Mulvey v Secretary of State for Social Security

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD BROWNE-WILKINSON,LORD JAUNCEY OF TULLICHETTLE,LORD MUSTILL,LORD SLYNN OF HADLEY,LORD LLOYD OF BERWICK
Judgment Date13 Mar 1997
Judgment citation (vLex)[1997] UKHL J0313-2
Docket NumberNo. 9.

[1997] UKHL J0313-2

HOUSE OF LORDS

Lord Browne-Wilkinson Lord Jauncey of Tullichettle

Lord Mustill Lord Slynn of Hadley

Lord Lloyd of Berwick

Mulvey (A.P.)
(Appellant)
and
Secretary of State for Social Security
(Respondent) Scotland
LORD BROWNE-WILKINSON

My Lords,

1

For the reasons contained in the speech to be given by my noble and learned friend Lord Jauncey of Tullichettle with which I agree I would dismiss the appeal.

LORD JAUNCEY OF TULLICHETTLE

My Lords,

2

Prior to 3 February 1993 the appellant received a number of repayable awards from the social fund and was also in receipt of income support benefit. From this benefit the respondent made deductions towards repayment of the awards. On the above date the estate of the appellant was sequestrated. Thereafter she continued as before to receive income support benefit from which deductions were made. The issue in this appeal is whether the respondent was entitled to continue making these deductions after the date of sequestration. The Lord Ordinary held that he was not but the First Division of the Inner House of the Court of Session held that he was.

3

The social fund consists of limited sums paid into it from time to time by the respondent in terms of section 167(3) of the Social Security Administration Act 1992 ("the Administration Act") and is intended to be recycled at least in part so that awards may thereafter be repaid for the benefit of others in need. Payments out of the fund are regulated by Part VIII of the Social Security Contributions and Benefits Act 1992 ("the Contributions and Benefits Act"). Section 138(1) of the latter Act provides inter alia:

"(1) Payments may be made out of the social fund, in accordance with this Part of this Act ….

(b) to meet other needs in accordance with directions given or guidance issued by the Secretary of State."

4

Section 139(1) provides that a social fund officer is to determine whether a payment is to be awarded and if so of what amount. Subsections (3) and (4) are in the following terms:

"(3) A social fund officer may determine that an award is to be repayable.

(4) An award that is to be repayable shall be repayable upon such terms and conditions as before the award is paid the Secretary of State notifies to the person by or on behalf of whom the application for it was made."

5

Section 140(2) requires a social fund officer to determine any question in accordance with any general directions issued by the Secretary of State. In the present case the Secretary of State had issued directions which required the awards to the appellant to be repayable.

6

The method of repayment is provided for in section 78 of the Administration Act of which subsections (1) and (2) are in the following terms:

"(1) A social fund award which is repayable shall be recoverable by the Secretary of State.

(2) Without prejudice to any other method of recovery, the Secretary of State may recover an award by deduction from prescribed benefits."

7

Income support benefit is a prescribed benefit for the purposes of subsection (2) and it was in terms of that provision that the respondent made the deductions which are challenged.

8

The appellant argued that the deductions from her income support benefit after sequestration amounted to an attempt to set off a pre-sequestration debt against a post-sequestration obligation, something which was impermissible at common law. The rule as to compensation or set-off in bankruptcy is stated by Goudy on Bankruptcy (4th ed.) pp. 554-555 as follows:

"The concourse of debit and credit must have existed antecedent to the date of bankruptcy. Thus, against a debt which becomes due to the trustee on a bankrupt estate after the date of the bankruptcy, it is not competent to plead compensation in respect of a claim against the bankrupt which existed prior to that date. This rule is based on sound principles of equity and expediency—one of the main considerations being to prevent persons indebted to the estate purchasing up claims at a low figure and then pleading set-off, to the serious detriment of the general body of creditors."

9

When that was written, shortly after the passing of the Bankruptcy (Scotland) Act 1913, income accruing to a debtor after the date of sequestration fell under the sequestration with certain exceptions. Section 32(1) of the Bankruptcy (Scotland) Act 1985 now vests in the debtor income received by him after the date of sequestration which is not derived from the estate vested in the trustee. The appellant also referred to further well established principles of the common law, namely (1) that a creditor in an obligation undertaken by a debtor prior to sequestration must, after sequestration, enforce that obligation against the estate vested in the trustee and can only seek a decree of constitution thereanent against the debtor personally, and (2) that a creditor can enforce against the debtor an obligation incurred after sequestration: Fraser v. Robertson (1881) 8 R. 347. The relevance of these principles, which were not in dispute, was, it was submitted, that upon sequestration the respondent could only recover the balance of the social fund awards from the permanent trustee in whom the sequestrated estate was vested whereas his attempt to recover by deduction was tantamount to suing the appellant personally for enforcement of a pre-sequestration obligation, or in any event to doing diligence contrary to section 32(5) of the Bankruptcy (Scotland) Act 1985.

10

Both the Lord Ordinary and the First Division considered that the two codes relating to social...

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5 cases
  • R (Cooper) v Secretary of State for Work and Pensions
    • United Kingdom
    • Supreme Court
    • 14 December 2011
    ...The House of Lords has reached the same conclusion in the context of the rather different Scottish bankruptcy law: Mulvey v Secretary of State for Social Security 1997 SC (HL) 105. Once a bankrupt is discharged, however, the Court of Appeal has held that the liability to repay the Secretary......
  • R (Cooper) v Secretary of State for Work and Pensions
    • United Kingdom
    • Queen's Bench Division (Administrative Court)
    • 26 July 2010
    ...cases, have an important bearing on their outcome. The first is Mulvey v Secretary of State for Scotland 1996 SC 8, [1997] UKHL 10, 1997 SC(HL) 105. In that case the Secretary of State continued to deduct from income support sums for the repayment of a loan from the social fund after Mrs M......
  • R (Balding) v Secretary of State for Work and Pensions
    • United Kingdom
    • Queen's Bench Division (Administrative Court)
    • 3 April 2007
    ...actually chosen is by way of deduction. 38 We were also referred to the House of Lords decision in the Scottish case of Mulvey v Secretary of State for Social Services [1997] SC(HL) 105, [1997] SLT 753. That considered the relationship between s.78(2) of the 1992 Act and the relevant Scot......
  • R (Cooper) v Secretary of State for Work and Pensions
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 14 December 2010
    ...of State for Social Security, ex p Taylor and Chapman [1997] BPIR 505 at 513H; Mulvey v. Secretary of State for Social Security 1997 SC (HL) 105 at 109D; Razzaq v. Pala [1997] 1 WLR 1336 at 1343 E-G; and R(Balding) v. Secretary of State for Work and Pensions [2007] 1 WLR 1805 (DC); affirmed......
  • Request a trial to view additional results

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