Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/2308/2011

ADMINISTRATIVE APPEALS CHAMBER

Before Upper Tribunal Judge Rowland

The claimant appeared in person.

The local authority neither appeared nor was represented.

Decision:  The claimant’s appeal is allowed.  The decision of the First-tier Tribunal dated 7 February 2011 is erroneous in point of law.  I set it aside and substitute a decision that the overpayment of housing benefit of £7,556.05 in respect of the period 1 April 2008 to 6 December 2009 and the excess council tax benefit credited to the claimant’s account in respect of the same period are not recoverable from the claimant.  Council tax benefit credited to the claimant’s account in respect of the period from 7 December 2009 to 31 March 2010 is recoverable from him.

REASONS FOR DECISION

1. This is an appeal by the claimant, brought with my permission, against a decision of the First-tier Tribunal dated 7 February 2011 whereby it dismissed the claimant’s appeal against a decision by the local authority that overpayments of £7,556.05 housing benefit and £3,422.20 council tax benefit were recoverable from him.

2. There is no dispute as to the fact that there were overpayments or as to their amount, although perhaps I should record two points in relation to council tax benefit.  The first is that what has been called an “overpayment” of council tax benefit is technically an amount of “excess benefit” allowed by the local authority.  This terminology is used because it is rare for any real payment of council tax benefit to be made.  All that usually happens is that an amount is credited to the claimant’s council tax account.  The second, and connected, issue is that the council tax benefit credited to the claimant’s account in respect of the period from 7 December 2009 to 31 March 2010 is arguably not recoverable as “excess benefit” but is recoverable administratively because it was caused as a result of the payment method rather than anything else.  Nothing turns on those two points, but the second explains the form of my decision.  I will use the term “overpayment” in respect of both benefits for the sake of simplicity and I do not understand the claimant to claim to be entitled to council tax benefit from 7 December 2009.  What is really in issue between the two parties is whether the First-tier Tribunal erred in holding that the overpayments in respect of the period from 1 April 2008 to 6 December 2009 are recoverable. 

3. The facts are straightforward and not in dispute.  The claimant and his wife were, at all material times, self-employed.  He submitted monthly spreadsheet “accounts” for both businesses, showing income and “expenditure”.  The local authority calculated his income by simply deducting the expenditure from the income.  However, the “expenditure” spreadsheets included tax and National Insurance payments and drawings, which plainly ought not to have been taken into account as expenses when calculating the profit.  Failing to make that adjustment was the cause of the overpayments and was plainly an “official error” for the purposes of regulation 100 of the Housing Benefit Regulations 2006 (SI 2006/213) and regulation 83 of the Council Tax Benefit Regulations 2006 (SI 2006/215).

4. The effect of regulation 100 of the Housing Benefit Regulations is that any overpayment is recoverable by the local authority unless it was “an overpayment which arose in consequence of an official error where the claimant … could not, at the time of receipt of the payment or any notice relating to that payment, reasonably have been expected to realise that it was an overpayment”.  Regulation 83 of the Council Tax Benefit Regulations is to the same effect.

5. The local authority realised in December 2009 that overpayments had been made.  It accepted that the overpayments had been due to official error but considered that the claimant could reasonably have been expected to realise that he was being overpaid and it therefore decided on 16 December 2009 that the overpayments were recoverable.  The claimant appealed on the ground that he was a telephone engineer who had provided correct information and trusted the local authority to process his spreadsheets properly.  The local authority resisted the appeal on the ground that its decisions awarding housing benefit and council tax benefit set out how the benefit had been calculated and, in particular, the amount of income that had been taken into account, which the claimant should have realised was inaccurate.

6. The First-Tier tribunal accepted the local authority’s arguments and dismissed the appeal, saying at paragraph 2a of the statement of reasons –

“Although respondent was in error calculating appellant’s entitlement to Housing Benefit and Council Tax Benefit, he was variously advised in the letters sent to him referred to at 1f above of the significantly lower level of income used in the calculation than his actual income.  Tribunal accordingly concluded that appellant could reasonably have been expected to realise by reading the letters sent to him that his benefits were awarded on the basis of a lower income than he was actually receiving.  If appellant had difficulty understanding the letters, it was considered that he could have obtained advice and help in understanding them in view of his business experience and general experience of life.”

7. When I granted permission to appeal, I raised the question whether a claimant could reasonably be expected to realise that he was being overpaid if understanding that that was so required advice or help from another person and I drew attention to CH/2943/2007.  In that case, Deputy Commissioner Ovey said that –

“a claimant cannot reasonably be expected to seek advice about the local authority’s decision notice because she does not understand all the figures unless she has some reasons to believe the figures are wrong.  Despite what the local authority says in this case about explanations in the documents, the information given about disregards and the applicable amount does not of itself enable a claimant to know whether or not the figures used are correct; they are prescribed and, in a sense, arbitrary amounts.  A claimant who has given clear and correct information is entitled to start from the basis that the local authority has such information when stating her weekly earnings”.

8. The local authority does not support the appeal.  It does not disagree with the approach taken in CH/2943/2007.  However, it argues that in this instance the claimant did have reason to believe the figures were wrong because the local authority had provided twelve decision letters to the claimant from which he could have seen that the income used in the calculation of benefit was lower than he actually received through drawings from his business and that the expenses listed by the accountant were less than those provided in the spreadsheets to the local authority.

