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GK v Secretary of State for Work and Pensions [2009] UKUT 98 (AAC) (27 May 2009)
Recovery of overpayments
failure to disclose

IN THE UPPER TRIBUNAL Case No CIS/2710/2008

ADMINISTRATIVE APPEALS CHAMBER

Before UPPER TRIBUNAL JUDGE WARD

Attendances:

For the Appellant: Mrs S Burns (DIAL Peterborough)

For the Respondent Ms K Arnold, Solicitor

Decision: The appeal is allowed (though the outcome is of limited benefit to the claimant.) The decision of the Peterborough appeal tribunal given on 20 March 2008 was in error of law and is set aside. In exercise of the power conferred by sections 12(2)(b)(ii) and (4)(b) of the Tribunals, Courts and Enforcement Act 2007 I remake the decision, having made such findings of fact as I consider appropriate, in the following terms.

On 5 March 2005 or as soon as practicable thereafter, the claimant failed to disclose the material fact that his underlying entitlement to carer's allowance for his mother had ceased.

As a consequence, income support was overpaid to him from 5 March 2005 to 18 October 2005 (both dates included) and is recoverable from the claimant.

The amount of such overpayment is to be re-calculated by the Secretary of State and the claimant may apply to me to resolve any dispute as to the amount within one month of being notified of the amount by the Secretary of State.

REASONS FOR DECISION

The claimant, who was born in 1949 and who is a registered blind person, appeals against a decision of the appeal tribunal given on 20 March 2008, which upheld a decision of the Secretary of State that he had been overpaid income support for the period 16 February 2005 to 18 October 2005 in the amount of £855.50 and that the overpaid amount was recoverable from the claimant.

The issue in this case concerns the correct legal position where the claimant has not himself taken any step to disclose a material fact but that fact has, nonetheless, unbeknown to the claimant, come to be known to his local benefits office (though not to the part concerned with the benefit overpaid.)

An oral hearing was held at which the claimant was represented by Mrs S Burns of DIAL Peterborough, who had also provided a clear and thorough written submission beforehand, and the Secretary of State by Ms K Arnold. I am grateful to them both for their respective submissions. The scope of this decision goes beyond those submissions and I consequently circulated it in draft, providing an opportunity (including an extension of time) for further written submissions, before finalising it.

Before the circumstances giving rise to the overpayment, the claimant had been living with his mother. The claimant's benefit position was a complex one. He had been in receipt of income support since 1991. In 1994 he had become entitled to severe disablement allowance; this was topped–up by income support and the two benefits were paid as one composite sum. In 2000 he had become entitled to carer's allowance because of the care he was providing to his mother. However, the effect of regulation 4 of the Social Security (Overlapping Benefits) Regulations 1979 was that the claimant was only entitled actually to receive the higher of severe disablement allowance and carer's allowance, which was the severe disablement allowance; his underlying entitlement to carer's allowance remained, but without resulting in any payment to him directly in respect of it. The claimant was also entitled to disability living allowance.

As a result of the claimant's circumstances, his income support included a number of premiums: the disability premium, the severe disability premium and, because of his underlying entitlement to carer's allowance, the carer premium.

On 11 November 2004, the claimant's mother was admitted to hospital. In consequence of this, the claimant ceased to be entitled to carer's allowance, even in the somewhat notional sense in which he had so far been entitled to it, from 27 December 2004. Entitlement to the carer premium for income support purposes ceased eight weeks thereafter, the last day of entitlement being 15 February 2005: see the Income Support (General) Regulations 1987, schedule 2, paragraph 14ZA (3) and (3A). The claimant continued to be paid the carer premium until 18 October 2005 and it is not disputed that that this was an overpayment.

The claimant's income support was dealt with within the Peterborough Benefit Delivery Centre ("the local office"). His carer's allowance claim was dealt with by the carer's allowance unit, which is a national unit not forming part of the local office.

