Supreme Court Ruling - DWP cannot take legal action to recover benefit overpayments where the error was made by them
Click here for the Press release and here for the judgement. Also covered in the Guardian online.
This is covered on The Child Poverty Action Group website here.
8 December 2010
PRESS SUMMARY
The Child Poverty Action Group (Respondent) v Secretary of State for Work and Pensions (Appellant) [2010] WKSC 54
On appeal from the Court of Appeal [2009] EWCA Civ 1058
JUSTICES: Lord Phillips (President), Lord Rodger, Lord Brown, Lord Kerr and Sir John Dyson SCJ
BACKGROUND TO THE APPEAL
This appeal concerns the question whether, in cases of social security benefit awards mistakenly inflated
due to a calculation error, the Secretary of State is entitled to recover sums overpaid under the common
law of unjust enrichment or whether section 71 of the Social Security Benefits Act 1992 (the “1992 Act”)
provides the only route to recovery.
Section 71 allows the Secretary of State to recover any overpayment resulting from misrepresentation or
the non-disclosure of a material fact by the benefits claimant. The background to this appeal is the
Secretary of State’s practice (adopted in about 2006) of writing to benefit claimants who he considered
have been overpaid, but where there had been no misrepresentation or non-disclosure, indicating that his
Department had a common law right of action to recover the overpayment. Although no common law
claim for repayment was ever in fact brought in the courts, the letters led to the recovery of substantial
sums, for example, just over £4m in 2007-8. The Child Poverty Action Group brought this legal test case
on behalf of social security claimants to challenge the Secretary of State’s practice on the basis that it is
based on a false legal premise.
One of the salient features of the history of the social security benefits legislation is the fact that prior to
the Social Security Act 1998 (the “1998 Act”) there was a division between the functions of adjudication
which involved the quantification of the award and the payment of the award. Until the 1998 Act, the
Secretary of State was responsible for the payment function only and therefore at the time of enactment
of section 71 of the 1992 Act there was no possibility of mistake on the part of the Secretary of State in
the calculation of the award, since he played no part in the calculation. The only possibility of mistake lay
in the payment of the award. Since the 1998 Act the Secretary of State had been responsible both for the
calculation and the payment of the awards. Both parties agreed that where the Secretary of State overpays
by mistake, for instance by sending a cheque for £120 following an award of £60, the amount of the
overpayment can be recovered as money paid by mistake. The overpayments with which this appeal is
concerned are those made as a result of a mistake in calculating the award.
JUDGMENT
The Supreme Court unanimously dismissed the appeal. Lord Brown and Sir John Dyson gave
lead judgments; Lord Rodger gave a concurring judgment. It held that section 71 of the 1992 Act
provides the only route to recovery of social security benefits overpayments to the exclusion of
any common law rights.
REASONS FOR THE JUDGMENT
Both Lord Brown and Sir John Dyson agreed with the respondent’s argument that, rather than excluding
any common law rights to recovery, section 71 and its predecessors created a power of recovery when
otherwise, due to the division of adjudication and payment functions up until 1998, there would have
been none: [13], [22].
Lord Brown noted that it would seem inconceivable that Parliament would have contemplated leaving the
common law restitutionary recovery available to the Secretary of State alongside the carefully prescribed
scheme of section 71. He found it striking that Parliament had not made express provisions for recovery
of mistaken overpayments alongside provisions for misrepresentation and non-disclosure. Lord Brown
thus concluded that section 71 does necessarily exclude any common law restitutionary claim the
Secretary of State might otherwise have: [14]-[15].
Sir John Dyson dismissed the Secretary of State’s argument that section 71 cannot be taken to have
excluded prospectively the possibility of a common law right to recovery arising in the future. In his view,
the change in the identity of adjudicator of the social security benefits awards in 1998, which was not
accompanied by any change in the statutory criteria for recovery of overpayments, was not intended to
open the door to recovery any wider than it previously had been: [23]-[25]. Whilst noting that the appeal
could be dismissed on that basis alone, Sir John Dyson went on to consider whether, if, contrary to the
finding of the Court, the common law right to recovery did exist by the time section 71 and its
predecessors were introduced, that right was impliedly displaced by statute. Having discussed the
authorities at [27]-[30], Sir John Dyson concluded that the test is not one of “necessary implication” but
instead that of statutory interpretation, namely, whether, looked at as a whole, a common law remedy
would be incompatible with the statutory scheme and therefore could not have been intended to co-exist
with it: [31], [34]. Sir John Dyson concluded that, for the reasons given by Lord Brown, he too agreed
that section 71 was intended to be an exhaustive route to recovery of wrongly calculated benefits: [35].
