UK Social Security and Child Support Commissioners' Decisions

Chief Adjudication Officer v. Sherriff [1995] UKSSCSC CIS_545_1992 (04 May 1995)

R(IS) 14/96

(Chief Adjudication Officer v. Sherriff)

CA (Nourse, Millett and Otton LJJ) CIS/545/1992
4.5.95

Recovery of overpayment - whether claim form incorrectly completed by third party and signed by mentally incapacitated claimant - misrepresentation by the claimant

From about 1983 the claimant was an in-patient in a psychiatric hospital. In 1986 her daughter was appointed as her receiver by the Court of Protection, but she died in April 1988. In May 1988 the local authority moved the claimant into a nursing home. On 27 May 1988 an income support claim form was completed for the claimant by a care assistant in the nursing home and the claimant signed it beside the standard declaration that the information on the form was correct and complete. The form was completed to indicate that she had no savings. Income support was awarded. In February 1989 the claimant's son was appointed receiver by the Court of Protection. On 5 July 1989 the son's solicitors wrote to the nursing home to explain that the claimant had savings of £36,000 and asked them to notify the Department of Social Security. An adjudication officer reviewed and revised the award and found her entitlement was nil, that she had been overpaid £8,842.95 income support and that sum was recoverable. The son appealed arguing that his mother had been incapable of making a misrepresentation, that he had been unaware of the manner in which the nursing home fees were paid until shortly before the solicitor's letter of 5 July 1989 and that the nursing home had no power to make a claim on his mother's behalf. The social security appeal tribunal upheld the adjudication officer's decision. The son appealed to the Commissioner who decided that the son had no liability because he had disclosed to the Department of Social Security the material fact of the claimant's capital as soon as he became aware that it was necessary to do so. He decided that the claimant was mentally incapable of making a misrepresentation and in fact made no misrepresentation because she lacked the power of reasoning necessary for her to be negligent in the legal sense. The Chief Adjudication Officer appealed to the Court of Appeal.

Held, unanimously allowing the appeal, that:

the son was not liable, for the reasons given by the Commissioner;

the effect of the words "whether fraudulently or otherwise" in subsection (1) was that section 53 of the Social Security Act 1986 applied to innocent as well as to fraudulent misrepresentations and failures to disclose, Page and Davis v. Chief Adjudication Officer (CA, 24 June 1991) [R(SB) 2/92] applied;

when a person has misrepresented a material fact her knowledge of that fact, or that she is making a misrepresentation, is irrelevant so far as section 53 is concerned (dictum of Evans LJ in Jones v. Chief Adjudication Officer [1994] 1 WLR 62, 64C [R(IS) 7/94] approved);

although the claim form was filled in by the nursing home, it was signed by the claimant and was her claim;

the making of representations on the claim form was a necessary condition of entitlement to benefit and a necessary part of making the claim: the claimant had not been shown to lack the necessary mental capacity to make a claim and by signing the claim form made any representations which it contained her representations, so that the overpaid benefits were recoverable from her under section 53(2);

alternatively if the claimant had lacked the necessary mental capacity to make the claim containing the misrepresentation, the Secretary of State was entitled to recover the overpaid benefits under the general law of restitution as payments made in the mistaken belief that a claim had in fact been made by her;

neither the nursing home nor the care assistant were liable for repayment as they had not made the misrepresentation themselves but only assisted the claimant to do so.

DECISION OF THE COURT OF APPEAL

Mr. J. R. McManus (instructed by the Office of the Solicitor to the Department of Social Security, London) appeared on behalf of the Appellant.

Miss J. Beech (instructed by Messrs. Talbots, Birmingham) appeared on behalf of the Respondent.

LORD JUSTICE NOURSE: This appeal raises a question on section 53 of the Social Security Act 1986 (now section 71 of the Social Security Administration Act 1992), which enables overpayments of certain benefits to be recovered where someone "whether fraudulently or otherwise" has misrepresented, or failed to disclose, a material fact.

