CPC/2021/2008
							[2008] UKUT 15 (AAC)

DECISION OF THE UPPER TRIBUNAL
(ADMINISTRATIVE APPEALS CHAMBER)

My DECISION is to allow the appeal by the appellant.

The decision of the Sutton appeal tribunal dated 1 May 2008 under file reference 154/08/00983 involves an error on a point of law.  My decision is to set aside the tribunal’s decision and to remake it:

The appeal by the appellant against the decision of the Secretary of State dated 16 March 2007 succeeds.

There was an overpayment of state pension credit in the sum of £3,599.48 for the period from 06 July 2004 to 19 June 2006 (both dates included).

This overpayment is not recoverable from the appellant under section 71 of the Social Security Administration Act 1992.  The appellant did not misrepresent any material fact.  Nor did the appellant fail to disclose any material fact.

My decision is given under sections 11 and 12 of the Tribunals, Courts and Enforcement Act 2007 and rule 40 of the Tribunal Procedure (Upper Tribunal) Rules 2008.

REASONS FOR DECISION

The decision in summary

1.		The appellant’s appeal to the Upper Tribunal (formerly the Social Security Commissioner) is allowed.  The decision of the Sutton appeal tribunal sitting on 1 May 2008 under file reference 154/08/00983 is wrong in law.

	2.		I am substituting my own decision, as set out above, for the decision that the appeal tribunal reached, and for the reasons set out more fully below.
	
	The impact of the new tribunal system on this case

3.	On 3 November 2008 the Tribunals, Courts and Enforcement Act 2007 replaced the appeal tribunal with the Social Entitlement Chamber of the First-tier Tribunal.  This case started as the appellant’s appeal to the Social Security Commissioner against the appeal tribunal’s decision. The 2007 Act also replaced the Social Security Commissioner with the Administrative Appeals Chamber of the Upper Tribunal with effect from the same date.  These changes have been made with a view to improving the system of administrative justice as a whole.

4.	A Judge of the Administrative Appeals Chamber of the Upper Tribunal has therefore decided this appeal. The changes in the 2007 Act do not affect the substantive law relating to entitlement to social security benefits and recovery of overpayments.  However, as well as affecting judicial and tribunal titles, these reforms make important procedural improvements relating to the disposal of appeals, which I refer to further below.

	The issue before the appeal tribunal

5.		The appellant (Mrs B) is an elderly lady now aged 92.  She has been in poor health for some years and for some time has been assisted in relation to certain financial matters, and in various capacities, by her financial advisor (Mr M).  

6.		The Department’s decision of 16 March 2007 referred to an earlier decision dated 19 June 2006 to the effect that Mrs B had been overpaid state pension credit in the sum of £3,599.48 for the period from 6 July 2004 until 19 June 2006.  The 16 March 2007 decision was to the effect that, as from 7 June 2004, Mrs B had failed to disclose the material fact that she had been admitted to a residential care home.  As a result, a decision maker concluded that the overpayment was legally recoverable from her.

7.		The Pension Service asked for an oral hearing of the appeal.  Neither Mrs B nor Mr M attended the hearing – Mr M explained that Mrs B was too frail and unwell to attend, and that her modest funds did not justify instructing him to prepare for and attend a hearing.

The outcome of the appeal tribunal

8.		The appeal tribunal considered Mrs B’s appeal at an oral hearing.  A presenting officer attended on behalf of the Pension Service. The tribunal confirmed the Secretary of State’s decision and so dismissed the appeal.  The tribunal helpfully set out its reasons on the Decision Notice issued on the day of the hearing.

9.		The tribunal found that Mr M had notified the Disability Benefits Unit (DBU) by letter dated 7 July 2004 that the county council were meeting Mrs B’s nursing home costs.  The tribunal found that there had been no parallel notification to the Pension Service and that there had been an overpayment of state pension credit as a result which was recoverable from Mrs B.

The appeal tribunal’s reasoning

10.		In its summary reasons the tribunal referred to the statutory provisions under section 71 of the Social Security Administration Act 1992 and regulation 32(1) of the Social Security (Claims and Payments) Regulations 1987.  The tribunal also referred to the three decisions of the courts in B v Secretary of State for Work and Pensions [2005] EWCA Civ 929 (also reported as decision R(IS) 9/06), Hinchy v Secretary of State for Work and Pensions [2005] UKHL 15 (also reported as decision R(IS) 7/05) and Hooper v Secretary of State for Work and Pensions [2007] EWCA Civ 495 (also reported as decision R(IB) 4/07).  Based on that case law, the tribunal set out three propositions.

11.	  First, there was an absolute duty to disclose information or evidence required by the Secretary of State, not qualified by any reasonableness test, and a more general requirement to disclose changes of circumstances, but only those that a claimant might reasonably be expected to know would affect benefit (B).

