Overpayments and disclosure – test case victory
A recent decision of the Court of Appeal has put a severe dent in the DWP's ability to recover overpayments under the 'failure to disclose' test, while at the same time suggesting that arguments based on 'misrepresentation' may not be so clear cut in the DWP's favour. Stewart Wright and Pamela Fitzpatrick consider the judgment and its implications

Facts of Case
Court of Appeal's decision
Implications and limitations of the judgement
Appeal to the House of Lords
Effect of the judgement on cases in Scotland and Northern Ireland
Misrepresentation Arguments
Decisions made after Hinchy
Decisions made before Hinchy – do anti-test case rules apply?
Challenging decisions made before Hinchy
Secretary of State's Discretion to recover overpayment
Claimant has already repaid
Postscript – card notifications from the Disability Benefits Unit


Facts of Case
In Hinchy v Secretary of State for Work and Pensions [Footnote 1] the claimant had been overpaid income support (IS) when a disability premium continued to be paid although her fixed term award of disability living allowance (DLA) had come to an end. It was accepted that she had not told her local IS office that her DLA had come to an end. She was paid her IS by order book. The Secretary of State sought to recover the bulk of overpayment on the basis that the claimant had failed to disclose the material fact that her DLA award had come to an end.

However for the last week of the overpayment, recovery was sought on misrepresentation based on her signing the counterfoil in her order book which contained a declaration that she was entitled to a payment of IS. The foundation of this misrepresentation argument was that just before signing the relevant counterfoil in the order book Mrs Hinchy had been sent a letter from her local IS office asking her to return the book as she was now entitled to a lesser amount of IS, yet she had gone on to sign the counterfoil stating that she was entitled to a greater amount of IS. For the sake of the argument in the Court of Appeal it was accepted that this had constituted a misrepresentation of fact rather than law, though the court accepted that this issue required further investigation.

Court of Appeal's decision
The Court of Appeal held that the overpayment was not recoverable from the claimant on the basis of failure to disclose. Mrs Hinchy had not failed to disclose the fact that her DLA award had stopped, because it was not possible to fail to disclose a fact the Secretary of State already knew.
On this aspect of the case, the Court of Appeal's reasoning was as follows.

• Firstly, the word disclosure requires something to be 'revealed' or 'made apparent', and that can only happen if the fact is unknown to the recipient. Moreover, contrary to what was said in R(SB)15/87 and other commissioner caselaw, disclosure does not depend upon the state of mind of the discloser (ie, whether the discloser realises that the fact was known or unknown to the Secretary of State). All that is required for disclosure to be made out is that the Secretary of State knows of the material fact.
• Secondly, in cases where the overpayment arises because of a change in another DWP benefit, the Secretary of State can be treated as already knowing about this change (and so there can be no failure on the part of the claimant to disclose this change) because (i) a reasonable Secretary of State would put in place, and would be expected to put in place, a system to enable decision makers in one DWP office to provide the decision makers in another DWP office with knowledge of relevant material facts, and everybody would expect that that would have been done; and/or (ii) the Secretary of State cannot disclaim knowledge of his own decisions (having taken the legal responsibility for all benefit decisions under the Social Security Act 1998).

The issue of whether there was a misrepresentation leading to one weeks' overpayment of benefit was remitted to the commissioners because there were insufficient findings of fact for the Court to determine the matter. The claimant's case was that the signing of the order book counterfoil simply acknowledged receipt of a sum of money already paid over, and as such it could not have been a cause of the payment as the payment had already been made. The Court stated that the precise relationship between the Post Office and the DWP, and what actually happened with the signed receipts, [Footnote 2] would need to be investigated before a proper decision could be made on this point. However, the Court indicated that it would require some persuasion that the signing of the declaration alone could amount to a misrepresentation.

