London Borough of Croydon v Shanahan [2010] EWCA Crim 98

Case No 2009/5004/D5[2010] EWCA Crim 98IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM CROYDON CROWN COURT
HH Judge Stow QC
T20070857
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 05/02/10
Before
LORD JUSTICE PITCHFORDMR JUSTICE PENRY-DAVEYTHE RECORDER OF LONDON
Between
London Borough of CroydonApplicantMichelle ShanahanRespondent
Ms. Francesca Levett (instructed by DMH Stallard LLP) for ApplicantMr. Rossano Cifonelli for RespondentHearing Hearing dates : 26/01/2010
JudgmentLord Justice Pitchford :
[1]On 14 September 2009 the respondent faced trial upon a three count indictment at Croydon Crown Court before HHJ Stow QC and a jury. She was charged that: Count 1 between 24 June 2004 and 12 December 2006, she dishonestly failed to notify the London Borough of Croydon of a change in circumstances that she knew would affect her entitlement to housing benefit and council tax benefit, namely that she was in receipt of income through remunerative employment that commenced on or about 24 May 2004. Count 2, similarly she failed to notify the London Borough of Croydon that she was in receipt of working tax credit from 28 May 2004. Count 3, similarly she failed to notify the London Borough of Croydon that her child tax credit had increased from 28 May 2004. Each of these charges was laid under section 111A(1A) Social Security Administration Act 1992 which provides; “(1A) a person shall be guilty of an offence if – a) there has been a change of circumstances affecting any entitlement of his to any benefit or other payment or advantage under any provision of the relevant social security legislation; b) the change is not a change that is excluded by regulations from the changes that are required to be notified; c) he knows that the change affects an entitlement of his to such a benefit or other payment or advantage; d) and he dishonestly fails to give a prompt notification of that change in the prescribed manner to the prescribed person.”[2]At the close of the case for the prosecution the respondent’s counsel, Mr Cifonelli, made a submission to the trial Judge that there was no case to answer upon counts 2 and 3. The learned Judge acceded to the submission. Counsel for the prosecution, Miss Levett, informed the Judge of the prosecution’s intention to appeal the ruling. The trial proceeded upon count 1 only and the jury returned a verdict of not guilty on that count. It is not the intention of the applicant to seek a re-trial but it is submitted that the issue of law raised is a matter of some importance which requires clarification. The applicant seeks leave under section 58 CJA 2003.[3]It was established in evidence that the respondent first claimed housing and council tax benefit on 19 November 2001. She renewed her applications on 24 September 2002 and 3 November 2003. The respondent was a single woman who cared for her young child and was unable to work. In her application of 3 November 2003, the respondent declared her income as: i) Child benefit £17.55 per week; ii) Family credit £34 -£36 per week; iii) Maintenance payments for the benefit of her son £484.34 per month.[4]On 24 May 2004 the respondent started work for Parkwood Leisure Centre and in that employment earned between £953.92 and £1331.32 per month gross. Her first payment was received on 24 June 2004. On 25 May 2004 the respondent notified HMRC that she had commenced full time employment. A consequence of her employment was that she was entitled to receive an increase in her child tax credits from £1991.04 per annum to £4027.94 per annum and she became entitled for the first time to working tax credit in the annual sum of £1841.52. The increase in child tax credits and the entitlement to working tax credits took effect on 27 May 2004 and the respondent was notified of them on 28 May 2004.[5]The prosecution was conducted by London Borough of Croydon whose case was that it had received no notification from the respondent of any change in her circumstances. As a result the respondent continued to receive housing benefit and council tax benefit. Croydon was first advised that overpayments had probably been made in about October 2006. After initial enquiries housing benefit and council tax benefit were suspended as from 30 December 2006. By that time the respondent had received £9,370.53 in housing and council tax benefit to which she was not entitled. Of that amount £933.65 represented council tax benefit which was, as an accounting exercise, simply added to her liability for council tax for inclusion in the next bill. The remaining sum, £8,436.88, was treated as an overpayment to the respondent and the applicant demanded repayment by notices given periodically thereafter.[6]The respondent was interviewed under caution on 6 February 2007. She maintained that she had declared her employment to Croydon by means of a telephone conversation. She volunteered during the course of the interview that she had also received an increase in child tax credit and had received working tax credit. Until that moment, Croydon asserted, it was unaware of the receipt of tax credits. Following the interview but before receiving confirmation of the respondent’s tax credit awards from HMRC, the applicant wrote to the respondent notifying her of the overpayment of benefit and of her right of appeal. The overpayment referred to was “income from employment” which, of itself was sufficient to remove the respondent’s entitlement to receive housing benefit and council tax benefit between 24 May 2004 and 13 December 2006. The respondent did not appeal against the demand for repayment.