Jamila Ali Adan v London Borough of Hounslow and Secretary of State for Work and Pensions

This appeal turns on the construction of a provision in the Housing Benefit (General) Regulations 1987 (“the Regulations”) which is concerned with the amount of overpaid housing benefit which an authority may recover. The appeal is brought against a decision of a Social Security Commissioner, Dr David Williams, issued to the parties on 26 February 2003. By his decision the Commissioner dismissed the appellant’s appeal from a decision of an appeal tribunal at Hounslow about her liability to repay overpaid housing benefit and council tax benefit. The Commissioner himself granted permission to appeal to this court. We have been told that the relevant provisions in respect of council tax are in similar form to those dealing with housing benefit and the matter has been argued before us solely by reference to the housing benefit provisions.

The facts of the case are not unduly complicated nor, one suspects, unusual. Mrs Adan was in receipt of housing benefit and income support from about July 1997. In January 1998 she began working at a hotel near London Heathrow airport, but failed to report this change in circumstance to the London Borough of Hounslow (“Hounslow”). There is no finding that she was acting dishonestly in failing to report that change. In due course it came to light. There is no dispute that as a result she was overpaid housing benefit and council tax benefit for the period from 29 December 1997 to 12 December 1998.

Hounslow determined that there had been an overpayment but did so in two stages and at two different dates. In February 1999 it determined that there had been an overpayment for approximately the latter half of the period, from 22 June 1998 to 13 December 1998. Subsequently it determined that there had been an overpayment for the earlier part of the period up to 21 June 1998, but by then there had been an amendment to the relevant Regulations and eventually Hounslow accepted that it was obliged to allow for Mrs Adan’s underlying entitlement to benefit during that earlier period. Thus there was no net overpayment for that period ending on 21 June 1998.

The dispute relates to the period from 22 June 1998 to 13 December 1998, in respect of which Hounslow made its determination before the amendment to the Regulations, an amendment which came into effect on 2 October 2000. This appeal is consequently concerned with the Regulations in that un-amended form. Hounslow took the view that it was entitled to recover the full amount overpaid in housing benefit and council tax benefit, without deducting such amount of benefit as the appellant would have been due, once her change in circumstances had been taken into account.

The appellant’s income support entitlement was stopped in December 1998 with retrospective effect from 18 June 1998. During the second half of 1998 she was overpaid housing and council tax benefits in the sum of just over £3,000, but had she reported her changed circumstances she would have been entitled to benefits of about £2,400 for that period, leaving a net amount due from her of about £600.

The appeal tribunal at Hounslow took the view that it was bound by the High Court decision in the case of R –v- Wyre Borough Council, ex parte Lord, unreported but dated 24 October 1997. On that basis it held that the authority was not required to set-off the so-called “underlying benefit” of £2,400. That decision was upheld by the Social Security Commissioner.

At the heart of this case is Regulation 104 of the Regulations in their form before the amendment coming into force in October 2000. That Regulation (insofar as material for present purposes) reads as follows:

In the case of ex parte Lord, the issue as to the meaning of Regulation 104 arose in respect of a man who had been paid housing benefit while not disclosing that his wife was working. He had been convicted of making fraudulent benefit claims, but there is no reason to regard the decision in that case as being restricted to those who have acted fraudulently or otherwise dishonestly. When the local authority sought to recover the overpaid benefit, it was argued on behalf of Mr Lord that the amount paid to him of about £5,000 should be reduced by £1,468 because of an underlying entitlement to benefit on the true facts. Potts, J., however rejected that argument. He stressed that the case turned on the meaning of the expression “properly payable” in Regulation 104, and then said this:

In the present case the Commissioner considered a submission on behalf of the appellant that ex parte Lord was wrongly decided. He noted that the decision had been criticised in a leading textbook on the subject and, although he did not accept that it was wrongly decided, his reasoning was different from that of Potts J. He drew attention to the fact that Regulation 104 was concerned with a “recoverable overpayment”, that is to say, what an authority was legally entitled to recover, which he distinguished from what an authority actually decided to recover. That was governed by Regulation 100 which stated that

I am bound to say that, while the Commissioner’s reasoning is obviously relevant to any argument about the unfairness or otherwise of the interpretation adopted in ex parte Lord, it does not go to the real issue of the proper construction of Regulation 104. That issue must be seen in the context of the Regulations as a whole, and it is to that context that the parties to this appeal have directed their arguments.

