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Feature

posted 1 Mar 2000 in Volume 5 Issue 3

Benefit Overpayments and Mental Incapacity

In a recent article (ECA Vol 4 Issue 6 p 26) I set out the detailed legislation concerning the overpayment and recovery of benefit. This article sets out to examine in more depth the position regarding overpayments made to those who are not of full mental capacity.

As explained previously, an overpayment arises when there has been a payment of benefit to a person who is not entitled to it. Section 71 of the Social Security Administration Act 1992 says that the Secretary of State is entitled to recover overpaid benefit where the overpayment results from a misrepresentation or from failure to disclose a material fact. The first question is whether there has been a misrepresentation or a failure to disclose, with a causal link to the benefit overpaid. This is a matter for decision by the Secretary of State, with an appeal to a tribunal. The second question, whether the overpayment shall be recovered, only arises if the answer to the first question is in the affirmative. If it does arise, it is a matter for the Secretary of State's discretion, and there is no right of appeal.

Misrepresentation

A misrepresentation may be wholly innocent and nevertheless result in a recoverable overpayment. It therefore tends to follow that there is little to be gained by investigating the claimant's honesty or motive, nor indeed by considering what the claimant, or a reasonable person, might have thought about the state of affairs in question. There may, however, be room for an argument based on his or her mental state.

The leading case is the Court of Appeal decision in Chief Adjudication Officer v Sherriff, The Times, May 10 1995. In that case, the claimant, who was elderly and unable to look after her own affairs, had been an in-patient in a psychiatric hospital from 1983. In 1986 she became subject to the jurisdiction of the Court of Protection, and her daughter was appointed as her receiver. Her daughter died in April 1988 but, although Mrs Sherriff remained subject to the jurisdiction of the Court of Protection, no new receiver was appointed until her son was appointed in February 1989. During the intervening period, Mrs Sherriff moved into a nursing home, and a claim was made for income support to meet all or part of the fees. Mrs Sherriff had capital in the region of £36,000 which was not disclosed. The claim form was completed on her behalf by staff at the nursing home, who were unaware of the Court of Protection Order, but were aware of her inability to understand and manage her own affairs. She signed the claim form, which contained a statement to the effect that she had no savings, and therefore did not have capital in excess of the (then) £6000 limit; therein lay the alleged misrepresentation.

The existence of the capital became known when her son, having been appointed her receiver and having become aware of the situation, disclosed it to the Department through his solicitors. It was held and not disputed that her son was not liable for any misrepresentation. The Commissioner also held that Mrs Sherriff was mentally incapable of any misrepresentation, and therefore made no misrepresentation as to her capital. He rejected the argument advanced on behalf of the Adjudication Officer to the effect that the issue turned on her capacity at the time of the alleged misrepresentation, which it would in most cases be impracticable to determine.

The Court of Appeal allowed the Adjudication Officer's appeal, and held that there had been a misrepresentation. The argument on behalf of Mrs Sherriff was that there could be no overpayment as there was no misrepresentation; Mrs Sherriff had no knowledge that a representation was being made at all, and thus could not make a misrepresentation. The Court of Appeal rejected this argument. If the law did not require her to have knowledge of the material fact being misrepresented, there was no reason why she had to know a representation was being made at all in order for there to be a misrepresentation. The Court held that, although the form had been completed by the nursing home on her behalf, she had signed it, and had therefore adopted the representations made as her own.

The Court held that there was a direct relationship between capacity to make a claim and capacity to make a representation. If she were mentally incapable of understanding that she was making a representation, then she was also mentally incapable of understanding that she was making a claim. Since a valid claim is necessary for the payment of benefit, then if she were not capable of understanding that she was making one, the income support paid to her was recoverable in any event, not under s.71 but on the ordinary principles of restitution (a conclusion which has been doubted).

On the face of it, Sherriff draws a fairly firm line under the proposition that a mentally incapable person may not make a representation; the capacity to make the representation is indivisible from the capacity to make the claim. However, there are other arguments which may be of value to a representative.

