R (Balding) v Secretary of State for Work and Pensions
| Jurisdiction | England & Wales |
| Judge | Mr Justice Davis,Lord Justice Laws |
| Judgment Date | 03 April 2007 |
| Neutral Citation | [2007] EWHC 759 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/7636/2006 |
| Date | 03 April 2007 |
[2007] EWHC 759 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Lord Justice Laws and
Mr Justice Davis
Case No: CO/7636/2006
Mr Paul Stagg (instructed by Leicester Law Centre ) for the Claimant
Miss Katherine Olley (instructed by Treasury Solicitors ) for the Defendant
Hearing date: 15 th March 2007
Crown Copyright ©
Introduction
This is another case which requires consideration of the interrelationship between the Social Security Administration Act 1992 ("the 1992 Act") and the Insolvency Act 1986 ("the 1986 Act"): although the actual issue here arising has not, according to the researches of counsel, itself been the subject of any previous decision. The issue, put compendiously, is this. Where it has been determined pursuant to s.71(1) of the 1992 Act that an individual has been overpaid benefits and the Secretary of State for Work and Pensions has decided to recover them by way of deduction from subsequently payable prescribed benefits, and the individual then goes bankrupt, is that individual released from liability to repay the overpayments, by reason of s.281 of the 1986 Act, upon his subsequent discharge from bankruptcy?
The facts
The background facts giving rise to these proceedings can be shortly stated.
Mr Balding, the Claimant, had received income support over a number of years. Investigations in due course were made. A review decision was reached on the 12 th June 1994 that Mr Balding had been overpaid £8680.45 by reason of a failure on his part to disclose a material fact as to his residence (and mortgage interest payable in respect of it). On 6 th July 1994 an Adjudicating Officer determined under s.71 of the 1992 Act that the sum of £8680.45 was recoverable. Mr Balding, as was his right, challenged the decision by way of appeal to the Leicester Social Security Tribunal. By decision, after a hearing on 23 rd October 1995, notified on the 8 th December 1995 the Tribunal determined that Mr Balding had failed to disclose that he was not living at a particular address and that income support of £8,335.48 had been overpaid, which amount was recoverable. The original decision was thus in effect upheld. Neither the original review nor the Tribunal made any finding, however, of fraud in this regard; and it is not suggested before us that Mr Balding had been fraudulent.
In the meantime Mr Balding had presented his own bankruptcy petition on 15 th June 1995 and he was declared bankrupt by order of the Leicester County Court on the 16 th June 1995.
On the 23 rd December 1995 the Benefits Agency wrote to the Official Receiver to say that "In addition to his right to prove for this debt in the bankruptcy in the normal way" the Secretary of State might, without prejudice to any other method of recovery, recover overpayments by deduction from prescribed benefits; and that "debts recovered in this way are outside the scope of [the] bankruptcy legislation". On the 1 st April 1996 the Secretary of State commenced recovery, by way of deduction from prescribed benefits payable to Mr Balding. On 30 th July 1996 the Benefits Agency wrote a lengthy letter to Mr Balding (who had queried the entitlement to make deductions in view of his bankruptcy) saying among other things that entitlement to, and the power to recover from, benefits were "free standing provisions of law operating quite outside the law of insolvency".
Deductions thereafter from prescribed benefits payable to Mr Balding were, for various reasons, sporadic. At all events, on 16 th June 1998 Mr Balding was discharged from bankruptcy. Recoveries stopped shortly thereafter: in part at least because Mr Balding was now in prison. Deductions recommenced on 4 th October 2000 but were stopped on 17 th July 2001, at a time when the outstanding balance was £7,621.60. The matter was referred to Central Recovery Group.
On the 6 th August 2003 Mr Balding presented a further debtor's bankruptcy petition and he was declared bankrupt, for the second time, by order of the Leicester County Court on 7 th August 2003. In his statement in the bankruptcy proceedings he listed the outstanding overpaid income support as a bankruptcy debt. Mr Balding has not yet been discharged from that bankruptcy.
