IN THE UPPER TRIBUNAL			Case No  CIS/2494/2012
ADMINISTRATIVE APPEALS CHAMBER

Before UPPER TRIBUNAL JUDGE FORDHAM QC

Decision:  The appeal is allowed. The decision of the First-tier Tribunal (the tribunal) sitting at Liverpool on 22 March 2012 under reference SC068/11/05794 involved the making of an error on a point of law and I set it aside. Acting under section 12(2)(b)(ii) of the Tribunals Courts and Enforcement Act 2007, I remake the tribunal’s decision as follows: (1) The claimant’s appeal against the decision (or purported decision) of 21 March 2011 (“the recoverability decision”) is allowed. (2) The income support claimed to have been overpaid to the claimant is not recoverable under the recoverability decision, because there was not the valid supersession decision in place which the statute requires. (3) This decision does not prejudice the Secretary of State’s ability to take further or alternative steps to recover such income support, nor the claimant’s rights to appeal should such steps be taken.

REASONS FOR DECISION

Introduction

1.	On 21 March 2011 (page 37) the Secretary of State sent the claimant a notice of overpayment of income support in the sum of £3475.50. The claimant had been interviewed on 5 July 2010 (pages 18-19) about an account in her name at the Bank of China. The Secretary of State concluded that this account, set up in 2002, should have been disclosed. The claimant’s income support, which she had been receiving since 1990 (page 12), was recalculated for a period between 23 November 2006 and 21 July 2010 (page 40).The Secretary of State’s decision to recover the £3475.50 (which I am calling “the recoverability decision”) was made under section 71 of the Social Security Administration Act 1992 (“the 1992 Act”), on the grounds of failure to disclose a material fact.

2.	The claimant appealed (page 10) against the recoverability decision, on the basis that she had been totally unaware of the account at the Bank of China, set up by her brothers in 2002, as a protection in case anything happened to their mother. The tribunal held a hearing on 22 March 2012 (page 57) and dismissed the claimant’s appeal for reasons given later (page 64). The tribunal rejected the claimant’s version of events.

3.	This is the claimant’s appeal from the tribunal’s decision. The Secretary of State supports this appeal being granted (page 93), on one of the grounds identified by Judge Wikeley when granting permission to appeal (pages 81-82). No oral hearing of this appeal is requested by the Secretary of State. The claimant says she would wish an oral hearing “if needed so that the Judge can see for him/herself the degree of the claimant’s learning disability to fully establish whether she can manage her affairs appropriately or not” (page 96). I am satisfied in all the circumstances that I can proceed to determine this appeal properly and justly without an oral hearing, and that it is not necessary for me to reach my own assessment of the claimant. I am satisfied that the decision of the tribunal involved the making of an error on a point of law.
 
Section 71(5A): the need for an entitlement decision

4.	Parliament required by section 71(5A) of the 1992 Act that the amount in question (here, the £3475.00) would not be recoverable “unless the determination in pursuance of which it was paid has been … revised under section 9 or superseded under section 10 of the Social Security Act 1998” (“the 1998 Act”). This means there must have been a separate decision (sometimes called “the entitlement decision”), under which a previous decision conferring entitlement was lawfully changed. The tribunal was not satisfied that this requirement had been complied with, but invoked the tribunal’s own “power to correct any procedural defect” (page 65 §13). There is a helpful survey of cases discussing the tribunal’s power to remedy defects in the commentary to section 71 of the 1992 Act in Sweet & Maxwell, Social Security Legislation 2012/13 Vol. III pages 60-61.

5.	In this case, the relevant “entitlement decision” needed to be a supersession decision. The documents in this case refer to a decision dated 9 August 2010 (pages 23-24, page 39), when it is said that a “decision maker” made an “entitlement decision” (page 41) and “superseded the award of IS” (page 92). In granting permission to appeal, Judge Wikeley raised the concern that this “crucial” supersession decision may not have been properly notified to the claimant, it being “settled law that a decision is not fully effective until it is notified (see R (Anufrijeva) v Secretary of State for the Home Department & Another [2003] UKHL 36)”. The Secretary of State agrees, and supports the appeal on this basis. The decision relied on (page 23) bears a section recording “Notified to customer on form/letter on”, and which is blank. Nor in fact is the box for “superseded” ticked. The Secretary of State accepts “there is no evidence” that this decision was notified to the claimant “therefore the rule in Anufrijeva applies, that a decision is of no effect if it is not notified” (page 93).

Section 71(5A) analysed

6.	In my judgment, the correct analysis in law is as follows. I shall focus on supersession, because that is the relevant feature of section 71(5A) in the present case.

