[2008] UKUT 38 (AAC)

IN THE UPPER TRIBUNAL	Appeal No.  CH/3/2008
ADMINISTRATIVE APPEALS CHAMBER

Before Deputy Judge Nicholas Paines QC

Decision:  The appeal is allowed.  I set the decision of the appeal tribunal aside and remit the case to the First-tier Tribunal for reconsideration in accordance with this decision.

REASONS FOR DECISION

1.	This appeal concerns a decision by a local authority that there had been recoverable overpayments of housing benefit (‘HB’) and council tax benefit (‘CTB’) to the claimant in respect of the period from February to May 2007.  The claimant is a married man living with his wife and child in local authority accommodation.
2.	In May 2006 an official of the local authority visited the claimant’s home and completed a HB/CTB Visiting Form.  It appears that the information on the form was given by the claimant’s wife, who signed the form, though nothing turns on this.  The form recorded that the claimant’s wife worked as a shop assistant, usually working 22½ hours per month, and was paid by the calendar month.  Her pay before tax and national Insurance was given on the form as £492.38.  
3.	She showed the local authority official her pay slips for March and April 2006; the March pay slip showed 75 hours worked and gross pay of £378.75, while the April pay slip showed 97½ hours worked and gross pay of £492.38 – the same amount as was declared on the form.  The local authority took the average of the two monthly figures and calculated the claimant’s HB and CTB entitlement on the basis of that.
4.	In October 2006 the claimant’s wife’s earnings increased as a result of the increase in the national minimum wage.  This was not disclosed to the local authority.
5.	In May 2007 a local authority official visited again and completed a fresh Visiting Form.  On that form the claimant’s wife’s gross earnings were declared as £550 per month.  The visiting official was shown pay slips for February and March 2007, both showing 97½ hours worked and gross pay of £550.88.
6.	As a result of the information contained in the February and March 2007 pay slips the local authority determined that recoverable overpayments of HB and CTB had been made to the claimant since at latest February 2007.  The claimant appealed on the grounds that the supposed overpayment had been calculated without waiting for information regarding his tax credit entitlement.
7.	At the hearing before the appeal tribunal the claimant’s representative abandoned the argument based on tax credit entitlement but argued that it had not been reasonable to expect the claimant to disclose the increase in his wife’s pay; it was due to the uprating of the national minimum wage, which the local authority ought to have known about.  He also argued that the original award of had been wrongly calculated; the local authority should have based the claimant’s wife’s average weekly earnings on monthly gross income of £492.38, not the average of the April 2006 figure of £492.38 and the unusually low figure of £378.85 earned in March 2006.  
8.	The tribunal dismissed the appeal.  In the statement of reasons it dismissed as ’ludicrous’ the argument that the local authority ought to have known that the claimant’s wife’s income increased annually as a result of the increase in the minimum wage, and found that the claimant ought to have reported the increase.  The social security commissioner who gave leave for this appeal refused leave to appeal in respect of that part of the decision, and I respectfully agree with him that the tribunal was plainly right.  Regulation 88 of the Housing Benefit Regulations 2006 places claimants under a duty to report relevant changes of circumstances and any increase in the claimant’s wife’s earning was a relevant change of circumstances.  It is unrealistic to suggest that a local authority ought to work out for itself that particular earnings are earned at the level of the minimum wage and, without being told of an increase in pay, automatically recalculate those earnings in proportion to an increase in the level of the minimum wage.
9.	The tribunal went on to dismiss the argument based on the alleged incorrect calculation of the original 2006 award, holding that ‘the overpayment had been correctly calculated on the basis of the information provided’, that the claimant had produced no further wage details to support the argument that the 2006 award had been incorrectly calculated, that the claimant had not challenged the 2006 award and that ‘if his argument was to be accepted then the benefit awarded in that year would have been incorrect resulting in an overpayment for that year’.
10.	The claimant applied for permission to appeal to the social security commissioner; the grounds in respect of which permission was granted were that the tribunal had failed to explain (i) ‘why the average taken from both the March and April wage slips, which gave a distorted average, complied with regulation 29 of the Housing Benefit General Regulations’, (ii) ‘why the overpayment was recoverable or why it rejected the argument that the overpayment was due to official error’ and (iii) ‘why the calculation of the overpayment provided by the representative was rejected and why the local authority’s calculation preferred’.
11.	The social security commissioner who gave leave to appeal directed the parties to say whether they objected to the decision being set aside on the grounds that the tribunal’s reasoning was inadequate in the respects complained of, and directed that, if a party did object, the other party should be given an opportunity to comment on the objections.
12.	The local authority did object, supporting the tribunal’s reasoning that I have summarised in paragraph 9 above.  Owing to an administrative error the claimant’s representative was not initially given an opportunity to comment on the local authority’s objections, but has now done so, saying that the operation of regulation 29 was fundamental to the issue of the amount of the overpayment and that the tribunal had erred in law by not considering it.
