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DWP cannot recover benefits overpayments, Supreme Court rules

8 December 2010

The Department for Work and Pensions cannot recover welfare benefit payments through the courts where the claimant is not at fault, the Supreme Court has ruled.

The court heard that between March 2006 and February 2007 the DWP wrote to over 65,000 claimants telling them it could sue them in the county court if they did not return overpayments made as a result of administrative errors.

The benefits involved included income support, incapacity benefit, disability living allowance, jobseekers’ allowance and child benefit. Over £4m was recovered by the department in the financial year 2007-08.

Delivering the leading judgment in The Child Poverty Action Group v Secretary of State for Work and Pensions [2010] UKSC 54, Lord Brown said it was common ground that the secretary of state was entitled to recover overpayments resulting from misrepresentation or non-disclosure.

He said that in 2006 the DWP started writing standard letters to claimants whose awards had been miscalculated indicating that it had a common law right to recover the money.

The Child Poverty Action Group (CPAG) thought the letters were based on a “false legal premise” and launched a judicial review.

Lord Brown said the question was whether section 71 of the Social Security Act 1992, which allows the DWP to recover money in cases of misrepresentation or non-disclosure, provided an “exclusive code for recovery” or whether other cases of “mistakenly inflated awards” could be dealt with through the common law.

Lord Brown said that before the Social Security Act 1998 the adjudication of awards was not carried out by the DWP, but by adjudication officers.

Counsel for the DWP argued that if the government could make up for underpayments but not recover overpayments, there would be a “lacuna” in the scheme.

“It seems to me 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 out in the statute,” Lord Brown said.

“Such an arrangement, moreover, would seem to me to create well-nigh insoluble problems. Could there, for example, be parallel recovery proceedings against the maker of the misrepresentation under section 71(3) and against the recipient of the benefit at common law in the courts?”

Lord Brown said it was “entirely rational” for parliament to decide that only those whose behaviour brought about the overpayments should be liable to reimburse them.

He dismissed the government’s appeal. Sir John Dyson agreed, saying that tax cases showed that the test was “whether in all the circumstances parliament must have intended a common law remedy to exist with the statutory remedy”.

Lords Phillips and Kerr agreed, as did Lord Rodger, for his own reasons.

Alison Garnham, chief executive of the Child Poverty Action Group, said she hoped the DWP would “regret the anguish” caused to people who received the letters and improve its administration processes.

“The people we spoke to did not know they had been paid too much,” she said. “They were not fraudulent or feckless claimants trying to get extra money. Rather, they were the innocent victims of DWP error and the complexity of the benefit system.

“It is a very great concern that if the government’s plans to end legal aid for welfare benefits proceed claimants will not be able to get advice on these complex issues in future and may face injustices as a consequence.”

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