IN THE UPPER TRIBUNAL                              Case No  CIS/997/2009

ADMINISTRATIVE APPEALS CHAMBER

Before UPPER TRIBUNAL JUDGE WARD

Decision:

1. The decision of the First-tier Tribunal sitting at Newcastle-upon-Tyne on 30 December 2008 under reference 227/08/01096 involved the making of an error of law and is set aside.

2. I remake the decision by substituting a decision that on or around 6 January 2006 the claimant misrepresented a material fact, namely that her son, for whom she was claiming income support, did not have savings of £2,500 or more.  At that time he was beneficially entitled  to capital consisting of the sum of £3,347.51 (inclusive of interest) transferred out of the claimant’s account with the Halifax xxxxx802 on 17 March 2005 (as to the whereabouts of which no sufficient explanation has been provided by the claimant); and the sums deposited into that account between 15 April 2005 and 15 November 2005 (inclusive) (assuming, in the claimant’s favour, that the sum deposited on 15 December 2005 had not yet acquired the quality of capital); and to the sum of £2,000 in the account xxxxx844 in the claimant’s name with the Halifax.  Such sums exceeded the figure of £2,500 which was the subject of the misrepresentation but also the higher figure of £3,000 which was the limit determining that a personal allowance, the disabled child premium and the enhanced disability premium were not payable in respect of the claimant’s son.

3. As a consequence of the misrepresentation, the claimant was, subject to the application of regulation 14 of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988,  overpaid income support for the period 6 January 2006 to 24 March 2007 and the overpayment in respect of that period  is recoverable.

4. The Secretary of State shall within one month of when this decision is sent to the parties calculate the amount of the recoverable overpayment on the basis of the conclusions of fact and law reached in this decision and its accompanying reasons and applying regulation 14 of the 1988 Regulations and shall notify the claimant accordingly.  The claimant may within one month of the date when the Secretary of State's calculation is sent to her apply to the Upper Tribunal for it to resolve any dispute as to the calculation of the amount recoverable. 

5. The sums overpaid between 17 March 2005 and 5 January 2006 and 25 March 2007 and 23 July 2007 are not recoverable.

6. There is no provision permitting the reduction of the amount I have adjudged to be recoverable by such amount (if any) as the claimant might have claimed by way of Child Tax Credit.  Whether and how to recover the amount adjudged to be recoverable is a matter for the Secretary of State to determine, over which the Upper Tribunal does not in general have jurisdiction.  It is for the claimant if she sees fit to make representations in this regard to the Secretary of State.

7.  The claimant’s appeal has thus succeeded to the extent set out above.

REASONS FOR DECISION

1. The claimant is a lone parent, with a teenage son with disabilities.  She had been in receipt of (among other benefits) a running award of income support since 1990.  Her income support included a personal allowance for her son, the disabled premium and the enhanced disability premium.

2. Information was received from the Generalised Matching Service on 8 November 2006 that the claimant had a number of undisclosed bank accounts. She was sent a letter on 27 November 2006 requiring her to attend an interview on 5 December 2006.  The claimant was less than forthcoming in providing information requested by the DWP.  On 20 July 2007 a decision was taken that the claimant was not entitled to an increase in her income support in respect of her son, because he was the beneficial owner of capital in excess of £3000 from 17 March 2005.  The decision was described as being on supersession, but is more appropriately categorised as a revision on the grounds of ignorance of, or a mistake as to, a material fact, bearing in mind that it was seeking to re-open past decisions as to entitlement.  The decision was reconsidered on 13 August 2007, but not changed.

3. The decision correctly reflected the law set out in regulation 17(1)(b) and (d) of the Income Support (General) Regulations 1987 SI 1987/1967, and schedule 2, paragraphs 13A (2)(a)  and 14(a) thereof, in each case as the provision applied at all material times to someone in receipt of income support for herself and her child for as long as the claimant had been and who had not at the material times claimed child tax credit: see regulation 1(3) of the Social Security (Working Tax Credit and Child Tax Credit) (Consequential Amendments) Regulations 2003 SI 2003/455.  These provisions stipulated that no personal allowance, enhanced disability premium or disabled child premium respectively may be claimed in respect of a child who has capital in excess of £3,000.  It appears possible from the papers in the present appeal that the claimant may believe that she is entitled to an overall capital limit of £9,000 i.e. £6,000 for her and £3,000 for her son.  Under the provisions referred to above, this is not the case.  If her son had capital of more than £3,000 capital, entitlement to the allowance and premiums listed is lost, regardless of the amount (if any) of the claimant’s own capital.

