‘Legacy’ overpayments – a change in the weather?

Legacy benefit overpayments

In the ‘old’ or ‘legacy’ benefit system, most overpayments were recoverable only where the overpayment had been caused by ‘misrepresentation’ or ‘failure to disclose’ a material fact.1 This is because section 71(1) of the Social Security Administration Act 1992 requires that the overpayment be made ‘in consequence of’ (ie, be caused by) that misrepresentation or failure.

By contrast, in the UC system, the rule is simply that any amount of overpaid benefit may be recovered. This is because of the different wording in section 71ZB of the 1992 Act.

In legacy benefits, therefore, arguments that there was no failure to disclose a fact, or that the failure did not actually cause the overpayment, may provide a defence against overpayment recovery. Recent caselaw has considered these in the context of official computer interfaces with DWP offices.

Failure to disclose

Claimants sometimes suppose that something already known in the DWP can be assumed also to be known across all DWP offices – ie, so that there can have been no failure on their part to disclose facts already known. But that has not been supported in the caselaw. It has long been established that the claimant’s duty is to disclose to the office handling the benefit, and therefore cannot assume that a fact already known in another benefit office will be known to the office handling the claim. So, for example, a claimant on income-related employment and support allowance (ESA) cannot assume that the office handling the claim will know that their personal independence payment entitlement has ended, and so that their premiums should be adjusted. The key case here is the decision of the House of Lords in Hinchy v Secretary of State for Work and Pensions [2005] UKHL 16.2

Hinchy and the claimant’s duty

Giving the lead decision in Hinchy, Lord Hoffmann depicted a relatively simple – and arguably somewhat harsh – environment for claimants:

‘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. Her duty is to comply with what the tribunal called the “simple instruction in the order book”.’

After Hinchy

Hinchy was decided in 2005. It dealt with a world in which computer interfaces between offices were not as sophisticated as they are now. Could a claimant now argue that a fact already known somewhere in the DWP should be taken (deemed) already to be known in the office handling the claim? That would be too simplistic, and it remains that Hinchy has not formally been overturned.

But there are clear signs in recent caselaw of a willingness to reconsider this in the contemporary context.

Time for a change?

The first indication of this was in 2020, and a decision of the Northern Ireland Commissioners in SK v Department of Communities (ESA) (see Bulletin 279, p11).3 The claimant was entitled to income-related ESA including the severe disability premium (SDP). But he did not report to the ESA office the ending (by the Department for Social Development, the Northern Ireland equivalent of the DWP) of his entitlement to the middle rate of the care component of disability living allowance (DLA). His ESA continued to include the SDP and that was an overpayment. Holding that, on the facts (which included a computer interface between the DLA and ESA offices, which had been accessed by officials in this case), the claimant had not failed to disclose and that the overpayment was therefore not recoverable from him, Commissioner Stockman considered that Hinchy no longer counted against the claimant. That decision, he held:

‘addressed a disjointed departmental administration in the period from 1993 to 1998 passing information about DLA awards around on pieces of card...The evidence in this case indicates that that system has been consigned to the past...it is plainly time that the factual circumstances underpinning the House of Lords decision in Hinchy are distinguished in order to reflect the reasonably expected standards of 21st century benefits administration.’

Most recently

The suggestions made in SK have most recently been picked up (in the Great Britain context) by Judge West in MW v SSWP (ESA) (see Bulletin 294, p11).4 The facts involved a claimant, getting income-related ESA, who was overpaid the SDP after his adult daughter moved in with him – ie, so that he no longer counted as living alone. The claimant sought to refute a finding of failure to disclose that fact, by relying on the fact that his daughter was herself entitled to ESA and arguing that meant her disclosure regarding her own claim should also count as disclosure for him. But there was no evidence that internal DWP arrangements would have resulted in the daughter’s claim information being linked to the claimant’s – ie, because no such arrangements existed. The judge also pointed to the fact that in SK there was evidence that the computer interface had been accessed, so that the ESA office did know about the change in the claimant’s DLA. SK was therefore clearly distinguished on the facts. But commenting more widely, Judge West considered that there was force in the view expressed in SK that time had moved on since Hinchy. Again, the increasing sophistication of computerisation was relevant:

‘At some point the Upper Tribunal will have to grapple with the decision in Hinchy in the light of 21st century developments in computer technology. That was very much an analogue decision relating to a paper-based system and the question which will fall for decision is how it now translates into the computerised and digital age. This case, however, is not an appropriate vehicle for essaying that decision.’

Judge West summed up:

‘It is plainly time that the factual circumstances underpinning the decision in Hinchy are considered afresh in order to reflect the reasonably expected standards of 21st century benefits administration. In that context in the appropriate case it will have to be determined, on the appropriate facts, whether and to what extent a social entitlement claimant in 2023 is, or is not, entitled to make any assumptions about the internal administrative arrangements of the Department and in particular whether (a) a claimant is, or is not, entitled to assume the existence of efficacious (if not infallible) channels of communication between one office and another and (b) a claimant is, or is not, entitled to assume that when a decision is received in relation to one benefit, the Department’s modern computerised systems will not just have communicated that decision to the individual claimant, but also to any other branches of the departmental administration where that decision has an impact.’

Causation and common sense

Even if, applying Hinchy, the DWP cannot be deemed to have known the relevant facts, it remains that if a relevant computer interface was in operation, claimant failure may not have been the actual cause of the overpayment. In the recent WS v SSWP [2023] UKUT 81 (AAC) (see p12), Judge Church refused the claimant’s appeal, on the basis that by the time the relevant DWP office actually accessed the material transmitted by computer interface (real-time information from HM Revenue and Customs), the overpayment had already occurred. So as a matter of common sense, the cause of the overpayment of contributory ESA remained the claimant’s original failure to disclose the fact that he had started to receive an occupational pension. However, in more general terms, the judge cited the decision in SSWP v SS (SPC) [2013] UKUT 272 (AAC), where Judge Mark said:

‘Even when the relevant office of the DWP has all the relevant information but fails to act promptly on it, and even where that information has been supplied late by the claimant, as a matter of strict logic the original breach of duty by the claimant remains a cause of the overpayment because had the duty been performed the overpayment would never have been made. Nevertheless, at least by that stage it is generally accepted that the failure of the DWP to act with reasonable speed breaks the chain of causation. What in my judgment is really meant by breaking the chain of causation applying the common sense required the authorities referred to by me in GJ v Secretary of State [2010] UKUT 107 (AAC) is that a situation has been reached where intervening factors mean that it would not be right as a matter of common sense, and in all the circumstances, to hold the claimant responsible for subsequent overpayments.’

What now?

Hinchy has not been disapproved, and, as a matter of good advice, claimants should continue to disclose relevant changes in their circumstances to the office handling their claim. The post-Hinchy developments discussed here will not avail claimants in the UC system, where overpayment recovery is not dependent on claimant error or failure. But it is clear that there is an argument to be had, in some future case before the Upper Tribunal, about the balance to be struck between a claimant’s duty to disclose and whether and when reasonable assumptions can be made about 21st century benefit administration.