Hardy, R (on the application of) v Sandwell Metropolitan Borough Council [2015] EWHC 890

Oh, we have been waiting for this one. According to DWP survey evidence, some 75% of Councils take Disability Living Allowance into account as income when deciding on an award of Discretionary Housing Payments. This judicial review concerned Sandwell Council’s policy of doing just that. The implications are clearly of significance for other councils, and will potentially impact many disabled people faced with the bedroom tax.

Mr & Mrs Hardy live in a three bedroomed property specially adapted for their disabilities, where they have done since 1987. They had been assessed as needing at least two bedrooms as Mrs Hardy’s mother, who suffers from dementia, stayed when her health was particularly bad.  Under the bedroom tax, they were faced with a ‘two bedroom’ 25% deduction in their housing benefit.  (As as not eligible for a one bed place, due to an assessed two bedroom need, would inevitably be faced with at least a 14% reduction. The joy of the bedroom tax). They applied for DHPs to Sandwell.

Both Mr & Mrs Hardy receive Disability Allowance mobility (DLA(m)) and care (DLA(c)) components. Sandwell assessed their income and expenditure and made a decision of an award well short of the shortfall in rent on the basis that

“your Incapacity Benefit, Carer’s Allowance, your [DLA(c)] and your Wife’s [DLA(c)], which totals £311.95 per week. The amount you and your wife receive in respect of [DLA(m)] is excluded from the income assessment for DHP purposes.”

On review, Sandwell stated

“Although your [DLA(c)] is disregarded as an income for Housing Benefit purposes there is no provision in the DHP Policy to disregard this income so it is included in the assessment of your income when calculating your eligibility for a DHP.”

Mr H began judicial review steps. In response to pre-action protocol letters, Sandwell stated (and this is worth quoting, not least for its sheer internal inconsistencies):

“Although the Council does not take into account [DLA(m)], and this is not stated in the policy, I can confirm the decision not to include this income has been taken in accordance with Discretionary Financial Assistance Regulations 2001, Part 2 paragraph 1.In the analysis of this regulation it states that specific provision is made for the mobility component of disability living allowance to be disregarded in the calculation of other benefits. Sections 73 (14) of the [Social Security Contributions and Benefits Act 1992] states:‘A payment to or in receipt of any person which is attributable to his entitlement to the mobility component, and the right to receive such a payment, shall (except in prescribed circumstances and for prescribed purposes) be disregarded in applying any enactment or instrument under which regard is to be had to a persons[sic] means’The decision by the council to include [DLA(c)] as an income for [DHP] purposes, has been taken on the basis of Turner v London Borough of Barnet Housing Benefit Review Board … which confirms that [DLA(c)] can be taken into account as an income for DHP purposes. In this case the court was presented with arguments of disability discrimination but did not consider this was in fact taking place.
When calculating the [DHP] entitlement the Council has taken all of your clients [sic] expenditure figures into account and compared this to their income minus [DLA(m)].”

And

“[DHP] by there [sic] very wording are discretionary in nature. There is nothing in the DWP guidance issued by the DWP or the Discretionary Financial Assistance Regulations 2001 to state that incomes received from Disability Living Allowance (DLA) should not be taken into account for DHP purposes. For [HB] purposes it is accepted that DLA is not taken into account as an income in accordance with HB regulations.
DLA is an income which is available for the individual to spend as they see fit. If your client produced evidence to show that the income was being spent on personal care etc, then this expense will be offset against the income from DLA when working out the available income to contribute towards the rent. In your client’s case all of the expenditure … which your client and his wife have declared has been accepted without further query, due to their disabilities. … My client has taken into account your clients [sic] living costs as disabled people in his assessment of your clients [sic] income. The claim for disability discrimination and breach of article 14 is accordingly denied….
It is to be noted that following the Burnip decision there has been no amendments to the SSCBA to allow Authorities to disregard [DLA(c)] in their calculations of income. This is despite what you say regarding the Burnip decision having changed the legal landscape in this area.”

The JR claim was issued and proceeded to hearing.

Mr & Mrs Hardy argued:

1. The decision and policy was a fettering of discretion

2. The decision amounted to Article 14 (ECHR) discrimination

3. The decision was a breach of Sandwell’s Public Sector Equality Duty.

4. The decision was irrational and/or against statutory purpose.

We should note that the DWP guidance on DHPs state:

“3.8 In establishing if the claimant requires further financial assistance, you can decide how to treat any income or expenditure, taking into consideration the purpose of the income where appropriate.
3.9 For example, you may decide to disregard income from disability related benefits as they are intended to be used to help pay for the extra cost of disability. As part of the application process you should take care to ascertain whether such money is committed to other liabilities for which it was intended, such as Motability schemes or provision of care, seeking evidence regarding expenditure from the claimant. If you do decide to take such income into account then you should consider providing an explanation to the claimant as to why you have done so….
3.11 You will need to decide locally how you treat income and expenses when calculating the amount of DHP. However, in all cases you should consider what is reasonable and not create a process that is too onerous for the claimant.”

Further, the Good Practice Guide annexed to the Guidance has as an example a situation exactly analogous to the Hardys’ with the recommendation that DHP for the full shortfall should be paid.

