Upper Tribunal (Administrative Appeals Chamber)

                                       DECISION OF THE UPPER TRIBUNAL

                                    ADMINISTRATIVE APPEALS CHAMBER

The claimant's appeal to the Upper Tribunal is allowed. The two decisions of the Liverpool First-tier Tribunal dated 1 June 2013 involved errors on points of law and are set aside. The case is remitted to a tribunal within the Social Entitlement Chamber of the First-tier Tribunal for reconsideration in accordance with the directions given in paragraph 20 below and further case management directions to be given by a district tribunal judge (Tribunals, Courts and Enforcement Act 2007, section 12(2)(b)(i)).

                                                   REASONS FOR DECISION

1.         The tribunal of 1 June 2013 was concerned with two decisions of the Secretary of State. The first was made on 19 June 2012 and, as set out on pages 82 to 83 of the papers, was to the effect, on revision of an awarding decision dated 8 June 2011 and any subsequent decisions, that the claimant’s entitlement to income-related employment and support allowance (ESA) was to be reduced or extinguished with effect from 1 June 2011 to take account of payments received by the claimant under an income protection policy with Trent Services. However, the notification letter sent to the claimant on 21 June 2012 stated that the new decision was that the claimant was not entitled to income-related ESA for the period from 25 June 2011 to 7 October 2011, but remained entitled to contributory ESA for that period. I shall come back later to the details of that decision and the nature of the awards made in 2011. The second decision was made on 28 June 2012 and was to the effect that as a result of the decision of 19 June 2012 an overpayment of income-related ESA in respect of the period from 25 June 2011 to 7 October 2011 and amounting to £576.75 was recoverable from the claimant under section 71 of the Social Security Administration Act 1992 on the ground of failure to disclose a material fact. Again I shall come back later to the details.

2.         The appeal to the Upper Tribunal is supported on behalf of the Secretary of State in the submission dated 22 May 2014, where remission to a new First-tier Tribunal for rehearing was suggested. The claimant in his reply requested an oral hearing by the Upper Tribunal, in particular to investigate what he sees as fraudulent or at least underhand action by the Department for Work and Pensions in awarding him income-related ESA that he had not claimed. I have carefully considered that request, but have concluded that the appeal to the Upper Tribunal can fairly and properly be decided without a hearing. The primary issue before the Upper Tribunal of whether the tribunal of 1 June 2013 went wrong in law is not now in dispute. The relevance of the issue raised by the claimant to the outcome of the appeals against the two Secretary of State decisions (on which I hope I can supply a little legal background below) can only be established after a hearing of evidence and the making of findings of fact. That is best and most economically done by a new and locally based First-tier Tribunal (with the benefit of directions of law from the Upper Tribunal), rather than by the Upper Tribunal. Accordingly, as allowed by regulation 34 of the Tribunal Procedure (Upper Tribunal) Rules 2008, I make this decision without a hearing. As will be seen below, I direct that the Secretary of State is to make a fresh written submission and to supply further evidence. The claimant will have the opportunity to see and consider that fresh submission and evidence before working out the case he wants to make to the new tribunal.

3.         The claim for ESA had been made by telephone on 31 May 2011. There is an undated transcript of the telephone conversation between the claimant and Tanya at pages 10 to 29 of the papers. Although the date of 3 June 2011 has been written at the top of the first page of the transcript, with a reference to an “input document”, the internal evidence of the terms of the transcript (see in particular pages 12 and 13 of the papers) show that the conversation took place on 31 May 2011. There was reference to a copy of the information given by the claimant being sent to him for his records and to be checked, but it appears that in accordance with regulation 4G of the Social Security (Claims and Payments) Regulations 1987 the telephone claim is to be treated as a valid claim, without the need for approval by the claimant of a written statement. No copy of anything in writing sent to the claimant was put in the tribunal papers by the Secretary of State, but page 141 (an appendix to the claimant’s application for permission to appeal to the Upper Tribunal) suggests that he did receive the record. During the conversation Tanya explained that there were two forms of ESA, contributory and income-related. She took some details of the claimant’s partner and he said that she would agree to that information being added to the claim form (page 15), having earlier (page 110 said that his claim would be a joint claim. At the top of page 15, it is recorded that Tanya said that the claimant would be put through for both parts of the benefit, so that his partner could be added to the claim, and that the claimant said OK. The details were then taken and the many later questions about income were asked about both the claimant and his partner. I come back to some specific relevant questions below.

