Hinchy v Secretary of State for Work and Pensions

Section 71 of the Social Security Administration Act 1992 creates a statutory right to recover benefit overpayments only where there has been a material misrepresentation or failure to disclose, and the payment was made in consequence. It does not provide recovery for administrative error alone.

Disclosure requires revelation of a fact previously unknown to the relevant recipient. For actual departmental decisions, knowledge held by officials acting for the Secretary of State is relevant, and the Secretary of State cannot disclaim knowledge of his own decisions. The route by which information is communicated is judged objectively. Misrepresentation is distinct: departmental knowledge does not itself prevent an active misrepresentation, but causation must still be established.

The appellant received income support including a severe disability premium because she was receiving the middle-rate care component of disability living allowance. That award expired on 13 October 1998 and was not renewed, but the premium continued until 3 July 2000. The Secretary of State sought recovery under section 71 of the Social Security Administration Act 1992.

The appeal followed the Whittington House Appeal Tribunal’s rejection of the appellant’s appeal and the Social Security Commissioner’s dismissal of her further appeal on 3 May 2002. The central questions were whether there could be a failure to disclose where the Department already knew the relevant fact, and whether signing the benefit order-book counterfoil constituted a material misrepresentation causing the later payment.

Appeal allowed in part. The Court of Appeal set aside the Commissioner’s decision. The overpayment for 13 October 1998 to 26 June 2000 was not recoverable. The issue whether the payment for 27 June to 3 July 2000 was recoverable by reason of misrepresentation was remitted.

1. Statutory conditions. Section 71 of the Social Security Administration Act 1992 provides a special recovery route. Recovery requires both a material misrepresentation or failure to disclose and a payment made in consequence of that act or omission. The provision does not make an overpayment recoverable where it resulted solely from administrative error.
2. Meaning of disclosure. Disclosure involves revealing a fact previously unknown to the recipient. A person cannot fail to disclose a fact to an official who already knows it. The result does not depend on whether the person making the statement realised that the information was already known. The Court relied on and applied the reasoning in Foster v Federal Commissioner of Taxation [1951] 82 CLR 606 and Condon v Commissioner of Taxation [2000] FCA 1291.
3. Departmental knowledge. The relevant recipient is the official or officials responsible for the decision. Under the post-1998 statutory scheme, decisions on relevant benefits were entrusted to the Secretary of State: Social Security Act 1998, section 8(1)(a) and (2). He could not disclaim knowledge of his own decisions merely because officials worked in separate offices. The principle of departmental attribution was supported by Carltona Ltd v Commissioners of Works [1943] 2 AER 560 and M v Home Office [1994] 1 AC 377.
4. Objective communication standard. A claimant need not identify the precise official handling the claim. Information is disclosed if given in circumstances in which it is objectively reasonable to believe that it will reach the relevant decision makers. The Court accepted the thrust of Decision R(SB) 15/87, while explaining that its formulation was not exhaustive. Maladministration is not taken into account in deciding what communication route was reasonable.
5. Application. The disability allowance decision makers knew that the award was for a fixed period and had not been renewed. That knowledge was knowledge of the Secretary of State, and it was reasonable to expect it to reach the income support decision makers. There was therefore no failure to disclose, and no need to investigate whether the internal card had actually been sent.
6. Misrepresentation. The disclosure analysis did not determine the separate misrepresentation issue. An active misrepresentation concerning a previous decision may remain a misrepresentation even if the Secretary of State knows that decision; payment must nevertheless have been made in consequence of it, even if the misrepresentation was only one cause. The tribunal had to determine whether the counterfoil made a false statement of material fact or was merely a receipt, whether any oral statement altered the representation, and whether the representation caused the payment. Further evidence concerning the Post Office’s role as paying agent and the flow of information was required.

• Court of Appeal (Civil Division), [2003] EWCA Civ 138: allowed the appeal in part, set aside the Commissioner’s decision, declared the earlier overpayment period non-recoverable, and remitted the later misrepresentation issue.
• Social Security Commissioner: on 3 May 2002 dismissed the appellant’s appeal, following CG 4494/99 as binding on the tribunal.
• Whittington House Appeal Tribunal: rejected the appellant’s appeal on 22 August 2001 and found a material failure to disclose causing the overpayment.