§ Mr. BradleyI beg to move amendment No. 3, in page 1, line 7, at end insert—
§ '(1A) 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).".'.
§ The Second Deputy Chairman of Ways and Means (Dame Janet Fookes)With this, it will be convenient to discuss also amendment No. 4, in page 1, line 7, at end insert—
'(1A) At the end of subsection (1), there shall be inserted "; so however that, in a case where the misrepresentation or failure in question was not fraudulent, or negligent, the Secretary of State shall only be entitled to recover the amount which is referable to the 12 months immediately preceding the determination".'.There is a slight printing error in amendment No. 4 to which I ought to draw the attention of the House. The words "or negligent" should have been deleted.
§ Mr. BradleyThank you, Dame Janet; I am grateful for your clarification of the fact that the words "or negligent" should have been removed from amendment No. 4.
The main purpose of amendment No. 3 is to reverse the effect of the Court of Appeal decision in the case of Jones v. Chief Adjudication Officer in 1993. The background to that decision is that there are two situations in which a claimant may have to repay an overpayment of benefit under section 71 of the Social Security Administration Act 1992.
The first arises when a claimant has misrepresented a material fact; the second when he has failed to disclose a material fact. Case law has held that the threshold for the Department is lower for the misrepresentation limb than for the failure to disclose limb. In essence, all that the Department has to prove is that there has been a misrepresentation, and that the claimant knew that the misrepresentation caused the overpayment in question. Whether the claimant knew the fact in question is immaterial, and so is the reasonableness of his behaviour. The test is one of strict, if not absolute, liability.
However, the failure to disclose limb provides some limited protection for claimants. The case law, which largely draws on insurance case law, has held both that the claimant must know the fact in question, and that disclosure of it must have been reasonably expected in the circumstances. In other words, a claimant cannot disclose a fact that he does not know, and should not be penalised for not having disclosed a fact that a reasonable person would not think had any impact on his benefit entitlement.
In the Jones case, the claimant had signed the standard form giro declaration to the effect that he had correctly reported all the facts that might affect his benefit entitlement. The Department of Social Security argued that the declaration constituted a representation, so that if the claimant had not reported or disclosed all material facts he was guilty of a misrepresentation.
Consequently, whether the claimant knew the fact, and whether disclosure was reasonably to be expected in the cir-cumstances, was irrelevant. In other words, the declaration converted what would otherwise have been a failure to disclose into a misrepresentation too, so the protection associated with failure to disclose was thereby lost.
The majority in the case accepted that argument in part. It was agreed that there was a conversion, and it was said that although there was a reasonableness in the claimant's actions, that was irrelevant. However, the claimant did have to know the fact in question.
1017 In a later case, Franklin v. Chief Adjudication Officer, in 1995, the Department argued that knowledge in itself was also irrelevant in conversion cases. That argument was decisively and unanimously rejected by the Court of Appeal. There are suggestions both in the Franklin case and in the minority judgment in the Jones case that the giro declaration may be unlawful, given that it has the consequence found by the majority in the Jones case.
The reference to the claimant's mental state is designed to reverse the effect of a commissioner's decision, CA/303/92, that mental capacity is relevant to the question only when the claimant knew the fact in question, and not to the reasonableness or otherwise of disclosure. That inevitably brings about injustice for an especially vulnerable group.
Amendment No. 3 therefore seeks to do three things. First, it seeks to confirm that knowledge is an essential ingredient in all failure to disclose cases. Secondly, it is intended to restore the law on the reasonableness of the claimant's behaviour to the pre-Jones position, even in conversion cases. Thirdly, it would stipulate that, in the consideration of whether disclosure was reasonably to be expected, account should be taken of the claimant's mental state.
The amendments represent a modest proposal. With the possible exception of amendment No. 3, they would simply restore the law to what everyone thought it was until 1993, and reintroduce some fairness into an otherwise harsh overpayments regime.
Amendment No. 4, too, is intended to introduce some equity into the overpayments regime. Where a claimant has acted innocently, it seems unfair that he should have to repay benefit overpaid over what may have been a very long period. Inevitably that can cause hardship, especially if the claimant remains on benefit.
Benefits law is extremely complicated; I think that everyone in the House accepts that. So long as a claimant acts in good faith and does his best to give the Department the information that it needs, there should at least be a cap on his overpayment liability. When a claimant is wrongly denied benefit, he can usually be paid arrears dating back only 12 months. The amendment simply provides some balance between the claimant and the Department in terms of benefit decisions later found to be wrong.
In income tax law there is a limit on the period during which the Revenue can recover underpayments of tax in non-fraud cases. Broadly, that limit is six years. We are trying to probe the Government and suggest that some consideration be given to the issues surrounding the Jones and Franklin cases. They should consider equity in connection with overpayment, and impose some cap where it is absolutely clear that the claimant was not at fault in respect of the information that was given and that subsequently led to overpayment recovery by the Department.
I hope that the Minister will consider the amendments sympathetically and throw some light on the Government's thinking and attitude to the issues raised both by the Jones case and by amendment No. 4. I hope that we will be able to have a meeting of minds concerning the way in which overpayments should be considered in future.
