Undeclared capital

Morning all,

Am advising a client whose wife has recently died. Prior to the wife’s death, they were in receipt of HB and CTB.

Now that probate has been sorted, it turns out that the wife had £30,000 of premium bonds that had not been declared previously. The husband states he knew nothing of these premium bonds and seeing his reaction of complete shock when he was told about them, I’m inclinded to believe him that he had no knowledge.

Now this amount has been discovered, the capital exceeds the HB and CTB limits and as such the LA have cancelled the claims back to inception and are seeking recovery of what is now a substantial overpayment.

Is there any mileage in asking the LA to write off the overpayment on the basis that he knew nothing of this money and as such did not knowingly contribute to either the reason for the overpayment or the amount of the overpayment or am I clutching at straws with this?

Anyone any experience of anything like this in the past? Advice, guidance, etc as always would be gratefully received

Cheers

John

Couldn’t the overpayment be recovered from her estate? Which assuming he is inheriting it all has the same impact on him.

Duncan - 12 July 2011 08:33 AM

I would appeal anyway. If the Tribunal Judge accepts that your client had no knowledge of the premium bonds you might win

I respectfully disagree with Duncan that a lack of knowledge will result in a successful appeal.  Unless an overpayment is expressly caused by an official error, ALL HB and CTB overpayments are recoverable irrespective of any other consideration.  In R(H ) 3/09, it was found that a claimant’s lack of knowledge about a partner’s finances was irrelevant where the o/p was not caused by an official error.

However, Duncan’s other points may well offer more promise.

Duncan - 12 July 2011 08:33 AM

Was the capital £30k from the start of the claim, or did it gradualy increase by the late wife buying new premium bonds?

Would the diminishing capital rule help reduce the overpayment?

I assume Pension Credit was not in payment.

All of the above points are at issue in my view and I’ll hang onto Duncan’s coat tails accordingly:

1)  Actual capital throughout award.  Definitely worth checking.

2)  I think Duncan means to the “Diminution of capital” provision, as provided by regulation 84 of the HB regs (pension age version) & the CTB equivalent.  This is a MANDATORY provision that MUST be applied in all overpayment cases where was a failure to disclose a material fact relating to capital.  Despite it being mandatory, some LAs don’t apply this provision; some are just plain lazy, others are positively obstructive (one can only speculate as to the motives).  For legal authority on how this should be applied, see CH/314/2007.

3)a)  Pension credit:  If Guaranteed credit, ALL of the clmt’s income AND capital MUST be disregarded for HB/CTB purposes - even if capital is above £16.000 (and if the DWP was aware) - see reg 26 of the HB regs (pension age version).

3)b)  Pension credit:  If Savings credit, but no Guaranteed credit, the LA must follow the DWP’s capital assessment unless:
i)  the DWP’s assessment was made in ignorance of a material fact (case law applies here, rather than bare legislation); or
ii)  the clmt’s capital was originally assessed at less than £16,000 but then positively rises above £16,000 AND an “assessed income period” was in force for SPC purposes (HB reg 27(8) - pension age).

Hope the above helps.

Hi,

Thanks for the prompt responses, it’s appreciated.

Sorry if I wasn’t clear in my original posting. I wasn’t considering appealing against the actual overpayment as I know it’s a recoverable overpayment, I was wondering if there was any mileage in asking the LA to use their discretion and make the decision not to recover the overpayment?

The late wife has had the £30,000 premium bonds for years - they’ve never been added to and none have been cashed at any point.

As far as I can see the AL haven’t applied the diminution of capital provision so I will look into this straight away.

Pension Credit hasn’t been in payment so unfortunately can’t go down this route

Thanks again

John

Hi John,

If there was no official error, then I agree there isn’t much point in appealing the recoverability of a CORRECTLY ASSESSED overpayment.  However, if the LA hasn’t applied “diminution”, it is highly likely the o/p is wrong and that most certainly can be appealed on those grounds.

Once the point is reached where the o/p is correct AND lawfully recoverABLE, actual recoverY is entirely a matter of discretion for the LA.  Although there is a right of appeal in relation to whether or not an overpayment is recoverABLE, there is no such right against recoverY of an o/p that is lawfully recoverABLE.

There is nothing to stop your client from asking the LA to exercise discretion on recoverY, whether in whole or part.  However, in my experience (on both sides of the fence), LAs tend to seek full recovery in cases of non-disclosure (whether fraudulent or otherwise); especially where the clmt has the means to pay it.  Of course, the LA cannot fetter a discretionary decision and the decision mustn’t be “Wednesbury” unreasonable.

NB:  If diminution hasn’t been applied, that would be an error on the part of the LA.  This may be useful if your client’s appeal is late, or even completely out of time because, where a decision is reached in error, the LA has the discretion to correct it at any time - i.e. no time limit.

Tony Bowman - 13 July 2011 09:22 AM

Can diminution be used where the capital is ACTUAL rather than NOTIONAL?

Yes.

Diminution for Actual capital you will find @ HB [2006] reg 103 and Diminution for Notional capital @ HB [2006] reg 50.

Tony Bowman - 13 July 2011 09:22 AM

Can diminution be used where the capital is ACTUAL rather than NOTIONAL?

I agree with chacha with just a clarification of terms.  “Diminution of capital” applies to actual cap where an overpayment is caused by failing to disclose, or misrepresenting, capital to the extent it was material to an overpayment (HBR 103; HB(PC)R 84 & CTB equivalents).

“Diminishing notional capital rule” only applies to notional cap (HBR 50 & HB(PC)R 48 & CTB equivalents).

Note the difference in wording - “diminution” v “diminishing”.  Also, the two provisons operate VERY differently.  As cited above, CH/314/2007 looked at how “diminution” should be applied.

It’s worth remembering there is also a “Quarterly diminution of capital” rule for other means tested DWP benefits - see reg 14 of the Social Security (Payments on account, Overpayment & Recovery) Regulations 1988.

One odd characteristic for “diminution” is that it must be applied to each benefit individually.  For example, say a clmt is found to have undisclosed capital and it results in overpayments of IS & HB & CTB; three individual “diminution” calculations are needed - one for each benefit.

There is one area of potential dispute in relation to “Diminution”.  How is tariff income determined?  Instinct immediately leads to thinking it depends on the amount of capital.  Trouble is, HBR 52 (& pension age + CTB equivalents) categorically state that Tariff income MUST be calculated with reference to capital as assessed within THAT part of the HB/CTB regulations.  The assessment of diminuted capital is made under a completely different part of the HB/CTB regulations.  On that basis, it is open to argument that Tariff income must always be assessed in relation to ACTUAL cap, even if diminuted cap is different for the same period.  From memory, I’m sure there is legal authority (non HB/CTB) which arguably supports this view.  Unfortunately, I haven’t been able to maintain my “library” for some time so can’t immediately identify the CD (edited) in question.  I’ll repost IF / when I identify it.

Edit 1 (case identified):  In CIS/2287/2008 at para 43, Cmmr Jacobs expressly found that the diminution provision “...only applies for the purposes of the overpayment decision. It is notional in its effect. It does not treat the capital as reduced for any other purpose, let alone for all purposes. It is a notional reduction that applies for a particular purpose only. If the claimant claims benefit later, that claim must be decided on the circumstances obtaining at that time, including the amount of capital actually held by the claimant.”

Edit 2 (more):  In CH/3057/2009, Judge Pacey found that a Tribunal’s failure to consider “diminution” amounted to an error in law.  On that basis, I can’t see any good reason to treat a failure by the DWP or a LA to apply “diminution” any more favourably.