UK Social Security and Child Support Commissioners' Decisions

 


[2007] UKSSCSC CPC_3742_2004 (02 February 2007)

R(DLA) 2/07

(SB v Secretary of State [2006] EWCA Civ 89)

CA (Waller, Hallett and Collins LJJ) 14 February 2007

CDLA/3742/2004

Payment – offset under regulation 5 of the Social Security (Payments on account, Overpayments and Recovery) Regulations 1988 – whether arrears resulting from the suspension of payments pending the making of an award superseding a previous award can be offset against an overpayment arising as a result of the subsequent award

The claimant suffered from autism and received DLA middle care and lower mobility components. In September 2001 he began boarding at a residential college funded by the Learning and Skills Council, continuing to live with his parents during school holidays and half-terms. He was therefore not entitled to the care component except during the vacation periods. When the change of circumstance came to light, on renewal of the DLA claim by SB's father on 27 May 2003, the payment of the care component was suspended under regulation 16(1) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 pending investigation. A decision was issued on 13 October 2003, described as superseding the award of 14 July 2000, ruling that no care component was to be paid for the period SB was in the residential home and that any DLA already paid should be treated as paid on account of that benefit awarded. The suspension was lifted but no payments were made of the care component unpaid since May 2003. On January 2004 the overpayment was found not to be recoverable but calculated to include the amount of care component due for the summer of 2003 (£529) as a sum which could be offset against the overpayment. The tribunal, on appeal from the claimant's father, upheld the decision that the overpayment was not recoverable; this involved also upholding the decision that the arrears due could be offset against the overpayment although the tribunal's reasons did not address this issue. The claimant appealed and the Secretary of State requested that the Commissioner address the legitimacy of offsetting the sum relating to the later period against the overpayment held to be irrecoverable. The Commissioner accepted the Secretary of State's argument that regulation 5 of the Social Security (Payments on account, Overpayments and Recovery) Regulations 1988 (the Regulations) entitled the decision-maker to offset the arrears and dismissed the appeal. The claimant appealed to the Court of Appeal. It had been argued at all stages by both parties that the October decision superseded the original decision with retrospective effect and both parties sought a determination as to the proper construction of regulation 5 on that basis.

Held, allowing the appeal, that:

1. regulation 5(1) allows for overpayments to be offset against "arrears" of entitlement "under the subsequent determination". However the Regulations were passed pursuant to section 71(6)(b) of the Social Security Administration Act 1992 which empowers the Regulations to deal with "arrears" payable "by virtue of the subsequent determination". The sum in this case was in arrears, not by virtue of the subsequent determination on entitlement but by virtue of the decision to suspend payments and/or by virtue of a delay in reaching a decision as to the amount of the overpayment (paragraphs 24 to 26);
2. regulation 16(3) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 draws the line at allowing recovery of recoverable overpayments against arrears due to suspension of payments and, while the same distinction is not drawn in the 1988 Regulations in relation to non-recoverable overpayments, any interpretation should reach a logical result which will not be seen as arbitrary or capricious (paragraphs 27 and 28);
3. even if the decision of October 2003 had entirely replaced the July 2000 decision, the entitlement to £529 for the summer months was not arrears of entitlement under (or by virtue of) the subsequent decision, but was arrears by virtue of the suspension of payment directed in May 2003. The determination in October 2003 was simply determining that, during the period of overpayment, that overpayment should be being treated as paying on account that now held to be due (but in arrears) over that same period (paragraph 30).

DECISION OF THE COURT OF APPEAL

Mr Paul Stagg (instructed by Morrison Spowart, Solicitors) appeared for SB.

Mr James Maurici (instructed by the Solicitor, Department for Work and Pensions) appeared for the Secretary of State.