[7]The argument addressed to the Judge on behalf of the respondent at the close of the prosecution case concerned the effect of the notifications of overpayment. Each of the notifications declared that, by reason of income from employment, the respondent’s entitlement to housing benefit had been reduced to zero. It was submitted that it was plain the receipt of earned income was itself sufficient to extinguish the respondent’s entitlement to receive housing and council tax benefit. It followed that an additional and contemporaneous failure to disclose the receipt of working and child tax credits was immaterial to the respondent’s entitlement to housing and council tax benefit. Since the sums received by way of tax credits had no effect upon the respondent’s entitlement to housing and council tax benefits (it remained at zero), its payment and increased payment did not amount to “change of circumstances” which the respondent was required to notify. Furthermore, if the entitlement was unaffected by receipt of tax credits, the respondent could not have “known” that the change effected her entitlement.[8]In his ruling the learned Judge summarised Mr Cifonelli’s submission, referred to the practicalities of the trial, and made brief reference to previous decisions of the Divisional Court and Court of Appeal, concluding that they did not provide him assistance on the facts of the present case. He continued:
“Neither help me with the issue I have to decide in this case, which is whether or not it could be said that the receipt of working tax credit and increase in child tax credit not only should have been notified but was sources of income which she knew affected her entitlement of housing benefit and council tax benefit. The fact remains that in both these cases, the Court was concerned with the single source of income and not the interplay between three different sources of income. The first major source of income triggered the whole of the obligation to repay benefits to which she was not entitled. Had this been a case where the defendant had received a separate source of income in addition to her remuneration which had nothing to do with her remuneration, for instance a receipt of annuity, bestowed upon her by a wealthy relative, I can see the force of the argument that both of those sources of income should be regarded, not only collectively, and both constituted receipt of an income which disentitled the claimant to the relevant benefit. It matters not to which particular benefit the Council attached the obligation to repay as a result of the non-disclosure. However this case is somewhat different to that. In my view, there is a clear relationship between the obtaining of the job by the defendant at Parkwood Leisure and the receipt by her of the working tax credit and the increase of the child tax credit. Plainly there is a relationship between the receipt of earnings arising from her job, and the increase in child tax credit, triggered by her job and the income from it, to which she would not be entitled to except from her job. It seems to me as a matter of reality and common sense that the correct approach is to look first at the receipt of the remuneration arising from the job, as it was the job which has given rise to the three sources of income. Of course, I accept that the money coming in by working tax credit and child tax credit did not come from the Council but from Her Majesty’s Revenue and Customs. That indeed appears to have been the general approach of the Council in this case. They made a claim for repayment to the defendant originally by letter dated 20 February 2007 which is at tab 81, claiming repayment of overpaid housing benefit as a result of income. That was before they received the letter from the HMRC of 22 March 2007, tab 89, dealing with the receipt by the defendant of working tax credit and the increase in child tax credit. But it is right to point out that thereafter, on 26 March 2007 and 10 April 2007, they repeated effectively their original demands for the payment of £8,436.88 arising from the non-disclosure of the receipt of earnings. The fact remains that the additional receipt of working tax credit and child tax credit did not add to the obligation to repay benefit. Had there been an additional obligation to repay, as a result of receipt of working tax credit and child tax credit, it could be said it was a change that “affected her entitlement” to housing benefit and council tax benefit, but that is not the case here. In the context of criminal offences one should construe the legislation, where there is ambiguity, in favour of the defendant and it strikes me, at the end of the day, that it is unrealistic on the facts of the case to keep in counts two and three in circumstances where they do not add at all to the obligation to repay triggered by her job. Indeed it might confuse the jury as it might be difficult for them to decide the question as to whether or not the receipt of those benefits was a change affecting her entitlement to the benefit. It strikes me, if on the facts of this case the receipt of the working tax credits and increase in child tax credit did not add at all to the obligation to make a repayment already triggered by the remuneration from work, it is difficult to see how it could be said that the defendant knew the changes arising from the receipt of the working tax credit and increase in child tax credit affected her entitlement to the benefits. At the end of the day, and not without considerable hesitation, I conclude that Mr Cifonelli’s principle submission is correct and I should withdraw counts 2 and 3 so that the trial proceeds solely on count 1.”
