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[2004] UKSSCSC CIS_4348_2003 (12 October 2004)

DECISION OF A TRIBUNAL OF SOCIAL SECURITY COMMISSIONERS

Decision

We allow the appeal of the Secretary of State. We set aside the decision of the Hounslow appeal tribunal dated 7 July 2003, and confirm the Secretary of State's decision made on 20 May 2002 that the sum of £4,626.74 paid to the claimant in income support is recoverable from her.

As indicated at the hearing, we limit the time in which an application may be made for leave to appeal to the Court of Appeal. Under the powers in regulation 5(2) of the Social Security Commissioners (Procedure) Regulations 1999 (SI 1999 No 1495), we abridge the time to 4 weeks from the date when our decision is issued to the parties.

The Background

This case concerns the recoverability of an overpayment of income support. The overpayment, which is not in dispute, arose as follows.

The claimant has a learning disability. She was in receipt of income support as a lone parent from 15 May 1990, and claimed an allowance for her children who lived with her and for whom she was responsible.

She received a Form INF4, which listed, in a section headed, "Changes you must tell us about":

"Tell us as soon as you can if any of the changes listed in these notes apply to you or your partner… or children…

Changes to do with where you live

Tell us if you or someone who you have claimed for

Move to a different address

…

Changes to do with your family

…

If children who you have claimed for go into care."

The claimant was paid by order book. The notes at the back of that book read as follows:

"Changes that you must tell us about

…

9 Remember

The amount of money that you are entitled to is based on what you told us when you first claimed.

If things change and you do not tell us, you might get the wrong amount of money - and you may be breaking the law

…

19 Moving to a different address

You must send us a letter or Form A9 if you or your partner or any dependent or anyone else who you have told us is living with you, moves to a different address."

The claimant's children were taken into care in October 2000, and they moved to a different address. However, the claimant did not notify the Department for Work & Pensions ("the Department") of these changes until December 2001. Taking account of a disability premium to which she was entitled (which offset some of the overpayment made on account of these changes of circumstance), an overpayment of £4,626.74 was made between 1 November 2000 and 24 December 2001.

The claimant understood that her children had been taken into care. However, the tribunal found that the claimant "did not understand that the placing of her children in care was a material fact that she needed to disclose to the [Department]. Her mental problems prevented her from realising the significance of this event." (Statement of Reasons, Paragraph 7). It is important to note that the reasons why the claimant submitted she should not be the subject of a section 71 recovery - and the reason accepted by the tribunal - was that, in the context of her benefit, she did not have the mental capacity to appreciate the significance or materiality of the change in her circumstances, namely her children being taken into care and leaving her house. The tribunal also expressly found that, although the claimant could read and the requests were in simple and unambiguous terms, she would not have understood the meaning of what was written in the order book (Statement of Reasons, paragraph 11) or, presumably, in the Form INF4.

The issue arising on this appeal is consequently whether the mental capacity of the claimant was such as to prevent the Secretary of State seeking to recover the overpayment admittedly made.

This issue appearing to be one of special legal difficulty (involving consideration as to correctness of R(A) 1/95 and other conflicting Commissioners' decisions), the Chief Commissioner convened a Tribunal of Commissioners to deal it with, and we heard the case in July and August 2004. At the hearing, the Secretary of State was represented by Mr Jason Coppel of Counsel (instructed by the Office of the Solicitor to the Department of Work and Pensions) and the claimant was represented by Mr Tom Weisselberg of Counsel (instructed by the Child Poverty Action Group). We are grateful to both of them for their detailed and thought-provoking submissions.

The Principles

In respect of the issue before us, there are conflicting Commissioners' decisions. We will first deal with the relevant principles (of course taking account of the relevant authorities in the higher courts), before considering these decisions.

The general law provides a remedy for money mistakenly paid, by way of restitution, but that remedy is subject to certain defences. The statutory scheme gives the Secretary of State an alternative remedy, to which these defences do not apply, but which is not a blanket power of recovery. He is only entitled to recover in the specific circumstances prescribed by the statutory scheme.

For his entitlement to recover in the claimant's case, the Secretary of State relies upon section 71(1) of the Social Security Administration Act 1992 ("the 1992 Act") which provides:

"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… but for the misrepresentation or failure to disclose."

This section has been considered by the higher courts in several cases, and a number of propositions of construction are well settled and were common ground before us.

