DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

 

 

The DECISION of the Upper Tribunal is to allow the claimant’s appeal but to re-make the First-tier Tribunal’s decision to the same effect.

The decision of the Lancaster First-tier Tribunal dated 12 May 2010 under file reference 067/09/00846 involves an error on a point of law.  The First-tier Tribunal's decision dated 12 May 2010 is set aside.  The Upper Tribunal re-makes that decision in the following terms:

 

“The housing benefit appeal is disallowed.

 

The local authority’s decision in relation to housing benefit issued on 3 September 2009 is confirmed.

 

The council tax benefit appeal is disallowed.

 

The local authority’s decision in relation to council tax benefit issued on 3 September 2009 is confirmed.

 

The relevant income was correctly applied under regulation 79(7) of the Housing Benefit Regulations 2006.  There was no official error and the revised sums of £11,923.11 by way of the housing benefit overpayment and the £2,907.80 excess payment of council tax benefit are recoverable from the appellant.”

This decision is given under section 12(2)(a) and (2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007.

REASONS FOR DECISION

 

Introduction: what this appeal is all about

1. The claimant was paid housing benefit (HB) and council tax benefit (CTB) for several years on the basis that she was not receiving any child support.  Those awards were all correct at the time that they were made because she was indeed getting no child support.  However, the Child Support Agency (CSA) eventually extracted a substantial lump sum of money from the claimant’s ex-partner by way of arrears of child support.  The CSA paid a large part of those arrears to the claimant.  The local authority then recalculated the claimant’s entitlement to housing benefit and council tax benefit for the past period in question.  Thus the heart of the appeal, according to the First-tier Tribunal (FTT) in its statement of reasons, involved:

 

“a question over the correct treatment of the appellant’s Child Support arrears and whether those should be included as income in the assessment of her entitlement to benefit for the relevant period.”

 

2. There is, of course, a starker way of looking at the problem.  One arm of the State, the CSA, failed for more than 10 years to get a single penny out of the claimant’s ex-partner.  As a result another arm of the State, the local authority, had to pay out to the claimant more by way of weekly means-tested HB and CTB for a decade.  What should then happen when the CSA finally secured for the claimant the payment of thousands of pounds of arrears in child support maintenance? Is the local authority entitled to decide that, although through no fault of her own, the claimant had been overpaid HB and CTB for all the years in between and that she was now liable to repay those sums? This appeal therefore raises the questions of whether the local authority can and should recover any such overpayment.

 

3. The FTT (and on appeal the Upper Tribunal) is only able to decide whether the local authority can recover any such overpayment.  There is no right of appeal on the issue of whether the local authority should actually recover any such overpayment, although I make some observations on this issue at the end of this decision.  For the reasons that follow, my decision is that as a matter of principle the local authority can recover an overpayment of HB and CTB in such circumstances.

 

A summary of the child support background to this appeal

 

4. The claimant is a lone parent.  She started receiving HB and CTB from Lancaster City Council (“the local authority”) in 1997.  In May 1998, when she was claiming income support, she also applied for child support maintenance.  In fact, of course, under the legislation as it then stood she was required by law to make that application (see the version of section 6 of the Child Support Act 1991 in force at that time).

 

5. In September 1998 the Child Support Agency (CSA) issued her husband (or now “non-resident parent” in the language of the 1991 Act) with a maintenance enquiry form (MEF).

 

6. On 12 March 1999, there being no response from the claimant’s ex-partner to the MEF, the CSA made a Category A interim maintenance assessment for £61.82 a week, effective from 16 March 1999.  The claimant still received no child support maintenance. The claimant later told the local authority that when she had been on income support she had kept telling the CSA where her ex-partner was and where he was working “but nothing seemed to happen”.

 

7. In May 1999 the claimant started work; she stopped claiming income support but continued to receive both HB and CTB.  As before, she received no payments of child support maintenance.

 

8. For the best part of the next 10 years, as with many other cases, the CSA made no progress and on the face of it appears to have taken little, if any, action in pursuing the claimant’s ex-partner either for current payments of, or the mounting arrears of, child support maintenance. 

 

9. However, in April 2008 the claimant advised the CSA that her ex-partner’s property was up for sale.  Spurred into action, in September 2008 the CSA obtained a liability order in the magistrates’ court for the sum of £23,535.75 in arrears of child support covering the period from 13 July 2000 to 29 October 2007.  The CSA also put in train an application to the county court for a charging order.

 

10. Faced with this more robust approach, in February 2009 the ex-partner’s solicitors offered to pay the CSA £23,779 in settlement of the arrears of child support.  On 13 March 2009 the CSA paid the claimant a lump sum of £16,965.17.  The CSA also forwarded weekly payments of £61.82 for a few weeks.  A further lump sum payment of some £6,000 was paid by the CSA to the claimant in the summer of 2009.

 

11. Meanwhile on 30 March 2009 – after the claimant had received the first and larger lump sum – the CSA converted the Category A interim maintenance assessment into a full maintenance assessment.  The new full assessment provided for the payment of maintenance at various weekly rates from 22 September 1998 onwards, although there were nil liabilities between July 2001 and March 2003 and with effect from 10 April 2007, presumably reflecting e.g. periods of unemployment on the part of the non-resident parent.

 

12. The consequence of the full maintenance assessment was that the claimant’s ex-partner owed a total of £34,408.64 in child support for the period from 22 September 1998 to 9 April 2007.  The CSA finally informed the local authority that the claimant herself had actually been paid a total of £23,779.75. This sum was said to cover the period from 13 July 2000 to 29 October 2007.