4.         I therefore find it hard to see how the claimant can contend that the claim he made did not encompass the income-related form of ESA as well as the contributory form. That result also seems to me to fit with legal structure of the benefit. ESA is one benefit, with two forms that have different conditions of entitlement. Contributory ESA and income-related ESA are not separate benefits. It is therefore the case that any claim has to be made for ESA in general. I do not think that it is legally possible for claim to be made for contributory ESA standing alone. It is then a necessary part of the Secretary of State’s duties in considering claims to explore whether the conditions of entitlement to both contributory and income-related ESA are or are not satisfied. A claimant who objectively qualified for income-related ESA could no doubt in practice secure the result of a decision against entitlement by declining to answer questions or to provide information specifically relevant to the income-related conditions or by making it so clear that he did not wish to claim that those questions were never asked. But that is a different thing from saying that a claim can be limited to contributory ESA from the outset.

5.         It should also be noted that at the end of the conversation Tanya read out to the claimant a lot of statements that he was required to understand, as would appear on a paper claim form and as presumably (although I do not know) were repeated on the written record sent to the claimant. These included (page 26) that the claimant understood that if his circumstances changed he was obliged promptly to inform the office that paid his benefits because that might affect his entitlement to benefit or the amount received. The Secretary of State’s written submission to the First-tier Tribunal stated that a leaflet ES40 was issued to the claimant at the initial award of ESA that instructed him to report any relevant changes in his circumstances, although no copy or specific proof of sending was included in the papers. The tribunal of 1 June 2013 accepted the claimant had received an ES40 because he did not deny it.

6.         The decision on the claim was made on 8 June 2011. The claimant was found entitled to contributory ESA from and including 4 June 2011 (after the three waiting days), but there was not then entitlement to income-related ESA, apparently because income in the form of working tax credit was in payment. As from 25 June 2011 the claimant became entitled £38.50 per week attributable to entitlement to income-related ESA (on the basis of having no income) and £67.50 per week attributable to entitlement to contributory ESA. I do not know from the papers before me when the decision to make that award was made (presumably it could not have been made in advance on 8 June 2011) and how the claimant was informed of it. Payment of those amounts continued until 7 October 2011. After the claimant had telephoned to seek confirmation that he was only receiving contributory ESA and been told that he was also receiving income-related, he asked for his partner to be removed from his claim and for income-related ESA to cease. I need not enquire into the precise technical mechanism by which that request was put into effect.

7.         At some date (but presumably prior to September 2011) a generalised matching service return revealed that the claimant had income in the form of payments under an income protection policy. The letter dated 5 September 2011 to a fraud investigator from Trent Services stated that the claimant had requested a sickness claim form on 3 May 2011 which had been received back on 3 June 2011. The first payment (£1800) was made in week ending 3 June 2011 to cover the period from 9 March 2011 to 8 May 2011. Further payments of £900 were made in week ending 10 June 2011 (for the period from 9 May 2011 to 8 June 2011), in week ending 15 July 2011 (for the period from 9 June 2011 to 8 July 2011) and in week ending 19 August 2011 (for the period from 9 July 2011 (correcting an obvious typo) to 8 August 2011). The claimant’s bank statements showed payments by automated credit on 7 June 2011, 10 June 2011 and 13 July 2011. Further investigations revealed that the claimant’s partner had received earnings from employment from June 2011 onwards. The claimant was interviewed by fraud investigators on 24 January 2012 (transcript at pages 60 to 81). As noted above, the revision and overpayment recoverability decisions were not made until June 2012.

