Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2016] CSOH 170

P455/16

OPINION OF LORD ARMSTRONG

In the petition of

AUDREY CULLEN (AP)

Petitioner

against

THE ADVOCATE GENERAL FOR SCOTLAND

Respondent

Petitioner:  Bahrami: TC Young WilsonTerris 

Respondent:  Pirie; Office of the Advocate General

9 December 2016

Introduction

[1]        This case concerns the issue of whether the obligation to repay an amount paid in respect of state benefit to which section 71 of the Social Security Administration Act 1992 (“section 71”) applies (specifically income support), obtained by misrepresentation, falls to be categorised as an obligation based on redress of unjustified enrichment for the purposes of paragraph 1(b) of Schedule 1 to the Prescription and Limitation (Scotland) Act 1973 (“paragraph 1(b)”), and is therefore subject to prescription after the elapse of 5 years in the absence of a relevant claim or acknowledgement. 

The Background

[2]        The petitioner received social security payments for a number of years.  By letter dated 6 March 2008, the Secretary of State for Work and Pensions (“the Secretary of State”) issued a decision, under section 71, determining that he was entitled to recover from the petitioner the sum of £20,836.96, paid in respect of income support as a result of misrepresentations made by her.  The petitioner denied any misrepresentations and sought to appeal the decision but her application did not proceed as a consequence of being late, through failure on the part of her solicitors.  Subsequently, by letter dated 14 February 2016, the Secretary of State issued a decision giving effect to the decision of 6 March 2008, by putting in place a direct earnings attachment (“DEA”).  The petitioner seeks declarator that her obligation to repay has prescribed, and reduction of the decisions referable to the putting in place and effective commencement of the DEA.

[3]        In the period between 2008 and 2016, there was no change to the petitioner’s employment, and there was correspondence between her and the Department of Work and Pensions throughout.  Although the petitioner continues to deny any misrepresentation, it was conceded on her behalf, for the purposes of these proceedings, that, on the basis that there had been misrepresentation, there was an obligation on the petitioner to repay.  It was conceded on behalf of the respondent that the obligation to repay had subsisted for 5 years without any relevant claim or acknowledgement. 

The Submissions for the Petitioner

[4]        In terms of paragraph 1(b), section 6 of the 1973 Act, which provides that an obligation shall be extinguished after a continuous period of 5 years without any relevant claim or acknowledgement, applies to

“any obligation based on redress of unjustified enrichment including without prejudice to that generality any obligation of restitution, repetition or recompense”.

[5]        The principal contention for the petitioner was that the obligation to repay benefits, received by misrepresentation, falls within that classification as a form of unjustified enrichment. 

[6]        In Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd, 1998 SC (HL) 90, Lord Hope stated, at 94E:

“an obligation in unjustified enrichment is owed where enrichment cannot be justified on some legal basis arising from the circumstances in which the defender was enriched.”

At 99E, agreeing with Lord Rodger, he went on to state:

“… the pursuers must show that the defenders have been enriched at their expense, that there is no legal justification for the enrichment and that it would be equitable to compel the defenders to redress the enrichment.”

[7]        In that context, it was submitted for the petitioner that the basis of such an obligation, and the basis of the available remedy, that is, that it should be equitable, were separate concepts.  Reference was made to the Scottish Law Commission Report on Unjustified Enrichment, Error of Law and Public Authority Receipts and Disbursement (Scot Law Com No. 169) (1999), at paragraph 5.15.  On the basis that the content of paragraph 1(b) concerned the nature of the underlying obligation and not rights to remedies, section 6 of the 1973 Act should apply regardless of the manner of redress actually sought.  The fact that, in particular, the remedy sought was recovery under section 71 was therefore not a relevant consideration. 

[8]        In any event, section 71 and its statutory predecessors did not create an obligation to make redress.  They were simply vires provisions empowering the Department of Work and Pensions, as a public body, to take action in circumstances where previously and otherwise it had no authority to do so.