 

The local authority’s HB and CTB decisions and the claimant’s appeal

 

13. As noted above, the claimant started receiving HB and CTB in 1997.  Her HB and CTB claim ceased on 29 October 2007.  She then re-claimed HB and CTB with effect from April 2009.  She told the local authority about the recent child support assessment and the March 2009 lump sum payment of child support, which naturally prompted the local authority to make enquiries of the CSA.

 

14. On 3 September 2009 the local authority made a decision superseding the awards of HB and CTB for the period from 10 May 1999 to 16 April 2007.  The local authority attributed the lump sum payment of child support arrears on a weekly basis from July 2000 to October 2007.  This produced an overpayment of £6,899.80 in HB and an excess payment of £2,127.31 in CTB.  Those payments were found to be recoverable from the claimant.

 

15. On 28 September 2009 the claimant appealed.  Her letter was short and to the point:

 

“I would like to appeal against the decision of overpayment as at the time of claiming housing benefit I was not receiving CSA [payments of maintenance] and did not expect this money at all.  I was not the one pursuing this money as one day I got a phone call out of the blue saying that they had got this money.  And I disagree with you putting me in any more debt as this is not my fault.”

 

16. The local authority made further enquiries of the CSA, as a result of which the overpayments were re-calculated (and substantially increased).  The new decisions, made on 23 October 2009, were that the claimant had been overpaid from 10 May 1999 (an earlier start date than the one previously used).  The resulting overpayments were now said to be £16,328.49 in HB and £3,996.53 in CTB.

 

17. On 1 December 2009 the local authority issued further decisions, reverting to the July 2000 start date for the period of the overpayment, and resulting in slightly reduced overpayments of £14,350.47 in HB and £3,358.08 in CTB.

 

The first First-tier Tribunal’s decision

 

18. On 22 December 2009 the FTT (or “the tribunal”) heard and allowed the claimant’s appeal.  The tribunal decided that the local authority had no power to supersede the awards of HB and CTB for the period from 1999 to 2007.  It took the view that the March 2009 payment was a change of circumstances which affected entitlement as from that date only, applying regulation 79(1) of the Housing Benefit Regulations 2006 (SI 2006/213; the “2006 Regulations”).  The tribunal rejected the local authority’s argument that regulation 79(6) applied, ruling that that provision applied only where there was no entitlement to the income during the relevant past period.

 

19. The local authority applied for permission to appeal, arguing that the tribunal had misinterpreted regulation 79(6) and, even if that did not apply, regulation 79(7) did, which the tribunal had not considered, allowing the attribution of the payment over the past period.  A District Tribunal Judge exercised her power to set aside the tribunal’s decision and directed a re-hearing.

 

The second First-tier Tribunal’s decision

 

20. By now the claimant had managed to obtain some expert advice from the county council’s welfare rights service.  Her representative’s submission, in short, was that neither regulation 79(6) nor 79(7) applied so as to spread the lump sum payments as income over the years from 2000 to 2007.  If they did, he argued that the overpayment was caused by official error on the part of the CSA and that as such any overpayment was not recoverable from the claimant under regulation 100.

 

21. Meanwhile, the local authority undertook yet another re-calculation of the claimant’s benefit entitlement.  The new decision was that the period of the overpayment (and excess payment) ran from 17 July 2000 to 15 May 2006.  The total amounts overpaid were now said to be £11,923.11 (HB) and £2,907.80 (CTB).

 

22. The second FTT, sitting on 12 May 2010, dismissed the claimant’s appeal, confirming the local authority’s most recently revised decisions.  The tribunal’s decision notice simply recorded that “the relevant income was correctly applied under Regulation 79(6) HB Regs” and that, in the absence of any official error, the sums in question were recoverable from the claimant.  The tribunal then expanded on that brief explanation in its fuller statement of reasons.

 

The claimant’s appeal to the Upper Tribunal

 

23. The claimant’s representative applied for permission to appeal to the Upper Tribunal, arguing that the March 2009 payment should have been treated as a payment of capital.  Furthermore, “[w]hile the payment was made in respect of an identifiable period, it is submitted that the length of time it took for it to be paid to [the claimant] altered the status of the payment from income to capital.”

 

24. The District Tribunal Judge granted permission to appeal.  In doing so, she also drew attention to paragraph 47A of Schedule 5 to the 2006 Regulations.  This provides for a complete disregard of child support payments, albeit only with effect from 27 October 2008 (before that date there was a weekly disregard of £15).  She asked whether it was fair that an overpayment had been raised in respect of a period before that date where, if the sum had been paid as income after that date, it would have been disregarded in total.

 

25. The short answer to the District Tribunal Judge’s point is that the law in force at the relevant time has to be applied.  It is inevitable that, if the law is changed, then subsequent cases might well be decided differently.  However, the District Tribunal Judge was right to give permission on the income/capital issue and the period over which the payment should be attributed, if it was considered to be income.

 

26. I invited the Secretary of State for Work and Pensions to be joined as a party to this appeal, given both the complex child support history of the case and the fact that it raised potentially important questions of construction on the 2006 Regulations, an invitation he accepted.  The Secretary of State’s representative has provided invaluable information on the child support context to this appeal, information which was not before the FTT.  He also submits that (i) the March 2009 payment was properly classified as income; (ii) a parent with care does not become “entitled” to an award of child support until (amongst other things) the CSA has made a full maintenance assessment; (iii) accordingly regulation 79(6) applied; (iv) if regulation 79(6) did not apply, then the payment was correctly attributed for the past period by regulation 79(7); and (v) there was no evidence of any “official error” on the part of the CSA. The Secretary of State’s representative therefore invited me to dismiss the claimant’s appeal.

