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[2008] UKSSCSC CPC_1370_2007 (19 May 2008)

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. The appeal on behalf of the claimant's estate is allowed, but with limited practical benefit. The decision of the Sutton appeal tribunal dated 15 February 2007 is erroneous in point of law, for the reason given below, and I set it aside. It is expedient for me to substitute the decision on the appeal on behalf of the claimant's estate against the Secretary of State's decision dated 12 May 2006 that the appeal tribunal should have given (Social Security Act 1998, section 14(8)(a)(i)). The decision is that that appeal is allowed and that the substituted decision is as set out in paragraph 37 below.
2. This is in many ways a relatively routine overpayment recoverability case where, after a claimant's death, the Department for Work and Pensions discovers the existence of capital resources that had not been taken into account in the calculation of a means-tested benefit. However, some new and difficult points arise from the particular structure of the legislation on state pension credit (SPC), to do with the question of what counts as capital. There was an oral hearing of the appeal on 20 November 2007. The personal representative of the claimant's estate (who from now on I shall call "Mr H") attended. The Secretary of State was represented by Mrs Gillian Jackson of the Office of the Solicitor to the Department for Work and Pensions. I am grateful to both for putting forward their cases clearly and effectively. There has unfortunately been some subsequent delay caused by my directing further written submissions on some questions that arose in the course of drafting this decision, which in the end turned out to be red herrings. I apologise for that delay.

The background

3. On 29 February 2004 the claimant, who was then aged 73, signed a pension credit PC1 claim form. This had evidently been generated on a computer by an officer of the Pensions Service while speaking to the claimant on the telephone on 23 February 2004 and then sent to her for checking and signature. In the section on savings and investments, "no" was ticked to the question "Do you or your partner have any savings or investments?". The form disclosed that the claimant was receiving attendance allowance and that someone (her son, it turns out) was receiving carer's allowance in respect of her. In the section about making payments there was an agreement to having pension credit paid into an existing bank account and the details of a bank account in the claimant's name were given (which turns out to have been a saver account). It was indicated on the form that there was no need to disclose the claimant's receipt of retirement pension. Her retirement pension was paid four-weekly into a different account, a current account, at a different branch of the same bank. The declaration immediately above the claimant's signature was as follows (plus further agreements to payment direct into an account):

"I declare that the information I have given on this form is correct and complete as far as I know and believe, and I have included all of my income and savings."

4. The claimant was apparently visited on 25 March 2004, because of a question about whether she had any occupational pension earned from her past employment. It was confirmed that she did not and she signed a statement that her only pension was the state retirement pension. She was then awarded pension credit from 6 October 2003 calculated on the basis that she had no capital.
5. The claimant died on 18 December 2005. Mr H was appointed as her executor by her will. On 16 January 2006 he wrote to the Pensions Service in Blackpool, saying that the local office had not responded to being informed by the claimant's carer of her death. He asked to be advised at once of any moneys due to the claimant and of any claims against her estate. On 19 January 2006 Mr H signed a form IHT205 return of estate information for Her Majesty's Revenue & Customs (HMRC), recording the gross value of the estate as £25,417.59 (money in banks, building societies etc), plus £175.78 owed to the claimant. Probate was apparently granted on 16 February 2006. On 4 April 2006, the Pensions Service wrote to Mr H, pointing out that the information submitted to HMRC did not match that on which pension credit had been awarded and asking him to complete an assets sheet. The letter included strong advice not to distribute the estate. On the form to be returned Mr H declared the claimant's assets at death as £4,873.11 in a bank current account and £20,994.50 in a saver account. He said that the estate had been distributed on 5 April 2006. Copies of the pages of the bank statements for the two accounts covering 6 October 2003 were later produced. The statement for the current account showed bank giro credits of £419.72, representing payments of retirement pension, on 3 October 2003 and 31 October 2003. The total balances in the two accounts on 6 October 2003 came to £21,579.41.
6. On 12 May 2006 the decision was given revising the decisions awarding pension credit on the ground of ignorance or mistake of material fact and deciding that the claimant was entitled to pension credit at a reduced rate for the period from 6 October 2003 to 18 December 2005, resulting in an overpayment for that period of £1,396.40. It was further decided that on 29 February 2004 the claimant had misrepresented the material fact that she had capital assets in excess of £6,000, that the amount of £1,396.40 would not have been paid but for that misrepresentation and that that amount was recoverable from her estate under section 71 of the Social Security Administration Act 1992. There was a schedule of overpayment attached which purported to show the total amount overpaid in the period as £1,396.40, but that was on the basis of applying the quarterly reduction of capital under regulation 14 of the Social Security (Payments on account, Overpayments and Recovery) Regulations 1988 ("the Payments Regulations"). I shall have to come back briefly to the proper operation of regulation 14.

