Benefit overpayments, the common law and human rights

Transcription

1 Trinity College Dublin, Ireland From the SelectedWorks of Mel Cousins 2010 Benefit overpayments, the common law and human rights Mel Cousins, Glasgow Caledonian University Available at:

2 Benefit overpayments, the common law and human rights Abstract This article examines the issue of benefits overpayments in UK social security law. Current estimates put the level of overpayments due to error (as opposed to fraud) at about 2 billion per annum. Concern about his issue has led to the publication of a DWP statement of strategy and an attempt by DWP to use the common law to recover overpaid benefits. The article looks at a number of recent court decisions which have important implications for UK practice. Introduction The issue of fraud and error in the benefits system is one of considerable importance for UK policy makers. A recent estimate is that 3 billion (or about 2.2 per cent of total benefit expenditure) was overpaid due to fraud and error in Of course, considerable caution should be attached to such estimates, 2 nonetheless the scale of overpayments is such that the Comptroller and Auditor General has qualified the DWP s accounts annually for two decades and the issue attracts the regular attention of the Committee on Public Accounts (and, of course, the media). 3 The largest areas of overpayment occurred in the big means-tested schemes: housing benefit, pension credit and income support and jobseeker s allowance (although it should be noted that different legal rules apply to (a) general social security benefits (b) housing benefit and council tax benefit and (c) tax credits). 4 While one could hardly suggest that overpayments due to fraud were ever officially treated in a benign manner, there has been a progressive toughening of the law in relation to social security fraud. 5 However, this article focuses on overpayments arising for reasons 1 The DWP Accounts quote a figure of 2.7 billion (2.0 per cent of expenditure): Department for Work and Pensions Resource Accounts : Report by the Comptroller and Auditor General (C&AG, 2009). The higher figure is quoted in the more recent DWP, Fraud and error in the benefit system: April 2008 to March 2009 (DWP, 2009). Estimates relate to Great Britain. These figures do not take account of the amount of overpayments subsequently recovered by DWP which in amounted to almost 500 million. Although the issue tends to receive less attention it is interesting to note that estimates for underpayments are also significant at 1.2 billion: ibid. 2 Indeed the estimated figure for overpayments appears to have hung around 3 billion for some time: see Committee of Public Accounts, Fraud and error in benefit expenditure, (HMSO, 2005). 3 Department for Work and Pensions Resource Accounts : Report by the Comptroller and Auditor General, (C&AG, 2009); Committee of Public Accounts, Fraud and error in benefit expenditure, (HMSO, 2005).; Id, Progress in Tackling Benefit Fraud, (HMSO, 2008) despite the title the latter report also considers overpayments due to error. 4 DWP, Fraud and error in the benefit system: April 2008 to March 2009 (DWP, In contrast, estimates of overpayments in State pension are much more modest and, in fact, outweighed by underpayments (the latter due primarily to official error): DWP, Fraud and error in State pension, (DWP, 2006); Department for Work and Pensions Resource Accounts : Report by the Comptroller and Auditor General, (C&AG, 2009). 5 See the Social Security Fraud Act 2001 and the Welfare Reform Act See generally P. Larkin, The criminalisation of social security law: towards a punitive welfare state? (2007) 24(3) Journal of Law and Society 295; G. McKeever, Rights, responsibilities and social security fraud (2009) 16 Journal of Social Security Law, 139.

3 other than fraud and looks at a number of recent important court decisions (both of the Court of Appeal 6 and the European Court of Human Rights 7 ) which have important implications for UK practice. While the legal distinction between fraud and other forms of overpayment may be relatively clear, it is in practice much more difficult to make such distinctions. A number of years ago evidence to the Public Accounts Committee suggested that roughly about half of the total overpayments could be attributed to fraud with the reminder due to official and claimant error. 8 More recently, however, it has been suggested that almost 2 billion of the total relates to error rather than fraud with about half this total due to official error and half due to customer error. 9 This concern about overpayments has led to a number of research reports 10 and to a DWP statement of strategy on tackling error in the benefit system. 11 This states, inter alia, that We [DWP] will maximise the amount of overpayments we recover where it is costeffective to do so and does not cause financial hardship to the customer. We will put extra effort into recovering overpayments where an error has been made by our customers. And we will also look to recover overpaid benefit where there is reasonable indication that the customer knows they are receiving an incorrect award of benefit. Although (unsurprisingly) not specifically mentioned in the strategy statement, one of the steps adopted by DWP to achieve these goals included a cunning plan to use common law powers to recover benefits not specifically recoverable under the statutory provisions in social security law. Recovery of overpayments at statute and at common law The social security legislation already sets out quite broad powers to recover benefits overpaid where a person had misrepresented or failed to disclose (whether fraudulently or not) a material fact. 12 This provision has been broadly construed by the courts so as to allow the Secretary of State to recover overpaid benefit where a claimant failed to disclose a 6 R (Child Poverty Action Group) v of State for Work and Pensions [2009] EWCA Civ App. No /05, Moskal v Poland, 15 September 2009; App. No /05, Wieczorek v Poland, 8 December Committee of Public Accounts, Fraud and error in benefit expenditure, (HMSO, 2005). 9 NAO, Progress in tackling benefit fraud, (HMSO, 2008). Though as this report acknowledges this categorisation will always be subjective : ibid at p. 6. For a discussion of the type of errors involved see Department for Work and Pensions Resource Accounts : Report by the Comptroller and Auditor General, (C&AG, 2009). 10 Annie Irvine, Jacqueline Davidson and Roy Sainsbury, Reporting changes in circumstances: Tackling error in the benefit system, (DWP, 2008); Jacqueline Davidson and Roy Sainsbury, Reporting changes in circumstances: tackling error in the Housing Benefit system - Standard Housing Benefit cases, (DWP, 2008). 11 DWP, Getting welfare right: Tackling error in the benefits system, (DWP, 2007). 12 S. 71 of the Social Security Administration Act 1992 as amended. Note that separate legal provisions apply to (i) housing benefit and council tax benefit and (ii) tax credits.