(i) The words "fraudulently or otherwise" cover the entirely innocent, and the phrase applies to "failure to disclose" as well as to "misrepresentation": see, for example, Jones v Chief Adjudication Officer [1994] 1 WLR 62 at page 65B (also reported as R(IS) 7/94), and Page and Davis v Chief Adjudication Officer (1991) (reported as R(SB) 2/92). Consequently, a wholly innocent failure to disclose may result in a recovery. It has been said that the innocent in this context include those who fail to disclose a matter because of a failure to appreciate that matter's materiality: R v Medical Appeal Tribunal (North Midland Region) ex p Hubble [1958] 2 QB 228 at page 242, approved in Jones at page 65F.

(ii) "[A] person cannot be held liable for failing to disclose what he does not know" (Jones per Evans LJ at page 65D). Consequently, one cannot "fail to disclose" a matter unless one knows of it. Whether one a particular person "knows" of a matter is determined by a subjective test.

(iii) "Material fact" means a fact that is objectively material to the decision of the Secretary of State to make an award of benefit (Jones at page 68D-F, and Hinchy v Secretary of State for Work and Pensions [2003] 1 WLR 2018 at paragraph 11). Whether the particular claimant considers the matter material is of no relevance. This test is entirely objective.

(iv) "Failure to disclose" does not mean simply "non-disclosure". It imports a breach of some obligation to disclose.

Proposition (iv) - for there to be a "failure to disclose" there must be an underlying obligation to disclose - was common ground before us, although from where the obligation might arise was in issue. However, before we come to that issue, we should deal with two matters raised before us in respect of the nature of the duty.

First, there was the issue as to the extent to which insurance concepts of non-disclosure may inform the duty of disclosure in the benefits field. Neither party before us considered reference to insurance cases to be helpful. We agree. It may be useful to refer to authorities and concepts from other areas of the law where there is a true analogy. There is some analogy between non-disclosure in insurance and failure to disclose in benefits law, because both involve a breach of duty. However, the analogy is weak because the nature of the respective duties is very different: a common law duty of good faith in the case of insurance non-disclosure, and specific duties of disclosure set out in a statutory scheme in respect of benefits. The approach to these issues in insurance is necessarily very different from the approach in the field of benefits. In particular, we respectfully agree with Evans LJ in Jones (at page 66) that the application of section 71 should not become subject to the "kind of refined analysis which has been permitted to enter the law of marine insurance".

Second, in R(SB) 21/82 (a decision to which we will return), Mr Commissioner Edwards-Jones QC said:

"… I consider that a failure to disclose necessarily imports the concept of some breach of obligation, moral or legal" (emphasis added).

We have some difficulty with the concept of a "moral obligation" in this context. If a breach of an obligation has legal consequences (e.g. loss of benefits already paid), it seems to us difficult not to describe that as a "legal obligation". We know of no authority where recovery has been sought from a claimant, in which such a "moral duty" has been vital; and, indeed, we cannot envisage a case in which it would be necessary for the Secretary of State to rely upon a moral duty when seeking recovery from a claimant.

In any event, both parties to this appeal agreed that any duty to disclose resting on the claimant was a legal duty, and consequently we do not consider it is necessary to consider the circumstances in which a moral duty to disclose may arise and, if it does, in respect of whom it might arise and the circumstances in which and terms on which it might arise. These matters are better addressed in the context of a case in which they may arise on the facts, and after full argument.

Restricting ourselves to the legal duty to disclose, from where does it arise, what is its scope and what are the consequences of breach?

Mr Weisselberg for the claimant submitted that the duty arose from section 71 itself. So far as the scope of duty is concerned, as we understood Mr Weisselberg, he submitted that the duty to disclose under section 71 only arose where disclosure was to be reasonably expected taking into account the circumstances of the particular individual, that being implicit from the words "failure to disclose" and from the context in which the phrase appeared. The scope of duty was to be determined on the basis of a mixed objective/subjective test. He submitted that recovery could be made under the provisions of section 71 only as a result of a breach of this obligation to disclose.

Even if the duty to disclose were to be found exclusively in section 71, we do not consider that the criteria for the existence of the duty would include a requirement of reasonable expectation as submitted by Mr Weisselberg. We shall return to this (see paragraphs 37 et seq below). However, irrespective of scope, we do not accept that section 71 itself gives rise to any such duty at all. The primary basis for our view is the wording of the section itself - particularly the opening words - which does not purport to impose a duty, but rather presupposes such a duty. If such an important independent duty had been intended, we would have expected it to have been set out clearly and not left to be implied by a process of highly sophisticated reasoning such as that employed by Mr Weisselberg.

