PLH                                                                          Commissioner's File:  CIB 1985/04

	SOCIAL SECURITY ACTS 1992-1998

APPEAL FROM DECISION OF APPEAL TRIBUNAL
ON A QUESTION OF LAW

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Claim for:  		Incapacity Benefit (Overpayment)
Appeal Tribunal: 		Enfield 
Tribunal Case Ref:  	
Tribunal date:		9 February 2004
Reasons issued:		25 March 2004

[ORAL HEARING]
     1.     	This claimant’s appeal is allowed, as in my judgment the Enfield appeal tribunal consisting of a chairman Mr A D Hughes sitting alone on 9 February 2004 misdirected itself in holding that there had been a failure on the claimant’s part to make a disclosure reasonably to be expected of him in connection with his incapacity benefit, and that overpaid benefit amounting to £2,874.52 was legally recoverable from him under section 71 Social Security Administration Act 1992.  I set the decision aside and as none of the facts are in dispute I exercise the power in section 14(8)(a) Social Security Act 1998 to substitute the decision I am satisfied the tribunal should have given, namely that although the £2,874.52 was, as matters turned out, paid in excess of the claimant's prescribed entitlement for the period 9 January to 28 August 2003 inclusive as he omitted to give a written notice of certain part-time employment within the period required by regulation 17 Social Security (Incapacity for Work) (General) Regulations 1995 SI No. 311, none of that amount is legally recoverable from him as the conditions in section 71 of the Administration Act for such recovery are not satisfied.  
     2.     	I held an oral hearing of this appeal at which Benjamin Newton of the Free Representation Unit appeared on behalf of the claimant and Ms S Das of the solicitor’s office, Department for Work and Pensions, appeared for the Secretary of State.  I also had the benefit of a thoughtful written submission on the Secretary of State’s behalf from Mr G P Cahill of the Leeds Adjudication and Constitutional Issues Branch.  
     3.     	The claimant in this case is a highly educated and intelligent young man now aged 28, who after an excellent school and university record was unhappily hit by chronic fatigue syndrome and depressive illness and at the time we are considering had not yet managed to make the transition into adult working life.  He was living with his parents and was awarded incapacity benefit continuously from 8 October 2001 on the ground of incapacity for work.  The various medical and other reports in the papers leave no doubt as to the genuineness of his illness, and there is no suggestion that he has been other than entirely straightforward and conscientious in his dealings with the department.  
     4.     	His benefit entitlement was taken away by a departmental decision of 28 August 2003, effective retrospectively from 9 January 2003, on the ground that from then onwards he had been doing a small amount of part‑time work without complying with the notification requirements to enable this to count as “exempt work” for the purposes of regulations 16 and 17 of the incapacity regulations cited above; this had the effect that he had to be treated as “capable of work” for benefit purposes regardless of whether he actually was.  Consequent on that decision (the correctness of which in terms of the regulations is not disputed), an officer of the Secretary of State made a further determination on 4 September 2003 that the benefit paid to him for the period 9 January to 28 August, in the total sum of £2,874.52, was recoverable from him on the ground that he had begun working on 9 January but not notified the department till 27 August 2003.  
     5.     	It is not in dispute that the “work” in question was in fact very limited.  It consisted only of some temporary assistance with research, for which he was paid at the rate of £10 an hour for three hours' assistance a week.  I was informed by Mr Newton that this was arranged for the claimant by a friend of his parents, in the hope of helping him to start getting back on his feet and giving him something he could do but without placing any pressure or anxiety on him, as the arrangement was informal and free from any deadline or obligation so far as he was concerned.  It is, I imagine, just the kind of arrangement the legislators had in mind in introducing the present more relaxed provisions for “exempt work” in the context of incapacity benefit, the purpose of which is to help people with the transition back into the world of work by allowing a modest amount of work to be undertaken for a limited period without prejudicing the benefit.  