4 material fact whether or not that disclosure was reasonably to be expected. 13 However, the statutory provisions do not provide for recovery where, for example, a benefit has been overpaid due to an official error unrelated to any misrepresentation or failure to disclose. It appears that around 2006, DWP took the view, on the basis of legal advice, that it had the legal power to recover such payments under the common law of restitution. It started to send letters to overpaid claimants. DWP's view - as set out in a letter to CPAG was that section 71 was an additional power to any existing in common law, and that, where s. 71 did not apply, repayment of any overpayment of benefit might be pursued under a common law claim of restitution. 14 Such an attempt to enforce recovery could only be pursued through a civil court and there would be defences against such action. In the DWP's view there is nothing within the statutory social security scheme which precluded recovery under the common law where section 71 did not apply. CPAG did not agree with this analysis and brought judicial review proceedings to clarify the legal position. A sample letter, quoted in the recent Court of Appeal decision, states We are writing to let you know that a mistake has been made and you have been paid too much Income Support. This is because of your entitlement to the benefit has stopped. This was our mistake and we are sorry that it happened. However, you have been paid public money that you were not entitled to and it should be paid back. The law allows us to ask you to pay back money that should not have been paid. As Sedley LJ pointed out (in the context of the CPAG challenge), such a letter could be devastating to a person already living in or close to penury. 15 In total 65,000 such letters were issued until, arising from judicial review proceedings brought by CPAG, DWP gave an undertaking not to issue such letters pending clarification of the legal position. In the circumstances of the case, the courts accepted that CPAG s application for judicial review was an appropriate use of the administrative court s jurisdiction. However, the High Court rejected the claim ruling that s. 71 neither expressly nor by necessary implication removes the Defendant's power to claim repayment at common law of money paid by mistake. 16 However, CPAG s recent appeal to the Court of Appeal has been successful. The decision of the Court of Appeal The Court of Appeal stated that the issue before it could not be starker or simpler: where the cause of an overpayment has not been misrepresentation or non-disclosure, can the Secretary of State resort to common law to recover it? B v Secretary of State for Work & Pensions [2005] EWCA Civ See S. Wright Overpayments and recovery at common law, Welfare Rights Bulletin 196 February R (Child Poverty Action Group) v of State for Work and Pensions [2009] EWCA Civ 1058 (hereafter CPAG) at [6]. 16 Child Poverty Action Group, R (on the application of) v Secretary of State for Work and Pensions [2009] EWHC 341 (Admin) at CPAG at [3].

