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Judgments - Hinchy (Respondent) v. Secretary of State for Work and Pensions (Appellant)


SESSION 2004-05
[2005] UKHL 16
on appeal from: [2003] EWCA Civ 138




Hinchy (Respondent)


Secretary of State for Work and Pensions (Appellant)



The Appellate Committee comprised:

Lord Hoffmann

Lord Hope of Craighead

Lord Scott of Foscote

Lord Walker of Gestingthorpe

Baroness Hale of Richmond




Hinchy (Respondent) v. Secretary of State for Work and Pensions (Appellant)

[2005] UKHL 16


My Lords,

    1.  Miss Maureen Hinchy lives in Islington. For many years she has been paid income support, a benefit payable under Part VII of the Social Security Contributions and Benefits Act 1992 ("the Benefits Act") and the Income Support (General) Regulations 1987 (SI 1987 No 1967). Her entitlement, which is governed by regulation 17 and Schedule 2, depends upon a variety of factors, including her entitlement to certain other benefits. In some cases, entitlement to another benefit, such as child benefit, results in a reduction in income support. In other cases, it results in being paid a premium. In the latter category is disability living allowance ("DLA"), payable under Part III of the Benefits Act to people who are in need of care in various degrees because they are severely disabled. A person who is awarded DLA for care appropriate to the highest or middle category of disablement will also be entitled to a premium on his or her income support.

    2.  In 1993 Miss Hinchy, who suffers from irritable bowel syndrome, was awarded DLA in the middle category. Such awards may be indefinite or for a fixed period. Miss Hinchy's was for 5 years and expired on 13 October 1998. She applied for a renewal but was refused. She appealed but the appeal was dismissed. When the award expired, she ceased also to be entitled to the premium payments on her income support. Her weekly payments should have gone down from £96.15 to £57.65.

    3.  Unfortunately, the person responsible for determining Miss Hinchy's entitlement to income support at her local Social Security Office in Hackney did not realise that her DLA award had expired. For nearly two years the office went on sending her order books, containing weekly orders to present at a Post Office for payment, in amounts which included the premium. Eventually a spot check revealed the mistake and her payments were reduced to the correct amount from 3 July 2000. By that time, she had been overpaid £3555.40.

    4.  The question in this appeal is whether the Secretary of State can claim the money back. He has a statutory right of recovery under section 71 of the Social Security Administration Act 1992 ("the Administration Act"):

    "(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)  any sum recoverable by or on behalf of the Secretary of State in connection with any such payment has not been recovered,

    the Secretary of State shall be entitled to recover the amount of any payment which he would not have made or any sum which he would have received but for the misrepresentation or failure to disclose…

    (3)  An amount recoverable under subsection (1) above is in all cases recoverable from the person who misrepresented the facts or failed to disclose it."

    5.  The Hackney Social Security Office claimed that the requirements of this section were satisfied because Miss Hinchy had failed to disclose a material fact, namely that her DLA had expired. In consequence of that failure, she had been paid £3555.40 which she would not otherwise have received. Miss Hinchy appealed to an Appeal Tribunal. She accepted that she knew that her DLA award had expired. Nor was it disputed that this was a material fact; the person who made the decision, if he had known about it, "would have wished to supersede and reduce the amount of [the income support] award." Likewise, it was conceded that if Miss Hinchy had told the office about the expiry of the award, then, on a balance of probability, the overpayment would not have occurred.

    6.  There were two grounds of appeal. The first was that Miss Hinchy had made disclosure. She said she thought she had mentioned it on the telephone. But the Tribunal said that the absence of any record of such a communication at the Social Security Office made it more likely that she had not done so. The second ground was that in all the circumstances disclosure could not reasonably have been expected of her. The reasons she gave were that she was not in good health and did not understand the benefit system. The Tribunal rejected these excuses. In so doing, it relied upon the instructions printed on the standard order books issued to Miss Hinchy. They have yellow pages at the back with notes headed: "These notes are important, please read them carefully." In addition, each order contains a declaration which the claimant must sign when he or she presents it for payment:

    "I declare that I have read and understand all the instructions in this order book. That I have correctly reported any facts which could affect the amount of my payment and that I am entitled to the above sum."