Leaflet INF4 Income Support Information Sheet "Changes you must tell us about" contains relevant provisions. I am quoting from the version dated 10/04. It is accepted on behalf of the claimant that he received this leaflet. Much of the wording of the leaflet is difficult to apply to these circumstances. However, under a heading "Carers", it does state: "If you are claiming Carer's Allowance, tell us if it stops for any reason". In my judgment, that wording is sufficient to impose an obligation to notify the local office of the cessation of carer's allowance on 27 December 2004, even though he was not actually receiving any money in respect of carer's allowance. However, the claimant could not do so until he knew about this himself, which it is conceded was not until 5 March 2005. In my view, there is nothing in Leaflet INF4 which imposes any separate obligation to notify the local office that the claimant's mother had gone into hospital.

As to "How to tell us about changes", the reader is instructed to "get in touch with your nearest local office. The telephone number and address are at the top of any letters they have sent you." At the very foot of the page, in a separate section, the leaflet introduces the idea of a separate income support section: "If you get Income Support, tell the income support section at your nearest local office about the change. If you are sick, tell the Incapacity Benefit section as well."

The claimant telephoned the carer's allowance unit to tell them that his mother had gone into hospital. He did not tell the local office of this fact, or of the subsequent cessation of carer's allowance. (Though there is no finding of fact on the point, it is said that this may have been because the carer's allowance claim form states that the carer's allowance unit will tell the local office when someone who is on income support is awarded carer's allowance and therefore that one was entitled to infer that it would also tell the local office when carer's allowance stopped: however, for the reasons in paragraph 31 below, this does not assist the claimant in any event.)

In the course of the appeal to the Upper Tribunal, further evidential material became available. It was established that the claimant's severe disablement allowance was handled by the incapacity benefit section within the local office. The carer's allowance unit on an unknown date prior to 11 March 2005 notified the incapacity benefit section of the local office of the cessation of the underlying entitlement to carer's allowance. The incapacity benefit section on 10 March sent a memo to the income support section of the local office and it was either not received by the income support section or, if it was (and it cannot now be produced), no action was taken in relation to it. The contents of this paragraph were not known to the claimant at the time.

It is common ground between the parties that the appeal tribunal was in error of law because of the mistakes of fact it made, which are considered to fall within limb (vii) of the errors of law suggested in R (Iran) v Secretary of State for the Home Department [2005] EWCA Civ 982. The correct facts were known to the Department for Work and Pensions and largely only to them, they could have been provided by the Department and the claimant and his advisers were not responsible for the mistake. Unfairness resulted, in that the claimant was unable to argue his case before the appeal tribunal on the true facts, which gave rise to legal issues of some difficulty and in respect of which more than one view is possible, and in that a greater overpayment was ordered to be repayable than is being ordered now the true facts are known.

The claimant's obligations in terms of provision of information were governed by regulation 32 of the Social Security (Claims and Payments) Regulations 1987 ("the 1987 Regulations"), which, so far as relevant, provided:

"(1) Except in the case of a jobseeker's allowance, 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 for determining whether a decision on the award of benefit should be revised under section 9 of the Social Security Act 1998 or superseded under section 10 of that Act.

(1A) 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.

(1B) Except in the case of a jobseeker's allowance, every beneficiary and every person by whom or on whose behalf sums by way of benefit are receivable shall notify the Secretary of State of any change of circumstances which he might reasonably be expected to know might affect—

(a) the continuance of entitlement to benefit; or

(b) the payment of the benefit,

as soon as reasonably practicable after the change occurs by giving notice of the change to the appropriate office

(i) in writing or by telephone (unless the Secretary of State determines in any particular case that notice must be in writing or may be given otherwise than in writing or by telephone); or

(ii) in writing if in any class of case he requires written notice (unless he determines in any particular case to accept notice given otherwise than in writing)."

