Common law rights – Overpayment of benefits

R (on the application of Child Poverty Action Group) v Secretary of State for Work & Pensions: Sup Ct (Lords Phillips (president), Rodger, Brown, Kerr, Sir John Dyson): 8 December 2010

The appellant secretary of state appealed against a decision ([2009] EWCA Civ 1058, [2010] 1 WLR 1886) that in relation to social security benefits that had been overpaid by mistake, the secretary of state could not resort to common law to seek recovery.

The secretary of state enforced recovery of any overpayment of social security benefits under section 71 of the Social Security Administration Act 1992, where it was determined that a person misrepresented or failed to disclose a material fact. The secretary of state then adopted a practice of writing letters to benefit claimants he considered had been overpaid benefit by mistake but who had neither misrepresented or failed to disclose a relevant fact. The letters were accompanied by a document stating that the money was recoverable under common law. The Court of Appeal held that section 71 provided the sole circumstances in which the secretary of state was entitled to recover an overpayment made pursuant to an award; those included only cases where the original award was obtained by misrepresentation or non-disclosure and it excluded cases of receipt, even knowing receipt, of an overpayment due to a mistaken award. The secretary of state could not resort to common law to recover social security benefit which had been overpaid by mistake. The secretary of state submitted that the Crown’s common law right to recover benefits overpaid by mistake of fact or law was not excluded by the legislation either expressly or by necessary implication, there was nothing inconsistent between the express right of recovery in cases of misrepresentation and non-disclosure provided by section 71(1) and the common law right to seek recovery in other cases.

Held: (1) Section 71 provided a comprehensive and exclusive scheme for dealing with all overpayments of benefit made pursuant to awards. The interpretation of section 71 had to be considered against the background that at the time it was enacted there was a division of functions between the adjudication of awards and their payment. Adjudication officers were responsible for all decisions concerning the making of awards, and the secretary of state for their payment. It was only by the enacting of the Social Security Act 1998 that the secretary of state was made responsible for both functions. Thus, when the 1992 act was drafted, as the law then stood, there was no possibility of mistake on the part of the secretary of state in the calculation of the award since he played no part in that and thus no relevant mistake on which he could have founded an action at common law. The statutory right to recovery therefore introduced by the 1992 act was by definition intended to be exhaustive and was limited to recovery of payments made pursuant to an award by an adjudicating officer, which was in error by reason of misinterpretation or non-disclosure. Simple error on the part of the adjudicating officer was excluded. The only material difference after 1998 was that the secretary of state determined the awards. That was not accompanied by any change in the statutory criteria for recovery of overpayments and there was no basis for holding that, after 1998, parliament intended to allow a common law right of recovery. Indeed, the inevitable inference was that, post the 1998 act, parliament intended the same exclusive code to continue. In the case of recipients of social security benefits, parliament, from first to last, had taken the view that only those who themselves brought about the overpayments should be liable to reimburse them and that in those cases reimbursement should be made easily enforceable. Such a scheme was entirely rational. For better or worse those benefitting from official errors were not subject to recovery proceedings (see paragraphs 13, 15, 24, 25 of judgment).

(2) Section 71 was intended to be an exhaustive code. Common law restitution claims were, at the best of times, far from straightforward, and it seemed inconceivable that parliament would have contemplated leaving the suggested common law restitutionary route to the recovery of overpayments available to the secretary of state to be pursued by way of ordinary court proceedings, alongside the carefully prescribed scheme of recovery set up in the statute. Such an arrangement would create well-nigh insoluble problems, Deutsche Morgan Grenfell Group Plc v Inland Revenue Commissioners [2006] UKHL 49, [2007] 1 AC 558, and Customs and Excise Commissioners v Total Network SL [2008] UKHL 19, [2008] 1 AC 1174 ­considered (paragraph 14).

Appeal dismissed.

James Eadie QC, Andrew Henshaw (instructed by DWP/DH Legal Services) for the appellant; Richard Drabble QC, Richard Turney (instructed by the Child Poverty Action Group) for the respondent.