The appeal tribunal's decision

7. Mr H appealed and attended the hearing on 15 February 2007, giving a good deal of background to the case. The appeal tribunal disallowed the appeal and confirmed the decision that the Secretary of State was entitled to recover £1,396.40 from the claimant's estate. It took account of the circumstances in which Mr H had become the claimant's executor. She had asked him, as her local ward councillor, to do so because her son, the main beneficiary of her will, had learning difficulties. It also took account of the fact that Mr H was himself a pensioner on a fixed income and that he had genuinely thought it reasonable to distribute the estate when he did. The claimant's son had now disappeared and it was believed that the moneys derived from the will had been spent. However, it found that none of that, nor Mr H's complaints about aspects of the administration of the claimant's pension credit, affected the recoverability in law of the overpayment, while stressing that in its view both the claimant and Mr H had acted innocently.

The appeal to the Commissioner

8. Mr H now appeals against the appeal tribunal's decision with my leave. When granting leave to appeal I said this, having said that I would not have granted leave on various grounds put forward by Mr H:

"The ground on which I grant leave is this. The copy page from the claimant's current account (page 38) shows that her retirement pension was paid into that account at four-weekly intervals. One payment of £419.72 was made on 3 October 2003. In accordance with general principle and as decided in Commissioner's decision R(IS) 3/93, that payment would not lose its character of income until the expiry of the four-week period to which it would have to be attributed. It should therefore have been excluded from the amount of capital that the claimant possessed as at 6 October 2003. It appears that making that exclusion would reduce the claimant's capital as at that date, the start date of entitlement and the assessed income period, from £21,579.41 to £21,159.69. That would have affected the amount of the tariff income assumed from the claimant's capital (since £1 per week income is assumed for each complete £500, or final part of £500, over £6,000) at the start of the period of entitlement and would also have affected the diminishing capital calculation as part of the calculation of the overpayment said to be recoverable from the estate."

9. The submission for the Secretary of State dated 20 July 2007 did not support the appeal. On the particular point that I had raised, it was submitted that although the approach suggested was correct for income support, it was different for SPC:

"11. In the case of IS and JSA income becomes capital only if it is unspent after the period it remains as income. This is known as the period of attribution and is provided for by regulation 29 of the IS (General) Regulations and regulation 94 of the Jobseeker's Allowance Regulations. For SPC there is no equivalent provision in the regulations.

12. I submit that in the absence of any provision for attribution, there is no means by which it can be said that income becomes capital after a particular period. Therefore, in the case of SPC, any income becomes capital as soon as it is received. The amount of capital for SPC purposes is a simple snapshot of what is in the late claimant's bank at the time the decision is made and takes no account of what period any sums were intended to cover. As a consequence of this, a resource can be both income and capital at the same time for the purposes of SPC. For example, retirement pension paid into a bank account is income but it also forms part of the late claimant's capital resources as soon as it is received and falls to be calculated in accordance with regulation 19 of the State Pension Credit Regulations."