     6.     	The claimant however failed to comply with the notification requirement for exempt work under regulation 17, which is that such work must be notified to the department in writing within six weeks of starting it.  The claimant did not do this because having read the department’s literature on the conditions for “permitted work” sent to him when the present rules were introduced in April 2002, he did not understand that he had to.  He only became aware that this requirement was an essential condition of his benefit when he consulted the CAB about another matter the following August, and then immediately did notify the department.  It is not in dispute that the notification of this very limited amount of work did not take place until 27 August 2003, or that (as expressly found as a fact by the tribunal) the actual work itself and the small amount the claimant earned from it met all the conditions for “exempt work” from 9 January 2003 save only that of sending the prescribed notice of it to the department.  
     7.     	It is as I say common ground that the admitted omission to send that notice within the prescribed period under regulation 17 prevented the claimant's work from counting as “exempt” so that he had to be treated under regulation 16 as “capable of work” from 9 January 2003, and there was no appeal against the removal of his entitlement to incapacity benefit from that date. He did however appeal to the tribunal against the subsequent overpayment decision of 4 September 2003, the two issues being whether the Secretary of State had shown a relevant “failure” by the claimant to disclose a material fact so as to bring him within the provisions in section 71 for recovery of benefit, and if so whether the payments sought to be recovered met the further conditions necessary for any recovery under that section that they had been made in consequence of that failure to disclose, and would not have been made but for it.   
     8.     	The tribunal chairman determined both issues against the claimant, and both were reargued before me.  To understand the arguments it is necessary to have in mind the wording of the primary and subordinate legislation itself, which so far as material provides as follows:
Social Security Administration Act 1992:
“Overpayments - general
71.	 (1)	Where it is determined that, whether fraudulently or otherwise, any person has misrepresented, or failed to disclose, any material fact and in consequence of the misrepresentation or failure –
(a)  a payment has been made in respect of a benefit to which this section applies; or
(b)	  ...
the Secretary of State shall be entitled to recover the amount of any payment which he would not have made … but for the misrepresentation or failure to disclose.”
Social Security (Incapacity for Work) (General) Regulations 1995 SI No. 311 as amended and in force from 8 April 2002:  
“Person who works to be treated as capable of work.
16.	 (1) … a person shall be treated as capable of work on each day of any week … during which he does work … unless that work – 
	(a)	falls into any of the categories of exempt work set out in regulation 17(1); and 
	(b)	is done within the limits set out in regulation 17(2).  …
Exempt work
17.	(1)   The categories of exempt work referred to in regulation 16(1)(a) are –
	(a)	work in respect of which the required notice is given, and – ...
			(iv)  to which paragraph (1A) below applies; …
(1A)  This paragraph applies in the case of a person whose circumstances are specified –
	(a)	in sub‑paragraph (a) of paragraph (1B) below, to work which is undertaken by that person during the period specified in sub‑paragraph (b) of that paragraph; 
	(b)	in sub‑paragraph (a) of paragraph (1C) below, to work which is undertaken by that person during the period specified in sub‑paragraph (b) of that paragraph; …
(1B)   For the purposes of paragraph (1A)(a) above –
	(a)	the specified circumstances are where –
	(i)	no work to which paragraph (1A) applies has previously been undertaken by that person …
	(b) the specified period is the period of 26 weeks beginning with the first day on which the work is undertaken.
