the precedent set by R. v. Bolton Supplementary Benefits Appeal Tribunal Ex p. Fordham [1981] 1 All ER 50.

Respondent's Arguments

• The term "income," not being defined in the Regulations, should be given its natural and ordinary meaning.
• Money subject to an immediate and crystallised obligation to repay should not be regarded as income.
• At the date of the claim, if there is a certain and immediate liability to repay money, that money should not be treated as income for income support purposes.
• The grant was only payable while the claimant was a student; upon abandonment, the grant ceased to be payable and an immediate repayment obligation arose.
• The period over which a lump sum payment is taken into account must be the period in respect of which it is payable, so the post-abandonment portion should not be treated as income.
• The Bolton case is distinguishable because the liability to repay wages was uncertain and at an indeterminate future date, unlike the present case where repayment was immediate and certain after the invoicing letter.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by rejecting the notion that the remainder of the grant was impressed with a constructive trust in favor of the local education authority. The authority did not retain a proprietary interest nor was a fiduciary obligation created. Moreover, by the time the claimant abandoned his course, the entire grant had been spent, leaving no remaining funds to be subject to a resulting trust.

The Court then examined the interpretation of "income" under the Social Security Contributions and Benefits Act 1992 and the Income Support (General) Regulations 1987. It noted that "income" is undefined in the legislation, requiring the Court to apply ordinary meaning and consider the statutory scheme.

The Court accepted that monies not repayable are plainly income. However, monies subject to an immediate, crystallised obligation of repayment do not amount to income for income support purposes. Prior to the local education authority's invoicing letter on 24 May 1995, the claimant's obligation to repay was not immediate or certain, so the grant was properly treated as income.

After 24 May 1995, when the claimant was formally invoiced and became under an undisputed immediate obligation to repay, the relevant portion of the grant lost its character as income. The Court distinguished the Bolton case because the repayment obligation in that case was uncertain and at an indefinite future date, whereas here the obligation was certain and immediate.

The Court concluded that the Social Security Appeal Tribunal should have excluded the post-24 May portion of the grant from the claimant's income in assessing income support entitlement. The Court directed the matter be remitted to the tribunal to reconsider the claimant's income support claim as at 24 May 1995 on this basis.

Holding and Implications

The Court of Appeal ALLOWED THE APPEAL and remitted the case to the Social Security Appeals Tribunal with directions to consider the claimant's income support claim as at 24 May 1995, recognizing that from that date there was a crystallised obligation to repay £1,698.85 to the local education authority, and that sum was not to be treated as income from that date onward.

The decision directly affects the parties by requiring reconsideration of the claimant's income support entitlement excluding the post-invoice portion of the grant as income. No new precedent was established beyond clarifying the treatment of repayable grants under the existing statutory framework.