10. In reply, Mr H made a number of good points. He said that before the introduction of SPC retirement pensions were topped up by income support, in which the "period of attribution" rule applied and that SPC was supposed to reduce pensioner poverty, not to introduce new rules that were less favourable. He submitted that the legislation should not be interpreted in a way that created a difference in treatment between a pensioner paid four weeks' retirement pension into a bank account (said to become capital immediately) and a pensioner who cashed an order book weekly at the Post Office (who was not asked to disclose the amount of cash in a purse or wallet at the relevant date). He further submitted that the Secretary of State knew of the claimant's current account, because her retirement pension was paid into it, and of her saver account, because that was nominated on the SPC claim form, so that there had been no misrepresentation about her savings. If there had been, the appeal tribunal should have taken into account the claimant's ability to understand, as a result of her mental problems and deafness. And the visitor on 25 March 2004 should have clarified the situation.
11. I granted Mr H's request for an oral hearing so that there could be further exploration of the Secretary of State's case on income and capital and of Mr H's arguments. At the hearing Mr H re-emphasised, vigorously but courteously, the points mentioned in the previous paragraph. He submitted that reasonable people would think that the Secretary of State's proposition that all receipts of money were capital at the instant of their receipt was unfair and ridiculous. Even on that basis, there would be a discrimination between benefit recipients paid weekly and those paid four-weekly, because the latter would have larger sums said to be capital that had to last until the next payment. He submitted that current receipts of retirement pension should not count as capital, either at all in so far as they were used for day-to-day expenditure or for 12 months.
12. Mrs Jackson for the Secretary of State maintained the position put forward in the submission of 20 July 2007, as set out in paragraph 9 above. She submitted that the decision of Mr Commissioner Hoolahan QC in R(IS) 3/93 that payments of income paid in respect of a period could not "metamorphose" into capital until after the expiry of that period from the date of payment turned on the existence of the specific provision in regulation 29(2)(a) of the Income Support (General) Regulations 1987 that a payment of income in respect of a period is to be taken into account as income for a period equal in length to that period. She submitted that the omission of such a provision from the SPC legislation had been deliberate. The SPC scheme was designed to be simpler and to require less intrusive enquiries into a claimant's affairs. There was to be a simple snapshot at a particular date, taking into account any money or other assets the claimant happened to possess at that date. The compensation for the possible crudity of that approach was that the rules on capital for SPC were more generous than for income support and JSA, with no capital limit as such and with tariff income being assumed to arise from capital at a lower rate than for those other benefits. Then income was not taken into account over any prescribed period, so that sources of income in existence at the relevant date were treated as producing prescribed levels of weekly income. Mrs Jackson submitted that there was no double counting of income and capital; it was simply that there was more than one consequence of the receipt of income.
13. In relation to the question of whether there had been a misrepresentation of material fact when the claimant signed the PC1 form on 29 February 2004, Mrs Jackson submitted first that the declaration as to having included all income and savings was not subject to the "as far as I know and believe" proviso. The amount of the claimant's savings had not been stated, so that there was a representation that was incorrect. It would not have mattered if the claimant had forgotten about one of the bank accounts. She did not have an appointee. She signed the form to make the claim and there was no indication that she did not realise the nature of the document she was signing. On Mr H's argument about the Pensions Service's existing knowledge of one bank account and the nomination of the other account on the PC1 form, Mrs Jackson submitted that that fell a long way short of disclosure that the accounts contained any particular amount, far less an amount exceeding the crucial £6,000 at which tariff income started to be calculated. She submitted that the present case was very different from those in which it had been held that, if the Secretary of State failed to investigate some obvious inconsistency or ambiguity in the completion of a form, the overpayment ceased to be a consequence of a misrepresentation in the form, being rather a consequence of the official error in failing to investigate. She said that here the answer to the question about savings was plain and unambiguous and there was no necessary inconsistency between a person having two bank accounts, yet possessing no savings or no savings that would make any difference to entitlement to SPC.