12.		Second, claimants could not rely on arrangements between different parts of the Department to notify each other of decisions, and were under a duty to notify any material fact direct to the office that administered the particular benefit in question (Hinchy).  The tribunal expressly found as a fact that the notification of 7 July 2004 was to the DBU (which administered attendance allowance) but was not effective as regards state pension credit.

13.	 	Third, instructions to claimants about the need to report changes must be clear and unambiguous (Hooper).  The tribunal noted that the Pension Service relied upon the information booklet (INF4 (PC)) to demonstrate the requirement to report changes about hospitals and care homes and benefits.  The tribunal made no express findings as to the clarity of those instructions.

14.		In its final paragraph the tribunal concluded as follows:	

“Taking all the evidence into account, the Tribunal decided that there had been an overpayment of State Pension Credit because [Mrs B’s] nursing home costs for the appropriate period were being paid by the Local Authority, and that the overpayment is recoverable because she had not disclosed that material fact to the Pensions Service.  Her health was not good but she had at the time the assistance of [Mr M] who had given notification to the Disability Benefits Unit.  If disclosure had been made appropriately, no overpayment would have arisen. The decision must be upheld.”

15.		Mr M then wrote to the tribunal making three points.  The first was that the Pension Service had been communicating with Mrs B at her residential care home since she first became resident there in 1999, and so there was no failure on her part to disclose the material fact that she had entered such a home.  The second point was that other correspondence showed that the Pension Service was on notice about the change in her circumstances, which had resulted in the local authority providing direct assistance for the costs of her care.  The third point, in summary, was that all Mrs B’s benefits were being paid via the Pension Service and Mrs B was entitled to expect some “joined up government”.

16.		The tribunal chairman issued a statement of reasons for its decision, building on those contained in the Decision Notice.  The statement of reasons explained that the material fact in issue was not that Mrs B had entered the care home, but rather that she was no longer self-funded in that care home.  The statement acknowledged that Mr M might have been misled by the terms of the Secretary of State’s decision under appeal.  The tribunal reiterated that the Pension Service (rather than the DBU) had not been informed that Mrs B had started to receive local authority financial support.  It added that the leaflet INF4(PC) “sets out the requirement to notify to the Pension Service of any change in a care home, and any change in benefit being received”.  As this notification had not taken place until 16 June 2006, when a local authority employee telephoned the Pension Service, there had been an overpayment of state pension credit, which was recoverable from Mrs B.

The application for permission to appeal

17.		Mrs B, via her appointee, then applied for permission to appeal.  Mr M’s primary ground was the “joined up government” argument.  He asserted that the same Government department and the same office had been paying all relevant benefits, and that office had been informed of the change in funding arrangements in 2004.  He added that Mrs B was in no position to interpret leaflet INF4(PC) and that he had never been sent a copy. 

18.		A District Chairman refused the application for permission to appeal, which was renewed before the Commissioner. However, Mr Commissioner Mesher granted permission to appeal, detailing a series of difficult issues presented by the case.  The Secretary of State’s representative now involved in the appeal has provided a detailed submission addressing these various points.  He supports the appeal and invites me either to send the appeal back for rehearing or to decide the matter myself.  Mr M has also made further submissions.

19.		I agree that the tribunal erred in law, even if I do not accept all the arguments advanced by Mr M on behalf of Mrs B.  For the reasons explained further below, I do not think it is appropriate to remit this case for rehearing by a fresh tribunal.  I must therefore set out the relevant chronology in a little more detail before returning to explaining why the tribunal’s decision is wrong in law.

The background to the case and the relevant chronology

20.		Mrs B moved to the nursing home in question in June 1999 (she may have moved rooms within the same establishment since that date, but the same nursing home has been her permanent address since that time).  Mr M started acting for Mrs B, advising her generally on financial and tax matters, in April 2000.  

21.		On 15 April 2004 Mr M wrote to the local authority explaining that Mrs B’s assets were diminishing and that she wished to apply for assistance with the costs of her care.  The local authority replied to Mr M on 18 June 2004, setting out the financial contribution that was expected from Mrs B as a result of their assessment.  The council explained that the assessment included savings credit (an element of the state pension credit) and that “You should apply for this on her behalf if you have not already done so”.  The letter also explained that attendance allowance would cease to be payable after 28 days, and so “you should inform the Department of Work and Pensions [sic] that she is now being funded by the local authority”.

22.		Mr M did as he was instructed.  He had in fact already written to the Pension Service (at a PO Box Freepost address in Blackpool) on 15 April 2004, enclosing “the pension credit application forms completed by our client”. On 7 July 2004 he also wrote to the DBU (at a different postal address, but also located in Blackpool) explaining that the county council “have now taken responsibility for the payment of her nursing home costs” as from 1 June 2004.  Mr M added that he expected that attendance allowance would therefore no longer be payable to Mrs B as from 29 June 2004 (i.e. after 28 days had elapsed).