5 S. 71(1) provides that Where it is determined that, whether fraudulently or otherwise, any person has misrepresented, or failed to disclose, any material fact and in consequence of the misrepresentation or failure (a) a payment has been made in respect of a benefit to which this section applies; or (b) any sum recoverable by or on behalf of the Secretary of State in connection with any such payment has not been recovered, the Secretary of State shall be entitled to recover the amount of any payment which he would not have made or any sum which he would have received but for the misrepresentation or failure to disclose. Counsel for the DWP argued that the purpose of s. 71 (which is set out in full, as amended, in annex 1) was to modify the common law right of recovery of a particular class of overpayment. 18 It was argued that s.71 carved out of the general law a specific regime for a specific class of overpayment leaving the DWP s common law rights to recover overpaid benefits intact for all cases not covered by it. 19 The CPAG s case was as Sedley LJ acknowledged more complex. 20 Rather than arguing that the specific rule in s. 71 displaced the common law right to restitution, CPAG argued that, in the absence of s. 71, there would be no right to recovery of overpaid benefits at all (other than in cases where an overpayment arose other than pursuant to an award). The argument was that payments... are made pursuant to an award which, so long as it stands, constitutes both the authority to make the payment and the entitlement to receive it. 21 S.71 recognises that it is an essential precondition of recovery that the award pursuant to which the payment was made must first be modified. 22 Section 8(1)(a) of the Social Security Act 1998 provides for the making of decisions by the Secretary of State in relation to claims for benefits. Such a decision may be revised (s. 9), superseded (s. 10) or appealed (s. 12) and otherwise is final (s. 17). S. 71 (5A) of the Social Security Administration Act 1992 provides that Except where regulations otherwise provide, an amount shall not be recoverable under subsection (1) above unless the determination in pursuance of which it was paid has been reversed or varied on an appeal or [has been revised under section 9 or superseded under section 10 of the Social Security Act 1998]. 18 CPAG at [13]. 19 At [14]. 20 At [15]. 21 At [15]. 22 Ibid. S. 71(5) and (5A).

6 Thus CPAG s argument was that it was only where a determination has been reversed, varied, revised or superseded (see subsection (5A)) that the question arises under subsection (1) whether any payment made meanwhile has been procured by misrepresentation or non-disclosure. 23 Ultimately, the Court of Appeal accepted this interpretation with Sedley LJ (with whom the other judges agreed) describing the CPAG case that s.71 created a power of recovery where otherwise there is none as a cogent and to my mind conclusive answer. 24 In a separate judgment, Lloyd LJ outlined why the DWP s reliance on tax cases where a common law right of restitution had been held to coexist with statutory recovery provisions did not assist its argument. 25 Lloyd LJ noted that there was a highly material distinction between cases of overpaid tax and overpaid social security at the heart of which is the fact that in the one instance, the sums wrongly paid have been paid by a person (individual or corporate) to the State, whereas in the other they have been paid by the State to a person. 26 He concluded that the principle drawn from the Magna Charta that taxes should not be levied without the authority of Parliament 27 self-evidently does not apply to payments by the State to a person which have nothing to do with the tax regime. 28 The approach of the Court of Appeal is welcome and the argument that the common law principle of restitution should operate in the field of social security seems objectionable from both a legal and a policy perspective. 29 However, the Court seemed less than certain of the basis of its decision. It stated without explanation that only the question of benefits paid consequent to an award was before it and Sedley LJ expressly stated that overpayments not in accordance with an award were not the concern in these proceedings. 30 CPAG s argument was narrowly tailored to this issue. It was not as the Court recognised a general argument that the existence of a right of recovery in s. 71 displaced the common law right of restitution but rather that the correct interpretation of s. 71 meant that there is no common law right of restitution as regard payments pursuant to an award. As we have seen Sedley LJ expressly accepted this point. 31 But if this is simply a question of the correct interpretation of s. 71, then there is no need for the extended consideration of whether different principles should apply to tax and social security. In fact Lloyd LJ s judgment would support a broader argument that a common law right of 23 CPAG at [24] 24 At [27]. Sedley LJ expressly agreed (at [26]). Wilson LJ agreed with both judgments. 25 Woolwich Equitable Building Society v IRC [1993] AC 70; Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL At [33]. 27 Quoting Lord Goff of Chieveley in Woolwich Equitable Building Society v IRC [1993] AC 70, at At [35]. 29 Given the complexity of the statutory provisions (and their interpretation) it seems rather optimistic to expect either claimants or benefits staff to grasp the additional complexities of the common law of restitution. 30 At [19]. Obviously overpayments can arise in other circumstances such as payment of an incorrect amount or to the incorrect person. 31 Although his comments (at [20]) that this did not directly answer the DWP case that the statutory right to recover overpayments is sui generis is rather equivocal.