In fact, the statutory scheme does have elsewhere within it in a variety of duties to disclose, most notably in regulation 32(1) of the Social Security (Claims and Payments) Regulations 1987 (SI 1987 No 1968 as amended, "the 1987 Regulations") made under section 51(1)(h), (k) and (l) of the Social Security Act 1986, now re-enacted as section 5(1)(h), (i) and (j) of the 1992 Act. Section 5(1) provides:

"(1) Regulations may provide-

…

(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;

…

(i) for the person to whom, time when and manner in which a benefit to which this section applies is to be paid and for the information and evidence to be furnished in connection with the payment of such a benefit;

(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."

Regulation 32(1) of the 1987 Regulations, as in force at the time relevant to this case, provided as follows. For convenience, we have divided the paragraph into its two constituent parts.

First duty

"Except in the case of a jobseeker's allowance, every beneficiary and every person by whom or on whose behalf sums payable by way of benefit are receivable shall furnish in such manner and at such times as the Secretary of State or the Board may determine such certificates or other documents and such information or facts affecting the right to benefit or to its receipt as the Secretary of State or the Board may require (either as a condition on which any sum or sums shall be receivable or otherwise),"

Second duty

"and in particular shall notify the Secretary of State or the Board 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, by giving notice in writing (unless the Secretary of State or the Board determines in any particular case to accept notice otherwise than in writing) of any such change to the appropriate office."

The regulation has been subsequently amended (by regulation 2 of the Social Security and Child Support (Miscellaneous Amendments) Regulations 2003, SI 2003 No 1050) to make the duties the subject of separate sub-paragraphs. With a number of inconsequential amendments, the first duty is now split between regulation 32(1) and (1A), and the second duty is now found in regulation 32(1B). In this decision, except where the context indicates otherwise, references to "regulation 32(1)" are to the pre-2003 amendment version. However, for the reasons we give below, we do not consider the 2003 amendment affected the substance of the provisions so far as relevant to this case, and the reasoning we adopt as relevant to the pre-2003 amendment applies equally to the current version of the regulation.

In submitting that the duty imposed by regulation 32(1) was something different from that underlying "failure to disclose" in section 71, Mr Weisselberg referred to the difference in language, section 71 referring to "disclose" but regulation 32(1) referring to "furnish" and "notify". We do not consider these differences to be significant, the word "disclose" as a matter of language being wide enough to include the concepts of "furnish" and "notify".

In most cases in which "failure to disclose" under section 71 has been discussed, the source of the underlying duty to disclose has not been vital, and has consequently not been considered. Mr Weisselberg did however, rely upon Franklin v Chief Adjudication Officer (1995) (reported as R(IS) 16/96). Staughton LJ, having referred to regulation 32(1), said:

"There does not appear to me to be power in regulation 32 to make provision for the consequences of misrepresentation or of non-disclosure unless perhaps it is to be found in the words "either as a condition on which any sum or sums shall be receivable or otherwise". But whether that be so or not, in my view it is immaterial. The consequences of misrepresentation and a non-disclosure are set out in section 71 of the Act. Nowhere else in the Act is any other power conferred to deal with the consequences of misrepresentation or non-disclosure. If and to the extent that regulation 32 purports to do so, upon which I express no opinion, it is not authorised by the powers conferred in the Act. It seems to me that it is section 71 of the Act which alone must regulate the consequences of misrepresentation and non-disclosure."

Mr Weisselberg submitted that "regulation 32" at the start of this passage must have been intended to be a reference to section 5(1), and Staughton LJ was indicating that it was that section of the primary legislation that did not enable consequences to be attached to a failure to disclose. We accept that regulation 32(1) did not specify - and possibly could not have specified - the consequences of a breach of duty. However, it is not unusual for one statutory provision to create a duty and for another to specify the consequences of a breach of that duty. Staughton LJ was merely indicating that section 71 exclusively regulated the consequences of a breach of a duty to disclose, at least insofar as recovery of overpayments are concerned. With that, we respectfully agree. But his comments are entirely consistent with that duty arising from another statutory provision, and do not support the proposition that the duty must arise from section 71 itself.

Mr Coppel submitted that section 71(1) does not create a duty, but rather presupposes a duty and sets out the consequences of a breach of that duty. Although not crucial in this case, for the reasons set out above, we accept that analysis. Whilst previous jurisprudence on the issue is thin, the analysis we have adopted is reflected in some previous Commissioners' decisions (e.g. CIS/0407/2002, see especially paragraph 11).

Therefore, the duty to disclose sufficient to found entitlement to recovery under section 71 has to be sought outside section 71 itself. Mr Coppel submitted that in this case - and indeed in most cases where recovery was sought before 2003 - the duty was to be found in regulation 32(1).