[9]The Court has not before, to our knowledge, considered the issue whether a claimant for housing and council tax benefits is obliged under s.111A(1A) to disclose all sources of income when any one or more of them would have been sufficient under the regulations to extinguish the entitlement to receive the benefit. One of the cases drawn to the attention of the trial Judge was Passmore (2007) EWCA Crim 2053; [2008] 1 Cr App R 12, in which the Court of Appeal (Criminal Division) was required to examine the meaning of section 111A(1A) in somewhat different factual circumstances. There, the appellant had formed a company in September 2000 but had failed to disclose that fact to the benefit authority. He was convicted of an offence. The appellant’s ground of appeal was that an obligation to report a change of circumstances only arose if that change would cause a difference in the computation of the claimant’s entitlement to benefit. The respondent argued that “a change of circumstances affects a person’s entitlement to benefit if it is something that a benefit officer would properly wish to know in order to compute or check that person’s entitlement to the relevant benefit, whether or not at the end of such enquiries and computations as the benefit officer carried out the amount of entitlement was found to be the same”. Toulson LJ, delivering the judgment of the Court, noted that the meaning of the word “affecting” in paragraph (a) had been considered by the Divisional Court in King v. Kerrier District Council [2006] EWHC 500 (Admin). He said:
“11…..That case arose from a decision of the Truro Magistrates' Court which convicted the appellant of two offences under section 112(1A)[for relevant purposes in identical terms]. According to the case stated, the magistrates found that the appellant either knew that there had been a change in circumstances which affected her entitlement to benefit, or closed her eyes to the obvious, but they went on also to find that the lack of information from the appellant “ could have” affected the amount of benefit paid. 12 In allowing the appeal Newman J. said at [7]: “It has been submitted, in my judgment correctly, that if the magistrates had merely concluded that the lack of information from the appellant could have affected the amount of benefit paid, it must follow that despite their stated conclusion to the contrary, they could not have reached the conclusion to the criminal standard of proof that the change in circumstances had affected the appellant's entitlement to benefit.” 13 He then went on to set out the question, which had been stated for the opinion of the High Court, as being: “ The prosecution having conceded that before the justices could convict they had to be satisfied that the change of circumstances which the defendant failed to notify would have affected her entitlement to benefits, whether the justices were right to convict in view of their finding that the change of circumstances could have affected her entitlement for benefits.” 14 Newman J. said that in his judgment the answer to the question was plainly no. He added at [9]: “ … [P]roof of the offence [under section 112(1A) ] requires more than the possibility that the change could have affected the benefit.” 15 Miss Roberts submits that that decision was perincuriam and wrong because it proceeded on a wrong concession. In this case that was the approach taken by the trial judge. He said, in giving a ruling on the interpretation of section 111A(1A) before he came to sum up, as follows: “He [that is counsel for the defendant] relies on the case of King v Kerrier District Council [2006] EWHC 500 (Admin). This was a case where a concession was made before the justices that they could only convict if they were satisfied that the change of circumstances, which the defendant failed to notify, would have affected her entitlement to benefit. That concession is not made in this case. In the case of King, the concession having been made, it is unsurprising that the Divisional Court found the magistrates who had only made a finding that the information not reported could have or might have affected the benefit, said that was not good enough and they should not have convicted.” 16 We find it difficult to identify what is said to be the material erroneous concession. The concession quoted from the question posed in that case for the opinion of the court was that: “Before the justices could convict they had to be satisfied that the change of circumstances which the defendant failed to notify would have affected her entitlement to benefits.” 17 That language reflected and repeated the wording of the statute itself, which uses the term “a change of circumstances affecting any entitlement to any benefit”
. The question is what is the meaning and effect of those words. The Divisional Court plainly read the words in the sense contended for by the appellant in the present case, namely that the change of circumstances must have made a difference to the amount of benefit which the recipient was entitled to claim in order for it to be characterised properly as a change of circumstances affecting his entitlement to benefit. 18 A decision of the Divisional Court is not binding on this court, but it is of persuasive authority. Moreover, we agree with it. We think that the meaning advanced by the appellant is the natural and ordinary meaning of the phrase. Further, if we were in serious doubt about that matter, we remind ourselves that this is a penal statute. It is a well established principle that if a penal statute is reasonably open to rival constructions it should be construed in the defendant's favour.” “It has been submitted, in my judgment correctly, that if the magistrates had merely concluded that the lack of information from the appellant could have affected the amount of benefit paid, it must follow that despite their stated conclusion to the contrary, they could not have reached the conclusion to the criminal standard of proof that the change in circumstances had affected the appellant's entitlement to benefit.” “ The prosecution having conceded that before the justices could convict they had to be satisfied that the change of circumstances which the defendant failed to notify would have affected her entitlement to benefits, whether the justices were right to convict in view of their finding that the change of circumstances could have affected her entitlement for benefits.”[10]Toulson LJ proceeded to compare the punitive provisions of section 111A(1A) with the civil recovery provisions of part 10 of the Housing Benefit (General) Regulations 1987 (SI 1987/1971). Regulation 75 provided:
“(1) subject to paragraph (2), if at any time between the making of a claim and its determination, or during the benefit period, there is a change of circumstances which the claimant….. might reasonably be expected to know might affect the claimant’s right to the amount of or the receipt of housing benefit, that person shall be under a duty to notify that change of circumstances by giving notice in writing to the designated office.”