As I have held that the wording of leaflet INF 4 was sufficient to impose a requirement to notify the cessation of underlying entitlement to carer's allowance, it follows that the obligation was imposed on the claimant by virtue of paragraph (1A) of regulation 32 rather than by paragraph (1B). Accordingly, it was not material whether the claimant thought the information was relevant (it is said that he did not know that he received a carer premium), which could only have been material under paragraph (1B).

The ability of the Secretary of State to recover an overpayment via the statutory mechanism for doing so is determined by section 71 of the Social Security Adjudication Act 1992, which stated:

" (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."

The decision of the Tribunal of Commissioners in R(IS)9/06 establishes that section 71 does not purport to impose a duty to disclose, but rather presupposes such a duty, the actual duty now being found in the provisions of the 1987 Regulations cited above. Rejecting an argument from counsel that the source of the duty was to be found in section 71 itself, the Tribunal of Commissioners observed at paragraph 24:

"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"."

The decision of the Tribunal of Commissioners was upheld by the Court of Appeal in B v Secretary of State for Work and Pensions [2005] EWCA Civ 929; [2005] 1 WLR 3796. At paragraph 47, Lord Justice Buxton (with whom Sir Martin Nourse agreed) pointed out that:

"Read in isolation, the phrase "failed to disclose" might seem to be addressed to some sort of deliberate concealment, or conscious suppression, of a material fact. That might well be its application where the fact in issue is not one addressed by specific regulations, but is nonetheless determined to be "material". But that cannot be the expression's meaning or application where, as in our case, the fact in question is mandated for transmission to the Secretary of State by a specific regulation."

I am invited to distinguish B on its facts, on the ground that there the local office did not know of the material facts. In my view, the attempted distinction is without substance. In order to reach a decision about whether Mrs B needed to tell the local office something which it did not know already, despite her learning disabilities, the Tribunal of Commissioners first ruled, on a level of principle, as to the interplay between section 71 and regulation 32. There is nothing in their reasoning which necessitates confining the application of the principle to the factual circumstances of B. The approach of the Tribunal of Commissioners was endorsed by the Court of Appeal in this regard: see especially Sedley LJ at paragraphs 37 and 40 and Buxton LJ at paragraph 47.

It is argued for the claimant that (a) disclosure, in general terms, must be to the local office, rather than to any individual section or decision-maker within it; and that (b) there can be no question of failure to disclose where, as here, the fact was known to the local office, albeit a different section within it and albeit the claimant did not know it was known. Ms Arnold correctly concedes that if (b) were the case, she would not take a any point against the claimant on the possible gap of a few days between when the claimant was notified on 5 March and the date, unknown but prior to 11 March, when the incapacity benefit section were notified by the carer's allowance unit, bearing in mind that only the Department could provide the evidence for the unknown date and it has not done so.

I am prepared for present purposes to accept (a) as being well-founded, while observing that it may not remain the case forever if the instructions in forms such as INF4 evolve. In the present case there is, as previously noted, a limited indication that it is the income support section that should be informed, but the point is shrouded in ambiguity and I do not regard the leaflet in the present case as sufficiently clear to impose that more specific obligation. As Dyson LJ said in Hooper v Secretary of State for Work and Pensions [2007] EWCA Civ 495 at paragraph 56:

"The consequences for a claimant of not complying with a requirement in accordance with regulation 32(1) can be very serious. That is why in my view, 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."

As to (b), I am asked by Mrs Burns to follow the decision of Mr Commissioner Howell QC in CIS/1887/2002. In that case, the claimant claimed income support and incapacity benefit, which were both handled by the same local office. Because his incapacity benefit claim took longer to process, he was paid income support to begin with. When in due course he was awarded incapacity benefit by the local office, his income support was not reduced, as it should have been, and so the claimant for a while received both his incapacity benefit and his unreduced income support, resulting in an overpayment. The Commissioner, citing with approval an earlier decision (CSB/0677/1986) on very similar facts to those with which he was concerned, held that there was nothing on the evidence before him to indicate that the claimant had to concern himself with different sections within the local office but also that there could be no breach of an obligation to disclose by failing to report to a local office something which the same local office had just told the claimant.