23.		On 13 April 2005 Mr M wrote to the Pension Service stating that his firm acted for Mrs B “in connection with her taxation affairs, and generally look after her financial affairs”.  That letter concerned the payment of pension credit and retirement pension for a period earlier that year when Mrs B had been in hospital.  The letter concluded by asking the Pension Service to write to Mrs B notifying her of the action the Department proposed to take.  Thus throughout this period Mrs B was executing her own affairs, albeit on the advice of Mr M.

24.		Mr M has explained in later correspondence that he did not become Mrs B’s nominated representative as far as her state benefits were concerned “until around July 2006, when it was clear that she was unable to deal with her own affairs in a competent fashion”.  The file shows that in June 2006 the Pension Service wrote to Mrs B about her pension credit award.  The appeals file contains a copy of neither that letter nor of the decision it was notifying, although it appears that a decision maker had decided on 19 June 2006 that Mrs B was entitled to a reduced rate of state pension credit for the inclusive period from 6 July 2004 to 19 June 2006, resulting in an overpayment of £3,599.48.  The calculation of the amount itself and the relevant dates are not in dispute.

25.		Mrs B evidently sent a copy of the Pension Service letter to Mr M, who wrote to the Pension Service on her behalf on 11 July 2006, querying the pension credit calculation and appealing against the assessment. Mr M’s letter concluded with the following statement:

“As you are aware, our client is now 90 years old and becoming increasingly frail. And finds it difficult to deal with her affairs, particularly complicated matters as pension credit.  We should be grateful if you would ensure therefore that a copy is sent to us of any correspondence or documents sent to her, and your assistance in this mater will be greatly appreciated.”

26.		It is unclear from the file how that particular matter was resolved, if at all.  Indeed, the underlying nature of that disagreement is unclear.  Mr M’s letter questions the calculation of Mrs B’s pension credit entitlement but makes no mention of any claimed overpayment. The Secretary of State’s representative informs me that there is no record of that particular letter of appeal ever having progressed to a hearing.  I suspect that no action was taken within the Pension Service for a while and Mr M saw no reason to follow the matter up.

27.		Some eight months later, however, on 16 March 2007, a decision maker decided that (i) as from 7 June 2004 Mrs B had failed to disclose the material fact that she had been admitted to a residential care home; (ii), as a result, she had been overpaid state pension credit in the sum of £3,599.48 for the period from 6 July 2004 until 19 June 2006; and (iii) this amount was recoverable from Mrs B.  On the same date the Department’s Debt Management section wrote a letter to Mrs B, c/o Mr M’s firm, asking her to repay the sum in question which it said had been overpaid owing to “your admission to a home”.

28.		Mr M states that he did not receive this letter in the normal course of post.  Rather, he explains that a Pension Service official handed it to him by at a meeting on 18 April 2007.  The Secretary of State has not disputed that account and I have no reason to doubt that it is accurate.  I accept that Mr M asked to see the Pension Service official on that date after the Department had written directly to Mrs B on 27 March 2007, asking to meet her to discuss her benefit entitlements (and so ignoring Mr M’s request of 11 July 2006 that they send copies of all correspondence to him).

29.		This incident may well have prompted Mr M to put his role in assisting Mrs B on a more formal footing.  Certainly on 31 May 2007 Mrs B appointed Mr M as her attorney under the Powers of Attorney Act 1971 and on 27 July 2007 the Secretary of State appointed Mr M as Mrs B’s appointee under the social security legislation.  In June 2007 Mr M had also sent a copy of the power of attorney to a local Pension Service official, adding that he had “no objection to your attending at [the care home] to establish my client’s existence, but under no circumstances must you question her about her financial circumstances, because of her confused state regarding them”.

30.		On 4 October 2007 the Department wrote to Mr M about the overpayment again (although there is no copy of this letter on file).  On 15 October 2007 Mr M replied, lodging an appeal on the basis that the department was “duly notified of our client’s financial position at the appropriate time, and in the circumstances that this information was not used in a timely fashion by you, we do not believe that our client should be liable”.  Mr M added that Mrs B’s assets had been considerably reduced over time.  Moreover, she was “not in good health at age 91, and is suffering paranoid delusions associated with auditory hallucinations”.

What was the subject matter of the appeal to the tribunal?

31.		The typical case in which the Secretary of State seeks to recover an alleged overpayment of benefit involves at least three separate decisions at three separate stages: (1) what was the proper level of entitlement (if any) and was there an overpayment of benefit? [the overpayment decision]; (2) is that overpayment recoverable in law? [the recoverability decision]; and (3) is it appropriate actually to seek recovery of that overpayment in the circumstances of the case in question? [the recovery decision]. Stage 1 and 2 decisions are subject to appeal to an independent tribunal whereas a stage 3 decision is a matter for the discretion of the Secretary of State.  There is no right of appeal at stage 3, although judicial review remains a (in practice remote) possibility.