The Commissioner's decision on the appeal

14. My conclusions of law are against most of Mr H's submissions, but also against the Secretary of State's submissions on the meaning of capital in the SPC scheme. That means that the appeal tribunal went wrong in law and that its decision must be set aside. I deal with Mr H's arguments first, before turning to the error of law that I find has been made out.

Misrepresentation

15. In my judgment, a complete answer in law to Mr H's arguments is supplied by the decision of Mr Commissioner Jacobs in R(IS) 4/06, with which I respectfully agree and in which there is a full and helpful analysis of the previous case-law. That decision was not specifically mentioned at the oral hearing or in written submissions, but the principles that it stands for were relied on by Mrs Jackson for the Secretary of State. In those circumstances there is no need to delay this decision further by giving Mr H an opportunity to comment on the decision, but I am arranging that a copy be sent to him with the decision.
16. In R(IS) 4/06, and in the case before the Court of Appeal in Chief Adjudication Officer v Sherriff, R(IS) 14/96, the claimant had signed a declaration on a claim form that "the information I have given on this form is correct and complete". Mr Commissioner Jacobs held that such a declaration, where specific questions have been asked on the form, guarantees the accuracy of the answers and that they accurately set out all income and other details that may affect entitlement. That form of declaration, in contrast to some other forms, was not restricted to facts that were within the claimant's knowledge. In my judgment, the declaration in the present case as to the inclusion of all income and savings is to the same effect. That particular category of information was taken out of the qualification "as far as I know and believe". There was a misrepresentation of material fact on 29 February 2004 even if the claimant did not know of the accounts in question or the amounts in them. The representation that was wrong in fact was that all the claimant's income and savings had been included on the form. The only possible meaning of that representation is that the amount of the savings and income had been included. Merely nominating a savings account for the payment of SPC, when the specific question about savings had been answered in the negative, is (despite Mr H's conviction to the contrary) a very long way from a statement of the amount of savings.
17. Nor was this a case where there was such an ambiguity or contradiction in what had been put on the form that it was possible to conclude that the sole reason for the making of the overpayment was the failure of officers of the Pensions Service to investigate the ambiguity or contradiction and that the misrepresentation on the form had no causative effect at all (see paragraphs 42 to 47 of R(IS) 4/06). There was no inconsistency between nominating a bank account into which SPC would be paid and an answer that a claimant had no savings. Similarly, the knowledge of the Pensions Service in administering the claimant's retirement pension that it was paid four-weekly into a different bank account did not deprive the misrepresentation of all causative effect on the making of the overpayment of SPC. Even if an officer thought (wrongly as I find below) that the effect of making those payments was that the claimant would inevitably have capital of the amount of each payment immediately on its receipt, that would be so far below the level at which capital affected the amount of SPC entitlement through the deeming of income (£6,000) that it would have made no difference to the amount of SPC awarded or have given rise to a need to make further investigations. It has not been suggested that anything was said by the claimant at the visit on 25 March 2004 that ought to have alerted the visitor or any other officer to a need for further investigation of the amounts in the claimant's bank accounts. The visit was for one specific purpose and there was no obligation, just because a visit was taking place, to investigate aspects of the claim about which there appeared to be no doubt. Even if there had been some fault on that occasion, that would not in itself prevent the claimant's misrepresentation still being one of the causes of the overpayment.

