denotes premium content | Jan 8 2009 Feature
posted 1 Sep 1999 in Volume 4 Issue 6
Overpayment of Benefits.
The law,
recovery and implications for appointees
When a person is paid benefit to
which they are not entitled, there is said to have been an overpayment of
benefit. That overpayment may or may not be recoverable. This is an issue which
is not just one which arises in the context of someone who fails to disclose
their part-time earnings, but also one which occurs among older people,
especially those who may be claiming a means tested benefit for the first time,
and who are unfamiliar with the system - in particular the fact that disclosure
to one person will not necessarily count as disclosure sufficient to prevent an
overpayment. For example, a person claiming (say) income support may well give
details of their state retirement pension but fail to disclose a private pension
or (as in a case known to the writer) a war pension or industrial disablement
pension
.
This article considers the law on
overpayments and their recovery, and considers in particular the relationship
between overpayment and appointees. It should be mentioned that the law on
overpayment and recovery in the case of housing benefit and council tax benefit
is different and generally harsher on the claimant; it is not covered in this
article.
The
general rule is that benefit need only be repaid if the overpayment is due to
either a misrepresentation as to, or a failure to disclose, a material fact. The
law is to be found in Section 71 of the Social Security Administration Act 1992.
Section 71(1) states,
(1) Where it is determined that, whether fraudulently or otherwise, any
person has misrepresented, or failed to disclose, any material fact and in
consequence of the misrepresentation or failure -
(a) a payment has been made in respect
of a benefit to which this section applies; or
(b) any sum recoverable by or on
behalf of the Secretary of State in connection with any such payment has not
been recovered, the Secretary of State shall be entitled to recover the amount
of any payment which he would have received but for the misrepresentation or
failure to disclose.
There must be a valid review of the decision awarding benefit for an
overpayment determination to be made. Prior to July 24, 1996, this review had to
take place at the same time as the determination; since that date, however,
under the Social Security (Overpayments) Act 1996, it may be made
separately.
For
an overpayment to be recoverable, there must firstly have been a
misrepresentation or failure to disclose a material fact; secondly there must
have been a payment of benefit, or non-recovery, as a consequence of that
overpayment. It is then necessary to determine the amount recoverable and the
period to which it relates. The burden of proof lies on the Adjudication
Officer.
The
Commissioner in R(SB) 54/83 held that there were six tests for recovery on the
ground of failure to disclose; (a) there has been a failure to disclose (b)
where disclosure could reasonably be expected (c) a material fact (d) by a
person who knew that fact (e) as a result of which expenditure was incurred (f)
by the Secretary of State. It is not necessary for the Adjudication Officer or
the Tribunal to deal with all six tests in every case. It is a useful way of
identifying the points at issue, but, said the Commissioner in R(IS) 17/95, they
should be applied intelligently.
Many overpayment cases arise as a
result of the signature by the claimant of an order from an order book. The
order includes certain words which amount to a declaration by the claimant that
there are no changes in the claimant's circumstances which would affect
entitlement. The wording is:
"I declare that I have read and
understood all the instructions in this Order Book, that I have correctly
reported any facts that would affect the amount of any payment and that I am
entitled to the above sum. I acknowledge receipt of the above sum."
Material
facts
What is a "material fact"? Firstly, it is not a matter of law. The
statement by the claimant signing the order book that "I am entitled to the
above sum" has been held to be a statement of law, not of fact, and thus cannot
be considered as grounds for overpayment (by Evans LJ, dissenting, in Jones
& Sharples v Chief Adjudication Officer [1993] 1 All E.R. 225 - the majority
did not consider the question). This view has been supported in CS 102/1993,
although the Commissioner points out that it may be read as a statement by the
claimant of a belief in a current entitlement. Even this is not the end of the
matter, because the Commissioner in CIS 309/1994 held that a claimant's belief
is not material; what a claimant believes is irrelevant since payment does not
depend on belief.
Secondly, Commissioners have drawn a distinction between a fact and
conclusions to be drawn from facts.
Thirdly, the fact must be material. It
must be the case that knowledge of the fact would have caused the decision to be
different. Hence the conclusion of the Commissioner in CIS 309/1994 (above) that
the claimant's opinion was irrelevant. Even had the Adjudication Officer known
of it, it would not have altered the decision.
