VERDICT
In the legal dispute between
1. xxx,
2. xxx,
3. xxx,
– Plaintiffs –
Legal representative:
for 1-3: Attorney Sven Adam,
Lange Geismarstraße 55, 37073 Göttingen
against
District of Göttingen, represented by the District Administrator,
Reinhäuser Landstraße 4, 37083 Göttingen
– Defendant –
The 35th Chamber of the Social Court of Hildesheim, in the oral proceedings of June 18, 2018, with Judge xxx and Lay Judges xxx and xxx presiding, has ruled as follows:
1. The defendant is ordered, with the annulment of the rejection notice of 02.09.2013 as amended by the appeal decision of 11.02.2014, to make a new decision on the plaintiffs' application for benefits of 09.08.2013 for the period from 01.09.2013 to 28.02.2014.
2. The defendant shall bear 2/3 of the plaintiffs' necessary extrajudicial costs.
FACTS
The plaintiffs are requesting that certain costs be taken into account as operating expenses within the framework of the defendant's calculation of performance.
The plaintiffs receive ongoing basic income support for job seekers in accordance with the provisions of Book Two of the German Social Code (SGB II). Plaintiffs 1 and 2, together with their daughter, plaintiff 3, form a household unit for the purposes of this benefit.
On August 9, 2013, the household submitted an application to the defendant for benefits under Book II of the German Social Code (SGB II). In the application, the second plaintiff stated a monthly income of €1,200 from self-employment and €184 in child benefit. An attachment entitled "Income from Self-Employment" was included with the application, indicating a shareholding in xxx. Also included was a profit estimate for the period from September 1, 2013, to February 28, 2014, showing an average monthly income of €1,300 after deducting expenses. Furthermore, the application included short-term profit and loss statements from the tax consultancy xxx for the months of May 2013 and June 2013.
As part of the review of the benefit claim, the defendant, by letter dated August 26, 2013, requested the plaintiffs to provide further evidence of their self-employment. The defendant requested information on personnel costs, tax consulting fees, costs for repaying business loans, interest payments, and other business expenses.
Since the plaintiffs subsequently failed to submit the requested documents, the defendant, according to a note by the responsible case worker (see page 419 of the defendant's administrative file), calculated the monthly income by taking the income for June 2013, amounting to €4,809.03 as shown in the short-term profit and loss statement of the tax consultancy, and deducting the expenses for the same month, amounting to €1,791.11. The defendant then divided the difference by two to determine the individual share of the second plaintiff in the company's profits. In this way, the defendant calculated a monthly income of €1,508.96 for the second plaintiff.
Based on this calculation, the defendant rejected the plaintiff's application for benefits under Book II of the German Social Code (SGB II) for the period from September 1, 2013, to February 28, 2014, in a decision dated September 2, 2013. The defendant stated as grounds for the rejection that, based on the income forecast prepared by the tax advisor, the plaintiff was not in need of assistance. The defendant based its decision on the previously calculated monthly income of the second plaintiff, amounting to €1,508.96. Furthermore, certain expenses could not be considered pursuant to Section 11 of Book II of the German Social Code (SGB II) in conjunction with Section 3 of the Unemployment Benefit II Ordinance (AlgII-Verordnung): These included, for example, bookkeeping costs, bank charges, other operating expenses, depreciation, and other business-related expenses. Tax-related expenses would also not be taken into account when calculating income and expenses. With regard to the first plaintiff, the defendant refused to grant benefits until the required cooperation had been provided. Thus, the result of an official medical examination of November 29, 2012, could not be obtained for the first plaintiff because, despite letters dated February 18, 2013, May 3, 2013, and June 11, 2013, the first plaintiff did not return an enclosed declaration of release from confidentiality to the defendant.
The plaintiffs, through their legal representative, filed an objection on September 15, 2013, against the rejection notice of September 2, 2013. In support of the objection, the legal representative stated that it was unclear why bookkeeping costs, incidental bank charges, other operating expenses, and advance payments of value-added tax should not be deductible as business expenses when calculating income.
The defendant rejected the appeal with a formal notice of rejection dated February 11, 2014, and denied reimbursement of costs pursuant to Section 63 Paragraph 1 of the German Social Code, Book X (SGB X). The defendant reasoned that, for self-employed individuals, necessary expenses actually incurred during the benefit period are deductible from business income, regardless of tax regulations. Therefore, only taxes directly related to generating income are deductible. Value-added tax (VAT) on sales of goods and services is not deductible. Unlike tax law, SGB II law only considers expenses actually incurred that are business-related, necessary, unavoidable, and reasonable. The reasonableness of business expenses is determined by the circumstances of a person receiving assistance, not by those of other self-employed individuals who can meet their needs without state support. For this reason, the claimed bookkeeping costs are not reasonable, as a balance sheet is not necessary to determine profit; a simple comparison of business income and business expenses suffices (see Section 4 Paragraph 3 of the German Income Tax Act). These costs are not reasonable for a business with a monthly profit of only €1,300. Special bookkeeping skills are also not required. The incidental costs of cash transactions and other operating expenses cannot be recognized as business expenses, as there is no documentation for them and they are not necessarily related to generating income.