7 restitution does not exist at all in relation to social security (although he also was careful to confine his decision to cases where an award had been made). 32 The broader human rights issue The outcome of the CPAG case, while severely narrowing the scope of the legal rights available to the DWP still, of course, leaves in place the right to recover overpayments in accordance with s. 71 and, it would appear, insofar as overpayments do not arise as a result of an award, the right to recover at common law. Insofar as overpayments arise as a result of deliberate misrepresentation, non-disclosure or fraud, few (at least few academics) would seek to argue that overpayments should not be recovered. However, as shown in its wording and as interpreted by the courts, s. 71 goes far beyond cases of deliberate misrepresentation and fraud. In addition, the power to recover at common law would also not require proof of wrong-doing. It would appear, however, that the provisions of the European Convention on Human Rights may well be relevant as to whether benefits overpaid without fault on the part of the claimant are recoverable. Such a human rights argument had been rejected by the Court of Appeal in B v Secretary of State for Work and Pensions 33 on the basis that overpaid benefits did not constitute a possession for the purposes of Protocol 1, Article 1 of the European Convention on Human Rights (P1-1). 34 However, a number of recent decisions of the European Court of Human Rights suggest that this is no longer good law. 35 Moskal v Poland In the Moskal case the European Court of Human Rights considered the position of a woman whose benefit had been paid as a result of official error and which was subsequently terminated. 36 The circumstances of the case were that Ms. Moskal who was in employment in Poland had a child with various disabilities including asthma. She claimed an early retirement pension for persons raising children who require constant care due to a serious health condition. She submitted a medical certificate from the health service institution 32 At [35]. And Sedley LJ s obiter comments (at [20]) to the effect that a recipient of an incorrect overpayment not arising from an award could not claim to be entitled to receive or to keep it would not support such a broader argument. 33 [2005] EWCA Civ This provides that Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. 35 An application in the B case has been pending before the Court of Human Rights since 2006: B v United Kingdom, 36571/06. A statement of facts (including questions to the parties) was issued by the Court in March Moskal v Poland, 10373/05, 15 September 2009.

8 specifying the child s state of health and his need for constant care. In August 2001, the social security board granted the applicant s claim but suspended it as she was still in employment. Two days later she resigned and the pension was put into payment. However, for reasons which are not fully clear from the judgment, the social security board reexamined the case and, in June 2002, issued a further decision revoking the pension from 1 July This was on the basis that the condition with which the child had been diagnosed was not listed in the relevant regulation and did not justify the award of the pension on the basis of the need for constant care. It appears that similar reviews were carried out in a relatively large number of cases. 37 The Polish authorities did not seek repayment of the pension already paid and Ms. Moskal was, in October 2005, awarded a pre-retirement benefit (payable at a lower rate and backdated to October 2002). 38 The decision was upheld by the national courts. The Polish authorities argued that P1-1 did not extend to erroneously acquired rights to pensions and welfare benefits, rights which had never arisen under domestic law. The Court set out the general principles applicable and quoted Stec to the effect that Where an individual has an assertable right under domestic law to a welfare benefit, the importance of that interest should also be reflected by holding Article 1 of Protocol No. 1 to be applicable. 39 The Court went to point out that the fact that a property right was subject to revocation in certain circumstances did not prevent it being a possession (at least until revoked). 40 On the other hand, a conditional claim which lapsed as a result of the non-fulfilment of the condition did not amount to a possession for the purposes of P Applying these principles to the facts of this case, the Court found that a property right was generated by the favourable evaluation of the applicant's dossier attached to the pension application which had been lodged in good faith and by the Social Security Board's recognition of the right. 42 This broad interpretation of the scope of P1-1 might be welcomed by many welfare lawyers. However, the jurisprudential basis for this decision is less than clear. One might speculate that the concept of legitimate expectation might have a role but this was not explicitly referred to by the Court in this case. 43 It is also not clear that the decision is consistent with some of the Court s earlier case law. For example, in the Rasmussen case the Court held that where a benefit was terminated because the person concerned does not satisfy, or ceases to satisfy, the legal conditions laid down in domestic 37 About 120 similar applications are before the ECtHR at [28]. 38 The maximum backdating allowed under Polish law. Again the reason for this delay to 2005 is not explained. 39 At [39]. App. No /01 and 65900/01, Stec and Others v. the United Kingdom, July 2005, ECHR 2005-X, (2005) 41 EHRR SE 295. This is, in fact, a quote from Stec (at [51]) although this is not very clearly acknowledged in the judgment. 40 At [40] citing App. No /96, Beyeler v. Italy, ECHR 2000-I at [105]. 41 App /98, Prince Hans-Adam II of Liechtenstein v. Germany,,ECHR 2001-VIII at [82]-[83], and App. No /05, Rasmussen v. Poland, 28 April 2009 at [71] (in the latter case the loss of a pension based on a false declaration was found not to involve an interference with property rights under P1-1). 42 At [45]. 43 On the interpretation of the concept of legitimate expectation by the Court see A. Moybray, Cases and materials on the European Convention on Human Rights, 2007, at [ 912]-[913].

