Overpayments and recovery at common law

Issue 196 (February 2007)

It may have been thought that, with his success in the case of B, the Secretary of State would have been content with the overpayment recovery powers in section 71 of the Social Security Administration Act 1992. However, recent correspondence between the DWP and CPAG reveals that the DWP thinks it also has powers of recovery under the common law. Stewart Wright explains the correspondence, suggests why the DWP may be wrong and how the issue may be tested in court.

The problem

CPAG had been getting a number of queries from advisers about the actions of the Debt Management Centre in Salford continuing to seek recovery of overpayments from claimants even when the DWP had accepted that the money was 'not recoverable under Social Security law'. This quote comes directly from a Debt Management Centre letter to a claimant. An explanation sheet which accompanied the letter set out the apparent view of the DWP that even if the overpayment was not the claimant's fault, the DWP had a right to recover the money under the common law. The language used suggested that the DWP was not seeking repayment on a voluntary basis, and if the money was not paid back then enforcement action could be taken.

Resolution?

CPAG was concerned about these developments, but initially took the view that the letters were just badly written and were not intending to convey a message that the DWP had a right in (common) law to get the money back. This was based on our understanding that, if the overpayment was not recoverable under social security law, then the DWP accepted it could write to a claimant asking them to pay the money back, but that any payment back would be voluntary and the DWP could not enforce recovery.

We therefore wrote to the DWP asking them to confirm this as being the case, as, if it was not, it arguably would run a coach and horses through section 71. We asked what the point of that section was (and all the case law on it), if a finding in favour of the claimant under the section would not provide her/him with any legal protection?

The DWP's view

The DWP's reply began by making the narrow point that it cannot make compulsory deductions in respect of an overpayment that has been caused by official error: such deductions can only be made where a decision maker has decided that an overpayment is recoverable (normally under sections 71 or 74 of the Social Security Administration Act (SSAA) 1992).

However, on the wider issue, the reply stated the DWP's view that section 71 is an additional power to any claim existing in common law, and that repayment of any overpayment of benefit may be pursued under a common law claim of restitution. Such an attempt to enforce recovery could only be pursued through a civil court, which would replace the appeals process, and there would be defences against such action. If section 71 applies then the DWP would pursue recovery action using this route. However, in the DWP's view there is nothing within the statutory social security scheme which precludes recovery under the common law where section 71 does not apply.

The DWP went on state that, if an overpayment is not recoverable under social security legislation, then its current policy is to seek repayment via a common law claim.

No common law right of recovery

There are, it is suggested, powerful arguments to suggest the DWP is wrong, and that the correct view is that once a claim has been made then any wrong payments made under that claim can only be recovered under section 71 SSAA 1992 (or any other specific statutory provision - e.g., section 74 SSAA 1992).

To start with, once a claim has been decided and an award put in place pursuant to that decision, that award is final and can only be lawfully brought to an end if it is revised or superseded: per section 17 of the Social Security Act 1998. However, unless and until the award is revised or superseded, legally it remains in place and any payment made pursuant to that award will be lawful. Moreover, once an award has lawfully been brought to an end, the starting point has to be that any amount found to be overpaid is only recoverable if it can be shown that the claimant (or any other person) failed to disclose or misrepresented a material fact (or whatever other statutory test may apply). However, if a final decision is made that no relevant person either failed to disclose or misrepresented a material fact, then arguably the overpayment is in law irrecoverable. If this is correct it does not mean that the DWP cannot ask for the money back; but it does mean is that if such a request for repayment is refused the DWP has no legal mechanism available to it (at common law or otherwise) to require repayment.

In addition, the DWP's view is arguably contrary to the binding view of the Court of Appeal in R(Steele) v Birmingham city Council and the Secretary of State for Work and Pensions [2005] EWCA Civ 1824, where the court said:

'Once a claim is made, the machinery of section 71 is invoked and there is no room for recovery at common law, whether by way of restitution or otherwise'.

Conclusion

CPAG is seeking urgent clarification from the DWP as to what its position is: in particular, whether when it says that section 71 does not apply (and so the common law route is available), that includes a case which been pursued under section 71 by the DWP but a tribunal has held the overpayment not to be recoverable.

Assuming that the DWP confirms that this is its view, CPAG will wish to test it in a legal challenge. If advisers have any cases where recovery of an overpayment has been sought after the claimant has succeeded at an appeal tribunal under section 71, we welcome them getting in touch with us.


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