CPAG wins appeal on overpayment recovery

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CPAG wins appeal on overpayment recovery
We are delighted to have won our legal bid to stop the Government clawing back millions of pounds in benefits overpaid through DWP errors. CPAG brought the case after 65,000 benefit claimants received letters threatening court action if they did not pay back the money - which caused considerable distress to thousands of families with children. Judges in the Court of Appeal ruled the Government had no power to recoup the overpayments unless they were the result of misrepresentation or fraud. They also ordered benefits officials not to send warning letters in future. However, the Government is now appealing the decision.

Click here for further details and factsheet

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Re: CPAG wins appeal on overpayment recovery

Overpayment Recovery Test Case Between March 2006 and February 2007 the Department for Work and Pensions (DWP) wrote to over 65,000 claimants telling them it could take them to court under common law if they did not pay back overpayments of benefit. The letters say the money was paid due to DWP error and/or is not recoverable under social security law.
In social security law, the test for when the DWP can recover overpayments of relevant benefits is set out in section 71 Social Security Administration Act.. The test in s71 broadly allows for recovery where the claimant has misrepresented or failed to disclose a material fact. Importantly the claimant has a right to appeal to a tribunal against a decision that an overpayment is recoverable under this test. If the overpayment is found to be recoverable under this test there are a number of ways the DWP can recover it including through deductions from current or future benefit payments.
The DWP accepted in the letters it wrote that the overpayments fell outside the test in s 71. The DWP accepted that the overpayments were caused by mistakes made by the DWP and were not caused by anything the claimants had done or failed to do. The DWP was arguing that even though these cases did not meet the test set out in s 71 they could still recover the overpayments through the county court at common law, ie outside the scheme set out in the social security legislation.
The evidence we had showed that on receipt of these letters many claimants were very worried and frightened by the threat of legal action. Social security law is extremely complicated. Claimants often do not realise that they are being overpaid. They spend the money received in good faith and have no means to repay. Claimants in receipt of these benefits are likely to be on extremely low incomes, and may be vulnerable, elderly or in poor health.
CPAG made an application for judicial review challenging the writing and sending of these letters. CPAG argued that the DWP had no legal right to recover overpayments at common law where the s71 test was not satisfied. We argued that the practice of writing these letters was unlawful. We asked the court to make a declaration that overpayments made in these circumstances were not recoverable at common law. At first instance we were not successful. By a judgment made in February 2009, the High Court decided that the Secretary of State could recover overpayments at common law. CPAG appealed this judgement to the Court of Appeal.
CPAG’s appeal has been successful. The Court of Appeal accepted CPAG’s argument that s 71 was part of a complete statutory scheme and that the DWP had no power to recover outside the scheme. Put simply, the DWP can only recover under s 71. This means that if overpayments are caused by the DWP’s own error the Department cannot recover them by suing at common law in the county courts. Claimants who have been overpaid as a result of the DWP’s own errors can choose to repay voluntarily if they wish to.
Overpayments covered by this ruling

These letters were sent out between March 2006 and March 2008. Claimants affected by this ruling are those who had a letter from the DWP asking for repayment of a non-recoverable overpayment between these dates. The letters have notes attached saying the overpayment can be recovered through the courts at common law.
Examples showing the wording from the letters are set out below
What does the ruling mean?

The ruling means that if the case is one of those outlined above, the claimant does not have to pay the money back, although s/he can do so if s/he wishes.
NB We do not yet know whether the DWP will appeal this ruling to the House of Lords.
Overpayments not covered by this ruling

This case does not cover tax credits overpayments. The law that says when tax credits overpayments can be recovered is different See CPAG's tax credits factsheets.
This case does not cover housing benefit or council tax overpayments. The law that says when housing and council tax benefit overpayments can be recovered is different.
This case does not cover overpayments where the DWP does not say that the overpayment was caused by its own error and says the overpayment is recoverable under social security law. If the DWP says that the overpayment was caused by the claimant’s misrepresentation or failure to disclose a material fact, the case is not covered by this ruling even if the claimant thinks the overpayment is not his/her fault. Claimants in this situation need to consider whether to appeal, see below.
This case covers overpayments of benefits which are administered by the Department for Work and Pensions, and child benefit and guardian’s allowance which are administered by HMRC. These benefits are listed below.
There are some types of overpayment that are not covered by the ruling even if the benefit is administered by the DWP. These are payments not made under an award of benefit such as duplicate payments and interim payments.
What should claimants do if they get a letter from the DWP saying they have been overpaid social security benefits?

Claimants should never ignore a letter saying they have been overpaid. If the claimant does not agree that the overpayment is recoverable then s/he needs to make sure s/he appeals within the deadline.
If you are a claimant and you are not sure what to do then you should get advice from a Citizens’ Advice Bureau, an advice agency, a law centre, or you may qualify for free help from a solicitor.
Please note that CPAG is a small organisation with limited resources and we do not advise members of the public. We can however, provide advice to advisers via our advice line.
What do the letters say?

Examples of excerpts from the letters are set out below. The wording may vary. The letter may say:

“We are writing to you because too much Income Support has been paid. This is because of your Child Benefit ending or reducing.
Although this money is not recoverable under social security law we are asking for it back as it was money that should not have been paid.”

Or:

“We are writing to let you know that a mistake has been made and you have been paid too much Income Support.
This is because of your entitlement to the benefit has stopped.
This was our mistake and we are sorry that it happened. However, you have been paid public money that you were not entitled to and it should be paid back. The law allows us to ask you to pay back money that should not have been paid.”

The notes to the letter say:

Q: What if I don’t agree that I should pay this money back?
A: This money is recoverable under common law, as you were not entitled to receive this money. We are allowed to ask for the money back on this basis and could seek recovery through the courts if necessary.
Benefits administered by the Department for Work and Pensions
These benefits include:
Attendance allowance, bereavement benefits, carer’s allowance, disability living allowance, incapacity benefit, income support, industrial injuries benefits, jobseekers’ allowance, maternity allowance, pension credit, state retirement pension.
Child benefit and guardian’s allowance are administered by HMRC, but are subject to the same test for overpayment recover as DWP administered benefits, so they are also covered by this case.