 

27. The local authority also resists the appeal.  It repeats its position on regulation 79(6) and (7) and rejects the argument that the overpayment arose in consequence of any “official error”, e.g. by the CSA.  Rather, “the overpayment was caused by the payment of arrears of maintenance.  It is the council’s view that the underlying cause(s) for why there were arrears is irrelevant.”

 

28. The principal legal questions that arise on this appeal may be summarised thus.  First, was the March 2009 payment a payment of capital or a payment of income?  Second, if it was a payment of income, was its attribution covered by regulation 79(6)?  Third, if it was income, and regulation 79(6) did not apply, did regulation 79(7) apply instead?  Fourth, were any consequential overpayments of HB and CTB recoverable from the claimant or was she excused by virtue of an “official error” on the part of the CSA?

 

(1) Was the March 2009 payment a payment of capital or income?

 

29. The argument now made by claimant’s representative that the March 2009 payment was a payment of capital, and not income, had not been raised in those terms before the FTT.  Was the tribunal’s failure to consider the point a material error of law?

 

30. It is arguable that the tribunal should have spotted this point and explored it, even though it was not raised by the claimant’s representative at the time.  After all, the tribunal has an inquisitorial function.  In addition, I have no doubt at all that a single lump sum payment of £16,965.17 would have looked very much like a payment of capital to the claimant when she received it.

 

31. However, the classification of a payment as either capital or income does not depend on the perception of the recipient or the label she (or indeed the payer) attaches to it.  As I pointed out in EM v London Borough of Waltham Forest [2009] UKUT 245 (AAC), ultimately this is a question of law (Lillystone v Supplementary Benefits Commission [1982] 3 F.L.R. 52).  Further, as Bridge J. observed in R v Supplementary Benefit Commission ex parte Singer [1973] 1 W.L.R. 713 at 717, the “essential feature of receipts by way of income is that they display an element of periodic recurrence.”  There are clearly difficult borderline cases which may go either way (R v West London Supplementary Benefits Appeal Tribunal, ex parte Taylor [1975] 2 All ER 790 at 794b per May J.). 

 

32. In EM v London Borough of Waltham Forest [2009] UKUT 245 (AAC) I held that a payment made by a local authority by way of a compromise of its employee’s claim under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 was a payment of capital not income.  That decision was subsequently distinguished on its facts by Judge Jacobs in Secretary of State for Work and Pensions v JP (JSA) [2010] UKUT 90 (AAC), which concerned a payment following a claim under the Equal Pay Act 1970.  Judge Howell QC, in another equal pay case, Kingston upon Hull City Council v DLM (HB) [2010] UKUT 234 (AAC), has expressed the view that my analysis in EM v London Borough of Waltham Forest was, amongst other things, “too purist” (at paragraph 31) and that that case was (with respect, and putting it bluntly) wrongly decided.

 

33. Those differences of view may yet be resolved, as the Court of Appeal is due to hear an appeal in Kingston upon Hull City Council v DLM (HB), even if the decision in EM v London Borough of Waltham Forest itself was not appealed by the local authority in that case.  In any event, I would be the first to concede that the latter case was a borderline case with very special facts.

 

34. Be that as it may, it seems to me that there is no doubt that child support payments typically “display an element of periodic recurrence”. They are, obviously, by their very nature meant to be periodic payments of income (capital provision being the subject matter of applications made under Schedule 1 to the Children Act 1989, and not the child support regime).  The present case certainly lacks the special and rather peculiar features of EM v London Borough of Waltham Forest.  I am satisfied that the payment of £16,965.17 was a payment of arrears of income by way of child support maintenance. The way in which it had been calculated, with direct reference to particular weekly liabilities to pay child support maintenance, was such that it had not transmuted from income into capital.  Ideally the tribunal would have identified this as an issue and ruled on it.  However, its omission to do so made no material difference to the outcome of the appeal. As the monies received by the claimant represented a payment of income, albeit in arrears, the next question was the period over which it should be attributed for the purposes of assessing entitlement to HB and CTB.

 

(2) If the payment was income, was its attribution covered by regulation 79(6)?

 

35. The claimant’s representative argues that the claimant is effectively been penalised because of the delays in securing payment of child support maintenance (CSM).  The Secretary of State’s representative admits that “the immediate impression one gets in this case is that of a harsh result.”  But he continues in his written submissions as follows:

 

“8. However when one looks at the situation more closely the result of the Local Authority’s decisions is perfectly reasonable.  As CSM paid timeously is taken into account in assessing the amount of Housing Benefit payable then why should the parent with care who receives CSM promptly each month have her HB reduced while another who receives it by a lump sum in arrears receives both the unadjusted HB and the CSM. Hence the rules in Regulation 79(6) and (7) of the Housing Benefit Regulations 2006 [SI 2006 No. 213].

9. It needs to be borne in mind that we are looking here at a benefit financed out of public funds.  Should the public have to bear a greater cost because, for example, a non-resident parent successfully evades his responsibility to pay CSM for some considerable time?”

 

36. Regulation 79  of the 2006 Regulations governs the date on which a change of circumstances is to take effect under the HB scheme (the CTB equivalent is regulation 67(1) of the Council Tax Benefit Regulations 2006 (SI 2006/215).  Paragraph (6) provides as follows:

 

“(6) Where the change of circumstances is that income, or an increase in the amount of income, other than a benefit or an increase in the amount of a benefit under the Act, is paid in respect of a past period and there was no entitlement to income of that amount during that period, the change of circumstances shall take effect from the first day on which such income, had it been paid in that period at intervals appropriate to that income, would have fallen to be taken into account for the purposes of these Regulations.”

