UK Social Security and Child Support Commissioners' Decisions

[2006] UKSSCSC CP_540_2005 (30 June 2006)

CP/540/2005

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The decision of the Retirement Pension Appeal Tribunal dated 25 October 2004 on Case No. U/01/007/2004/1243 is erroneous in law. I set that decision aside and, as empowered by section 14(8)(a)(i) of the Social Security Act 1998, I give the decision which I consider the tribunal should have given which is:-

1. An increase in retirement pension paid to the claimant in respect of his spouse in the period from 13 April 1992 to 9 January 2000 was overpaid and is recoverable from the claimant in terms of section 71 of the Social Security Administration Act 1992.

2. The amount of the overpayment is to be calculated by the Secretary of State with recourse to a Commissioner by either party in the event of dispute about the arithmetical correctness of the calculation.

2. The claimant appeals, with my leave, against the tribunal's decision that an increase of retirement pension amounting to £13,793.80 paid to the claimant in respect of the period from 8 July 1991 to 6 February 2000 was overpaid and is recoverable from the claimant in terms of section 71 of the Social Security Act 1992.
3. The factual background to this case is apparent from the statement of the tribunal's reasons for its decision which is as follows:-

"…  .

The decision against which [the claimant] appeals is that in the period 8 July 1991 to 6 February 2000 there has been an overpayment of Retirement Pension of £13,793.80 which is recoverable from him because he failed to disclose his wife's income.

[The claimant] retired in 1991. He claimed his Retirement Pension. His wife retired on 31 August 1991 and had received an occupational pension for 1 September 1991. He claimed an increase of Retirement Pension for his wife. Her income was below the statutory limit and so he was entitled to the increase. Although the claim form is not now available there is no suggestion that it contained any error or mistake.

[The claimant] was an NHS Consultant Radiologist with a small private practice. His accounts have for many years being prepared by [his accountants]. With effect from the financial year 1992/1993 [the claimant] commenced to pay [his wife] for an amount of secretarial work. This payment when added to her own occupational pension took her earnings above the statutory limit with the effect that he lost entitlement to a dependency increase in his Retirement Pension. [His accountants] confirm in their letter of 14 July 2004 that there is no dispute with the figures and they suggest that the crux of the matter revolved around what declaration was made by [the claimant] in 1991. I disagree with that proposition because in 1991 [the claimant's wife] was receiving only occupational pension and not a salary from [the claimant's] practice. The crux of the matter is whether in the financial year 1992/1993 [the claimant] revealed to the Pensions Service that [his wife] was receiving a salary from him with the effect that her income had increased above the statutory limit.

[The presenting officer] says that when [the claimant] began to receive his pension he would have been supplied with a booklet explaining what changes of circumstances should be declared and that a similar booklet would be sent to him each year in February/March. An example appears at page 11A and the relevant information as to income is at Page 11D.

[The claimant] says that he did not remember receiving any claim form and he did not remember receiving the annual uprating notices or instruction leaflets. He would have made a full disclosure. The whole problem was due to miscalculation by the Pensions Department. The Department had made mistakes. He said that his accountants would have dealt with any correspondence. He would have been warned by his accountants but they would not have written the letters for him. [The claimant] himself is careful with his financial correspondence, he keeps photocopies but there is no copy in this case and he questioned anyway whether he would have been likely to keep correspondence from 1992/1993.

[The claimant] also suggests that it is possible that communications from the Department were sent to his old address in 1991. He had produced a document from the Department for Work and Pensions showing that his previous address was [F Lane] which was apparently the [address] on file in 1991 although he did not live there since 1986. [The presenting officer] says that the annual statements and instruction leaflets would be sent to the address shown on the claim form in 1991 which was [G Lane]. I accept that it is more likely than not that the annual uprating statements and accompanying leaflets were sent to [the claimant's] address at [G Lane].

Section 71 of the Social Security Administration Act 1992 entitles the Secretary of State to recover an overpayment which has been made as a result of misrepresentation or failure to disclose a material fact. Fraudulent intent is not necessary and is not suggested and I accept [the claimant] had no such intent. Wholly innocent mistakes by a claimant can result in a recoverable overpayment.

On the evidence I have heard I find it is more likely than not that [the claimant] was issued with the explanatory booklets when he claimed his pension in 1991 and each year thereafter. The allocation of salary to a wife is quite often an accounting exercise and I think it is probable that the need to disclose this to the Department for Work and Pensions was overlooked by both [the claimant] and his accountants when dealing with the accounts for the year 1992/1993. I find therefore that there was a failure to disclose the relevant information relating to the salary paid to [the claimant's wife]. I am satisfied that in view of the information supplied to [the claimant] disclosure was reasonably to be expected. He clearly knew the material fact because he would have to sign the accounts and return to the Inland Revenue. Therefore the overpayment of £13,793.80 is recoverable from [the claimant].".