On Ground 1 – fettering of discretion, the High Court found the obvious:

“However, it appears from the Council’s correspondence with Mr Hardy’s solicitors that its blanket policy of taking into account all of an applicant’s income (except DLA(m)) is in fact based on a misunderstanding of its powers. In the Council’s letter dated 4 April 2013 (see paragraph 14 above), reference is made to there being “no provision in the DHP Policy to disregard [DLA(c)]“. In the Council’s letter dated 12 September 2013 (see paragraph 16 above), signed by a solicitor, it was noted that no amendment has been made to the 1992 Act “to allow Authorities to disregard [DLA(c)]“. As it therefore appears that the Council adopted its policy to include DLA(c) as income because it (wrongly) understood that it was not allowed to exclude that benefit, it cannot have given proper consideration to the DHP Guidance (which advises authorities to consider not taking such benefits into account) nor, indeed, can it have exercised its discretion on the issue properly or at all.

Further, the Council’s letter dated 27 June 2013 (see paragraph 15 above) explained that the Council’s decision to include DLA(c) as an income for DHP purposes was taken on the basis of Turner, asserting that that decision had considered arguments of disability discrimination but “did not consider this was in fact taking place“. If that was indeed the basis of the policy decision, it was also flawed. Turner was concerned with a decision which pre-dated the introduction of the Human Rights Act 1998. Neither the arguments presented in that case nor Richards J’s decision addressed the issue of disability discrimination (let alone discrimination in the context of the size criteria), but were focused on the interpretation of the statutory provisions. Reliance on the decision in Turner indicates that the Council did not properly take into account the significant sections of the DHP Guidance and Good Practice Guide which address more recent developments and considerations, in particular, the effect of the size criteria on disabled applicants who have adapted their home.

It follows, in my judgment, that the Council’s policy of always taking into account DLA(c) as income when assessing awards of DHP, as reflected in the Sandwell Policy, fails to have due regard to the DHP Guidance, constitutes a failure to exercise the Council’s discretion and fetters any future exercise of that discretion. The Sandwell Policy is therefore unlawful in that respect. It also follows that the Council’s decision of 12 September 2013 in Mr Hardy’s case is unlawful, as are the Council’s further decisions as to the rate of his DHP.”

So, unlawful on ground 1.

Ground 2. – Article 14 discrimination, hinged firstly on whether DHP was a ‘possession’ in A1P1 terms. The High Court found that they were, when considered in the overall HB scheme. As per Rutherford [our note] the purpose of DHP is to ‘pug the gap’ to avoid discrimination. On that view DHPs are an integral part of HB entitlement for disabled applicants.

Alternatively, Article 8 rights were engaged, as the tenants would be unable to remain in their existing accommodation, as per Lord Dyson (MR) in R (JS) v Secretary of State for Work and Pensions [2014] PTSR 643.

The intervener (unidentified in the judgment, but apparently the Z2K Trust) threw in disability discrimination under Equality Act 2010:

“In any event, as Mr Knight (counsel for the Intervener) points out in his skeleton argument, and Mr Clayton has not disputed, the Council is under a duty not to do anything that constitutes discrimination in the exercise of a public function by virtue of section 29(6) of the 2010 Act. It seems clear that a decision as to the award of DHPs is a public function within that section. Previous challenges to the HB size criteria and other welfare reforms have focused solely on Article 14 as the source of a duty not to discriminate because the subject-matter of the challenges was legislation, not the decision of a public body applying it. However, the approach of local authorities to making discretionary awards would seem to fall squarely within the above provisions of the 2010 Act.”

Sandwell argued that there was no discrimination, because the reduction due to DLA(c) was not due to disability, but level of income, having more than an equivalent applicant without a disability. All expenditure was taken into account in every case, so any disability related expenditure was reflected in the decision. Excluding DLA(c) would result in a windfall to the applicant.

Perhaps unsurprisingly, this did not go down well.

“In my judgment the Council’s approach is an example of indirect or Thlimmenos discrimination because it treats disabled applicants and their disability-related income in exactly the same way as it treats others and their non-disability related incomes, giving rise to unfavourable treatment to the disabled applicants. DLA(c) is not the same as any other income, but is awarded specially to enable disabled persons in need of personal care to cope better with their disabilities in the way they see fit. Equally, the pattern of expenditure of a disabled person may well be different and more difficult to predict than that of an applicant without a disability.”

Even on the ‘manifestly without reasonable foundation’ test for justification of discrimination, the council failed.

“Given that the discriminatory effect of the HB size criteria on disabled persons is only justified by the availability of DHPs to “plug the gap”, and given that paragraph 2.7 the Good Practice Guide refers to additional funding having been allocated for this purposes, it is difficult to see any reasonable justification for the Council’s approach, nor that it is a means of achieving a legitimate aim, let alone a proportionate one. Having analysed the effect of Burnip and MA, Stuart-Smith J in Rutherford took the view that a decision to withhold DHPs in that case “would appear to be unjustifiable” and, more generally, that councils were acting “wrongly” by including DLA(c) in household income: I fully agree with that conclusion.”

