The Child Poverty Action Group (Respondent) v Secretary of State for Work and Pensions (Appellant) 2010

Summary

12 January 2011

The Supreme Court has upheld the decision, won on appeal by the Child Poverty Action Group, on common law overpayment recovery.

Child Poverty Action Group (CPAG) had succeeded in overturning a decision allowing the Department for Work and Pensions to issue letters requesting repayment, at common law, of money paid by mistake where Section 71 of the Social Security Administration Act 1992 is intended to be used as a means of recovery.

Background

Child Poverty Action Group (CPAG) applied for judicial review regarding the practice of the Secretary of State for Work and Pensions (DWP), of seeking to recover overpaid Social Security benefit by methods other than under Section 71 of the Social Security Administration Act 1992.

Section 71 of the 1992 Act gives the DWP powers to recover, subject to specified conditions, a payment of any relevant benefit from any person who has misrepresented or failed to disclose any relevant fact.

The DWP argued that Section 71 did not prevent it from claiming repayment, at common law, of money paid by mistake. In response the CPAG contended that this practice was unlawful where the original payment was made "pursuant to and in accordance with a valid determination" and where the pre-conditions for recovery under Section 71 are not met.

What this meant in practice was that the DWP wrote standard letters to claimants who were considered to have been overpaid benefit, but who had not misrepresented or failed to disclose any relevant fact.

These letters claimed that the DWP had a right to recover an overpayment under common law. Between March 2006 and February 2007 65,000 common law recovery letters were sent.

The High Court decision

The case went to the High Court as R on the application of Child Poverty Action Group v Secretary of State for Work and Pensions 2009.

Michael Supperstone Q.C. (Sitting as Deputy High Court Judge) dismissed CPAG's claim, thus allowing the DWP to continue to issue common law overpayment recovery letters should it choose to do so.

"In my judgment a common law power to recover the overpayment of benefit paid by mistake of fact or law exists. Accordingly in such cases the Defendant is entitled to ask for money back on the basis that the recipient was not entitled to receive it. So understood the practice of sending the standard form letter is not unlawful."

Child Poverty Action Group then appealed the decision to the Court of Appeal, which was heard as Child Poverty Action Group, R (on the application of) v Secretary of State for Work and Pensions [2009]. The DWP suspended the issue of "common law recovery" letters pending the outcome of the new decision.

The Court of Appeal decision

The Court of Appeal allowed CPAG's appeal, upholding Section 71 of the Social Security Administration Act 1992 as the only legal avenue by which the DWP can recover overpayments. The DWP therefore had to stop issuing 'common law recovery' letters in section 71 cases.

The Secretary of State then appealed to the Supreme Court.

The Supreme Court decision

A panel of five judges dismissed the Secretary of State's appeal, confirming Section 71 as the only avenue to recovery in such cases and upholding the earlier Court of Appeal decision.

"15. With regard to Mr Eadie’s point that a stronger moral argument for recovery of overpayments may exist in cases of the knowing receipt of mistaken awards than, say, in cases of innocent misrepresentation, I would pose these questions.

First, this being so, why would Parliament not prescribe the same stronger recovery powers for these cases as for cases of misrepresentation and nondisclosure and include them within the statutory recovery scheme?

Secondly, why would Parliament not make express provision for this separate category of cases, similarly prescribing the conditions for the Secretary of State’s entitlement to recovery, such as that the claimant knew that he had been overpaid and/or that he had not changed his position?

The answer to both must surely be that in the case of recipients of social security benefits Parliament from first to last has taken the view that only those who themselves brought about the overpayments should be liable to reimburse them and that in their cases reimbursement should be made easily enforceable. Such a scheme is entirely rational. For better or for worse those benefiting from official errors are not subject to recovery proceedings. I am persuaded that section 71 does indeed necessarily exclude whatever common law restitution rights the Secretary of State might otherwise have."

Overpayments not covered by the decision

The judgment applies to all cases where section 71 is used as a means of recovery. This includes all social security benefits except for housing benefit and council tax benefit. Tax credit overpayments are also not covered by the decision.

For the ruling to apply the overpayment must have been made 'in pursuance of a benefit award'. It does not apply to the recovery of overpayments resulting from other errors such as those in relation to duplicate payments of benefit or interim payments. Common law recovery letters can still be issued in these cases.

Government's intention to change the law

In response to a parliamentary question from Stephen Timms asking whether universal credit payments attributable to official error would be recoverable from recipients as debts Minister for Employment Chris Grayling replied:

"As announced in the joint DWP/HMRC strategy paper, 'Tackling fraud and error in the benefit and tax credits systems', we will be bringing forward proposals in the Welfare Reform Bill to widen the range of working age benefit overpayments we can recover and this will include those resulting from official error. While the Department must take responsibility for its mistakes, that does not give people the right to keep taxpayers' money that they are not entitled to."

[source Hansard 10 Jan 2011 : Column 137W]

More information

Note: for pdf files you will need to download adobe acrobat reader. To convert the pdf to alternative formats or for more information on accessibility go to adobe accessibility.