Case note - overpayment of benefits

A recent Commissioners Decision (CA/1014/1999) has considered the relative liability of social security appointees and attorneys where an overpayment of benefit is made. This article considers that decision at some length because the clear analysis by the Commissioner (Mr Jacobs) is likely to be of assistance to all those who are acting for others with regard to their benefit claims.

In my earlier articles on benefit overpayments (ECA Vol 4 Issue 6 and Vol 5 Issue 3) I explained that where benefit is paid to someone by mistake that benefit is recoverable provided the overpayment arose as a result either of a misrepresentation or of a failure to disclose a material fact (section 71 Social Security Administration Act 1992). A misrepresentation can be entirely innocent. Normally recovery will be from the person making the misrepresentation or failing to disclose but the law allows recovery to be made from anyone who is responsible for the misrepresentation or failure to disclose (Section 71(3) of the Act). This rule is of particular relevance where a benefit claimant has someone else acting for them who has either been appointed by the Secretary of State to operate the claim on their behalf under regulation 33 of the Social Security (Claims and Payments) Regulations 1987 or has been appointed by the claimant under an Enduring Power of Attorney which has now been registered with the Court of Protection.

The Facts

The particular case considered by the Commissioner was that of a man (‘C’) who was already in receipt of attendance allowance from 1992. He then suffered a stroke which led him to be admitted to hospital and subsequently to a nursing home. One of the consequences of the stroke was that C began to have severe difficulties with communication; he may also have had problems with understanding but this is uncertain because of his inability to communicate.

In July 1993 a director of the nursing home (‘D’) was made C’s appointee by the Secretary of State. D claimed income support on behalf of C and disclosed that C was receiving attendance allowance. Payment of attendance allowance should have stopped at 24 May 1993 (because of the rule that a person in hospital may not receive attendance allowance for more than 28 days) but did not do so. D reported to the DSS the fact that benefit continued to be paid both in 1995 and again in 1997.

On 30 November 1993 C executed an Enduring Power of Attorney in favour of his daughter G. His attendance allowance was being paid into a building society account under the control of G. She believed the payments represented not attendance allowance but a pension.

The Adjudication Officer found that an overpayment had occurred covering the period from 24 May 1993 to 13 April 1997 and that the overpayment was recoverable from C on the grounds of his failure to disclose. Both G and D purported to appeal on behalf of C against this decision. The appeal from G being the first in time was accepted. The tribunal found that the overpayment was only recoverable for the period from 28 November 1993 until 13 April 1997 on the basis that C’s mental state was such that he could not have made the necessary disclosure but his daughter once appointed as his attorney could do so.

The tribunal decision

The decision did not specify from whom the overpayment was recoverable; assumed that G became C’s attorney on 28 November when clearly the Power of Attorney was not executed until 30 November; referred to C’s mental state but had little evidence about it and might have had no evidence to support their finding as to C’s mental state before 30 November; did not consider the possibility of a failure to disclose by D; and failed to investigate or make any findings on the earlier disclosure said to have been made by D.

For these reasons the Commissioner held that the tribunal had erred in law and sent the case back for a rehearing. He made the following directions to the new tribunal.

The Commissioner’s directions

Firstly the tribunal has no jurisdiction to decide that an overpayment is recoverable from anyone who is not a party to the proceedings. The parties to the rehearing would be C (against whom the original decision was made) and the Secretary of State (now taking the place of the Adjudication Officer under the changes in procedure introduced by the Social Security Act 1998). To decide that an overpayment was recoverable from either D or G would be contrary to the rules of natural justice and also to Article 6 of the European Convention. The appointee was only able to make an appeal on C’s behalf and did not thereby become a party to the appeal; and under the legislation now governing appeals the tribunal chairperson has no power to add anyone else as a party to the appeal.

Secondly the burden of proof that the duty to disclose has been breached was on the Adjudication Officer and is now on the Secretary of State. Given C’s communication problems the Commissioner felt that the tribunal would not find it hard to conclude that the Secretary of State had not discharged that duty.

The third question for the tribunal would be whether there was a failure by someone else which could be attributed to the claimant. The Commissioner dealt firstly with the appointee whom he held has a duty to disclose. This arises under regulation 32 of the Social Security (Claims and Payments) Regulations 1987 (the duty to furnish information affecting a claim and to report changes of circumstances) which applies to “every beneficiary and every person by whom … sums payable by way of benefit are receivable”. The duty falls on the appointee notwithstanding the fact that the attendance allowance was paid into an account managed by the attorney. The duty arises under the terms of the undertaking signed by the appointee on appointment.

The Commissioner then goes on to deal with the liability of the claimant through the attorney. Having firstly expressed doubts about the validity of the power in any event (although this is not a matter which he needs to decide) he holds that the power confers a general authority to act but does not impose a duty to do so. “There is no authority that an attorney’s failure to disclose at all in circumstances like this case is a breach of duty. So that failure cannot be attributable to the claimant.” The Commissioner holds that if G was aware that her father was receiving attendance allowance she may be under a moral duty to report this and a breach of such a duty would be a personal breach of a duty owed by her.

She is not covered by regulation 32 because benefit is not receivable by her but by the appointee. The solicitor for the DSS at the hearing argued that an appointment was subsequently superseded by the Power of Attorney and that the two could not co-exist without the risk of chaos. The Commissioner finds nothing in law to prevent this situation. There is nothing either in statute or in the grant of the Power of Attorney to enable the latter to supersede the appointment. It is a matter for the Secretary of State in an individual case to decide whether to revoke the appointment and give the appointee’s powers to the attorney.

The final question for the tribunal is when disclosure was made. It is possible that D made the necessary disclosure on appointment in July 1993 or that he did so on one of the two later occasions referred to above.

Comment

The case is helpful not merely because it outlines the relevant law with clarity but also because it draws attention to pitfalls for the unwary. The appointment of an appointee by the Secretary of State is a fairly common procedure and it will help to avoid some of the problems which may arise if advisers when drawing up an EPA check to see whether there is already an appointee and if so make arrangements for one person to fulfil both roles. The decision is helpful to attorneys whom the Commissioner obviously felt were not to be expected by reason of their appointment to have a close understanding of the donor’s benefit position but conversely makes it very clear what the duties of the appointee are and emphasises the importance of an appointee taking steps to acquaint him or herself with the benefit position and making all necessary disclosures promptly. In the instant case no decision had been made that recovery could be made from anyone other than the claimant; but the power to make such a decision is there and a defaulting appointee (or indeed attorney) should expect a decision requiring them to repay any overpayment personally. Furthermore where the claimant prior to his or her incapacity has been overpaid apparently on the basis of a misrepresentation or failure to disclose there is nothing to be gained by the appointee or attorney keeping quiet about this. The only safe route for the appointee or attorney is to make immediate disclosure.

Alan Robinson, Legal and Welfare Rights Training