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[2002] UKSSCSC CIS_2178_2001 (28 October 2002)

R(IS) 5/03

Judge M. Harris CIS/2178/2001

Mr. M. Rowland

Mrs. L. T. Parker

28.10.02

Recovery of overpayment – whether recoverable from appointee

The appellant was appointed by the Secretary of State to act on behalf of her daughter who was a claimant of income support. From May 1997 until she died in April 2000, the claimant lived in a nursing home. Whilst there she had received disability living allowance and incapacity benefit as well as income support, such benefits being paid by direct credit transfer into the claimant's bank account over which the appellant had power of attorney. On 7 April 1999 the relevant county council informed the incapacity benefit section of the Department that a health authority had taken over responsibility for the claimant's nursing home fees from 8 October 1998. On 12 April 1999 the adjudication officer reviewed the award of income support and revised it with effect from 6 October 1998 on the basis that the claimant had ceased to be entitled to income support, once her nursing home fees were fully funded by the health authority, because her incapacity benefit exceeded her applicable amount. In June 2000 two separate overpayment decisions were made with respect to the appointee. The first related to the period from 6 October 1998 to 5 April 1999, by virtue of which recovery was sought under section 71(1) of the Social Security Administration Act 1992 on the basis that on 8 October 1998 or as soon as possible thereafter the appointee on behalf of the claimant failed to disclose the material fact that the health authority were funding the claimant's stay in the nursing home. The second related to the period from 6 April 1999 to 12 April 1999 and sought recovery under regulation 11 of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988 on the basis that overpayment in that week had been caused by direct credit transfer arrangements. The appointee appealed, arguing that the overpayment was not recoverable because she could not reasonably have been expected to tell the Department about the change of funding and, relying on CIS/332/1993, that, in any event, a failure to disclose or a misrepresentation by an appointee grounded recovery against the claimant alone and not against the appointee unless the latter was acting in a personal capacity rather than in the capacity as appointee. The tribunal dismissed her appeal, preferring R(IS) 5/00 to CIS/332/1993. The claimant appealed to the Commissioner. The Chief Commissioner directed that the appeal be determined by a Tribunal of Commissioners.

Held, allowing the appeal in part, that:

the tribunal's decision was erroneous in point of law because, applying R(SB) 21/82, unless disclosure by the appellant was reasonably to be expected, there was no failure to disclose on her part and the tribunal had not considered whether the appellant could reasonably have been expected to know that the new source of funding was, or might be, a material fact that she ought to disclose (paragraph 39);

on the evidence, the appellant could not have been expected to realise until 1 December 1998 that the change of the source of funding was, or might be, a material fact that she ought to disclose and, accordingly, the overpayment before then was not recoverable from her (paragraph 45);

where an appointee had obtained a social security benefit by misrepresenting or failing to disclose a material fact, the Secretary of State might generally recover the overpaid benefit from both the appointee and the claimant, but, where the appointee had retained the benefit instead of paying it to, or applying it for the benefit of, the claimant, only the appointee was liable and, where the appointee had acted with due care and diligence, only the claimant was liable (paragraph 63);

from the finding that disclosure by the appellant of the change of source of the funding was reasonably to be expected, it followed that she had not used due care and diligence and, accordingly, the resulting overpayment from 1 December 1998 to 5 April 1999 was recoverable from her under section 71(1) and (3) of the 1992 Act (paragraph 69);

an overpayment might be recovered from an appointee under regulation 11 of the 1988 Regulations only to the extent that the appointee had not paid the money to the claimant or applied it for the claimant's benefit and, otherwise, was recoverable only from the claimant who had had the benefit of the money so that, in this case, the overpayment from 6 April 1999 to 12 April 1999 was not recoverable from the appellant because the benefit had been paid straight to her daughter (paragraphs 73 and 74);

in every case where there is an appointee, the Secretary of State should, when the overpayment is discovered, issue a recoverability decision that deals with the liability of both the appointee and the claimant (paragraph 67).

DECISION OF A TRIBUNAL OF SOCIAL SECURITY COMMISSIONERS

The claimant's appeal is allowed in part. The decision of the Luton appeal tribunal dated 18 December 2000 is set aside because of error in law. We substitute the following decision. Income support totalling £918 overpaid to the appellant's daughter from 1 December 1998 to 5 April 1999 is recoverable from the appellant because the appellant failed to disclose the material fact that a health authority was funding her daughter's accommodation in a nursing home. However, income support overpaid to the appellant's daughter from 6 October 1998 to 30 November 1998 and from 6 April 1999 to 12 April 1999, is not recoverable from the appellant.

REASONS

Introduction

The appellant in this case was appointed by the Secretary of State to act on behalf of her daughter who was a claimant of income support. The main issue on this appeal is whether section 71 of the Social Security Administration Act 1992 allows an overpayment of benefit to be recovered from such an appointee personally. Subsidiary issues have been raised as to whether any of the overpayment could in any event be attributed to a failure on the part of the appellant to disclose a material fact, as to the calculation of the overpayment and as to the procedural requirements for recovery under section 71(4) of the 1992 Act.

We held an oral hearing. The appellant was represented by Mr. James Maurici of counsel, instructed by Mr. Stewart Wright of the Child Poverty Action Group, on the main issue and by Mr. Gus Ghataura of the Welfare Rights Service of Bedfordshire County Council on the other issues. The Secretary of State was represented by Ms. Julie Anderson of counsel, instructed by Ms. Deborah Haywood of the Office of the Solicitor to the Department of Health and the Department for Work and Pensions.