4. A tribunal sitting on 5 September 2007 upheld the decision of 20 July 2007.  There was no onward appeal from that tribunal decision (although the claimant subsequently asserted that she had tried, unsuccessfully, to do so.).

5.  A further decision (“the overpayment decision") was taken on 29 September 2007, to the effect that the claimant had been overpaid income support amounting to £13,211.82 from 17 March 2005 to 23 July 2007 and that the overpayment was recoverable from the claimant because she had failed to disclose a material fact.

6. The claimant appealed, on 15 April 2008.  This was treated as a late appeal against the overpayment appeal and was admitted, though it is possible that what the claimant in fact intended may have been an appeal (late and incomplete) against the tribunal decision of 5 September 2007.  Her contention was that she did not owe any overpayment money, in that she and her son were each allowed £3000 in savings and that they were not over the limit.  These were matters which had already been addressed by the tribunal decision of 5 September 2007, which was, however, not binding on the subsequent tribunal.  The claimant in the event did no pursue the point that what her appeal was being treated as was not in fact what she was seeking to appeal.  She requested a paper determination of the appeal.

7. On 15 October 2008, the tribunal determined that the "period of the [sc. recoverable] overpayment” was from 17 March 2005 to 8 November 2006 and remitted the matter to the DWP for calculation of the amount.  The restriction to 8 November 2006 was on the basis that once the DWP had received the information from the Generalised Matching Service, the claimant could not longer have failed to disclose anything, as the Department by then knew it; rather, the Department should immediately have suspended payment.

8. The revised amount recoverable was calculated at £9,154.37.  No representations were received from the claimant and on 30 December 2008 the First-tier Tribunal issued a reasoned decision setting out the history of the various sums involved and confirming the recoverability of that amount asserted by the DWP.

9. The claimant was given permission to appeal by the District Tribunal Judge against the decision issued on 30 December 2008.

10. The Secretary of State initially supported the claimant’s appeal to the Upper Tribunal.  He did so on the footing that the DWP submissions to the tribunal below had provided information which further examination had shown, regrettably, to have been incorrect.  It had been asserted in those submissions that leaflet INF4 had been issued to the claimant on 19 January 2004, 17 January 2005, 16 January 2006 and 15 January 2007.  The submission asserted that the version provided contained a clear and express instruction to notify the benefits office “if a child's savings are more then £3,000”.  However, as the Secretary of State now concedes, the versions issued on 19 January 2004 and 17 January 2005 were not in the same form as versions issued later, and did not contain this wording.  In those forms, the instruction was to tell the office “if savings reach £2,500 or more".  As the Secretary of State points out (all emphases in italics are in the original submission):

"In various other parts of the form, the instructions are at pains to specify that changes affecting "you or anyone you are claiming for"  must be reported.  But no such phrase is used about savings of £2,500 or more.  On the contrary, the section on savings reserves the phrase solely for the final bullet point, which applies where “you or anyone you are claiming for get a Far Eastern Prisoner of War Compensation payment".  Moreover, the section entitled "income support", which does refer to changes "you or anyone you are claiming for”, provides this curious instruction to the recipient: "Tell your nearest local office if you or anyone you are claiming for [...] changes the amount of your savings".  Taken literally, this instruction appears to apply to changes to the claimant’s own capital brought about by either the claimant or any other person he or she is claiming for.  In view of the rather ambiguous wording of the various instructions about capital, I would submit that a question arises as to whether the terms of the INF4 are sufficiently clear to impose a duty to disclose under regulation 32(1) of the Social Security (Claims and Payments) Regulations 1987.  In paragraph 56 of Hooper v Secretary of State for Work and Pensions [2007] EWCA Civ 495 (reported as R(IB)4/07) Dyson LJ said that

"if the Secretary of State wishes to impose a requirement on claimants within the meaning of regulation 32(1), it is incumbent on him to make it absolutely clear that this is what he is doing.  There should be no room for doubt in the mind of a sensible layperson as to whether the SSWP is imposing a mandatory requirement or not.").