8.         The claimant appealed against both decisions. His case, in brief, was that he did not know that he was receiving income-related ESA, so had not realised any need to disclose any income and particularly not any earnings of his partner, because he had not asked for his claim to cover her. As noted above, the decision of 28 June 2012 as recorded on page 82 did not say what material fact it was said that the claimant had failed to disclose. In the decision as set out (and “improved”) in part 3 of the written submission to the tribunal the material fact was said to be that the claimant had other income of £900 per calendar month from the income protection policy. In paragraph 10 of part 5 there was a reference to the duty under regulation 32 of the Claims and Payments Regulations to notify the Secretary of State of any change of circumstances that he might reasonably be expected to know might affect the continuance of entitlement to or payment of benefit. However, in paragraph 16 it was submitted that the claimant had in his claim misrepresented the material fact that he had claimed another income. There was thus some confusion about the alleged basis for recoverability under section 71 of the Administration Act.

The decision of the tribunal of 1 June 2013

9.         The claimant attended the hearing on 1 June 2013. The tribunal disallowed both appeals. I think that little difficulty was seen with the decision of 19 June 2012. Whether the relevant decision in relation to entitlement to income-related ESA from 25 June 2011 was that of 8 June 2011 or some later decision, there was ignorance of the claimant’s receipt of the payments from Trent Services which on any basis, since such income had to count in full, was easily high enough to wipe out entitlement to income-related ESA from 25 June 2011 to 7 October 2011 regardless of whether or not any earnings of the claimant’s partner should also have counted. The statement of reasons thus concentrated on the issue of the recoverability of the resulting overpayment.

10.       The tribunal based its decision on that issue on the claimant having failed to disclose the receipt of the payments from Trent Services. In paragraph 13 of the statement of reasons, there was a reference to regulation 32 of the Claims and Payments Regulations and then it was said that the claimant knew that he should disclose those payments as a change of circumstances that was likely to be relevant, because he had been told at least twice that he should disclose such changes (in the telephone conversation with Tanya and when he received the leaflet ES40). Then there was particular reference to two questions that had been asked by Tanya. The first (question A) was:

“Do either yourself or [your partner] then currently receive or waiting to hear about any other benefits, any other credits or any other allowances?”

The claimant replied “No”. The second question (B) was:

“Do either you or [your partner] currently receive any income from any pensions, any permanent health insurance or compensation?”

The claimant again replied “No”. Paragraph 13 of the statement of reasons continued:

“(c) [The claimant] knew that the receipt of income from pensions, permanent health insurance or compensation was relevant to his claim for ESA. When it was asked, Question B put him on notice of that fact. The payments [the claimant] received from Trent plainly fell within the description ‘pensions, permanent health insurance or compensation’. This was or must have been apparent to [the claimant]. It is worthy of note that Trent itself described his claim form as a ‘sickness claim form’ and the payments made to him as ‘benefit payments’.

 (d) [The claimant] knew, when he made his claim for ESA, that the information he gave was being given for the purposes of both the ‘income-related’ and the ‘contribution-based’ elements of that benefit. His subsequent assertion that he thought his claim was confined to the latter element is not supported by the evidence.

 (e) The reply [the claimant] gave to Question A was untrue: there was nothing in that question or in the discussion that preceded it, to suggest that the ‘other benefits, any other credits or any other allowances’ referred to were confined to those paid by the state, or that they excluded the payments from Trent he was at that point waiting to hear about. Again, Trent itself described his claim form as a ‘sickness claim form’ and the payments made to him as ‘benefit payments’.

 (f) The reply [the claimant] gave to Question B was, at best, disingenuous. The question that elicited it, however, put [the claimant] on notice that the receipt of income from pensions, permanent health insurance or compensation was relevant to his claim for ESA.”

