Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/2400/2011

ADMINISTRATIVE APPEALS CHAMBER

Before Upper Tribunal Judge Rowland

Decision:  The claimant’s appeal is dismissed

REASONS FOR DECISION

1. There is not really any dispute about the history of this case. 

2. When her partner left her in June 2008, the claimant, who was working as a teaching assistant, claimed housing benefit, council tax benefit and working tax credit and either claimed, or sought a revision of an existing award of, child tax credit.  Payments under an existing award of child tax credit, which was probably a joint award made in favour of the claimant and her former partner, appear to have been suspended.  In her claim for housing benefit and council tax benefit, she said she was not receiving either child tax credit or working tax credit but was awaiting decisions in respect of both.

3. On 21 July 2008, the local authority awarded housing benefit and council tax benefit with effect from 16 June 2008.  It had been in contact with the claimant, both in writing and by telephone, seeking information about the claims for tax credits.  The claimant had informed it on 17 July 2008 that she was still waiting for decisions because HMRC had managed to lose her claims.  The notices of the awards of housing benefit and council tax benefit included the statement “Your tax credits changed on the 17 June 2008, and I have recalculated your benefit from Monday 23 June 2008”. However, the awards were calculated on the basis of the claimant’s former entitlement to child tax credit, which appears to have been £78.75 pw although for some reason the amount taken into account in respect of the first week was £79.88.

4. On the following day, 22 July 2008, HMRC awarded working tax credit and revised the award of child tax credit so as to increase it.  The claimant did not inform the local authority of that award and nor did she inform it of a higher award in respect of the following tax year, notified on 15 July 2009.  After making its awards on 21 July 2008, the local authority did not make any further request for details of awards of tax credits and it did not discover those details until late in 2009.  The consequence was that the claimant was overpaid housing benefit amounting to £2,846.31 in respect of the period from 21 July 2008 (i.e., the beginning of the week in which the tax credit awards were notified to the claimant) to 30 November 2009, and there had been credited to her council tax account excess council tax benefit amounting to £872.65 in respect of the same period.  The local authority revised the awards of housing benefit and council tax benefit and decided that the overpayment and excess benefit were recoverable.  Notice of those decisions was given on 9 December 2009.  It also prosecuted the claimant.  I do not fully understand the minor fluctuations in the weekly amounts of tax credits taken into account by the local authority in its revised awards but for the first several weeks the total amount of child tax credit and working tax credit was about £160 pw.  In other words, the claimant’s entitlement to tax credits had doubled.

5. The claimant has not challenged the revision of the awards or suggested that the overpayment or excess benefit have been wrongly calculated.  However, she did appeal against the decisions that the overpayment and excess benefit were recoverable.  The appeal was late but was admitted by the Fist-tier Tribunal.  However, on 20 April 2011, the First-tier Tribunal dismissed the appeals.  Shortly afterwards a magistrates’ court found her not guilty of the criminal offences.

6. The claimant now appeals against the decisions of the First-tier Tribunal with permission granted by a different judge of the First-tier Tribunal on the ground that “the Tribunal does not appear to have considered whether the respondent made a mistake in deciding the Appellant’s new claim for benefit when it was known that her claim for tax credits was outstanding and in failing to make it clear in the award letters of 21.07.08 that her awards were provisional pending the outcome of the tax credits claim”.  This, I think, amounts to saying that it was arguable that the First-tier Tribunal had failed to consider whether the overpayment and excess benefit were not recoverable because they had been paid due to “official error”.

7. The claimant’s representative argues that the First-tier Tribunal did not make adequate findings of fact on the issue and she refers to the three questions asked in Warwick DC v Freeman (1994) 27 HLR 616 and in CH/3302/2002.  These may be stated as follows.  Was the overpayment caused by a relevant mistake by the local authority (or other relevant body)?  Did the claimant cause or contribute to the relevant mistake?  Could the claimant have been reasonably expected to have known that she was being overpaid?

8. These questions are raised by what are now regulation 100 of the Housing Benefit Regulations 2006 (SI 2006/213) and regulation 83 of the Council Tax Benefit Regulations 2006 (SI 2006/215).  The provisions are in very similar terms and it is necessary for me to set out only the former.

“100.—(1) Any overpayment, except one to which paragraph (2) applies, shall be recoverable.