32.		In the present case it seems that the Secretary of State made a stage 1 overpayment decision in June 2006.  An appeal was lodged against that decision but, as mentioned above, it is unclear what (if anything) happened to that appeal. The instant appeal is concerned with a stage 2 recoverability decision.

What was the Department’s case before the appeal tribunal?

33.		In summary, the Department’s case before the tribunal was as follows (as set out, or as implied, by its written submission to the tribunal): (1) Mrs B was awarded state pension credit (SPC) from 21 April 2004; (2) that SPC award included an element in respect of the severe disability premium, as she was then also in receipt of attendance allowance; (3) Mrs B moved into the residential care home on 7 June 2004; (3) Mrs B’s attendance allowance ceased 28 days later, as she was not self-funded; (4) the Pension Service did not receive this information at the time and so the severe disability premium remained in payment as part of her SPC entitlement; (5) moreover, the Pension Service were unaware that Mrs B had been funded by the county council since June 2004 until a local authority official notified them of this fact in July 2006; (6) Mrs B had been overpaid SPC amounting to £3,599.48 for the period from 6 July 2004 until 19 June 2006; (7) this sum was recoverable from Mrs B as she had failed to disclose a material fact at the relevant time. There are several difficulties with the Department’s submission to the tribunal.

34.		First, the assertion that Mrs B moved into the residential care home on 7 June 2004 is plainly wrong.  There is simply no evidence to support this proposition.  Rather, the evidence from Mr M – which has not been disputed – is that Mrs B became a resident of the care home in 1999.

35.		Secondly, the assertion that Mrs B had failed to disclose the material fact that she had been admitted to the residential care home (at whatever date) is at best suspect.  Leaving aside for a moment the question of what amounts to a material fact, the Pension Service must have been aware of Mrs B’s residence there since at least April 2004 (and probably before).  Mr M’s letter of 15 April 2004, enclosing the SPC application, was evidence of that, and indeed he specifically asked the Pension Service to note his client’s correct address.

36.		Thirdly, the recoverability decision itself states clearly that the failure to disclose was by Mrs B herself.  However, the submission to the tribunal asserts that the failure to disclose was on the part of Mr M as her appointee.  The submission argues that leaflet INF4(PC) had been issued (Mr M, it will be recalled, denied ever having been sent a copy), and that Mr M “should therefore have informed the Pension Service that [Mrs B] was moving into a nursing home.  [Mr M’s] failure to disclose [Mrs B’s] move was therefore a failure to disclose a material fact despite his legal obligation to do so” (emphasis added). The submission ignores the fact that whilst Mr M had clearly been advising Mrs B for some years, he did not become her appointee and attorney until 2007 (after the period in question).

Why did the tribunal err in law?

37.	The tribunal did not really get to grips with all these nuances.  In short it accepted that Mr M’s notification in April 2004 that Mrs B had started to receive financial support from the county council was good notice to the DBU, which administered attendance allowance.  It decided, however, that this was not proper notice to the Pension Service, which administered SPC.  It also concluded that the ending of self-funding was a material fact, which had not been notified to the Pension Service at the right time, resulting in an overpayment, which in turn was recoverable from Mrs B.

38.	The Secretary of State’s representative (Mr W. Spencer), in a very helpful submission responding in detail to the points raised by Mr Commissioner Mesher when granting permission to appeal, now argues that the tribunal’s decision is erroneous in law for several reasons.

39.	First, Mr Spencer submits that the terms of leaflet INF4(PC) are not such as to impose an express duty to notify the Pension Service of the cessation of self-funding.  For the reasons he gives, I agree that the very general terms of the leaflet are insufficient to impose an absolute obligation of disclosure of the cessation of self-funding for the purposes of regulation 32(1) or (1A) of the 1987 Regulations.  The Tribunal of Commissioners in R(IS) 5/03 noted that there was “nothing in the form that would alert a person to the fact that a change in funding arrangements might be material”.  The Tribunal of Commissioners also suggested that the Secretary of State might wish to amend the wording of that leaflet, but no action appears to have been taken on that suggestion.

40.	Secondly, the Secretary of State’s representative refers to the general duty under regulation 32(1B) to notify, as soon as reasonably practicable, “any change of circumstances which [she] might reasonably be expected to know might affect –
(a) the continuance of entitlement to benefit,
(b) the payment of benefit.”

41.	The Secretary of State’s representative also submits that this provision generated no duty for this claimant to disclose the end of her self-funding.  The reasoning of Mr Spencer is as follows:

“A construction that interprets this phrase as including ‘any change that if reported to the appropriate office may prompt an investigation into its implications for a benefit administered by another office, an investigation that may, if the change is properly acted on by that second office, then lead to a second change of circumstances by way of a supersession of the benefit administered by the second office, which may in turn affect the benefit administered by the first office’ steps too far beyond the simple words of regulation 32(1B) of the Claims and Payments Regulations”.