The statutory provisions

Section 5(1) and (2) of the Social Security Administration Act 1992 reads:

"5.–(1) Regulations may provide-

…

(g) for enabling one person to act for another in relation to a claim for a benefit to which this section applies and for enabling such a claim to be made and proceeded with in the name of a person who has died;

(h) for requiring any information or evidence needed for the determination of such a claim or of any question arising in connection with such a claim to be furnished by such person as may be prescribed in accordance with the regulations;

…

(j) for notice to be given of any change of circumstances affecting the continuance of entitlement to such a benefit or payment of such a benefit;

…

(2) This section applies to the following benefits––

…

(b) income support

(c)

…"

As in force at the material time (subsequent amendments do not affect the issues arising in this appeal), section 71 of the 1992 Act read:

"71.– (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) Where any such determination as is referred to in subsection (1) above is made, the person making the determination shall -

(a) determine whether any, and if so what, amount is recoverable under that subsection by the Secretary of State, and

(b) specify the period during which that amount was paid to the person concerned.

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

(4) In relation to cases where payments of benefit to which this section applies have been credited to a bank account or other account under arrangements made with the agreement of the beneficiary or a person acting for him, circumstances may be prescribed in which the Secretary of State is to be entitled to recover any amount paid in excess of entitlement; but any such regulations shall not apply in relation to any payment unless before he agreed to the arrangements such notice of the effect of the regulations as may be prescribed was given in such manner as may be prescribed to the beneficiary or to a person acting for him.

(5) Except where regulations otherwise provide, an amount shall not be recoverable under regulations under subsection (4) above unless-

(a) the determination in pursuance of which it was paid has been reversed or varied on an appeal or revised on a review; and

(b) it has been determined on the appeal or review that the amount is so recoverable.

(5A) Except where regulations otherwise provide, an amount shall not be recoverable under subsection (1) above unless the determination in pursuance of which it was paid has been reversed or varied on an appeal or revised on a review.

…

(11) This section applies to the following benefits-

…

(b) income support;

…"

Sections 5 and 71 of the 1992 Act are derived from sections 51 and 53 respectively of the Social Security Act 1986. Under the enabling provision of section 51 of the 1986 Act, the Social Security (Claims and Payments) Regulations 1987 (S.I. 1987 No. 1968) were enacted which, by virtue of section 17(2)(b) of the Interpretation Act 1978, have effect as if made under section 5 of the 1992 Act. The relevant provisions are regulations 32 and 33, the pertinent parts of which read:

"32.– (1) … every beneficiary and every person by whom or on whose behalf sums payable by way of benefit are receivable shall furnish … such information or facts affecting the right to benefit or to its receipt as the Secretary of State … may require … 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, as soon as reasonably practicable after its occurrence …

33.– (1) Where-

(a) a person is, or is alleged to be, entitled to benefit, whether or not a claim for benefit has been made by him or on his behalf; and

(b) that person is unable for the time being to act; and either

(c) no receiver has been appointed by the Court of Protection with power to claim, or as the case may be, receive benefit on his behalf; or

(d) in Scotland, his estate is not being administered by any tutor, curator or other guardian acting or appointed in terms of law,

the Secretary of State … may, upon written application made to him … by a person who, if a natural person, is over the age of 18, appoint that person to exercise, on behalf of the person who is unable to act, any right to which that person may be entitled and to receive and deal on his behalf with any sums payable to him.

(2) Where the Secretary of State has made … an appointment under paragraph (1)–

(a) he … may at any time revoke it;

(b) the person appointed may resign his office after having given one month's notice in writing to the Secretary of State … of his intention to do so;

…

(3) Anything required by these regulations to be done by or to any person who is for the time being unable to act may be done by or to … the person appointed under this regulation … and the receipt of any person so appointed shall be a good discharge to the Secretary of State … for any sum paid."

Regulation 11(1) and (2) of the Social Security (Payments on account, Overpayments and Recovery) Regulations 1988 (S.I. 1988 No. 664) was made under section 53 of the 1986 Act and now has effect as if made under section 71(4) of the 1992 Act. It provides:

"11.–(1) … where it is determined by the adjudicating authority that a payment in excess of entitlement has been credited to a bank or other account under an arrangement for automated or other direct credit transfer made in accordance with regulation 21 of the Claims and Payments Regulations and that the conditions prescribed by paragraph (2) are satisfied, the excess, or the specified part of it to which the Secretary of State's certificate relates, shall be recoverable under this regulation.

(2) The prescribed conditions for recoverability under paragraph (1) are as follows –

(a) the Secretary of State has certified that the payment in excess of entitlement, or a specified part of it, is materially due to the arrangements for payments to be made by automated or other direct credit transfer; and

(b) notice of the effect which this regulation would have, in the event of an overpayment, was given in writing to the beneficiary, or to a person acting for him, before he agreed to the arrangement."

The factual background

The appellant (the appointee) was appointed by the Secretary of State under regulation 33 to exercise on behalf of her daughter (the claimant) the latter's rights in relation to claims for benefit. The claimant, who suffered from multiple sclerosis, sadly died on 17 April 2000. She was then living, as she had been from 17 May 1997, in a nursing home. Before moving to that home, she had been living in residential accommodation elsewhere and so it is possible that she had a "preserved right" to funding for accommodation through income support (see regulation 19 of the Income Support (General) Regulations 1987). While at the nursing home, the claimant received disability living allowance and incapacity benefit as well as income support. These benefits were paid by direct credit transfer into the claimant's bank account over which the appointee had power of attorney. Before the period with which we are concerned, the nursing home fees were financed partly by the county council, partly by the health authority and partly by the appointee using the claimant's income.