(1)	Section 71(5A) of the 1992 Act imposes an important requirement that the recoverability of overpaid benefit depends on there having been a proper and valid (supersession) entitlement decision. This imposes a discipline which has two legal consequences: one of which is internal; the other external.

(2)	The internal consequence is that, before payment is recoverable, the Secretary of State must have made an entitlement decision (supersession) under section 10 of the Social Security Act 1998: “a decision made by the Secretary of State”. The Secretary of State will need to show, by reference to a documentary record, that such a decision was made.

(3)	The external consequence is that, before payment is recoverable, the Secretary of State must have notified the entitlement decision. That is because (a) this is an appealable decision of which written notice is statutorily required (regulation 28(1)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999) and (b) there is a general constitutional principle linking legal validity of a decision to its notification (see Anufrijeva’s case).

(4)	Both of these steps – the taking and notification of a supersession decision – must have been taken before the recoverability decision is taken under section 71 of the 1992 Act. That is the meaning and effect of section 71(5A). But it is also supported by section 12(8)(b) of the 1998 Act, because when a tribunal comes to consider the legality of any section 71 decision under appeal, supersession (making and notification) would need to be “circumstances … obtaining at the time when the decision appealed against was made”.

(5)	This analysis is not undermined by the provisions which deal with the effective date for a supersession decision. Those provisions have a different function. There is a distinction between (a) a valid supersession decision and (b) its effective date. The statutory scheme makes detailed provision as to the effective date for supersession decisions. That means the date from which they take effect in law. The starting-point is that a supersession decision “shall take effect from the date on which it is made” (section 10(5) of the 1998 Act). But regulations can provide for a different date (section 10(6)), so that certain non-advantageous decisions based on a change of circumstances “shall take effect … from the date of the change” (regulation 7(2)(c)(v) of the 1999 Regulations). Those provisions are important because a supersession decision is changing an existing benefits entitlement, and where the Regulations permit may do so retrospectively (as when they take effect from the date of the relevant change of circumstances).

(6)	In giving section 71(5A) of the 1992 Act a proper (as well as a practical and effective) application, it must be possible to ask, at the date of the section 71 recoverability decision: has section 71(5A) been complied with? The answer cannot depend on some future step which will then, once it is taken, have a retrospective effective past date. That demonstrates that the ‘effective date’ provisions do not hold the answer to the question whether there has been a valid supersession decision, for the purposes of section 71(5A).

(7)	The crucial question is therefore whether there has been a properly made and notified supersession decision (under section 10 of the 1998 Act) by the time of the recoverability decision (under section 71 of the 1992 Act). If not, section 71(5A) is not satisfied. This is not a mere ‘procedural defect’ which a tribunal could later ‘correct’.

(8)	A properly notified supersession decision means a written notice, which must be clear. It must clearly describe the supersession decision, as a “decision against which [an] appeal lies” (regulation 28 of the 1999 Regulations). That means a person receiving the notice would clearly understand from it that they were being notified of that decision and could appeal that decision.

Hamilton: valid decisions and “effective date”

7.	In Secretary of State for Work and Pensions v Deane [2010] EWCA Civ 699 [2011] 1 WLR 743, the Court of Appeal endorsed the position which had been stated in R(SB) 1/90, which means I am to follow the ratio of a decision of the Court of Appeal of Northern Ireland as to the meaning of materially identical provisions. For present purposes, such a case is Hamilton v Department for Social Development [2010] NICA 46. In considering that Court’s analysis, I have had the advantage of Judge Ward’s discussion of Hamilton in SSWP v AD (IS) [2011] UKUT 184 (AAC).

8.	The judgment in Hamilton can be seen to have involved two strands. The first strand can be found in the Court’s consideration at §29, of Anufrijeva and the effective date provisions. The Court made this observation:

“Anufrijeva recognises that Parliament may make clear that an administrative decision takes effect before notice of the decision comes to the attention of the party affected. In the present instance, the [legislation] and the Regulations do spell out that such a decision will take effect in this case from the date of the relevant change of circumstances. It is thus clear that when the recoverability decision was made the relevant entitlement decision was effective from 4 October 2004 being the date of the relevant change of circumstances and the recoverability decision, accordingly, had been validly made.”

9.	I confess to having some difficulties with this passage. There is no problem with the fact that the legislation spells out the ‘effective date’ for a valid supersession decision, which can be retrospective. That deals with when a valid decision “takes effect”. Where I have difficulty is with the suggestion that an uncommunicated decision is validly made, and that notification (and Anufrijeva) has no relevance to the question of whether a decision is “validly made”.