42.	I can only agree.  As Mr Spencer goes on to argue, “the chain that leads from the end of self-funding to the loss of payability of attendance allowance and then to the loss of entitlement to the additional amount of guarantee credit for severe disablement is not something the claimant could reasonably be expected to unravel for herself”.  I agree that it has not been shown that Mrs B could reasonably have been expected to realise the possible materiality of the change in funding arrangements to her state pension credit award.

43.	In the present case it is true that the tribunal correctly identified the two strands in regulation 32 (the absolute duty under regulation 32(1) and (1A) and the qualified duty under regulation 32 (1B)).  However, it failed both to make it clear which of these it considered applied in the circumstances of this case and to find the necessary facts that supported such a conclusion.  That amounts to an error of law that is such that I must set aside the tribunal’s decision.

44.	I agree with the Secretary of State’s representative that, as a matter of principle, the effect of regulation 32 was at most to impose potentially two distinct duties on the claimant in this case.  The first duty was to disclose to the DBU (which administered attendance allowance) that her self-funding had ceased.  Mr M’s letter of 7 July 2004 did precisely that. The second duty was a duty to disclose to the Pension Service the resulting cessation of attendance allowance payments.  However, the tribunal failed to make sufficient or indeed any findings of fact on this second matter, which amounts to a further error of law justifying the setting aside of the tribunal’s decision.

The effect of the Hinchy decision

45.	Mr M has argued all along that there was full disclosure of the change in Mrs B’s funding arrangements as his notification to the DBU was effective for the purposes of both attendance allowance and what he describes as “disability benefits” (by which he must mean the disability premium which forms part of the state pension credit).

46.	In Hinchy v Secretary of State for Work and Pensions [2005] UKHL 15 the House of Lords held by a majority that notification to one office of the Department is not necessarily notice to another office.  Lord Hoffmann, at paragraph 32 of his opinion, stated that:

“The claimant is not concerned or entitled to make any assumptions about the internal administrative arrangements of the department. In particular, she is not entitled to assume the existence of infallible channels of communication between one office and another…For my part, I would approve the principles stated by the Commissioners in R(SB) 15/87 and CG/4494/99. The duty of the claimant is the duty imposed by regulation 32 or implied by section 71 to make disclosure to the person or office identified to the claimant as the decision maker. The latter is not deemed to know anything which he did not actually know.”

47.	Similarly, and also in Hinchy, Baroness Hale of Richmond explained (at paragraph 49) that:

“there is nothing intrinsically wrong in relying on the claimant to give the Secretary of State the information he requires to make his decisions, provided that this is information which the claimant has and that the Secretary of State has made his requirements plain. Nor is it intrinsically wrong to include in these requirements information which is already known in one part of the system but not in the part that needs to know it to make the decision in question.”

48.	Mr M’s riposte is that he told the same office at Blackpool.  However, this is not strictly the case.  The Department’s DBU is based at Warbreck House in Blackpool (to which office Mr M wrote).  The Department’s Pension Service has both national and local offices. At the time in question it had a national office in Blackpool (it is now in Gateshead).  However, this was not the same office as the DBU, even if both offices were in the same town.  This distinction is not affected by the fact that the benefits may have been paid together as a matter of administrative convenience.

49.	It follows that on the authority of Hinchy I accept the argument of the Secretary of State’s representative that the fact that there was an effective disclosure to the DBU does not necessarily mean that there was good disclosure to the Pension Service.

The options for the disposal of this appeal

50.	For the reasons set out above I am satisfied that the tribunal’s decision involves an error on a point of law (Tribunals, Courts and Enforcement Act 2007, section 11).  These are material errors and so I must set aside the tribunal’s decision.  In exercising the powers available to the Upper Tribunal, I may either remit the case to the First-tier Tribunal with directions for its reconsideration or re-make the decision under appeal myself (Tribunals, Courts and Enforcement Act 2007, section 12(2)(b)).

51.	The Secretary of State’s representative very fairly makes submissions in the alternative.  In the event that I was to decide to direct a rehearing, Mr Spencer also helpfully gives detailed draft directions that might be issued.  Mr M submits that there is ample evidence already on file to determine the matter in his client’s favour.

52.	As this appeal is being decided after 3 November 2008, I must bear in mind the overriding objective set out in rule 2(1) and (2) of the Tribunal Procedure (Upper Tribunal) Rules 2008.

Overriding objective and parties’ obligation to co-operate with the Upper Tribunal

2.—(1) The overriding objective of these Rules is to enable the Upper Tribunal to deal with cases fairly and justly.
(2) Dealing with a case fairly and justly includes—
(a) dealing with the case in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties; 
(b) avoiding unnecessary formality and seeking flexibility in the proceedings; 
(c) ensuring, so far as practicable, that the parties are able to participate fully in the proceedings; 
(d) using any special expertise of the Upper Tribunal effectively; and 
(e) avoiding delay, so far as compatible with proper consideration of the issues.

