Upper Tribunal (Administrative Appeals Chamber)

Decision of the Upper Tribunal
(Administrative Appeals Chamber)

 

As the decision of the First-tier Tribunal (made on 12 October 2012 at Fox Court under reference SC160/12/00190) involved the making of an error in point of law, it is SET ASIDE under section 12(2)(a) and (b)(ii) of the Tribunals, Courts and Enforcement Act 2007 and the decision is RE-MADE, but to the same effect.

The decision is: on her claim for income support, made on 30 March 2011 and refused on 27 May 2011, the claimant was a person from abroad with an applicable amount of nil. She was not entitled to income support.

Reasons for Decision

A.        The issue

1.         This appeal raises the issue whether a parent and primary carer who has been self-employed while her children were in general education has a right to reside in the United Kingdom. I referred this question to the Court of Justice of the European Union in the cases of Czop and Punakova v Secretary of State for Work and Pensions (Joined cases C-147/11 and C-148/11), but the Court did not deal with the issue in view of concessions made by the Secretary of State. I have now decided that there is no right to reside in these circumstances.

B.        The claim and appeal to the First-tier Tribunal

2.         Ms M is Norwegian. She came to the United Kingdom on 1 September 2008 with her children, who entered school on their arrival. She obtained work as a cleaner for a shop owner. When asked by the First-tier Tribunal ‘Any reason why only worked at one place?’, she replied that she ‘worked around family’. On the advice of Her Majesty's Revenue and Customs, she registered as self-employed on 28 September 2008 and had earnings in the tax year 2009/2010. She gave up work in 2009, at which time she was pregnant. She claimed employment and support allowance for the inclusive period from October 2009 to April 2010, but no payments were made. She was then awarded a jobseeker's allowance for the inclusive period from 10 May 2010 to 13 December 2010 as a work seeker. From February 2011 she ceased to be available for work, as one of her children was in hospital.

3.         On 30 March 2011, Ms M made a claim for income support as a lone parent. At that time, she had seven children, born in 2002, 2003, 2004, 2005, 2008, 2010 and 2011. The Secretary of State refused the claim on 27 May 2011 on the ground that she did not have a right to reside in the United Kingdom and was, therefore, barred from entitlement to income support. Ms M exercised her right of appeal to the First-tier Tribunal. The tribunal dismissed the appeal, but gave her permission to appeal to the Upper Tribunal.

C.        The proceedings in the Upper Tribunal

4.         I held an oral hearing of the appeal on 30 May 2014. Ms Joanne Clement of counsel represented the Secretary of State and Ms Gwyneth King solicitor-advocate represented Ms M. In view of the opinion of the Advocate General in the case of Saint Prix v Secretary of State for Work and Pensions (Case C-507/12), I said I would wait for the judgment of the Court of Justice and allow the parties to comment on its relevance. They have done so. Ms Clement again represented the Secretary of State, whilst Mr Martin Jay of the Great Ormond Street Hospital CAB commented on behalf of Ms M. Neither asked for the oral hearing to be resumed. I am grateful to all concerned for their written and oral arguments.

5.         Neither party invited me to refer the question to the Court of Justice.

D.       The income support legislation

6.         Income support was established by the Social Security Act 1986. The relevant provisions have been consolidated by the Social Security Contributions and Benefits Act 1992.

7.         Section 124(1) of the 1992 Act provides:

‘(1)    A person in Great Britain is entitled to income support if-

…

(b)     he has no income or his income does not exceed the applicable amount.’

8.         Section 135 provides:

‘(1)    The applicable amount, in relation to any income-related benefit, shall be such amount or the aggregate of such amounts as may be prescribed in relation to that benefit.

(2)     The power to prescribe applicable amounts conferred by subsection (1) above includes power to prescribe nil as an applicable amount.’

9.         The Income Support (General) Regulations 1987 are made, in part, under that authority. Paragraph 17 of Schedule 7 to those Regulations prescribes that the applicable amount for a ‘person from abroad’ is nil.