…  ".

4. The claimant's ground for appealing the tribunal's decision to a Commissioner is that the decision contains factual errors. I granted leave to appeal because I was concerned that the Department for Work and Pensions and its predecessor department seem to have had either an out of date address or two addresses for the claimant. The claimant's past address was in F Lane and his current address is G Lane.
5. The Secretary of State's representative does not support this appeal. In a written submission of 26 April 2004 she rejects, in an argument which I shall recount later in this decision, the suggestion that confusion about the claimant's address had led to a relevant disclosure being overlooked by the Department.
6. The first thing which occurred to me when I began to consider this appeal was that there is a slip in the notice of the tribunal's decision. The Secretary of State's decision under appeal to the tribunal revised the original overpayment decision to reduce the amount recoverable from £15,000.15 to £13,793.80. The reason for the reduction was that the Secretary of State's appeals officer accepted that the increases in retirement pension overpaid from 8 July 1991 to 8 September 1991 and from 10 January 2000 to 6 February 2000 were not overpaid by reason of any failure on the part of the claimant to make a disclosure which could reasonably have been expected of him. Therefore the recoverable overpayments took place during an overall period from 13 April 1992 to 9 January 2000. But that overall period straddles two separate periods of overpayment because in revising the original overpayment decision the decision maker took account of a change in the rules for ascertaining the period to which earnings should be attributed. That change was with effect from 25 November 1996. Prior to that date any earnings paid at the end of a year to the claimant should be attributed retrospectively on a weekly basis to that year. From 25 November 1996 earnings paid in that way are, the officer thought, attributed on a weekly basis to the coming year. He considered that on a literal interpretation of the regulations he would be required to attribute the earnings paid to the claimant's wife at the end of the tax year 1996/1997 to that year and also to the following year, 1997/1998. He therefore compromised and accepted that in the period from 25 November 1996 to 13 April 1997 there had been no overpayment. Consequently, according to the evidence before the tribunal, there are two overpayments. One is £8,279.80 in respect of the period from 13 April 1992 to 24 November 1996 and one is £5,514 in respect of the period from 14 April 1997 to 9 January 2000. Those figures and periods of overpayment can be extrapolated from the Schedule of Overpayment on document 8F of the bundle.
7. Inasmuch as the notice of the tribunal's decision and the statement of the reasons for the decision find one overpayment of £13,793.80 in respect of the period from 8 July 1991 to 6 February 2000 the decision is contrary to the evidence and, therefore, erroneous in law. At that stage of my consideration of the appeal I thought that the case probably could have been sent back to the tribunal for the error in the decision notice to be corrected under the slip rule enacted in the Social Security and Child Support (Decisions and Appeals) Regulations 1995 but I concluded that it would be a quicker disposal of the appeal if I set the decision aside as erroneous in law and substituted my own decision. However, on looking into the case further I realised that, as explained below, the appeal's officer's calculation of the overpayment was wrong in law and the tribunal's decision, not having corrected that error, is also wrong in law and must be set aside.
8. According to the information provided by the claimant on document 25 of the appeal bundle he paid his wife nothing in the tax year 1991/1992. In 1992/1993 he paid her £1,500 and he made annual payments of varying amounts at the end of each following tax year throughout the overpayment period. The error in the appeals officer's calculation of the overpayment relates to his compromise in respect of the period from 25 November 1996 to 13 April 1997 When I came to consider that compromise I could, unfortunately, see no basis in law for the appeals officer's accepting that there had been no overpayment in that period. I issued a direction in the following terms to the Secretary of State's representative on 2 November 2005:-

" 1. I require further assistance on this case from the Secretary of State's representative.

2. I refer to the 11^th paragraph of the Appeals Officer's letter of 2 March 2004 to the claimant (document 8B of the bundle). Therein the Appeals Officer explains the change from the retrospective to the prospective allocation of earnings effected by the enactment of the Social Security Benefit (Computation of Earnings) Regulations 1996.

3. It seems to me that the only provision in the 1996 Regulations to deal with the effect of the change in the method of allocation of earnings on cases current on 25 November 1996 is sub-paragraph (2) of Regulation 18 which disapplies the sub-paragraph (1) revocation of the 1978 Computation of Earnings Regulations if the claimant concerned was entitled to benefit in any benefit week prior to 25 November 1996. According to the schedule of overpayment on document 8F of the bundle the claimant in this case never was entitled to the spouse's increase before 25 November 1996. Therefore the 1978 Regulations are not saved in his case.

4. Since the 1996 Regulations apply it seems to me that the claimant's spouse's earnings in 1996/97 fall to be allocated on a weekly basis in the year 1997/1998. What legal basis is there for the compromise arrived at by the appeals officer in paragraph 11 of his letter?