While I respectfully agree with Mr Commissioner Howell in the result, on the understanding of the law following B I would be minded not now to reach it by the same reasoning, preferring to view instances where the local office informs a claimant in writing of a fact which he would otherwise be required to notify back to the local office as an instance where the information requirements that would otherwise be applied under regulation 32 of the 1987 Regulations are waived.

Paragraph 16 of CIS/1887/2002 states:

"The Secretary of State's ability to recover overpaid benefit on the ground put forward in this case is governed by the terms of section 71 Social Security Administration Act 1992 which requires him to show a failure to disclose a material fact, not merely failure to send or give any specific written or other notification that may be stipulated in subordinate legislation, or in literature the department itself may put out: for example the detailed instructions or advice given to claimants contained in or accompanying their benefit order books."

However, it seems to me that following the decision in B and in particular the remarks of Buxton LJ cited above, section 71 is sufficient to provide a remedy for breaches of all those duties as long as the terms of such duties are capable of falling within the word "disclose" (as the Tribunal of Commissioners and Court of Appeal held those imposed by regulation 32 are). Therefore, a breach of a regulation 32 duty will lead, subject to questions of causation, to entitlement to recover under section 71. Insofar as paragraph 16 of CIS/1887/2002 is to be read as suggesting that a breach of regulation 32 requirements may escape the sanction of section 71 if it does not also fall within an additional test linked to an inherent meaning of the word "disclose", I would respectfully decline to follow it. Rather, B has clarified the meaning to be given to "failure to disclose" in the context of section 71 so as to prevent the possibility of such a double test arising. Likewise, where in CG/5631/1999, a decision of a Tribunal of Commissioners, it is stated, though without argument, that:

"It is well established that there can be no failure to disclose something which is already known to the person to whom disclosure might otherwise be owed"

I do not consider that it remains good law following the decision of the Court of Appeal in B, which I am required to follow.

In urging me to take a different view of the impact of B, submissions for the claimant point out that CG/5631/1999 was not cited to the Court of Appeal in B and that the observations of Buxton LJ were directed at the question (raised in B) as to whether the claimant needed to understand the materiality of a fact in order to be liable for having "failed to disclose". Consequently, it is said, CG/5631/1999 should not be taken as having been overruled by B. I am unable to accept this argument. The Tribunal of Commissioners built up their argument (subsequently endorsed by the Court of Appeal), dealing first with the interplay between section 71 and regulation 32 (see paragraph 27) before only later addressing the relevance, if any, of learning disabilities. It is the interplay between these provisions which left no room for consideration of learning disabilities in B and which in my judgment leaves no room for an independent meaning of "disclose" either: the two consequences are separate branches from a common stem.

It is argued for the claimant that to adopt the approach of this decision means that the Secretary of State would be able to recover even where the particular part of the local office knew the material facts and that there is no reason to import such a requirement into section 71. The answer to this is that we now know that the source of the duty is not to be found in section 71 itself and that the duties found in regulation 32 are capable of falling within the word "disclose" as used in section 71. Further, where the Secretary of State seeks to recover when the particular part of the local office knows the material facts, questions of causation still need to be addressed.

Before leaving B, I should record that an application to the European Court of Human Rights is currently pending in that case. In supplemental further submissions, clearly prepared with the benefit of informed legal advice, it is argued that "it is unlikely (albeit not impossible) that the decision of the European Court of Human Rights will affect the outcome of this appeal. Accordingly the [claimant] wishes to reserve his right in future to rely on any subsequent decision of the European Court of Human Rights which, by reason of his disability, might affect the outcome of this appeal." As even if the decision in B before the European Court of Human Rights when available proved to be material to the present appeal, I would be bound in general to apply the domestic system of precedent (see Kay v Lambeth LBC, Leeds CC v Price [2006] UKHL 10, [2006] 2 AC 465), I merely note the point in case the present appeal goes further.