9 law for the grant of such benefits, there is no interference with the rights under Article 1 of Protocol No However, this case involved an alleged false declaration by the applicant and arguably the different approaches adopted by the Court can be distinguished on these grounds. Ms. Moskal argued that the termination of her pension was an unjustified deprivation of property and sought financial compensation equivalent to the pension which would have been payable up to 2015 when she qualified for a general retirement pension. It was agreed that the revocation of the pension amounted to an interference with the applicant s rights under P The Court had, therefore, to decide if this was in accordance with law, based on a legitimate aim and proportionate to that aim. The Court decided that the decision to revoke the pension was in accordance with Polish law. It also agreed that the objective of correcting a mistake of the social security authorities which had resulted in the applicant unjustly acquiring a right to the... pension pursued a legitimate aim, i.e. to ensure that the public purse was not called upon to subsidise undeserving beneficiaries of the social welfare system without limitation in time. 46 However, the Court ruled that the decision was not proportionate. It held that in the context of property rights, particular importance must be attached to the principle of good governance. It is desirable that public authorities act with the utmost scrupulousness, in particular when dealing with matters of vital importance to individuals, such as welfare benefits and other property rights. In the instant case, the Court considers that having discovered their mistake the authorities failed in their duty to act in good time and in an appropriate and consistent manner. 47 The Court unsurprisingly conceded that as a general principle, public authorities should not be prevented from correcting their mistakes, even those resulting from their own negligence. 48 However, the majority argued that this general principle could not prevail in a situation where the individual concerned is required to bear an excessive burden as a result of a measure divesting him or her of a benefit. 49 It ruled that If a mistake has been caused by the authorities themselves, without any fault of a third party, a different proportionality approach must be taken in determining whether the burden borne by an applicant was excessive. The Court went on to refer to a number of factors including (i) the total loss of her pension which constituted her sole source of income; (ii) the potential risk, in view of her age and 44 App. No /05, Rasmussen v. Poland, 28 April 2009 at [71] citing App. No /98, Bellet, Huertas and Vialatte v. France, 27 April In the latter case, the Court upheld a reduction in pension of seconded civil servants to take account of the pension payable from the country to which they were seconded on the basis that there was no interference with possession under P1-1 (even though France had, in practice, allowed cumulation of both pensions for a number of years). This case is only available in French and does not appear on the English section of the Court s website. 45 At [53]. 46 At [62-3]. 47 At [72]. Note that the relatively long delay (at [69]) in this case ran from September 2001 to June At [73]. The Court appears to have assumed (although without clarifying the basis for its assumption) that the error in this case resulted from the negligence of the authorities. 49 At [73].

10 the economic reality in the underdeveloped region where she lived that she would have considerable difficulty in securing new employment, and (iii) the long delay in determining her entitlement to an alternative early retirement pension. The relevance of factors (ii) and (iii) is somewhat unclear especially as the Court appears to have had no evidence as to the reasons for the delay in granting the new pension. As to the state of the labour market, one might ask whether the decision would have been proportionate if the local labour market had been booming? In view of these considerations, the Court found that a fair balance has not been struck between the demands of the general interest of the public and the requirements of the protection of the individual's fundamental rights and that the burden placed on the applicant was excessive. 50 Not only that but the majority awarded 15,000 - roughly equivalent to an award of pension until 2015 (or at least until her son attained the age of majority in 2012). The minority (led by Judge Bratza, president of the section) disagreed with the majority that the revocation of pension was not proportionate They accepted that the applicant had acted in good faith, had resigned her job following the award of pension and had suffered serious financial consequences as a result of the decision to revoke the pension. The minority was also satisfied that the blame for what had occurred lay exclusively with the social security authorities. 51 The minority accepted that it would have been disproportionate had the authorities sought to recover the pension erroneously paid. However, they argued that it would upset any fair balance if, once having discovered their mistake, the authorities were precluded from ever redressing its effects and were required to perpetuate the error by continuing to pay the pension which had been wrongly granted. This would, as the judgment expressly recognises, not only lead to the unjust enrichment of the recipient but would have an unfair impact on other individuals contributing to the Social Security fund, in particular those who were denied benefits because they failed to meet the statutory requirements; it would also amount to sanctioning an improper allocation of scarce public resources. 52 The decision is a potentially important one in terms of the powers of social security authorities in reviewing awards of benefit. The arguments in this case did not focus on procedural issues as in the famous USA case of Goldberg v Kelly 53 - but rather on the substantive property rights of the applicant. Even assuming that the Court was correct to hold that the claim fell within the scope of P1-1, 54 the decision that the revocation of a pension (to which it was accepted the applicant was not entitled) was in breach of P1-1 is surprising. Clearly, the applicant had been put in a very difficult situation and, it appears, the reason was some failure in the procedures of the social security authorities. In this particular situation, the applicant had resigned from her job on the basis of the decision to award the 50 At 76]. 51 At [3] of the minority opinion. Unfortunately the exact circumstances are not explained. 52 At [4] U.S. 254 (1970). 54 One might in principle welcome this approach so as to provide a review of decisions to revoke a pension. However, the Court s judgment is lacking in a clear rationale as to why a possession to which a person was never actually entitled in national law will be considered as a possession.