10.      ‘Person from abroad’ is defined by regulation 21AA. This has been the governing provision since 30 April 2006:

‘Special cases: supplemental – persons from abroad

21AA.—(1) “Person from abroad” means, subject to the following provisions of this regulation, a claimant who is not habitually resident in the United Kingdom, the Channel Islands, the Isle of Man or the Republic of Ireland.

(2)     No claimant shall be treated as habitually resident in the United Kingdom, the Channel Islands, the Isle of Man or the Republic of Ireland unless he has a right to reside in (as the case may be) the United Kingdom, the Channel Islands, the Isle of Man or the Republic of Ireland other than a right to reside which falls within paragraph (3).

(3)     A right to reside falls within this paragraph if it is one which exists by virtue of, or in accordance with, one or more of the following—

          (a)     regulation 13 of the Immigration (European Economic Area) Regulations 2006;

          (b)     regulation 14 of those Regulations, but only in a case where the right exists under that regulation because the claimant is—

                   (i)      a jobseeker for the purpose of the definition of "qualified person" in regulation 6(1) of those Regulations, or

                   (ii)    a family member (within the meaning of regulation 7 of those Regulations) of such a jobseeker;

          (c)     Article 6 of Council Directive No. 2004/38/EC; or

          (d)     Article 39 of the Treaty establishing the European Community (in a case where the claimant is a person seeking work in the United Kingdom, the Channel Islands, the Isle of Man or the Republic of Ireland).

(4)     A claimant is not a person from abroad if he is—

(a)     a worker for the purposes of Council Directive No. 2004/38/EC;

(b)     a self-employed person for the purposes of that Directive;

(c)     a person who retains a status referred to in sub-paragraph (a) or (b) pursuant to Article 7(3) of that Directive;

(d)     a person who is a family member of a person referred to in sub-paragraph (a), (b) or (c) within the meaning of Article 2 of that Directive;

(e)     a person who has a right to reside permanently in the United Kingdom by virtue of Article 17 of that Directive;

(f)      a person who is treated as a worker for the purpose of the definition of "qualified person" in regulation 6(1) of the Immigration (European Economic Area) Regulations 2006 pursuant to—

          (i)      regulation 5 of the Accession (Immigration and Worker Registration) Regulations 2004 (application of the 2006 Regulations in relation to a national of the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia or the Slovak Republic who is an "accession State worker requiring registration"), or

          (ii)    regulation 6 of the Accession (Immigration and Worker Authorisation) Regulations 2006 (right of residence of a Bulgarian or Romanian who is an "accession State national subject to worker authorisation");

(g)     a refugee within the definition in Article 1 of the Convention relating to the Status of Refugees done at Geneva on 28th July 1951, as extended by Article 1(2) of the Protocol relating to the Status of Refugees done at New York on 31st January 1967;

(h)     a person who has exceptional leave to enter or remain in the United Kingdom granted outside the rules made under section 3(2) of the Immigration Act 1971;

(hh)  a person who has humanitarian protection granted under those rules;

(i)      a person who is not a person subject to immigration control within the meaning of section 115(9) of the Immigration and Asylum Act and who is in the United Kingdom as a result of his deportation, expulsion or other removal by compulsion of law from another country to the United Kingdom; or

(j)      a person in Great Britain who left the territory of Montserrat after 1st November 1995 because of the effect on that territory of a volcanic eruption.’

E.        Ms M was self-employed and not a worker

11.      If Ms M was worker, she would have a right to reside as the primary carer of her children who were in education. I accept Ms Clement’s argument that the First-tier Tribunal failed to investigate sufficiently whether Ms M was a worker. I have, therefore, considered the issue afresh, but have decided that it came to the correct decision.

The First-tier Tribunal

12.      The First-tier Tribunal found that Ms M was self-employed:

‘The tribunal found no documentary evidence that Ms M… had ever been an employed worker since coming to the UK. It would seem that her only work had been in a self-employed capacity and her income had been supplemented by Working Tax Credits.’