(1C)   For the purposes of paragraph (1A)(b) above – 
	(a)	the specified circumstances are where –
	(i)	work to which paragraph (1A) applies has previously been undertaken by that person during a period specified in paragraph (1B)(b) above, and 
	(ii)	there is appropriate evidence that, by undertaking further work, during the period specified in sub‑paragraph (b) below, he is likely to improve his capacity to engage in full‑time work; 
	(b)	the specified period is the period of 26 weeks beginning immediately after the end of the period specified in paragraph (1B)(b) above.  …
(1E)   In this regulation –
‘appropriate evidence’ means, in relation to any work –
(a)  evidence from an officer of, or person providing services to, the Secretary of State who is authorised by the Secretary of State for the purpose; and 
(b)	 evidence (if any) from any other person (including the person undertaking the work), 
or such part of such evidence as constitutes the most reliable evidence available in the circumstances; …
‘the required notice’ means, in relation to work referred to in any of heads (i) to (iv) of paragraph (1)(a), notice to the effect that the person is undertaking, or is about to undertake the work, given in writing to the Secretary of State by that person or another person acting on his behalf - …
(b)	in the case of work referred to in paragraph (1)(a)(iv), no later than the end of the period of 42 days which begins with the day on which the work begins; 
(2)	The weekly limits in relation to exempt work are –
	(a)  that earnings from work referred to in paragraph (1)(a)(ii) to (iv) do not exceed £67.50; 
	(b)	 that … the combined total of the number of hours spent doing work referred to in paragraph (1)(a)(iv) is less than 16; …”
     9.     	Although the drafting of the amended regulation 17 is perhaps a little on the laborious side, the effect is clear.  Compliance with the requirement to give written notice within six weeks of starting work is a condition of continued entitlement even for work which meets all the other conditions, since if the notice is not given the claimant is not exempted from being treated as “capable of work”, so under regulation 16 the incapacity benefit entitlement is taken away from the beginning of the week in which the work started.  Conversely if the required notice is given and the work meets the other conditions, the claimant is entitled as of right to the continuation of his benefit throughout the first 26 weeks of his exempt work, and may subject to the additional evidence condition in regulation 17(1C) keep it for a second 26 weeks as well.  
     10.     	In this context there can in my judgment be no doubt that the fact of the claimant beginning to do any work, albeit only a small amount and in a very limited way from 9 January 2003 onwards, was a “material fact” as it would or might without more have affected his entitlement to incapacity benefit from that date.  To be “material” a fact does not have to be one that would necessarily have resulted in the removal of the entitlement on a full consideration of all the circumstances once notified:  cf. Saker v Secretary of State R(I) 2/88 Appendix, per Nicholls L J at page 172C.
     11.     	Failure to disclose issue:  The tribunal chairman decided this issue against the claimant, referring to the terms of a leaflet sent to him in about April 2002 when the new rules on what work incapacity benefit claimants can undertake without prejudicing their entitlement (in the leaflet referred to as “permitted work”) were introduced.  In the statement of reasons for his decision issued on 25 March 2004 at pages 29-30 he said:
“9.  [The claimant] is clearly a person of high intelligence, being an Oxford graduate.  The DWP’s letter about permitted work (document 20) is in straightforward terms.  The second paragraph indicates the need to contact the DWP if work is contemplated.  Even though [the claimant] had forgotten, by January 2003, what was in the letter, the Tribunal find that he was not so incapacitated by his illness that he could not be expected to realise that as a recipient of benefit he should inform the DWP of significant changes in his circumstances and should make enquiries as to possible conditions attached to his continued entitlement to incapacity benefit if he started work.  If necessary, his parents could have made enquiries on his behalf.”
     12.     	In accordance with the well-established test consistently applied and understood by Commissioners and tribunals for many years following R(SB) 21/82, the chairman therefore held the claimant had not made the disclosure reasonably to be expected of him in all the circumstances, and had accordingly “failed” in terms of section 71 to disclose the fact of his starting work at the time he did so in January 2003.