By letter dated 7 April 1999, the county council informed the incapacity benefit section of the Department that from 8 October 1998 the health authority had taken over responsibility for the claimant's nursing home fees. On 12 April 1999 an adjudication officer reviewed the award of income support and revised it, with effect from 6 October 1998, on the basis that the claimant ceased to be entitled to income support, once her nursing home fees were fully funded by the health authority, because her incapacity benefit exceeded her income support applicable amount.

In June 2000 two separate overpayment decisions by a decision-maker were made with respect to the appointee. The first was dated 16 June 2000 and related to the period from 6 October 1998 to 5 April 1999. Recovery was sought under section 71(1) of the 1992 Act on the basis that, on 8 October 1998 or as soon as possible afterwards, the appointee on behalf of the claimant failed to disclose the material fact that the health authority was funding the claimant's stay in the nursing home. The second overpayment decision was made on 21 June 2000 in respect of the period 6 April 1999 to 12 April 1999. Recovery was sought under section 71(4) of the 1992 Act and regulation 11 of the 1988 Regulations on the basis that the overpayment for that week had been caused by direct credit transfer arrangements. The overpayment under the first decision amounted to £1,326.00 and under the second decision was £51.00, so that the total overpayment held to be recoverable was £1,377.00. The appointee appealed to a tribunal.

The appeal to the tribunal

The Secretary of State's submission to the tribunal was deplorable. It gave no information about the review and revisal decision of 12 April 1999; nor did it state that there were two overpayment decisions referable to the appointee. Instead, it wrongly asserted that there was one such decision made 1 August 2000 to the effect that:

"Income support amounting to £1377.00 from 24 April 1999 to 10 September 1999 [sic] (both dates included) was paid which would not have been paid but for the failure to disclose."

There were several further errors on dates. Even more seriously, the submission contained no explanation of the claimant's entitlement to benefit – it merely asserted that she had no entitlement to income support from 6 October 1998 but had been paid £51 per week for a period of 27 weeks – and no evidence was lodged nor argument directed to support an assertion that disclosure by the appointee was reasonably to be expected. To make matters even worse, no representative of the Secretary of State appeared to assist the tribunal at the hearing.

The appointee was present at the tribunal hearing and represented by Mr. Ghataura. The main point raised, in reliance on the decision of Mr. Commissioner Mesher in CIS/332/1993 was that a failure to disclose or a misrepresentation by an appointee grounded recovery only against the claimant and not against the appointee unless the latter was acting in a personal capacity rather than in the capacity of appointee. However, it was also argued that the appointee could not reasonably have been expected to disclose the change of circumstances, that the change of funding raised a point of law but was not a material fact and that, in any event, there had been no overpayment during the first six weeks after the change in funding.

The appointee's evidence to the tribunal was that on or about 11 August 1998 when she went to make her payment to the nursing home she was told that she "didn't need to pay over [her] income support received for [the claimant] any more". The appointee said she wondered whether this might have something to do with disability living allowance which the claimant was also receiving but she had not mentioned anything to the Department.

The tribunal dismissed the appeal. In respect of the argument based on CIS/332/1993, he preferred the reasoning of Mr. Commissioner Howell QC in R(IS) 5/00, stating that there was a right of recovery from an appointee when acting on behalf of a claimant. The tribunal finally concluded:

"… I find that the information communicated to [the appointee] [that] from a certain date the local health authority would be funding her daughter's stay at the nursing home was a fact. It is clearly a material fact and the appellant failed to disclose it. As a consequence of the failure to disclose IS amounting to £1,377 paid from 24 April 1999 to 10 September 1999 both dates included was paid. This amount would not have been paid but for the failure to disclose the material fact [and] even though [the appointee] is an appointee I am satisfied that in the circumstances set out above the amount which is not in dispute is recoverable from [the appointee]."

The argument that there had been no overpayment for the first six weeks was not addressed.

The appeal to the Commissioner

This appeal is brought with the leave of Mr. Commissioner Mesher. The primary ground of appeal at the written stage (and it has remained so) is that CIS/332/1993 is correct and is to be preferred to R(IS) 5/00. However, it is also argued that there was no failure to disclose a material fact and that the tribunal recorded an inadequate statement of reasons for his decision.

The Secretary of State's written submission supports the appeal in part. The Secretary of State notes the various errors in dates in the papers which led the tribunal to accept an overpayment period which is clearly wrong because the Benefits Agency knew from a prior date that the claimant's care was now funded by the health authority.

The Secretary of State for the first time produces copies of the two separate overpayment decisions. In respect of the second decision, purportedly made under regulation 11 of the 1988 Regulations rather than under section 71(1), it is suggested that the reasoning in CIS/451/1995 (also a decision of Mr. Commissioner Mesher) may apply and that the decision may be invalid because it was not given as "part and parcel" of the review decision, which was given on 12 April 1999. However, it is said that Mr. Commissioner Walker QC in CSIS/670/95 disagreed with that interpretation.