 

37. In the present case the second FTT concluded that regulation 79(6) applied, and so concluded that there was no need to consider regulation 79(7).  The tribunal’s reasoning was that regulation 79(6) “requires more than an unquantified or notional entitlement to an unliquidated amount of income.”  The tribunal further found that the claimant could not enforce any entitlement to child support until the assessment dated 30 March 2009 had been concluded by the CSA.  According to the FTT, the March 2009 payment represented a sum that had been “paid in respect of a past period” during which “there was no entitlement to income of that amount during that period” for the purpose of regulation 79(6).

 

38. I acknowledge that the notion that a parent with care, such as the claimant, has an “entitlement” to child support is by no means straightforward.  The focus of the Child Support Act 1991 is on the liability of the non-resident parent to pay child support rather than on any corresponding entitlement on the part of the parent with care to receive such maintenance (see R (on the application of Kehoe) v Secretary of State for Work and Pensions [2005] UKHL 48).  Nonetheless, the tribunal’s approach on this issue was still fundamentally mistaken.  As the claimant’s representative points out, section 29(2) of the Child Support Act 1991 (now) provides that:

 

“Where a maintenance calculation is made under this Act, payments of child support maintenance under the calculation shall be made in accordance with regulations made by the Secretary of State” (emphasis added).

 

39. Furthermore, with emphasis again added, regulation 2(1) of the Child Support (Collection and Enforcement) Regulations 1992 (SI 1992/1989) provides that:

 

“Where a maintenance calculation has been made under the Act and the case is one to which section 29 of the Act applies, the Secretary of State may specify that payments of child support maintenance shall be made by the liable person—

(a) to the person caring for the child or children in question or, where an application has been made under section 7 of the Act, to the child who made the application;

(b) to, or through, the Secretary of State; or

(c) to, or through, such other person as the Secretary of State may, from time to time, specify.”

 

40. In addition, and significantly, both of regulations 5 and 6 of the Collection and Enforcement Regulations, which deal with the transmission of payments and representations about payment arrangements respectively, refer in express terms to “the person entitled to receive the payments of child support maintenance” (emphasis added).

 

41. The Secretary of State’s representative argues that a parent with care will be “entitled” to child support for the purposes of regulation 79(6) where (i) she has made a valid application under the 1991 Act; (ii) the Secretary of State has made a full assessment under section 11 of that Act; and (iii) he has also decided that the parent with care is the person entitled to receive the payments.  On that basis, he argues, entitlement did not arise until 30 March 2009 (see paragraph 11 above). The claimant’s representative argues that, as regards condition (ii), an interim maintenance assessment is sufficient.  On that analysis, her entitlement arose a decade earlier in March 1999 (see paragraph 6 above).

 

42. I agree with the submission of the claimant’s representative on this issue.  In the present case the CSA made an interim maintenance assessment on 12 March 1999 with effect from 16 March 1999.  The effect of that assessment was to impose an obligation on the non-resident parent to pay child support (section 29(2) of the 1991 Act).  At that point, or at least shortly thereafter, the claimant became “the person entitled to receive the payments of child support maintenance” for the purposes of the Collection and Enforcement Regulations 1992. The fact that the claimant’s ex-partner successfully avoided making payments for the best part of a decade did not affect the underlying legal position as regards his liability and her entitlement.  

 

43. The tribunal was much exercised by the fact that regulation 79(6) refers to there being “no entitlement to income of that amount during that period” (emphasis added). It therefore concluded that it was only when the full maintenance assessment was made that the claimant became entitled to “that amount” of child support.  There are, however, two problems with that approach. 

 

44. The first problem is that the tribunal had wrongly assumed that the CSA had made no assessment of any sort in the claimant’s case until 2009.  This was also how the local authority had put the case to the tribunal (in fairness to the local authority, it had considerable difficulty in getting a coherent history and explanation of the child support aspects of the case from the CSA). Thus the existence of the 1999 interim maintenance assessment had not been disclosed in the (admittedly limited) papers before the FTT.  The tribunal had therefore proceeded on the mistaken basis that the claimant’s ex-partner had, at best, some sort of inchoate liability to pay child support which did not crystallise until the 2009 full assessment.  The information now helpfully provided by the Secretary of State’s respresentative demonstrates the fallacy behind that assumption.

 

45. The second difficulty is that, even on the evidence before the FTT, the claimant had plainly received the lump sum on 13 March 2009, a fortnight before the CSA’s full maintenance assessment.  The dates accordingly demonstrated that the full maintenance assessment could not, itself, have caused or prompted the payment of arrears.  Rather, the most likely explanation is that the payment of arrears was made by way of an initial down payment of the amount owing under the pre-existing liability order, which in turn had been based on the interim maintenance assessment from 1999.  At that point, the non-resident parent suddenly developed a keen interest in the accuracy of the CSA’s assessment, a concern which he had not shown over the whole of the previous decade.  That in turn persuaded the CSA to make a full maintenance assessment on the basis of the information about his financial circumstances which had now been (belatedly) disclosed.

 

46. Accordingly, notwithstanding the difficulties posed by the decision in Kehoe, which arose in a rather different context, the claimant in the present case became “entitled”, at least for the purposes of regulation 79(6) of the 2006 Regulations, to receive income by way of child support with effect from March 1999.  As that provision only applies where income “is paid in respect of a past period and there was no entitlement to income of that amount during that period”, the second FTT had therefore erred in law in applying regulation 79(6).

