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15/10/2009

Accidental overpayments not recoverable

Child Poverty Action Group, R (on the application of) v Secretary of State for Work and Pensions [2009] EWCA Civ 1058

This is a benefits case rather than housing per se, but it concerns an important point which will affect many.

An overpayment of social security benefits where the overpayment came about through misrepresentation or failure to disclose on the part of the person claiming can be recovered by under s.71 Social Security Administration Act 1992. However, s.71 only covers these exact circumstances. What of accidental overpayments, through miscalculation or error by the Department?

The Secretary of State asserted that such overpayments could be recovered under common law as a debt and had introduced a policy of sending letters requesting repayment and stating that a civil claim may be made. CPAG challenged this assertion by Judicial Review and the case came to the Court of Appeal by that route.

The Secretary of State argued that s.71 created a special class of overpayment, leaving untouched the common law right to restitution on the remaining field of overpayments.

CPAG argued that s.71 created the sole power of recovery. It covered all instances where the benefit was revised on account of a mistake. Further:

Under the Supplementary Benefits Act 1976, and until the reforms of 1998, awards were made by independent officers, making it conceptually almost impossible that a claim for restitution would lie at the instance of the paying department if such an officer made an erroneous award. Moreover, s.119 of the Social Security Act 1975 imposed an obligation to repay benefits when a decision was revised, but subject to an exception for cases of due care and diligence. Common law recovery would have been unarguable. Adjudication and payment were still constitutionally separate functions when the 1992 Act was passed. Thus the legislative context of s.71 was one in which common law powers of recovery were not on the map. This, Mr Drabble argues, is as one would anticipate: since benefits are entirely a creature of legislation, it is in the legislation that one would expect to find all their incidents and the relevant rights and obligations. [para 16]

When an award is made, the benefit is properly paid under that award. S.71 does not take effect until the award has been modified, by revision or supercission of the original award. Although a revision takes effect from the date of the original decision, or change in circumstances, it does not mean that the ‘overpayment’ was improperly made. S.71 provides for the the specific instances in which recovery may be made in that context.

In Sedley LJ’s lead judgment, the Court of Appeal held that the only right to recovery was under s.71 and therefore only in respect of cases of misrepresentation or failure to disclose.

Section 71 was not enacted in a void. It was introduced into an established statutory scheme which had always been understood to be exhaustive of the rights, obligations and remedies of both the individual and the state. It was introduced at a time when adjudication was separate from administration. Both then and since, awards have been conclusive of the obligation to pay and of the right to receive payment. In such a context it is unsurprising that the power of recovery when an award is modified should be prescribed by Parliament and not at large. That is the role of s.71. It does not affect payments made otherwise than pursuant to an award, but it is in my judgment exhaustive of the power to recover payments made pursuant to an award. [para 25]

[…] the effect of Mr Henshaw’s argument is that at that point the Department may elect between statutory and common law recovery, using the expanded powers afforded by s.71 in misrepresentation and non-disclosure cases. This is not an oppressive or fundamentally unjust scheme, since a defence of change of position is not likely to prevail in the face of obtaining payment by one form or another of deception. But it does not answer the thrust of Mr Drabble’s case, which is not that s.71 has excluded any power of recovery that was previously available but that it has created a power of recovery where otherwise there is none. That is a cogent and to my mind conclusive answer. [para 27].

It should be noted that this does not cover accidental payments, e.g. the same payment made twice, payment to the wrong person, etc.. These remain recoverable. The ‘overpayment’ has to be made as a part of an award of benefits.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

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