AML: HMRC flexes enforcement muscle to the tune of £7.8 million
R (on the application of RF) v Secretary of State for Work and Pensions  EWHC 3375 (Admin)
The court quashed paragraph 2(4) of the ‘Social Security (Personal Independence Payment) (Amendment) Regulations 2017’ (the 2017 regulations) on the basis that it was unlawfully discriminatory.
Paragraph 2(4) of the 2017 regulations had sought to amend part 3 of schedule 1 of the equivalent 2013 regulations. The amendment would have restricted access to Personal Independence Payments (PIP) for individuals suffering from mental health related issues, whilst not affecting individuals with physical health issues, even where the result of each was the same restriction to movement. The Secretary of State for Work and Pensions (SoS) accepted that the intention behind the amendment was to make a policy distinction between not supporting with PIPs individuals with mental health impairments and supporting with PIPs those with physical health impairments. In the Government’s equality assessment in February 2017, it was estimated that this change would likely disadvantage over 300,000 people and save £900m annually. In deciding the case, Mr Justice Mostyn held that this distinction could not be objectively justified on the evidence presented, and, as such, the amendment was manifestly without reasonable foundation and therefore unlawful.
The claimant, supported by two interveners; Mind and the Equality and Human Rights Commission, relied on the following three grounds in support of its application to quash paragraph 2(4) of the 2017 regulations, all of which were successful:
i) the 2017 regulations are in breach of the prohibition against discrimination in Article 14 of the European Convention on Human Rights (ECHR), read together with Article 8 and Article 1 Protocol 1;
ii) the 2017 regulations are ultra vires Part 4 of the Welfare Reform Act 2012; and
iii) SoS unlawfully failed to consult prior to making the 2017 regulations.
Mr Justice Mostyn considered the four-limbed test from Bank Mellat v HM Treasury (No 2)  AC 700 when considering whether or not the 2017 regulations were in breach of Article 14 ECHR:
i) the objective of the measure is sufficiently important to justify the limitation of a protected right;
ii) the measure is rationally connected to that objective;
iii) a less intrusive measure could not have been used without unacceptably compromising the achievement of the objective; and
iv) when balancing the severity of the measure’s effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter.
All these limbs are to be evaluated to the standard of whether or not the measure is ‘manifestly without reasonable foundation’.
Limbs i) and ii) were addressed together by the court. The objective of the measure was held to be to save on the financial costs of PIP payments. This finding was contrary to submissions advanced on behalf of SoS that saving costs alone was never the reason for making the 2017 regulations, and that the objective was instead to restore the original policy intention, which was based on differing levels of functional need for claimants of PIP, and that in any event the protection of a country’s economic system is a legitimate aim under Article 14. Mr Justice Mostyn was unconvinced by these submissions on the basis that the policy objective was, plainly, to save money, in that if money was no object the 2017 regulations would not have been passed, and saving money is manifestly not a sufficiently important objective to justify the limitation of Article 14 rights.
When considering whether or not the measure was rationally connected to that objective, SoS relied upon the evidence of a highly qualified medical expert, whose expertise was recognised by the court. However the issue came down to one of the principles of expert evidence, as set out in The RBS Rights Issue Litigation  EWHC 3433 (Ch). The first principle of expert evidence from this case is that unless there is a recognised body of expertise governed by recognised standards and rules of conduct relevant to the question which the court has to decide, the court should decline to admit evidence which, ex hypothesi, is not evidence of any body of expertise but rather the subjective opinion or hypothesis of the intended witness. There was no research presented to the court regarding whether or not the functional needs of individuals with physical health issues and individuals with mental health issues were in any way materially different such that the distinction between them could be justified in the 2017 regulations. The evidence of the medical expert, by itself, was therefore no more than a subjective opinion or hypothesis. Mr Justice Mostyn extrapolated that lower standards should not apply to a law-maker than to a judge applying the law. If anything, they should be higher. He concluded that the discriminatory measure introduced by the 2017 regulations was not rationally connected to the legislative objective.
Regarding limb iii) SoS did not seek to argue that it was impossible to save money in some other non-discriminatory way. In evaluating limb iv) the court accepted the legitimacy of a formulaic evaluation system, even if it produces some, arguably unfair, results. Based upon the failure of the 2017 regulations to satisfy the test, it was also not possible for limb iv) to be satisfied. For the above reasons, Mr Justice Mostyn concluded that the measure could not be objectively justified, and that paragraph 2(4) of the 2017 regulations was manifestly without reasonable foundation. This required him to be very strongly satisfied that the four limbed test was not met. He said he had no hesitation in reaching that conclusion. The other grounds of challenge were also clearly proved. The parent statute did not grant the power to make secondary legislation with this effect, which was incompatible with the purpose of the scheme as defined in the parent statute. Further, a change of this magnitude and potential momentousness should have been consulted on, which it had not been. Therefore paragraph 2(4) of the 2017 regulations was quashed as unlawful.
This was an interesting case, particularly as Mr Justice Mostyn highlighted that the intention of differentiating between individuals with physical and mental health issues was never communicated to ‘the outside world’ and could not be deduced from either a literal or purposive construction of the original 2013 regulations. An uncharitable reading of these events might be that an unpopular (and, as the court concluded, ‘blatantly discriminatory’) amendment was slipped into law utilising secondary legislation, hoping it might not be noticed.
On 19 January 2018 the Secretary of State for Work and Pensions announced that the government did not intend to appeal this decision to the Court of Appeal and that the Department for Work and Pensions will now undertake an exercise to go through all PIP cases affected by this judgement, with payments to affected individuals to be backdated to the effective date in each individual claim.
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