 

(3) If regulation 79(6) did not apply, did regulation 79(7) apply instead?

 

47. The FTT concluded that it did not need to consider regulation 79(7), as regulation 79(6) applied.  However, as the tribunal was mistaken on the latter point, the potential application of regulation 79(7) for HB purposes now falls to be considered (the CTB equivalent being regulation 67(9)).  Regulation 79(7) provides as follows:

 

“(7) Without prejudice to paragraph (6), where the change of circumstances is the payment of income, or arrears of income, in respect of a past period, the change of circumstances shall take effect from the first day on which such income, had it been timeously paid in that period at intervals appropriate to that income, would have fallen to be taken into account for the purposes of these Regulations.”

 

48. I note that the local authority, in its supplementary submission prepared for the second tribunal hearing, had resiled from its previous reliance on regulation 79(6).  The local authority argued that as the claimant should have been paid child support weekly then “in accordance with regulation 79(7) the arrears of child maintenance are to be taken into account for the period they covered.”  The counter-argument, put by the claimant’s representative, was that regulation 79(7) was concerned solely with the payment of benefits (but not other payments, such as child support) in arrears.

 

49. As I noted in EM v London Borough of Waltham Forest (at paragraph 53), regulation 79(6) and (7) are not happily phrased.  I reviewed the statutory history of the sub-paragraphs, neither of which appeared in the Housing Benefit (General) Regulations 1987 (SI 1987/1973) as originally enacted (see paragraphs 57-62). I observed that what was then regulation 68(7) had apparently been inserted to reverse the effect of the decision of Brooke J. in R v Middlesbrough Borough Council, ex parte Holmes, concerning arrears of industrial disablement benefit. However, the  fact remains that regulation 68(7) (and now regulation 79(7)) “refers in general and unqualified terms to a ‘payment of income, or arrears of income, in respect of a past period’” (at paragraph 66). There is no suggestion in the wording of sub-paragraph (7) that its effect is confined to payments of benefits in arrears, rather than other types of income.  My conclusion in the EM case was that if the payments, which were clearly on any analysis not payments of benefits in arrears, were properly classified as income payments, then they necessarily fell within what is now regulation 79(7). I concluded (at paragraph 69):

 

“If this may cause injustice in particular cases, then the answer must lie in the discretion which local authorities have as to whether to seek recovery of overpayments.  For example, the fact that a claimant has been ‘kept out of his money’ was certainly regarded by Moses J. as relevant to the local authority’s exercise of its discretion in R v South Hams District Council, ex parte Ash (1999) 32 H.L.R. 405 at 411-413.”

 

50. There is nothing in the subsequent Upper Tribunal decisions in either Secretary of State for Work and Pensions v JP (JSA) or Kingston upon Hull City Council v DLM (HB) to suggest that this part of the analysis in EM v London Borough of Waltham Forest is in the least controversial.  In the former case the point did not directly arise, as the statutory rules for the attribution of income for the purpose of jobseeker’s allowance are differently phrased to those for HB.  However, there is nothing in Judge Howell QC’s analysis (e.g. at paragraphs 13-15 of Kingston upon Hull City Council v DLM (HB)) to suggest that he regarded regulation 79(7) as in any way confined to payments of arrears of social security benefits, and indeed the factual context of that case suggests to the contrary.  In essence, it seems that regulation 79(6) is concerned with the situation where there was no entitlement to income but for some reason (e.g. a delayed pay settlement) money is eventually paid, whereas regulation 79(7) was concerned with the situation where there was entitlement but for some reason (e.g. third party default) payment was delayed but then arrears are eventually paid.

 

51. My conclusion in the present appeal is accordingly that the attribution of the payments in question was governed by regulation 79(7), and not by regulation 79(6) as the FTT had found.  The tribunal should have found that the payment of arrears of child support maintenance had been a “relevant change of circumstances” so that the claimant’s previous awards of HB and CTB for the periods they covered fell to be superseded under regulation 8 of the Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001 (SI 2001/1002), insofar as the payments consisted of income or arrears of income. That being so, as Judge Howell QC explained in Kingston upon Hull City Council v DLM (HB) (at paragraph 14):

 

“regulation 79 displaced the general rule that a superseding decision takes effect from the date it is made, and the change of circumstances had to be taken into account retrospectively over the period such income should have been paid if it had been paid on time and at appropriate intervals, with the benefit entitlement for past periods redetermined accordingly.”

 

52. Given the various different calculations made by the local authority in the course of the history of this case, the question inevitably arises as to whether the tribunal reached the correct conclusion by confirming the authority’s final revised decisions.  It will be recalled that the tribunal upheld the authority’s decisions that the total amounts overpaid were £11,923.11 in HB and £2,907.80 in CTB. 

 

53. The information eventually obtained by the local authority from the CSA is summarised at paragraph 12 above. In more detail:

 

·        the claimant’s ex-partner owed a total of £34,408.64 in child support payments between 22 September 1998 and 9 April 2007;

·        the Secretary of State was owed £2,239.26 for the period from 22 September 1998 to 4 May 1999;

·        the claimant herself was owed £32,169.38 for the period from 5 September 1999 to 9 April 2007;

·        the claimant was actually paid £23,779.75 for the period from 13 July 2000 until 29 October 2007 in part and subject to two qualifications, namely (i) the period from 24 July 2001 to 25 March 2002, for which no payment was due, was excluded, and (ii) there were outstanding arrears for the whole of the period from 15 May 2006.

