Housing benefit overpayments – who is liable?

Simon Osborne describes the bizarrely complex rules regarding from whom a housing benefit overpayment is recoverable, and when appeals can be made.

Introduction
The relevant legislation
Recovery from 10 April 2006
Landlords and claimants
Recovery from 1 October 2001 - 9 April 2006
Claimants
Recovery before 1 October 2001
Rights of appeal

Introduction
The rules governing from whom an overpayment of housing benefit can be recovered, and when appeals can be made, should be simple. They are not. Due to poor drafting of the rules, differing versions of the rules and some contradictory case law, the rules on when an overpayment can be recovered from the landlord alone, the claimant alone or from both are difficult to make out. They also differ according to which version of the relevant legislation applies. Thankfully, a recent decision of a Tribunal of Commissioners, CH/4234/2004 (see Bulletin 192, p. 16 for an account of the decision itself) has at least provided a key to unlocking the complexity.

In the light of the decision, we now know that:

1. as a starting point, overpayments are recoverable from the person to whom they were paid;
2. additionally, overpayments may be recoverable from some other person, either as well as or instead of the person to whom they were paid;
3. regarding that, the provisions are subtly but importantly different regarding the October 2001 - April 2006 and post-April 2006 periods;
4. appeal rights attach to whether the overpayment was recoverable from an individual, i.e. to the liability issue, but not to the local authority decision actually to recover such an overpayment from a liable person, i.e. the local authority 'choice' decision to enforce recovery from that person.

The relevant legislation
There are two main pieces of relevant legislation regarding overpayment recovery in the post October 2001 period. The starting point overall is the amended version of section 75(3) of the Social Security Act 1992. This provides:

An amount recoverable under this section shall be recoverable -

(a) except in such circumstances as may be prescribed, from the person to whom it was paid, and

(b) where regulations so provide, from such other person (as well as, or instead of, the person to whom it was paid) as may be prescribed.

(It is worth pausing here to note the basic rule that unless exceptions apply, an overpayment will always be recoverable from the person to whom it was paid. If certain conditions are satisfied it may also be recoverable from some other person, either additionally to or instead of the person to whom it was paid.)

The other relevant legislation is regulation 101 of the Housing Benefit (General) Regulations. There is a version that applies in the 1 October 2001 - 9 April 2006 period, and a slightly different version that applies in the period from 10 April 2006. In both versions, subparagraph (1) of regulation 101 concerns subparagraph (a) of section 75(3) - i.e., situations in which an overpayment is not recoverable from the person to whom it was paid. Essentially, this relates to situations where the overpayment was paid to a landlord, but s/he reported a possible overpayment, there are grounds for suspecting fraud and the landlord has played no part in that. This provision is not at issue in the case law, and is not central to this article.

Much more relevant is subparagraph (2) of regulation 101. This concerns subparagraph (b) of section 75(3), i.e. situations where an overpayment is recoverable from some other person 'as well as or instead of' the person to whom it was paid. It is this provision that produces different results regarding the period from 10 April 2006, and the 1 October 2001 - 9 April 2006 period.

Recovery from 10 April 2006
In the 10 April 2006 version, regulation 101(2) provides that, regarding recovery:

(a) the prescribed person from whom it is sought shall be -

(i) in a case where an overpayment arose in consequence of a misrepresentation of or a failure to disclose a material fact . . . the person who misrepresented or failed to disclose that material fact instead of, if different, the person to whom the payment was made;

(ii) in a case where an overpayment arose in consequence of an official error where the claimant or a person acting on his behalf or any other person to whom the payment has been made could reasonably have been expected, at the time of receipt of the payment . . . to realise that it was an overpayment, that person instead of, if different, the person to whom the payment was made; or

(b) where sub-paragraphs (a)(i) and (ii) do not apply, the prescribed person from whom it is sought is -

(i) the claimant;

(ii) in case where a recoverable overpayment is made to a claimant who has one or more partners, the claimant's partner or any of his partners.

CH/4234/2004 confirms that in this version the express provision is that recovery will be sought from the specified person instead of (i.e., not as well as) the person to whom the overpayment was made. Specifically though, that relates only to subparagraphs (a)(i) and (ii). So that the overpayment will be recoverable from the person who misrepresented or failed to disclose, or in official error cases the person who should have expected to have realised there was an overpayment, instead of the person to whom the payment was made.

By contrast, the Commissioners also make clear that, regarding subparagraphs (b)(i) and (ii), 'it is clearly intended that recovery may be sought from the claimant and any partner of the claimant as well as the person to whom the overpayment was made . . . '. Essentially, this is because if an overpayment were always recoverable from the claimant and her/his partner instead of the person to whom it was paid, it would never be recoverable from the latter, and the basic rule is section 75(3)(a) could never be observed.