We have set out the terms of that regulation at the time relevant to this appeal (paragraph 22 above). Although the second part of the regulation began with the words "in particular" - which suggest that that which follows is an example of that which precedes - the two parts of the regulation which we have identified created two entirely separate legal duties. This has now been made more manifest because the two duties are set out in different paragraphs of the regulation, but we consider it was clear before the 2003 amendment that there were two distinct duties. The first duty required a claimant to furnish information upon request. That part of the regulation was empowered by section 5(1)(h) and (i); although to the extent that requests for information were in respect of changes of circumstance that part of the regulation could also have been empowered by section 5(1)(j). The second duty required a claimant to notify a change of circumstances affecting the continuance of entitlement to benefit. That part was empowered by section 5(1)(j) alone.

We reject Mr Weisselberg's submission that the wording of the second duty in some way informed the scope of the first, the submission being that the words "which he might reasonably be expected to know might affect the right to benefit" must also be read into the first duty. As we say, we consider that the two duties were entirely distinct but, even if the words "in particular" indicated that the second duty was an example of the first, the specific duty would have been subordinate to the general duty and not the other way round.

The first duty is phrased in terms of a claimant being required to furnish information that the Secretary of State may require. There are no words importing any restriction upon that obligation. Such restrictions could easily have been expressed, if they had been intended. Indeed, in the second duty, such restrictions do appear ("…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…", emphasis added). In our view, the absence of such restrictions from the first duty confirms the Parliamentary intention that there should be no such restrictions. In particular, bearing in mind the reference to "reasonable expectation" in the second duty, the absence of any such reference in the first duty makes clear that there was no intention that there should be such a criterion in respect of the first duty. Far from the words in the second duty informing the first duty, in context, we consider that it is quite impossible to imply such a criterion into the first duty, as Mr Weisselberg contended.

Although regulation 32(1) and section 71 were not specifically related, we consider that some of the section 71 jurisprudence is relevant to the proper construction of regulation 32(1), notably in two respects.

(i) Just as one cannot "fail to disclose" a fact unless one knows of it, one cannot fail to furnish information or notify a change of circumstance unless one knows of the information or change of circumstance as the case may be. On this issue, the rationale of cases such as Jones applied to regulation 32(1) as much as to section 71.

(ii) Similarly, where information was requested by the Secretary of State under what we have referred to as "the first duty" within the former regulation 32(1), the claimant's view on whether the information requested had any effect upon benefit entitlement was irrelevant. Insofar as the first duty was empowered by section 5(1)(h) of the 1992 Act, that only enabled the Secretary of State to require to be furnished "information or evidence needed for the determination of… a claim or of any question arising in connection with such a claim…", i.e. information and evidence material to any decision in relation to a claim. Insofar as section 5(1)(i) was the enabling provision, that enabled the Secretary of State to request any information "in connection with a payment of… a benefit", a phrase wide enough to include any information material to a payment decision. Materiality in these contexts is just as objective as it is in the context of section 71.

Certainly, in our view, in the exercise of the first duty, the Secretary of State could properly have requested information that, when provided, might not in the event have changed the benefit entitlement. Both section 5(1)(h) and (i), and the terms of regulation 32(1), were wide enough to cover requests for information needed for the determination of a claim or needed to determine whether existing benefit entitlement or payment should be changed or not. The only limit on the Secretary of State was that he could only request information that may have affected entitlement to or payment of benefit, the test of whether information may affect entitlement or payment being an objective one.

Regulation 32(1) therefore provided a legal basis for essential information gathering by the Secretary of State to enable him to make decisions with regard to entitlement to and payment of benefit. It imposed upon claimants an obligation to disclose information at the request of the Secretary of State. The only limit on the scope of the requests was that they must have been in respect of information that may have affected entitlement to or payment of benefit. Of course, the Secretary of State had to be clear as to what information he required but, if the request was unambiguous and the claimant had the information requested, then the claimant had a duty to disclose that information. Materiality and relevance of the information requested were subject to an objective test, and the subjective opinion of the claimant as to materiality or relevance of the information sought had no part to play in the scope of the duty.

Furthermore, in our view, it would have been no answer for a claimant to say that he/she was unable to respond to an unambiguous request because, as the result of his/her mental incapacity, he/she did not understand the request. We consider Mr Weisselberg's suggestion to the contrary to be on a par with the submission in Chief Adjudication Officer v Sherriff (1995) reported as R(IS) 14/96 that someone without the mental capacity to make a representation could not make a representation sufficient to found recovery under section 71. That submission was rejected, and the Court of Appeal stressed that recovery could be made under section 71 for an entirely innocent misrepresentation:

"…[I]t 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 out 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" (per Millett LJ at pages 547-8).