It would seem strongly arguable that the instructions about capital contained in the forms INF4 the claimant received do not make absolutely clear to a sensible layperson that changes to a dependent child's capital must be reported.  However, in R(IS) 10/08 the Commissioner considered what appear to be precisely the same INF4 instructions (see paragraph 8) and concluded that there was a duty to disclose (see paragraph 26).  In my respectful submission, this conclusion of the Commissioner, which is not supported by any extensive reasoning and makes no reference to Dyson LJ's test in Hooper, should not be followed.  As the Secretary of State no doubt recognised when he later amended the form so as to include a clear instruction about a child's capital, the wording of the instructions in force at the time [the son’s] capital went above £2,500 did not make it clear that a change that increased the capital of someone the claimant was claiming for to £2,500 or more must be reported to the benefits office.  It is easy to imagine what such an instruction would look like.  It is easy to see that no such instruction plainly appears on the face of the form.  I would further submit that if the form did not make it sufficiently clear that disclosure of an increase of a dependent child's capital is required, there are no grounds for concluding that a duty to disclose arose independently under regulation 32(1A) of the Claims and Payments Regulations.  The wording of the form INF4 would reasonably lead a diligent reader to believe that changes to a child’s capital are not material to income support entitlement.  If so, it was not reasonable to expect the claimant to suspect that such a change might affect her income support, from which it follows that there was no duty to disclose under the terms of regulation 32(1A).”

11.  The First-tier Tribunal in its decision nowhere indicates what was the legal duty which the claimant was said to have breached, thereby giving rise (subject to questions of causation) to an obligation to repay.  That itself in my judgment was an error of law.

12.  I further accept that on the submission it was likely that the tribunal, even if it did not say so, considered the regulation 32(1A) test to have been satisfied.  That regulation provides:

“ Every beneficiary and every person by whom, or on whose behalf, sums by way of benefit are receivable shall furnish in such manner and at such times as the Secretary of State may determine such information or evidence as the Secretary of State may require in connection with payment of the benefit claimed or awarded”

but for the reasons above, the tribunal’s consideration of it was vitiated by the incorrect evidence provided to it, which amounted to a mistake of fact falling within limb vii of the errors of law listed in R (Iran) v Secretary of State for the Home Department [2005] EWCA Civ 982.  I am content to accept the concession on the part of the Secretary of State that the wording in the earlier form of INF4 was not sufficient to trigger a duty to report changes in the capital of a child dependant.  I do not regard the decision in R(IS) 10/08 as being such established authority on this point so that I should reject the  concession as wrongly made: it respectfully appears to me that the focus of consideration in R(IS)10/08 was much more on the difficult point about the applicability of the 1988 Regulations to capital held by child dependants.

13. The Secretary of State then asked me to rule that the overpayment was non-recoverable.  That, however, was not an appropriate concession in my view and I declined to accept it.  I considered that at least part of the overpayment might be recoverable on the basis of misrepresentation.   The matter arises in this way.  An income support review form dated 6 January 2006 states “We need to know about any money, savings and property in this country or abroad that you, your partner or any children you are claiming income support for have".  The claimant ticked a box indicating a bank account and under “Amount”, “regular payments for income support every week” but nothing else.  In response to the question "Do any of the children you are claiming income support for have savings of £2,500 or more?” she ticked “no”.  The claimant had subsequently argued, and the Department had accepted, that money in two accounts with the Halifax had been held on trust for the claimant’s son.  If they were held beneficially for him, then they were his savings, so that the accurate answer to the question, if their amount exceeded £2,500, should have been "yes". As the tribunal had held (as it was entitled to) that the money transferred out of account xxxxx802 on 17 March 2005 (£3250 plus interest) remained available and since further money was accumulating in that account prior to being transferred out on 17 March 2006, the amount of such savings must have exceeded £2500. In R(SB)40/84 a switch from failure to disclose to misrepresentation was permissible provided the misrepresentation had been properly identified and the claimant had been given an adequate opportunity to prepare a defence.  I see no reason why this principle should not apply equally to the Upper Tribunal when it is considering remaking a decision and I consequently identified the point to the parties and gave an opportunity for further submissions.  In response the Secretary of State in a reasoned submission supported the point I had raised.  The claimant said (1) that she did not misrepresent when she filled in the form on 6 January 2006 and all information was correct at that time; and (2) “the capital reduced by regulations 1988 is correct and no monies is payable as the case does not clarify who the monies belonged to either”.

14.  The difficulty which the claimant faces is that she has attempted to argue two mutually inconsistent positions.  In a letter dated 23 February 2007 she had said that the money in her regular saver account (i.e. xxxxx802) was funded by money from her current account with TSB.  Her son’s Disability Living Allowance (“DLA”)  covered the payment each month.  Further, “some monies reimbursed by friends who attend the church so that [her son] could save for medical equipment he needed and will need as growing up, also for other social items.”  She went on to say that the benefits payable in respect of her son were his payments, not hers.

15. It is part of the claimant’s contentions that payments of DLA cannot be taken into account as part of an income support claim.  That is true in the sense that DLA is not taken into account as income for income support purposes.  However, savings of DLA will ultimately become capital.  This occurs after the period in respect of which a given payment of benefit is payable has elapsed - see R(IS)3/93 - and that is what has happened here.