Misrepresentation
The two main concepts to consider are
those of misrepresentation and failure to disclose. Misrepresentation firstly
requires a statement to have been made, whether orally or in writing (or in some
cases by conduct). Secondly, the statement must be untrue. The issues were
considered by the Court of Appeal in Jones and Sharples v Chief Adjudication
Officer (see above).
Mr Sharples had completed a form on which he had stated that no member
of his family had any insurance policies. Unknown to him, this was incorrect.
The declaration at the end of his form was worded as follows: "As far as I know
the information on this form is true and complete." It was held that these words
qualified his answer, which was therefore not a misrepresentation.
On the other
hand, Mr Jones had signed a declaration in the current formulation set out above
("I declare that I have read and understood all the instructions..."). Mr Jones
had claimed unemployment benefit, which he reported to the benefits office when
claiming income support, but he did not tell them when it was later awarded.
In the Court of
Appeal, Evans LJ accepted his contention that there was no representation of a
material fact, and whether or not Mr Jones had reported a material fact was not
itself a material fact. As noted above, his representation of entitlement to the
sum in question was a representation of law, not of fact. Stuart-Smith LJ and
Dillon LJ, however, disagreed, Stuart-Smith LJ holding that the statement "I
have correctly reported any facts ..." was a statement of a material fact,
because if it were untrue, Mr Jones was not entitled to any benefit. The
reasoning leaves something to be desired, and Evans LJ's approach is clearer and
more cogent.
It
should additionally be noted that the majority was prepared to import into the
declaration the words "known to me" after "correctly reported any facts". In CP
34/1993, the Commissioner refused to follow this approach, saying the comments
were obiter, but the approach of the Court of Appeal has been upheld by a
further decision of the Court of Appeal in Franklin v Chief Adjudication Officer
(The Times, 29 December 1995).
Since the misrepresentation may be
wholly innocent, is it possible for a person who is mentally incapable to make a
misrepresentation? The Commissioners began to develop the idea that a mentally
disordered person could not make a misrepresentation, partly through the use of
the contractual concept of "non est factum". In CIS 545/1992, the Commissioner
held that there was a presumption that someone subject to an order of the Court
of Protection was incapable of making a valid representation, and that there was
a heavy onus on anyone seeking to show otherwise. However, on appeal to the
Court of Appeal, this approach was rejected. The Court refused to allow the
claim to be considered separately from the representation; if the claimant were
capable of making a claim, she was capable of making a representation, and vice
versa (Chief Adjudication Officer v Sheriff, The Times, 10 May 1995). The
representation and the claim are inextricably linked. What happens, though, if
the misrepresentation is not on the claim form, but elsewhere? The question of
mental incapacity and overpayment will be considered in a future article.
Failure
to disclose
The concept of failure to disclose proceeds from, but is not always
linked to, the duty placed on claimants by Reg 32 of the Claims and Payments
Regulations to notify the Secretary of State in writing of any change in
circumstances which might affect the right to benefit. Failure to disclose is
perhaps a more common source of findings of overpayments, and hence of appeals,
than is misrepresentation - which, although it may be wholly innocent,
nevertheless offers a number of possible arguments to the claimant who is
accused of a misrepresentation.
The term 'failure' might imply some
breach of obligation, and has been held to mean this by a Commissioner, but
given that within the present wording of section 71 an innocent failure to
disclose is enough, this approach must be doubted. The circumstances of the
particular case are important. Is disclosure reasonably to be expected? In a
case where the claimant had reported her expectation that she would in due
course be awarded a benefit, it was held that she had acted properly and
reasonably and that she should not be expected later to report the fact that it
was actually being paid (CSB 727/1987). In another case where the claimant was
advised by both her solicitor and her barrister that she need not disclose an
increase in child maintenance payments, it was held that disclosure was not
reasonably to be expected (CSB 510/1987).
This also raises the question of
mental incapacity, and the ability of the claimant to disclose a matter which
she may have forgotten, or the significance of which is no longer apparent to
her. Generally it may be stated that a person's mental state could be relevant,
but only where it rendered the claimant wholly incapable of appreciating the
need to disclose the material fact of which he or she knew. There are several
cases on this point, which as noted above will be considered in a future
article.