There are of course differences between misrepresentation and a failure to disclose. However, recovery can equally be made for an entirely innocent failure to disclose, and we consider that much of the thinking of Millett LJ in relation to misrepresentation is equally applicable to failures to disclose. In particular, we do not consider it is an answer to a claim for recovery of an overpayment for a claimant to rely upon a failure to understand a request as the result of his/her mental incapacity.

If there was a failure to disclose in breach of the obligations imposed by regulation 32(1), what were the consequences?

As Staughton LJ indicated in Franklin, no consequences were set out in the regulation itself. They are set out in section 71. That provides simply that, where there was a breach of the obligation to disclose any material fact under regulation 32(1), whether fraudulent or innocent, then the Secretary of State shall be entitled to recover any overpayment that results.

We said that we would return to Mr Weisselberg's primary submission - that section 71 itself creates a duty to disclose - and we do so now.

Even if the duty to disclose arises from section 71 itself, we do not accept that the duty arises only where disclosure is to be reasonably expected taking into account the circumstances of the particular individual.

Mr Weisselberg accepted that "materiality" was the subject of an entirely objective test, as he was bound to do on the basis of authority binding on us (and, we should add, authority that we respectfully consider to be correct). However, he submitted that a person could only "fail to disclose" a matter if he could reasonably be expected to disclose it. This requirement was, he submitted, inherent in the phrase "fail to disclose". Whether a particular person could reasonably be expected to disclose a matter was to be ascertained by the application of a mixed objective/subjective test, i.e. whether a person in the circumstances and with the attributes of the claimant could reasonably have been expected to disclose the matter.

We reject this submission. The potential complexities and varieties of such objective/subjective criteria are demonstrated by the House of Lords judgments in Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164, to which we were referred. Fortunately, we do not consider there is any scope for importing such complexities into this context.

Eloquently as he presented it, Mr Weisselberg's analysis is fundamentally flawed. He was driven to concede that, on the basis of his submissions, in considering whether a particular claimant could reasonably have been expected to disclose a matter, the particular claimant's facility to appreciate that the matter was material would be an attribute which must properly be taken into account. Indeed, it was necessary for him to go this far because in the case before us it was in reality the claimant's inability to appreciate the significance of her children being put into care and leaving her house that founded the case that section 71 did not apply. This concession by Mr Weisselberg was in conflict with (i) materiality being entirely objective (as he conceded it was); and (ii) innocent failures to disclose being grounds for recovery under section 71 (see paragraph 13(i) and (iii) above).

Therefore, even had we been persuaded that the duty to disclose sufficient to enable recovery of overpayments arose from section 71 itself, we would not have been persuaded that the duty was restricted to circumstances in which the claimant could reasonably have been expected to disclose it. That construction is simply impermissible in context. We would have held that in respect of any duty arising under section 71 - as with the duty actually arising under regulation 32(1) - the subjective opinion or appreciation of the claimant as to materiality has no part to play in the scope of the duty.

Before leaving the area of principle, we should deal with two final issues raised at the hearing.

First, it was submitted by Mr Weisselberg that, a person who lacks the mental capacity to realise that disclosure of a particular matter is required should be considered impotent to make such disclosure, and that person should not be penalised for failing to do what it is impossible for him/her to do. To hold otherwise, he submitted, would be a breach of the maxim impotentia excusat legem, the law does not punish a person for not doing what they lack the power to do or for being in a situation they are powerless to avoid.

We do not find these submissions compelling. First, we do not consider that reference to the maxim in itself adds to the weight of Mr Weisselberg's substantive submissions. Second, recovery of overpayment, whilst it may cause hardship in a specific case, is not penal. We consider the concession of Counsel for the Child Poverty Action Group in R(IS) 5/03 (paragraph 56) to that effect was well made. Third, the proposition is inconsistent with authorities such as Sherriff (see paragraph 34 above), in which the Court of Appeal made clear that where a misrepresentation had been made as a result of mental incapacity, that did not defeat a claim for recovery of benefit overpaid as a result.

Therefore, without the benefit or burden of previous Commissioners' jurisprudence, but on the basis of principle as informed by the decisions of the higher courts, we would hold that:

(i) No duty to disclose arises from section 71 itself.

(ii) Two distinct duties to disclose arose from regulation 32(1) prior to the recent amendment (and now arise from regulation 31(1), (1A) and (1B)), namely (a) a duty to furnish information and evidence pursuant to a request from the Secretary of State, and (b) a duty to notify the Secretary of State of any change of circumstance which the claimant might reasonably be expected to know might affect the right to benefit.