16. The position that the monies in this account were his, not hers, was accepted by the department in the decision of 20 July 2007. It took the same position in relation to the claimant’s further account with the Halifax xxxxx844.  Sums of £3,347.51, £3,096.37 and £2,031.10 were transferred out of xxxxx802 (which had been opened on 17 March 2004) on 17 March 2005, 17 March 2006 and 1 December 2006 respectively.  When xxxxx844 was closed, it had a balance of £2019.18.  The claimant had, somewhat belatedly, written in asserting that the money withdrawn from xxxxx802 had been spent.  It was suggested inearlier evidence that the money had been transferred to her current account but as she had then failed to provide evidence about her current account, this did not advance matters significantly.  She indicated that when account xxxxx802 was closed on 1 December 2006 (shortly after the Department had notified her of the existence of the information received from the Generalised Matching Service), the money was urgently needed for her son’s medical equipment. Account xxxxx844 had contained part of holiday money given for her son and had, she said,  been returned to the person said to have been instrumental in raising the funds, then apparently doing voluntary work in Rumania,  who returned it to the church which was said to have donated that amount.  There was no evidence from the fundraiser or the church or proof of such transfers.  As she had also, despite three requests, failed to provide information about her current account and another account, both of which she admittedly held, it was an entirely legitimate inference that these sums remained available to her: see R(SB)39/85- the claimant’s suggestion otherwise is misconceived.  As she had argued, the monies were beneficially his monies.  The attention of the decision-taker had been drawn to the possibility that a Quistclose trust might arise if monies were provided for a specific purpose and on terms that the money be returned if the purpose was not fulfilled, but the decision-taker was evidently (for more evidence had been requested, but not provided- see document 99) not satisfied on the evidence that any such trust arose.  The evidence about the source and origins of funds was sparse and what there was was vague, unparticularised and uncorroborated in respects where corroboration might be expected to have been available.   I also am not satisfied on the evidence that any Quistclose trust arose.

17.  The tribunal of 5 September 2007, which heard the appeal against the decision of 20 July, confirmed the Secretary of State's decision.  As neither of the parties appears to have obtained a statement of reasons in respect of it, it is difficult to know all the tribunal’s reasoning, but it is implicit in the decision that it endorsed the position adopted by the decision taker that the sums which had been in each of the Halifax accounts on or after 17 March 2005 were (and once withdrawn, remained) available to the claimant on behalf of her son, who was beneficially entitled to them.

18. While I might have had some sympathy for the claimant’s position that she could not be expected to produce receipts so long after the event to support her contention that the money had been spent and was no longer available to her, her representations in this regard might have carried more weight if she had co-operated to allow information to be obtained with regard to her current account with Lloyds and her account with ING, either or both of which might be expected through the pattern of payments revealed to have provided some corroboration for her version.  As she has not done so, the decision-maker and tribunal evidently drew, as I do, adverse inferences as to the weight to be put on the claimant’s version of events in his regard.

19. While the 2008 tribunal below was not bound by the decision of the tribunal of 5 September 2007 and neither is the Upper Tribunal in substituting a decision on appeal from the 2008 tribunal, no further evidence of any significant weight has been put forward establishing that the money in the two accounts in question did not continue to be held by the claimant or was not beneficially her son’s despite the claimant’s previous assertion that it was.  It followed therefore that, as regards the savings held by the claimant as trustee for her son on 6 January 2006 (whether in the accounts xxxxx802 and xxxxx844 at that date or which had previously been withdrawn from it without sufficient explanation having been given), the answer given on the review form was incorrect and a misrepresentation.  These amounts are listed in the decision at the head of these reasons. A misrepresentation for the purposes of recoverability of an overpayment may be entirely innocent and I do not need to make, and do not make, any finding as to the claimant’s knowledge or intention.

20.  I have to be satisfied that the misrepresentation was the cause of the overpayment of benefit.  I accept that submission on behalf of the Secretary of State that if the claimant had stated the position accurately on the review form dated 6 January 2006, further enquiries would have been made if necessary and the amount of the income support paid to the claimant reduced.  However, there came a point where the Department had the information on which it ultimately came to rely about the beneficial ownership of the monies – in essence, when it received the claimant’s letter of 23 February 2007.  Any inaccuracy caused by the original misrepresentation had by then been remedied, following the process of enquiry very properly undertaken by the Department.  I also recognise that proper time needs to be allowed for letters received to be considered and acted upon and a degree of latitiude allowed for the conflicting demands of a busy office.  Nonetheless it seems to me that by (at very latest) one month after the presumed date of receipt of the letter of 23 February 2007, the Department should have been in a position to suspend payment of the relevant benefit, in part, as regulation 16 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 allows.  That regulation allows such a suspension in a number of situations, including if an issue arises whether the conditions for entitlement to a relevant benefit are or were fulfilled, an issue arises whether a decision as to an award of a relevant benefit should be revised or superseded  and if an issue arises whether any amount of benefit paid or payable to a person is recoverable as an overpayment.  Potentially, all three of these situations were applicable here.