The arguments

13.      Ms Clement argued that the nature of the work suggested employment rather than self-employment: Ms M worked for one person at one location with no choice as to the number of hours she worked or the time when she did the work. She argued that the status of worker was an autonomous concept that bore the same meaning throughout the EU, as defined by the Court of Justice in Jany v Staatssecretaris van Justitie (Case C-268/99) [2001] ECR I-8615.

14.      Ms Clement invited Ms King to produce evidence that would allow the Upper Tribunal to resolve that issue. Ms King did not do so. She argued that Ms M had employee-like rights, but not employee-like duties. The shop owner who employed her avoided the need to pay national insurance or to set up PAYE arrangements and gave her no annual leave or sick pay. The fact that Her Majesty's Revenue and Customs accepted her as self-employed was indicative of her status. She had the capacity to take on more work for others, but was prevented by her personal circumstances. Ms King also quoted various statistics about the growth in self-employment and the extent to which women accounted for that increase. I do not quote those statistics, as they are not relevant to the issue of whether this individual claimant was or was not self-employed.

Analysis

15.      I accept, of course, the authority of the decisions of the Court of Justice on the nature of self-employed status. There are two different questions dealt with in the authorities. One is whether a person is undertaking an economic activity. Ms Clement did not argue that Ms M was not economically active. It would have been difficult to do so on the authorities, despite the limited amount of her work and the low earnings. The second question is whether that economic activity is pursued as a worker or as self-employed. The decision in Asscher v Staatssecretaris van Financiën (Case C-107/94) [1996] ECR I-3089 is useful. Mr Asscher was the sole director of a private limited company. The Court decided that, as such, he had not exercised his right of freedom of movement as a worker but rather had exercised the right of establishment (at [25]-[26]). The Court’s approach demonstrates two points. First, the issue is not determined by legal classification that would be given to the relationship by domestic law. In British law at least, Mr Asscher would have been considered the employee of his company. That is certainly the traditional view (Lee v Lee’s Air Farming [1961] 2 AC 12), although this may now need qualification (Secretary of State for Trade and Industry v Bottrill [2000] 1 All ER 915), and the classification may depend on the meaning of particular legislation (as in Bates van Winkelhof v Clyde & Co LLP [2014] 3 All ER 225). Second, the distinction depends on whether the activity was carried out under the direction of any other person or otherwise than in the context of a relationship of subordination. In Jany, the Court of Justice gave more detail on what is involved in self-employment. It set out the classifying conditions at [71]. An economic activity is pursued by a self-employed person

‘where it is established that it is being carried on by the person providing the service:

·                outside any relationship of subordination concerning the choice of that activity, working conditions and conditions of remuneration;

·                under that person’s own responsibility; and

·                in return for remuneration paid to that person directly and in full.’

There is little indication from the Court of Justice on how those factors are to be applied, as that is a matter for the national court.

16.      In domestic law, the element of subordination is not a straightforward concept to apply. As Baroness Hale said in Bates van Winkelhof at [39]:

‘I agree with Maurice Kay LJ that there is “not a single key to unlock the words of the statute in every case”. There can be no substitute for applying the words of the statute to the facts of the individual case. There will be cases where that is not easy to do. But in my view they are not solved by adding some mystery ingredient of “subordination” to the concept of employee and worker. The experienced employment judges who have considered this problem have all recognised that there is no magic test other than the words of the statute themselves. As Elias J recognised in Redcats, a small business may be genuinely an independent business but be completely dependent upon and subordinate to the demands of a key customer (the position of those small factories making goods exclusively for the “St Michael” brand in the past comes to mind). Equally, as Maurice Kay LJ recognised in Westwood, one may be a professional person with a high degree of autonomy as to how the work is performed and more than one string to one's bow, and still be so closely integrated into the other party's operation as to fall within the definition. As the case of the controlling shareholder in a company who is also employed as chief executive shows, one can effectively be one's own boss and still be a “worker”. While subordination may sometimes be an aid to distinguishing workers from other self-employed people, it is not a freestanding and universal characteristic of being a worker.’

I must, of course, accept the authority of the Court of Justice in Jany on an issue of EU law. But it is permissible to take account of the difficulties in applying that concept, which Baroness Hale noted.