5. I require a response to this direction within 1 month from the date of issue.".

9. The Secretary of State's representative responded to that direction by way of a written submission of 17 November 2005. In that submission he agrees that there is no basis in law for the compromise arrived at by the appeals officer and accepts that as the claimant was never entitled to the spouse's increase in his retirement pension the 1996 Regulations apply from 25 November 1996. The result is, he argues, that the claimant's wife's earnings for the period from and including 25 November 1996 should be calculated by reference to the payments made or payable before that date regardless of the fact that they had been used for different purposes under the 1978 Regulations. In doing that the same payment is not being taken into account twice. What is happening is that the weekly amount of the wife's earnings in two different periods is being arrived at by two different methods of calculation but utilising the same payment. There is nothing perverse in that because it ensures that the person who has been paid annual payments without interruption is treated for the purposes of calculating benefit as having had earnings on a weekly basis without interruption. The appeals officer and the tribunal should, therefore, have proceeded on that basis without compromise and included the benefit paid in respect of the period from 25 November 1996 to 13 April 1997 in the recoverable overpayment. The Secretary of State's representative argues also that there is an additional error in law in the tribunal's decision. Under the 1996 Regulations the date from which a payment made by the claimant to his wife is to be taken into account is the first day of the benefit week in which that payment was due to be paid. No evidence was sought from the claimant as to what the due dates in question were and it was an error in law on the tribunal's part not to have requested that evidence before reaching a decision on the effect of the undeclared earnings on the claimant's entitlement to the spouse's increase on his retirement pension.
10. I agree with the Secretary of State's representative's conclusion that the benefit overpaid in the period from 25 November 1996 to 13 April 1997 should not have been excluded from the recoverable overpayment but, despite what I said in my direction of 2 November 2005, I arrive at my conclusions for reasons different from those given by the representative. On further reflection, I have decided that the suggestion in paragraph 3 of my direction that the 1978 Regulations are not saved in the claimant's case because he was not entitled to the spouse's increase before 25 November 1996 is misconceived. Paragraph (1) of regulation 18 of the 1996 Regulations revokes the 1978 Regulations. Had there been no other provision modifying the effect of paragraph (1) then undoubtedly the 1996 Regulations would have governed the attribution of any earnings of the claimant's wife paid to her since that date. However, paragraph (2)of the regulations provides:-

"In the case of a claimant who was entitled to benefit for a benefit week which started on a date prior to 25^th November 1996, then in respect of each day of that benefit week the Social Security Benefit (Computation of Earnings) Regulations 1978 shall have effect in his case as if paragraph (1) had not been made.".

The mistake in my direction is the implication that a spouse's increase in a claimant's retirement pension is itself a "benefit" within the meaning of regulation 18.

11. "Benefit" is not specifically defined in the 1996 Regulations. What is covered by that word has, therefore, to be deduced from the contexts of the regulations and of the primary legislation. Regulation 3(1) provides:-

"For the purposes of Parts II to V (other than those of Schedule 8) of the [Social Security Contributions and Benefits Act 1992] and of any regulations made thereunder which relate to benefit under those Parts of that Act or regulations, the earnings of a claimant shall be calculated by determining in accordance with those Regulations the weekly amount of his earnings.".

Entitlement to retirement pensions is enacted in Part II of the 1992 Act and entitlement to increases in pension for dependents and spouses is enacted n Part III. In particular, section 83 provides:-

(1) This section applies to –

(a) a Category A or Category C retirement pension;

(b) ……….

(2) Subject to sub-section (3) below, the weekly rate of a pension to which this section applies, payable to a man, shall be increased by the amount specified in relation to the pension in Schedule 4, Part IV, columns (3) –

(a) for any period during which the pensioner is residing with his wife; ……….

(3) Regulations may provide that for any period during which the pensioner is residing with his wife and his wife has earnings –

(a) the increase in benefit under this section shall be subject to a reduction in respect of the wife's earnings; or

(b) there shall be no increase in benefit under this section.".

