High Court Allows Judicial Review Claim on Universal Credit Overpayment Recovery

23 February 2023

R. (on the application of K) v Secretary of State For Work and Pensions [2023] EWHC 233 (Admin)

Anyone with any experience trying to negotiate a universal credit overpayment with the DWP will tell you that it can feel like a hopeless task and you are likely to hit a series of bureaucratic walls. One of the harsher aspects of this process (relating to “official error”) has recently come under the spotlight of the High Court in the case of R (K) v Secretary of State for Work and Pensions [2023] EWHC 233 (Admin) (7 February 2023).

Background

UC claimants are under a constant duty to update the DWP on their circumstances. Reporting any changes in income, employment, job searches, changes to the family, education, living arrangements and health are all the responsibility of the claimant. Any mistake or failure to promptly inform the DWP of any changes can result in an overpayment of benefit (and sometimes in criminal proceedings or a penalty). Any overpayment is usually then recovered directly from future payments of UC at a rate of between 15-40% of the standard allowance.

However, the DWP also has the power to recover a UC overpayment (under s.71ZB of the Social Security Administration Act 1992), even in cases where an overpayment occurs and it is entirely the fault of the DWP. Such cases are called “official error”. Striking statistics from the DWP show that between April 2020 and March 2021, there were 370,000 claimants who received overpayments classified as ‘official error’ totalling £228,355,000 (see §96 of the judgment[1]).

This is what happened to K. K was a single mother of two disabled adult children who was in receipt of UC. She was overpaid £8,623.20 in UC, entirely due to the fault of the DWP. She was told by DWP staff that she would still be entitled to the ‘child element’ and ‘disabled child element’ while her youngest son was undertaking an apprenticeship. She had then queried her entitlement to this element four times and was repeatedly told that she was entitled to these elements.

When the DWP realised its error, it sought to recover the overpayment by deductions from her ongoing UC claim. The claimant applied for a waiver of recovery and in three separate decisions the SSWP refused.

Under the statutory scheme, the Secretary of State for Work and Pensions (“SSWP”) has the discretion to waive recovery of an overpayment. The SSWP was operating this discretion using two policy guidance documents: the Benefit Overpayment Recovery Guide (“BORG”) which was a public document and the unpublished Decision Makers’ Guide to Waiver (“DMGW”).

The claimant brought a judicial review on the grounds that:

1. The SSWP unlawfully failed to publish the DMGW;
2. The SSWP’s policy on waiver was an unlawful fetter on his discretion;
3. The decisions to refuse to waive recovery were unlawful because they applied an unlawful policy, failed to take material facts into consideration, were irrational and breached the claimant’s legitimate expectation;
4. The SSWP had breached the Public Sector Equality Duty (“PSED”).

The Judgment

Mrs Justice Steyn sitting in the High Court held that:

• The failure to publish the DMGW was unlawful: Steyn J held that the SSWP’s failure to publish the DMGW was unlawful. The published policy (the BORG) was not the whole relevant policy position, and an assessment of the lawfulness of the policy and the decisions must be made considering both documents taken together. An individual who wished to apply for a waiver would not be able to make representations based on the BORG alone (§116).
• The waiver policy (BORG + DMGW) was lawful overall: Steyn J held that the policy itself did not unlawfully fetter the SSWP’s discretion to waive recovery or authorize or approve unlawful conduct and so was lawful (§127). But any decisions made on the basis of the BORG alone without the more beneficial aspects of the DMGW would be unlawful (§120).
• The decisions not to waive recovery in K’s case were unlawful: the judgment held:
  • failure to consider material facts: all three decisions were unlawful due to failure to consider material facts (§172 and §129).
  • rationality: the Court concluded that the third was not irrational on the basis of severe financial hardship or health/welfare grounds (§137) but “the reasoning process in respect of the public interest and detrimental reliance grounds was so lacking, and therefore flawed, as to rob the decision of logic” (§138), and therefore unlawful (§139).
  • legitimate expectation: Steyn J held that a clear and unambiguous representation by a decision maker that the claimant was entitled to an element of UC is capable of founding a legitimate expectation, even where the representations were based on a mistaken view of the law (§161). In the circumstances, K had relied on the DWP’s assertions that she was entitled to a higher level of UC to her detriment. She had spent the money on day-to-day living expenses and had lost out on other sources of income as a result of her understanding that she was entitled to the money she had been given.
• PSED: in amending the waiver policy, the SSWP had failed to consider the importance of eliminating discrimination on the grounds of disability (§210), despite there being reasonable grounds to suspect that there might be an adverse effect on disabled people. The SSWP should have made reasonable enquiries into what the effects would be (§204).

What This Means For Welfare Rights Advisers

This is an important case and provides a useful template for advisers who are seeking to obtain a waiver or challenge the refusal of a waiver of recovery of an overpayment due to ‘official error’. As the case also made clear, there are likely to be hundreds of thousands of official error overpayment cases every year.

It is important to note that the Court has not said a waiver should be granted in all instances of ‘official error’.