[9]        In any event, even if, in order to bring an obligation within the class of unjustified enrichment, it was necessary to satisfy both the requirement of the basis of the obligation and the requirement of the basis of the available remedy, that is, that it should be equitable, both criteria were satisfied in the present case.  In so far as the second requirement was concerned, it was appropriate to view the remedy provided by section 71 as an equitable one because it involved the exercise of discretion.  Reference was made to the Department of Work and Pensions policy document “The Overpayment Recovery Guide” (February 2012), Section 12 of which was entitled “Secretary of State‘s Discretion”.  In terms of that guidance, although the Secretary of State, and those to whom his authority is delegated, are not obliged by law to exercise discretion, they may do so. 

[10]      Accordingly, on either analysis of Lord Hope’s dicta in Dollar Land, the obligation incumbent on the petitioner fell to be one characterised as an obligation in unjustified enrichment.

[11]      In response to the submission for the respondent, to the effect that the terms of section 71 were such as to exclude categorisation of the obligation as one based on redress of unjustified enrichment, emphasis was placed on recognition that the requirements put in place by section 71 were properly to be regarded as matters of internal procedure designed to ensure that the powers conferred by the section were regulated appropriately.  A comparison was drawn with the equivalent position for a private individual, who before seeking a remedy would require to investigate, discover and determine whether another had been unjustifiably enriched at his expense.  Section 71 was simply an enabling provision in that regard which had no relevance to the underlying nature of the obligation to repay.  The respondent’s position in this respect was that the petitioner’s analysis of the effect of section 71 was flawed because the premise, that a public body is unable to take action against private individuals unless there is a vires provision conferring authority to do so, was wrong.  In response, for the petitioner, reference was made to R v Somerset County Council, ex parte Fewings and others, [1995} 1 All ER 513, at page 524d-j, for the propositions, that the principles that govern the relationships of public bodies and private individuals are different;  that private individuals may do anything which the law does not prohibit;  that, in contrast, any action taken by a public body must be justified by positive law and should be taken only to vindicate the better performance of the duties for the fulfilment of which it exists;  and that the rule in respect of public bodies is necessary in order to protect the people from arbitrary interference by those in power over them. 

[12]      Under reference to the report of the House of Lords Select Committee on the Constitution: “The pre-emption of Parliament” (HL paper 65) (2013), it was to be noted that although the Crown possessed powers under common law, the exercise of these powers was constrained by public law and constitutional principle (paragraph 65).  In that regard, the description of the scope of ministerial powers set out in the Ram memorandum of 1945 (“Ministers can do anything a natural person can do, unless limited by legislation”) was not an accurate reflection of current law.  The “Ram doctrine” was a legal fallacy (paragraphs 53-60).  Reference, on behalf of the respondent, to R (on the application of Shrewsbury and Atcham Borough Council and another) v Secretary of State for Communities and Local Government (Shropshire County Council, interested party) [2008] 3 All ER 548 at paragraph 44, where there was reference to the “Ram doctrine”, had to be assessed against that background.

[13]      Additionally, the common law and prerogative powers of the Crown were restricted by the Human Rights Act 1998, Schedule 1, Part 2, Article 1 of the First Protocol, in terms of which was enshrined the right to the protection of property.

[14]      Having regard to these constraints, legislation was clearly necessary to confer the necessary powers required by the Crown to carry out its functions, such as recouping overpayment of state benefits.  That was the purpose and effect of section 71.  That being so, the section had no impact on the characterisation of an obligation as being one arising from unjustified enrichment. 

[15]      In so far as the 1973 Act was concerned, emphasis was placed on the terms of section 6, and paragraph 1(b), which concerned obligations and not remedies and rights to take action.  The provisions were framed without reference to any remedies available.  In particular, there was no express distinction made between statutory and non-statutory remedies. 

[16]      The Scottish Law Commission had expressed the view that there were examples of statutory obligations in respect of which it was difficult to detect any reason of principle why the five-year prescription should be inapplicable (Discussion Paper on Prescription (Discussion Paper No. 160) (2016), paragraph 2.34).  On that basis, if, contrary to the main submission for the petitioner, the obligation to repay did arise from statute, it could nevertheless fall within paragraph 1(b). 