 

54. The CSA’s decisions as to the attribution of arrears were governed by what was then regulation 9 of the Child Support (Arrears, Interest and Adjustment of Maintenance Assessments) Regulations 1992 (SI 1992/1816; “the Arrears etc Regulations 1992”).  This vested the CSA with a broad discretion over the attribution of payments:

 

“9. Where a maintenance calculation is or has been in force and there are arrears of child support maintenance, the Secretary of State may attribute any payment of child support maintenance made by a non-resident parent to child support maintenance due as he thinks fit.”

 

55. The schedules produced by the local authority showed that the HB and CTB overpayments were said to cover the period from 17 July 2000 to 15 May 2006, with no overpayments arising in the period covered by the excluded period from July 2001 until March 2002.  But why were the payments attributed to the start date of 17 July 2000 and the end date of 15 May 2006?  The reason for the end date is straightforward; the CSA attributed the lump sum payment made in March 2009 to the oldest debt first within the period from 13 July 2000, and by 15 May 2006 the sum of £23,779.75 had been fully exhausted against the appropriate weekly liabilities in that period.

 

56. The precise reason for the start date of 13 July 2000 was not made clear in the papers before the FTT.  The CSA simply reported to the local authority as a fact that the liability order covered the period from 13 July 2000, so that was the date selected by the authority, applying the same process of attribution. The reality is that date had nothing to do with the claimant’s own circumstances and everything to do with the scope of the CSA’s powers.  Under the original child support scheme, the CSA was barred from applying for a liability order in respect of payments of child support which were more than 6 years old (see Collection and Enforcement Regulations 1992, regulation 28(2)). That rule was abolished by regulation 3(5)(a) of the Child Support (Miscellaneous Amendments) Regulations 2006 (SI 2006/1520), but not with retrospective effect (see regulation 3(5)(b)). As the Explanatory Memorandum accompanying those amendments explained (at pp.4-5):

 

“Removal of the limit does not apply retrospectively (i.e. debts that have already fallen under the 6 year limit before the amendment comes into force will remain unenforceable), but will apply to all cases where the debt has not yet reached the 6 year limit when these Regulations come into force. Removing the limit will enable the Agency to enforce older debts as part of its drive to improve enforcement and deliver money to more children.”

 

57. Those amendments came into force on 12 July 2006. Accordingly, as the newly inserted regulation 28(2A) of the Collection and Enforcement Regulations 1992 provided that no application may be “instituted in respect of an amount payment of which became due on or before 12th July 2000”, the date of 13 July 2000 became a standard start date for liability orders obtained by the CSA, assuming the case went back that far (which, of course, many did).

 

58. The question then is whether that date of 13 July 2000 is also the relevant date for present purposes.  The claimant’s representative points out that simply following the CSA’s approach to attribution disadvantages the claimant – attributing the arrears over a different and longer period might well be fairer.  The Secretary of State’s representative suggests that the local authority was perfectly entitled to follow the CSA’s decision, in the exercise of its broad discretion under regulation 9 of the Arrears etc Regulations 1992, to assign arrears to the oldest debt first.  He also referred to observations made by Carnwath LJ in Secretary of State for Work and Pensions v Menary-Smith [2006] EWCA Civ 1751, appearing to support the view that the CSA’s decision on attribution was binding for income support purposes.

 

59. However, the starting point must be the 2006 Regulations.  According to regulation 79(7), “the change of circumstances shall take effect from the first day on which such income, had it been timeously paid in that period at intervals appropriate to that income, would have fallen to be taken into account for the purposes of these Regulations.”  In the present case, of course, it is true that there was a child support liability in place from March 1999.  However, the 2009 payment of arrears was expressly based on the liability order, which was limited by law to payments due from 13 July 2000.  If that payment (“such income”) had been “timeously paid in that period at intervals appropriate to that income”, then it “would have fallen to be taken into account” for the period from 13 July 2000 for the purposes of the 2006 Regulations.

 

60. The FTT should therefore have decided that the payment of arrears of child support maintenance was caught by regulation 79(7) of the 2006 Regulations and was properly attributed from 13 July 2000 until such date as the arrears “ran out” when set against ongoing weekly maintenance liabilities.

 

(4) Were the consequential overpayments of HB and CTB recoverable?

 

61. The next question, assuming that the payments of child support arrears were properly attributed to that past period, is whether the consequential overpayment of HB (and excess payment of CTB) is recoverable from the claimant.  The starting point is that all such overpayments are recoverable, regardless of any fault on the claimant’s part (regulation 100(1)).  There is an exception where the overpayment has been caused by “official error”, assuming that the claimant “could not... reasonably have been expected to realise that it was an overpayment” (regulation 100(2)).

 

62. There is no suggestion in the present case that the claimant could reasonably have been expected to realise that she was being overpaid HB and CTB at the time she was receiving those benefits.  The eventual payment of arrears of child support came clearly as much as a surprise to her as to anyone else.  However, that is of no avail to her if she cannot point to an “official error”.  There is no suggestion that the overpayment was caused by any official error on the part of the local authority.

 

63. Regulation 100(3) defines “an overpayment which arose in consequence of an official error” as meaning “an overpayment caused by a mistake made whether in the form of an act or omission” by various official persons and bodies, including local authorities and the DWP.  The question, of course, was whether the CSA or any of its staff had made any relevant official error. The FTT accepted that, in principle, delay could amount to a mistake giving rise to official error.  However, on the admittedly limited evidence it had, the tribunal was not satisfied that any official error on the part of the CSA had been shown.  The tribunal simply did not have sufficient evidence to explain the long delay in recovering any funds from the claimant’s ex-partner.