17.      Fifty years ago it was possible in domestic law to identify traditional or classical patterns of employment and self-employment. Since then, the patterns of working have changed and the law has developed to reflect those changes. Some patterns of working are still indicative of self-employment. A builder who buys a plot of land and builds a house on it for future sale can only be self-employed, because there is no one who could be an employer. And it is inconceivable that the glazier called out to replace a pane of glass in a window would be an employee of the home owner. It is not so easy to identify circumstances that are so uniquely indicative of an employment relationship. Leaving aside the use of service companies, such as those used by television presenters, there are at least two reasons for this. First, the contractual arrangements for contracts of service and contracts for services may be similar in their effect, if not in their legal form. For example, a worker who is required to make private arrangements for a pension is in the same position as a person who is self-employed. And a worker on a zero hours contract who is not called in to work may be effectively in the same position as a self-employed person who has no work for the time being. Second, essentially the same arrangements can be made to fit into either category, depending on the wishes of the parties, or at least on the wishes of the party with dominant bargaining power. The general point I draw from this analysis is that, although the test is one of substance not form, the form that the parties have used may be a significant factor in classifying their relationship as it reflects the arrangements and intentions of the parties. And the closer the substance of the arrangement is to both legal categories, the more significant the legal form adopted by the parties becomes.

18.      EU law to some extent avoids these difficulties of classification encountered by domestic law by concentrating on the substance or nature of the arrangements rather than on the legal framework in which they are carried out. Taking the factors listed in Jany in turn, Ms M worked for only one person. She may have had the capacity, even the desire, to work for others, but the reality is that she could not at the time when she was cleaning for the shop owner. However, she remained free to take on work for others if her family circumstances allowed. She was free to undertake her work as she chose, subject to working at agreed times and to the appropriate standard. Only to that limited extent was she in a relationship of subordination. As to the choice of activity and the working conditions, Ms M chose these in the sense that she agreed to perform the work required by the shop owner at the only place where it could be performed. In that sense, she was no different from a permanent employee. The location, hours and times are a consequence of the nature of the work involved. Cleaning can only be done at the place where the cleaning is required. And no shop owner wants a cleaner working while the shop is open, any more than a house owner wants a cleaner working in the middle of the night or while the family are eating supper. But the same could be said of the duties of a window cleaner who cleaned the shop windows each morning before it opened. Again, this feature is consistent with either classification as a worker or as a self-employed person. As to the conditions of remuneration, these were no doubt dictated by the shop owner, who did not want the responsibility of taking on an employee just to undertake a few hours’ work a week. In so far as these are a different consideration from how remuneration was paid, they are indicative of self-employment. As to responsibility, Ms M worked under her own responsibility in the sense that she decided how to undertake the duties agreed with the shop owner. That is consistent with her being self-employed, but an employed cleaner would probably have had as much discretion in how to perform her duties as Ms M had. The responsibility was a feature or consequence of the nature of the work involved rather than the basis on which the work was undertaken. Finally, Ms M received remuneration that was paid to her directly and in full. That is indicative of being self-employed and it was accepted as such by Her Majesty's Revenue and Customs. That is not decisive in domestic law (Young & Woods Ltd v West [1980] IRLR 201) and no doubt the same is the case in applying EU law. Ms M might have preferred that the shop owner would take care of her income tax and national insurance, and make provision for holidays, sick pay and pension, but he was not prepared to do that.

19.      In summary, most of the factors are equivocal on classification. They are as consistent with worker status as with self-employment. However, there are some features that are indicative of self-employment. Looking at the factors overall, it seems to me that most of the features are equivocal and a matter of chance that depended on the particular circumstances at the time. Such factors as are indicative point to self-employment, which is how Her Majesty's Revenue and Customs classified the arrangement. That also reflects the view of the dominant party in the relationship. There are no factors that point unequivocally to worker status. I find as a fact that on balance the claimant was self-employed and not a worker.