[17]      Reference was made to the Stair Memorial Encyclopaedia, 2^nd re-issue, Social Security, at paragraph 231, in which it is stated that the 1973 Act does not apply to limit the time within which the Secretary of State can take action to identify an overpayment and decide on its recoverability, but that, however, once a decision has finally been made that an overpayment is recoverable, then, for the purpose of recovery action in the courts, the statutory time limit becomes relevant.  The case cited as support for that proposition is R(SB) 5/91, CSB/888/1988, a decision of a social security commissioner, concerning the operation of the Limitation Act 1980, a statute not applicable to Scotland and the terms of which were different from the 1973 Act.  Notwithstanding that, it was submitted that if prescription applied to an obligation to redress, enforcement of which was sought by court action, then it must also apply to such an obligation, enforcement of which was sought by means of a DEA.

[18]      Emphasis was placed on the fact that Schedule 3 of the 1973 Act, which lists imprescribable obligations, does not include any reference to section 71. 

[19]      Although section 108 of the Welfare Reform Act 2012 amended the Limitation Act 1980 so as specifically to exclude recovery of sums recoverable under Part 3 of the Social Security Administration Act 1992 from the effect of the six-year period of prescription, and section 149 of the 2012 Act extended the operation of that Act to Scotland, the parliamentary intention had been frustrated by the fact that the Limitation Act 1980 has no effect in Scotland.  Thus, the equivalent position in Scotland, as it was prior to the amendment of the 1980 Act, continued to subsist. 

[20]      In summary, the terms of section 71 did not affect the characterisation of the petitioner’s obligation to repay as one arising from unjustified enrichment; even if the obligation to repay was created by section 71, it was nevertheless one arising from unjustified enrichment; paragraph 1(b) was drafted in wide terms and applied to any obligation based on redress of unjustified enrichment; the obligation therefore fell within paragraph 1(b);  in terms of section 11(3) of the 1973 Act, the five-year period commenced on the date of the decision dated 6 March 2013, and, accordingly, the petitioner’s obligation had prescribed on 5 March 2013. 

Submissions for the Respondent

[21]      In what was essentially a question of statutory interpretation, it was necessary to assess the effect of the relevant provisions having regard to the guidance set out in Wilson v First County Trust Ltd (No 2), [2004] 1AC 816.  Adopting that approach, it was appropriate to consider the source and nature of the obligation to repay. 

[22]      The terms of section 71 were specific and imposed conditions for the exercise of the power of recovery which were not necessary conditions for an obligation to make redress for unjustified enrichment.  Thus, (1) they had application only where there had been misrepresentation or failure to disclose; (2) a determination to that effect, and to the effect that a payment had been made, was a necessary requirement for the entitlement to recover; (3) only certain payments were concerned, that is to say those in respect of state benefits;  and, (4) recovery was possible only in circumstances where the award of benefit was no longer in effect.  The entitlement to recover, where the necessary requirements were cumulatively satisfied, was unconditional in that no defence was available, (although there was a right of appeal in terms of section 12 of the Social Security Act 1998).  It was also significant that the use of the word “entitle” in section 71 was consistent with the conferring of a right.  The power to recover was conferred without regard to the requirements of an obligation to make redress for unjustified enrichment.  Thus, sums paid were recoverable from persons who had not necessarily actually received the benefit concerned.  Recovery was available as a remedy even in circumstances where it would not be equitable.  There were specific provisions for the manner of calculation of the amounts recoverable.  There were specific provisions for recovery other than by means of civil court proceedings.  There were specific statutory procedures for appeal. 