However, the Court has highlighted considerations that the DWP should take into account when considering a waiver, which advisers can draw on in drafting their own waiver requests:

• how the overpayment arose: there are different types of error and a waiver will be more appropriate where there has been a “profound lapse in service”. The case is stronger if the DWP has repeatedly miscalculated entitlement, the situation has taken place over a long period of time, and it can be shown that the DWP should have been aware of the situation (§130). Particular attention should be paid to whether the DWP have given a clear and unambiguous positive statement that the debtor was entitled to the money (§161);
• how the debtor responded: the case is much stronger if the debtor has been upfront, provided relevant information on time, has acted in good faith, and taken steps to try to check that their entitlement is correct (§131);
• what happened to the overpayment money: has the debtor spent the money? If so, an explanation of what the debtor has done with the money (e.g. spent it on living expenses and bills) may be useful (§134);
• any missed opportunities: if the debtor might have been eligible for other benefits, or grants or funding had the overpayment not occurred, this is relevant (§134);
• financial hardship: financial hardship alone is unlikely to be enough to justify a waiver (as other options such as temporarily suspending recovery may be more appropriate), but this will be relevant when combined with other factors. The Court in this case placed an emphasis on the fact that some of the financial information was out of date (§134).
• This highlights as ever the importance of a well-prepared and well-evidenced financial statement whenever a claim involving financial hardship is made. If suitable and appropriate in the situation, evidence from household family members financial situation should also be provided.
• the debtor’s health/welfare: a waiver should be granted where it is clear from all the evidence available that recovery will have or is having an excessive negative impact on the health and wellbeing of the debtor or their family (§111(v)). Here evidence of ill health or wellbeing is important, but this does not necessarily have to directly link the recovery of the debt to the debtor’s health.
•  whether recovery of the overpayment in the public interest: an argument can be made that, given the debtor’s circumstances, it is not in the public interest to recover the debt. Here, relevant points are the DWP’s reputation, the potential public response, legal implications and risk of challenge, how the DWP has acted (§42; §111).

Not all these factors will be a guarantee of a waiver, but the more of them that are present, the more likely it is that a waiver is appropriate. This could also be impacted by any changes to the policy that the DWP may make, so checking the up-to-date guidance will be important.

Of course, each case will turn on its own individual facts and legal advice should be sought if considering a challenge in a specific case.

Another important point to note is how much difficulty the claimant faced in even getting DWP to look at her waiver request. She was twice given flagrantly incorrect advice that her request could not even be considered [§66-75] and had to threaten judicial review before any decision was made (and, as noted above, DWP then made unlawful refusal decisions on three separate occasions). Advisers will therefore need to be tenacious in insisting on having a waiver request considered properly.

Implications For Future Cases

This case has highlighted various potential avenues for challenge in future cases.

Legitimate Expectation

 The Court held that a legitimate expectation can be created by the clear and unambiguous representations of a decision maker at the DWP, even where based on a mistaken view of the law. The legitimate expectation will not create continuing ongoing entitlement to a mistakenly calculated benefit (§163), but can be used to argue that the SSWP is not entitled to resile from a past expectation by seeking to recover the overpayment of benefit already paid (§164).

The Court was cautious about the extent of the number of people who would meet the “high threshold” of legitimate expectation in official error overpayment cases (§164), but that was merely a passing observation, and will not necessarily be borne out by experience. It should be noted that the Court held that once a legitimate expectation is established, it is then for the Court to determine the fairness of repudiating it (§166-7).

The availability of a legitimate expectation defence to recovery could have a wider effect where incorrect information has been given by the DWP. Cases of misinformation and miscalculation should be examined carefully to see what representations have been made by the decision maker.

In this case, the claimant was diligent in querying entitlement, and had advice and support to request a waiver. Recovery of the overpayment had not yet started at the time the claim was brought. However, the DWP’s policy places the onus (as with much of UC) on the claimant to request a waiver (§35). There may be scope for future litigation in cases involving this aspect of the policy, as there is no reason in principle why the DWP would not know for themselves, before ever deciding to recover an overpayment, that they had given the claimant a legitimate expectation from which it would be unfair for them to resile. Pertinent facts might involve situations where the debtor has not been capable of querying entitlement or requesting a waiver, especially where all the relevant facts can be shown to be within the knowledge of the DWP.

DWP Policy

The DWP in this case had unlawfully failed to publish its full policy, a fact which did not become clear until an additional document was made available in late disclosure following a Part 18 request. This is a useful indicator of DWP practice and worth bearing in mind when looking at cases with a disparity between policy and practice.

PSED

The Court held that in promulgating and formulating the waiver policy, the SSWP had failed to have ‘due regard’ to the equality considerations listed in the PSED.

Steyn J came to some important conclusions about the nature of the PSED. She attempted to resolve what has appeared to be a tension in approaches to the extent of the PSED’s duty of enquiry, concluding that a public authority has a duty to make reasonable enquiries into the impact of a proposed measure where there are grounds to suspect it might have an equalities impact, not just where it is obvious there will be such an impact (§§191-192).

The DWP has since published the version of the DMGW that was in force at the relevant time, although it notes that this was withdrawn on 23.12.22 and was incorporated into an updated version of the BORG in December 2022. The extent to which the amalgamation of the two documents has amounted to a change in policy will be relevant for any future challenge under the PSED, as will any Equality Impact Assessment that the DWP has since taken in relation to the policy.

[1] All future paragraph numbers are references to the above case unless otherwise stated.

This blog was written by our pupil Alexander McColl regarding a case in which K was represented by GCN’s Tom Royston, alongside Adam Straw KC instructed by Public Law Project.