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Earl Russell: I was interested to hear the Minister say that it was difficult to judge the existence of fraud. I wish he had said that to the House when he was on his feet about an hour ago. Nevertheless, I concede that what he says is true. And yet, he must also concede that in the ordinary courts of law the question of judging whether or not an intention is fraudulent comes before them almost every day. I agree that it is difficult, but I do not believe that the difficulty is insuperable.

I agree with everything that the Minister said about public money. But he should put into the scale against that the fact that those who are receiving benefits are receiving an entitlement. To deprive people of an entitlement which is also a subsistence is something which ought to be weighed in the scale even against public money. I was wondering whether to ask the Minister for an assurance about the Secretary of State's discretion, which he then gave in the last part of his speech. I think that is all I am going to get out of him but I ask him, when he exercises his discretion, to remember mercy as well as justice. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Earl Russell moved Amendment No. 2:

Page 1, line 7, at end insert--
("( )The following subsection shall be inserted after subsection (1)--
"(1A) A person shall only be taken to have failed to disclose a material fact within subsection (1) if--
(a) he knew the fact in question; and
(b) it was reasonable in all the circumstances, including but not limited to his mental state) for disclosure of the fact to be expected of him,
whether or not the failure also constitutes a misrepresentation of a material fact within subsection (1)".").

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The noble Earl said: Amendment No. 2 is a rather more technical amendment. It deals with the case of Jones v. Chief Adjudication Officer which came before the Court of Appeal in 1993, though it was not reported until 1994. The amendment seeks to assimilate the threshold for misrepresentation to the threshold for failure to disclose. As the law stands at present, the threshold for misrepresentation is very much lower. Therefore, by using the declaration that all material facts have been reported, the department can assimilate every failure to disclose into a misrepresentation and thus make it easier to prove.

The case of Jones v. Chief Adjudication Officer was a difficult one. I believe that the case itself was correctly decided, but some of the things that were said in the course of it, possibly obiter--not being a lawyer I would not be too insistent on the point--are capable of giving some ground for anxiety. It is entirely reasonable to say that people should not be required to disclose what they do not know. I was a little perturbed by Lord Justice Evans saying that,

    "when a person has misrepresented a material fact, his knowledge of that fact is irrelevant so far as Section 53 is concerned. It is sufficient that there was the misrepresentation, whether the fact was known to him or not".
Most of us can disclose everything we know. I have never found a way of disclosing what I do not know because if I do not know it I do not know that I am failing to disclose it. It seems to be a fairly fundamental objection, which is not to say that it needed to be asserted, as the learned judge asserted it, in order to decide the case of Jones.

Mr. Jones had claimed unemployment benefit but had not received it. He filled in his form correctly at the time. He subsequently received unemployment benefit but failed to disclose that he had subsequently received it. Obviously, he had been incorrectly in receipt of benefits. There were other ways of arriving at the conclusion that he had received a payment that he should not have done and that he should repay it other than that of requiring that he disclose what he did not know. He obviously should have completed the declaration when he received the unemployment benefit and said that he had done so. That is where Mr. Jones's failure lay. It was not in any failure to disclose something that he did not know.

The amendment would also allow people to take into account the mental state of the claimant. For example, one can imagine the existing law about failure to disclose being applied to a patient with as yet undiagnosed Alzheimer's disease. The effects of that could be absolutely catastrophic. So where a person is subsequently discovered to have contracted Alzheimer's disease, it might be reasonable not to insist on recovery of overpayment when they might have failed to disclose a material fact simply because at the moment they were actually incapable of remembering it. That is a point worthy of thought.

The learned judge I have quoted was not the only one who discussed this case. A different line was taken by Lord Justice Stuart-Smith. He made the crucial point that knowledge is not needed in innocent misrepresentation. It is the word "innocent" which is really crucial. Clearly, a misrepresentation is a misrepresentation, whether one

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knows it or not. But one can argue that if it is an innocent misrepresentation, it should not necessarily--with a person whose income is as low as that of someone on benefit--give rise to the right to require the recovery of overpayment. So in that way I believe that one might reconcile what the two learned judges said, the one with the other. One might perhaps incorporate this amendment into law without actually meaning to reverse the case, which I believe was correctly decided. This amendment would save the day. It would require that people should not be penalised for failure to disclose what they do not know. It is a simple principle and I hope that the Minister will find it acceptable. I beg to move.