Judgment

LORD JUSTICE WALLER:

Introduction

4. This is an appeal against the decision of the Commissioner, Mr S J Pacey, dated 12 December 2005, I having granted permission on 20 July 2006.
5. SB was born on 6 November 1984 and suffers from Asperger's syndrome and related incontinence.
6. In 1997 SB was awarded disability living allowance (DLA). On 14 July 2000 it was renewed from 6 November 2000 to 5 November 2003 at the middle rate of the care component and at the lower rate of the mobility component. At this time he was resident at his parents' house.
7. In September 2001 SB began boarding at the Glasshouse Project (the Project), a residential college funded by the Herefordshire and Worcestershire Learning and Skills Council. He continued to spend school holidays and half-terms at his parents' house, a total of 208 days between October 2001 and May 2003.
8. This should have reduced SB's benefits, as the care component would only be payable in respect of those periods (namely the school holidays and half-terms) when he resided at home: regulation 9(1)(b) and 10, Social Security (Disability Living Allowance) Regulations 1991 (SI 1991/2890).
9. This change of circumstances was not notified to the Department for Work and Pensions (DWP) at the time it occurred. It only came to the DWP's attention when a renewal claim form for DLA dated 27 May 2003 filled in by his father showed that SB was normally resident at the Project.
10. Shortly after 27 May 2003, and before any payment was made for any period after 20 May 2003, payment of the care component of the DLA was suspended pending enquiries: regulation 16(1) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 (SI 1991/991).
11. On 17 July 2003 SB's father was appointed to exercise SB's benefit rights: regulation 33 of the Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968) (appointments to act on behalf of persons aged over 18 who are unable to act).
12. On 13 October 2003 a decision was made, described as: "Supersession of a decision dated 14/7/00". The decision indicated that SB was in funded accommodation from 1 September 2001, and that 28 days from that date was 29 September 2001 (Part 1). The decision (Part 9) is to make a mobility award at the lower rate and a care award at the middle rate, ie at the same rates as the June 2000 award, but in each case from 29 September 2001 to 5 November 2005 (as opposed to 5 November 2003), but (Part 10) it held that no care component was to be paid for the periods when from 29 September 2001 or 3 October 2001 SB was in the residential home. The result was that SB had been overpaid for the days when he was in the residential home and the decision states: "Any DLA/AA already paid shall be treated as paid on account of that benefit now awarded".
13. The reason given for the decision was that SB had many classic features of Asperger's syndrome, was sometimes incontinent at night, but was able to deal with this himself; the care component was not payable for days in residential accommodation paid from public funds; the award was limited as long-term needs might be more apparent when he finished full-time education.
14. The suspension imposed in May 2003 was lifted after the October decision in relation to entitlement thereafter, but no payments were made of the care component unpaid due to the suspension.
15. On 30 January 2004 a decision was made relating to the quantum of the overpayment. The decision was that an overpayment of DLA had been made from 3 October 2001 to 20 May 2003 in the amount of £3,186.60, and that the amount of £1,411.85 was not recoverable. The reasons for the decision stated that the overpayment was caused by the failure to notify the Department of the relevant change of circumstance, although it would not be reasonable to expect SB to realise the change to be such as to affect entitlement due to his ongoing condition.
16. The figure of £3,186.60 is the total paid for care allowance in the period 3 October 2001 to 20 May 2003. The balance of £1,411 is arrived at (a) by taking the amount which SB should have received in care allowance between 26 October 2001 and 28 April 2003 for his days at home (approximately £1,245) and the amount he should have received in the period of suspension for the summer holidays of 2003 (about £529), a total of about £1,774, and (b) deducting the sum of those figures from £3,186, to give a result of £1,411.85 overpaid. The decision was furthermore that the sum overpaid was not recoverable, because there had not been any misrepresentation and the conditions of section 71(1) of the Social Security Administration Act 1992 were not satisfied. What is and has always been in issue is whether the amount which would have been received but for the suspension for the summer holidays of 2003 (about £529) was a sum that should have been deducted from the £3,186.
17. The figures in the January 2004 decision were used in the decision of the appeal tribunal and in the decision of the Commissioner (where the arrears are wrongly given as £1,744).
18. The decision was notified on 9 February 2004, and SB's father appealed on behalf of SB on 17 February 2004. His position was that the DWP required SB to be present and tell them that he had agreed to his father helping him with documents. His father entered the home address as his normal abode. SB was collecting his own payments from Stourbridge (his nearest post office) himself, and the DLA payments were for his mental disability. He at no time had the mental capacity to advise the DWP of any changes. SB was in his parents' care for the entire summer holiday term from 5 July to 8 September 2003. The period was difficult because they had booked a week's caravan holiday prior to the suspension decision which could not be cancelled. Due to SB's incontinence this was their first family holiday for some years. The care component of the DLA was a primary factor in their holiday finances followed by a further eight weeks while he was at home. Because of the suspension they then had to supplement the DLA with their own savings during SB's time at home, and they spent more than £600 during that period. His parents live on state benefits themselves and have no money to support SB other than his care component. His father is disabled and his mother is a lifelong diabetic. The savings used during the period were the only money they had as an emergency contingency.
19. The Worcester unified appeal tribunal on 10 June 2004 (for reasons issued in September 2004) upheld the decision that the balance of £1,411.85 was irrecoverable. This involved upholding the decision to calculate that sum by including the sums (about £529) due for the care periods in the summer of 2003 as sums that could be offset against the overpayment. The reasons however did not address this last point and accordingly, on appeal to the Commissioner, the representative of the Secretary of State accepted that the decision could not be upheld but requested the Commissioner to address the argument as to the legitimacy of offsetting the £529 relating to the later period against the overpayment held to be irrecoverable.
20. Mr Stagg appeared for SB before the Commissioner and he accepted that the Commissioner should address the point left unaddressed by the tribunal. The point involved the construction of regulation 5(1) of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988 (SI 1988/664) which is in the following terms:

"5.—(1) Subject to regulation 6 (exception from offset of recoverable overpayment), any sum paid in respect of a period covered by a subsequent determination in any of the cases set out in paragraph (2) shall be offset against arrears of entitlement under the subsequent determination and, except to the extent that the sum exceeds the arrears, shall be treated as properly paid on account of them."

21. The relevant case set out in paragraph (2) is:

"Case 1: Payment pursuant to a decision which is revised or superseded, or overturned on appeal

Where a person has been paid a sum by way of benefit pursuant to a decision which is subsequently revised under section 9 of the Social Security Act 1998, superseded under Section 10 of that Act or overturned on appeal."

22. A passage from the Commissioner's decision encapsulates both the arguments before him and his decision to uphold the entitlement to offset the £529 against the overpayment:

"10. Mr Stagg argues that the withholding of arrears may occur in a random and capricious way dependent on the timing of the decision-making. He goes on to argue that case 1 of regulation 5 of the 1988 Regulations is clearly designed to prevent a claimant being paid benefit twice in respect of the same period. Referring to regulation 5(1) of the 1988 Regulations, he argues that the decision-maker was not entitled to treat monies payable in respect of periods arising outside the overpayment period (that is to say periods when the claimant was at home and not in residential care) since the later periods could not properly be said to be 'covered by' the determination to supersede the original decision. Also, referring to case 1, he says that the claimant had not been 'paid a sum by way of benefit' in respect of the periods covered by the offset. That construction of the regulations is not accepted by the Secretary of State's representative who argues that the effect of regulation 5, case 1, is that DLA paid under the decision of 14 July 2000 for the period starting on 20 September 2001 (that is to say the start of the period covered by the superseding decision of 30 January 2004) must be offset against arrears due under that superseding decision.

11. Ingenious though Mr Stagg's arguments are in relation to the recovery of the offset I do not accept them. Regulation 5(1) of the 1988 regulations provides that: 'any sum paid in respect of the period covered by a subsequent determination … shall be offset against arrears of entitlement under the subsequent determination …'. It does not, however, refer to 'arrears of entitlement in respect of the same period …'. No such limiting or qualifying words as those which I have indicated appear in regulation 5.

12. In my judgment one has to consider what is covered by the 'subsequent determination' since the arrears of entitlement must necessarily arise under that determination. Regulation 5(2) provides for the cases in which regulations 5(1) applies to the subsequent determination. Case 1 applies 'where a person has been paid a sum by way of benefit pursuant to a decision which is subsequently … superseded under section 10'. There was, of course, in the instant appeal such a supersession decision. In my view what is relevant for consideration under regulation 5 is the scope of the 'subsequent determination', not the narrower construction of the periods covered by the overpayment of the arrears. I have not forgotten Mr Stagg's point about the capricious effect of the date on which the decision-making takes place. That may be right but it seems to me that the provisions in issue provide a mechanism for automatic recoupment of benefit where there has been an overpayment. The alternative, which would hardly be satisfactory and even more open to criticism on the basis of unfairness, would be the payment of arrears to which a claimant was entitled and then (in most overpayment cases although not this one) a separate decision to recover money overpaid.