The claimant's understanding of the claim form

18. Mr H had said to the appeal tribunal that he thought that the claimant might not have understood the question about savings on the claim form and referred to her many medical problems (learning difficulties, diabetes, hearing, poor eyesight, a heart condition and cancer). It may be that the appeal tribunal should have said expressly what it made of that argument, but that is not a material error of law because the only possible result was that those factors did not affect the recoverability of the overpayment. I have dealt above with the irrelevance of the claimant's actual knowledge to whether or not there was a misrepresentation. Mr Commissioner Jacobs dealt in paragraphs 8 to 29 of decision R(IS) 4/06 with the issue of when some fundamental mistake as to the nature of a document by a party under a disability deprives the document of legal effect (usually identified by the Latin term non est factum - it is not my deed).
19. Here the evidence about the exact nature and effect of the claimant's disability at the relevant time was understandably rather vague, but there was no real evidence at all that the document she thought she was signing on 29 February 2004 was fundamentally different from what it actually was - a pension credit claim form. The facts that she did not have an appointee and that the visitor on 25 March 2004 appears to have had no doubts about taking a statement from her point against such a conclusion. Thus there was no sufficient basis for a conclusion that the claimant was not to be taken as having made the misrepresentation on the form she signed, quite apart from the point made succinctly by Nourse LJ in Sherriff, R(IS) 14/96 (and see paragraph 10 of R(IS) 4/06):

"The claim and the misrepresentation being indivisible, if the claimant lacked the capacity to make the misrepresentation, she lacked the capacity to make the claim. In that event benefit was paid to her in the mistaken belief that a claim that had not been made had been made and, there being no power to pay without a claim, is recoverable by the Secretary of State not under [the predecessor of section 71(1) of the Social Security Administration Act 1992] but on ordinary principles of restitution."