In case, however, I am wrong in my conclusion that there is now no room for an argument based on the word "disclose" in section 71 having a meaning distinct from the duties for breach of which section 71 provides the sanction, I look at the argument put forward by Mrs Burns that the meaning to be given to the word "disclose" is that put forward in paragraph 21 of CIS/1887/2002. There the Commissioner observes:

"It is also in my judgment a principle established beyond question that for the purposes of section 71 there is no "failure to disclose" where the material fact in question is already known to the person or office to whom, under the principle laid down by the House of Lords in Hinchy, notification would otherwise have to be made. This too I take to be axiomatic and not called in question by anything said in the recent decision of their Lordships. It may be the kind of point Lord Hoffmann had in mind when he said "a disclosure which would be thought necessary only by a literal-minded pedant… need not be made", though perhaps a true pedant would be the least likely to think disclosure necessary in such circumstances, taking the (accurate) view that there can be no question of "disclosure" to a person or entity of something that he or it knows already."

In CIS/1887/2002, the claimant knew the local office knew the material fact, for they had just sent him a letter telling him about it. Mr Commissioner Howell did not need to enter into the claimant's state of knowledge, for it was not in issue. In the present case, however, it is necessary.

The authority for the proposition appears to be the decision of the Tribunal of Commissioners in R(SB)15/87, paragraph 25 of which states:

"Disclosure consists in the statement of a fact so as to reveal that which so far as the discloser knows was previously unknown to the person to whom the statement was made."

This proposition was in turn based on an Australian decision, Foster v Federal Commissioner of Taxation (1951) 82 CLR 606, where Latham CJ said at pages 614 and 615:

"In my opinion it is not possible, according to the ordinary use of language, to "disclose" to a person a fact of which he is, to the knowledge of the person making a statement as to the fact, already aware. There is a difference between "disclosing" a fact and stating a fact. Disclosure consists in the statement of a fact by way of disclosure so as to reveal or make apparent that which (so far as the "discloser" knows) was previously unknown to the person to whom the statement was made. Thus…the failure of the [plaintiff] to repeat to the Commissioner what he already knew did not constitute a failure to disclose material facts."

Common to both R(SB)15/87 and Foster is that disclosure is only ruled out if the person to whom there would otherwise be something constituting "disclosure" is known by the prospective discloser to know the fact already.

In the present case, the claimant did not know that the local office had been informed by the carer's allowance unit that entitlement to underlying carer's allowance had ceased. For this reason, I would in any event be unable to accede to the submission for the claimant that there was no failure to "disclose" because the information was known to the local office (albeit not effectively transmitted within it).

I would add that if the claimant did infer from the claim pack for carer's allowance that the carer's allowance unit were likely to inform the local office, that is not the same thing as knowledge: see in this regard the decision of Mr Commissioner Walker in CSIS/7/94. As Lord Hoffman said at paragraph 32 of Hinchy v Secretary of State for Work and Pensions [2005] UKHL 16; [2005] 1 WLR 967:

"The claimant is not concerned or entitled to make any assumptions about the internal administrative arrangements of the Department. In particular [he] is not entitled to assume the existence of infallible channels of communication between one office and another. [His] duty is to comply with what the Tribunal called the "simple instruction" in the order book."

Accordingly, even if, contrary to my view, the word "disclose" in section 71 has a meaning over and above the sum of the provisions creating the duty for which that section provides the sanction, it does not on the basis of the authorities assist the claimant, and paragraph 21 of CIS/1887/2002, as it did not need to deal with the relevance of knowledge, is in my respectful view not apt to be relied upon as a general proposition applicable in every circumstance. It follows, therefore, that the claimant has "failed to disclose" for the purposes of section 71 and I turn now to questions of causation.