    7.  The instructions included the following paragraphs:

    "9  Remember

    The amount of money that you are entitled to is based on what you told us when you claimed. If things change and you do not tell us, you might get the wrong amount of money and you could be breaking the law.

    10  How to tell us about changes

    You must get in touch with the Social Security Office as soon as you can. The address is on the front cover of this order book.

?????  Send them a letter or give details on the Form A9 that we have sent you….Explain what has happened…. or ?????  Take your order book along to the Social Security Office and explain what has happened.

    There is information on the next pages about the following changes:…

    13  Any benefit goes up or down

    You must send us a letter or form A9 if this happens to your money…If you have already told us that your benefit is going up or down and the amounts on the orders in this book change to take account of this, you do not need to tell us again."

    8.  Form A9, which is issued to everyone on income support, is headed "Telling us about changes". It lists the various changes which have to be notified. Under the heading "Changes to do with other money coming in" it says "Tell us if you…start to get a different amount of benefit…Remember to include things like social security benefits."

    9.  The Tribunal said that the direction in paragraph 13 of the notes, to tell the office if any benefit goes up or down, was a "simple instruction" and, in the absence of medical evidence about Miss Hinchy's mental state, the Tribunal did not accept that she was incapable of understanding it or taking appropriate action. If, as she claimed, she had not read the notes, it would be reasonable to expect her to have done so. This finding of fact is, I think, inconsistent with a submission that Miss Hinchy did not have to make disclosure because she could not be expected to realise that a change in her DLA position would affect her entitlement to income support.

    10.  The two questions which were in issue before the Tribunal - whether Miss Hinchy had told the office and whether she could reasonably be expected to have done so - were questions of fact against which there is no appeal. Miss Hinchy's advisers conceded that, as the law then stood, there was no other ground on which she could resist having to repay the money. The relevant principles had been laid down in a well-known decision of the Tribunal of Commissioners in 1986 (R(SB) 15/87), reaffirmed by another Tribunal in CG/4494/99. But Miss Hinchy applied to the Commissioner (Mr P L Howell QC) for permission to appeal and the Commissioner gave permission in order to enable her to test the correctness of the Tribunal decisions in the Court of Appeal. He dismissed the appeal without giving further reasons and gave leave to appeal to the Court of Appeal.

    11.  Before I come to the decision of the Court of Appeal, I shall summarise the effect of the earlier jurisprudence created by the decisions of the Commissioners. They have had to deal with various forms of the argument that a failure by a claimant to make disclosure to the official responsible for making an overpayment did not matter because that official already knew, or should have known, or was deemed to know, the relevant facts. It is seldom if ever possible to show that the relevant official actually knew (otherwise why should he have made the overpayment?), but it was said either that, as a matter of good administration, the necessary systems of communication to provide him with the information should have been in place, or that, as a matter of law, the information as to decisions made by other officials about other benefits was deemed to be known to the Secretary of State or the relevant decision maker. The argument does not appear to have been carried to the extent of asking for the Secretary of State to be deemed to have knowledge of all decisions made on behalf of the Crown in other departments, although it is hard to see why not, because the office of Secretary of State is in theory one and indivisible: see Harrison v Bush (1855) 5 E & B 344, 352 and Halsbury's Laws of England, 4th ed (1996), Vol 8(2), para 355.

    12.  This argument was advanced in relation to various elements of the claim under section 71 and its predecessors. In its purest form, it was said that "disclosure" to a person who already knew or was deemed to know was conceptually impossible: see Foster v Federal Commissioner of Taxation (1951) 82 CLR 606; Condon v Commissioner of Taxation [2000] FCA 1291 (Federal Court of Australia). Secondly, it was said that "failed to disclose" implies that there had been an obligation to disclose. Such an obligation exists only when it would be reasonable to expect the claimant to make disclosure. And it would not be reasonable to expect someone to disclose facts which she could reasonably expect were already known. Or, thirdly, it was argued that if the true facts were already known, then a failure to disclose them could have no causal effect and it could not be said that, but for the failure to disclose, the Secretary of State would not have made the overpayments.