10.	I have set out in §6 above what I consider to be the correct legal analysis, including (at §6(5) and §6(6)) as to the ‘effective date’ provisions. As I have explained, I see no difficulty with the proposition that a valid supersession decision – I would add, once communicated – is legally effective from the earlier ‘effective date’ specified in the legislation. Nor with a second proposition, that the principle in Anufrijeva is to that extent displaced. But does it follow that no notified supersession decision is needed for the purposes of section 71(5A)? I do not think so. Nor in my judgment did the Court in Hamilton, in the light of the second strand in its judgment, to which I now turn.

Hamilton: “two pronged decisions” and clarity

11.	The second strand in the Hamilton judgment, which immediately follows in the judgment, explains the significance of the notification which the Court held had properly been given in that case. The passage in question (§§30-31) was plainly part of the Court’s “reasons” (§32). Far from treating notification of the supersession decision as irrelevant, here the Court was concerned to analysis whether it had taken place. What the judgment decided was that (a) simultaneous dual notification (of a supersession decision and a recoverability decision) is legally permissible, and (b) the notification given in that case was sufficiently clear as to perform that dual notification function.

12.	On my reading of the judgment in Hamilton, this reasoning on this second strand was essential to the Court’s decision in that case. It is an essential part of the ratio, and the earlier passage needs to be read in the light of it. That was the view of Judge Ward. As he explained in SSWP v AD (IS) at §14, in Hamilton “the Court based its decision on the ability of the letter of 8 September 2006 to perform a dual notification function”. In my judgment there is no inconsistency between the ratio in Hamilton and the analysis at §6 above. Indeed, the Court of Appeal of Northern Ireland were treating as the key question in that case, the same crucial question that I have set out at §6(7) above.

13.	In the Hamilton case, the Court of Appeal of Northern Ireland concluded (at §§30-31) that a “two pronged decision”, notifying the recoverability decision and the supersession decision at the same time, was compatible with the equivalent provision to section 71(5A). I confess to having doubts as to whether that is correct. There is certainly no reason why the supersession decision should not be a distinct prior decision (as it was in the present case), promptly and distinctly notified to the individual affected (as it could have been in the present case). Judge Ward in SSWP v AD (IS) at §17 referred to “the difficult questions of the interaction between the taking of a decision, the communication of a decision and the rule in [section 12(8)(b) of the 1998 Act]”. As he noted, the latter provision and decisions on its application were not analysed in Hamilton.

14.	What can be said with confidence is this. Insofar as it is said that there is a “two pronged decision”, the notification would need to be clear: see §6(8) above. The Court of Appeal of Northern Ireland was satisfied in Hamilton on the basis that (§30): “The letter … makes clear that the Department had decided two things”, and “itself brought to the claimant’s notice the effect of the … entitlement decision”, so that: “Anyone receiving the letter would have known that they could appeal against the decisions”. In SSWP v AD (IS) the Secretary of State did not argue that the letter in question was proper notification of a two pronged decision (§18), and Judge Ward held that it was not (§§19-23). What about the letter in the present case?

Application to the facts here

15.	The tribunal raised the question of compliance with section 71(5A) and evidently did not regard the letter of 21 March 2011 (page 37) as being a clear notification of the supersession decision of 9 August 2010. The tribunal was careful to say that the papers were “not entirely clear” (page 65 §13). Judge Wikeley described the decision notified on 21 March 2011 as “an overpayment decision … based on a disentitlement decision”, posing the question whether that underlying disentitlement decision was “ever properly notified” (pages 81-82 §4). The Secretary of State has made careful and helpful submissions on the point (page 93) and has not contended that the letter of 21 March 2011 is to be regarded as proper notification of the underlying (supersession) decision. In my judgment, the Secretary of State is correct not to seek to characterise the letter in that way. The letter does not display the clarity which would be necessary for it to constitute a two pronged decision.

16.	I reach that conclusion for the following reasons. The letter (page 37) is headed “Notice of Overpayment”. It clearly presents a decision in the singular and notifies the right of appeal accordingly: “You … have the right of appeal against this decision” (page 38). It refers to questions “about our decision”, and what the claimant could do “if you disagree with this decision” (page 38). The next document (which looks like an attachment, though in the circumstances I do not need to decide whether it was in fact sent with the letter), says only that (page 39) it is the consequence of an earlier decision (“As a result of the decision(s) dated 09/08/2010”). That document is itself headed “Overpayment Decision” (page 39). Moreover, it describes “THE LAW USED TO MAKE THIS DECISION” (page 39). The relevant law does not include the provisions used in making a supersession decision. To paraphrase Hamilton at §30 it cannot, in my judgment, be said that: “Anyone receiving that letter would have known that they could appeal” against a decision said to have been taken more than 7 months earlier, on 9 August 2010.