(iii) In relation to the duty to furnish information and evidence pursuant to a request, whilst there is no duty to disclose that which one does not know, if a claimant was aware of a matter which the claimant had been required to disclose, there was a breach of that duty even if, because of mental incapacity, the claimant (a) was unaware of the materiality or relevance of the matter to his entitlement to benefit, and (b) did not understand an unambiguous request for information.

(iv) Where there was a failure to respond to a request for information in breach of regulation 32(1), that triggered an entitlement to recovery of overpayment under section 71 if the failure to disclose led to the payment of a benefit that would otherwise not have been paid.

Commissioners' Decisions

As we have indicated, previous Commissioners' decisions have adopted different approaches to these issues.

The most often cited decision is that of Mr Commissioner Edwards-Jones QC to which reference has already been made (R(SB) 21/82). The facts of the case were unusual. As summarised in the headnote:

"From 1969 to 1979 a husband and wife were in receipt of supplementary benefit claimed by either the husband or by the wife on his behalf. After the husband's death the wife claimed and was in receipt of supplementary benefit until her death three months later. Benefit had been assessed and paid in reliance on successive statements signed by both husband and wife to the effect that neither had capital resources. Following the wife's death, it was discovered that she had possessed significant capital resources and the Secretary of State sought to recover from her estate the benefit which had been overpaid as a result of the non-disclosure of those resources, in accordance with section 20 of the Supplementary Benefits Act 1976 [which was materially in the same form as section 70 of the 1992 Act]…".

In considering the term "failure to disclose", the Commissioner said (at paragraph 4(2)):

"…I consider that a "failure" to disclose necessarily imports the concept of some breach of obligation, moral or legal - i.e. the non-disclosure must have occurred in circumstances in which, at lowest, disclosure by the person in question was reasonably to be expected; see amongst the definitions of "failure" in the shorter Oxford English Dictionary:

'1… non-performance, default; also a lapse…'"

Significant doubt about the passage has been expressed in at least one case to which we were referred, namely CIS/14839/1996. In other decisions Commissioners have not in fact followed R(SB) 21/82 (e.g. CIS/0407/2002). However, the majority of the decisions to which we were referred followed the passage without comment, and apparently without argument. Commissioners have cited the passage on a number of occasions, sometimes with approval and never (so far as we are aware) with avowed disapproval (see, e.g. R(SB) 54/83, R(SB) 40/84, CSB/957/1987, CIS/14839/1996, CIS/1769/1999, CIS/3753/2000 CF/5505/2002). The passage has been cited with approval in three decisions of Tribunals of Commissioners (R(SB) 15/87, CG/4494/1999 and R(IS) 5/03).

Whilst of course taking into account the decisions of single Commissioners, a Tribunal of Commissioners is not bound by those decisions. The principles upon which a Tribunal of Commissioners will approach an inconsistent decision of a previous Tribunal are set out in R(U) 4/88, upon which we cannot, and do not attempt to, improve. In appropriate circumstances, a Tribunal of Commissioners has the flexibility to disapprove and even overturn the decisions of earlier Tribunals.

In approaching R(SB) 21/82 and the cases which have followed it (including those of Tribunals of Commissioners), we are concerned at the lack of analysis of either what Mr Commissioner Edwards-Jones QC said (quoted in paragraph 48 above) or the underlying statutory provisions. Our analysis of the statutory provisions can be seen above. With regard to what the Commissioner said, this has been described as "Delphic" (by Mr Commissioner Jacobs in CIS/14839/1996), and we agree that it is difficult to understand. We agree that "failure to disclose" imports some concept of breach of obligation. As we have already indicated, we do not understand what the Commissioner meant by "moral obligation" in this context, and certainly we do not understand what place such obligations have in the case of a non-disclosing claimant. However, even more obscure is what the Commissioner meant by "the non-disclosure must have occurred in circumstances in which, at lowest, disclosure by the person in question was reasonably to be expected". Mr Coppel submitted that this was an additional criterion for "moral obligation" cases but, if so, then it has been approved in many subsequent cases in respect of legal obligations to disclose. Mr Coppel submitted that, in his view, the criterion could have no place where there was a legal duty. Mr Weisselberg submitted that the Commissioner appeared to have introduced into the construction of section 71 - entirely erroneously, he accepted - a concept from the then-equivalent of the second duty in regulation 32(1). He frankly submitted, and we accept, that the phraseology used is so close to that used in the regulation that it would be an astonishing coincidence if it had not been derived from the regulation.

With considerable regret, we have concluded that, on any analysis, the passage of Mr Commissioner Edwards-Jones QC cannot represent the proper construction of what has now become section 71(1). Insofar as he imported words from the equivalent of regulation 32(1), he was not entitled to do so. Before us, no one could suggest how those words could properly be imported otherwise. On the most generous view, the words do not represent a possible construction of section 71.