In respect of the first decision, made under section 71(1), the Secretary of State accepts that the tribunal erred by failing adequately to explain why disclosure was reasonably to be expected. Beyond that, the appeal is not supported. The Secretary of State explains that, as the claimant was paid by direct credit transfer to a bank, there were no order book notes. However, form INF 4 is always issued by the paying system at the initial determination of any claim and on annual uprating. A copy is produced by the Secretary of State who refers in particular to an instruction to report if "you or anyone you have claimed for … get any money". It is submitted that this instruction, combined with the duty to disclose imposed by regulation 32, means that disclosure by the appointee that she no longer had to meet any of the claimant's nursing home fees out of income support was reasonably to be expected. The Secretary of State's representative states that he telephoned the relevant health authority and was advised that their records show that the appointee attended a series of case review meetings. During one such meeting on 28 September 1998 the funding by the health authority was decided in principle and at a further meeting funding from 8 October 1998 was confirmed.

Finally, in a brief paragraph, the Secretary of State refers to the conflict between CIS/332/1993 and R(IS) 5/00. It is pointed out that in the latter case the Commissioner considered the former one and did not follow it; moreover, that the latter case is reported suggests it has the support of the majority of Commissioners. R(IS) 5/00 was also specifically followed by Mr. Commissioner Angus in CIS/3813/97 when holding that both the claimant and the appointee are liable under section 71 in respect of a misrepresentation or non-disclosure on the part of the appointee.

In a written response to the Secretary of State, Mr. Ghataura, on the appellant's behalf, concentrates on three points. Firstly, with respect to the second decision as a determination under section 71(4), he submits that the reasoning of CIS/451/1995 is to be preferred to that in CSIS/670/1995. It is therefore submitted that the final week of the overpayment is not recoverable. Secondly, it is contended that a reasonable person would not have expected a change in residential funding to have an effect on income support entitlement. Finally, it is argued that policy reasons support a rule that an overpayment is recoverable only from the claimant:

"If there were concurrent liability … it would deter social work departments from becoming appointees for people who need such assistance. There would also be potential of [sic] abuse because in the event of social services being an appointee, there would be nothing stopping the Department of Work and Pensions always pursuing the social services department on the basis that recovery is more likely from the social services department."

The Chief Commissioner granted the appellant's request for an oral hearing and directed that the appeal be determined by a Tribunal of three Commissioners. The question of law of special difficulty is identified as being " … whether a distinction is to be drawn between recoverability of benefit from an appointee as appointee and recoverability of benefit from an appointee personally." In other words, the question is whether, if the overpayment in this case is recoverable at all, it is recoverable from the claimant's estate or from the appointee's own resources or both.

All representatives lodged skeleton arguments immediately prior to the hearing although there had been no direction to this effect. They were very useful and would have been even more so had they been lodged some time in advance of the hearing. All representatives amplified their submissions and we are grateful to them for their help.

The arguments on the main issue

The arguments on behalf of the appellant

The basic proposition advanced by Mr. Maurici is that the appointee simply stands in the shoes of the claimant so that any overpayment must be recovered only from the latter. The reason for the Child Poverty Action Group's involvement in the appeal is its concern in particular about possible discouragement to social workers acting as appointees if overpayments can be recovered from them.

Mr. Maurici submits that R(IS) 5/00 was wrongly decided and CIS/332/1993 should be followed. He says that the latter case contains very full reasoning and that the starting point is one agreed by the parties in that case (paragraph 19):

"… if an appointee makes a misrepresentation of material fact or fails to disclose a material fact, a resulting overpayment is recoverable from the claimant."

Mr. Maurici relies on Mr. Commissioner Mesher's view that the above proposition is supported by authority (R(P) 1/56 and R(SB) 28/83) and follows from the principle laid down in CWG. 6/50:

"When an agent is appointed by the Minister … to act on the claimant's behalf, that agent stands in the claimant's shoes for all purposes relating to claiming and obtaining payment of benefit. Anything the agent does in relation to those matters counts in law as if it were done by the claimant in person."

Mr. Commissioner Mesher then drew a conclusion (at paragraph 22) which Mr. Maurici submits is crucial:

"It seems to me that if, when an appointee acting in that capacity misrepresents or fails to disclose a material fact, it is as if the claimant personally has misrepresented or failed to disclose the fact, it cannot at the same time be said that the appointee personally has misrepresented or failed to disclose the fact. Mr. Latter's submission [for the adjudication officer] is of course to the contrary. He points to the plain and common-sense point that the appointee is a person who has misrepresented or failed to disclose the fact. However, in the light of the agreed effect of an appointee's misrepresentation or failure to disclose on the claimant's liability to repay overpayments, the position argued for by Mr Latter is in fact quite sophisticated. It involves the appointee at one and the same time acting in the capacity of appointee, whose acts and omissions are regarded as done by the claimant, and in a personal capacity, in which the selfsame acts and omissions are regarded as done by the appointee. I consider that that is too sophisticated an analysis. When an appointee acting in the capacity of appointee misrepresents or fails to disclose a material fact, the person who misrepresents or fails to disclose is the claimant and not the appointee."

Thus, as Mr. Maurici summarises CIS/332/1993, it is the claimant and not the appointee who fits the statutory wording under what is now section 71. Moreover, as acts and omissions by the appointee in that capacity are the claimant's acts and omissions, this distinguishes appointees from other third parties whose potential liability in respect of overpayments was accepted by the House of Lords in Plewa v The Chief Adjudication Officer [1995] 1 AC 249 (also reported as R(P) 2/95). With a third party who is not an appointee, there is not always an imputation of such third party's acts and omissions to the claimant.