Conclusion

17.	It follows that in this case, as in SSWP v AD (IS), there was no legally effective decision capable of satisfying section 71(5A) of the 1992 Act. That means this particular exercise in trying to recover the money in question from the claimant has failed. This does not prevent the Secretary of State from beginning again and carrying out a fresh overpayment process correctly. If the Secretary of State does decide to do that, and takes a decision or decisions which are adverse to the claimant, the claimant will have fresh appeal rights. In these circumstances, I do not need to deal with the other grounds of appeal, or deal with any further or other matter. If the question of recovery of overpayment is to be pursued, on which I make no comment, then no doubt the claimant and those who are assisting her will with to reflect on what documents and evidence they can provide in order to support what they are saying happened and why it happened. Materials can be provided to the Secretary of State. Materials can also be provided to the tribunal, if there is any further appeal.

Observations

18.	I hope it may assist the parties and any subsequent tribunal if I make three final observations. First, if there were to be any subsequent appeal in this case, it ought to be heard by a differently-constituted tribunal, with different panel members from those who dealt with the hearing on 22 March 2012. Since this is not a remittal, I am not in the situation of making a direction under section 12(3)(a) of the Tribunals, Courts and Enforcement Act 2007.

19.	Secondly, the materials which I have read in support of this appeal suggest that there is further evidence which the claimant and her family could rely on, and would wish to rely on. It appears that such further evidence could relate to a number of topics. For example: the claimant’s mother’s bowel cancer diagnosis in 2001; why arrangements were set up even though the condition was not life-threatening; the claimant’s learning difficulty (which I am told in an email dated 17 April 2013 was the basis for her disabled person’s bus pass); the claimant’s inability to read or write Chinese; why her ability to speak Chinese does not mean she can read and write Chinese; the arrangements made for the bank account at the Bank of China to be set up and operated; and so on. The important point, as I have explained at §17 above, is that the claimant’s position is fully protected as to any materials she wishes to rely on.

20.	Thirdly, as to the question of a “Quistclose trust” raised by Judge Wikeley (page 82 §6), the Secretary of State makes a number of points (page 94), including as to the importance of documents recording the purpose of the arrangement (as to which, see page 88 §14). I have not had to deal with these. As it seems to me, a key relevant reference point for the Quistclose trust argument would be the question whether the evidence of the claimant and other family members is accepted as to the purpose of the bank account. I sympathise with the claimant’s sister who has written (page 97): “I am afraid, reading through the Respondent’s observations, that I am not at all familiar with the ‘Quistclose’ trust or what that means”. As I have explained, it has not been necessary to this decision for me to analyse the Quistclose argument, and I have not done so. However, I hope I can help the claimant and those who are assisting her, by saying a little more about what the argument would be, as I have understood it.

(1)	Money placed into another person’s hands normally becomes that person’s property to apply as that person chooses. That means they are the beneficial owner of it. But the position can be different. The money may be provided for a specific purpose, so that the person who receives it is not free to apply it for another purpose. In that situation, the money may be held on trust. That means the person who provided the money can have a right in ‘equity’ to insist that the money is used only for the stated purpose, not some other purpose. The person who received the money would not become the beneficial owner of the money, at least while the purpose is still capable of being carried out. I have based this description on §§68-69 of the case of Twinsectra Ltd v Yardley [2002] UKHL 12 [2002] 2 AC 164, referred to in the papers in this case (page 87 §12).

(2)	So, the argument would be as follows, in this case. Although family members transferred money into an account in the claimant’s name, that money was for the specific purpose of being available for the claimant if something happened to her mother. While the claimant’s mother is alive and well, the purpose (or keeping money available in case something happens to the mother) is still capable of being carried out. The money is held on trust, and the claimant did not become the beneficial owner of the money, even though it was in her name. The Secretary of State cannot rely on the money as having been hers.

(3)	Logically, if that argument is right, it would also affect the lawfulness of an entitlement decision (supersession).

(4)	An example of a Quistclose trust argument being rejected is the case in the papers at page 83. An example of a Quistclose trust argument being accepted is the case at page 89.

MJ Fordham QC
Judge of the Upper Tribunal
26 April 2013