There was no suggestion that, in the words quoted, the Commissioner was construing the then-equivalent of regulation 32(1) (as delimiting the scope of the duty to disclose sufficient to found an entitlement to recover an overpayment under section 71). However, if and insofar as he was, for the reasons set out above, it was equally impermissible of him to have imported a reasonable expectation criterion into the first duty, i.e. the duty relating to disclosure.

For these reasons we consider Mr Commissioner Edwards-Jones QC to have been in error in importing a "reasonable expectation" requirement into the criteria that entitle the Secretary of State to recover an overpayment for a failure to disclose. However, Mr Weisselberg submitted that we were unable to correct this error for two reasons.

First, he submitted that R(SB) 21/82 was a settled interpretation by 1992 when the social security legislation was consolidated, so that Parliament was taken to have approved it. We reject that argument. Mr Coppel denied that there was any settled interpretation by 1992 but, even if there had been, insofar as the wording is relevant to this case, section 71(1) is merely the latest in a series of re-enactments in essentially identical terms of a provision that originated in 1948. Initially, it was limited to national assistance (section 45 of the National Assistance Act 1948) and was transferred to supplementary benefit when national assistance metamorphosed into that benefit in 1966 (section 26 of the Ministry of Social Security Act 1966, later re-named the Supplement Benefit Act 1966). The national insurance scheme took a different approach. It provided for recovery subject to a defence of good faith (regulation 21(1) of the National Insurance (Determination of Claims and Questions) Regulations 1948), which later became a defence of due care and diligence (section 119(2) of the Social Security Act 1975). But from April 1987, this was abandoned in favour of the national assistance/supplementary benefit approach (section 53 of the Social Security Act 1986). Section 53(1) was re-enacted in section 71(1) of the 1992 Act.

If a provision is re-enacted without relevant amendment, that is not equivalent to a statutory approval of the current interpretation of the provision. In Galloway v Galloway [1956] AC 299 at page 320¸ Lord Radcliffe said:

"It is said that the judicial interpretation of the sub-section was so clearly established by 1950 that the enactment of section 26(1) in the same form must be treated as, in effect, a statutory declaration that the established interpretation was the correct one. I must confess that I do not lend a sympathetic ear to this last and almost mystical method of discovering the law, least of all when it depends upon a consolidating Act the function of which is to repeat, but not to amend, existing statute law."

Second, Mr Weisselberg submitted that, because other Commissioners had approved the construction, we were now bound to perpetuate the error. Again, we disagree. The construction appears to have been accepted in several cases, but only by way of concession. The appeal before us seems to be the first case in which the construction has been the subject of full argument. The Tribunals of Commissioners' decisions R(SB) 15/87 and CG/4494/1999 were essentially concerned with the issue of to whom disclosure may be made, neither directly addressing the issue before us now. Whilst R(SB) 21/82 was expressly approved in Tribunal of Commissioners' decision R(IS) 5/03, it was concerned with recovery from an appointee (rather than a claimant) and, again, it was conceded that the reasonable expectation test applied. (Mr Weisselberg also prayed in aid the judgment of Evans LJ in Jones at page 66, but that expressly left open the criteria for "failure to disclose", the case itself concerning misrepresentation. That case is of no assistance to Mr Weisselberg on this issue.)

This issue has therefore never been the subject of any analysis or full argument. In consequence, all that which has gone before is technically obiter dicta; but is, in any event, of little precedential weight (see, for example, Baker v The Queen [1975] AC 774 at page 778 per Lord Diplock).

We do not resile from the fact that, in adopting the proper construction of the relevant statutory provisions, we are changing the direction of the law by abandoning a supposed but erroneous requirement in respect of recovery cases to which regular reference has been made over the years. However, having the law properly applied cannot of itself be unfairly prejudicial, even if that law is adverse to the interests of a particular person. We do not see any way in which claimants could be unfairly prejudiced by the benefit system adopting the proper construction of these statutory provisions now. They cannot for example possibly have organised their affairs on the basis that R(SB) 21/82 is good law, with the result that they would suffer a detriment if the position were changed now. There seems to us to be no reason to perpetuate error now by slavish adherence to previous decisions.

For these reasons, insofar as previous decisions of Commissioners (including Tribunals of Commissioners) are inconsistent with the reasoning of this decision, they must be treated as wrongly decided.