The appeal to the Upper Tribunal

11.       When giving the claimant permission to appeal against the tribunal’s decision I said this in my reasons:

“2. The tribunal’s statement of reasons seemed to rely, so far as recoverability of the overpayment was concerned, both on a misrepresentation of material fact and a failure to disclose a material fact. It is arguable that if the tribunal was relying on both grounds it needed to specify clearly what it regarded as having been misrepresented, ie stated to be fact when it was not correct, and what was not disclosed when there was a legal duty to disclose. However, in paragraph 13(e) of the statement the tribunal concluded that one reply given by the claimant when making the telephone claim on 31 May 2011 (as I think it must have been) was untrue when given. That was the answer “No” to what the tribunal called question A, whether the claimant or his wife was currently receiving or waiting to hear about any other benefits, credits or allowances. The tribunal’s view was that as the claimant had at that date made an application for payment under his income protection policy with Trent Services, he was waiting to hear about that benefit and that the question was not limited to state benefits. It must be arguable that in the context of the telephone conversation as transcribed the reasonable understanding was that question A was so limited. There is no evidence as there would often be when a claim was made on a written form of any explanatory notes to help in interpretation of the question. Although the operator in the telephone conversation said that a copy of the information recorded would be sent to the claimant for him to check and although the officers in the interview of 24 January 2012 obviously had some kind of document in front of them, neither of those documents formed part of the papers put before the tribunal of 1 June 2013. In the absence of such evidence, it is arguable that the ground of misrepresentation could not be sustained.

 3. So far as failure to disclose is concerned, the tribunal concluded in paragraph 13(c) and (f) of the statement of reasons that the claimant knew from the terms of what it called question B (whether he or his wife currently received any income from any pensions, permanent health insurance or compensation) that receipt of the payments from Trent Services was relevant to his entitlement to employment and support allowance (ESA). It was said that those payments plainly fell within that description. That appears to be incorrect in law. I do not think that there has been any suggestion that the payments constituted a pension or compensation. Then “permanent health insurance payment” has a particular technical meaning within the ESA scheme. It is defined in regulation 72 of the Employment and Support Allowance Regulations 2008 to mean a periodical payment arranged by an employer under an insurance policy providing benefits in connection with physical or mental illness or disability to ex-employees, with such payments counting as pension payments and to result in deductions from the amount of contribution-based ESA. In my view, question B must have been limited to that meaning. The claimant’s payments were not arranged by an employer, because he appears to have taken out the income protection policy himself and to have paid the premiums himself. Therefore, it is arguable that the claimant could not have been expected merely from the terms of question B to realise that receipt of the payments from Trent Services needed to be disclosed to the Department.

 4. There would still be an argument that the claimant was under a legal duty by virtue of regulation 32 of the Social Security (Claims and Payments) Regulations 1987 to disclose beginning to receive income of any kind, or a change in the amount of income, either as a result of the instruction given in the telephone conversation to report any change of circumstances (page 26) and the question about other income (page 23) or of the instructions in leaflet ES40. However, in the absence of production of a copy of leaflet ES40, a couple of sentences in a long conversation would a shaky foundation for either duty in regulation 32. Therefore, especially as the tribunal did not identify which of the duties in regulation 32 was being relied on, the existence of the arguable errors identified above justifies the giving of permission to appeal.

12.       I am now, on coming back to the case after an interval of a few months, not so sure that the tribunal of 1 June 2013 left it unclear whether it was relying on misrepresentation or failure to disclose. I now think that its approach, even though it made a finding in paragraph 13(e) of the statement of reasons that a reply by the claimant in the telephone claim was untrue and in paragraph 14 referred to an alternative basis of misrepresentation, was that it only needed to consider failure to disclose the actual receipt of the payments from Trent Services. It would have been better if that approach had been made clearer, but if that was the only flaw in the tribunal’s statement I would have been reluctant to set its decision aside.

13.       However, that approach leaves the significance of the claimant’s being asked questions A and B as being to put him on notice that receipt of the payments was relevant to the amount of ESA under the categories covered by those questions. For the reasons given when I gave permission to appeal, I conclude that neither question could rationally be relied on for that conclusion. In relation to question A, and as now agreed on behalf of the Secretary of State (paragraph 10 of the submission of 22 May 2014), that question could only reasonably be regarded as referring to other social security benefits or tax credits received or claimed. Its asking could not be taken to alert the claimant to a necessity to report receipt of a payment of the particular type received from Trent Services. In relation to question B, as also now agreed on behalf of the Secretary of State (paragraph 11 of the submission of 22 May 2014), since as a matter of law those payments did not fall within the meaning of “pensions, permanent health insurance or compensation”, the asking of the question could not be taken to have alerted the claimant to a necessity to report receipt of a payment of the particular type received from Trent Services.