  (2) Subject to paragraph (4) this paragraph applies to an overpayment which arose in consequence of an official error where the claimant or a person acting on his behalf or any other person to whom the payment is made could not, at the time of receipt of the payment or of any notice relating to that payment, reasonably have been expected to realise that it was an overpayment.

  (3) In paragraph (2), “overpayment which arose in consequence of an official error” means an overpayment caused by a mistake made whether in the form of an act or omission by—

(a)  the relevant authority;

(b)  an officer or person acting for that authority;

(c)  an officer of—

(i) the Department for Work and Pensions; or

(ii)  Revenue and Customs,

acting as such; or

(d)  a person providing services to the Department for Work and Pensions or to the Commissioners for Her Majesty’s Revenue and Customs,

where the claimant, a person acting on his behalf or any other person to whom the payment is made, did not cause or materially contribute to that mistake, act or omission.

  (4) Where in consequence of an official error, a person has been awarded rent rebate to which he was not entitled or which exceeded the benefit to which he was entitled, upon the award being revised or superseded any overpayment of benefit, which remains credited to him by the relevant authority in respect of a period after the date on which the revision or supersession took place, shall be recoverable.”

9. The First-tier Tribunal’s statement of reasons refers to regulation 100(1) and (2). As regards the suggestion that there had been an official error within the scope of regulation 100(2), the statement says –

“6. Even if [the claimant’s] failure to disclose the changes in her income was inadvertent, the overpayments ensued from the Respondent’s ignorance of the same, and from no other cause  …

7. Insofar as it is contended that the Respondent was at fault in its failure to make an earlier check on [the claimant’s] entitlement, I dismiss it at once.  The duty and responsibility to ensure that any changes of circumstances, which a claimant is instructed to notify, is duly notified to the paying authority [sic].  It is fortunate indeed that the Respondent conscientiously did check her entitlement when it did, so as to prevent further loss of public funds, and to limit the recoverable sums to those claimed.”

10. The claimant’s case has been expressed in various ways but, in essence, it is this.  The decisions of the local authority and HMRC were almost contemporaneous and the statement in the local authority’s notices that the claimant’s tax credits had changed caused her to think that the local authority knew of the new awards of tax credits and had properly taken them into account when assessing her entitlement to housing benefit and council tax benefit.  Moreover, the local authority’s failure to make further enquiries about her tax credit claims, when she had not furnished the details herself, reinforced that view.  The local authority should either have waited for the tax credit information to be provided or should have made further enquiries about it after making its awards.

11. I do not consider that the local authority was obliged to wait for the tax credit decisions to be made before making its own decision – I need not consider whether it was entitled to include in its assessments a sum in respect of child tax credit that was not actually in payment – but otherwise I consider that there is some force in those criticisms.  In particular, it was potentially misleading to state in the notices of decision that the claimant’s tax credits had changed when the assessment was based on the previous award of child tax credit.  I am not surprised that this is what apparently caused the magistrates to acquit the claimant.  Moreover, even if the payments made were not strictly payments on account, the local authority knew that they had been based on figures that were likely to change and it is surprising that no further request for the results of the claims for tax credits appears to have been sent out during a period of nearly a year and a half.  Thus there are two possible errors on the part of the local authority: the misleading notice and the failure to make further enquiries about the tax credit awards.  However, it does not follow that the overpayment and excess benefit were not recoverable.

12.  While the claimant no doubt did not contribute to either of the errors of which the local authority may be said to have been guilty, it is clear from such cases as R,(Sier) v Cambridge City Council Housing Benefit Review Board [2001] EWCA Civ 1523, R(H) 2/04 and SN v London Borough of Hounslow [2010] UKUT 57 (AAC) 57; [2010] AACR 27 that section 100 raises a fourth question in addition to those suggested in paragraph 7 above.  Was the official error the only, or at least the substantial, cause of the overpayment? 