Capital

20. I reject the Secretary of State's submissions about the proper treatment of the receipt of four weeks' retirement pension of £419.72 on 3 October 2003. That amount could not in law have been found to be part of the claimant's capital as at 6 October 2003.
21. I am not going to set out here all the possibly relevant parts of the SPC legislation. Section 2(1) of the State Pension Credit Act 2002 makes entitlement to the guarantee credit dependent on having income which does not exceed the appropriate minimum guarantee and section 3(2) makes the claimant's income relevant to entitlement to the savings credit. There is no rule excluding entitlement when capital exceeds any limit. Then according to section 17, "income" and "capital" are to be construed in accordance with section 15, subsection (1)(i) of which includes "income from capital" within the list of what is income (which also includes in paragraph (j) income of any description prescribed in regulations). The rest of section 15 requires income and capital to be calculated as prescribed in regulations and, in particular, allows regulations to deem capital to yield income at a prescribed rate. Section 15(6) allows regulations to treat capital as income and income as capital. There is no further definition of income or capital in the Act. I do not need to go into the complications of assessed income periods and the changes in income that have to be reported. Stopping there, it seems to me, first, that the Act adopts the ordinary meanings of income and capital and, second, especially in the light of the powers in section 15(6), indicates that income and capital are separate and mutually exclusive categories (even if the boundary line might sometimes be fuzzy).
22. So far as the State Pension Credit Regulations 2002 ("the SPC Regulations") are concerned, there are no provisions deeming income to be capital or capital to be income and no further general definitions of those categories. Regulation 15 prescribes various forms of income under section 15(1)(j) and what social security benefits are to count (excluding, for example, attendance allowance and disability living allowance). Regulation 15(6) sets out the rule deeming capital over £6,000 in the ordinary case to yield income of £1 per week for each £500 plus any final excess. Regulation 17 contains rules for calculating weekly income which depend on the period in respect of which a payment is made. Schedules IV, V and VI provide for disregards of amounts in the calculation of income other than earnings, income from capital and earnings respectively. For most categories of capital, actual income from capital is disregarded as income (paragraph 18 of Schedule IV). In my judgment there is nothing in those or the other provisions of the SPC Regulations to displace the ordinary meanings of income and capital.
23. I take the view that the principle expressed by Mr Commissioner Hoolahan QC in decision R(IS) 3/93 (see paragraph 8 above) was not dependent on the existence of the specific rule in regulation 29(2)(a) of the Income Support Regulations that a payment of income is to be taken into account for a period equal in length to the period in respect of which the payment was made. The Commissioner, in accepting the adjudication officer's submission in that case, adopted the period fixed by regulation 29(2)(a) as determining the length of time before which a payment of income could not metamorphose into capital. However, in my judgment, he was starting from the general proposition, supported by paragraph 6 of R(SB) 2/83 and R(SB) 35/85, that payments received as income were not capital merely because of their receipt into a claimant's current account, but only after their transformation into capital. He was taking into account the nature of capital in the form of savings out of past income and merely adopting the regulation 29(2)(a) as a convenient measure of the timing of the transformation. Accordingly, the absence of a direct counterpart of regulation 29(2)(a) in the SPC legislation does not deprive R(IS) 3/93 of its authority.
24. Further, the SPC legislation must operate on an assumed notion of a period of attribution of income, to use the Secretary of State's term. It seems to me that there is a hole in the legislative scheme. The conditions of entitlement are in terms of whether a claimant "has" income. That test must be applied primarily as at the first day from which SPC could be awarded, but it is left unstated just what having income at that date means. There are no general provisions that payments are to be treated as paid on any particular date or to be taken into account for any particular period (although regulation 13B of the SPC Regulations provides, for purposes that I currently do not understand, for the day of a week on which various benefits are to be treated as paid and with effect from 5 April 2004 regulation 17ZA deals with final payments of income). Yet the scheme must work on the basis that someone like the claimant, who received a payment of retirement benefit before the first day of potential entitlement to SPC (6 October 2003) and was due to receive the next payment after that date and the benefit week containing that date, had that income at that date. An unstated principle of attribution must operate. Although the express purpose of regulation 17 of the SPC Regulations is merely the conversion of amounts into weekly income, it both supports the taking into account of actual payments of income (as opposed to the existence of sources of income) and having regard to the period in respect of which a payment of income is made. Accordingly, even if I were wrong in the previous paragraph, I would still reject the Secretary of State's submission against applying the principles of R(IS) 3/93.
25. That result in my judgment gives effect to the ordinary meanings of capital and income. The main indicator of the metamorphosis into capital of income paid in respect of a period will the expiry of a length of time equal to that period. I accept that there may be different indicators. For instance, if the income were paid directly into or transferred into something obviously identifiable as a savings vehicle (like an ISA or a savings account with a notice period or perhaps a broader category), it might become capital at that point. Similarly, the monthly interest earned on the claimant's saver account here, expressly disregarded as income, would in my view properly be regarded as capital as soon as it was credited notwithstanding the absence of a provision equivalent to regulation 48(4) of the Income Support Regulations (income from most forms of capital to be treated as capital).
26. The result also has the desirable effect of avoiding the appearance of double-counting. Mrs Jackson submitted that there was no real double-counting in the Secretary of State's position, merely that the claimant's retirement pension was a source of income whose weekly amount was relevant to the calculation of entitlement and a source of capital when the payments were made into her current account. However, that in my view is inconsistent with the assumption of an attribution of payments of income to a period that is necessary to the practical working of the scheme. If the payment of £419.72 to the claimant on 3 October 2003 were to be treated both as giving rise to a weekly income of £104.93 as at 6 October 2003 and as in full a part of her capital, that would give rise to a real double-counting. It also seems to me that it would be odd, to say the least, for particular forms of income not to count or to be disregarded as income, only for the amount of any payment to count as capital immediately on its receipt. Such effects should only be allowed if clear legislative words leave no alternative. The legislative words here fail that test by a long way.
27. The result has the further desirable effect of avoiding differences of treatment between those who receive benefits or other income at four-weekly or monthly or longer intervals and those who receive income at weekly intervals. I do not think that the Secretary of State's submissions would have produced the difference of treatment suggested by Mr H between those whose benefit is paid direct into bank accounts and those who take benefits in cash through the use of order books. That is because the logic of those submissions, as accepted by Mrs Jackson, was that any cash held by a claimant at a relevant date (including benefits just handed over by the Post Office clerk) should count as capital. But a person who receives several weeks' worth of income, that has to last until the next payment, would be more likely to be caught by the Secretary of State's suggested rule than a person who received the same annual amount of income in weekly payments. However, Mr H's wider argument about the treatment of retirement pension income could not have succeeded. It is firmly established that there mere existence of expenses that need to be paid out of capital, but have not yet been paid, does not affect the amount of capital to be counted for the purposes of means-tested benefits.
28. Accordingly, the appeal tribunal erred in law by including the payment of £419.72 as part of the claimant's capital. Her capital should only have been calculated at £21,159.69, generating weekly tariff income of £31, not £32.