On March 14, 2014, the plaintiffs filed a lawsuit before the local social court.
The plaintiffs argue that the rejection of their application for benefits under Book II of the German Social Code (SGB II) by the decision of September 2, 2013, was unlawful. They contend that they are in need of assistance because the defendant incorrectly considered the income of the second plaintiff. They further argue that the bookkeeping costs are deductible as business expenses, since the second plaintiff lacks formal bookkeeping training. She focuses entirely on her core business and leaves the bookkeeping to her tax advisor. Moreover, the Stade Social Court ruled in its judgment of February 28, 2013 (Case No. S 17 AS 814/11) that the deductibility of tax advisor fees, or their recognition as business expenses, depends on whether the training imparts the necessary knowledge. This is clearly not the case with a [missing information] or [missing information] training program. The ancillary costs of financial transactions, other operating expenses, and interest payments on long-term liabilities were already documented in the short-term profit and loss statements prepared by the tax consulting firm commissioned by the second plaintiff. The ancillary costs of financial transactions included account maintenance fees, the rental of a debit card terminal for the shop, and administrative costs for loans and returned direct debit fees. Other operating expenses encompassed purchases required by the shop, such as toilet paper and wrapping paper. Furthermore, the denial of benefits to the first plaintiff, also stipulated in the rejection notice of September 2, 2013, was likewise unlawful. A breach of the duty to cooperate could not exist, because requesting a medical certificate regarding employability was inadmissible. There was no evidence to suggest that the first plaintiff was "unemployable" within the meaning of the German Social Code, Book XII (SGB XII). Furthermore, the rejection notice of September 2, 2013, is also flawed because page 2 of the notice stipulates the denial of benefits for the period from September 1, 2013, to February 28, 2014 , although February 28, 2014 , was clearly intended. This inaccuracy is to the detriment of the defendant. Moreover, the plaintiffs consider the final denial of benefits in the notice of September 2, 2013, to be unlawful because the individual cost items were not sufficiently determined and, in any case, due to the inability to precisely ascertain the income of the second plaintiff, only a preliminary decision could have been issued. At the latest by the time the appeal decision was issued, the defendant could have also accessed existing data on the self-employment income. Therefore, there is at least a right to a new decision on the benefit application.
The plaintiffs request that
to order the defendant, setting aside the rejection notice of 02.09.2013 as amended by the appeal decision of 11.02.2014, to reconsider the plaintiffs' application for benefits of 08.09.2013 for the period from 01.09.2013 to 28.02.2014.
The defendant requests that
to dismiss the lawsuit.
He considers the contested decision lawful and refers first to his reasoning in the initial and appeal proceedings. Furthermore, the defendant does not yet consider the rejection notice of September 2, 2013, unlawful due to the erroneous date "February 28, 2013 " in the denial of benefits to the first plaintiff, because an interpretation of the notice reveals that February 28, 2014 , was meant, a date also mentioned several times elsewhere in the contested notice. Moreover, there is no entitlement to a new decision because the defendant was entitled to base his decision on the income forecasts that the plaintiffs themselves stated or estimated in their benefit application. Insofar as certain business expenses were not taken into account, this is because they were deemed unreasonable. Finally, the bookkeeping costs are also not deductible as business expenses, as they are disproportionate to the monthly profit of €1,300. Therefore, the judgment of the Stade Social Court cannot be applied because it involved entirely different sums of money. Furthermore, the plaintiffs did not claim that special accounting skills were required to generate a monthly profit of €1,300.
For further details of the facts and the other submissions of the parties, reference is made to the court file and to the administrative file of the defendant.
REASONS FOR DECISION
The admissible claim is well-founded.
After the plaintiffs' attorney withdrew the original claim for benefits under Book II of the German Social Code (SGB II), which had been announced in writing, during the oral hearing on June 18, 2018, and now only requested a new decision from the defendant regarding the plaintiffs' benefit application of August 9, 2013, the only remaining issue in the present proceedings is whether the plaintiffs have a right to a new decision (see section 1 below). Notwithstanding this, the court finds itself compelled to make supplementary findings (see section 2 below)
In detail:
1.
The plaintiffs, with the annulment of the opposing rejection notice of 02.09.2013 as amended by the appeal decision of 11.02.2014, are entitled to a new decision on their benefit application of 09.08.2013 for the period from 01.09.2013 to 28.02.2014.
In the opinion of the adjudicating chamber, the defendant was not permitted to make a final and conclusive decision on the rejection of SGB II benefits on September 2, 2013 , without first taking into account the actual income of the plaintiff no. 2 for the month of June 2013, which was already known at that time.
In detail:
A note from a case worker of the defendant (see page 419 of the defendant's administrative file) shows that, due to a lack of evidence, the defendant based his subsequent rejection decision of 02.09.2013 on the short-term profit and loss statement of the tax consultancy firm "xxx" from xxx for the month of June 2013.
