Assuming that the LA were first in possession of the info more or less at the time of the change of circs, AND the LA have apparently acknowledged overlooking that information, it seems that there was an error on the part of the LA.
Based on the info given, the issue is whether or not the clmt could reasonably have been expected to realise s/he was being overpaid .
BUT, the LA MUST first assess underlying entitlement - i.e. the amount of HB/CTB that s/he would otherwise have been entitled to had all the actual circumstances been known at all relevant times.
Hope the above helps.
Regards
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