Mr. Maurici submits that R(IS) 5/00, in which Mr. Commissioner Howell QC upheld a tribunal decision that an overpayment was recoverable from an appointee, was wrongly decided. At paragraph 19, the Commissioner said:-

"I do not think it is to be doubted that in a case where an appointee acting on behalf of a claimant has been responsible for a failure to disclose material information and benefit has been overpaid as a result, concurrent rights of recovery may exist under section 71 of the Administration Act: against the appointee as the person directly responsible, and against the claimant who, through his appointee, has failed to disclose the material information that should have been disclosed. There are many instances in the law where a person has concurrent rights of recovery against two different people for the same sum. Where an appointee fails to give the disclosure reasonably to be expected, section 71(3) is such a case. The aggregate amount recoverable is of course limited in all cases to the amount of the overpaid benefit, because these are rights of restitution, not penalties."

Mr. Maurici draws on general principles of the law of agency and those inherent in the law of restitution in preferring the rationale of CIS/332/1993. He argues that, so far as the latter is concerned, the person obtaining restitution must show, at minimum, a gain by the one sued which is at the complainer's expense. As any benefit is obtained by the claimant and not the appointee, restitutionary principles are not consistent with attaching liability to appointees.

With respect to agency, Mr. Maurici submits that the general rule is that an agent is not personally liable but only his principal and that Mr. Commissioner Howell QC had the general rule and the exception from it the wrong way round when at paragraph 17 he said:

"… a person is not relieved from general civil or statutory responsibility for his own acts or omissions merely because he is acting on behalf of someone else. (In the field of private contractual obligations a person may of course contract expressly as agent in such a way as to incur no personal liability; but that is more a matter of what is being agreed than an exception to the principle.)"

The main thrust of Mr. Maurici's argument is that CIS/332/1993 conforms with a rule limiting recovery from agents and throwing liability on the principal. Mr. Maurici notes that Mr. Commissioner Mesher at the close of paragraph 22 of CIS/332/1993 raises the possibility that an appointee may be liable for a misrepresentation or failure to disclose material facts relating to the claimant's benefit if the appointee acts "in a personal capacity". Mr. Maurici suggests that fraud by the appointee might make the appointee personally responsible, but the difficulties of differentiating when an appointee is or is not acting personally point to a conclusion that his or her actions should in any event be imputed to the claimant so that the latter is always responsible.

Finally, Mr. Maurici contends that policy considerations favour liability attaching only to the claimant. He says that it is inequitable that an appointee who acts in good faith and for no gain may be personally liable to repay social security benefits and this will result in such volunteers, including social workers and helpful relatives or friends, refusing to undertake the task. Concurrent rights of recovery against the appointee and the claimant are inappropriate. If the Secretary of State may recover an overpayment from either appointee or claimant or both that choice could be challenged by way of judicial review or the appointee might have a claim in restitution against the claimant. This potential for unfairness and possible satellite litigation does not arise if there is only recoverability against the claimant. Mr. Maurici argues that the question who is "the person" in section 71(3), in the context of the appointee system, is the beginning, rather than the end, of the problem and cannot be answered by a simplistic analysis of the statutory wording.

The arguments on behalf of the Secretary of State

Ms. Anderson supports the position taken in R(IS) 5/00, which was expressly followed by Mr. Commissioner Angus in CIS/3813/1997 when he decided that:

"The benefit overpaid is recoverable from the claimant's executor and from the claimant's appointee in terms of section 71 of the Administration Act."

It is submitted for the Secretary of State that this reflects the ordinary meaning of the statute, which is framed in very broad terms. If it was intended there be recovery against either claimant or appointee but not both then the statute would have plainly said so.

Ms. Anderson argues that neither the law of agency nor that of restitution is relevant because the social security appointment system is statutory and sui generis. There may be innocent appointees and innocent claimants and she says that policy suggests concurrent recovery, leaving the choice to the Secretary of State who will be able to take all relevant factors into account, including those of fairness. It is not accepted by the Secretary of State that a decision confirming the liability of appointees would put the appointment system under serious strain. Ms. Anderson says that the Secretary of State has followed R(IS) 5/00 with no discernible outcry. It is stressed that only the overpayment is recoverable and not any element of additional costs.

The complexities of Mr. Commissioner Mesher's approach were, Ms. Anderson submits, underscored by Mr. Commissioner Howell QC at paragraphs 11 and 12 of his decision in R(IS) 5/00:

"… The suggestion, based on some observations in another Commissioner's decision in case CIS/332/1993, is that it was an error of law for [the tribunal] not to draw a distinction between failures of disclosure by the claimant's mother in her capacity as his appointee, and others for which she was in some way responsible in her personal capacity.

In my judgment, this puzzling and metaphysical distinction is not a helpful one to try and make in a case such as the present. The practical reality is that the claimant's mother was taking the whole of the responsibility for dealing with the claimant's social security affairs, and it was her silence after giving the initial figure to the department that in the circumstances led to his getting too much benefit. Even a philosopher would find it difficult to say when she was being silent on her own account and when as appointee."

Ms. Anderson suggests that the majority of the authorities adopt Mr. Commissioner Howell's line viz that recovery may be pursued either against the claimant or the appointee, rather than Mr. Commissioner Mesher's view which is that recovery lies only against the claimant. Furthermore, the Secretary of State sees no reason to limit recovery to the appointee. It is argued that the broad terms of section 71 combined with the wording of regulation 33 in establishing the appointment, encompass liability of the claimant as well as of the appointee, because the latter acts "on behalf of" the former.

Was disclosure by the appointee reasonably to be expected ?