53.	In my view the only fair and just way of disposing of this appeal is for me to deal with the matter myself, rather than send the case back with directions for rehearing by a fresh tribunal.  The appellant is 92.  She is clearly not in a fit state to attend any rehearing herself and would not be able to provide any useful evidence.  It would be entirely inappropriate to put her through such an ordeal.  Nor is it realistic to expect Mr M to attend on Mrs B’s behalf, given the funding constraints.  He has in any event said all that he can in correspondence. Any tribunal rehearing would therefore be a paper hearing in any event, based essentially on the same evidence as is before me.

54.	I have therefore decided that in keeping with the overriding objective of dealing with cases fairly and justly I shall determine the substantive appeal myself, rather than send it back for rehearing.  This is a proportionate and flexible approach, which avoids unnecessary delay; moreover, any other solution would not permit Mrs B to participate any more effectively.

How should the substantive appeal be determined?

55.	As Mr Commissioner Mesher noted when giving permission to appeal, there is no mention in either the Secretary of State’s original submission to the tribunal or the tribunal decision itself of the relevant state pension credit legislation.  The submission to the tribunal is couched solely in terms of arguments about recoverability based on section 71 of the Social Security Administration Act 1992.

Has there been an overpayment of state pension credit in the first place?

56.	The deficiencies in the submission may, of course, have been caused in part by the fact that no action appears to have been taken on Mr M’s previous appeal on Mrs B’s behalf on the overpayment issue itself.  In this context Mr Commissioner Mesher has raised a technical issue in relation to the proper interpretation of paragraph 1 of Schedule 1 to the State Pension Credit Regulations 2002 (SI 2002/2792).  Regulation 6(4) of those Regulations provides that an additional amount in respect of severe disability forms part of a claimant’s applicable amount for the purposes of the guarantee credit where the conditions in that paragraph are satisfied.

57.	Paragraph 1 in turn provides that this extra amount is to be included where the claimant “is in receipt of attendance allowance”.  Mr Commissioner Mesher asked whether this expression was confined to a person who was actually receiving attendance allowance, or whether its meaning extended to include a person who was entitled to attendance allowance but had no right to actual payment of that benefit.  The point is potentially important for this reason.  Technically a claimant who is receiving publicly funded residential care remains [notionally] entitled to attendance allowance but has no right to receive that benefit after 28 days (regulation 7(1) of the Social Security (Attendance Allowance) Regulations 1991 (SI 1991/2740) stipulates that “ a person shall not be paid any amount in respect of attendance allowance” for such a period [emphasis added]; see also regulation 8).

58.	In particular, Mr Commissioner Mesher observed that there is no equivalent in the state pension credit legislation to paragraph 14B of Schedule 2 to the Income Support (General) Regulations 1987 (SI 1987/1967).  This states as follows:

Person in receipt of benefit

14B.    For the purposes of this Part of this Schedule, a person shall be regarded as being in receipt of any benefit if, and only if, it is paid in respect of him and shall be so regarded only for any period in respect of which that benefit is paid.

That provision was inserted in part to reverse the effect of the Commissioner’s decision in R(SB) 12/87, where Mr Commissioner Sanders had held – in a different context – that “in receipt of” included both actual payment and entitlement to receipt (whether or not there had been actual payment).

59.	The Secretary of State’s representative argues that the correct construction of “in receipt of” attendance allowance in the context of paragraph 1 of Schedule 1 to the State Pension Credit Regulations 2002 is the narrower sense of “actually being paid” the benefit.  Mr Spencer gives three reasons for that submission.  

60.	First, the meaning of the phrase depends on the context, and R(SB) 12/87 was concerned with the particular case of regulations providing for transitional protection.  Moreover the Court of Appeal emphasised the importance of context as an aid to construction in Rider v Chief Adjudication Officer (reported as appendix to R(IS) 10/94).

61.	Secondly, if “in receipt of” in of paragraph 1 of Schedule 1 to the 2002 Regulations is read in the wider R(SB) 12/87 sense, then the provisions of paragraph 1(2) to the Schedule to the 2002 Regulations are nugatory.  These are specific deeming rules which would not be needed if the R(SB) 12/87 meaning applied.

62.	Thirdly, Mr Spencer argues, social security legislation distinguishes between the three concepts of entitlement, payability and payment.  The Commissioner’s comments in R(SB) 12/87 were directed towards accidents of payment (or rather non-payment), whereas the present situation is concerned with payability.

63.	Mr M has not specifically commented on these nuances.  However, I am persuaded by the force of Mr Spencer’s submissions on this point.  I do not regard the absence of a provision equivalent to paragraph 14B of Schedule 2 to the Income Support (General) Regulations 1987 as decisive given these other considerations.  I accordingly hold that the reference in paragraph 1 of Schedule 1 to the 2002 Regulations to the claimant being “in receipt of” attendance allowance is to be read as meaning “in actual receipt of” attendance allowance.  It does not include a person who is “entitled to but not actually in receipt of” that benefit. 