     13.     	I accept Mr Newton’s submission that in so holding on the basis of the departmental leaflet he referred to, the chairman misdirected himself.  The question is one of the proper construction to be placed on the terms of that document itself, and that document alone.  The entire departmental case for the alleged failure of disclosure was based on what that leaflet told the claimant, not on any other statements made to him as to circumstances he should report, as to which there was in any case no evidence.  (This claimant I understand had his benefit paid direct into the bank and so was not provided with an order book, and in any event any initial statements about what he was required to do if he worked would have been overtaken by the leaflet describing the changes and dealing specifically with “permitted work”).  On this, the leaflet agreed to have been sent to and read by this claimant (pages 17 to 20) was in identical terms to that already considered in detail by the Commissioner in case CIB 3925/03, where it was held that the wording used was not such as to amount to an unambiguous instruction to claimants that they must report to the department before doing any work, nor did it tell them that work otherwise counting as exempt would only be permitted work if an application form or information was submitted at the right time.  As paragraph 23 of that decision put it:
“In those circumstances, I conclude that a person reading the factsheet with a degree of care to be expected of ordinary people, rather than lawyers or benefit experts, could think, without going outside the boundaries of reasonableness, that it was not necessary to inform the incapacity benefit authorities of work within the hours and earnings limit for permitted work.  It could reasonably have been thought that giving such information was desirable, but no more, as it could have been thought that the giving of the information was irrelevant to the question of whether or not the work would affect entitlement to benefit.  It could also reasonably have been thought that the new information superseded whatever was printed in the order book.”
I respectfully agree with that, and it follows that I disagree with the tribunal chairman that what the leaflet told the claimant was “in straightforward terms”, at least so far as concerns the crucial point whether it was essential to report to the department before work otherwise within the limits notified to him could count as “permitted work” at all.  
     14.     	In fact the leaflet, which started by explaining that from 8 April 2002 there were new more flexible rules for people who wanted to try paid work while getting incapacity benefit, and that it would now be much easier to do this without it affecting benefit entitlement, made no mention of any notification condition when setting out the requirements for the “permitted work” claimants were told they were now allowed to do.  In the section of the leaflet describing what qualified as “permitted work” it referred to the various conditions as to hours of work, earnings and so forth, but at no point there or elsewhere in the leaflet did it set out anything that reflected the actual condition as to notification or the 42-day time limit for it under regulation 17.  Instead all the leaflet contained was a passage in a separate section, after the one that described what work was “permitted” and after the express assurance that “Permitted work will not affect your incapacity benefit”, saying:  
“You will no longer need to get a doctor to agree that the work will help your medical condition, but you should tell the office that deals with your benefit before you start work.  You should fill in an application form before you do any permitted work.”  
     15.     	I agree with the decision already cited and with Mr Newton’s argument that this language is not apt on a fair construction to convey a mandatory requirement or condition of reporting in order for the work to count as permitted work at all.  It follows that on the basis of what the claimant was told in that letter, which was the only evidence relied on by the department, the chairman was not justified in his conclusion that there had been a failure on the claimant’s part to make the disclosure reasonably to be expected of him in all the circumstances, applying the established test in R(SB) 21/82.    I further accept Mr Newton’s submission that if any more stringent test omitting the element of reasonableness is the one to apply in this context as suggested in a recent Tribunal of Commissioners' decision in CIS 4348/03, the evidence was still insufficient to establish a “failure” on the claimant’s part in view of the lack of clarity in the leaflet about whether notification was actually required, as distinct from being advisable.  Paragraphs 33 and 34 of that decision make clear that what is there said about failure to provide information required by the Secretary of State applies only if the form of the requirement or request is “unambiguous”, and the leaflet here was very far from that.  In addition, the chairman’s reference to the claimant’s parents being able to make enquiries introduces what as it stands is an irrelevant consideration since the question is what the claimant himself ought or ought not to have done, there being no suggestion that he was unable to manage his own affairs or that anyone else was appointed to act for him.  
     16.     	For those reasons, I am satisfied that the tribunal chairman misdirected himself and following the Commissioner’s decision in CIB 3925/03 his decision must be set aside; the decision that ought to have been given was that the failure of disclosure relied on by the Secretary of State, namely that “[The claimant] failed to disclose on 09/01/03, or as soon as possible afterwards, the material fact that he had started work” (section 2 of his submission to the tribunal), had on the evidence before the tribunal not been established.