§ Mr. Roger EvansThe hon. Member for Manchester, Withington (Mr. Bradley) has raised important points on 1018 amendment No. 3 in respect of the Jones case and the Franklin case, both of which he mentioned. This is not an easy area. It is important that the law must not be over-complex such that it cannot be administered or understood properly, but it must be fair. One of the judges was greatly concerned to prevent the sophistications of marine insurance law policies—in that area the details are spelt out at great length both in statute and in case law—from being imported into what should be a relatively simple, fair and straightforward social security regime.
I understand that there is a difficulty, but the fundamental distinction is between doing something positive—making a misrepresentation—and doing nothing, which is failure to disclose. The way in which the law has always worked is that, if someone does something positive, they are much more likely to be liable than if the law imposes a duty to do something yet they do nothing. In a sense, in omission cases, we are really talking about the extent of the duty at the same time as we discuss the failure to comply with it.
The position is indeed as the hon. Gentleman described it. In failure to disclose cases, no obligation can be imposed to disclose something that a person does not know. That does not make moral, legal or practical sense. There must also be some form of moral or legal obligation that says that people must explain or tell the fact that they are obliged to disclose. Otherwise, the whole thing would be nonsense.
As the hon. Gentleman explained, in cases of mental incapacity, illiteracy or educational or linguistic difficulties, case law is consistent on failure to disclose. In those circumstances—I suppose that this is really a doctrine of equity—there is no conscionable basis on which the duty can be imposed, and there can therefore be no breach of such a duty. That is fairly well-established law that applies not only to social security arrangements, but generally. There must be a moral or legal obligation for people to disclose before they can be blamed for not doing so, but it is traditionally different in a case where someone signs a piece of paper and states something positive.
Someone can tell a lie—that is what a misrepresentation must be—that is deliberate, and that is normally termed a fraudulent misrepresentation. Sometimes there is a halfway house where they ought to have taken care, which is described as a negligent misrepresentation. There can also be a reckless misrepresentation, which is normally regarded in the same way as an intentional misrepresentation. Furthermore, they can simply make a blunder, which is generally termed an innocent misrepresentation.
The traditional view is that, if someone does something positive, they must take the consequences upon themselves. If they are foolish enough to put their name to a piece of paper indicating something wrong, they must ordinarily be expected to take the consequences. That is the ordinary way in which contracts and other arrangements work.
The difference with social security arrangements was rightly pointed out by the hon. Member for Withington, and comes from the nature of the wording on the various forms, which he described as a form of conversion. I would not go along with that terminology, but I see what he is saying. The hon. Gentleman is, in effect, complaining that some of the statements on the forms amplify a failure to disclose into a positive statement and therefore that it is unfair to deal so 1019 severely with the particular claimant. That is the rub of the complaint. I can see the force of that argument, and I undertake that we will have a look at the forms to see whether that aspect needs further thought and consideration.
I am not attracted to the proposition of reversing the case law, which the hon. Member suggested. Unless the case has arisen out of a particular complication in the forms, there is a well-established and clear-cut difference between doing something positive—a misrepresentation—and doing something negative, or failing to do something, where there are considerable protections.
I should stress that we should be careful in looking at section 71 and considering misrepresentations. These have to be proved, and the burden of proof is on the Department and on the adjudicating officer. There must be material fact, not just any fact. A mistake of law, for example, is not a misrepresentation for this purpose—the classic one being, "I am entitled to the above sum." That is not a statement of fact—it is a statement of opinion as to the law. If somebody signs up to that, the Department cannot recover.
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There must be a causal link between what has been said that is wrong and the payment of benefit, as it cannot just have happened that the Department has paid out in any event. There are considerable difficulties of proof in the Department's way—as there are normally in contractual cases of misrepresentation—and these can operate as safeguards.
I shall, perhaps, conclude my remarks, Dame Janet—
§ The ChairmanOrder. The hon. Gentleman may not have heard Madam Speaker earlier in the week ask all Ministers and hon. Members to address the Chair.
§ Mr. EvansI apologise, Mr. Morris. I was addressing the Chair, but I had not, perchance, looked upon it for a moment in error. That is my fault, for which I apologise.
We will look at the forms again, but I am not attracted to altering what appears to be a well-established and clear-cut distinction that is probably well-founded in practice. It may have been confused by the so-called conversion. If so, I am happy to look at the matter again. I invite the hon. Gentleman not to press the amendment to a Division
Before I conclude, I should deal also with amendment No. 4. The hon. Gentleman is again trying to separate different kinds of class of misrepresentation. He is saying that there should be no limit if fraudulent behaviour is proved, but that the treatment should be different if the behaviour is less than fraudulent. The word "negligent" has been added to the amendment, and that is a difficulty for the hon. Gentleman.