To whom
should disclosure be made? The leading case is R(SB) 15/87. The duty on the
claimant is not necessarily to disclose to the person who is dealing with the
claim, but to disclose to the appropriate office while giving adequate
information to enable the person dealing with the claim to be identified. The
claimant is not entitled to assume that making disclosure to a different office
(for example to the Child Support Agency) is sufficient to amount to disclosure.
There may be
problems for someone who believes they have made appropriate disclosure, but who
have quite innocently disclosed to the wrong person - for example, where an
award of attendance allowance has been reviewed and terminated as part of the
Benefit Integrity Project, entitlement to the severe disability premium would go
with it. The claimant may well believe that, since the Benefits Agency has
itself made the decision to review the attendance allowance, there is no
separate need to notify the income support section. The only escape from this
situation is by way of an argument that it is not reasonable to expect further
disclosure - an argument which may or may not be successful.
Once effective
disclosure is made, no further overpayment is recoverable. The AO must show that
the overpayment resulted from the misrepresentation or the failure to disclose.
Recovery
from appointees
From whom may recovery be made? Section 71(3) says that all amounts are
recoverable from the person who made the misrepresentation or failed to make
disclosure, including a third party. The question is how this affects an
appointee. In CIS 332/1992, the Commissioner held that, where a
misrepresentation is made by the appointee in that capacity, recovery can be
from the claimant only and not from the appointee. The appointee is not a third
party; her acts and omissions are those of the claimant. This view is also that
contained in the Adjudication Officers Guide. However, in CIS 12022/1996, ( a
case cited in CPAG's Income Related Benefits: The Legislation, ed Mesher and
Wood, and in August 1998 Legal Action, but not mentioned in the Adjudication
Officers Guide) another Commissioner declined to follow CIS 332/1993, and held
that the statement in subsection (3) that recovery is from the person making the
misrepresentation (etc.) means just what it says. In that case the appointee was
the claimant's mother. A failure to disclose by the appointee could lead to
recovery from the claimant, but also from the appointee, in line with principles
of agency and vicarious liability. It would seem to follow, given the "strict
liability" wording of section 71, that where the claimant is mentally incapable,
the appointee may nevertheless be liable - although the issue mentioned above
remains, which is the question of whether a claimant with limited or
deteriorating mental capacity can be taken to know a particular fact, and if
not, whether independent knowledge can be imputed to the appointee.
It should be said
that the careful reasoning of the Commissioner in the latter case has its
attractions. The issue is one which awaits legislation, or the Court of Appeal.
Meanwhile it apparently applies to receivers appointed by the Court of
Protection in just the same way as to appointees.
How then should an adviser react to a
claim that say £5000 of benefit has been overpaid? The first point which must be
made is that, if fraud is suspected, there is a possibility of prosecution, and
the client should be made aware of this. Even if no prosecution is to follow,
however, the situation is still one which is likely to be distressing for a
client, whether personally or as an appointee or personal representative. Paul
Stagg points out ("Overpayment and Recovery of Benefits", Legal Action Group)
that the first step is not, as it may be in other cases, to write to request a
review with a statement that the claimant should be regarded as appealing
against a refusal to review. This is because the burden of proof is on the
person who asks for a review, and the burden of proof in an overpayment case is
therefore reversed. The proper course is to appeal.
The adviser should check the amount of
the alleged overpayment, as well as the circumstances giving rise to the
finding. Note that, even if s/he was not entitled to a particular benefit, the
claimant will often have been entitled to something else in its place. Apart
from the issues discussed above, such as whether it is reasonable to disclose,
around which an argument for an appeal may be constructed, the adviser should
also be aware of the need for the adjudication officer to show a causal link
between the misrepresentation or non-disclosure and the overpayment. The adviser
should note two other things: firstly, the decision to recover benefit is one
for the Secretary of State, who can waive recovery if persuaded (by the
claimant's MP?) to do so. The other is that personal representatives may be able
to apply to the court for relief.
The advice in every case must be to
make full and frank disclosure. Given the wording of the section, even an
innocent failure to disclose may lead to a substantial overpayment being
recovered.
Alan Robinson
Legal and Welfare Rights
Training