 

64. The claimant’s case before the tribunal was simple.  The CSA was an executive agency of the DWP at the material time.  It had instigated an application for child support maintenance, which the claimant had not wanted to make, and no payments had materialised for more than 10 years.  As noted above, in fact the CSA had made an interim maintenance assessment in 1999 but it is true that little progress had been made in extracting any payments for the best part of a decade.  The claimant’s representative argued that the CSA’s long delays amounted to an official error, as inaction over the course of several years can constitute an official error just as much as positive action.

 

65. The Secretary of State’s representative submits that the circumstances of the present case are some way removed from the mischief with which regulation 100 and the “official error” exception is concerned.  He suggests that it is unrealistic to expect local authority decision makers and tribunals to investigate the terms of the CSA’s procedural instructions to identify any specific mistake by way of omission.  He further submits that a mistake by way of omission involves more than simply delay or inactivity, but requires some definite action, or inaction, closely enough related to the overpayment (e.g. failing to record that some relevant information had been given on a HB claim form).

 

66. The local authority’s position is that there is no evidence that the CSA made any error.  Even if the CSA had made an official error, could such a mistake be said to be the cause of the overpayment?  The real cause of the overpayment, according to the local authority, was not any official error but rather the non-resident parent’s failure to pay the interim maintenance assessment made in March 1999 and generally to co-operate with the CSA.

 

67. I have considerable sympathy for the claimant’s argument.  Experience of other cases suggests that in this case as well there is, at the very least, a distinct possibility that the CSA’s inefficiency was a contributory factor in the delays experienced before the arrears were recovered.  I also doubt whether the concept of official error is constrained in quite the narrow way that the Secretary of State’s representative argues.  However, in my judgment the local authority’s submission is to be preferred.  This is ultimately an issue of causation.  According to the Court of Appeal, what matters in the HB context is the substantial cause of the overpayment, viewed in a commonsense way: R (Sier) v Cambridge City Council Housing Benefit Review Board [2001] EWCA Civ 1523.  Judge Howell QC has neatly summarised the effect of Sier in SN v London Borough of Hounslow (HB) [2010] UKUT 57 (AAC) (at paragraph 19):

 

“The issue before the Court of Appeal was whether a claimant who had obtained a series of benefit overpayments by not disclosing the facts that he had another property (on which he also claimed benefit), and further had ceased to qualify for income support, could avoid recovery on the ground of ‘official error’ when the DSS, as it then was, had failed to send the authority the usual notification of his income support being stopped.... the Court of Appeal decision emphasises that the approach to causation in such cases is to be concerned with the practical question of what really caused the overpayments in question to be made. The unanimous (and perhaps not very surprising) conclusion was ... that a claimant who has got benefit by not disclosing relevant facts is not able to turn the case into one of ‘overpayment caused by official error’ by saying that if only officialdom had been more vigilant he would have been spotted.”

 

68. The facts of the present case and those of Sier are a long way apart.  Sier, of course, was a relatively straightforward case; both the claimant and the DSS were at fault, but the substantial cause of the overpayment was the claimant’s own failure to inform the local authority.  The factual background to the present case is much more complex, with four protagonists rather than three; the claimant, the local authority, the claimant’s ex-partner and the CSA.  It may well be that after the claimant came off income support in 1999, both she and the CSA lost whatever enthusiasm they had had for pressing for recovering payments of maintenance.  The claimant indicated that her ex-partner had been violent and so it was certainly understandable if she was not pressing for payment.  Once she had come off income support, the CSA may well have given the case little priority in the absence of any pressure from her.  Indeed, the claimant conceded to the tribunal that he was “probably very hard to find – he used to move around a lot”.  In the end, Sier requires one to ask, in effect, the following question: who really caused the overpayment?  As indicated above, I suspect that the CSA must bear some responsibility for the delays incurred.  However, the reason that the claimant was overpaid HB and CTB was that she was not paid child support maintenance in accordance with the CSA’s assessment.  The substantial cause of that non-payment was the ex-partner’s default.

 

69. Regulation 100 requires one to ask the question, was this “an overpayment which arose in consequence of an official error”, being “an overpayment caused by a mistake made whether in the form of an act or omission”?  For the reasons set out above, I think the answer to that question has to be “No, the substantial cause of the overpayment was the failure of the non-resident parent to meet his child support obligations in a timely fashion, even if the delays involved may have been contributed to by the CSA.”

 

The Upper Tribunal’s re-made decision on this appeal

 

70. The FTT decided that the facts of the case were governed by regulation 79(6) of the 2006 Regulations.  That was an error of law for the reasons set out above at paragraphs 35-46.  For that reason I set aside the FTT’s decision under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007.  However, I can re-make the decision rather than send the case back for re-hearing before a new tribunal (section 12(2)(b)(ii)).  The outcome is the same but the reasoning is different.  The decision that the FTT should have made, and which I accordingly re-make, is as follows:

 

“The housing benefit appeal is disallowed.

 

The local authority’s decision in relation to housing benefit issued on 3 September 2009 is confirmed.

 

The council tax benefit appeal is disallowed.

 

The local authority’s decision in relation to council tax benefit issued on 3 September 2009 is confirmed.

 

The relevant income was correctly applied under regulation 79(7) of the Housing Benefit Regulations 2006.  There was no official error and the revised sums of £11,923.11 by way of the housing benefit overpayment and the £2,907.80 excess payment of council tax benefit are recoverable from the appellant.”