On behalf of the appellant, Mr Stagg accepts that by virtue of section 1(1) of the Social Security Administration Act 1992 (“the 1992 Act”), which is one of the parent Acts of the Regulations, “entitlement” to housing benefit is dependent upon a claim being made in writing. But he draws attention to the definition of “overpayment” in Regulation 98. Regulation 98 provides:

The appellant emphasises the reference there to review of the initial determination, and it is contended that the carrying out of a review under the terms of Regulation 79(1) is a necessary pre-condition for determining that there has been an overpayment. Mr Stagg argues that in the course of a review, the local authority will decide what the proper level of entitlement to benefit is. This applies in all cases where reviews are carried out, whether the result is to increase or decrease the level of entitlement for the future or the past. Therefore in an overpayment case entitlement to benefit has already been determined before one gets to Regulation 104.

Consequently, “properly payable” in Regulation 104 must mean benefit which was properly payable on the basis of the claimant’s true resources, rather than benefit to which he was strictly entitled as the result of a claim. Regulation 104 deliberately chooses not to use the language of “entitlement”, and rightly so, since it would be an unnecessary provision, were it to be dealing with entitlement. “Properly payable” cannot be a synonym for “entitled”. It is submitted that the decision in ex parte Lord leaves Regulation 104 with little effect. Mr Stagg advances various arguments as to why a backdated claim does not, as the respondents argue, operate to give the Regulation any real effect. Mr Stagg also submits that no fresh claim is normally needed after a revised determination and that it would be impractical to require a fresh claim because an individual’s income may fluctuate week by week with consequential changes in the level of benefit.

For the respondent Hounslow, Mr Choudhury submits that Hounslow was not required to reduce the overpayment by the underlying entitlement, unless a properly constituted claim for that entitlement had been made and had been determined by the authority. Such a claim must have been made on a properly completed form as required by the Regulations. There was no such claim form submitted in the present case by the appellant for the underlying entitlement. Nonetheless, it was open to a person in respect of whom it has been determined that there has been overpayment to submit a backdated claim in accordance with Regulation 72(15). If the authority then determines that he or she had continuous good cause for failing to make the claim on time, the claim may be backdated and so in such circumstances the underlying benefit may be properly payable in the sense used in Regulation 104.

Mr Choudhury contends that that both gives a role to Regulation 104(a) and may avoid any unfairness, while still applying the construction of that Regulation adopted in ex parte Lord. Reliance is placed for the meaning of “properly payable” on the decision in Morton –v- Chief Adjudication Officer [1988] IRLR 444, which shows that “payable” means “due and owing”.

In response to Mr Stagg’s reliance on Regulation 79, the review provision, Mr Choudhury submits that one cannot say that a fresh claim is never required after a Regulation 79 review determination. He points out that under Regulation 67, when a person ceases to be entitled to income support, the housing benefit period will automatically end and that is why the authority must under Regulation 72(14) invite a further claim from that person. Consequently, where the benefit period has ended as here because of Regulation 67, no review under Regulation 79 can resurrect the claim.

It is accepted on behalf of Hounslow that in cases where there is not a loss of income support, there may be circumstances where it is right to say that no fresh claim is needed after a review. In such circumstances the original claim is still extant, and in such a situation Mr Choudhury accepts that the revised sum to which the claimant was entitled can be deducted under Regulation 104. He contrasts that with the case where the benefit period has ended because of loss of eligibility for income support. Consequently the respondent seeks to draw a distinction between the two types of cases, the one where the loss of eligibility for income support brings the housing benefit period to an end, and the other where that situation does not exist.

At the beginning of the hearing we granted leave to the Secretary of State for Work and Pensions to appear as an interested party. Miss Demetriou on behalf of the Secretary of State advances a case broadly similar to that of Hounslow. She contends that housing benefit, as section 1(1) of the 1992 Act makes clear, is only properly payable if made pursuant to a claim. If no claim for backdating is made in respect of a particular period, then housing benefit was not properly payable during that period.

Like Hounslow, the Secretary of State seeks to draw a distinction between cases involving loss of income support and other cases. The point is made that income support is in effect a passport to housing benefit and it follows, it is said, that if a person becomes disentitled to income support, then there would have to be a fresh consideration of a housing benefit claim. That is why Regulation 67(1)(a) and Regulation 72(14) make specific provision for such cases. The benefit period in such a situation has ended and consequently the original claim has lapsed.