14.       Taking those elements out of the equation would leave the conclusions of the tribunal of 1 June 2013 resting on paragraph 13(b) of the statement of reasons, that the claimant had been told that he had to report changes in circumstances that were likely to be relevant to entitlement to or the amount of ESA and that the start of the payments was such a change. In my judgment, there was an insufficient explanation of that conclusion to allow the tribunal’s overpayment recoverability decision to stand. That ties in with the point made above about regulation 32 of the Claims and Payments Regulations. It is now clearly established by the decision of the Court of Appeal in B v Secretary of State for Work and Pensions [2005] EWCA Civ 929 [2005] 1 WLR 3796, also reported as part of R(IS) 9/06, that there can only be a failure to disclose a material fact for the purposes of section 71 of the Administration Act where the claimant was under a legal duty to disclose that fact and that any such duty is to be found in regulation 32.

15.       Regulation 32(1B) imposes a duty on an ESA beneficiary to notify the Secretary of State of “any change in circumstances which he might reasonably be expected to know might affect” continued entitlement or payment of benefit. Whether or not a claimant is told of the existence of that duty is not relevant; the crucial question is what the particular claimant could reasonably be expected to know might affect benefit. If the tribunal’s view was that, since the claimant must have known that his claim encompassed both income-related and contributory ESA, he must have known from that and the general tenor of the sorts of questions asked on the telephone that receipt of any kind of new income needed to be notified, that needed to be spelled out more specifically. Further, the tribunal needed to deal with two points. The first is that, although the claimant may have known that his claim covered income-related ESA, the initial decision was to award an amount attributable to contributory ESA only. Although it might be asked why the claimant thought that he received the increase in the amount of benefit from 25 June 2011 onwards, in my judgment the tribunal’s reasons were inadequate in the absence of any evidence of when the decision to include an amount attributable to income-related ESA was made and how it was notified to the claimant. Second, the fact that on the telephone on 31 May 2011 questions were asked about several very specific kinds of income, whereas the only question about income in general was rather hidden away in a question that seemed to be more specifically directed to child tax credits (page 23), might be argued to have suggested to the claimant that only specific types of income, not income in general, were relevant. If the tribunal did not accept any such argument it needed to spell that out expressly, especially in the absence of any evidence of the terms of leaflet ES40.

16.       Regulation 32(1A) of the Claims and Payments Regulations provides that every beneficiary is to furnish such information or evidence as the Secretary of State may require in connection with the payment of the benefit claimed or awarded and regulation 32(1) imposes the same duty for the purpose of determining whether there should be a revision or supersession of an existing decision. It is plain that the Secretary of State cannot take a case into regulation 32(1) and (1A) simply by giving an instruction in the terms used by Tanya in the telephone claim of 31 May 2011 that if a claimant’s circumstances change that change must be reported. As explained by the Tribunal of Social Security Commissioners in paragraphs 32 and 33 of decision R(IS) 9/06, regulation 32(1) and (1A) only empower the Secretary of State to require the provision of information or evidence that may objectively affect entitlement or payment of the benefit concerned, regardless of whether or not the claimant could reasonably be expected to realise that possible effect. There was no adverse comment on that aspect of the decision when the case went to the Court of Appeal as B v Secretary of State for Work and Pensions. See also the helpful discussion in CDLA/2328/2006 (Mr Commissioner Jacobs). It must follow that the instruction mentioned above would have to be regarded as restricted to changes of circumstances that might objectively affect entitlement to or payment of benefit. But, even if restricted in such a way, in my judgment such an instruction could not fall within regulation 32(1) and (1A). The phrase “such information or evidence as the Secretary of State may require” in its context must be restricted to instructions with some degree of specificity about the type of information or evidence required. It would be wrong to attempt any definition of how specific the instruction has to be. But purely by way of example, it seems to me that an instruction to notify the Secretary of State of receipt of any new source of income by a claimant or partner would be good enough. It may well be that there was such an instruction in leaflet ES40, but the tribunal of 1 June 2013 had no evidence of the contents of that leaflet beyond its assumption that Tanya’s instruction was repeated there. Thus, that tribunal could not properly have relied on regulation 32(1) or (1A) in relation to paragraph 13(b) of the statement of reasons to support the conclusion that there had been a breach of a duty to notify under regulation 32 and thus a failure to disclose a material fact.