21. I do not think it is an answer to suggest, as does the Secretary of State, that regulation 16 provides a power, not a duty.  Regulation 16 has a protective effect for public finances but also, given the consequences for claimants of having to find the money to repay substantial overpayments, which may occur through no fault of theirs, for claimants themselves.  The circumstances in any given case may be such that the Secretary of State has to exercise that power, or face the consequences of not doing so. Clearly a process of fact-finding needed to go on and a degree of latitude needs to be allowed to the Department before causation can be said to have been broken, otherwise the Department may rush  to suspend  payment of benefit, causing hardship to people who may be in considerable need  Allowing for all these matters, though, I have concluded that once the Department had had a month from receipt of the letter of 23 February 2007 it should have suspended benefit and its failure to do so  took over thereafter from the original misrepresentation as the operative cause of the overpayment.  If there were more than one operative cause, this would have been sufficient to satisfy section 71(1): see Duggan v Chief Adjudication Officer (appendix to R(SB) 13/89 and Morrell v Secretary of State for Work and Pensions (reported as R(IS) 6/03)).  But by then the Department knew what it would have known if the misrepresentation had not been made and had had time to digest it. Thereafter the operative cause in my judgment was solely the failure of the Department, having been informed of the information, to exercise its powers of suspension.  The 2008 tribunal in my view further erred in law by failing to consider issues of causation fully, wrongly leaving the matter to turn on what is encompassed within the meaning of to ”disclose” (as to which see GK v SSWP [2009] UKUT 98).

22. This brings us to the impact of regulation 14 of the 1988 Regulations.  Under it:

“(1) For the purposes of [section 71(1) of the Social Security Administration Act 1992], where income support…has been overpaid in consequence of a misrepresentation as to the capital a claimant possesses…the adjudicating authority shall treat that capital as having been reduced at the end of each quarter from the start of the overpayment period by the amount overpaid by way of income support…within that quarter. 

(2) Capital shall not be treated as reduced over any period other than a quarter or in any circumstances other than those for which paragraph (1) provides.

(3) …”

23. In R(IS)10/08 Mr Commissioner Mesher (as he then was) held for the reasons at paragraphs [18] – [20] of that decision that where the legislation quoted above

”refers to cases where income support has been overpaid in consequence of a misrepresentation of or failure to disclose ”the capital a claimant possesses” the reference includes cases where the capital concerned was possessed by a child or young person who was a member of the family of the person claiming income support.”

Consequently, if applying regulation 14 brings the claimant’s son’s capital down below £3,000, the amount of the recoverable overpayment will be reduced.

24. The Secretary of State in the present appeal accepts this view of the law. The calculation prepared for the First-tier Tribunal failed to refer to this principle and the tribunal also erred in law in this respect by failing to apply it.

25.  I then turn to the claimant’s view that she would have fared better on these facts if she had claimed child tax credit instead.  Given that entitlement to child tax credit is unaffected by the amount of savings, this may well be so.  However, there is no legal power available to set off any amount of child tax credit which might have been payable had the claimant claimed it.  Specifically, the provisions of regulation 13 of the 1988 Regulations do not assist the claimant, for the reasons set out at [6] in Larusai v Secretary of State for Work and Pensions [2003] EWHC 371 Admin  (a case on working families tax credit).  While I have ruled that a part of the overpayment is recoverable, whether to do so and if so, how, is a matter for the discretion of the Secretary of State over which the Upper Tribunal has, in general, no jurisdiction, and the claimant may wish to make representations to him in this regard.

26.  Finally, the decision notice and record of paper proceedings dated 30 December 2008 recites that a Dr H (whom I take to be a medically qualified panel member) was a member of the tribunal as well as the tribunal judge.  If this is so, it would appear to have been non-compliant with the Practice Statement on Composition of Tribunals in Social Security and Child Support Cases in the Social Entitlement Chamber on or after 3 November 2008. It may just have been a clerical error.  If anything turned on it, I should have made enquiries of the tribunal, But as I am setting the decision aside on other grounds, I need not press the point, save by emphasising the need for tribunals, particularly where mixed lists are involved, to take care to ensure that the tribunal is properly constituted and that the paperwork reflects the constitution.

CG Ward

Judge of the Upper Tribunal

30 December 2009