It is for the Secretary of State to show that the conditions for recovery are satisfied, including that of causation. The legal test was set out by the Court of Appeal in Morrell v Secretary of State for Work and Pensions [2003] EWCA Civ 526 (reported as R(IS) 6/03), endorsing an earlier decision of the Court, in the following terms:

"45. As the Commissioner also observed, the misrepresentation does not have to be the sole cause of the overpayment. He referred to the decision of this court in Duggan v. Chief Adjudication Officer, a judgment of 8 December 1988 apparently reported only as an annex to Commissioner's decision R(SB) 13/89. The case concerned a failure, in the context of a supplementary benefit claim, to disclose a material fact concerning receipt of unemployment benefit by the claimant's wife. In relation to an argument that the cause of overpayment was not the claimant's failure to disclose that fact but a false assumption and failure to investigate by the adjudication officer, May LJ stated:

"The wrong assumption by the Adjudication Officer may in certain circumstances have been a cause of the overpayment, but it does not follow that it was the sole cause. As a matter of common-sense, which questions of causation always are, if one poses the question: did the failure of the claimant to disclose the fact that his wife was in receipt of unemployment benefit have as at least one of its consequences the overpayment of the supplementary benefit?, the only reasonable answer that one can give is 'yes'. … It may be, as I have said, that there were two causes of the consequence at the time I have outlined, but certainly one of the causes was the failure of the claimant … to disclose a material fact."

For the same reason the misrepresentations on the appellant's review forms could properly be considered to be a cause of the overpayments, so that the overpayments were made "in consequence" of the misrepresentations, even if a further cause was a failure on the part of the Benefits Centre to take due account of the information provided by the local authority.

In my judgment, therefore, the Commissioner was correct to find that the appeal tribunal had not erred in law in relation to causation."

In the present case, I accept that the local office was in possession of the relevant information. Whether the memorandum from the incapacity benefit section to the income support section went astray and never reached the income support section, or whether it was received by the income support section but due to an oversight never acted upon is not known but in my opinion is immaterial. Ms Arnold invites me to infer that had the claimant disclosed the information of the cessation of entitlement to carer's allowance to the local office, it would have been acted on. Putting it at its lowest, on the balance of probabilities that must be right, and is not called into question by the fact that on a single occasion the internal memorandum was not duly processed in one or other of the circumstances outlined above, and I find accordingly. The consequence is that there were two operative causes for the overpayment, a failure to disclose by the claimant and some form of departmental administrative mistake. In these circumstances, I am constrained by Morrell and Duggan to hold that the continuing payment of the carer premium was made in consequence of the failure to disclose for the purposes of section 71.

Though I was not referred to them in argument, I am aware that there are decisions of individual Commissioners which adopt a somewhat different approach. In CSIS/7/94, Mr Commissioner Walker found for the claimant on a causation issue on the basis that:

"in this case it seems clear that the primary if not indeed the whole reason why there was an overpayment was that the relevant office failed properly to act when it received notice from the family credit unit."

Although Morrell had not been decided by that time, Duggan had been (but does not appear to have been cited), and it respectfully seems to me that the Commissioner's decision there would be sustainable if indeed departmental error was the whole reason, but not if it was merely the primary one. In CIS/159/1990 Mr Commissioner Sanders effectively found as a fact that the overpayment was in consequence of departmental error in failing to act on information which it already had, rather than of a failure to disclose. Once again, there is no indication that Duggan was cited, and it may be that if it had been, the learned Commissioner would have addressed the possibility that the payment in question might have had more than one operative cause. In any event, I have the advantage of the guidance provided additionally by Morrell and my finding of fact is as set out in paragraph 34 above.

In consequence, although this appeal succeeds on a technical level, the only actual benefit to the claimant arises out of the slight reduction in the period for which an overpayment can be said to have occurred.

C.G.Ward

Judge of the Upper Tribunal

27 May 2009