CG/160/1999

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	This is an appeal, brought by the claimant with the leave of a Commissioner, from a decision of the Birmingham social security appeal tribunal, dated 13 May 1998, whereby they dismissed her appeal against a decision of an adjudication officer reviewing and revising an award of invalid care allowance and holding that £5,411.85 overpaid benefit was recoverable from her.  I held an oral hearing at which the claimant was represented by Mr Allan Norman, solicitor of Messrs J M Wilson of Birmingham, and the Secretary of State was represented by Mr Jeremy Heath of the Office of the Solicitor to the Departments of Social Security and Health.  I am very grateful to Mr Norman and Mr Heath for their helpful submissions.

2.	The claimant had been awarded invalid care allowance because she was caring for her mother who was in receipt of the middle rate of the care component of disability living allowance.  On a renewal claim made in early 1994 in anticipation of the current award (which appears to have been for a period of twelve months) expiring in September of that year, the claimant’s mother was awarded only the lowest rate of the care component of disability living allowance from 21 September 1994.  The consequence was that the claimant ceased to be entitled to invalid care allowance from that date.  However, she did not inform the Invalid Care Allowance Unit that her mother was no longer in receipt of the middle rate of the care component and invalid care allowance remained in payment until 17 August 1997 when payment was stopped following a “routine check”.

3.	The claimant appealed against the adjudication officer’s decision on the ground that she had never stopped looking after her mother.  She explained that she had given up her own house in 1989 to go and look after her mother and that she was available for her 24 hours a day.  When contacted by the clerk to the tribunal, she opted for a “paper” hearing, saying that otherwise she would have to make arrangements for someone to be with her mother.  Her appeal was therefore considered in her absence.

4.	Whether or not the claimant’s mother ought to have challenged the decision awarding her only the lowest rate of the care component of disability living allowance, it appears that she did not do so and, in those circumstances, it was inevitable that the tribunal should find that the claimant had not been entitled to invalid care allowance from 21 September 1994.  There then remained the question whether the overpaid benefit was recoverable from the claimant under section 71 of the Social Security Administration Act 1992 on the ground that the claimant had either misrepresented a material fact or had failed to disclose a material fact.

5.	The adjudication officer argued, in the written submission to the tribunal, that the instructions in the claimant’s order book had told her to report to the Invalid Care Allowance Unit any reduction in the rate of disability living allowance and that disclosure was therefore reasonably to be expected.  He or she said that such disclosure by the claimant was necessary because the Invalid Care Allowance Unit and the Disability Living Allowance Unit were two separate units “operating independently of each other”.  It really does seem most unwise of the Benefits Agency to arrange matters so that an indefinite award of invalid care allowance was made when there was a finite award of disability living allowance and no procedure for the Disability Living Allowance Unit to notify the terms of any further award.  However, for reasons I gave in CG/662/98, CG/1567/98 and CG/2112/98, that was not fatal to the adjudication officer’s case if he or she could show a failure to disclose or a misrepresentation on the part of the claimant.  The tribunal were satisfied that there was a failure on the claimant’s part to disclose the material fact that the rate of her mother’s disability living allowance had been reduced.  They found that disclosure could reasonably be expected from her because the notes in the order book were “more than clear” and it was therefore “beholden upon the Appellant to check with the person for whom she is receiving Invalid Care Allowance that there have [sic] been no changes in the Disability Living Allowance that was payable to her mother”.

6.	The claimant now appeals on the ground that the tribunal erred in failing to make any finding as to whether the claimant knew of the reduction in the rate of her mother’s disability living allowance.  Mr Norman submitted that “constructive knowledge”- that is, knowledge that the claimant should have obtained - was not enough.

