Secretary of State for Work and Pensions v Tolley [2015] UKSC 55

Mrs Tolley, a British national receiving Disability Living Allowance, moved permanently to Spain. The Secretary of State withdrew her benefit on residence grounds. The Supreme Court considered whether EU Regulation 1408/71 required portability of DLA, ultimately referring questions to the CJEU.

Facts

Mrs Tolley, a British national born in 1952, had paid national insurance contributions between 1967 and 1984, with some credited contributions thereafter. From 26 July 1993, she was awarded the care component of Disability Living Allowance (DLA) on an indefinite basis, as she was unable to prepare a cooked meal for herself. On 5 November 2002, she and her husband moved permanently to Spain, where she was not employed or self-employed. In 2007, the Secretary of State for Work and Pensions decided that, with effect from 6 November 2002, she was no longer entitled to DLA, owing to the residence and presence conditions in section 71(6) of the Social Security Contributions and Benefits Act 1992 and regulation 2(1) of the Social Security (Disability Living Allowance) Regulations 1991.

The First-tier Tribunal held she remained entitled by virtue of article 10 of Council Regulation (EC) No 1408/71. The Upper Tribunal upheld entitlement on a different basis, holding she was an “employed person” within article 1(a) because she was insured against the risk of old age, and that article 22 applied. The Court of Appeal dismissed the Secretary of State’s appeal, considering itself bound by Commissioners for HMRC v Ruas [2010] EWCA Civ 291 applying Martinez Sala. Mrs Tolley died on 10 May 2011, and her husband continued the proceedings.

Issues

The central issue was whether the United Kingdom was precluded by Regulation 1408/71 from imposing a residence requirement as a condition of entitlement to DLA, thereby depriving a claimant who had moved to another Member State of that benefit. Subsidiary issues included:

• Whether the care component of DLA is properly classified as an invalidity benefit (freely exportable under article 10) or as a cash sickness benefit;
• Whether Mrs Tolley remained an “employed person” within the meaning of article 1(a)(ii) of the Regulation by virtue of being insured against old age;
• Whether article 13(2)(f) operated such that UK legislation had ceased to apply to her;
• The proper interpretation of Points 19 and 20 of the UK’s entry in Annex VI;
• Whether articles 19 or 22 of Chapter 1 of Title III entitled her to export the benefit.

Arguments

Secretary of State

The Government did not challenge the classification of DLA as a sickness benefit but argued that treating Mrs Tolley as an “employed person” merely because she was insured against old age would collapse the careful distinctions in Chapter 1 of Title III between employed/self-employed persons and unemployed persons. The specific provisions of Title III were lex specialis overriding the general provisions. The authorities relied on (Martinez Sala, Dodl, Pierik) did not address the exportability question now arising. Alternatively, article 13(2)(f) applied because UK legislation had ceased to apply to her, and following Kuusijarvi, the UK could make continued application of its legislation dependent on residence. Point 19 of Annex VI did not assist her because she was no longer entitled once she moved, and Point 20 did not apply because she was not an employed/self-employed person for Title III, Chapter 1.

Respondent

It was argued that Commission v Parliament showed that allowing export of DLA was consistent with the Regulation’s policy. Mrs Tolley fell within the definition of “employed person” as established in Martinez Sala and confirmed in Dodl, since she was insured for the risk of old age. There could not be different definitions for different purposes within the same Regulation. Article 25 concerned job-seekers, not the wholly economically inactive. Article 13(2)(f) did not apply because Points 19 and 20 of Annex VI preserved her position. Reliance was also placed on Advocate General Jacobs’ opinion in Kuusijarvi that article 22 would be devoid of purpose if defeated by a national residence requirement.

Judgment

Lady Hale, with whom Lord Clarke, Lord Reed, Lord Toulson and Lord Hodge agreed, expressed the court’s view that the principled solution would be to treat the care component of DLA as an invalidity benefit for the purposes of the Regulation, and thus freely exportable under article 10, citing Stewart (Case C-503/09). The court observed that the broad characteristic of benefits listed in article 10 is that they are long-term or one-off payments in respect of permanent conditions, rather than short-term benefits.

However, if DLA continued to be treated as a sickness benefit, the court agreed with the Government that none of the cases relied upon by Mrs Tolley had addressed whether the broad definition in Dodl applied where Title III drew specific distinctions between employed persons and unemployed persons. It might be thought surprising if the wholly economically inactive were treated more favourably than active job-seekers under a Regulation designed to facilitate the free movement of workers.

The court further noted that, logically, article 13(2)(f) preceded articles 19 to 22. Mrs Tolley had ceased to be subject to UK legislation regarding DLA because she was no longer resident, but remained subject to UK legislation regarding any potential state retirement pension entitlement. This raised the question whether article 13(2)(f) referred to all legislation or only to legislation relating to the particular benefit, and how Points 19 and 20 of Annex VI should be interpreted, including whether Point 19(c) referred to actual receipt or entitlement, and whether Point 20 obliged or merely permitted the UK to continue payment.

Given these unresolved questions of EU law, the Supreme Court referred three questions (with sub-questions) to the Court of Justice of the European Union concerning the classification of DLA, the application of article 13(2)(f) and Annex VI Points 19 and 20, and the scope of the Dodl definition for the purposes of articles 19 to 22.

Implications

The decision is significant because it identifies a tension within Regulation 1408/71 between the broad definition of “employed person” emerging from the case law (Martinez Sala, Dodl, Pierik) and the specific structure of Title III, Chapter 1, which distinguishes between employed/self-employed persons and unemployed persons for the purposes of exportability of sickness and maternity benefits. The Supreme Court highlights that benefits such as DLA, which can apply on a long-term basis, do not fit comfortably within rules designed for short-term sickness benefits, noting the observations in Da Silva Martins.

The court’s preferred analytical route, though not argued before it, was to reclassify the care component of DLA as an invalidity benefit, which would render it freely exportable under article 10. This signals concern that the existing classification as a cash sickness benefit (following Commission v European Parliament) generates anomalies.

The decision is important for claimants moving between Member States who rely on long-term disability-related benefits, as well as for the Secretary of State in administering residence conditions. It also matters for tribunals and practitioners advising on the portability of UK social security benefits within the EU. By referring the questions to the CJEU, the Supreme Court acknowledged the matter could not be safely resolved as a matter of domestic interpretation of EU law alone. The judgment does not resolve the substantive entitlement, which awaits the CJEU’s answers, and is therefore limited to the framing and articulation of the relevant legal issues.

Verdict: The Supreme Court did not finally determine the appeal. It referred three questions concerning the classification of DLA and the interpretation of Regulation 1408/71 (including article 13(2)(f) and Annex VI Points 19 and 20, and the scope of the “employed person” definition in articles 19 to 22) to the Court of Justice of the European Union for a preliminary ruling.

Source: Secretary of State for Work and Pensions v Tolley [2015] UKSC 55