Discrimination under Article 14 and/or under Equality Act 2010 found. Decision unlawful under ground 2.

Ground 3 – Public Sector Equality Duty/Failure to make reasonable adjustments.

Sandwell argued that it had carried out an equality impact assessment in 2009. “The brief assessment stated that there was no evidence of adverse impact on the grounds of disability, but recommended sample checks on decisions to award and refuse the benefit.” Sandwell claimed to have carried out monthly sample checks. The High Court, though, found:

“It is will be apparent from the above summary of Mrs Knowles’ evidence that no assessment has been made of the Sandwell Policy in the light of the changes to HB in April 2013 or the DWP Guidance which deals with the effect of those changes on the approach of local authorities to awarding DHPs. That is perhaps not surprising in view of my finding in relation to issues 1 above that the Council has not taken those matters into account. The monitoring exercise undertaken appears to be a plain case of ticking boxes rather than a substantive consideration of how the Council’s discretion is being exercised and its effect on disabled applicants.”

Thus a clear breach of the PSED

On failure to make reasonable adjustments, Equality Act s.29(7) of the 2010 Act provides that a person who exercises a public function that is not the provision of a service owes a duty to make reasonable adjustments. That duty includes, pursuant to section 20(3) of the 2010 Act, the following requirement:
“… where a provision, criterion or practice … puts a disabled person at a substantial disadvantage in relation to a relevant matter in comparison with persons who are not disabled, to take such steps as it is reasonable to have to take to avoid the disadvantage.”

Given the findings on ground 2 above, there was clear failure to make reasonable adjustments. Decision unlawful on ground 3.

Ground 4 – statutory purpose/irrationality

Here the Hardys argued from Burnip [Our report]:

“It would therefore be wrong in principle, in my judgment, to regard Mr Burnip’s subsistence benefits as being notionally available to him to go towards meeting the shortfall between his housing-related benefits and the rent he had to pay.”

R (Turner) v London Borough of Barnet Housing Benefit Review Board [2001] EWHC 204 (Admin) was wrongly decided, the Hardys argued. (Turner held that “In circumstances where the draftsman has been so specific about what is to be disregarded and in what context, I do not think that one can extract any wider statutory purposes to the effect that disability living allowance is to be disregarded altogether when determining housing benefit. The very fact that the statutory ring-fencing does not apply to the care component in the context of [the regulation permitting a discretionary award] is in my view a strong indicator that ring-fencing is not required.“).

Amongst other reasons, Parliament’s failure to ring fence DLA(c), unlike DLA(m), could be explained by Councils themselves providing care services, for which it would be irrational to exclude consideration of DLAc.

Alternatively Turner should be distinguished or should not be followed.

But the High Court disagreed:

“the key point remains that specific provision is made to ring-fence DLA(m) but no such protection is given to DLA(c) other than in relation to HB. Parliament could have provided such protection (and qualified it as necessary), but did not do so. Identifying certain care-related assessments in which it would make sense to take DLA(c) into account may or may not explain why DLA(c) was not ring-fenced, but in any event the legislative solution chosen was not to provide general protection as was provided for DLA(m). In those circumstances, as Richards J held in Turner, is it not possible to extract a wider statutory purpose that DLA(c) should be disregarded in calculating housing benefits. Whether it is right for DLA(c) to be taken into account in assessing another benefit in any particular case may well engage issues of public law and the Human Rights Act, as discussed above in relation to the facts of this case, but taking into account DLA(c) in calculating another benefit is not in itself irrational.”

Ground 4 therefore failed.

Overall, the DHP decision was unlawful on 3 of 4 grounds.

Comment

While only 75% as devastating as Sandwell’s loss in the Council Tax residence test JR, this is a significant case.

The Court did not agree a blanket ban on taking into account DLAc in calculating other benefits. However, given the terms of the remaining areas of the judgment, any Council that proposes to continue taking DLA(c) into account in assessing income for DHP awards needs to consider it very carefully indeed.

Firstly, no blanket policy – trite public law on fettering of a discretion (and the D does stand for discretionary), but all too often forgotten.

Secondly, it is hard to see any situation in which taking DLA(c) into account as income would not amount to Thlimmenos discrimination in the terms set out in this judgment. While both the A1P1 and Art 8 decisions might well be argued further and higher up, as it stands this decision follows MA, Rutherford etc. as taking DHP as part of the statutory HB scheme, required to avoid unjustified discrimination at the level of the HB regulations themselves. As such, this is the codification of the ‘DHP is necessary to avoid discrimination in each case’ position that I and others saw following from Rutherford.

The findings in Art 14 discrimination meant the finding on the PSED was pretty much inevitable. But no equality impact assessment having been carried out on the DHP policy in relation to the huge changes (and additional funding) brought about through the introduction of the bedroom tax and the subsequent DHP Guidance was a certain way to lose this point. How many councils carried out a fresh EIA on their DHP policies with the introduction of the bedroom tax?

While the final refusal to find a blanket ring fencing of DLA(c) might offer a crumb of comfort to some councils, I suspect that a close look at grounds 1 to 3 would show that most councils’ approach to assessing DLA(c) as income would fail.