Implications and limitations of the judgement
Subject to it being overturned by the House of Lords, the Court of Appeal has established an important principle in Hinchy with wide ramifications for future overpayment cases. It may also assist claimants with overpayment decisions made prior to the judgement.
In particular, Hinchy establishes that claimants do not need to tell one office of the DWP about a decision that has been made by another office of the DWP. There is no reason to limit this principle to cases involving DLA and IS. However, it is not authority for arguing that disclosure of other matters (eg, of increases in income) will have been made merely by disclosing to any DWP office. Here, disclosure still needs to be made to the relevant office – ie, the office handling the claim. Also, at least until the misrepresentation issue is resolved, reporting any relevant fact (including relevant decisions about benefit entitlement) to the relevant offices remains advisable. This is because, pending resolution of the misrepresentation issue, recovery might still be founded on alleged misrepresentation when signing the order book – ie, a statement that all relevant facts have been reported by the claimant, when in fact they have not.

Appeal to the House of Lords
The Secretary of State was refused leave to appeal to the House of Lords by the Court of Appeal but presented a petition to the House of Lords for leave to appeal on 19 March 2003. At the time of writing this article it was not known whether leave to appeal had been granted or refused. However, until the petition for leave to appeal has been determined, or if it is granted until the appeal itself is decided, it is likely that look-alike cases will be stayed or suspended, [Footnote 3] and the comments below should be read in the light of this.

Effect of the judgement on cases in Scotland and Northern Ireland
Judgements of the Court of Appeal in England are binding only in England and Wales. However, the Commissioners have held in R(SB) 1/90 that pronouncements on common provisions by the Court of Appeal in England or the Court of Session in Scotland must be followed by all Commissioners in Great Britain. In the same decision the Tribunal of Commissioners also held that although decisions of the Court of Appeal in Northern Ireland are not binding in Great Britain, as a matter of comity they should be followed where identically worded provisions are in issue. Hinchy is the only judgement of a higher court in the UK and so it should be followed by decision makers across the UK.

Misrepresentation Arguments
Arguments on misrepresentation arising from the signing of an order book counterfoil should be stayed pending the resolution of the arguments on this issue in the Hinchy case. The Court of Appeal remitted that issue to the commissioners. It is understood that a Tribunal of Commissioners may be invited to consider the issue and the DWP will seek to put before the Commissioner(s) evidence of its relationship with the Post Office and what happens to order book counterfoils once they have been signed. However, resolution of this misrepresentation argument has itself been stayed pending the DWP's attempt to appeal the failure to disclose point to the House of Lords.

Decisions made after Hinchy
Decisions on overpayments which involve a similar set of facts to those in Hinchy should not be recoverable under the failure to disclose limb of section 71 of the Social Security Administration Act 1992 (SSAA 1992). Although the main part of the Court of Appeal's reasoning was based on the changes to decision making introduced by the Social Security Act 1998 (SSA 1998), it is arguable that this was not the sole basis for its decision as Mrs Hinchy's overpayment was for a period beginning in October 1998 and that date fell before the SSA 1998 was brought into effect for IS. Accordingly, Hinchy may apply to overpayments in respect of periods prior to 1998. However, with overpayments which arose some years before 1998 it may be difficult to argue that a reasonable Secretary of State would have put in place systems connecting one DWP (or DSS) office to another, and in any event such overpayments may well have by now been recovered (see below).

Decisions made before Hinchy – do anti-test case rules apply?
It is strongly arguable that the anti-test case rules do not apply in overpayment cases, and so cannot apply to overpayment decisions made before Hinchy was decided. This is because the rules - which are contained in section 27 of the SSA 1998 – only apply to decisions which relate to a person's entitlement (see s.27(3) SSA 1998) and a decision under section 71 of the SSAA 1992 is not about entitlement; it being a necessary precondition for the use of section 71 that a decision has already been made that a person was not entitled and as a consequence has been overpaid. Whether that overpayment is recoverable is what section 71 is concerned with, but that issue has nothing to with the person's entitlement to benefit. Indeed, appeals on overpayments start from an acceptance that the person was not entitled during the relevant period and so has been overpaid and then focus on whether the overpayment is recoverable.

Challenging decisions made before Hinchy
Claimants with decisions regarding overpayments made prior to Hinchy can revisit those decisions by asking the Secretary of State to look again at the decision on the basis of error of law. However, the way in which claimants may now challenge decisions will depend very much on the circumstances of the case.