[11]The Court noted that regulation 75 was drawn more widely than the section which created the criminal offence. Toulson LJ further observed:
“…. It is interesting to compare and contrast the express language of regulation 75 with the interpretation which the prosecution ask this Court to put on section 111(1A) by way of reading into the section words which are not there. The prosecution’s argument requires the Court to read the words “change of circumstances affecting any benefit” as not limited to a change of circumstance which would make a difference to the amount of the benefit, nor even limited to a change of circumstance which a person in the claimant’s position ought to realise might make a difference to the computation of their benefit. It extends to disclosure of anything which might cause a benefits officer to make enquiries in order to satisfy himself or herself as to the claimant’s entitlement to benefit. So we are asked as a process of interpretation to read in a duty enforced by criminal sanctions more extensive than the expressed duty imposed by regulation 75 which carries only a civil sanction. This would go beyond the ordinary process of statutory construction. For these reasons we reject the prosecution’s argument on the construction of the section.”
[12]There are, it seems to this Court, two possible interpretations of section 111A(1A)(a). In its context of entitlement to benefit and other social security payments or advantages, the word “affecting” could mean “resulting in a change to an entitlement” or, alternatively, “touching upon” or “relevant to” an entitlement, in other words “capable of resulting in” a change to an entitlement. The implication of the first construction would be that an entitlement to any benefit, payment or advantage will only be affected by a change of circumstances if that change would, upon the assessor’s application of the regulations,make an actual difference to the amount of benefit, payment or advantage receivable by the claimant. If this is the correct interpretation, the Judge was right to conclude that the respondent was obliged only to disclose a change of circumstances sufficient to extinguish her benefit. The result of the second construction would be that an entitlement to benefit would be affected by a change of circumstances if that change was of a nature which was capable, depending upon the assessor’s application of the regulations, of making a difference to the right to receive the benefit, payment or other advantage. Upon this interpretation, since income of any sort from any source was capable, subject to the assessor’s calculation upon application of the regulations, of affecting the right to receive benefit, the Judge would have been wrong to rule that the receipt of tax credits did not “affect” the respondent’s entitlement.[13]We reject Miss Levett’s argument, advanced on behalf of the applicant, that there may be a distinction to be drawn between extinction of an entitlement to housing and council tax benefit and the assessment of an entitlement at zero. She submitted that while receipt of earned income might have the effect of reducing a claimant’s benefit to zero, that may not mean that an entitlement to benefit was extinguished. It may depend upon other of the claimant’s personal circumstances. It may therefore be that the receipt of tax credits would “extinguish” the entitlement to benefit while the receipt of earned income alone may not. This was a novel argument, not raised in Miss Levett’s skeleton argument, and it was unsupported by evidence.[14]Upon the principal issue of construction, Miss Levett concedes that Passmore is unhelpful to her argument but she submits its facts are distinguishable from the circumstances faced by the trial Judge. In Passmore the appellant had done nothing which was capable of affecting his entitlement to benefit since forming a company could have had no effect upon it. On the facts of that case only income earned as a result of carrying on business would have had a notifiable effect. Miss Levett submits that the proper interpretation of the section is to be gleaned by a consideration of the benefits system. The respondent was in receipt of benefits on the factual basis that she was receiving the sums set out in her claim of 3 November 2003, that she was a single parent caring for a child and that she incurred expense in caring for her child. While the event which triggered her relevant change of circumstances was her employment which, in turn, entitled her to receive additional income by way of tax credits, it was the receipt of the total of these sums which amounted to the change of circumstance and not any one of them, even if, had she disclosed her earned income, that earned income would have been sufficient by itself, as it turned out, to extinguish the right to receive benefit. It was not the respondent’s employment which alone which constituted the change of circumstances but each of the new sources of income resulting from that employment. The question whether a claimant “knows” within the meaning of subsection (1A)(c) that the receipt of tax credits affected an entitlement to benefit was a matter for evidence, as was the issue of dishonesty under subsection (1A)(d).[15]In response Mr Cifonelli submitted that upon a natural interpretation of sub paragraph (a), supported by the reasoning of the Court in Passmore, if the claimant disclosed her employment and earnings from that employment sufficient, as the overpayment notices demonstrated, to extinguish the right to receive housing and council tax benefit, there could be no further obligation to disclose additional sources of income which would have no effect upon the calculation.