The claimant is Mrs. Edith Constance Sherriff, who was born on 10 July 1915 and is now two months short of her 80th birthday. In about 1983 she became an in-patient at a psychiatric hospital. On 16 June 1986 her daughter was appointed to be her receiver by the Court of Protection. The daughter died on 24 April 1988. On about 15 May 1988 the local health authority wrote to the claimant's son, Mr. D. J. Sherriff, stating that they had obtained a place for her in a private nursing home and adding:

"This will be fully funded by Department of Health and Social Security allowances."

Having moved into the nursing home, the claimant, in a form dated 27 May 1988, claimed income support. The form was filled in by someone in the nursing home on her behalf, but she signed it herself beside a declaration that the information she had given on the form was correct and complete. In answer to the question "Do you or your partner have any savings?" the "No" box had been ticked. Above that box it was made clear that "savings" included money in shares, unit trusts and other investments. In due course the claimant was awarded income support to cover the nursing home fees.

On 7 February 1989 Mr. Sherriff was appointed by the Court of Protection to be the claimant's receiver in place of her deceased daughter. On 5 July 1989 Mr. Sherriff's solicitors wrote to the nursing home, stating that he was uncertain whether or not his mother should be eligible for DHSS assistance since she had investments in the region of £36,000 of which the Department might not be aware. The letter asked the nursing home to notify the Department that the claimant did have the benefit of those investments.

The result was that the claimant received no income support after 26 July 1989 and the adjudication officer reviewed the decision awarding her the benefit up to that date. His revised decision, notified on 16 October 1989, was that because the value of the claimant's capital had exceeded the prescribed amount of £6,000, her entitlement had been nil and she had accordingly been overpaid to the extent of £8,842.95. He claimed that that sum was recoverable from her pursuant to section 53 of the 1986 Act. Mr. Sherriff, as the claimant's receiver, appealed against that decision on her behalf, contending that she had been incapable of making a misrepresentation within section 53(1), that he himself had been unaware of the manner in which the nursing home fees were being funded until shortly before his solicitors' letter of 5 July 1989 and that the nursing home had had no authority to make a claim on the claimant's behalf. On 10 October 1991 the social security appeal tribunal confirmed the adjudication officer's decision and ordered that there be recovery of the full amount claimed.

With the leave of the chairman of the tribunal, Mr. Sherriff appealed to the social security Commissioner. His appeal, which was supported by the adjudication officer then acting in the matter, came before Mr. Commissioner Johnson who, on 23 September 1993 and after an oral hearing, gave a written decision allowing it. In paragraph 9 the Commissioner, having held that the tribunal's decision was erroneous in point of law and must be set aside, said that it was expedient that he should substitute his own decision for that of the tribunal. In paragraphs 10 to 14 he then considered the position of Mr. Sherriff, concluding that, since he had properly disclosed to the Department the material fact of the claimant's capital as soon as he had become aware of the necessity to do so, he had no liability in the matter. No complaint has been made of that part of the Commissioner's decision, which, with respect, was clearly right.

In paragraphs 15 to 17 the Commissioner considered the question whether the claimant could be held personally responsible for misrepresenting her financial position when making the application for income support on 27 May 1988. He decided that she could not on the grounds, shortly stated, that in order to be guilty of a misrepresentation within section 53(1) the person making it had to have the intention to commit a tortious act and that the claimant could not have been guilty of negligence because she lacked the power of reasoning at the time that the application was made. In regard to the latter point, he said:

"There seems to me overwhelming evidence that [the claimant] lacked the power of reasoning necessary for her to be negligent in the legal sense, and accordingly I hold that she was mentally incapable of making a misrepresentation and in fact made no misrepresentation as to her capital."

He therefore held that no part of the £8,842.95 was recoverable from the claimant. With the leave of another social security Commissioner, the Chief Adjudication Officer now appeals to this court.

Section 53(1) and (2) of the 1986 Act provided:

"53 - (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 not have made or any sum which he would have received but for the misrepresentation or failure to disclose.

(2) An amount recoverable under subsection (1) above is in all cases recoverable from the person who misrepresented the fact or failed to disclose it."

Section 53(10) provided that the benefits to which that section applied included income support.