[23]      The letter of 6 March 2008 had set out the reasoning of the decision, consistent with the terms of section 71 which had been expressly applied.  That reasoning was quite different from, and was not directed to, any consideration of the remedy of redress of unjustified enrichment at common law.  The power conferred by section 71 was statutory, and was to be contrasted with redress for unjustified enrichment, which was a common law remedy grounded in equity.  The terms of the section, properly interpreted, were indicative of a scheme operating to the exclusion of common law rights.  Even if that were not so, and the Secretary of State had a right to recover on the basis of unjustified enrichment, that was not relevant to the characterisation of the petitioner’s obligation for the purposes of section 6 of the 1973 Act in circumstances where the Secretary of State had elected to proceed under section 71. 

[24]      Reference was made to R (Child Poverty Action Group) v Secretary of State for Work and Pensions [2011] 2AC 15.  Against the background that, prior to the enactment of section 71, there had been a division of functions between the adjudication of awards and their payment, resulting in there being no possible question of the Secretary of State having made an error of fact or law in making payment, the decision in that case was authority for the propositions that (1) prior to the enactment of section 71, the Secretary of State had no common law right to recover payment made pursuant to an award;  (2) section 71 provided a comprehensive and exclusive scheme for the recovery of all overpayments of benefits made pursuant to awards;  (3) it created powers where otherwise there were none; and (4) it excluded all common law rights, (such as any based on unjustified enrichment), in the sense that the Secretary of State had no power to reclaim overpayments of benefit made pursuant to incorrect awards other than those falling within section 71 (paragraphs 1, 2, 6,12, 13, 15, 20-22).

[25]      In Plewa (Executrix of the Estate of Jozef Plewa, decd.) v Chief Adjudication Officer, [1995] 1AC 249, the House of Lords considered the effect of section 53 of the Social Security Act 1986, a provision similar in its terms to section 71.  Both provisions created a liability to repay, dependent on there having been a determination, a misrepresentation or a failure to disclose, and a payment made in consequence.  Both provisions provided for recovery from the person responsible for the misrepresentation or failure to disclose, rather than from the person in receipt of the benefit concerned.  The case was instructive because, central to the reasoning of the decision, was the language of obligations, including references to the creation of new obligations, in particular liability to repay, where previously no rights had existed, (pp. 254C-D;  255B-E; 256A-B;  257B-D, G-H;  258A-D).  The case was supportive of the proposition that in such circumstances, where section 53 of the 1986 Act had created rights and obligations, so too, it must follow, had section 71. 

[26]      In B v Secretary of State for Work and Pensions [2005] 1 WLR 3796, the Court of Appeal held that the meaning of “failed to disclose” for the purposes of section 71, was not subject to qualification in favour of claimants who were unaware of the obligation to disclose.  Recognising that reliance on executive discretion was not a relevant aid to the interpretation of the statute, and notwithstanding the moral justice of the position to the contrary, the decision was that the obligation to disclose, imposed by section 71, was unqualified (paras 9, 33, 37, 38, 40, 44).  On that basis, it was submitted that, in the absence of any scope for moral judgement in the operation of section 71, no equitable considerations, such as were a necessary prerequisite for redress for unjustified enrichment, could be said to apply. 

[27]      In response to the pursuer’s submission that section 71 did not create a statutory obligation, but rather simply created the vires necessary to vindicate existing rights, reliance was placed on R (Shrewsbury and Atcham Borough Council) (supra) for the propositions that the Crown has prerogative powers, arising from its status as a corporation possessing legal personality, which include those which any private individual would have, and that the powers of the Secretary of State are not confined to those conferred by statute or prerogative but extend, subject to any relevant statutory or public law constraints and to the competing rights of other parties, to anything which could be done by a natural person (paragraphs 21, 44).  On that basis, the Secretary of State had always had the common law power to sue.  (See also, R (New London College Ltd) v Secretary of State for the Home Department (Migrants’ Rights Network and another intervening [2013] 1WLR 2358 at paragraph (28).  The true effect of section 71 was to create legal obligations. 