The claimant's case in Sherriff seems to have been argued on a narrow basis. The argument was that it was necessary for the claimant to know that a representation had actually been made, although not knowing of the material fact represented. The Court of Appeal clearly took the view that the fact that a claimant does not know that a representation is being made is not conclusive.

However, the clear link which is made between capacity to make a claim and capacity to make a representation equally clearly deals with the situation at the time the claim is made, and says nothing of the situation where a claimant's mental state deteriorates during the currency of the claim. The Court of Appeal's reasoning, that a valid claim is necessary for benefit to be paid, and this demands capacity, may well be correct. Even where this criterion is fulfilled, however, capacity may deteriorate. This is a different situation from the question of whether there must be capacity when the claim is made. Signatures on giros and order books may be representations, but they are not claims.

Furthermore, the Court made no reference to the decision in Jones & Sharples v Chief Adjudication Officer (see ECA Vol 4 Issue 6 p27) in which the majority draw a distinction between a general representation ('I have correctly reported all facts known to me') and a specific representation ('my capital does not exceed £8000'). They held that, for a general misrepresentation to lead to an overpayment, the claimant's knowledge of the particular fact is required. This principle (which would in any event not have availed the DSS in Sherriff, relying as they were on a specific misrepresentation) is therefore not affected by Sherriff. A person who was not aware of the true state of affairs, whether as a result of mental incapacity or for any other reason, cannot make a general misrepresentation.

An alternative argument which has found some favour with Commissioners is the argument of 'non est factum' (the common law doctrine which occasionally enables a person to argue that they should be treated as though they had never signed a particular document). The doctrine is of limited effect; the mistake must be as to the practical consequences of the signature, and not the legal significance of the document. If the claimant understands that money is to be paid to them as a result of their signature, they are unlikely to be able to rely on the defence.

In CSB/1093/1989, the Commissioner concluded that the doctrine did apply where the claimant had signed the slips in her order book and her daughter took them to be cashed. The Commissioner in CIS/545/1992 (Sherriff), who rejected the application of the doctrine to a claim form on the basis that non est factum is 'exclusively a contractual consideration', was not only arguably wrong in that assertion, but also made no reference to CSB/1093/1989.

The Court of Appeal in Sherriff does not seem to have considered the legality of a defence of non est factum. Millett LJ cited CSB/1093/1989 but does not disapprove it, apparently taking the view that, if the Commissioner in that case was correct, there could nevertheless be recovery in restitution. It therefore appears that the doctrine may still be argued.

However, its use is likely to be restricted to cases where the claimant is so mentally incapacitated as to be incapable of appreciating that money is being paid to them as a result of their signature. This is a fairly low level of capacity. In CSB/1093/1989, the Commissioner says that tribunals should consider the mental state of the claimant throughout the claim. If the claimant's mental state fluctuates, then an appreciation at any time of what the claimant was doing can be relied upon by the Benefits Agency as providing grounds for a finding of a recoverable overpayment. This should be considered in the light of the Commissioner's suggestion in CIS/545/1992 (Sherriff) that there is a rebuttable presumption that a patient of the Court of Protection is incapable of understanding the nature of what she or he is doing.

Failure to disclose

Where the basis of the alleged overpayment is a failure to disclose, different considerations arise. Whereas a misrepresentation needs no taint of fraud for a recoverable overpayment to arise, in the case of failure to disclose the mind of the claimant becomes relevant. Reg 32 of the Social Security (Claims and Payments) Regulations 1987 (SI No.1968) requires a claimant who is entitled to benefit to notify the Secretary of State in writing of 'such information or facts affecting the right to benefit or to its receipt ... and in particular shall notify the Secretary of State of any change of circumstances which he might reasonably be expected to know might affect the right to benefit, or to its receipt ...' (emphasis added).