13.	On 3 November 2008 the functions of social security commissioners in relation to appeals from appeal tribunals were transferred to the Upper Tribunal.
14.	I consider that the appeal tribunal’s decision did involve an error of law for the reasons set out below.  I have to say that the tribunal may have been hampered by the difficulty that the precise thrust of the claimant’s argument based on the supposed miscalculation of the original award was not clear; there is no written submission to the tribunal and the record of proceedings sets out the claimant’s representative’s argument that the original award had been wrongly calculated without setting out an explanation of what allegedly flowed from that, other than that if the original award had been lower, then the amount of the overpayment calculated by comparing the original award with entitlement on the basis of the February and March 2007 pay slips would have been lower.  The claimant’s representative’s comments on the local authority’s objections do not take matters any further either.
15.	I have therefore considered what the consequences might be if the local authority did calculate the original award incorrectly.  It seems to me that the consequence could be that different portions of the overpayment might have different causes: even before the increase in the claimant’s wife’s rate of pay, the claimant was being overpaid as a result of the alleged miscalculation of her average earnings; following the increase in her pay, that initial degree of overpayment continued and there was a further amount of overpayment that was attributable to the failure to report the increase.  The recovery calculation, in calculating the difference between entitlement as originally calculated and entitlement based on the 2007 pay slips, recovers both elements of overpayment.  However, the portion of overpayment attributable to the original alleged miscalculation of the award might not be recoverable if it arose in consequence of an official error and the other requirements of regulation 100(2) of the HB Regulations were satisfied.
16.	For these reasons it seems to me that, in order to determine the appeal, it was necessary to decide whether regulation 29 had been applied correctly in calculating the original award.  In not dong so, the tribunal erred in law.
17.	Regulation 29 provides in the first instance that average weekly earnings are to be estimated, in a case where a person is paid monthly, by reference to earnings in the preceding two months.  It was no doubt for that reason that the local authority official in this case looked at the wife’s pay slips for March and April 2006.  But regulation 29(1)(b) contains an over-riding rule that, where a person’s earnings fluctuate, one is to look at ‘such other period … as may, in any particular case, enable [the] average weekly earnings to be estimated more accurately’.
18.	The evidence suggests that the claimant’s wife’s earnings did not normally fluctuate; she seems normally to have worked consistently for 22½ hours per week.  However, they did fluctuate in March and April 2006 when they were lower in March than in April – as the pay slips themselves show.  It therefore seems to me that regulation 29 required the local authority to look earlier than March 2006 in order to estimate the wife’s weekly earnings more accurately.  I therefore agree with the claimant that the local authority misapplied regulation 29 in this instance.
19.	That would on the face of it be a mistake within the meaning of regulation 100(3) and thus an official error.  It seems unlikely that the claimant or his wife contributed to it: the fluctuation was apparent on the face of the pay slips she provided.  
20.	The tribunal dealt with the point first by saying that the claimant produced no evidence to substantiate the assertion that the figures in the original award used were erroneous; in my judgment that misses the point.  The claimant was not suggesting that the March pay slip was inaccurate, merely that it was unrepresentative.  It seems likely that that is right but, whatever was the typical position, the fact is that the two pay slips showed a fluctuation in earnings; that being so, regulation 29 required further periods to be taken into account.
21.	Secondly, the tribunal said that the claimant had not challenged the original award and that ‘if his argument was to be accepted then the benefit awarded in that year would have been incorrect resulting in an overpayment for that year’.  While I can understand that it struck the tribunal as unattractive for the claimant to be relying on an argument that he was already being overpaid even before he failed to disclose his wife’s pay increase, I do not consider that the tribunal’s reasoning adequately addressed the issue thrown up by the fact that the local authority had originally misapplied regulation 29.  That issue was whether the misapplication of regulation 29 was a mistake which the claimant or his wife did not cause or materially contribute to (within the meaning of regulation 100(3) of the Regulations) and whether the claimant or his wife could reasonably have been expected to realise that there was an overpayment (within the meaning of regulation 100(2)).
22.	If part of the overpayment was, on the correct application of regulation 100, irrecoverable, then I consider that regulation 100 afforded the claimant a defence to the recovery of that element of the overpayment, despite the fact that his failure to disclose his wife’s pay increase led to a further overpayment that is recoverable.  
23.	I do not consider that I am in a position to decide all the issues that arise under regulation 100 in respect of the first part of the overpayment.  I therefore remit the case to the First-tier Tribunal (as the appeal tribunal is now called) with a direction to reconsider the case in accordance with the law as set out in this decision.  I direct that the Tribunal that reconsiders the case should not have the same membership as on the previous occasion.

Nicholas Paines QC
12 December 2008