The calculation of the overpayment and the amount recoverable

29. This is the issue on which I directed further submissions after the oral hearing. As it turns out I can deal with it fairly briefly.
30. The decision-maker of 12 May 2006, and therefore also the appeal tribunal, went wrong in describing the amount overpaid

as £1,396.40. That calculation was made after making quarterly reductions in the amount of capital, and thus the tariff income, through the period of overpayment using the method in regulation 14 of the Payments Regulations. The amount actually overpaid was the amount that would not have been paid throughout on the basis of the claimant's capital as at 6 October 2003 and the tariff income appropriate to that amount. Schedule 1 to the submission dated 24 January 2008 on behalf of the Secretary of State (page 125) shows the calculation on the basis of capital of £21,579.41 as £1,472.00. That should have been described as the amount overpaid, out of which the amount of £1,396.40 was recoverable. As I have decided above that £21,579.41 was the wrong starting-point, there will have to be a recalculation of the exact amounts, but the principle holds good.

31. That in itself was a minor technical error that could for most purposes be overlooked, but I was concerned that it had led to an inaccurate application of regulation 14(1) of the Payments Regulations:

"(1) For the purposes of [section 71(1) of the Social Security Administration Act 1992], where income support, or state pension credit, or income-based jobseeker's allowance, working families' tax credit or disabled person's tax credit has been overpaid in consequence of a misrepresentation as to the capital a claimant possesses or a failure to disclose its existence, the adjudicating authority shall treat that capital as having been reduced at the end of each quarter from the start of the overpayment period by the amount overpaid by way of income support, or state pension credit, or income-based jobseeker's allowance, working families' tax credit or disabled person's tax credit within that quarter."

I was concerned that, in the schedule of recoverable overpayment showing an amount of £1,396, the reduction applied in later quarters was what would have been overpaid if the tariff income was calculated on capital as reduced by previous quarterly reductions, instead of by the amount actually overpaid in the quarter. But it turned out that I had not done the arithmetic and that the schedule on page 40 and 41 (and on page 126) had properly applied the same reduction in each quarter.