    13.  The Commissioners have dealt with these arguments in a practical way, first by considering how the administration of the social security system actually works and secondly, by trying to discern the policy of the statutory scheme of which section 71 forms a part.

    14.  How does the system work? By way of background, the Secretary of State submitted a memorandum to the Court of Appeal:

    "[The Department] administers some 24 different benefits, the cost of which in 2002 was £110 billion, one third of all government spending. The spend on DLA in 2002 was £6.5 billion, with 2,329,000 beneficiaries. The numbers for IS were £9.6 billion and 2,227,000 beneficiaries. Organisationally, the Department is not monolithic. In 2002 (following merger with the employment service of the old Department for Education and Employment) it employed 122,687 people. These civil servants are organised in discrete structures, although those structures may change from time to time. For example currently there are four agencies - Jobcentre Plus, the Pensions Service, the Child Support Agency and the Tribunals Appeals Service…DLA and IS are separate benefits (with separate legislation and indeed different rules, eg as to duration of the award.) Further, DLA has always - since its introduction in the early 1990s - been a centrally administered benefit whereas IS is locally administered, through several hundred local offices. The civil servants administering DLA and IS have always been geographically separate, with separate 'files'. There has never been a computer link between these two systems."

    15.  Counsel for the Secretary of State appears to have told the Commissioner in this case that there was no communication whatever between the DLA and IS systems. But this turned out to be a mistake; true, there is no computer link, but the DLA office, when making an award, normally sends by post a card to notify the appropriate local Social Security Office. If the award is for a limited period, the Social Security Office should diarise the expiry date, so that, five years later or whenever, the relevant official will be reminded that, in the absence of another card arriving, the claimant's DLA is about to cease. In this case it appears that at some point the system failed.

    16.  The result is that officials administering one benefit may or may not know from internal sources about the other benefits which the claimant is receiving. Whether they do or not depends upon the departmental or inter-departmental information systems in place and the efficiency with which they operate.

    17.  The one person who can usually be depended upon to know all the benefits which a claimant is receiving is the claimant himself. And he is usually also in the best position to know about the benefits which are received by other people, such as his wife and children, which may affect his own entitlement. The legislative policy for dealing with this potential imbalance of information is expressed in the Administration Act and its subordinate regulations. Section 5(1) of the Administration Act confers broad rule-making powers on the Secretary of State, including the power to make regulations—

    "(h)  for requiring any information or evidence needed for the determination of [a claim to income support] or of any question arising in connection with such a claim to be furnished by such person as may be prescribed in accordance with the regulations;….

    (j)   for notice to be given of any change of circumstances affecting the continuance of entitlement to such a benefit or payment of such a benefit."

    18.  Pursuant to these powers, the Secretary of State has made the Social Security (Claims and Payments) Regulations 1987 (SI 1987 No 1968) as amended. Regulation 7(1) deals with the duty to provide information at the time of the claim:

    "every person who makes a claim for benefit shall furnish such certificates, documents, information and evidence in connection with the claim, or any question arising out of it, as may be required by the Secretary of State…"

    19.  Regulation 32 deals with the on-going duty to provide information while in receipt of benefit:

    "(1)…every beneficiary and every person by whom…sums payable by way of benefit are receivable shall furnish in such manner and at such times as the Secretary of State…may determine…such information or facts affecting the right to benefit or to its receipt as the Secretary of State…may require…and in particular shall notify the Secretary of State…of any change of circumstances which he might reasonably be expected to know might affect the right to benefit, or to its receipt, as soon as reasonably practicable after its occurrence, by giving notice in writing (unless the Secretary of State…determines in any particular case to accept notice given otherwise than in writing) of any such change to the appropriate office."