Lord Rodger noted that section 9(3) of the 1998 Act, which provides that any revision of the award takes
effect from the date of the original award, would have no practical effect in cases of downward revisions
resulting from a mistake in favour of the Secretary of State. He concluded that while section 9(3) creates a
problem, it does not solve it. Thus the question of whether a remedy should be available in cases of
mistaken awards is a matter for Parliament: [39].
References in square brackets are to paragraph numbers in the judgment.
NOTE
This summary is provided to assist in understanding the Court’s decision. It does not form part
of the reasons for the decision. The full judgment of the Court is the only authoritative
document. Judgements are public documents and are available at:
PDF version
The Child Poverty Action Group (Respondent) v Secretary of State for Work and Pensions (Appellant) 2010
The Supreme Court has upheld the decision, won on appeal by the Child Poverty Action Group, on common law overpayment recovery.
Child Poverty Action Group (CPAG) had succeeded in overturning a decision allowing the Department for Work and Pensions to issue letters requesting repayment, at common law, of money paid by mistake where Section 71 of the Social Security Administration Act 1992 is intended to be used as a means of recovery.
Background
Child Poverty Action Group (CPAG) applied for judicial review regarding the practice of the Secretary of State for Work and Pensions (DWP), of seeking to recover overpaid Social Security benefit by methods other than under Section 71 of the Social Security Administration Act 1992.
Section 71 of the 1992 Act gives the DWP powers to recover, subject to specified conditions, a payment of any relevant benefit from any person who has misrepresented or failed to disclose any relevant fact.
The DWP argued that Section 71 did not prevent it from claiming repayment, at common law, of money paid by mistake. In response the CPAG contended that this practice was unlawful where the original payment was made "pursuant to and in accordance with a valid determination" and where the pre-conditions for recovery under Section 71 are not met.
What this meant in practice was that the DWP wrote standard letters to claimants who were considered to have been overpaid benefit, but who had not misrepresented or failed to disclose any relevant fact.
These letters claimed that the DWP had a right to recover an overpayment under common law. Between March 2006 and February 2007 65,000 common law recovery letters were sent.
The High Court decision
The case went to the High Court as R on the application of Child Poverty Action Group v Secretary of State for Work and Pensions 2009.
Michael Supperstone Q.C. (Sitting as Deputy High Court Judge) dismissed CPAG's claim, thus allowing the DWP to continue to issue common law overpayment recovery letters should it choose to do so.
Child Poverty Action Group then appealed the decision to the Court of Appeal, which was heard as Child Poverty Action Group, R (on the application of) v Secretary of State for Work and Pensions [2009]. The DWP suspended the issue of "common law recovery" letters pending the outcome of the new decision.
The Court of Appeal decision
The Court of Appeal allowed CPAG's appeal, upholding Section 71 of the Social Security Administration Act 1992 as the only legal avenue by which the DWP can recover overpayments. The DWP therefore had to stop issuing 'common law recovery' letters in section 71 cases.
The Secretary of State then appealed to the Supreme Court.
The Supreme Court decision
A panel of five judges dismissed the Secretary of State's appeal, confirming Section 71 as the only avenue to recovery in such cases and upholding the earlier Court of Appeal decision.
Overpayments not covered by the decision
The judgment applies to all cases where section 71 is used as a means of recovery. This includes all social security benefits except for housing benefit and council tax benefit. Tax credit overpayments are also not covered by the decision.
For the ruling to apply the overpayment must have been made 'in pursuance of a benefit award'. It does not apply to the recovery of overpayments resulting from other errors such as those in relation to duplicate payments of benefit or interim payments. Common law recovery letters can still be issued in these cases.
Government's intention to change the law
In response to a parliamentary question from Stephen Timms asking whether universal credit payments attributable to official error would be recoverable from recipients as debts Minister for Employment Chris Grayling replied:
[source Hansard 10 Jan 2011 : Column 137W]
More information
http://www.disabilityalliance.org/cpag.htm