As it was expressly referred to in the direction that set up the Tribunal of Commissioners to deal with this case, before leaving previous Commissioners' decisions, we should briefly deal with Mr Commissioner Rowland's decision in R(A) 1/95. We agree with the conclusion of the Commissioner that, although mental capacity is relevant to whether the claimant knew of the matter not disclosed, capacity is not relevant to the issue of whether there was a failure to disclose. However, we disagree with the Commissioner's reasoning in relation to the latter aspect in two respects:

(i) In paragraph 6 of his decision, the Commissioner quoted paragraph 19(5) (erroneously cited in the report as paragraph 19(2)) of R(SB) 21/82 as support for the proposition that the Commissioner was referring in paragraph 4(2) to capacity as being relevant to knowledge of the matter not disclosed as opposed to failure to disclose it. We do not consider that to be correct - as Mr Commissioner Edwards-Jones QC appears to deal with the issue of knowledge in paragraph 19(2), and in any event in proper context in paragraph 4(2) he appears there to be dealing with capacity as being relevant to the failure to disclose. We commend Mr Commissioner Rowland for his attempt at rationalising the relevant passage from paragraph 4(2) of the earlier decision; but, for the reasons we have already given, we have not been able to deduce any proper explanation of the passage, which should no longer be followed.

(ii) Mr Commissioner Rowland relied upon an insurance authority in support of his conclusion. For the reasons given above (paragraph 15), we do not consider the analogy with insurance non-disclosure to be helpful.

Application of Principles

In this case, the Secretary of State relies upon the first duty within the unamended regulation 32(1), namely upon a request for information with which the claimant failed to comply. The requests relied upon are found in the Form INF4 ("Tell us if you or someone who you have claimed for … move to a different address.. [or] if children you have claimed for go into care") and order book ("You must send us a letter or Form A9 if you or your partner or any dependent or anyone else who you have told us is living with you, moves to a different address"). These requests were unambiguous. They imposed a duty on the claimant to report the fact that her children had been removed from the house. She knew that fact. She was able to communicate that fact to others. By not disclosing the fact to the Department, she was in breach of her obligation under regulation 32(1). She failed to disclose a material fact in breach of an obligation to do so, resulting in an overpayment of benefit to her. The consequences of the breach were those under section 71, i.e. the Secretary of State was entitled to recover the overpayment resulting.

The Claimant's Protection

Claimants who lack capacity are not without all protection or recourse. As indicated by Mr Coppel, they have at least two means of protection: the power to appoint an appointee to act on their behalf, and the discretion of the Secretary of State not to recover overpayments even where he is entitled to do so.

If a claimant lacks capacity and no representative has otherwise been appointed, the Secretary of State has power to appoint an appointee to act on behalf of the claimant under regulation 33 of the 1987 Regulations. Where no appointment has been made, the higher courts have in the past taken a fairly robust approach to submissions based upon a lack of capacity (see, e.g., Chief Adjudication Officer v Sherriff reported as R(IS) 14/96, per Nourse LJ at page 546).

Where section 71(1) applies, it confers a power (not a duty) on the Secretary of State to recover the overpayment which has been made (R (Larusai) v The Secretary of State for Work & Pensions [2003] EWHC 371, at paragraph 4). The Secretary of State has a discretion as to whether recovery should be made in a particular case. It is noteworthy that the initial response of the claimant to the Secretary of State's decision that he was entitled to recover the overpayment was to ask him to exercise his discretion to "wave" the overpayment in the circumstances of this case (letter from the Link Project Coordinator Owl Housing Limited on behalf of the claimant, 14 June 2002).

We are not aware of any published guidelines on the exercise of this discretion. The Secretary of State in this case (through Mr Coppel) emphasised that his discretion covers whether or not to recover all or part of the overpayment and, if so, in what way. Newman J in Larusai (paragraphs 31 et seq) set out some of the factors which the Secretary of State should take into account in its exercise. As Newman J emphasised (at paragraph 32), it is not for the courts to form a view with regard to the exercise of this discretion. However, the disclosure must be exercised by way of a positive decision, taking into account all relevant matters. Amongst those factors will be the fact that the claimant is entirely innocent in his/her failure to disclose (as in this case), and any hardship that would be caused to the claimant by any recovery (about which we have had no evidence in this case) (see the comments of Leggatt LJ in Page and Davis v Chief Adjudication Officer (1991), another case involving the principles of recovery from innocent claimants, reported as R(SB) 2/92, at page 542).

Disposal

For these reasons, we allow the appeal, set aside the decision of the appeal tribunal and substitute the decision that the tribunal should have given as set out in paragraph 1 above.

His Honour Judge Gary Hickinbottom

Chief Commissioner

(Signed on original)

Jonathan Henty

Commissioner

(Signed on original)

Edward Jacobs

Commissioner

(Signed on original)

12 October 2004