Revision
If within the time limit, claimants can ask for a revision under section 9 of the SSA 98 on any ground and the decision should be revised in accordance with Hinchy. It is not possible to seek a late, or any time, revision on the basis of 'official error' because an error that is discovered by a decision of Commissioner or Court is excluded from the definition of official error.

Supersession
A supersession can be sought for any reason within one month of a decision being given. If outside of this time limit the claimant will have to show grounds, which includes error of law. Therefore a claimant can rely on Hinchy to show that the decision was wrong in law. However, this ground cannot be relied on to supersede a decision of a tribunal or commissioner. In such cases claimants would have to seek an appeal or late appeal to the Commissioner.

A new decision is only effective from the date of the supersession. This rule is intended to prevent arrears of benefit being paid. However in overpayment cases, where the claimant has not repaid the overpayment, the new decision should be that the overpayment is not recoverable.

Appeal to tribunal
Claimants who are within the time limits for an appeal can seek an appeal to a tribunal. Late appeals are likely to succeed because of the rule which allows a late appeal to be admitted solely because there are reasonable prospects that the appeal will be successful. If the House of Lords do not overturn Hinchy then cases on similar facts to those in Hinchy are bound to succeed if recovery is being sought on the basis of failure to disclose alone. However, a late appeal cannot be admitted if it is made more than 13 months after the date of the decision being sought to be appealed.

Appeal to Commissioner
Where claimants have already appealed to a tribunal they may appeal to a Commissioner if within the time limits. They may also make a late appeal to the Commissioner if they have special reasons. Special reasons are not defined and there are no restrictions on relying on new interpretations of law by Courts or Commissioners in order to show special reasons for a late appeal.

Secretary of State's Discretion to recover overpayment
In cases where an appeal, further appeal or supersession is not possible it may be worth asking the Secretary of State not to recover on the basis of Hinchy. Any refusal could be subject to judicial review.

Claimant has already repaid
However, where a claimant has already repaid an overpayment and wants to claim the return of money that s/he has paid back to the DWP the position is more complex. The law describes this as a claim for restitution. As with most claims for money, the law imposes a limitation period of six years, starting from the date that the payment was made. It is likely to be difficult for a claimant to recover this money. For a start, it will be assumed that the claimant has voluntarily repaid the amount, albeit in some cases the claimant may be able to show on the facts that s/he did so under a mistake (as to what the law was). Furthermore, the DWP are likely to argue that they have used the recovered money in good faith (to pay out other benefit claims) on the basis that they were entitled to recover the sum, and may also argue that claimant would be unjustly enriched if they were to be repaid the overpayment amount of benefit because it is a sum to which the claimant was never actually entitled. Moreover, any claim in restitution for an overpayment which relates to a period prior to the SSA 1998 changes is likely to fail on the basis that Hinchy only applies in the post-SSA 1998 landscape.

Postscript – card notifications from the Disability Benefits Unit
It emerged during the case that the DSS (as it then was) had an internal card index system for transferring information about benefit awards from the Disability Benefits Unit to the IS office. Importantly, this card was (and still is) to be issued in all cases and show when an award of DLA begins and ends (if time-limited). If the basis on which the Secretary of State can be treated as knowing something is overturned by the House of Lords, this card index system may provide Mrs Hinchy (and others) with an alternative basis for showing that, as a matter of fact, the Secretary of State did know that the DLA award had come to an end.

Stewart Wright is CPAG's Legal Officer; Pamela Fitzpatrick is a Welfare Rights Worker at CPAG

Footnotes
1. EWCA [2003] Civ.138, Times Law Report, 24 February 2003. [back to text]
2. For example, are they sent back to the local IS office and relied on by the DWP in clearing payment of the following 2 weeks benefit? [back to text]
3. Either by the tribunal or commissioner of their own volition, or by the Secretary of State under sections 25 or 26 of the Social Security Act 1998. [back to text]

Welfare Rights Bulletin 173 April 2003