32. I noted when directing the further submissions that the amount of capital declared to HMRC on the claimant's death was £25,417.59, significantly higher than the level on 6 October 2003. In the case of other means-tested benefits, account would be taken of increases in the amount of actual capital and resulting tariff income through a period in calculating the amount of the actual overpayment. The regulation 14 quarterly reductions would then be applied in calculating the amount of the recoverable overpayment. However, for SPC purposes, if an "assessed income period" from the start of entitlement (usually five years) has been specified, the acquisition of additional capital generating additional tariff income during that period does not affect the amount of entitlement to SPC and need not be reported.
33. I asked the Secretary of State whether, in an overpayment case where hypothetical reductions of capital were being made under regulation 14 of the Payments Regulations, increases in the actual amount of capital possessed should be taken into account. The argument for doing so would have been that the principle behind the regulation 14 rule was that, if a claimant had not been receiving the benefit overpaid, she might have had to spend capital to live, and SPC could be superseded during the assessed income period to a claimant's advantage to take account of a reduction in tariff income. On that hypothesis, actual increases in capital would have been relevant to whether or not there was an advantage to the claimant. The Secretary of State's answer, in paragraph 19 of the submission of 24 January 2008, was that, because of the special structure of SPC, increases of actual capital should be ignored in the calculation of the recoverable overpayment. I am content to accept that that is the position, which avoids what are probably uneconomic complications of administration and investigation.
34. I am also content that the Secretary of State was not, in the present case, obliged to request from Mr H copies of the claimant's bank statements covering the entire period from 6 October 2003 to 18 December 2005, just in case the amount of her capital decreased at some points in that period in a way that would have allowed supersession to her advantage if the initial award of SPC had been calculated taking into account the capital she possessed on 6 October 2003. That is the kind of thing that the personal representatives of an estate can raise if they wish, having obtained the necessary evidence. The Secretary of State need not go to the expense, and impose the expense, of obtaining such evidence in all cases. If Mr H were, following this decision, to discover that there had been reductions in the amount of capital (although I suspect that there was a steady increase through the addition of interest and the claimant's income exceeding her outgoings), he could apply to the Secretary of State for supersession of my decision on the ground of ignorance of material fact. Similarly, if Mr H discovered something about the nature of the deposit of £4,960 into the claimant's saver account on 30 September 2003 that indicated that it should not have been counted as part of her capital (eg because it was a payment of arrears of benefit or from an insurance company under a property or contents policy), he could apply for a supersession on the same ground.

Conclusion

35. For the reason given in paragraphs 20 to 28 above, the appeal tribunal's decision is erroneous in point of law and I set it aside. In view of the limited nature of that error it is plainly expedient for me to substitute the decision that the appeal tribunal should have given on its findings of fact.

The Commissioner's decision on the appeal against the decision of 12 May 2006

36. The only substantial way in which the decision-maker of 12 May 2006 went wrong was in taking the claimant's capital as at 6 October 2003 as £21,579.41 instead of £21,159.69 (plus the trivial error about the description of the amount overpaid as distinct from the amount recoverable). In accordance with my conclusions above on Mr H's submissions, I am satisfied that the decision awarding the claimant pension credit fell to be revised and that the consequent overpayment was recoverable from the claimant's estate because it would not have been paid but for the claimant's misrepresentation of material fact on 29 February 2004. The amounts of the actual overpayment and the recoverable overpayment will have to be recalculated by the Secretary of State on the basis of what I have held to be the correct amount of capital. The difference is likely to be slight. I give directions about the recalculation in my formal decision in the following paragraph.
37. My decision on the appeal is that:

(a) the decision dated 31 March 2004 awarding the claimant pension credit from and including 6 October 2003 falls to be revised on the ground that it was given in ignorance of a material fact as a result of which it was more advantageous to the claimant than it would have been but for that ignorance (Social Security and Child Support (Decisions and Appeals) Regulations 1999, regulation 3(5));

(b) the revised decision is that the claimant is entitled to pension credit at reduced weekly rates for the periods from 6 October 2003 to 11 April 2004), from 12 April 2004 to 10 April 2005 and from 11 April 2005 to 18 December 2005), instead of to £13.66, £14.55 and £15.74 respectively, but the precise weekly amounts are to be calculated by the Secretary of State on the basis of the claimant possessing capital of £21,159.69 as at 6 October 2003, subject to the directions in sub-paragraph (d) below;

(c) as a result, an overpayment of pension credit was made to the claimant for the period from 6 October 2003 to 18 December 2005 of an amount to be identified after the calculation under sub-paragraph (b) above, out of which an amount to be calculated on the same basis is recoverable from the claimant's estate under section 71(1) of the Social Security Administration Act 1992, as it would not have been paid but for the claimant's misrepresentation of material fact made on 29 February 2004;

(d) if there is any dispute about the arithmetic of the calculations ordered above, the case is to be referred back to me (or, if necessary, another Commissioner) for further decision.

(Signed) J Mesher

Commissioner

Date: 19 May 2008