64.	The significance of this is that it implies that Mrs B was indeed overpaid state pension credit.  Her attendance allowance had stopped 28 days after the end of self-funding, and the loss of attendance allowance meant that she was no longer entitled to the additional amount for severe disability as part of the guarantee credit element of her state pension credit.  However, the fact that she was overpaid does not necessarily mean that that overpayment is recoverable in law.

Is the overpayment of state pension credit recoverable from Mrs B?

65.	The potential recoverability of the overpayment of state pension credit is governed by section 71 of the Social Security Administration Act 1992.  There is no suggestion of any misrepresentation on the part of Mrs B (or indeed by Mr M).  So the question is whether or not she failed to disclose any material fact to the Pension Service.  The scope of the duty to disclose is governed by regulation 32 of the Social Security (Claims and Payments) Regulations 1987.

What is a “material fact” in the context of section 71 of the 1992 Act?

66.	The suggestion that the material fact was Mrs B’s admission to the nursing home is clearly incorrect on the facts of this case.  So the first question to determine is whether either the ending of self-funding or the consequential cessation of attendance allowance was a “material fact” that should have been disclosed to the Pension Service.

67.	There is a considerable jurisprudence on what constitutes a “material fact” (e.g. Saker v Secretary of State for Social Services, reported as an appendix to R(I) 2/88 and CIS/3655/2007).  In CIS/3655/2007, albeit in the context of supersession, Mr Commissioner Jacobs ruled that since the Social Security Act 1998, which changed the adjudication regime in place at the time of Saker, “a fact is material if it would justify a different outcome.  It is a fact that makes a difference” (at paragraph 29).

68.	The Secretary of State’s representative argues that the reasoning of Mr Commissioner Jacobs in CIS/3655/2007 may not necessarily apply in the different context of section 71(1) of the 1992 Act.  Mr Spencer disavows any attempt to provide a comprehensive definition, and invites me to take a pragmatic approach, namely that “the concept of a material fact for the purposes of section 71(1) includes (but is not necessarily restricted to) any facts that the claimant is required to disclose and that if not disclosed would cause an overpayment”. I adopt this as a sensible working definition.

Was the ending of self-funding a material fact?

69.	Applying Mr Spencer’s helpful working definition, it is by no means obvious to me that the ending of self-funding was a material fact in the context of the recoverability of the overpayment of state pension credit.  First, there is no clear and express requirement in leaflet INF4(PC) to disclose such information to the Pension Service.  It follows that there is no absolute duty to disclose within regulation 32(1) and (1A) of the 1987 Regulations.  I also find, for the reasons discussed above, that the qualified duty under regulation 32(1B) does not apply.  It is not realistic to regard the ending of self-finding as a change of circumstance which a claimant “might reasonably be expected to know might affect” state pension credit.  I see no justification for taking any wider approach to the concept of a “material fact” in this particular context.

Was the cessation of attendance allowance a material fact?

70.	However, as a matter of principle the ending of payment of attendance allowance was in my view potentially a material fact.  Leaflet INF4(PC) states that changes in benefits or allowances must be reported to the Pension Service.  This amounts to an absolute duty to disclose within regulation 32(1) and (1A) of the 1987 Regulations.  It is also plain that non-disclosure may result in an overpayment of state pension credit through the continued but erroneous inclusion of the additional amount for severe disability under the 2002 Regulations.

Did Mrs B fail to disclose the material fact that her attendance allowance had ceased?

71.	It is plain that Mrs B did not disclose to the Pension Service the material fact that her attendance allowance had ceased.  But that is not the question.  The question is whether she failed to disclose that material fact.  I have decided that she has not so failed, for two reasons.

72.	First, Mrs B can only have failed to disclose that material fact if she was herself under a duty to disclose it (B v Secretary of State for Work and Pensions [2005] EWCA Civ 929, also reported as decision R(IS) 9/06).  The Secretary of State’s submission to the tribunal pointed to leaflet INF4(PC).  However, the Secretary of State produced no evidence to the tribunal that Mrs B had actually been sent that leaflet.  The burden of proof is on the Secretary of State and I am not prepared simply to make that assumption.  I am therefore not satisfied that the regulation 32(1) or (1A) absolute duty applied. I am also not prepared to find that the qualified duty under regulation 32(1B) applies on the facts of this case, again for the reasons explained above.

73.	Secondly, as Mr Commissioner Mesher noted when granting permission to appeal, one of the basic tenets of section 71 is that a person cannot fail to disclose something which one does not know (see R(IS) 9/06, paragraphs 32 and 62, and see e.g. paragraph 47 of the Court of Appeal’s decision).  Given the evidence on file as to Mrs B’s deteriorating physical and mental health, and Mr M’s role in advising her, I think it is at best questionable whether Mrs B knew and fully appreciated in the summer of 2004 that she was no longer fully self-funded and that her attendance allowance had ceased.  There is certainly no clear evidence to that effect.  There is, furthermore, no evidence on file as to when or how the Department informed Mrs B that her attendance allowance had ceased.

