SB v Secretary of State for Work And Pensions

Under regulation 5(1) of the Social Security (Payments on account etc) Regulations 1988, an overpayment may be offset only against arrears payable under or by virtue of the subsequent determination. Arrears which arise because benefit payments were suspended during an investigation are distinct. They cannot be used to reduce an irrecoverable overpayment, even where the later determination is assumed to supersede the earlier award retrospectively. The statutory scheme should, where possible, avoid arbitrary results depending on the timing of suspension and decision-making.

SB received disability living allowance, including the care component, while attending a funded residential college. His care entitlement was reduced for periods spent in residential accommodation, and payments were later suspended after the change of circumstances came to light. The Department made a superseding decision and calculated an overpayment, but determined that part of it was irrecoverable under section 71(1) of the Social Security Administration Act 1992.

The Worcester Unified Appeal Tribunal upheld the calculation. The Social Security Commissioner, S J Pacey, in decision CDLA/3742/2004, upheld the offset of approximately £529 representing care allowance due during a later period at home. The central issue before the Court of Appeal was whether those sums were arrears under the subsequent determination and could properly be offset against the irrecoverable overpayment.

1. Appeal allowed unanimously. Lord Justice Waller delivered the judgment; Lady Justice Hallett and Lord Justice Lawrence Collins agreed.
2. The court noted serious doubts about whether the October 2003 decision had retrospective effect. That issue was not decided because both parties sought a ruling on regulation 5 on the common assumption that the later decision had superseded the earlier award retrospectively.
3. Section 71(6)(b) of the Social Security Administration Act 1992 empowered regulations to deal with overpaid amounts and to reduce or withhold arrears payable by virtue of a subsequent determination. Regulation 5(1) of the Social Security (Payments on account etc) Regulations 1988 had to be construed within that statutory framework.
4. The court distinguished between arrears replacing benefit overpaid during the relevant overpayment period and arrears which would have been paid after that period but for a suspension of payments. The latter were arrears caused by the suspension, not arrears payable by virtue of the subsequent determination. Regulation 5(1) therefore did not authorise their offset against an irrecoverable overpayment.
5. Regulation 16(3) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 supported recognising the distinction between arrears caused by suspension and other arrears, although the court acknowledged that the regulations were not easy to interpret. The construction adopted avoided arbitrary outcomes depending on administrative delay.
6. The wording that benefit already paid was to be treated as paid on account was also consistent with matching each payment against what would have been due at the same time under the superseded decision. The Department was not entitled to offset the £529 against the irrecoverable overpayment.

1. Court of Appeal (Civil Division) — In [2007] EWCA Civ 89, the appeal from the Social Security Commissioner was allowed.
2. Social Security Commissioner — S J Pacey, decision dated 12 December 2005, CDLA/3742/2004, upheld the offset of approximately £529 against the overpayment.
3. Worcester Unified Appeal Tribunal — The tribunal’s decision of 10 June 2004, with reasons issued in September 2004, upheld the decision that the balance of the overpayment was irrecoverable and included the disputed sum in the offset calculation.