On the 2 nd February 2004 the deductions recommenced. There are indications in the papers that the Department for Work and Pensions had first proposed execution process and court proceedings against Mr Balding but did not pursue these when it learned of the second bankruptcy; and instead proceeded to make deductions.
At the end of 2005 solicitors instructed on behalf of Mr Balding wrote to the Department for Work and Pensions asserting that, by reason of Mr Balding's discharge from his first bankruptcy, the overpayment ceased to be recoverable. The matter was debated, with no particular sense of urgency, in correspondence in 2006, deductions being suspended in the meantime. A detailed letter of claim was sent on 27 th June 2006. On 18 th July 2006, there was a response by the Department to the effect that discharge from bankruptcy on 16 th June 1998 did not release Mr Balding from his liability to repay the overpayment. These proceedings, claiming wide ranging relief, were issued on the 12 th September 2006. Permission was granted on 13 th November 2006.
In the Statement of Facts in support of the claim Mr Balding referred to his discharge from his first bankruptcy and said: "I hoped that following the indignity of bankruptcy I would have a new start free of debt". Rather curiously, Mr Balding nowhere in his statement mentioned the fact of his subsequent (second) bankruptcy. However, the argument before us proceeded on the footing that the second bankruptcy has no bearing on the issue now raised.
Since Mr Balding had been discharged from his first bankruptcy on 16 th June 1998, it is a point of comment that these proceedings – which heavily rely on the fact of that discharge – were not issued until over 8 years later. Of course, the Secretary of State asserts an ongoing entitlement to deductions: and at all events Miss Olley (appearing on behalf of the Secretary of State before this court) disclaimed any argument to the effect that delay was a bar to this claim. For his part, Mr Stagg (appearing on behalf of Mr Balding) accepted that the delay might have a bearing on at least some aspects of the remedies claimed if these proceedings were otherwise well-founded.
At the outset of the hearing, this Court granted to the Secretary of State an extension of time in respect of its Grounds of Defence and supporting evidence.
The legislation
Overpayments and adjustments of benefits are dealt with in Part III of the 1992 Act (as amended). Section 71 provides, in the relevant respects, as follows:
"71. (1) Where it is determined that, whether fraudulently or otherwise, any person has misrepresented, or failed to disclose, any material fact and in consequence of the misrepresentations or failure –
(a) a payment has been made in respect of a benefit to which this section applies; or
(b) any sum recoverable by or on behalf of the Secretary of State in connection with any such payment has not been recovered,
the Secretary of State shall be entitled to recover the amount of any payment which he would not have made or any sum which he would have received but for the misrepresentation or failure to disclose.
[(2) Where any such determination as is referred to in subsection (1) above is made, the person making the determination shall [in the case of the Secretary of State or a tribunal, and may in the case of a Commissioner or court]
(a) determine whether any, and if so what, amount is recoverable under that subsection by the Secretary of State, and
(b) specify the period during which that amount was paid to the person concerned.]
(3) An amount recoverable under subsection (1) above is in all cases recoverable from the person who misrepresented the fact or failed to disclose it.
…..
(8) Where any amount paid [, other than an amount paid in respect of child benefit or guardian's allowance,] is recoverable under –
(a) subsection (1) above;
…..
it may, without prejudice to any other method of recovery, be recovered by deduction from prescribed benefits.
(9) Any amount recoverable under the provisions mentioned in sub-section (8) above –
(a) if the person from whom it is recoverable resides in England and Wales and the county court so orders, shall be recoverable by execution issued from the county court or otherwise as if it were payable under an order of that court…
[(10A) Where –
(a) a jobseeker's allowance is payable to a person from whom any amount is recoverable as mentioned in subsection (8) above; and
(b) that person is subject to a bankruptcy order, a sum deducted from that benefit under that subsection shall not be treated as income of his for the purposes of the Insolvency Act 1986.
….."
That last sub-section was introduced, by way of amendment, with effect from 7 th October 1996 by certain provisions of the Jobseekers Act 1995. It is common ground that by sub-section (11) section 71 applied to the benefits paid to Mr Balding.
Section 78 of the 1992 Act relates to social fund awards. That in part provides as follows:
"78. (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...
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