[28]      In that regard, the passages of the Report of the House of Lords Select Committee on the Constitution: The pre-emption of Parliament, cited on behalf of the petitioner, were not strictly relevant in that they concerned the limit of executive action in general, rather than, in particular, a consideration of the common law power to sue for debt.  Paragraphs 63 and 64 of the Report, on the other hand, recognised the dicta in R (Shrewsbury and Atcham Borough Council) (supra) and were consistent with the submissions, in that regard, for the respondent.

[29]      In so far as reference to the Human Rights Act 1998 was concerned, the terms of the First Article of the First Protocol, concerning the protection of property, were qualified to the extent necessary in the public interest and in accordance with law.  In that regard, the operation of the common law available to central government was not excluded.

[30]      The principles of statutory interpretation were relevant to an assessment of the effect of section 6 of the 1973 Act and paragraph 1(b).  First, the terms of the provisions should be read in the context of the statute taken as a whole (Docherty v Scottish Ministers [2012] SC 150, at paragraph (41).   Read as a whole, the law of prescription, as set out by the 1973 Act, was concerned with the private law of Scotland (Docherty, at paragraph (46)).  On that basis, the scope of paragraph 1(b) did not encompass obligations referable to the right of the Secretary of State to recover under section 71 because his power to do so, being a power conferred by statute on a public authority in relation to the administration of the state’s system of social security, was part of public law. 

[31]      Secondly, the court should construe a statute against the background of the mischief that parliament had intended to remedy (Wilson (supra), at paragraph (56)).  The mischief, to which the 1973 Act was directed, was set out in the Scottish Law Commission Report:  Reform of the Law Relating to Prescription and Limitation of Actions (Scot. Law Com. No. 15).  At the time of that report, the statutory predecessor of section 71, (The Ministry of Social Security Act 1966, Section 26(1)), was in force, but was absent from the Commission’s discussion of the proposal which, in due course, was enacted as paragraph 1(b) (paragraph 63 and 164(2) of the Report).  In these circumstances, it was submitted that what is now the content of section 71 was not part of the mischief then in contemplation. 

[32]      Thirdly, the technical meaning of language should be adopted unless the contrary intention is apparent from the terms of the statute concerned (Bennion on Statutory Interpretation, 6^th edition, sections 365, 266).  The language of paragraph 1(b) is that of the private law of obligations.  The three necessary and cumulatively sufficient conditions for an obligation based on redress of unjustified enrichment (Dollar Land (supra), per Lord Hope at 99E) were not consistent with the source and nature of the power conferred by section 71 and the obligation to repay arising from it.  Given the specific nature of the terms and purpose of section 71, the effect of its operation lay outside the technical meaning of the phrase “unjustified enrichment”. 

[33]      In circumstances where the power conferred by section 71 and its statutory predecessors was sui generis, arising from a comprehensive and exclusive scheme for dealing with overpayments of benefit, creating a right of recovery where previously there was none, and where no express provision was made for it in Schedule 1 to the 1973 Act, the pursuer’s referable obligation to repay did not fall within paragraph 1(b). 

Discussion

[34]      In determining whether the petitioner’s obligation falls within the category of unjustified enrichment, it is of course necessary to have regard to the definition of that term.  In that regard, it would appear that the difficulties expressed by Lord President Dunedin, in Edinburgh and District Tramways Co Ltd v Courtenay (recognised by Lord Hope in Dollar Land at page 99C-E) remain.  In the course of the arguments before me, it was not suggested that the position was otherwise.  In these circumstances, the appropriate approach is that then adopted by Lord Dunedin, as set out by Lord Hope in Dollar Land, at page 99E.  On that basis, for a case to fall within the doctrine, three criteria must be fulfilled:  (1) one party must have been enriched at the expense of the other;  (2) there must be no legal justification for the enrichment;  and (3) it must be equitable to compel the party enriched to make redress. 

[35]      I note that, as I read them, the observations made at paragraph 5.15 of the Scottish Law Commission Report on Unjustified Enrichment, Error of Law and Public Authority Receipt and Disbursements (1999), which include reference to redress, do not detract from Lord Hope’s dictum in Dollar Land, at page 99E. 