9. I granted the claimant’s request for an oral hearing because it seemed to me that there was considerable force in the local authority’s arguments.  However, having heard the claimant and his wife, I am persuaded that, on the facts of this case, the claimant should succeed.

10. The rationale of the legislation is clear enough.  The general rule is that overpayments should be paid back because the parties should be put in the position they would have been in had the correct amount of benefit been paid in the first place.  The exception for cases of official error exists for the same reason that the doctrine of estoppel was developed elsewhere in the law.  It may not be reasonable to require repayment where a person has acted entirely properly and has been misled by a local authority into thinking that he had a right to spend benefit he has been paid. The thinking is presumably that, had he been paid the correct amount of benefit, he might not have incurred the same expenditure so that requiring repayment may not in fact put him in the position he would have been in had there been no overpayment.

11. In my judgment, the First-tier Tribunal erred insofar as it appears to have suggested that the claimant should have sought advice about the decision letters for the purpose of finding out whether the figure for earnings was correct even if he did not believe it was wrong.  It may be that a person who cannot read English can reasonably be expected to get help from someone as to the general content of an official letter, but the issue in this case was not whether the claimant understood what the letters said but whether he understood the significance of a particular figure in a letter.  I agree with the approach of Deputy Commissioner Ovey.  A claimant has no need to seek advice unless he or she believes a figure to be wrong or, as the legislation puts it, could “reasonably have been expected to realise that [there had been] an overpayment”.

12. This error by the First-tier Tribunal is an error of law.  I accept that the conclusion reached by the First-tier Tribunal may have been open to it but I cannot be certain that it would have reached that conclusion had it not made the error of law.  I therefore set aside the First-tier Tribunal’s decision.  I am satisfied that I should remake the decision, rather than remitting the case to the First-tier Tribunal. 

13. One difficulty with the local authority’s case is that the amount of a person’s earnings may be different when calculated for different purposes and so the figure shown as part of a calculation for housing benefit and council tax benefit is unlikely to be a figure recognisable to the claimant from other documents. The figure is even less likely to be recognisable if earnings fluctuate and if the period in respect of which earnings are calculated for the purposes of the relevant benefit differs from that in respect of which other calculations have been made.

14. In the present case, the claimant and the local authority agreed that, due to the fluctuations, the amount of earnings should be re-calculated at intervals and eventually agreed that the necessary information should be supplied every three months.  The claimant supplied the necessary figures on spreadsheets, showing income and expenditure.  He was not asked to work out the profit of the business himself and he did not do so.  For tax purposes, he entrusted that task to his accountant, to whom he also supplied the spreadsheets and for tax credit purposes he similarly supplied the spreadsheets to HMRC.  The accountant and HMRC each produced an annual figure.  The local authority produced a weekly figure.  None of those figures will have been the same as the claimant’s actual drawings from week to week, which were themselves very irregular.

15. I accept that claimants can, in general, reasonably be expected to read decision letters and that the basis of a local authority’s calculations is shown in such letters so that a claimant can draw attention to errors he or she spots.  I also accept that the amount of earnings shown in the calculations may well have been ones that should have struck the claimant as being on the low side when looked at over a long period, notwithstanding that he had no direct comparator.  However, against that, he knew that the local authority was doing the calculations on the basis of the accurate information supplied by him on the spreadsheets.  This is not a case where he could reasonably have been expected to realise that some information that had been supplied had not been received or had been overlooked.  Here, the local authority took the same erroneous approach on twelve separate occasions spread over a very lengthy period.  If the local authority had set out its workings in the decision letters so that the error it had made was plain for all to see, it seems to me that the claimant would still have been entitled to believe simply that that was the way things should be done for the purposes of these benefits.  Claimants are not expected to be particularly numerate or familiar with either accounting practice or benefit law.  In my judgment, they cannot reasonably be expected to realise that they are being overpaid if that would involve them realising that a trained benefit officer using the correct information was not calculating their earnings properly.

16. I do not need to consider the position where a claimant does realise that entitlement has been miscalculated, where different considerations may apply.  Having heard the claimant and his wife, I am quite satisfied that they did not realise that housing benefit and council tax benefit were being overpaid.  The First-tier Tribunal’s reference to seeking help suggests that it, too, was at least unsure on that point.  The claimant and his wife maintained good contact with the relevant officers and were scrupulous in notifying changes of circumstances.  One of the problems seems to have been that a main point of contact was the one particular officer who was responsible for all the errors and so naturally was reassuring as to the correctness of the awards.

17. Of course a person may genuinely not realise that he or she is being overpaid in circumstances where he or she ought to realise it because, for instance, he or she has failed to read a letter that made it clear that the decision was based on an error of fact.  In such a case, the overpayment will be recoverable, even if due to official error.  However, these sorts of cases are very fact-specific.  In judging what a claimant can reasonably have been expected to realise, it is very important to look at the case from his or her perspective.  Here, the irregularity of the earnings and the fact that the claimant was sure that the local authority had the correct information make it unreasonable to expect him to have realised he was being overpaid.  He may have thought that the system was generous, but that is a different point.

18. Therefore, this appeal succeeds.  If there is any dispute as to the amount of excess council tax benefit credited in respect of the period up to 6 December 2009, that question should be referred back to me.

Mark Rowland

25 September 2012