There is an element of culpability when someone puts their name to a form and signs something that is wrong, and it is asking too much of the Department to examine 1020 minutely the conscience and mind of the person who has done it to discover whether the act is wholly innocent, in some intermediate category or culpable fraud. If someone puts their signature to something or says something, they ought to take the consequences—the consequences of such an act being that the taxpayer is paying benefit that should not be paid. I am not attracted to amendment No. 4.
§ Ms LynneThe Minister has answered many of my queries, particularly those that related to amendment No. 3. I am grateful that he will look at the forms, because—as he no doubt realises—some of them are a minefield. A person should not be penalised for signing a form when he or she does not realise that the information asked for was relevant. In addition, I hope that the Minister will look again at someone who has signed a form with regard to his or her mental state.
§ Mr. BradleyI am grateful to the Minister for his detailed response to amendment No. 3. These are complicated matters, and it is helpful when the Government put on record their interpretation of the judgments so that advocates can look carefully at the words and see how they are being followed in practice by the Department. I am also grateful that the Minister said that he was prepared to look again at the forms, as that is the point at which claimants provide the information. Enabling the forms to be as simple and as certain as possible is important, as is the way in which information is presented to the Department. That may overcome some of the problems that some claimants have experienced when they have found that the information has led subsequently to a request for overpayment.
On amendment No. 4, I accept the Minister's arguments about fraudulent behaviour on which, as he rightly said, I wanted to concentrate. However, the area of negligence needs further debate, but it was not my intention to have that debate tonight. Rather, I wanted to concentrate on the more simple arguments about fraud. While I understand the Government's argument on that, I was not clear on the Minister's response on the point of equity regarding recovery of overpayments within a limited period., as against the entitlement to benefit on arrears.
§ Mr. EvansThe difference with amendment No. 4 is that one can have—to use words rather loosely—a fraudulent non-disclosure of the most blatant variety, but the amendment bites only on fraud that is positive. One would have thought that, in moral terms, a deliberate concealment fraud ought to be treated in the same way. The difficulty for the Department is where it draws the line in these cases. Surely the money has been wrongly paid as a result of something that has been done or undone by the claimant, and the Department should have it back.
§ Mr. BradleyI am grateful for the Minister's further comments. I do not want to labour the points about the moral entitlement to benefit against the moral requirement on the Department to recover overpayments. Clearly we support the recovery of overpayments, but we want to ensure that all claimants are treated fairly regarding their entitlement to benefit. I do not wish to labour the point further, and I am grateful for the concession that the Minister has give to look at the forms. I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Mr. BradleyI beg to move amendment No. 1, in page 1, line 22, leave out 'subsection' and insert 'subsections'.
§ The ChairmanWith this, it will be convenient to discuss also amendment No. 2, in page 1, line 26, at end insert—
'(5B) For the avoidance of doubt, on a review of, or appeal against, a determination that an amount is recoverable made later than the appeal or review referred to in subsection (5A), an adjudication officer or, as the case may be, a social security appeal tribunal shall consider whether there existed grounds for the reversal or variation referred to in that subsection.'.
§ Mr. BradleyThis, too, is a short amendment and I shall not delay the House with too long an explanation. The purpose of the amendment is to meet the concerns expressed by Commissioner Mesher at the end of paragraph 10 of the Mustard case, where he said:
Requiring the decision on recoverability to be made in the course of the review decision relating to the period of the alleged overpayment…means that an appeal against the recoverability decision encompasses an examination of the propriety of the review decision".The amendment would ensure that the propriety of the review decision would fall for consideration on a challenge to a recoverability decision. I hope that that is clear. I also hope that the Minister's previous commitments on appeals against decisions are already encompassed in the Bill. Through this brief amendment, we seek further clarification and certainty on that matter.
§ Mr. Roger EvansThe argument has moved on since Commissioner Mesher's decision because of the terms in which the Bill is drafted. Commissioner Mesher was understandably worried—the force of the argument is clear—that, if everything is not done at the same time, one might be prejudiced by a later decision.
The way that it works is this: we have separated the two decisions and there is a right of appeal against each. If the half-truth comes out at the beginning of the process—if there is a review, but it is not accurate because for one reason or another either side does not know—the claimant has a right of appeal against the first decision. Let us suppose, however, that it is not right—perhaps there has been an argument, or facts have emerged during the following month or so. There will be a second review of the original review decision, and that also will be appealable.
In effect, if someone is shocked by a thumping great bill some months later, when the overpayment decision is made, there may well be grounds for review if there is a basis of fact that has developed or moved on, and there can, of course, be a further appeal on the second review.
The matter is dealt with in that fashion in the Bill, and I urge the hon. Gentleman not to press the amendment.
§ Mr. BradleyI thank the Minister for that explanation. As he rightly says, the Bill has been framed to ensure that 1022 there can be appeals at each of the stages. The purpose of the amendment was to obtain the assurance from the Minister that that is the case, so that the claimant is protected at each stage if information can subsequently be produced to enable an appeal. With that further assurance from the Minister, I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 1 ordered to stand part of the Bill.
§ Clauses 2 and 3 ordered to stand part of the Bill
§ Bill reported, without amendment.
§ Bill read the Third time, and passed.