11 pension. Nonetheless, the implications of the Court s decision are that where a social security authority incorrectly and through its own error awards a pension to a person in the difficult circumstances of the applicant, it cannot revoke the pension at all. This is unacceptable and, as the minority points out, arguably does not represent a fair balance between the public interest and individual rights. On the (limited) basis of what is set out in the judgement, while the social security authorities were (apparently) responsible for the original erroneous award, it is not clear the authorities breached the principles of good governance in revoking the pension. Clearly, the applicant should have been awarded the alternative pension to which she would have been entitled from the date of the revocation. However, this aspect of the case was not investigated by the Court and the reasons for the delay in awarding this pension are not clear. 55 Wieczorek v Poland More recently in Wieczorek the Court considered the lawfulness of a decision to revoke the applicant s disability pension on the basis that she was no longer disabled. 56 Ms. Wieczorek had been in receipt of a pension for 15 years and the Court accepted that the decision to revoke her pension amounted to an interference with her possessions within the meaning of P This interference was based on Polish law and the Court therefore turned to whether it pursued a legitimate aim. It took the view that the purpose was to protect the financial stability of the social insurance system and ensure that it was not threatened by subsidising, without any temporal limitations, the pensions of recipients who with the passage of time had ceased to meet the relevant statutory requirements and was satisfied that this involved a legitimate aim. 58 In this case, the Court accepted that it is permissible for States to take measures to reassess the medical condition of persons receiving disability pensions with a view to establishing whether they continue to be unfit to work, provided that such reassessment is in conformity with the law and attended by sufficient procedural guarantees. 59 Allowing unqualified claimants to continue to receive benefits said the Court - would lead to their unjust enrichment; be unfair to persons contributing to the social insurance system; and sanction and improper allocation of public funds. 60 However, the Court felt it necessary to note that in contrast to Ásmundsson the applicant was not completely divested of her 55 The minority speculate that it may have been due to the legal proceeding brought by the applicant. 56 App. No /05, Wieczorek v Poland, 8 December At [61]. 58 At [63]. 59 At [67]. 60 Ibid.

12 entitlement to pension. 61 Nor was she required to repay any amount. Overall the Court was satisfied that a fair balance had been struck and there was no violation of P1-1. This decision taken with Moskal indicates that the Court will subject decisions to terminate benefits to close scrutiny. For the purposes of this article it is interesting to note that the Court in Moskal would have unanimously prevented any attempt to recover benefits incorrectly paid and in Wieczorek the Court noted the fact that the applicant was not required to repay any benefits as one factor going to show that a fair balance has been achieved between the public interest and the interests of the claimant. Reconsidering B v Secretary of State for Work and Pensions In the B case the Court of Appeal upheld the view of a Tribunal of Social Security Commissioners that recovery under s. 71 arose where a person had failed to disclose a material fact (whether or not she was able to appreciate that it should be disclosed). 62 It had been argued that such an interpretation of the law would be contrary to the European Convention. Ms. B was in receipt of child benefit and income support (including payments in respect of her three children). The children were taken into care and ceased living with her and there was a general legal obligation to disclose such facts to DWP. However, she had a severe learning difficulty and while it was accepted that she was aware of the relevant facts, she did not understand that the placing of her children in care was a material fact that she needed to disclose. It was argued that a claimant who is unable to understand that she has an obligation to report something cannot fail to disclose it within the meaning of s.71(1) but this was rejected by the Court as a matter of statutory interpretation. On the human rights issue, it was argued that this strict interpretation would involve a breach of Article 14 of the Convention 63 taken with P1-1 in that (i) the legislation discriminated between persons who were unable to report facts because they did not have the mental capacity to be aware of them and persons (like Ms. B) who were aware of the facts but did not appreciate that they should be disclosed; and/or (ii) the law treated identically people who were capable and incapable of understanding that there was something they were required to disclose. As will be noted, it was not argued before the Court of Appeal that the decision to asses and recover an overpayment involved a breach of P1-1 itself. 64 This was perhaps on the basis of the English jurisprudence at this pre-stec, pre-rjm period. However, it was still necessary to establish if P1-1 was engaged as Article 14 is not, of course, free standing. Here the Court of Appeal found that money which should not have been paid to the appellant in the first place 61 At [71]. In fact she was allowed a continuation of pension for a further two years. Kjartan Ásmundsson v. Iceland, 60669/00, 39, ECHR 2004-IX - although this case concerned a legislative change in the qualification conditions rather than a change in the claimant s circumstances. 62 B v Secretary of State for Work & Pensions [2005] EWCA Civ Article 14 provides that The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status. 64 See Sedley LJ at [20]