12. It seems to me clear that in the context of section 83 of the 1992 Act the "benefit" is the retirement pension, not the increase in that pension which is authorised by the section. It follows that in the absence of any specific definition in the 1996 Regulation the word "benefit" as used in paragraph (2) of regulation 18 in relation to the computation of earnings for the purposes of entitlement to retirement pension refers to the same benefit, namely, retirement pension, as does the same word when it is used in sub-section (3) of section 83. That being so, regulation 18(2) does apply to the claimant because he was entitled to the benefit known as retirement pension before 25 November 1996. Therefore, for the purposes of calculating whether or not benefit should be increased in accordance with section 83 his wife's earnings have to be computed in accordance with the 1978 Regulations rather than the 1996 Regulations for as long as his entitlement to retirement pension subsists. That, of course, leads me to the same conclusion and the Secretary of State's representative, that there should have been no break in the overpayment period, although for different reasons.
13. Since I have concluded that the 1996 Regulations do not apply in this case the Secretary of State's representative's criticism that the tribunal had made no findings, for the purposes of applying regulation 7(b), as to the date on which the payments of the secretarial salary by the claimant to his wife were due is not valid. Regulation 2 of the 1978 Regulations applies and the payments made in respect of each tax year are to be attributed on a weekly basis throughout the relevant year. As the computation is being made with hindsight in the knowledge of what was paid at the end of each tax year there is no need to invoke regulation 5. It follows, therefore, that the revised calculation of the overpayment put to the tribunal was erroneous in law. As the tribunal did not detect that error its decision is also erroneous in law and has to be set aside.
14. Section 71 of the Social Security Administration Act 1992 insofar as relevant to this appeal provides:-

"(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.".

15. What disclosure should the claimant have made? He was in receipt of an increase in benefit, an addition to his retirement pension in respect of his wife, which was limited by the amount of his wife's earnings. He paid her for the work which she did for him in his financial year at the end of that year. He therefore was required to disclose at the end of each financial year, or as soon thereafter as possible, what those earnings were. The claimant says that he wrote to the Department in September 1991 to say that his wife was employed. However, the directly material fact was not the claimant's employment of his wife but the amount of earnings being paid to her by him. That would not be known until the profit and loss account showing what was to be credited to her for her work in the accounting year had been drawn up. That is the point at which the disclosure of the earnings should have been made. Had the necessary disclosures been made each year any overpayment resulting from the first annual payment of salary would have been recovered by adjustment of the spouse's addition paid in the following year and regulations 5 and 6 of the 1978 Regulations could have been invoked to avoid further overpayments.
16. The question of fact for the tribunal was, and since I have set the tribunal's decision aside, the question of fact for me is did the claimant disclose his wife's earnings to the Department. I accept, since he says that he did, that he disclosed in 1991 the fact that his wife was working. However, as I say above, in this case that was not the material fact or, at least, not the only material fact which needed to be disclosed. The important thing was the amount credited to the spouse in the claimant's profit and loss account at the end of each financial year. The Department's contention is that there is no evidence that it ever received from the claimant a disclosure of his wife's earnings. The original claim forms for the retirement pension and for the spouse's addition have been destroyed as a matter of routine. The Secretary of State's representative argues that it is unlikely that any declaration of earnings made on the claim forms would not have been taken into account.
17. The matter on which the claimant puts considerable emphasis is the fact of the Department having on its records, and reporting to the claimant as the address which it holds for him, his old address at F Lane. As I say above, it was my disquiet about that which prompted me to grant leave to appeal. On that matter the Secretary of State's representative argues that the address held for the claimant by the Pensions Service of the Department is his current address at G Lane. That was the address to which the notice of entitlement to claim pension was sent and the address from which the claim form was eventually submitted. Had the annual notices of uprating been returned from the old address because it was no longer the claimant's address payment of pension would have been suspended and if that had produced no reaction from the claimant payment would have been stopped. Neither has ever happened. I do not regard that argument as totally convincing. If the claimant's retirement pension including the spouse's addition was being paid straight into his bank account he would not be particularly aware of the fact that he was not receiving notices of uprating at G Lane. If the notices were being sent to the wrong address at F Lane they would only be returned if the occupant there was being punctilious about returning mail addressed to a former occupant or if the post office was returning it as undelivered. It is not totally improbable that the current occupier simply destroys mail addressed to former occupiers.
18. However, it seems to me that the weakness in the claimant's case is that to avoid the annual overpayments which have been made he would have needed to disclose the amount of his wife's earnings each year. It is improbable that if he had done that each year from his current address at G Lane that his communications would not have been linked to the file which related to the address held on the Pension Service records rather than the F Lane address which also seems to be held by the Department. There is also the point that if the claimant had been making such annual disclosures to the Department one would have thought that he would have expected some acknowledgment of them or expected to see them have some effect on the amount of the spouse's addition which was being paid to him and that, in the absence of any such sign of the Department having reacted to his disclosures, he would have followed matters up: but there is no evidence that anything like that ever happened. I have come to the reluctant conclusion that when the claimant's accountant produced the profit and loss account at the end of each financial year the claimant simply overlooked the fact that the amount credited to his wife for her year's work for him had a significance for the amount of the spouse's addition to his retirement pension.
19. The consequence is that the overpayment is recoverable from the claimant. The correct amount of that overpayment should now be calculated by the Secretary of State, the earnings in question being computed in accordance with the 1978 Computation of Earnings Regulations.
20. For the foregoing reasons the claimant's appeal fails and my decision is in paragraph 1 above.

(Signed) R J C Angus

Commissioner

(Date) 30 June 2006