It is convenient to take this point first because it is conceded that the tribunal's decision is erroneous in point of law in its approach to this issue and because, unless disclosure by the appointee was reasonably to be expected, there was no failure to disclose on the part of the appointee (R(SB) 21/82) and the question of recovery of the overpayment from her under section 71(1) would not arise at all.

Despite the appellant having specifically argued in her grounds of appeal to the tribunal that she had not failed to disclose a material fact, the Secretary of State's submission to the tribunal was simply that "disclosure was reasonably to be expected because the nursing home were no longer taking money for [sic] her in respect of her daughter [sic] accommodation needs". Before the tribunal, Mr. Ghataura argued that the only material fact was that the claimant was resident in a nursing home and that did not change when the funding changed. He submitted that the change in funding was not itself a material fact; it merely gave rise to a point of law. His argument, which appears to have been based on an assumption that the claimant had no "preserved right" to have her accommodation funded through the income support scheme, was that the amount of the fees charged to the claimant was irrelevant to the determination of the claimant's entitlement to income support. The only reason that the claimant's entitlement was reduced to nil was that the effect of the funding was that she became a "patient" within the terms of regulation 21 of the Income Support (General) Regulations 1987. It was on this basis that he argued that the change of funding was not itself a material fact. The tribunal rejected that submission and held that the funding of the nursing home placement by the health authority was a fact and was plainly a material fact. We agree. The change of funding may have had only an indirect effect on the claimant's entitlement to benefit but that did not make the new source of funding any less of a fact. However, the obscurity of the impact of the change of funding was relevant to the question whether the appellant could reasonably have been expected to know that the new source of funding was, or might be, a material fact that she ought to disclose. Unfortunately, the way the case was put before the tribunal led the tribunal to overlook that question almost entirely. In this, as the Secretary of State concedes, the tribunal erred in law.

The flaw in the Secretary of State's submission to the tribunal is that, although it is obvious to anyone acquainted with the manner in which income support is calculated that the change in funding was a material fact, claimants and appointees can be expected only to know as much about income support as they have been told. No material was laid before the tribunal to explain why the appellant should have known that the funding was relevant. It was not suggested that the mere fact that the claim form signed by her on 10 December 1997 had asked about the amount of fees paid to the nursing home necessarily meant that she should have realised that the fact that the health authority had taken on the funding of the place would affect the amount of her daughter's entitlement to benefit. Nowhere is there any indication that the appellant was ever told how the amount of income support was calculated. The claimant had been awarded incapacity benefit and disability living allowance as well as income support, so that, even if the claimant had had a "preserved right", the amount of income support payable would not simply have been the amount of the fees plus an element of "pocket money" which might have made plain the link with the liability to pay fees. Therefore, on the material before the tribunal, it does not seem to us that it was shown that the appellant ought to have realised that the change of funding and consequent change in liability to pay fees might affect the claimant's entitlement to income support.

Further evidence was made available to us. Firstly, Mr. Ghataura explained the complicated arrangements that had existed between the county council social services department and the health authority as regards the placement in the nursing home. In particular, it appears that there had in fact been "joint funding" before 8 October 1998. The appellant had already been paying only part of the total fees of £450 per week out of the claimant's benefit, with the county council paying the rest and invoicing the health authority for the relevant proportion. Secondly, the appellant told us that, "when the nursing home was taken over by BUPA", she was told the county council would thereafter "deal direct" with the home and that she did not consider that payment was any longer her "problem". She also told us that the authorities consulted her mainly about practical matters and there was not a great deal of discussion with her about the technicalities of funding, which is understandable. Thirdly, the Secretary of State produced a copy of Form INF 4, given to people to whom benefit is paid by direct credit transfer and therefore given to the appellant in this case. That form lists a large number of changes in circumstances that should be reported to the Benefits Agency. It ends by stating that the "lists are only a guide as to the types of things we need to know. …. If you are not sure we need to know about a change, tell us anyway." However, although it deals with receiving new income, moving home and changes in housing costs, it does not seem to us that any of the examples given really deals with the situation in this case where the health authority took over complete responsibility for the nursing home fees of a home where the claimant was already residing. There is nothing in the form that would alert a person to the fact that a change in funding arrangements might be material.

In the light of all the evidence as to how matters would have appeared from the appellant's point of view, we accept Mr. Ghataura's submission that it has not been proved that, when the change of funding was first mentioned to the appellant and she ceased to be liable to pay any of the nursing home fees, she realised, or could reasonably have been expected to realise, the possible materiality of the new circumstances to the claimant's entitlement to income support. The Secretary of State may wish to amend form INF 4.

However, Mr. Ghataura also produced a "Report Sheet", dated 29 October 1998. This emanates from the county council and shows that the county council and health authority had realised in July 1998 that joint funding was not permissible and that it had been agreed on 28 September 1998 that the health authority would be the funding agency. There is no record on the "Report Sheet" of the appellant being told at that time and, of course, she could not in any circumstance be expected to disclose a fact before she became aware of it. The Secretary of State's representative believes, as a result of the telephone call to the health authority, that the appellant was present at the meeting on 28 September 1998 when funding was discussed, but it is not clear whether that was actually so. In any event, there was then further argument between the authorities as to the date from which the health authority should commence payment and 8 October 1998 was eventually agreed upon on 28 October 1998. On the same date the report states:

"Carole has also advised [the appellant] to return her benefit book to benefit agency next month."