F.        Ms M did not have a right to reside as a primary carer

Saint Prix

20.      It is convenient to begin with this case. There is no caselaw directly on the status of a former self-employed person who is the primary carer of a child in education. The caselaw has all involved workers. Saint Prix shows, not for the first time, that it is possible to derive a right to reside from the provisions of the Treaty on the Functioning of the European Union (the TFEU).

21.      The case arose from a reference to the Court of Justice by the Supreme Court. The issue was whether a former worker could retain that status during pregnancy. The Court of Justice decided that it could, although that possibility was not recognised by Article 7(3) of Directive 2004/38/EC. This case does not depend on Ms M’s pregnancy, but I directed submissions in case the reasoning of the Court of Justice was relevant to the issue I have to decide.

22.      The Court of Justice decided that the Directive provided ‘a single legislative act codifying and revising the instruments of EU law which preceded that directive’ ([25]). Article 1(a) provides that it contains ‘the conditions governing the right of free movement’ ([26]), but that does not ‘limit the scope of the concept of worker within the meaning of the FEU Treaty’ ([33]). The Court then explained why a pregnant woman could remain a worker during pregnancy and following the birth of her child.

23.      Ms Clement argued that this decision was of limited relevance to this case, as the Court of Justice ‘did not create a free-standing right to reside for Ms Saint Prix, outside the terms of the Citizenship Directive. Rather, the CJEU expanded the circumstances in which an individual would retain the status of “worker” …’ In contrast, Ms M ‘seeks to extend the very specific right conferred by Article 12 of Regulation 1612/68 to a category it was never intended to cover … [c]reating a wholly new right to reside …’

24.      Mr Jay argued the Court of Justice’s approach applied to the self-employed as it applied to workers, that the Court has recognised that in a number of cases; denying Ms M a right to reside would be discriminatory.

25.      I accept Ms Clement’s argument on what the Court decided in Saint Prix, but I accept Mr Jay’s argument that the Court’s reasoning can be applied to the scope of the concept of establishment and self-employment under Article 49 TFEU as it applies to the concept of worker under Article 45. However, this does not mean that it is possible, using that reasoning, to identify a right to reside for the self-employed that is equivalent to the right for workers.

26.      So, the next question is whether the reasoning that has shown a right to reside for primary carers in the case of workers is applicable to the self-employed. This issue is resolved by the decision of the Court of Justice in Czop.

Education and the children of workers

27.      It is necessary to begin with the basis on which the Court of Justice has held that that a right to reside arises. Article 12 of Regulation (EEC) 1612/68 provided that the children of a worker who was or had been employed in the territory of a Member State was to be admitted to that State’s general education system. In short, the child was given a right to education. That provision applies in this case, although it has since been re-enacted as Article 10 of Regulation (EU) 492/11.

28.      In a series of cases, beginning with Baumbast v Secretary of State for the Home Department Case (C-413/99) [2002] ECR I-7091 and developed in Ibrahim v London Borough of Harrow [2009] EUECJ C-310/08 and Teixeira v London Borough of Lambeth [2009] EUECJ C-480/08, the Court of Justice held that the primary carers of children exercising their right to education under Article 12 had a right to reside in order to render the children’s right effective (Baumbast at [71]).

Education and the children of the self-employed

29.      Czop is one of a pair of cases that I referred to the Court of Justice asking whether a primary carer who had been self-employed had a right to reside equivalent to that of a worker. Ms Clement argued that the Court’s decision was decisive that a primary carer who was previously self-employed did not have a right to reside. Ms King and Mr Jay argued that that was not so.

30.      In the event, the Court in Czop did not need to answer the question referred, as the United Kingdom conceded that the claimant in each case had a right to reside on other grounds. However, the Court did deal with the issue whether the child of a self-employed person had a right to education. The child of a worker had that right under Article 12 of Regulation (EEC) 1612/68, now Article 10 of Regulation (EU) 492/11. The Court held that this provision applied only to workers and that it would deprive ‘the clear and precise wording of all effectiveness’ if it were applied also to the self-employed ([31]-[33]).