Lord Mackay of Ardbrecknish: The purpose of this amendment, as the noble Earl has described it, is to limit the Secretary of State's right to recover overpayments in certain circumstances where it would not have been reasonable to expect the person to have known that a change in circumstances must be reported to the department. In my view the amendment is not necessary. Case law already deals with cases of mental incapacity, illiteracy or educational or linguistic difficulties. Therefore, it would encompass, I suspect, the case that the noble Earl made about Alzheimer's disease. Indeed, perhaps I may go further and give the noble Earl an assurance that the mental state at the time of the claim is taken into account in deciding whether a person had knowledge of a relevant fact. The Secretary of State could decide not to pursue overpayment if Alzheimer's disease was subsequently discovered. No obligation can be imposed to disclose something that a person does not already know and an overpayment arising in such circumstances is not recoverable.

More importantly, case law does not limit consideration of failure to disclose in the way the amendment would do. Rather than benefiting claimants, which I am sure the noble Earl intends to do, it could have the effect of narrowing the interpretation of these provisions as established by the case law over a long period. Even in those cases where the right to recover is undisputed the Secretary of State maintains a power of discretion to waive recovery in whole or in part.

The noble Lord mentioned at length the case of Jones v. Chief Adjudication Officer. I am aware of that case. Perhaps I may suggest to the noble Earl that the latest authoritative position is a decision made in December 1995 by the Court of Appeal in Franklin v. Chief Adjudication Officer. Mrs. Franklin was overpaid income support because there was no disclosure that the interest rates on her mortgage had reduced. The social security appeal tribunal found that Mrs. Franklin had not known of the decrease in her mortgage interest rate. The court determined that the overpayment was not recoverable under Section 71 on the grounds that Mrs. Franklin had not misrepresented a material fact and also that she had not failed to disclose a material fact since the fact was outside her knowledge. I do not particularly want to read out some of the relevant parts of the case, but, if the noble Earl looks at the judgment, which was given on Wednesday, 13th December 1995, it may help with the problem he brings to our attention in this amendment.

22 Jul 1996 : Column 1238

Where a person has no knowledge of a fact, there will be no recovery if he either fails to disclose it or misrepresents it. That has long been the position for failure to disclose. The Franklin case, which was decided last December, shows that a person is only required to report a relevant fact of which he has knowledge. There is no misrepresentation if he completes the standard declaration without reporting a fact of which he had no knowledge. With those assurances and with the recommendation of a little light reading for the noble Earl of yet another legal judgment, I hope that he will be able to withdraw his amendment.

Lord Skelmersdale: In answer to the noble Earl's amendments my noble friend has mentioned the Secretary of State's discretion to waive the refund of overpayment either in whole or in part. Surely, there is a third course. It would be helpful to me at least, and, I hope, to the noble Earl, if we can be told that where a substantial sum of money is due to be repaid, this can be done over a period of time and settled in the adjudication.

Lord Mackay of Ardbrecknish: As we are in Committee, perhaps I may respond. The period of time during which the overpayment can be paid back is, in the first instance, a matter for negotiation between the person and the Benefits Agency. If no agreement can be arrived at, there is a limit to the amount of weekly overpayment which can be imposed. If my memory is correct it is £7 and £9--odd if the claim was fraudulent. Obviously, depending on the size of the overpayment, that will have some bearing on the length of time during which the overpayment is made. If it is felt that that would be too much for the person, it can be reduced to a lesser amount as long as the overpayment is made. I think that it is fair to say that the Secretary of State tries to take a reasonable view of repayments.

7 p.m.

Earl Russell: I am grateful to the Minister for that reply. I was aware of the case of Franklin and I am encouraged by the Minister's reading of it. If that is indeed the law, I am satisfied, but I ask the Minister to continue to watch the situation to see whether the cases which caused so much confusion in Jones continue to arise and, if they do, to reconsider whether the law may be in need of clarification.

On the question of mental state, it is not quite so simple. It is clear that a person's mental state is relevant to the question of whether the claimant knew the facts in question, but there is a commissioner's decision--the reference is CA/303/92--which holds that the question is only whether the claimant knew the fact in question, not whether he understood that it was reasonable to require him to disclose it. There are a number of cases of mental impairment--severe brain injury after a road accident comes to mind--where that distinction might be vital. I hope that the Minister can again tell me, as he has on other issues, that he has discretion and that he will exercise it with mercy. Can he help me that far?

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