[36]      Given that the operation of the doctrine requires the existence of all three constituent factors, it follows, having regard to the relationship between them, that to assess the nature of the obligation to repay arising from unjust enrichment, in the abstract, without reference to the nature of the remedy available, would be to introduce an element of artificiality into the process.  Not only does the obligation become enforceable because of the nature of the remedy, but whether any given obligation can be said to fall within the doctrine is dependent on the other factors required for its operation.

[37]      In this case, for the purposes of the challenge made, it was conceded on behalf of the petitioner that the first and second of these criteria were satisfied.  As regards the third criterion, what then is the nature of the remedy afforded by section 71?

[38]      The answer to that question is to be found in the decision of the Supreme Court in R (Child Poverty Action Group) (supra):  section 71 provided a comprehensive and exclusive statutory scheme for the recovery of all overpayments of benefits made pursuant to awards, it created powers where otherwise there were none, and excluded all common law rights of restitution which the Secretary of State might otherwise have had. 

[39]      It is correct to describe the scheme as one involving necessary conditions for the exercise of the power to require repayment that are not necessary conditions for enforcement of an obligation to make redress for unjustified enrichment.  I accept that the decision of the House of Lords in Plewa (supra), concerning the effect of section 53 of the Social Security Act 1986 is, given the terms of both sections, equally relevant to the interpretation of section 71, and that, on that approach, the effect of section 71 and its predecessors was to create new obligations where previously there had been none. 

[40]      On that analysis, it would be wrong to characterise section 71 as simply an enabling provision.  Whilst, of course, there must be recognition that the citizen must be protected from arbitrary abuse of power, in the context of the ongoing debate as to the extent of the “Ram doctrine”, the position is as stated by Hale LJ in R v Secretary of State for Health, ex p C 
[2000] 1FCR 471, as set out in R (Shrewsbury and Atcham Borough Council) (supra) at paragraphs 21, 44.  In this regard, I accept the observations made on behalf of the respondent in relation to the Human Rights Act and to the passages cited from the House of Lords Select Committee Report:  “The pre-emption of Parliament”.

[41]      More significantly, however, in my assessment, and consistent with the application of the decision of Plewa, the purpose and effect of section 71 and its predecessors was to create rights and obligations referable to the statutory powers conferred.  In these circumstances, I conclude that, in contrast to redress for unjustified enrichment, which is a common law remedy grounded in equity (cf. Bell, Principles of the Law of Scotland, 10th edition, paragraph 531), the power conferred by section 71, and the corresponding obligation to repay, are creations of public law.

[42]      Although the terms of “The Overpayment Recovery Guide (2012)” indicate that section 71 recovery may be subject to the exercise of discretion, they also make plain that there is no legal requirement in that regard.  That is consistent with the decision in B (supra), which clearly indicates that section 71 is designed to operate outwith the scope of moral judgement.  On that basis it cannot be said to provide an equitable remedy. 

[43]      Thus, in circumstances where the obligation to make redress is properly to be regarded as a statutory one, in the sense that it arises in consequence of a statutory provision which confers a corresponding statutory right, and where the referable remedy is not an equitable one, it must follow that the petitioner’s obligation does not fall within paragraph 1(b).  I would add that I accept the submissions for the respondent, in this regard, as to the proper interpretation of the 1973 Act, including paragraph 1(b).

[44]      I note in passing that some of the material to which reference was made in submissions, (the Department of Work and Pensions document:  The Overpayment Recovery Guide;  and the Scottish Law Commission Discussion Paper on Prescription), in light of their relevant dates of publication, are not strictly to be regarded as background materials in the sense used in Wilson (supra). For that reason I have not attached material weight, for these purposes, to their content.

Decision

[45]      After due consideration of the arguments presented before me, I favour the submissions for the respondent.  I will therefore repel the petitioner’s pleas in law, sustain the respondent’s first plea in law, and dismiss the petition.  I reserve meantime all questions of expenses.