Miss Demetriou cites the decision of this court in the case of Secretary of State for Work and Pensions –v- Chiltern District Council [2003] EWCA Civ 508, [2003] HLR 1019 where, inter alia, it was held that where entitlement to housing benefit has ended because entitlement to a “passport benefit” like income support has ended, there is no power to postpone termination of payment of benefit until certain information which the local authority seeks has been provided. It is, however, accepted that, insofar as the court made reference there to Regulation 104, it was dealing with the new amended form of that Regulation. I also observe that in paragraph 18 of the leading judgment of Lady Justice Hale it was emphasised that Regulation 72(14)(a) and Regulation 67 were quite separate from Regulation 104 dealing with reducing the amount of a recoverable overpayment. Nonetheless Miss Demetriou submits that there is a justification for drawing a distinction between the two categories of case under Regulation 104 because in the “passport” cases there may not previously have been an investigation by the authority into entitlement to housing benefit.

Our attention is also drawn to the amended version of Regulation 104(1), which reads:

For my part I doubt very much whether any real assistance can be obtained from the amended wording of Regulation 104. The amendment was made after the decision in ex parte Lord and might have been intended to restore a situation which Parliament believed it had produced by the original wording of the Regulation. One simply does not know. The Commissioner’s attention was drawn to the explanatory note accompanying the statutory instrument making the amendment, S.I. 2000 Number 2331, which stated that the new Regulation:

As all parties are agreed, the problem in this present appeal is that the words in the un-amended version of Regulation 104, “properly payable”, are nowhere defined. The essence of the case advanced both by Hounslow and by the Secretary of State is that nothing was properly payable by way of housing benefit on the true facts unless there was an “entitlement” to a lesser amount and that that in turn requires that a claim was made on that basis. That was the reasoning on this issue in ex parte Lord also.

Regulation 104 does not itself expressly require a claim to have been made and I have to say that one would not normally read it as requiring such a claim. On the other hand, it is undoubtedly right that “entitlement” to benefit depends upon a claim being made in the manner and time prescribed. Section 1(1) of the 1992 Act says as much. But that is not the wording used in Regulation 104, which refers to “properly payable” rather than “entitlement”. In seeing whether a fresh claim is needed for a Regulation 104 deduction, it is helpful to note the role played by a claim under the Regulations generally. Its function is to lead to a determination by the relevant authority: Regulation 76 imposes a duty on the authority to determine a claim. But there was a determination in this case: it was the original determination which led in the present case to housing benefit being paid to the appellant.

Once such a claim has been made and determined, there does not then generally have to be a fresh claim before the authority can subsequently revise the amount of benefit payable, whether upwards or downwards. This can be seen by examining what happens when there is a change of circumstances about which the claimant ought to notify the authority under Regulation 75(1) because the change might affect his right to, or the amount of, housing benefit. The authority may find out about the change of circumstances either because it is duly notified of the change or by some other means, but in either case, if it considers the change to be a relevant one, it may exercise its power to review its earlier determination. That power is provided by Regulation 79(1), of which the material part reads as follows:

Regulation 79(3) then provides:

When one turns to consider the overpayment provisions in Part XIII of the Regulations, one finds that Regulation 98 defines an overpayment as:

The wording of Regulation 104 then falls into place and can be properly construed. The words at the beginning of Regulation 104(a), “if it determines”, show that a determination has been made, but do not require a fresh claim of a lesser amount or a fresh claim referring to the changed circumstances, any more than any other review of a determination requires such a claim. In all cases of overpayment there must have been a claim originally made for housing benefit relating to the period during which overpayment was made.

It is a recognition of this which has led both Hounslow and the Secretary of State to accept that no fresh claim is needed in order for a deduction to be made under Regulation 104 where the recipient of housing benefit was not on income support. But both those parties seek to distinguish those cases from ones where the recipient was on income support but his entitlement to income support ended, giving rise to overpayment of housing benefit. Reliance is placed, as it was in ex parte Lord, on Regulation 67 and Regulation 72(14). But I can see no reason why Regulation 104 should have sought to distinguish those two categories of case. It would mean that one was distinguishing between cases where a change in financial circumstances leads to a loss of income support and those where the same change in financial circumstances does not. In any event these arguments really go to the issue of whether the recipient had an “entitlement” to housing benefit, rather than to whether it was “properly payable”, the wording used in Regulation 104. There may need to be a fresh claim for housing benefit when income support is lost and the authority is considering the future entitlement of the individual to housing benefit, but no practical purpose is served in requiring a claim where one is dealing with past events as is the situation in overpayment cases. The legislature could very readily have used the word “entitlement” in Regulation 104 but chose not to, and the reason for that seems to me to be that something different was meant by the words “properly payable”. Indeed since “entitlement” would have already been dealt with in determining the amount of overpayment under Regulation 98, there is great force in the point made by Mr Stagg that Regulation 104(a) would be otiose if all that one was doing under that Regulation was to determine entitlement on the part of the recipient.