13. Applying that reasoning in the circumstances of this case the 'subsequent determination' is the decision dated 13 October 2003. In substance, in my view, it covers the issue of supersession and entitlement. That it does not deal with overpayment is not determinative since that is not a requirement of a case 1 decision. The decision of 13 October 2003 is expressed to be by way of supersession of the decision dated 14 July 2000. It is not entirely clear what period was covered by the latter decision but the claimant (through his appointee) completed a renewal claim pack on 22 May 2003 and the later overpayment decision (document 83) relates to the period from 3 October 2001 to 20 May 2003, that indicating that that was the end date of the period of the July 2000 award. The decision-maker on 13 October 2003 ticked the box to the effect that 'any DLA already paid shall be treated as paid on account of the benefit now awarded'. The decision then goes on to find entitlement to lower rate mobility and middle rate care from 29 September 2001 to 5 November 2005 but that the care component was not payable for any day after the claimant was in relevant accommodation. There was an award of the care component for a continuous period from the day the claimant entered the accommodation until 5 November 2005, and therefore qualifying entitlement giving rise to arrears when the actual periods of home leave had been established. Those arrears could then be offset.

14. In summary, then, for the reasons set out above, I accept the argument advanced on behalf of the Secretary of State in relation to the application of regulation 5 of the 1988 regulations and reject the construction argued for by Mr Stagg. The upshot is that the decision-maker was entitled to offset arrears in the way that he did."

23. One point which was accepted on all sides until the matter came before the Court of Appeal was that the decision taken in October 2003 "superseded" the original decision in June 2000 with full retrospective effect. It was on that assumption that it was common ground that SB's entitlement post-September 2001 was an "entitlement under the subsequent (ie the October 2003) determination". In seeking in argument to identify precisely how the October decision had this retrospective effect, Mr Stagg and Mr Maurici had difficulty in referring the court to any statutory provision which made the matter clear. At the conclusion of the oral hearing we asked Counsel to prepare an agreed note on this and other points. That note would indicate that there are serious doubts as to whether the October decision had the retrospective effect that had been assumed. It would not be right to take up time in this judgment explaining the joint and agreed views of Counsel which demonstrate the likelihood that the decision is not retrospective or what they describe as to possible arguments for avoiding that conclusion, because both also accept that amendments are due to come into force which would enable a fresh decision to be made and which might make any victory for the appellant based on that point pyrrhic, and because both wish for a decision on the true construction of regulation 5 on the basis that the common assumption made up until this point is correct.
24. What however must be recognised is that if the October decision was not retrospective, then the Commissioner's logic would break down, because on any view the £529 would be an entitlement under the original decision and not the subsequent decision.
25. The construction of regulation 5 having been argued at all stages on the basis that the October decision superseded the original decision with retrospective effect, and both parties seeking a determination as to proper construction of regulation 5 on that basis, I think it is right to tackle the point on that basis.
26. If I may say so, one sees the force of the reasoning of the Commissioner on the language of regulation 5 on the basis that it was the October decision that decided entitlement including the entitlement for the summer of £529. But equally it does seem unsatisfactory, to say the least, that the amount which may be offset can vary depending on the date when the suspension on payments ceases and/or the decision is taken as to the amount of any overpayment. Assume in the instant case, for example, that the Department had taken a decision as to the amount of overpayment and as to the amount which should otherwise have been paid during the period of the overpayment at or around the end of May or early June, and further assume that having taken that decision it set out to calculate the extent of the overpayment and the question whether the overpayment should be recoverable. As I understand how the regulations are intended to work, an offset would have been calculated under regulation 5 and then a decision taken as to whether the balance of any overpaid sum should be determined as recoverable or irrecoverable. A determination that the sum was irrecoverable (the circumstances not complying with section 71 as in SB's case) would have led to the Department having no right to offset the summer payments of £529 against the overpaid sums; the £529 would have had to have been paid. Can the fact that there is a delay in taking the decision and the fact that during that delay payments are suspended entitle the Department to treat the £529 as "arrears" under regulation 5?
27. The regulations of which regulation 5 forms part were passed pursuant to section 71(6) (b) of the 1992 Act. That subsection provides that:

"Regulations may provide –

…

(b) for treating any amount paid to any person under an award which is subsequently determined was not payable –

