I don't think you can now argue that the claimant had an intention to return, if it is clear that no intention now exists... (even if it previously existed)...
The HB guidance manual at Ch C, para 3.194 states "Similarly, if during the course of an absence it becomes clear that it will probably last longer than 13 weeks, stop the benefit immediately, unless the reason for absence changes to one covered by the 52 weeks rule, see The 52 week limit later in this chapter".
Link to this part of the guidance is below...
http://www.dwp.gov.uk/housingbenefit/manuals/hbgm/parts/pta_03c.asp#g
I think that challenging the 'target' for recovery is your best bet, but I have to confess, I would not be optimistic about your chances... the O/P seems to be covered by HB reg 99 (1), not 99 (2), so it is recoverable, (the overpayment is 'bound' to have a small LA error part to it, (it is unlikely that the O/P will have been created within days of the LA receiving the notification of change in circs), so you could attack that... Sorry for the bad news, I could be wrong though...
P.S. What about a request for a 'discretionary write off', if done to the HB Manager, then perhaps through a Cllr if unsuccessful, it might stand some chance too???
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