13 did not amount to a possession (leaving aside the then pending question as to whether noncontributory benefits could amount to a possession in principle). 65 Indeed, counsel for Ms. B did not even argue that the possession involved was the money originally (incorrectly) paid to her. 66 Rather it was argued that the possession was her current assets out of which repayment was sought. 67 This again presumably reflects a tactical choice 68 but one which would not now appear to be necessary in the light of Wieczorek. In any case, it is an argument with little merit. As the Court of Appeal pointed out, if the overpayment did not involve a possession, repayment of that amount did not deprive her of her possessions but merely recognised that her possessions did not properly include a sum representing the overpayment. 69 The Court was prepared to accept that mental capacity was a ground falling within the scope of Article but arguably correctly - rejected the first suggested ground of discrimination. Sedley LJ argued that a comparison between people who are unable to report facts because they are not aware of them and people who, like Ms. B, are unable to report them for some other reason did not compare like with like. He argued that the proposition that one cannot report something one does not know was a simple proposition of logic. 71 In contrast, the proposition that one cannot report something one does not appreciate one is obliged to report depended on often difficult questions of cognitive capacity and moral sensibility which vary from person to person. The contention that it was unreasonable not to distinguish between the two was he argued - untenable. However, had he found the issue to be within the scope of a Convention right, he would have needed to be persuaded that the distinction made by the legislation between those capable and those not capable of appreciating their obligation to report a change in circumstances was reasonable and justifiable. 72 The implications of the recent ECHR decisions in Moskal and, in particular, Wieczorek are that the Court of Appeal was incorrect to hold that the matter did not fall within P1-1. Wieczorek is clear authority for the proposition that where a person is entitled to a benefit, a termination of or reduction in that benefit because of a change of circumstances involves an interference with those possessions. The only distinction between the two cases is that Wieczorek involved a change in the claimant s disability status whereas B involved the claimant s family or dependency status but nothing would seem to turn on this point. Therefore, a claimant in the position of Ms. B could now argue that a decision to assess an 65 At [22]. 66 Buxton LJ at [52]. 67 It appears that a similar argument has been made before the Court of Human Rights. See Statement of Facts. 68 A correct one given that Buxton LJ described the former argument as unpromising, and unattractive. 69 Buxton LJ at [53]. 70 Mental capacity, although not listed in art. 14, is arguably at least as sensitive a personal characteristic, in relation to discrimination, as race or sex. At [25]. 71 At [23]. 72 At [26]. As Sedley LJ pointed out at [24] it is in fact rather the lack of distinction between the two which is open to question. Given his decision that the issue was not within the scope of the Convention, he did not pursue this enquiry.

14 overpayment constituted an infringement of P1-1 taken on its own as in Moskal and Wieczorek or a breach of Article 14 taken with P1-1. The Court of Appeal was clearly correct to accept that mental capacity is a ground for the purposes of Article Therefore, the discrimination issue should turn on whether there is a reasonable and objective justification for the failure to treat people lacking in the mental capacity to appreciate that they should report a fact differently from those who can appreciate this fact. The state s justification in B was basically that a line had to be drawn somewhere and it was within the state s margin of discretion as to where it should be drawn. This, without more, is rather unconvincing. In addition, the tone of the Court of Human Rights recent case law would suggest that imposing an obligation to repay money overpaid through no fault of the claimant is an unjust interference with that person s possessions under P1-1 so that no fault recovery of overpaid benefits may be questionable even where a person has mental capacity but, for some other reason (not involving moral culpability), 74 incurs an overpayment. Conclusion As highlighted by the range of reports and studies published on this issue, the question of overpaid benefits is clearly an important policy issue. However, despite the importance of the issue, relatively little attention has been paid to the question of where and in what circumstances overpaid benefits should be recovered. The statutory provisions (s. 71 of the Social Security Administration Act 1992) are quite broad but, as shown in the B case which overturned a long-held interpretation of these provisions, are open to different understandings. It is far from clear that the current legislation reflects the considered views of Parliament as to when (and why) overpayments should be made recoverable. In response to the attention focussed on this issue DWP has focussed on preventing overpayments in the first place, removing overpayments where these arise and recovering overpayments. The recent attempts to use the common law is indicative of an attempt to recover overpayments in a very wide ranging set of circumstances regardless of whether there is any fault or (moral) failure on the part of the claimant. The Court of Appeal decision in CPAG provides welcome clarification that, at least as to payments consequent on an award, common law powers of recovery do not exist. However, the recent decisions of the European Court of Human Rights would suggest that the Convention on Human Rights may impose more sweeping restrictions on the right to recover benefit where overpayment has arisen other than because of any fault on the part of the claimant. 73 See now R v Secretary of State for Work and Pensions ex parte RJM [2008] UKHL The Court of Human Rights obviously has not explored the boundaries of what this might involve.