Although, at the time of his rejection decision of 2 September 2013, the defendant could only make a predictive decision regarding the income situation in the following months of the benefit period from 1 September 2013 to 28 February 2014 , because no actual income data was available at that time.
However, if an administrative act is issued on the basis of incompletely established facts and a prognosis based thereon, the defendant must take into account the circumstances known or recognizable up to the conclusion of the administrative proceedings (see BSG, judgment of 06.04.2011 — B 4 AS 119/10 R — beck-online, para. 41; also Kemper, in: Eicher/Luik, SGB II-Kommentar, 4th ed. 2017, § 41a, para. 11, beck-online).
In the present case, this includes the requirement that the defendant, upon conclusion of the administrative proceedings on September 2, 2013, should have considered the actual income of the second plaintiff from the preceding months. However, the defendant's administrative file does not indicate that the defendant requested the plaintiffs to submit current income data for the second plaintiff before issuing the final denial of benefits on September 2, 2013. Instead, the defendant relied on an existing forecast prepared by the second plaintiff's tax advisors for the month of June 2013. In the opinion of the court, a final denial of benefits could not be issued on this uncertain factual basis.
Moreover, the case law, based on the previous legal situation regarding Section 40 of the German Social Code, Book II (SGB II) in conjunction with Section 328 of the German Social Code, Book III (SGB III), which is applicable here, has already concluded that in cases where, objectively, at the time of the administrative decision, only the possibility of a prognosis exists, particularly with regard to the income situation (e.g., in the case of fluctuating income), a final decision is unlawful (see Federal Social Court (BSG), judgment of November 29, 2012 – B 14 AS 6/12 R = BSGE 112, 221; also Kemper, in: Eicher/Luik, loc. cit., Section 41a, marginal note 14, beckonline).
Against this background, the defendant should therefore have issued a provisional grant of benefits (albeit a limited amount) instead of a final rejection of benefits. At the very least , however, he should have ascertained and considered the most current and available data on the income situation of the second plaintiff before issuing a final rejection.
Since the defendant did not properly exercise his discretion regarding a possible provisional grant of benefits by basing his decision on insufficient factual data in the form of income forecasts for June 2013, he is obligated to issue a new decision on the plaintiffs' benefit application of August 9, 2013. In this new decision, the defendant must take into account the now available factual data concerning the income situation of the second plaintiff and include it in the benefit calculation.
2.
Even though the question of which cost items are to be recognized as business expenses within the meaning of the ALG II regulation is no longer in dispute due to the amendment of the claim at the oral hearing on June 18, 2018, the court points out, as an obiter dictum and as a guideline for a new decision by the defendant, that, based on the outcome of the oral hearing on June 18, 2018, the following cost items claimed by the plaintiffs should be recognized as business expenses:
- Ancillary costs of financial transactions: These include account maintenance fees, rental of an EC card terminal, and administrative costs for loans and returned debit fees. Such costs are likely closely related to the second plaintiff's income from the xxx of "xxx".
- Other operating expenses: This refers to purchases that the company needs, such as toilet paper, wrapping paper, and other costs that are unrelated to the company's accounts. These costs should also be directly related to generating income and should not be disproportionate to the company's earnings.
- Regarding the bookkeeping costs, the question arises whether such costs are still proportionate to the company's income. On the other hand, the court tends to agree with the Stade Social Court's view that, for these costs to be considered business expenses under Section 11 of the German Social Code, Book II (SGB II), it is crucial whether the partners acquired bookkeeping skills during their training, for example, to avoid these costs. In this respect, the legal representative and the first plaintiff credibly asserted at the hearing that specific bookkeeping skills are not taught in the vocational training programs for xxx and xxx. Such skills are typically only acquired in vocational training programs aimed at future self-employment (e.g., in professions requiring a master craftsman's certificate). Therefore, there is strong support for the plaintiffs' position that these costs are also deductible as business expenses.
that the questions raised by the parties regarding the inaccuracy of the rejection notice of September 2, 2013, due to the incorrect date "February 28,2013," and the denial of benefits to the first plaintiff due to a failure to cooperate, are no longer relevant, since the court already considers the rejection notice of September 2, 2013, to be unlawful for the reasons stated above and has therefore ordered a new decision.
However, the court also notes, as an "obiter dictum," that requiring the defendant to issue a release from confidentiality in order to obtain the results of an official medical report would likely constitute an unreasonable obligation for the first plaintiff. In this respect, the court is unaware of any legal obligation that takes precedence over data protection and would require the plaintiff to issue such a release. Therefore, the defendant could have commissioned its own expert opinion on the first plaintiff's ability to work, should any doubts have existed in this regard.
Therefore, the complaint had to be granted.
The decision on costs is based on Section 193 of the Social Court Act (SGG). Since the plaintiffs only obtained a new decision on their claim for benefits and not full benefits, and since the amendment of the claim during the oral hearing on June 18, 2018, constituted a tacit partial withdrawal of the claim, the court considers a cost allocation of 2/3 to be appropriate.
The following is information on legal remedies.