In Page and Davis v. Chief Adjudication Officer (24 June 1991, unreported) it was held by this court that the effect of the words "whether fraudulently or otherwise" in subsection (1) was that section 53 applied to innocent as well as to fraudulent misrepresentations and failures to disclose. Moreover, in Jones v. Chief Adjudication Officer [1994] 1 WLR 62, 65C, [now reported as R(IS) 7/94] Evans LJ, having referred to it being established law that those words meant that the section covered cases of innocent as well as fraudulent misrepresentation and non-disclosure, said:

"This means that when a person has misrepresented a material fact his knowledge of that fact is irrelevant so far as section 53 is concerned. It is sufficient that there was the misrepresentation, whether the fact was known to him or not ...

But knowledge is not irrelevant in the case of nondisclosure, even though section 53 covers innocent as well as fraudulent non-disclosure. This is because of the equally well established rule that a person cannot be held liable for failing to disclose what he does not know."

While Dillon and Stuart-Smith LJJ disagreed with the conclusion of Evans LJ in regard to one of the two cases there under consideration, I think it clear that they agreed with his general statement as to the distinction between a misrepresentation and a failure to disclose. In my respectful opinion it is a correct statement of the law. It means that it is in general easier for the Secretary of State to establish an innocent misrepresentation than an innocent failure to disclose. It is on an innocent misrepresentation that Mr. McManus, for the Chief Adjudication Officer, relies in this appeal.

It is agreed that the negative answer to the question "Do you or your partner have any savings?" in the claim form dated 27 May 1988 was a misrepresentation of the material fact that the claimant then had investments worth in the region of £36, 000. It is also agreed that the payments made to the claimant in respect of income support up to 26 July 1989 were made in consequence of that misrepresentation. The basic question at issue is whether the misrepresentation was made by the claimant.

The evidence from the nursing home, accepted throughout, was that on her admission there in May 1988 the claimant was incapable of understanding her affairs and needed assistance to complete her DHSS claim forms. On the basis of that evidence and the earlier subjection of her affairs to the jurisdiction of the Court of Protection, Miss Beech, for Mr. Sherriff, has submitted that the claimant was incapable of making a representation for the purposes of section 53(1). While acknowledging that a representation may for those purposes be innocent and that the representor need have no knowledge of the material fact misrepresented, Miss Beech submits that he or she must nevertheless know that a representation is being made. She says that the mental incapacity of the claimant here deprived her of that knowledge. Pursuing the logical consequence of these submissions, Miss Beech asserts that the misrepresentation was made, or must be taken to have been made, not by the claimant but by the nursing home. On that view of the matter, by virtue of section 53(2), the overpayments are recoverable from the nursing home and not from the claimant.

I reject these submissions. If the representor need not know of the material fact misrepresented, I cannot see why it should make any difference if she does not know that she is making a representation. That no doubt would make the misrepresentation more innocent. But it would not take it outside section 53(1). So that can be no ground for saying that the misrepresentation was not made by the claimant. Whether it was or not depends on other considerations, in my judgment.

Like most social security benefits, income support is a benefit which can only be paid if it is claimed in the manner prescribed by the relevant legislation. The person, and the only person, entitled to claim it here was the claimant. Although the claim form was filled in by the nursing home, it cannot reasonably be suggested that the claim was made by someone other than the claimant. It was her claim. She made it by signing a form containing the misrepresentation. If she had the capacity to make the claim, surely she had the capacity to make the misrepresentation.

Suppose then that it is looked at the other way round. The claim and the misrepresentation being indivisible, if the claimant lacked the capacity to make the misrepresentation, she lacked the capacity to make the claim. In that event benefit was paid to her in the mistaken belief that a claim that had not been made had been made and, there being no power to pay without a claim, is recoverable by the Secretary of State, not under section 53(1) but on ordinary principles of restitution.

The evidence that the claimant was incapable of understanding her affairs is inconclusive as to the degree or extent of her mental incapacity. For the reasons given that question is immaterial. Either way the Secretary of State is entitled to recover from the claimant the amount of the payments made. I emphasise that on no footing can it be a correct view that the misrepresentation was made, or must be taken to have been made, by the nursing home, or indeed by anyone other than the claimant.