74.	I acknowledge that Mr M did not take on his formal role as Mrs B’s attorney and appointee until the summer of 2006.  However, I take into account Mrs B’s advanced years and her obvious poor health in reaching this decision.  For all these reasons I conclude that Mrs B herself did not fail to disclose a material fact to the Pension Service.

But is Mrs B fixed with Mr M’s knowledge?

75.	There is no dispute that Mr M was aware in the summer of 2004 of the cessation both of full self-funding and of the payment of attendance allowance.  Does his knowledge fix Mrs B with that knowledge, applying the common law principle that an agent’s knowledge, whilst acting within the scope of his authority, is to be attributed to the principal?

76.	Mr Spencer argues that Mrs B can be treated as knowing about these changes because of Mr M’s knowledge.  I reject this argument for two reasons.  First, Mr M only became Mrs B’s attorney and appointee in 2007; at the material time in 2004 he was certainly not either her attorney or her appointee.  There is therefore no ground for imputing his knowledge to her on either of those two bases.

77.	Secondly, Mr Spencer argues by reference to the Court of Appeal’s decision in Tkachuk v Secretary of State for Work and Pensions, reported as R(IS) 3/07 that the common law principle applies in any event.  However, the issue in Tkachuk was a narrow one – namely whether, on the construction of the particular income support regulations in issue, notification of an asylum decision to a claimant’s solicitor was notification to the claimant himself.  The Court of Appeal agreed with Mr Commissioner Angus that it was.

78.	Admittedly both the Commissioner and the Court of Appeal in Tkachuk regarded the common law of agency as underlying the social security code.  However, Mr Commissioner Angus explained that the common law rule that notice to an agent constitutes notice to the principal is “a common law protection for people who have to transact with the agents of others” (at paragraph 26).  The Commissioner also noted that social security legislation modified or supplemented the common law of agency in various ways.  

79.	In my view it would be a quite unwarranted extension of the scope of section 71 to hold that where a claimant’s advisor is aware of a material fact, the claimant herself is necessarily fixed with knowledge of that same fact by means of importing the common law rules of agency.  Such an interpretation would not be consistent with the purpose of agency identified by Mr Commissioner Angus.  It would also be inconsistent with the approach of the Tribunal of Commissioners in R(SB) 9/84.  There the Tribunal of Commissioners held, in the context of showing good cause for a late claim, that failure or delay by a duly appointed appointee would be imputed to a claimant.  However, “responsibility should not be imputed to a claimant for delay or failure to act by an unappointed person who lodges on a claimant’s behalf a claim which is refused” (at paragraph 9).  By analogy Mr M’s knowledge in 2004 should not be imputed to Mrs B.   

80.	Indeed, at the time in question the Pension Service did not have to transact with Mr M, even though he may have been acting as Mrs B’s adviser and as a conduit for correspondence. But Mrs B was the claimant and it was incumbent upon the Pension Service to make it clear to her what she had to disclose if they wished to rely on section 71 to recover an overpayment.  They should not be able to sidestep that by imputing his knowledge to her.  Moreover, if Mr M’s knowledge were to be imputed to Mrs B, in fairness Mr M should have been made aware of the duty to disclose.  There is no evidence of this – in particular, Mr M was never sent a copy of leaflet INF4(PC) and indeed never received any acknowledgement to his letter to the DBU about the cessation of attendance allowance.

Is the overpayment of state pension credit recoverable from Mr M?

81.	For the avoidance of doubt I should make it clear that there is no question of the overpayment of state pension credit being recoverable from Mr M personally.  He was not Mrs B’s attorney or appointee at the relevant time.  Mr Spencer for the Secretary of State has also quite properly conceded that Mr M was under no duty of disclosure himself at the time in question.

The decision that the tribunal should have made

82.	I have explained why the tribunal erred in law and so why its decision must be set aside.  In accordance with the powers vested in me by section 12(2)(b)(ii) of the Tribunal, Courts and Enforcement Act 2007, and bearing in mind the overriding objective in rule 2 of the Tribunal Procedure (Upper Tribunal) Rules 2008, I remake the tribunal’s decision as follows:

The appeal by the appellant against the decision of the Secretary of State dated 16 March 2007 succeeds.

There was an overpayment of state pension credit in the sum of £3,599.48 for the period from 06 July 2004 to 19 June 2006 (both dates included).

This overpayment is not recoverable from the appellant under section 71 of the Social Security Administration Act 1992.  The appellant did not misrepresent any material fact.  Nor did the appellant fail to disclose any material fact.

Signed on original					Nicholas Wikeley
on 11 November 2008				Judge of the Upper Tribunal