(i) as properly paid; or

(ii) as paid on account of a payment which it is determined should be or should have been made, and for reducing or withholding any arrears payable by virtue of the subsequent determination;

…"

28. The section is empowering the Regulations to deal with "arrears" payable by virtue of the subsequent determination. The same language does not reappear in regulation 5(1) itself where the overpayment is to be offset against "arrears" of entitlement "under the subsequent determination". If one asks the question was the £529 an entitlement "under" the subsequent determination, the answer as found by the Commissioner may well be "yes" (on the basis that the October decision entirely replaces retrospectively the original decision). If however one asks the question whether the £529 was "arrears" by virtue of the subsequent determination, the answer is "no" or, at best, not solely. The £529 was in arrears by virtue of the decision to suspend payments payable under the original decision and/or by virtue of a delay in reaching a decision as to the amount of overpayment.
29. It seems to me that, if for the moment one considered a determination being made as at the end of May when the new circumstances had been discovered, and assumed the determination was to supersede the original June 2000 decision, that determination would be analysed in this way. First a decision would be taken as to how much had been overpaid during the preceding period. Second a decision would then be taken as to how much should have been paid on the basis of the facts as now known. Thirdly a determination would be made as to whether any balance should be recoverable. The second decision would clearly be a determination of the "arrears of entitlement"; those arrears would be due "by virtue" of the subsequent determination and solely by virtue of that subsequent determination. If a determination is not made as in this case for some months and while payments are suspended, there are two types of arrears identifiable. There will be the arrears which it is determined should be paid in place of the sum overpaid, ie in this case the sums due in place of the overpayment, and the arrears being the sum which the Department should on this basis have paid after the period of the overpayment but which are in arrears because payment was suspended.
30. In regulation 16(3) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 there is recognition of the distinction to be drawn between arrears due to a suspension of payments and other arrears, and it seems that the regulation, even when dealing with recoverable sums, draws the line at allowing recovery against arrears due to suspension of payment. This is a matter relied on by Mr Stagg as indicating that if recovery of recoverable overpayments should not be allowed from arrears due to suspension of payments, a fortiori, in relation to irrecoverable overpayments, it cannot have been intended to allow offsets against arrears due to suspension of payments. There is force in that submission. But of course as Mr Maurici points out, the other side of that coin is that in regulation 16(3) the distinction is recognised between arrears due to suspension of payments and other sorts of arrears, but, despite being aware of the distinction, those drafting the regulations deliberately did not draw the same distinction in regulation 5. He submits thus that it must be presumed that regulation 5 intended to allow offset against arrears whether due to a suspension of payments or otherwise.
31. The regulations are not easy to interpret and it is not easy to draw conclusions as to what was intended in one regulation by reference to what is expressly said in another. Any interpretation should however reach, if possible, a logical result which will not produce decisions which as between beneficiaries could be seen to be arbitrary or capricious. To allow the offset of payments in arrears against irrecoverable overpayments, because payments have been suspended and which in amount will vary depending on how long it takes for the Department to reach a determination must lead to arbitrary results without any logic to them.
32. When the Department made its determination in October 2003 it determined that for the period from when SB entered the residential home the previous decision should be superseded so as not to allow the care component to be paid while he was in the residential home but to allow it while he was at home; it recorded furthermore that: "Any DLA/AA already paid shall be treated as paid on account of that benefit now awarded." That determination looks at the payment that has in fact been made up to May 2003 and determines that it be treated as paid on account of what should on the superseded decision have been paid. If a sum is being treated as paid on account of some other sum due, that would normally be understood to mean that one should look at each payment and treat each payment as offset against what would at that same time have been due under the superseded decision. The determination in October 2003 accordingly fits even as a matter of language with the construction I would suggest should be placed on regulation 5.
33. I would allow the appeal from the Commissioner. Even if the decision of October 2003 had entirely replaced the July 2000 decision, the entitlement to £529 for the summer months was not arrears of entitlement under (or by virtue of) the subsequent decision, but was arrears by virtue of the suspension of payment directed in May 2003. The determination in October 2003 was simply determining that, during the period of overpayment, that overpayment should be being treated as paying on account that now held to be due (but in arrears) over that same period.

LADY JUSTICE HALLETT:

34. I agree.

LORD JUSTICE LAWRENCE COLLINS:

35. I also agree.