Benefits claimed by misrepresentation not ‘unjustified enrichment’ and therefore not subject to prescription

The petitioner claimed that the obligation to repay benefits received by misrepresentation was based on redress of unjustified enrichment, and that any obligation to repay had prescribed, but a judge in the Court of Session ruled that section 71 of the Social Security Administration Act 1992 created statutory powers of recovery, and enforcement was therefore not time barred after five years.

Lord Armstrong heard that the petitioner Audrey Cullen received social security payments for a number of years.

In March 2008 the Secretary of State for Work and Pensions issued a decision, under section 71, determining that he was entitled to recover £20,836.96, paid in respect of income support as a result of misrepresentations made by the petitioner.

The petitioner denied any misrepresentations and sought to appeal the decision but her application did not proceed as a consequence of being late, through failure on the part of her solicitors.

Subsequently, by letter dated 14 February 2016, the Secretary of State issued a decision giving effect to the decision of 6 March 2008, by putting in place a direct earnings attachment (DEA).

The petitioner sought declarator that her obligation to repay has prescribed, and reduction of the decisions referable to the putting in place and effective commencement of the DEA.

In the period between 2008 and 2016, there was no change to the petitioner’s employment, and there was correspondence between her and the Department of Work and Pensions throughout.

The petitioner denied any misrepresentation, but it was conceded for the purposes of the proceedings, that, on the basis that there had been misrepresentation, there was an obligation on the petitioner to repay.

It was conceded on behalf of the respondent that the obligation to repay had subsisted for five years without any relevant claim or acknowledgement.

The issue was therefore whether the obligation to repay an amount paid in respect of state benefit to which section 71 of the 1992 Act applied, obtained by misrepresentation, fell to be categorised as an obligation based on redress of unjustified enrichment for the purposes of paragraph 1(b) of Schedule 1 to the Prescription and Limitation (Scotland) Act 1973, and was therefore subject to prescription after the elapse of five years in the absence of a relevant claim.

The principal contention for the petitioner was that the obligation to repay benefits, received by misrepresentation, falls within that classification as a form of unjustified enrichment.

On the nature of the remedy afforded by section 71, Lord Armstrong observed that the Supreme Court had held that section 71 provided a “comprehensive and exclusive statutory scheme for the recovery of all overpayments of benefits” made pursuant to awards and “excluded all common law rights of restitution” which the Secretary of State might otherwise have had.

The judge therefore held that the effect of section 71 and its predecessors was to “create new obligations where previously there had been none” and that “it would be wrong to characterise section 71 as simply an enabling provision”.

In a written opinion, Lord Armstrong said: “It is correct to describe the scheme as one involving necessary conditions for the exercise of the power to require repayment that are not necessary conditions for enforcement of an obligation to make redress for unjustified enrichment…

“he purpose and effect of s 71 and its predecessors was to create rights and obligations referable to the statutory powers conferred. In these circumstances, I conclude that, in contrast to redress for unjustified enrichment, which is a common law remedy grounded in equity…, the power conferred by s 71, and the corresponding obligation to repay, are creations of public law.”

The judge added that although in terms of an official guide on overpayment recovery s.71 recovery may be subject to the exercise of discretion, it was plain that there was “no legal requirement” in that regard.

“On that basis it cannot be said to provide an equitable remedy,” he said.

Lord Armstrong concluded: “Thus, in circumstances where the obligation to make redress is properly to be regarded as a statutory one, in the sense that it arises in consequence of a statutory provision which confers a corresponding statutory right, and where the referable remedy is not an equitable one, it must follow that the petitioner’s obligation does not fall within paragraph 1(b). I would add that I accept the submissions for the respondent, in this regard, as to the proper interpretation of the 1973 Act, including paragraph 1(b).”