For these reasons, which are substantially those advanced by Mr. McManus, I think that the decision of the Commissioner was wrong in law and must be set aside. I should add that when the appeal was opened Mr. McManus told us that the Secretary of State had resolved, in exercise of his discretion, not to demand repayment if the appeal succeeded. We did not see that as a reason for not proceeding to hear and determine it.

I would allow the appeal.

LORD JUSTICE MILLETT: I agree that the decision of the Commissioner cannot be supported. He based his conclusion on evidence that the claimant was:

" ... incapable of understanding her affairs and needed assistance to complete her DHSS claim forms."

From this he concluded that the claimant:

" ... lacked the power of reasoning necessary for her to be negligent in the legal sense, and accordingly ... was mentally incapable of making a representation and in fact made no representation ..."

If, as the preceding passage in his decision indicates, the Commissioner thought that section 53 of the Social Security Act 1986 requires the relevant misrepresentation to be culpable, that is to say, to be made either fraudulently or negligently, then he was in error: see Page and Davis v. The Chief Adjudication Officer (unreported) 24 June 1991. If, on the other hand, he took the claimant to be mentally incapable of understanding that she was making a representation, then the evidence did not support his finding.

We have been asked to consider the case as one of principle on the footing that the claimant was mentally incapable of understanding that she was making a representation. Does that provide the claimant with a defence to a claim to repayment? In my opinion it does not.

It is usually a necessary condition for entitlement to benefit that a claim for it is made in the manner prescribed by the relevant legislation. It was so in the present case. Section 165A(1) of the Social Security Act 1975 as substituted by section 86(1) and Schedule 10, paragraph 87 of the Social Security Act 1986 (now section 1(1) of the Social Security Administration Act 1992) required the present claimant to make a claim in the manner prescribed by regulations; and regulation 4 of the Social Security Claims and Payments Regulations 1987 required the claim to be made in writing on a form approved by the Secretary of State. The form approved by him called upon the claimant to make a number of representations. The making of such representations was thus a necessary condition of entitlement to benefit. In such a case a claimant who lacks the necessary mental capacity to make a representation lacks the necessary mental capacity to make the claim. Regulation 33 of the 1987 Regulations therefore provides that in the case of those unable to claim because of mental incapacity, the Secretary of State may, on written application to him, appoint a person to make a claim on the claimant's behalf.

If the Secretary of State pays benefits in the mistaken belief that the claimant has made a claim when in fact he has not, for example, because his signature to the claim form was forged, then he can recover the payments under the general law of restitution, though not, of course, under section 53. It does not avail a person who has received benefit to aver that he made no claim for it. Such an averment goes to the source of the Secretary of State's right to repayment, not to its existence. It follows, in my opinion, that it does not avail a recipient of benefit from whom the Secretary of State seeks repayment of benefit on the ground that he misrepresented a material fact to deny that he had mental capacity to make the representation.

I reach this conclusion without regret. As the social security Commissioner pointed out in CSB/1093/1989:

"The social security system in this country would grind to a standstill if every Post Office clerk were to seek to establish, on each occasion that a signed benefit order was presented to him, that the relevant signatory was of sound mind and fully understood that to which he had put his signature. And the system would be open to gross abuse if a claimant, taking advantage of the inevitable absence of any such enquiry by the Post Office clerk, could lightly maintain that his mental state at the relevant time was such that it would be inequitable to visit upon him the normal consequences of misrepresentation."

It is not, however, a question of imposing an obligation to pay compensation for the misrepresentation; but only of refusing to allow a recipient of benefit to defeat a claim to repayment by denying that he had the mental capacity to make a representation the making of which was a condition of benefit.

Counsel for the claimant in the present case was disposed to accept this, but submitted that the claim to repayment should be made against the nursing home or the care assistant who assisted the claimant to complete the claim form. Since neither of them was the recipient of benefit, any claim against them must be brought under section 53(2), and can be brought only if they were the persons who made the relevant representation. They were not. By signing the claim form the claimant made any representations which it contained her representations. By causing her to sign the claim form they may have caused the claimant to make the representation, but they did not make it themselves.

I, too, would allow the appeal.

LORD JUSTICE OTTON: I agree, for the reasons given by both Lord Justice Nourse and Lord Justice Millett in their judgments.

Order: appeal allowed; legal aid taxation of the respondent's costs.