7.	He relied heavily on the decision of the Court of Appeal in Franklin v. Chief Adjudication Officer (reported as R(IS) 16/96).  In that case, the claimant had not notified the Benefits Agency of a reduction in the interest rate on one of the mortgages on her home.  The tribunal found that she had not been aware of the reduction but they decided that the income support that had been overpaid because the Benefits Agency were unaware of the reduction was recoverable from her on the ground that she had misrepresented a material fact when she declared that she had “correctly reported any facts which could affect the amount of any payment”.  She appealed unsuccessfully to a Commissioner but the Court of Appeal allowed a further appeal.  They held that there was no misrepresentation when the claimant made the declaration because she could not report something she did not know.  The Court of Appeal did not consider whether or not the claimant ought to have known of the change of interest rates but Mr Norman submitted that such interest rates are matters of public knowledge and the claimant certainly had the means of knowledge.  He therefore submitted that it was implicit in the Court of Appeal’s decision that they considered that “constructive knowledge” was not enough to found a misrepresentation based on the non-reporting of facts or to found a failure to disclose.  He further relied on Sharples v. Chief Adjudication Officer [1994] 1 W.L.R. 62 (also reported as R(IS) 7/94) in which the Court of Appeal had held that there had been no misrepresentation where a claimant had been unaware of assets of his partner and had represented that she had no such assets as far as he knew.  There was no suggestion in the Court of Appeal’s decision that there was a question whether he ought to have asked his partner about the assets before signing the form and that there might have been a failure to disclose the facts even if there was no misrepresentation.

8.	There is considerable force in those submissions.  However, in neither Franklin nor Sharples did the Chief Adjudication Officer argue that the claimant ought to have known of the material facts.   Furthermore, in both cases, recovery was sought on the basis of misrepresentation rather than failure to disclose (although it is arguable that there is no true distinction between a misrepresentation based on non-disclosure and a failure to disclose).  

9.	Mr Norman acknowledged that “constructive knowledge” has been taken into account by Commissioners.  In R(SB) 28/83, the Commissioner said that it was necessary to show that the claimant “either knew or with reasonable diligence ought to have known” that he possessed assets and he referred to paragraph 20(4) of R(SB) 21/82 as authority for that approach.  Mr Norman submitted that nothing that wide was said in paragraph 20(4) of R(SB) 21/82 and that what was being said there was that the owner of assets could not rely on a lapse of memory so that knowledge includes past knowledge.  In my judgement, it is particularly important to note that, having held in paragraph 4(2) that a “a ‘failure’ to disclose necessarily imports the concept of some breach of obligation, moral or legal – i.e. the non-disclosure must have occurred in circumstances in which, at lowest, disclosure by the person in question was reasonably to be expected", the Commissioner in R(SB) 21/82 said:

“But, whilst this will be a matter for the tribunal re-hearing the reference to decide, I would myself as at present advised consider it highly doubtful if a person (such as the Father, who was not the owner) could be held to have ‘failed to disclose’ without a finding (as to which the burden of proof would be on the Department) that such person knew or had known of that which is the subject of the alleged failure, bearing in mind that the person so failing can be made accountable for the resultant overpayment notwithstanding that he or she may not have been the recipient of that or have received any benefit out of it.”

The term “constructive knowledge” used by the Commissioner in paragraph 22(2)(a) must clearly be viewed in the light of that statement, the last part of which appears to be a reference back to paragraph 4(4) of the decision where the Commissioner held that benefit paid to the Father might be recoverable from the estate of his wife who had been the owner of the material assets and had herself acted, or purported to act, on his behalf in connection with his claim.  On the other hand, the Commissioner left open the possibility that the tribunal might have found there to have been a failure to disclose even if the Father had never known of his wife’s assets.

10.	 I therefore do not accept Mr Norman’s submission that R(SB) 21/82 supports his submission that there can never be a failure to disclose a material fact by a person who has never known the fact.  However, I do accept that having the theoretical means of knowledge is not enough to create “constructive knowledge”.  It seems to me that the test is whether it is reasonable to expect a claimant to have made enquiries, or to have kept making enquiries, about material facts.   In R(SB) 28/83, the Commissioner held that the receiver, who was the deceased claimant’s brother, “either knew or ought to have known that the deceased was receiving supplementary benefit, if only because a portion of the claimant’s weekly benefit was being paid to the landlady to secure the deceased’s accommodation”, so that there the Commissioner satisfied himself that the receiver could reasonably have been expected to learn about his brother’s finances.  The two Commissioners’ decisions seem to me to be entirely consistent with each other.  The more recent decision of Mr Jacobs on file CF/14643/96, in which a number of earlier authorities are considered, is also consistent because he uses the term “means of knowledge” as meaning “knowledge which a person has the means of acquiring by making reasonable enquiries”.