[16]Miss Levett pointed out that this is not a case in which(i) having disclosed her earned income,(ii) the respondent was notified that her entitlement to benefit had been extinguished, and(iii) the respondent thereafter failed to give notification of the receipt of tax credits. If the disclosure of earned income had resulted in the cessation of benefit payments, the later receipt of further income by way of tax credits would not have been capable of affecting the respondent’s entitlement so that no obligation of further disclosure would have arisen. Here, however, the changes of circumstances all occurred between 24 and 28 May 2004 and all of them were capable of affecting the respondent’s entitlement to benefit. Miss Levett submitted that the judge was mistaken to place emphasis upon repayment notices issued over two years after the entitlement had ceased.[17]There is no doubt that the receipt of increased tax credit is a notifiable change of circumstances. In Eyeson v Milton Keynes Council (2005) EWHC 1160 (Admin) the Divisional Court held that working families’ tax credit was a source of income which may generate a change of circumstances under section 112(1A) (as inserted by section 16(3) of the Social Security Fraud Act 2001). It does not seem to us that the Judge was right to distinguish between a tax credit payable in consequence of employment and an annuity payable independently of an employment. There is, in principle, no difference between the two since they both amount to income capable of affecting an entitlement to housing and council tax benefit. The fact that tax credits became payable as a consequence of the respondent’s employment did not, in our view, change their nature as income and, therefore, a change of circumstances in their own right.[18]We are bound by the decision and the reasoning in Passmore. A change of circumstances will not “affect” an entitlement to benefit unless upon computation the entitlement to benefit would be altered by the change. That is the effect of the first construction described earlier in this judgment at paragraph 12. However, as at May and June 2004 any one of the respondent’s new sources of income would have made a difference to the computation. The unchallenged evidence of Croydon’s investigator, Gail Campbell (Transcript, Bundle page 7, page 29-30) was:
“If someone’s income is less than their applicable amount, then they would be entitled to maximum benefit because their income does not meet their needs. If someone’s income exceeded their applicable amount, then there would be no entitlement to maximum benefit and the higher the income went above the applicable amount, then the less benefit they would be entitled to receive….The income affects the rate of benefit.”
Each of the elements of the respondent’s increased income, either alone or in tandem, would have made a difference upon computation to the respondent’s entitlement to benefit. Each, therefore, “affected” the respondent’s entitlement to benefit and was notifiable under section 111A(1A)(a) of the 1992 Act. We do not consider that it was open to the judge to rule that there was no case to answer upon counts 2 and 3 simply by reason of the theoretical (on the prosecution’s case) position that if the respondent had notified Croydon of her employment and earned income her entitlement to benefit would have been, as two years later it was, computed at zero. At the time the change of circumstances occurred each of the new and increased payments received “affected” the respondent’s entitlement to benefit.[19]In our judgement, the judge was in error when finding that the respondent’s employment was the only change of circumstances “affecting any entitlement...to...benefit”. That was to assume that the respondent had or might have, as the jury later found, notified Croydon of her earned income. At the close of the prosecution case the evidence was that respondent had notified Croydon of none of these changes.[20]However, it was the judge’s further conclusion on the evidence before him that counts 2 and 3 added nothing to the case for the prosecution. The issue joined in count 1 was whether the respondent, as she said in interview, may have telephoned Croydon to notify them of her income from employment. If the jury concluded that she had or may have done, then in respect of counts 2 and 3, there would have been no obligation to notify Croydon of the receipt of tax credits since, under the construction of section 111A(1A)(a) approved and confirmed in Passmore, they would, on further computation, have had no effect upon the entitlement to benefit; the entitlement would already have been extinguished by the notification of earned income. If, on the other hand, the jury were to convict of count 1, it would add nothing to the respondent’s culpability that she had also failed to notify Croydon of her tax credits because the count 1 failure alone would have been enough to extinguish the entitlement to benefit. As the judge observed, there were good practical case management reasons for confining the jury’s consideration to count 1. He could have achieved the same result by discharging the jury from reaching verdicts on counts 2 and 3. We have no criticism of the judge for his pragmatic approach to those counts.[21]Accordingly, we grant leave but dismiss the appeal and order the acquittal of the respondent upon counts 2 and 3.

Cited in 1 later judgment