Before us, the appellant denied having been given such advice. However, we do not regard her evidence as satisfactory. She was very vague about most matters. It is, of course, some time since these events took place but, while generally vague, she gave very precise answers to some questions and then contradicted herself. In particular, she had stated that the overpayment had been used to buy a special chair for her daughter but when her attention was drawn to evidence about the cost and when it was bought and the amount of money disclosed on the income support claim form as having been in her daughter's bank account, she said that the money for the chair had come from her son-in-law. We consider that her evidence was somewhat disingenuous and we are not prepared to rely on it. We accept that she in fact had no order book because benefit was being paid into her daughter's account automatically. That, however, does not show that she was not given advice in terms that must have made it plain that, if she had no book, she needed to report to the Benefits Agency the fact that new financial arrangements had been made for her daughter because that fact would affect her daughter's entitlement to benefit. We see no reason to regard the evidence on the report sheet as being inaccurate. The appellant already knew that she no longer had to pay nursing home fees and so being told that the change of funding might affect benefit entitlement should not have been a surprise to her.

It follows that, although it may not have been reasonable to expect the claimant to disclose the change of funding on the basis of the information she had been given before "Carole" gave her advice, that advice made disclosure reasonable. However, it could only have become reasonable "next month". We do not know why the advice given was not to return the order book, or at least make disclosure, immediately – it may be because it was expected that the claimant's entitlement to income support would be unaffected by the change of funding for six weeks – but it seemss to us to be difficult to say that disclosure by the appellant was reasonably required until whatever date in November was suggested to her. In the absence of any evidence as to when that was, we consider that no overpayment of income support before 1 December 1998 is recoverable from the appellant.

The amount of the overpayment

The tribunal recorded that the calculation of the overpayment was not in dispute but at the same time recorded that a submission was made to them based on the notion that the claimant was a hospital in-patient. This latter point was raised again by Mr. Ghataura at the oral hearing before us. The submission was not very clearly articulated but, as we understand it, the argument is that, once the health authority took responsibility for the funding, the claimant became a "patient" within the scope of regulation 21 of the Income Support (General) Regulations 1987 and that that was the reason why her "applicable amount" was reduced, with a consequential loss of entitlement to benefit. Such a reduction takes place only six weeks after a person becomes a "patient" (see paragraph 1 of Schedule 7). Thus, he argues, there should have been no reduction in the claimant's entitlement during those first six weeks. If, as Mr. Ghataura assumes, the claimant's "applicable amount" was calculated under regulation 17 of the Income Support (General) Regulations 1987 before the health authority took over the funding, his submission appears to have some force. However, if the claimant's applicable amount was calculated under regulation 19, it seems to us the change of funding would have had an immediate effect on the applicable amount as calculated under regulation 19, even during the six weeks before regulation 21 began to bite.

As this point had not been raised in written submissions, Ms. Anderson was not in a position to answer it. The argument is a challenge only to the first six weeks of the overpayment. It is conceded that, after that period, the claimant had no entitlement to income support and that the £51 per week she had been paid was an overpayment. Our view that any overpayment before 1 December 1998 is not recoverable means that it is not necessary to express a definitive view on Mr. Ghataura's argument and we prefer not to do so, both because we have not received submissions on behalf of the Secretary of State and because the lack of information about the way the claimant's entitlement to benefit was calculated leaves us unsure that the premise upon which Mr. Ghataura made his submission was correct.

The liability of appointees under section 71(1)

This is the main issue on this appeal. The question for decision is whether a person appointed under regulation 33 of the 1987 Regulations to act on behalf of a claimant can be required under section 71 of the 1992 Act to repay, from his or her personal resources, benefit overpaid in respect of the claimant. The starting point is the terms of those provisions.

Section 71(3) provides that an overpayment due to a misrepresentation as to, or a failure to disclose, a material fact can be recovered from the person who misrepresented, or failed to disclose, the fact. There is nothing elsewhere in section 71, or in regulation 33, that expressly qualifies section 71(3). Accordingly, at first sight, it appears that, where an appointee misrepresents, or fails to disclose, a material fact, the overpayment may be recovered from the appointee. It equally appears that, if the claimant has not also misrepresented, or failed to disclose, a material fact, the overpayment is not recoverable from the claimant.

The relevance of common law principles

However, Mr. Maurici submits that regard must be had to the law of agency and that the consequence is that, save in cases of fraud, the claimant is made liable in place of the appointee. Ms. Anderson opposes that argument, submitting that the law of agency and other common law principles are irrelevant. At the same time, she submits that, where an appointee fails to disclose a material fact, any consequent overpayment is recoverable from both the appointee and the claimant. This, she argues, can be inferred from the fact that, under regulation 33, a person is appointed to act "on behalf of" a claimant.

We find Ms. Anderson's position illogical. She was wholly unable to explain how, if no common law principles applied, regulation 33 had the effect that the simple words of section 71(3) permitted recovery from the claimant where it was the appointee who had misrepresented, or failed to disclose, the material fact. Nevertheless, she is right to focus on the words "on behalf of". The common law has developed, mostly in the context of the law of agency, principles dealing with the liabilities of those who act on behalf of others and those on whose behalf others act. In the absence of any clear indication to the contrary in either section 71 or regulation 33, it seems to us that the rule imposed by section 71(3) – that an overpayment is recoverable from the person making a misrepresentation or failing to disclose a material fact – must be regarded as being subject to those common law principles whenever one person acts on behalf of another in respect of a claim for benefit. Consistently with the approach taken by a number of Commissioners over the last half-century, we therefore accept Mr. Maurici's submission that the principles underlying the law of agency are relevant when considering the position of appointees.

