There are a number of separate issues here;
1) Is the letter you have received an actual overpayment decision? Or is it chasing payment on an overpayment decision that was, in fact, made some time ago? If the latter, then you have the additional problem of getting a late appeal accepted....
2) Preserved rights to higher rates of IS when in residential care did, in general terms, also entitle a claimant to continue receiving the care component of DLA. However, there were also exceptions to that general rule - for example, where said residential care was arranged via a contract between the local authority and the caring institution, then preserved rights did not entitle a claimant to receive DLA care component, even in circumstances where the same local authority was not funding the care. If you don't already know, you'll need to research what the actual arrangements were.
3) Was there an appointee in place at the time that your client entered residential care (17/3/93, presumably) and during the course of the alleged overpayment? If not, one could make an argument for absolute non-recoverability - disclosure could not have been expected from your client, given the level and nature of her disabilities,.
Lastly, a rather lengthy aside - but one that may be of help if none of the above applies.
I'd be surprised if there weren't an appointee in regards to point 3, above; and I'd also be surprised if that appointee were not the Public Trustee/Public Guardianship Office, acting for the Court of Protection.
I did some consultancy work for a large national charity in late 2001; the time that, following the Audit Commission's recommendations, local and national charities were beginning to take over the work/cases formerly dealt with by the PGO. My work involved providing consultancy to the charity on precisely this kind of benefit issue, both in general terms and in specific cases. In short, what you've posted has led me to assume that you work for a charity that has taken on the appointee functions from the PGO.
The relevance of this being that, in my experience, the PGO had an extremely poor record in administering their clients' benefit claims and they frequently failed to notify the authorities of relevant changes of circumstance, such as entering residential care. The PGO would also, as a matter of routine, repay resultant overpayments from the claimant's own funds - even where said overpayments were caused entirely by the PGO's own negligence!
My view is that, in such cases, the appointee rather than the claimant should be liable. Unfortunately, for the purposes of benefit law, the claimant and appointee are one and the same. That distinction need not apply, however, to a civil negligence case.
Feel free to e-mail should you need more assistance.....
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