     17.     	Causation issue:  I go on to consider the causation issue as an alternative ground of my decision as it was fully argued before me, and in case this appeal should go further.  The tribunal chairman's statement of reasons dealt with it in the following terms:
“4.  Mr Newton … argued firstly that [the claimant’s] employment was not a material fact, non‑disclosure of which caused the overpayment, since timely disclosure would not have brought about the cancellation of [his] incapacity benefit but would have brought him within the exempt work provisions of regulation 17(1)(a) of the Incapacity for Work (General) Regulations, so that his entitlement to incapacity benefit would have continued. ….
5.  It is of course the case that entitlement to incapacity benefit would have continued if the required notice had been given, thus giving force to the apparent logic of Mr Newton’s argument.  The difficulty, however, is that, if Mr Newton is right, the requirement that a person in receipt of incapacity benefit who undertakes exempt work – and is therefore ex hypothesi not incapable of all work – should notify the DWP of this fact as a condition of continuing to receive incapacity benefit would be rendered otiose in most, if not all, cases.  
6.  Parliament can scarcely be taken to have intended such a result and the proper interpretation, in the Tribunal’s view, is that failure to give the required notice prevents reliance on the exempt work provisions in all cases.  In the absence of notice entitlement to incapacity benefit ceases, an overpayment results and the commencement of work is a material fact which is causative of that overpayment.”
     18.     	It is important to keep in mind that the conditions for legal recoverability of overpaid benefit are general and laid down by Parliament in the primary legislation in section 71 of the 1992 Act, whose construction cannot of course be affected by extra requirements for particular benefits imposed by the Secretary of State in later subordinate legislation such as the new form of regulation 17 introduced from 8 April 2002; a basic and important principle, to which the reasoning process in the last two paragraphs quoted above fails in my view to pay sufficient regard. 
     19.     	Section 71 contains three separate conditions, each of which has to be satisfied in order to establish legal recoverability of any sum reclaimed from a claimant on the ground of “failure to disclose”:
(1)  It must have been determined that he or she has failed to disclose a material fact.  Here as noted in paragraph 16 above the determination as formulated and relied on by the Secretary of State as the basis for the claim to recovery pursued before the tribunal was that “[The claimant] failed to disclose on 09/01/03, or as soon as possible afterwards, the material fact that he had started work.”
(2)  In consequence of that failure, a payment has been made in respect of a benefit to which section 71 applies; incapacity benefit being such a benefit.  
(3)	  The amount sought to be recovered is that of a payment which the Secretary of State would not have made but for that failure to disclose.  
     20.     	Applying the three conditions in section 71 to the undisputed facts of this case, and the alleged failure of disclosure as determined by the Secretary of State, produces in my judgment a different result from that reached by the tribunal chairman.  For this purpose it must be assumed that my conclusion on the first issue is wrong, so that the  “failure” satisfying the first condition was the non-disclosure “on 9 January 2003 or as soon as possible thereafter” of the fact that the claimant started work on that date.  So far as the second condition is concerned I would for my part doubt whether it can be said that the benefit payments for at any rate the six-week period starting on that date were made “in consequence of” any such failure. There is no condition of entitlement that exempt work must be reported in advance, or until the end of the 42 days, so that even if the Secretary of State had come to know of this work by some other means it is difficult to see how he could have avoided going on paying the claimant at any rate down to the end of the 42-day period, when for the first time he became in breach of the notice condition and lost his underlying entitlement.  After that point it can I suppose be more plausibly argued that the continued payments were made “in consequence of” the initial failure to disclose “on or as soon as possible after 9 January 2003”; though it is important to remember that the failure as determined under the first condition is the only relevant one for this purpose.  (The brief comments on causation made obiter in paragraph 30 of case CIB 3925/03, suggesting different results before and after expiry of the 42 days, appear more related to some assumed non‑disclosure at that point of the claimant having missed the deadline for giving notice, than on the initial non‑disclosure of work at the outset which is all that was relied on or the subject of determination here.)  