13. Those cases were concerned with the construction of the words “which arose as a consequence of” or the words used in previous legislation which were “caused by”.  (I am not sure why the language was changed but I cannot see that it makes any difference, at least in the present case.)  It would be very odd if the legislation required one to look at whether there was any contribution by the claimant to a local authority’s error without also requiring one to look at any other contribution by the claimant to the overpayment and it is clear from those cases that that is not how the legislation is to be construed.  In particular, in Sier, Latham LJ said –

“… one has to have regard to the general legislative purpose, which seems to me to be clear. Parliament has laid down in the Regulations that a person is to be relieved of the obligation to repay an overpayment when that has been occasioned by an administrative mistake and not by any fault on the part of the recipient. That seems to me to be the basic thrust of the Regulation and one should approach the meaning of the word "cause" and its application to the facts on that basis.”

Brown LJ said –

In my judgment a single composite question falls to be asked under regulation 99(3). One must ask: "was the overpayment the result of a wholly uninduced official error, or was it rather the result of the claimant's own failings, here his failure in breach of duty to report a change of circumstance?"

14. Broadly, therefore, the law envisages three possibilities where a claimant has been overpaid housing benefit or credited with excess benefit.  If the claimant has been dishonest, he or she is liable both to be convicted of an offence and to be required to repay the benefit.  If a claimant has not been dishonest but was nonetheless at fault, the claimant is not liable to be convicted but is liable to be required to repay the benefit.  If the claimant was not at fault at all, he or she is not liable to be either convicted or required to repay the benefit.

15. In this case, as the First-tier Tribunal pointed out, the cause of the overpayment and crediting of excess benefit was the local authority’s ignorance of the new awards of tax credits.  That was due to the claimant not disclosing the awards.  As the First-tier Tribunal clearly meant to say in the second sentence of paragraph 7 of the statement of reasons, a duty of disclosure lay on the claimant.  Nonetheless, had the non-disclosure been wholly or substantially attributable to an official error, the overpayment and excess benefit would not be recoverable, as was in effect argued on behalf of the claimant. 

16. However the potentially misleading notices of the awards of housing benefit and council tax benefits were accompanied by explanations of the calculation of the claimant’s entitlement.  I accept, as the magistrates appear to have done, that the claimant may not fully have appreciated the significance of those documents, particularly as she appears not to have been well at the time, and it is also apparent from SN v London Borough of Hounslow that claimants cannot be expected to check every element of such a calculation.  However, it was obvious on the face of the documents that working tax credit had not been taken into account in the calculations.  It was also clear once the claimant received notice of the award of child tax credit, albeit perhaps less immediately obvious until the first payment was received, that an amount of child tax credit that was not the amount being paid to her following the new award was being taken into account by the local authority.  The explanations of the calculations were supplied so that the claimant could spot any such errors.  The claimant’s case depends on her having read the notices issued by the local authority with the notice issued by HMRC and believing that the combined effect of them was to relieve her of the duty to report the tax credits awards.  However, she should have read the explanations of the calculations, which were provided with the notices, as well.  Had she read the three documents together, the inescapable conclusion is that, as soon as she received the awards of tax credits, she should have realised that they had not been taken into account by the local authority, or at least might not have been taken into account by the local authority, and that she still needed to inform the local authority of the awards in order to avoid being overpaid or at least to avoid the possibility of being overpaid. 

17. If she should have realised she was being overpaid, the third question identified in paragraph 7 would be determined against her and regulation 100(2) would not apply for that reason.  If she should merely have suspected that she might be being overpaid, the fourth question identified in paragraph 12 would be determined against her, because the substantial cause of the overpayment would have been her failure to disclose the tax credits awards in circumstances where an error by the local authority was insufficient to relieve her of that responsibility.  In either event, the overpayment was recoverable – ultimately because the fact that the potentially misleading notices coincided with the awards of tax credits was insufficient to relieve the claimant of her duty to disclose the awards of tax credits given the accompanying information as to the calculations.  I would add that no satisfactory explanation appears to have been advanced by the claimant for her not giving notice of the award of tax credits made on 15 July 2009.

18. The brevity of the First-tier Tribunal’s reasoning may reflect the way the case was argued before it but it has had the regrettable effect of leading to this appeal.  The statement of reasons should have pointed to the explanations of the calculations provided to the claimant as the reason why the potentially misleading notices did not relieve her of the duty of disclosure.  However, since there was no dispute as to the claimant’s receipt of that information, the failure to refer to them is immaterial.  On the evidence, the First-tier Tribunal reached the only conclusion open to it. 

19. Accordingly, I dismiss this appeal.

Mark Rowland

14 February 2013