31.      I accept the argument by Ms King and Mr Jay that Czop did not decide that the self-employed cannot have a right to reside. However, I accept Ms Clement’s argument to the extent that Czop did decide that the right to education, on which the right to reside was based in the Baumbast line of cases, did not apply to the children of the self-employed. It follows that if Ms M has a right to reside, it must arise on some other basis.

Other arguments for a right to reside

32.      I have first considered whether Ms M can derive a right to reside from any right that her children may have as citizens of the EU. On the caselaw, that is not possible unless the children would be obliged to leave the EU. That is true both of the caselaw of the Court of Justice and of the Court of Appeal. The latter, in Harrison v Secretary of State for the Home Department [2012] EWCA Civ 1736, reviewed the EU caselaw and came to the conclusion at [63] that ‘there is really no basis for asserting that it is arguable in the light of the authorities that the Zambrano principle extends to cover anything short of a situation where the EU citizen is forced to leave the territory of the EU.’ There is no evidence that that condition would be satisfied in this case.

33.      If Ms M cannot derive a right to reside from her children’s status as citizens of the EU, can she derive a right to reside from her own status? In particular, would it not deter persons from exercising their right to move to, and to establish themselves in self-employed activity in, a different State if their children’s education had to be disrupted if they were obliged to leave when they lost their right to reside? If so, should they not have a right to reside in order to remain there to allow their children to continue their education?

34.      I accept that freedom of movement is a fundamental concept of the EU. The Court of Justice regularly refers in its reasoning to factors that may deter or impede the exercise of that right. I note that in Saint Prix the Court took account at [44] of the potential deterrent effect on freedom of movement of the lack of a right to reside. It is not possible to disinter the precise significance that this had in the Court’s reasoning, as this was one of a number of factors that the Court set out. It was expressed in policy terms, by which I mean it was stated as a general proposition and not as a requirement to be investigated and proved before a right to reside could be established in a particular case. It can only operate at that level, as by definition anyone who seeks a right to reside has not been deterred from moving to another country.

35.      However, this does not mean that it is permissible to base a right to reside on the fact that, either theoretically or in practice, there might be a deterrent in particular circumstances.

36.      If there were such a right, it must apply to workers as well as to the self-employed. That cannot be. It was not the way it was put to the Court in any of the Baumbast line of cases and the Court did not exercise its power to deal with them on the basis of this wider and more fundamental principle. It would render the reasoning in those cases irrelevant. Indeed, it would be inconsistent with that reasoning, as it would in effect bypass the limitation of Article 12 of Regulation 1612/68 to the children of workers. Given the Court’s reasoning, I would not be able to rely on such general reasoning for workers and it would be contrary to the reasoning in Czop to create a right for the self-employed that would render the clear and precise wording of Article 12 of Regulation 1612/68 ineffective.

37.      Finally, I have considered whether there is discrimination between workers and the self-employed if the education of the children of the former, but not the latter, can give rise to a right to reside for their carers. I accept the argument of both Ms King and Mr Jay that there is a difference in treatment if Ms H does not have a right to reside. However, I accept Ms Clement’s argument that this issue is governed by the decision of the Supreme Court in Patmalniece v Secretary of State for Work and Pensions[2011] 1 WLR 783. Moreover, I return again to the reasoning in Czop. If I were to decide that there is discrimination, the effect would be to bypass the clear and precise wording of Article 12 of Regulation 1612/68. I am bound by Czop to decide that that is not permissible.

G.       Je regrette

38.      I have reached this decision without enthusiasm. The distinction between being a worker or self-employed can be a very fine one, especially in the sort of work that Ms M undertook. The difference in substance, as opposed to legal form, may be insignificant. But the existence of a right to reside in this area cannot be developed by analogy from the right that is recognises for the children of workers. The reasoning of the Court of Justice precludes me from deciding that Ms M has a right to reside. The logic of the Court’s reasoning limits the basis on which a right to reside can arise to the need to protect the child’s right to education, and that right can only arise in respect of the children of workers. It cannot be extended to the children of the self-employed. Any attempt to develop a right to reside on a different basis would have the effect of giving a child a right to education that does not exist in EU law.

 

Signed on original on 9 September 2014

Edward Jacobs Upper Tribunal Judge