However, in considering the application of the common law principles, it must be noted, as Mr. Commissioner Angus observed in CIS/3813/1997, that an appointee is not in the same position as a conventional agent. Whereas an agency is usually created by an agreement between the agent and the principal on whose behalf the agent will act, an appointment under regulation 33 is made by the Secretary of State even though the appointee is appointed to act on behalf of the claimant. The Secretary of State seeking to recover money from an appointee or a claimant is therefore not in the same position as a third person seeking to recover money from an ordinary agent and his or her principal. We therefore accept Ms. Anderson's submission that appointees are sui generis and that an appointee is in a different position from a volunteer who derives his or her authority from the claimant (as in R(P) 1/56 and R(SB) 21/82) or a receiver who derives his or her authority from the Court of Protection (as in R(SB) 28/83). The application of the common law principles must be considered against that background.

The application of the common law principles

In arguing that an appointee is not usually liable to repay benefit paid in consequence of a misrepresentation made by him or her, or his or her failure to disclose a material fact, Mr. Maurici relies heavily on the reasoning of Mr. Commissioner Mesher in CIS/332/1993, who, in turn, relied upon a passage from CWG 6/50:

"…when an agent is appointed by the Minister … to act on the claimant's behalf, that agent stands in the claimant's shoes for all purposes relating to claiming and obtaining payment of benefit. Anything the agent does in relation to those matters counts in law as if it were done by the claimant in person."

In the light of that passage, Mr. Commissioner Mesher concluded that –

"… if, when an appointee acting in that capacity misrepresents or fails to disclose a material fact, it is as if the claimant personally has misrepresented or failed to disclose the fact, it cannot at the same time be said that the appointee personally has misrepresented or failed to disclose the fact."

That was the basis on which he held that an appointee was not liable where recovery was sought under what is now section 71(1) and (3). It seems to us to draw too much from CWG 6/50. What was decided in CWG 6/50 was that, as the appointee was standing in the claimant's shoes for the purpose of obtaining benefit, it was the appointee who had the duty to comply with the relevant time limit, even though it was the claimant who would suffer the loss caused by a breach of that duty. That involved imputing the appointee's breach of duty to the claimant only in the sense that the claimant suffered the same consequence as she would have done had she herself been responsible for obtaining the benefit and acted in the same way as the appointee. The imputation of an agent's actions to his or her principal may sometimes be a useful concept but any such imputation is artificial and there is no justification for the conclusion that imputing the actions to the principal means that they cease to be actions of the agent.

In R(IS) 5/00, it was held that both appointees and claimants were liable where an appointee had misrepresented, or failed to disclose, a material fact. Mr. Maurici criticises the reasoning in that case. We accept that the two authorities to which Mr. Commissioner Howell QC referred are not directly in point. R(SB) 21/82 concerned a volunteer who was not an appointee and in R(SB) 28/83, which concerned a receiver, the issue before the Commissioner was the liability of the claimant rather than the receiver personally. More important is Mr. Maurici's submission that Mr. Commissioner Howell QC was inaccurate when he said:

"The second [well established principle of general law] is that a person is not relieved from general or statutory responsibility for his own acts or omissions merely because he is acting on behalf of someone else."

Mr. Maurici relies on the analysis in Bowstead and Reynolds on Agency (17th edition, 2001) dealing with the duty of an agent to repay money received for use of the principal. At paragraph 9-098, the general rule is stated as being that:

"[Subject to exceptions], an agent is not personally liable to repay money received by him for the use of his principal."

The exceptions are, however, important. They arise (i) where the agent acts personally, (ii) where money is obtained illegally, (iii) where the money is paid over under a mistake of fact or where for some other reason an immediate right of recovery arises and repayment is demanded from the agent before he has in good faith paid the money over to his principal or otherwise dealt with it to his detriment in the belief that the payment was a good and valid payment and (iv) where the receipt of the money is outside the actual and apparent authority of the agent (paragraphs 9-098 and 9-101 to 9-105). It seems. to us that, in referring to the agent's "acts and omissions", Mr. Commissioner Howell QC was referring to wrongful acts within exception (ii). Accordingly, it seems to us that he was accurately stating the rule as it applied where there had been such a wrongful act or omission.

We accept Mr. Maurici's submission that section 71 is not concerned with the imposition of a penalty. However, the basis of recovery of overpaid social security benefits under section 71(1) is misrepresentation or failure to disclose, which are generally wrongful acts or omissions. Compensatory principles are therefore in action, as is emphasised by section 71(3). In this context, the relevant general rule, as stated in Bowstead and Reynolds on Agency, is:

"Where loss or injury is caused to any third party by any wrongful act or omission of an agent while acting on behalf of his principal, the agent is personally liable whether he was acting with the authority of his principal or not, to the same extent as if he was acting on his own behalf …" (paragraph 9-112).

Furthermore, the agent is not discharged from liability to make repayment by any payment over to his or her principal (paragraph 9-102). Where an agent, acting with the authority of his or her principal, obtains money through a misrepresentation, the principal is likely also to be liable (paragraph 8-183). If the agent was acting without the authority of the principal, the principal may still be liable, applying equitable or restitutionary principles, but only to the extent that money was paid to, or applied on behalf of, the principal (paragraph 8-201). Thus it is clear that, in most cases where money has been obtained through misrepresentation by an agent, both the principal and the agent are liable to the third party.