    20.  The Commissioners have treated these regulations as placing upon the claimant the primary duty to inform the relevant decision maker of the material facts, including if appropriate the amount of the other benefits which he is receiving. As the Tribunal said in R(SB) 15/87, at para 13:

    "It is well settled that responsibility for keeping the Department informed of any change in a claimant's circumstances rests and remains upon the claimant…"

    21.  The practicalities of administration to which I have referred mean that such a policy would be seriously undermined by treating the person to whom disclosure must be made as the Secretary of State, as a constitutional entity, and then deeming the Secretary of State to know everything known to all officials of the department or even, more modestly, all decisions taken in his name by officials of the department. The Commissioners have therefore consistently rejected attempts to introduce a theoretical or constitutional dimension into the question of whether disclosure has been made for the purposes of section 71. They have accepted that that the notion of a failure to disclose connotes an obligation to disclose. They have found this obligation either in regulation 32 or, by implication, in section 71 itself. But they have rejected the submission that disclosure must be to "the Secretary of State", whatever that may involve. Instead, they have concentrated upon what the claimant has done to convey the information to the official who makes the actual decision about the amount of his benefit. In R(SB) 15/87 the Tribunal said, at paras 26-28:

    "26 …. To whom is there this obligation to disclose? We are concerned here with breaches of the obligation which have the consequence that expenditure is incurred by the Secretary of State; and, in our view, the obligation is to disclose to a member or members of the staff of an office of the Department handling the transaction giving rise to the expenditure….28 We accept that a claimant cannot be expected to identify the precise person or persons who have the handling of his claim. His duty is best fulfilled by disclosure to the local office where his claim is being handled, either in the claim form or otherwise in terms that make sufficient reference to his claim to enable the matter disclosed to be referred to the proper person….But…there can be other occasions when the duty can be fulfilled by disclosure elsewhere. This can happen, for instance, if an officer in another office of the Department of Health and Social Security or local unemployment benefit office accepts information in circumstances which make it reasonable for the claimant to think the matters disclosed will be passed on to the local office in question."

    22.  The theme which runs through this and similar passages is that the claimant must do what a person in his position would reasonably regard as sufficient to communicate the information to "the proper person" in the relevant office. If one regards the obligation as arising by implication from section 71 itself, then this is the kind of disclosure implied. If one regards it as arising from regulation 32, the matter is even clearer. The first part of the regulation imposes a duty to furnish "in such manner…as the Secretary of State may determine…such information or facts affecting the right to benefit or to its receipt as the Secretary of State may require". The Secretary of State has specified by the notes in the order book what information (including changes in other benefits) must be furnished and that it must be done by sending it to the office named on the cover of the book. The second part of the regulation imposes a duty "in particular" to give notice in writing of a change in circumstances to "the appropriate office".

    23.  Disclosure, then, must be made to the relevant official and not to the Secretary of State as an abstract entity. What assumptions can be made about what the relevant official already knows? The Commissioners have on the whole resisted arguments that the relevant official must be assumed to know, or that the claimant is entitled to assume that he knows, anything about his other benefit entitlements which cannot be described as common knowledge. It is not for the claimant to form views about what may go on behind the scenes in the Social Security or other benefit offices. His duty is to comply with the instructions in the order book. A disclosure which would be thought necessary only by a literal-minded pedant (see, for example, CSB/1246/1986) need not be made, but the safest course is to resolve doubts in favour of disclosure.

    24.  Some doubt was cast upon this doctrine by the decision of Commissioner Howell QC in CIS 5848/99 in which he found as a fact that because it was the practice of the child benefit officer to notify the relevant Social Security Office of child benefit awards, the latter office must be taken to have known of an award which was not disclosed to them by the claimant and that the non-disclosure was therefore not the cause of an overpayment. The Commissioner then went on to say, obiter, that in modern conditions, with the availability of computer systems, claimants might be entitled to assume that information had been communicated between officials of the department and that disclosure was therefore unnecessary. But this decision was overruled and the obiter remarks disapproved by the Tribunal of Commissioners in CG/4494/99.