A person who once knows of an asset which he or she owns is normally fixed with that knowledge even if she or he later forgets about it (R(SB) 21/82). However, it is possible that a person might become mentally incapable of knowing that they possessed an asset. This was so in R(SB) 28/83, where the claimant was a patient of the Court of Protection and his affairs were dealt with by his brother, firstly as his receiver and by the time of the Commissioners appeal as his personal representative, the claimant having died in the interim. The Commissioner held that,

Other cases have addressed the issue of deteriorating capacity. In R(SB) 40/84, there was a possibility that, owing to her advanced age, the claimant had not known that her superannuation had increased. The Commissioner in that case specifically instructed the tribunal to have regard to the mental capacity of the claimant in regard both to knowledge and to whether a reasonable person would disclose those facts.

The final issue is whether, where the claimant knows the material fact, there has been a failure to disclose. This implies some breach of obligation, either moral or legal (R(SB) 21/82) but the test is the objective one of whether disclosure is reasonably to be expected. On the face of it this ought to be determined without reference to the claimant's mental capacity, as the Commissioner held in R(A) 1/95. However, the Commissioner in that case was apparently not referred to the remarks of the Commissioner in R(SB) 40/84 above, which prompted the Commissioner in CIS 12032/1996 to hold that R(A) 1/95 is inconsistent with earlier decisions. The Commissioner goes on to say,

It may thus be possible to mount an argument on the basis that the claimant s disclosure was 'not reasonably to be expected' provided always that evidence can be brought to show a total inability to appreciate the need for disclosure.

The conclusion to be drawn in cases of both misrepresentation and failure to disclose is that a defence on the ground of mental incapacity might succeed, but in most cases this will only arise where there is clear evidence of incapacity of such severity as to render the claimant wholly unable to appreciate the significance of their actions. Such an argument will require medical and other evidence as to the effect of the claimant's incapacity - bearing in mind tribunals' frequent tendency to rely on medical evidence to the exclusion of other forms of evidence. The claimant whose overpayment is alleged to be due to failure to disclose is in a stronger position because of the possibility of an argument based either on their not knowing the fact which they are alleged to have failed to disclose, or alternatively on the argument that disclosure was not reasonably to be expected. Where the alleged recovery is based on a misrepresentation, then the adviser has the hurdle of Sherriff to surmount. This may be possible - see the comments above - and particularly where the claimant is a Court of Protection patient, where the comments of the Commissioner in R(SB) 28/83 cited above may be relied upon.

The remaining question concerns the liability of the person acting for the claimant, whether as appointee, receiver or attorney. The first point to make is that the fact that the claimant is mentally incapable does not of itself relieve an agent of responsibility. Section 71(3) provides that an overpayment is recoverable from the person who makes the representation or who fails to disclose, so it is clear that an agent who makes a misrepresentation or fails to disclose is him- or herself liable to repay any benefit overpaid. The question is whether an agent who is innocent of a misrepresentation or failure by an arguably mentally disordered person is liable to repay.

On the assumption that the view of the Commissioner in the latter case prevails, and that recovery is possible from the appointee (and, a fortiori, from an attorney, or a receiver appointed by the Court of Protection), how if at all is that proposition affected by the incapacity of the claimant? The answer would appear to lie in the strict liability nature of section 71. On the view of the claimant's liability as represented by the Court of Appeal in Sherriff, the claimant is liable notwithstanding his or her lack of understanding; on the view of Commissioner Howell in CIS/12022/1996 the appointee is liable in the same way as the claimant; therefore the appointee is liable for the claimant's (unknowing) misrepresentations. Insofar as the claimant is liable for non-disclosure, regardless of his or her mental capacity, the agent must be equally liable.

However, although Commissioner Howell's reasoning is persuasive, the point is not yet settled. From a practical point of view, since the issue of appointee's liability is subject to conflicting Commissioners decisions, a tribunal may follow whichever it wishes. It is therefore valid advice, pending a resolution of the matter by the Court of Appeal, that appointees, receivers and attorneys who seek to avoid liability should argue their case on the basis of the reasoning of Commissioner Mesher in CIS/332/1995. With the law in its present state, however, they cannot be confident of success.

Alan Robinson

Legal and Welfare rights Training (01724) 710819