The analysis which I have set out accords with what seems to me to be the natural and ordinary meaning of the words used in Regulation 104. There is no justification for importing into them all the procedural requirements appropriate to the determination of an entitlement to housing benefit. It follows that in my judgment the case of ex parte Lord was, on this aspect, wrongly decided and that in following it the Commissioner in the present case fell into error. I would allow this appeal.

I agree that this appeal should be allowed for the reasons set out by Lord Justice Keene. It is because we are overruling the decision of the High Court in R v Wyre Borough Council, ex parte Lord (unreported, 24 October 1997), which the Commissioner felt that he should follow, that I add some observations of my own. That decision has, of course, been overtaken by an amendment to the relevant regulation – regulation 104 in the Housing Benefit (General) Regulations 1987 (SI 1987/1971) – which came into force in October 2000; but we were told that there remain some pre-amendment determinations which are under appeal.

Housing benefit is an “income-related benefit” for the purposes of the Social Security Administration Act 1992. Section 1(1) of the 1992 Act provides that no person shall be entitled to any income related benefit unless he makes a claim for it in the manner prescribed in relation to that benefit by regulations made under Part I of that Act or is treated by virtue of such regulations as making a claim for it. Part III of the Act is concerned with overpayments and adjustments of benefit. Section 75(1) provides that, except where regulations otherwise provide, any amount of housing benefit determined in accordance with regulations to have been paid in excess of entitlement may be recovered either by the Secretary of State or by the authority which paid the benefit.

Part XIII of the Housing Benefit (General) Regulations 1987 makes provision for the calculation and recovery of overpayments of housing benefit. Regulation 98 defines “overpayment” to mean:

The point is brought into focus – but is not, of course, determined – by regulation 104 in the form in which it now is, following a substitution by SI 2000/2331. So far as material, the regulation now provides that:

The first submission advanced on behalf of the appellant is that it is necessary, in order to determine what (if any) amount was “properly payable” for the purposes of regulation 104 in its original form, to adopt the hypothesis which is now spelt out in paragraph (1)(c) of the regulation in its substituted form; or, to put the point another way, that the amount “properly payable” for the purposes of regulation 104 in its original form was the amount that should have been determined to be payable on the basis of the claim as it would have appeared if the relevant change of circumstances had been notified (as it should have been) at the time when the change occurred.

The provisions relating to the period of entitlement to benefit and change of circumstances are found in Part IX of the 1987 Regulations. Regulation 65(1) provides that a person who makes a claim and is otherwise entitled to housing benefit shall be entitled to that benefit “from the benefit week following the date on which his claim is or is treated as made”. Regulation 66(1) and (2) requires that, where a person is entitled to housing benefit, the appropriate authority shall make an award for a specified period. That period shall be “such number of benefit weeks as the appropriate authority shall determine having regard in particular to any relevant circumstances which the . . . authority reasonably expects may affect entitlement in the future”. Regulation 67(1) provides that the benefit period shall end with the last day of the final week of that period – that is to say, at the end of the specified period – unless the case falls within one or other of sub-paragraphs (a) to (c) of that regulation. Those sub-paragraphs describe cases in which a change of circumstances will, itself, bring the benefit period to an end. They include a case where the claimant has been on income support but, by reason of change of circumstances, ceases to be entitled to income support. In such a case, the benefit period ends on the last day of the benefit week in which the change of circumstances actually occurs. But it is important to keep in mind that, unless the case falls within one or other of sub-paragraphs (a) to (c) of regulation 67(1), the benefit period does not come to an end with a change of circumstances.

Regulation 73(1) requires a claimant to furnish such information as may reasonably be required by the appropriate authority to enable the authority to determine that person’s entitlement to housing benefit. Regulation 75(1) requires that if, at any time during the benefit period, there is a change of circumstances which the claimant might reasonably be expected to know might affect his right to, or the amount of, housing benefit, he must notify that change of circumstances to the authority. Regulation 79(1)(a) provides that any determination – including a determination as to the right to, or amount of, housing benefit – may be reviewed at any time by the appropriate authority if there has been a relevant change of circumstances since the determination was made. Where the determination is revised on review, the determination as revised takes effect from the date when the change of circumstances has effect; further, the entitlement to benefit at the reduced rate takes effect from the first day of the benefit week following the date on which the change of circumstances actually occurs – regulation 79(3)(a) read with regulation 68(1).