11.	I am also satisfied that the decisions of the Commissioners are not inconsistent with the decisions of the Court of Appeal.  On the Commissioners’ approach, there may have been good reason for it not being argued in either Franklin or Sharples that the claimant ought to have discovered the material fact in issue.  The tribunal’s finding in Franklin presumably implied that the claimant had not received notification from her building society or bank of the change of the mortgage interest rate.  A person with a mortgage can expect to be informed of interest rate changes and in those circumstances it is not likely to be reasonable to expect a claimant to keep making regular inquiries of his or her building society or bank.  In Sharples, it may have been considered that the claimant had grounds for believing that his partner did not have any assets about which to enquire and I am not prepared to accept that the Court of Appeal implicitly held that a person who was ignorant of a material fact could never be found to have failed to disclose the fact. 

12.	Furthermore, the Court of Appeal drew on insurance law in both cases and the approach taken by the Commissioners is consistent with the general duty of disclosure in non-marine insurance law, as explained in paragraph 357 of volume 25 of Halsbury’s Laws of England (4th edition) where it is stated:

 “Whilst the proposer can only disclose what is known to him the proposer’s duty of disclosure is not confined to his actual knowledge, it also extends to those material facts which, in the ordinary course of business, he ought to know.  However, the assured is not under a duty to disclose facts which he did not know and which he could not reasonably be expected to know at the material time.  If the assured fails to make reasonable inquiries which would have ascertained the material facts, he will be in breach of his duty and the policy is capable of being avoided.”

13.	Thus, in a case where a claimant has not actually known a material fact, disclosure can reasonably be expected only if the claimant could reasonably have been expected to ascertain the fact.  That is a matter of judgement for the Secretary of State or a tribunal.  In the present case the tribunal were entitled to find that the instructions in the order book made it clear enough to the claimant that she should make herself aware of her mother’s entitlement to disability living allowance if she did not already know it.  However, it was necessary for them to make findings as to whether the claimant had actual knowledge of that entitlement or had taken reasonable steps to obtain the necessary knowledge.  Depending on what each of them knew about the other’s claim, it might have been reasonable for the claimant to expect to be told by her mother of any change in her entitlement to disability living allowance.  There was no evidence before the tribunal as to what the claimant knew about her mother’s entitlement to disability living allowance.

14.	I am conscious that the claimant elected to have a “paper” hearing but, in my view, this was a case where the tribunal should have directed an oral hearing because the claimant had not been asked the appropriate questions by the adjudication officer and had not been put on notice as to the precise issue that the tribunal had to resolve (R(IS) 11/99, paragraphs 31 and 32).  I am satisfied that the tribunal’s decision is erroneous in point of law because they failed to make the necessary findings of fact to support their conclusion that the claimant had failed to disclose a material fact.  Mr Norman told me that the claimant’s case was that she had not known that her mother had ceased to be entitled to the middle rate of the care component of disability living allowance.  In those circumstances, the case must be considered by another tribunal.

15.	In considering what could reasonably be expected of the claimant, the tribunal may wish to consider whether the Invalid Care Allowance Unit made any inquiries of the Disability Living Allowance Unit during the relevant period in order themselves to check on the claimant’s mother’s entitlement to disability living allowance.  If the Invalid Care Allowance Unit did not make any such enquiries, that might be considered relevant to the question whether the claimant could reasonably have been expected to make enquiries of her mother, although if the tribunal conclude that the Invalid Care Allowance Unit acted unreasonably that might not assist her because fault on the part of the Department does not absolve a claimant (Duggan v. Chief Adjudication Officer, reported as an appendix to R(SB) 13/89).  There may also arise in this case a question as to whether a person can fail to disclose to the Invalid Care Allowance Unit a fact known already to the Disability Living Allowance Unit.  That question was not raised before me but I draw attention to the fact that that it is to be considered by a Tribunal of Commissioners in CG/4494/99, CG/4657/99, CG/5631/99 and CIS/7182/99.  The tribunal to whom the present case is referred should have regard to the decision to be given by the Tribunal of Commissioners in those cases.

16.	I allow the claimant’s appeal.  I set aside the decision of the Birmingham social security appeal tribunal dated 13 May 1998 and I refer the case for determination by a tribunal constituted under regulation 36 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 by a legally-qualified panel member who was not the chairman of the tribunal whose decision I have set aside.

M. ROWLAND
Commissioner
13 November 2000