15 Annex 1: Text of s. 71 of the Social Security Administration Act 1992 Section 71 as amended reads as follows: Overpayments general 71. (1) Where it is determined that, whether fraudulently or otherwise, any person has misrepresented, or failed to disclose, any material fact and in consequence of the misrepresentation or failure (a) a payment has been made in respect of a benefit to which this section applies; or (b) any sum recoverable by or on behalf of the Secretary of State in connection with any such payment has not been recovered, the Secretary of State shall be entitled to recover the amount of any payment which he would not have made or any sum which he would have received but for the misrepresentation or failure to disclose. (2) Where any such determination as is referred to in subsection (1) above is made, the person making the determination shall [in the case of the Secretary of State or a tribunal, and may in the case of a Commissioner or a court] (a) determine whether any, and if so what, amount is recoverable under that subsection by the Secretary of State, and (b) specify the period during which that amount was paid to the person concerned. (3) An amount recoverable under subsection (1) above is in all cases recoverable from the person who misrepresented the fact or failed to disclose it. (4) In relation to cases where payments of benefit to which this section applies have been credited to a bank account or other account under arrangements made with the agreement of the beneficiary or a person acting for him, circumstances may be prescribed in which the Secretary of State is to be entitled to recover any amount paid in excess of entitlement; but any such regulations shall not apply in relation to any payment unless before he agreed to the arrangements such notice of the effect of the regulations as may be prescribed

16 was given in such manner as may be prescribed to the beneficiary or to a person acting for him. (5) Except where regulations otherwise provide, an amount shall not be recoverable under... regulations under subsection (4) above unless (a) the determination in pursuance of which it was paid has been reversed or varied on an appeal or [has been revised under section 9 or superseded under section 10 of the Social Security Act 1998]; and (b) it has been determined on the appeal or [under that section] that the amount is so recoverable. (5A) Except where regulations otherwise provide, an amount shall not be recoverable under subsection (1) above unless the determination in pursuance of which it was paid has been reversed or varied on an appeal or [has been revised under section 9 or superseded under section 10 of the Social Security Act 1998]. (6) Regulations may provide (a) that amounts recoverable under subsection (1) above or regulations under subsection (4) above shall be calculated or estimated in such manner and on such basis as may be prescribed; (b) for treating any amount paid to any person under an award which it is subsequently determined was not payable (i) as properly paid; or (ii) as paid on account of a payment which it is determined should be or should have been made, and for reducing or withholding any arrears payable by virtue of the subsequent determination; (c) for treating any amount paid to one person in respect of another as properly paid for any period for which it is not payable in cases where in consequence of a subsequent determination (i) the other person is himself entitled to a payment for that period; or (ii) a third person is entitled in priority to the payee to a payment for that period in respect of the other person,

17 and for reducing or withholding any arrears payable for that period by virtue of the subsequent determination. (7) Circumstances may be prescribed in which a payment on account by virtue of section 5(1)(r) above may be recovered to the extent that it exceeds entitlement. (8) Where any amount paid [, other than an amount paid in respect of child benefit or guardian s allowance,] is recoverable under (a) subsection (1) above; (b) regulations under subsection (4) or (7) above; or (c) section 74 below, it may, without prejudice to any other method of recovery, be recovered by deduction from prescribed benefits. (9) Where any amount paid in respect of a [couple] is recoverable as mentioned in subsection (8) above, it may, without prejudice to any other method of recovery, be recovered, in such circumstances as may be prescribed, by deduction from prescribed benefits payable to either of them. (10) Any amount recoverable under the provisions mentioned in subsection (8) above (10A) Where (a) if the person from whom it is recoverable resides in England and Wales and the county court so orders, shall be recoverable by execution issued from the county court or otherwise as if it were payable under an order of that court; and (b) if he resides in Scotland, shall be enforced in like manner as an extract registered decree arbitral bearing a warrant for execution issued by the sheriff court of any sheriffdom in Scotland. (a) a jobseeker s allowance is payable to a person from whom any amount is recoverable as mentioned in subsection (8) above; and (b) that person is subject to a bankruptcy order, a sum deducted from that benefit under that subsection shall not be treated as income of his for the purposes of the Insolvency Act (10B) Where

18 (a) a jobseeker s allowance is payable to a person from whom any amount is recoverable as mentioned in subsection (8) above; and (b) the estate of that person is sequestrated, a sum deducted from that benefit under that subsection shall not be treated as income of his for the purposes of the Bankruptcy (Scotland) Act (11) This section applies to the following benefits (a) benefits as defined in section 122 of the Contributions and Benefits Act; (aa) subject to section 71A below, a jobseeker s allowance; (ab) state pension credit; (b)..., income support; (c), (d) ; (e) any social fund payments such as are mentioned in section 138(1)(a) or (2) of the Contributions and Benefits Act; and (f) child benefit. (12) In this section, couple has the meaning given by section 137(1) of the Contributions and Benefits Act. The full amendment history of the section is set out at 40(1) Halsbury Statutes,