The position, therefore, is that, where (following a change of circumstances which does not, itself, bring the benefit period to an end – because the case does not fall within sub-paragraphs (a) to (c) of regulation 67(1)) there is a review as a result of which the amount of benefit is reduced, the person continues to be entitled to benefit for the remainder of the benefit period (at the reduced rate) but without the need to make a new claim. And that is so whether the review takes place because the person entitled to benefit has notified the appropriate authority of the change of circumstances in accordance with the obligation imposed by regulation 75, or because the authority has become aware of the change of circumstances in some other way.

It follows that, in a case where there has been a change of circumstances which has not brought the benefit period to an end, the definition of “overpayment” in regulation 98 will, itself, take account of the entitlement to benefit at the reduced rate following the review. That is the effect of the words “to which there was no entitlement under these Regulations (whether on initial determination or as subsequently revised on review . . .) ”. “Overpayment”, as defined by that regulation, is the difference between the amount actually paid and the amount to which the recipient was entitled (as a result of the review) under the regulations during the continuing benefit period. In such a case there was, on a strict analysis, no need for regulation 104(a) in its original form. The amount of the recoverable overpayment was already defined by regulations 98 and 99(1). Where the change of circumstances does not, of itself, end the benefit period, the review under regulation 79(1) will, if it leads to a reduction in benefit, necessarily determine the amount of the overpayment.

That gives rise to the question: to what case was regulation 104(a), in its original form, directed. The answer, I think, is obvious. Regulation 104(a) must have been directed to those cases where the review under regulation 79(1) would not (or not necessarily) determine the amount of the overpayment; that is to say, to cases where the review under regulation 79(1) would not lead to a continued entitlement to benefit at a reduced rate so as to define the amount of the overpayment by reference only to regulation 98. And, if that was, indeed, the purpose of regulation 104(a), then effect must be given to that purpose by construing the words “amount . . . properly payable” to mean the amount that should have been determined to be payable on the basis of the claim as it would have appeared if the relevant change of circumstances had been notified (as it should have been) at the time when the change occurred. For my part, I find no difficulty in the concept that an amount would be “properly payable” if (although not actually payable) it would have been payable if the proper course had been followed. It is, I think, significant that regulation 104(a) – in contrast to regulation 98 - does not use the language of entitlement.

It follows that I would accept the first submission advanced on behalf of the appellant.

The second submission is that, in order to give full effect to the purpose of regulation 104(a) it is necessary, in a case where the change of circumstances has, itself, ended the benefit period, to construe the words “amount . . . properly payable” on the basis that the change of circumstances has not had that effect. The words must be construed to mean the amount that should have been determined to be payable on the basis of the claim as it would have appeared if (i) the relevant change of circumstances had been notified (as it should have been) at the time when the change occurred and (ii) the change of circumstances had not ended the benefit period or (perhaps) that, following the change of circumstances, a fresh claim to benefit had been made. It is said (correctly) that, unless that approach is adopted, cases in which the change of circumstances has, itself, brought the benefit period to an end will have been excluded from regulation 104(a).

I am persuaded that that submission is also correct. For the reasons that I have sought to explain, the cases in which regulation 104(a) must have been intended to have effect were those where the amount of the recoverable overpayment was not defined, following a review under regulation 79(1), by regulation 98; that is to say, those cases where, following review, there was no entitlement to benefit at a reduced rate. Those will include cases where the change of circumstances which has given rise to the review has, itself, brought the benefit period to an end. The paradigm example is a case within paragraph (a) of regulation 67(1); that is to say, a case where:

It seems to me that regulation 104(a) must have been intended to apply in such cases. No credible reason of policy has been suggested why those cases should be excluded from the scope of regulation 104(a); and, in that context, it is pertinent to note that those cases have been included, expressly, by the amended regulation 104(2). And, if regulation 104(a), in its original form, was not intended to apply to those cases, then, for my part, I find it impossible to identify cases to which that regulation was intended to apply. None have been suggested by the respondents. In my view, the correct approach is to construe regulation 104(a) on the basis that “amount . . . properly payable” means the amount that should have been determined to be payable if, on notification of the relevant change of circumstances, a fresh claim to benefit had been made.

I agree with both judgments.

The appeal be allowed and the decision of the Appeal Tribunal dated 15 ^th August 2002 be set aside

The case will be remitted to the respondent, the London Borough of Hounslow, for recalculation for of the amounts of overpaid housing benefit and excess Council Tax benefit paid 22 ^nd June 1998 and 13 ^th December 1998 which are recoverable from the appellant (if any) in the light of this judgment;

The respondent and the interested party do jointly pay the appellant’s costs, to be assessed if not agreed;

There will be a detailed assessment of the appellant’s public funded costs.