    25.  These were the principles applied by the Appeal Tribunal in the present case. Miss Hinchy had failed to make disclosure to her local Social Security office. She had done nothing to communicate the information to the relevant decision maker. He was not deemed to know about the cessation of her DLA merely because it was known to, or a decision by, another office of the department. Nor was there any basis for assuming that, on the facts, the non-disclosure had no causal effect because the relevant official had received the information by internal lines of communication. The inference of ignorance from the fact that he made the overpayments was far stronger than the possibility that he knew from a card on the file that the DLA award had in fact ceased.

    26.  The Court of Appeal reversed this decision. Aldous LJ said, at para 25, that he accepted "the thrust" of R(SB) 15/87, that is to say, that the person who whom disclosure needs to be made is not that abstract entity, the Secretary of State. "If there is to be disclosure" said Aldous LJ:

    "then it has to be in circumstances where it would be reasonable to believe that it would reach the decision-makers."

    Ms Hinchy had of course done nothing by way of disclosure which it would be reasonable to believe would reach the income support decision-makers. But Aldous LJ went on to say, at para 28, that disclosure was unnecessary because of what she, or possibly the court, was entitled to assume the decision-makers already knew. She knew that the relevant information was:

    "within the knowledge of the Secretary of State acting through the decision-makers in the [DLA] office…. It was reasonable to believe that the knowledge would reach the Secretary of State acting through his decision-makers in the relevant Income Support Office."

    27.  Anything else, said Aldous LJ, would be maladministration. Therefore there was no need for the appellant to give the information to the relevant "Income Support Office".

    28.  Carnwath LJ agreed with this reasoning but added by way of additional reason, at para 37, that "the Secretary of State cannot disclaim knowledge of his own decisions." Whether information of other kinds known to officials should be attributed to the Secretary of State was a more difficult question but he must be deemed to have knowledge of decisions (such as the refusal to renew Miss Hinchy's DLA award) which were taken in his name.

    29.  As will be apparent, this reasoning involves a rejection of the principles developed and applied by the Commissioners over a number of years. In particular, the reasoning of Aldous LJ adopts and indeed extends the obiter opinion of Mr Commissioner Howell in CIS 5848/99 which was rejected by the Tribunal in CG/4494/99 and the reasoning of Carnwath LJ applies theoretical constitutional principles which have been consistently rejected by Commissioners since R(SB) 15/87.

    30.  My Lords, I think that the Court of Appeal was wrong to overturn the decisions of the Commissioners. They have practical experience of the day-to-day working of the benefit system and I think that the principles they have devised to give effect to the legislative scheme dealing with overpayments are entitled to great respect. No doubt the Court of Appeal thought, as did Mr Commissioner Howell in CIS 5848/99, that in denying recovery to the Secretary of State, they would provide an additional impetus to improvement in the department's internal computer systems and thereby reduce the hardship for claimants who, through ignorance or fecklessness, omit to disclose information about other benefits and lay themselves open to repayment claims when the department's back-up systems fail. But this, in my opinion, is not a policy which is open to the courts. It is contrary to the legislative policy which remains unaltered in the current Act and regulations, namely that the primary onus of keeping the "appropriate office" informed rests upon the claimant.

    31.  Carnwath LJ, after citing the memorandum which I have quoted about the way the benefit system is administered, said at para 42:

    "I do not think that it affects the legal analysis in any way. The claimant is not concerned with the internal administrative arrangements of the department."

    32.  I quite agree. The claimant is not concerned or entitled to make any assumptions about the internal administrative arrangements of the department. In particular, she is not entitled to assume the existence of infallible channels of communication between one office and another. Her duty is to comply with what the Tribunal called the "simple instruction" in the order book. It seems to me, however, that this proposition of Carnwath LJ completely undermines the reasoning of Aldous LJ, based upon what Miss Hinchy was entitled to assume about what would amount to "maladministration", with which Carnwath LJ said he agreed. For my part, I would approve the principles stated by the Commissioners in R(SB) 15/87 and CG/4494/99. The duty of the claimant is the duty imposed by regulation 32 or implied by section 71 to make disclosure to the person or office identified to the claimant as the decision maker. The latter is not deemed to know anything which he did not actually know.