     21.     	However that may be, it is the third condition which appears to me to provide the Secretary of State with the most difficulty in pursuing his repayment claim on facts such as are agreed to exist in this case, for the first 26 weeks at least.  On the facts found in this case the only condition that could ever have prevented the claimant’s entitlement to incapacity benefit continuing for that time despite his starting work on 9 January 2003 was the requirement to give notice of this within 42 days; and the only “failure” relied on and determined under the first condition was the failure to give notice at the start of the period or as soon as possible thereafter.  If, as the third condition requires, one assumes away that failure (which can only mean assumes that there was no such failure, so that the required notice was given on 9 January 2003 or as soon as possible thereafter), the inevitable consequence of applying that assumption to the rest of the facts as they actually were is that it cannot be said there is any amount of the claimant’s incapacity benefit for the 26 weeks beginning on 9 January 2003 that would not have been paid to him anyway had that disclosure been made.  There is thus no amount in respect of those benefit payments that section 71 authorises the Secretary of State to recover.  
     22.     	I do not for my part regard this as an incongruous or absurd result.  All it means is that this is a case where when all the true facts have been fully looked into, they show the claimant has in fact received no more and no less for that period than the benefit properly payable to him all along had correct disclosure at the required time been made. In such a case there is no loss out of public funds to be recouped under section 71.  The powers in section 71 are confined to recouping true overpayments, that is money that turns out to have been paid out of public funds in excess of what would have been properly payable in any event had the correct representations and disclosures been made. It is of course entirely reasonable to have a notice requirement to help the Secretary of State keep track of what incapacity benefit claimants are up to, but if he wishes to impose what would in truth be an administrative penalty for the mere fact of non-compliance even where there is no true overpayment in the above sense, that must be a matter for appropriate primary legislation to authorise such penalties, not for a distortion of section 71 which as has often been said is restitutionary, not penal. 
     23.     	For the remaining period after expiry of the first 26 weeks from 9 January 2003 (that is from 10 July until 28 August 2003, when the claimant’s benefit was stopped) the answer differs because of the additional evidence condition in regulation 17(1C) above.  I accept the point made in Mr Cahill’s submission that in applying the third condition in section 71 it is only the particular misrepresentation or failure to disclose in question that is to be assumed away; all the other facts have to be left strictly as they actually were.  In other words it is a single but-for, not a series of what-ifs:  there is no scope for example for speculation that if a person working and earning £100 a week while claiming incapacity benefit had disclosed the fact, he would have been brought up short and stopped work or reduced his earnings to below the benefit limit, and so met the conditions for benefit after all when in fact he did no such thing. Applying that to paragraph (1C), whose language clearly envisages the “evidence” as something that needs to be considered and produced at or around the end of the first 26-week period (to see whether a further spell of exempt working is then likely to help the claimant back to full-time work), means that merely assuming initial disclosure would not be enough for benefit to have remained payable for that further period when the additional evidence condition for such entitlement was not met as a matter of objective fact.  Although I accept it as quite possible and even probable that if there had been an initial disclosure in January 2003 it would in turn have led to the claimant having an interview around the end of June, and to the value of a further period of exempt work then being assessed and  accepted, such a succession of assumptions in the claimant’s favour is in my judgment outside the single “but-for” that section 71 requires.  
     24.     	Accordingly if contrary to what I have held on the first issue there was here a relevant “failure” by the claimant to disclose on 9 January 2003 or as soon as possible thereafter the fact that he was working, the conditions in section 71 of the Administration Act for recovery of overpaid incapacity benefit from him are not in any event met as regards the £2,250.95 paid to him for the period 9 January 2003 to 9 July 2003 inclusive, and that amount is not recoverable from him on either footing. The balance amounting to £623.57 for the period 10 July to 28 August 2003 inclusive would be recoverable if my conclusion on the first issue were wrong. 
     25.     	The appeal is accordingly allowed and my decision substituted that none of the sum claimed is legally recoverable from the claimant.

(Signed)

P L Howell
Commissioner
21 February 2005