17.       The upshot of all that is that the tribunal’s decision on the overpayment recoverability appeal must be set aside as involving errors of law.

18.       There is an additional point that did not strike me until I came back to the case. I had not appreciated how early the letter from Trent Services detailing the payments made to the claimant was. Although dated 5 September 2011, it appears not to have been sent by fax until 26 September 2011. But, even assuming that that date is correct, payment of an amount of benefit attributable to income-related ESA continued until 7 October 2011. There must be an argument (if it was properly concluded that the claimant had failed to disclose a material fact) that once that clear evidence of payment was in the hands of an officer of the Secretary of State any subsequent overpayment of benefit was not a consequence of the claimant’s failure to disclose, but of the failure by the Department to act on that evidence at least to suspend payment of benefit. The tribunal of 1 June 2013 needed to deal with that argument but did not do so.

19.       So far as the tribunal’s decision on the entitlement appeal is concerned, there was very little in the statement of reasons. There was no identification of the precise decision to award income-related ESA that fell to be revised or of the particular ground of revision relied on. Nor was there any resolution of the discrepancy between the terms of decision copied on pages 82 and 83 and the terms of the letter of notification on page 84. If the appeal to the Upper Tribunal against the entitlement appeal decision had stood alone, no doubt all or most of that could have been regarded as not affecting the outcome of the case, especially as the claimant does not seem to dispute that as a result of his receipt of the payments under the income protection policy he was not properly entitled to income-related ESA from 25 June 2011 onwards. For instance, it could probably be assumed that there had been some further decision on or after 19 June 2012 crystallising the date on which the revision took effect, after identification of the date on which income-related ESA had first been awarded. Nor was there any real doubt, whether the decision to be revised was that of 8 June 2011 or some later decision of unknown date, that there was a ground of revision in ignorance of material fact that made the decision more favourable to the claimant than it ought to have been. However, in the circumstances, it seems to me that the two decisions ought to be reconsidered together by a new First-tier Tribunal, so that I conclude that as a result of those technical errors of law the tribunal’s decision on the entitlement appeal should also be set aside.

Conclusion and directions

20.       For the reasons given above the decision of the tribunal of 1 June 2013 is set aside in its entirety. The claimant's appeals against the Secretary of State's decisions of 19 June 2012 and 28 June 2012 are remitted to a First-tier Tribunal constituted by a different tribunal judge for reconsideration in accordance with the following directions. There must be a complete rehearing of the appeals on the evidence produced and submissions made to the new tribunal, which will not be bound in any way by any findings made or conclusions expressed by the tribunal of 1 June 2013. The Secretary of State is to make a fresh written submission to the new tribunal taking account of the points made above about the test of failure to disclose a material fact and of the view taken in the submission of 22 May 2014. The submission should contain an explanation (with as much supporting documentary evidence as available) of when the decision to increase the amount of the claimant’s award of ESA with effect from 25 June 2011 to include an amount attributable to entitlement to income-related ESA was made and when and how that decision was notified and with what explanation of the award was made up. A copy of the form of leaflet ES40 in use in June 2011 should also be provided, together with the best evidence available to show that a copy was sent to the claimant and, if so, when. The Secretary of State may of course put forward any other documentary evidence considered relevant. The salaried tribunal judge who considers the arrangements for the rehearing may well wish to give a direction as to the time within which the Secretary of State’s fresh submission is to be provided. The evaluation of all the evidence will be entirely a matter for the judgment of the new tribunal. The decision on the facts in this case is still open.

                                                                                                    (Signed on original):  J Mesher

                                                                                                     Judge of the Upper Tribunal    

                                                                                                     Date:                   17 June 2014