 

What happens next?

 

71. As I explained at the outset (see paragraph 3 above), the FTT (and on appeal the Upper Tribunal) is only able to decide whether the local authority can recover any such overpayment.  The decision on whether or not actually to seek recovery is a matter for the local authority. In doing so the local authority must exercise a discretion (section 75(1) of the Social Security Administration Act 1992 and Social Security Commissioner’s decision R(H) 6/06).  There is no right of appeal on the issue of whether the local authority should actually recover any such overpayment (see paragraph 3 of the Schedule to the Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001 (SI 2001/1002)), although such a decision may in principle be challenged by way of judicial review.

 

72. The DWP gives the following general guidance to local authorities in the HB/CTB Overpayments Guide on whether to recover overpayments:

 

“4.710  Just because an overpayment is recoverable, does not necessarily mean that it must be recovered. The law actually states that all overpayments are recoverable (except certain official errors), but it does not state that they must be recovered.

4.711 A recoverable overpayment may be recovered at the LA’s discretion. If an LA has a blanket policy of recovering all recoverable overpayments, the policy would be open to legal challenge.”

 

73. In practice the most common reasons for overpayments of HB and CTB arising are because of either claimant error or local authority error (or both).  Claimants may provide incorrect or false information when making a claim for benefit, or may fail to notify the local authority promptly of a relevant change of circumstances.  Local authorities may in turn make mistakes, typically where they fail to act on information provided by the claimant or by a third party such as the DWP.  The present case is not one of those typical cases.  There is no suggestion that either the claimant or the local authority is at fault.

 

74. Although it is not formally a matter for me, I note that Lancaster City Council, the local authority in this case, has published on the internet its Housing Benefit and Council Tax Benefit: Overpayments Policy (December 2006). In this document, “The Council recognises that there will be some debts that cannot be recovered for a variety of reasons and will use its discretion to write off all or part of those debts that it considers reasonable to do so” (page 6).  Moreover, the policy states that “consideration will be given to writing off debts” in various situations, the list starting with “financial hardship where the debtor does not have the means to repay”, but concluding quite properly that “this list is not exhaustive and each case must be considered on its own individual merit.”

 

75. In the present case the Secretary of State’s representative asked rhetorically “why should the parent with care who receives CSM promptly each month have her HB reduced while another who receives it by a lump sum in arrears receives both the unadjusted HB and the CSM... Should the public have to bear a greater cost because, for example, a non-resident parent successfully evades his responsibility to pay CSM for some considerable time?” (see paragraph 35 above).

 

76. That approach may provide the policy justification for regulation 79(6) and (7).  However, it would be wrong to take such a narrow view when considering whether or not to recover part or all of the overpayment. As noted at paragraph 49 above, one relevant consideration in the local authority’s exercise of its discretion is the fact that the claimant has had to make do without regular child support payments for the best part of a decade (see by analogy R v South Hams District Council, ex parte Ash (1999) 32 H.L.R. 405 at 411-413). By definition she was also denied the benefit of the weekly £15 disregard throughout that period. The claimant may well have incurred debts over the years because of the absence of regular child support payments.

 

77. Indeed, as the local authority’s own policy statement indicates, all the circumstances of the particular case must be taken into account.  This is not a case in which the claimant has misrepresented or failed to disclose her income or capital.  She told the local authority in April 2009 about the payment of arrears received in the previous month when she reclaimed HB and CTB. It seems from the correspondence on file that it was only in June 2009 that the local authority warned the claimant that a large overpayment may have arisen (see page 19).  By then it is possible that she may have already used the arrears to pay off debts.  There is no indication from the present papers as to what happened to the payment of child support arrears, other than a bank statement indicating that in March 2009 a large element was transferred to another account with the same bank.  The money may have been invested.  But equally the money may have been used to pay off debts. I note that in a telephone conversation in October 2009 (page 43) the claimant explained to the local authority that she had promised to pay her parents back for damage that her ex-partner had done to their property and that she had also had to repay debts.  I am sure that the claimant’s representative may be able to highlight other factors which the local authority should take into account when exercising its discretion in this matter.

 

The absence of a right of appeal on the decision to recover an overpayment

78. It may be that when the precursors of regulation 76(6) and (7) were drafted, it was assumed that the past periods for which arrears would be attributed would be relatively short.  However, their effect is not time-limited in any way.  The result, as in this case and others, is that one arm of the State (the local authority) can decide that overpayments of HB and CTB are retrospectively recoverable for lengthy periods where there is no suggestion that the claimant was in any way at fault and when the failure of another arm of the State (the CSA) may be a contributory, but not the substantial, cause of the delays in the claimant receiving her entitlement.  In those circumstances it is at least questionable whether it is adequate protection for claimants to rely on what is in effect the mercy of the local authority’s exercise of its discretion to recover. 

 

79. I simply note that other common law jurisdictions appear to have had no difficulty in giving claimants a statutory right of appeal to an independent tribunal to challenge the State’s decision on whether or not to waive recovery of an overpayment of benefit (see, for example, in Australia, Part 5.4 of the Social Security Act 1991 (Cth) and especially section 1237AAD “waiver in special circumstances”; see further Dranichnikov v Centrelink (2003) 75 ALD 134; [2003] FCAFC 133 and Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441, paras [75]-[80]).

 

Conclusion

 

80. Be that as it may, my decision is as at paragraph 70 above.

 

 

 

 

 

 

Signed on the original Nicholas Wikeley

on 4 July 2011 Judge of the Upper Tribunal