Landlords and claimants
So if an overpayment is paid to a landlord and s/he is not exempt from recovery under the provisions in regulation 101(1), it will be recoverable from the landlord, unless regulation 101(2)(a) (misrepresentation, failure to disclose, or reasonable realisation in official error cases) applies to someone (other than the landlord her/himself). Equally however, unless regulation 101(2)(a) applies to someone other than the claimant, it will also be recoverable from the claimant and any partner (i.e., under regulation 101(2)(b)) as well as the landlord. In short, claimants seeking to demonstrate that they are not liable for recovery need to show:

1. that they were not the person to whom the overpayment was paid, and
2. that someone (other than them) is caught by regulation 101(2)(a), or
3. where they were the person to whom the overpayment was paid, that someone (other than them) is caught by regulation 101(2)(a).

Recovery from 1 October 2001 - 9 April 2006
In the 1 October 2001 - 9 April 2006 version of regulation 101, subparagraph (2) provided that the person from whom an overpayment is recoverable instead of or as well as the person to whom it was paid is:

(a) in a case where the overpayment arose as a consequence of a misrepresentation or failure to disclose a material fact . . . by or on behalf of the claimant or any other person to whom housing benefit has been paid, the person who misrepresented or failed to disclose that material fact;

(b) in a case where a recoverable overpayment is made to a claimant who has one or more partners, the claimant's partner or any of his partners;

(c) the claimant.

CH/4234/2004 was in fact primarily concerned with this version of regulation 101 and therefore with overpayment recovery in this period. The Commissioners found that the power in section 75(3)(b) of the Act, 'was not intended to confer on local authorities a broad discretionary power to choose whether an overpayment should be recoverable from another person as well as or instead of the person to whom an overpayment was made.' In short, the local authority do not make a 'choice' about who the overpayment is recoverable from; the 'choice' relates only to the decision actually to enforce recovery against such a person. Given that regulation 101(2) must be construed with the power conferred by section 75 in mind, the regulation must be interpreted as actually specifying whether a person is jointly liable with the person to whom the payment was made, or is liable instead of that person.

In contrast with the post 9 April 2006 version of the regulation, the result here was that regulation 101(2) provided that the overpayment is recoverable from a prescribed person as well as (i.e., not instead of) the person to whom the overpayment was made. So, in the 1 October 2001 to 9 April 2006 period, an overpayment, 'is always recoverable from any person within the scope of regulation 101(2) as well as, if different, the person to whom the overpayment was made, except where regulation 101(1) applies in which case it is recoverable only from any person within the scope of regulation 101(2)'.

Claimants
In short, the position of claimants in this period is much more adverse than from 10 April 2006. This is because, unlike in the latter period, claimants are always a specified person in regulation 101(2) and so will always be at least jointly liable with the person to whom the overpayment was made. The only consolation is that there may be joint rather than sole liability and that the local authority might actually enforce recovery only or mostly against the other party. That choice however is not appealable - see below.

Recovery before 1 October 2001
The Commissioners in CH/4234/2004 were not specifically concerned with the situation in this period, which concerned yet another version of the relevant legislation (i.e., regarding both section 75 of the Act and regulation 101). That situation had been the subject of the decisions in Secretary of State for Work and Pensions v Chiltern District Council [2003] EWCA Civ 508 (now R(H) 2/03) and the Tribunal of Commissioners' decision in R(H) 3/04.

Those decisions were more concerned with rights of appeal about the local authority 'choice' decision on enforcing recovery than with liability. The Commissioners in CH/4234/2004 do identify that, regarding the latter, the version of section 75 then in force provided that an overpayment was always recoverable from the person to whom it was paid. Regulation 101 provided that the overpayment was also recoverable from the person who misrepresented or failed to disclose a material fact, or the claimant and her/his partner. The Commissioners in CH/4234/2004 point out that the power in the 1 October 2001 - 9 April 2006 version of regulation 101 to recover from a specified person instead of the person to whom the overpayment was paid was in contrast to that.

Rights of appeal
The decisions in R(H) 2/03 and R(H) 3/04 created a rather odd situation regarding rights of appeal. Essentially, they provided that appeal rights included a right of appeal against the local authority 'choice' decision to enforce recovery against a liable person, albeit only on judicial review grounds.

The decision in CH/4234/2004 casts a rather cold eye on that. But because of the amendments to legislation, the Commissioners decide definitively on rights of appeal only in the period from 1 October 2001. Here, they confirm that rights of appeal are limited to liability decisions, i.e. as to whether the individual is or is not caught by regulation 101. For example, for the post 9 April 2006 period, claimants may appeal on the basis that they were not paid the overpayment and that it was caused by someone else misrepresenting or failing to disclose a material fact. But there is no right of appeal concerning the local authority 'choice' actually to pursue recovery against an individual who is liable under regulation 101.

The Commissioners hold that in joint liability cases the local authority should make a single decision relating to all the liable persons, and that where the decision is that the overpayment is not recoverable from the person to whom it was paid, that should be included in the decision regarding the person from whom it is recoverable.

Consequently, decisions made under the post October 2001 legislation (i.e., including the 10 April 2006 form) that do not observe those findings may well be erroneous.

Welfare Rights Bulletin 193 August 2006