R (Cooper) v Secretary of State for Work and Pensions

JurisdictionEngland & Wales
CourtQueen's Bench Division (Administrative Court)
Judgment Date26 July 2010
Neutral Citation[2010] EWHC 2162 (Admin)
Date26 July 2010
Docket NumberCO/3793/2010

[2010] EWHC 2162 (Admin)


Royal Courts of Justice


London WC2A 2LL

Before: Mr Justice Cranston



The Queen on the Application of Eunice Payne and Gail Cooper
Secretary of State for Work and Pensions

MR DESMOND RUTLEDGE (instructed by Edwards Duthie) appeared on behalf of Mrs Payne

MR PAUL STAGG (Instructed by Public Law Project) appeared on behalf of Mrs Cooper

MR DENIS EDWARDS (instructed by DWP/DH Legal Services, Litigation Division) appeared on behalf of the Defendant


(As approved)






1. These test cases raise the lawfulness of the Secretary of State making deductions from ongoing social security benefit to recover the overpayment of incapacity benefit and the repayment of a social fund budgeting loan during the moratorium period of a debt relief order. The debt relief order, introduced in 2007, is a device less expensive than bankruptcy enabling low income, small debtors to discharge their debts. There is a moratorium period, usually a year, before discharge. The claimants’ case is that the existence of the debt relief order specifying the overpayment and the loan as debt prevents the Secretary of State from exercising his statutory powers to recover the overpayment and to ensure that the social fund loan is repaid.


The Factual Background


2. The evidence of Peter Madge, a Citizens Advice specialist, is to the effect that these claimants are typical of small debtors on benefit who have obtained debt relief orders. The first claimant, Gail Cooper, suffers from health problems and was in receipt of incapacity benefit and disability living allowance. She began working part time which had the effect of disqualifying her from incapacity benefit during that period. On 6th August 2009 a decision-maker, acting on behalf of the Secretary of State, determined that she had been overpaid £1,195.07 of incapacity benefit and that the overpayment was recoverable from her. On 4th December the Secretary of State began to recover the overpayment by making deductions of £128.44 every four weeks from her benefits. With the assistance of a Citizens Advice Bureau she applied for a debt relief order and listed the Department of Work and Pensions as a creditor in her application. The following day a debt relief order was granted and the overpayment was listed as a qualifying debt. The Secretary of State refused to cease making deductions and ultimately these proceedings were issued.


3. The second claimant, Eunice Payne, is also incapable of work due to health difficulties and is reliant on state benefits. In September 2007 she was granted a budgeting loan from the social fund. Budgeting loans are for the purpose of meeting an intermittent expense. Other payments which the Secretary of State can make from the social fund are crisis loans awarded for the purpose of meeting an immediate short term need, and community care grants which, unlike budgeting loans and crisis loans, are not required to be repaid. Social fund loans are interest free. Mrs Payne's budgeting loan of £843 was for a replacement washing machine and cooker. It was a condition of that loan that it should be repaid. Recovery of the loan did not commence immediately. In August 2009 Mrs Payne and her husband applied for a debt relief order with the assistance of a Citizens Advice Bureau. At the time they faced a desperate financial problem, which was exacerbating Mrs Payne's serious health problems. The debt relief order was quickly approved by the Insolvency Service. At that point the Secretary of State had not begun deductions from her benefit entitlement but on being informed of the debt relief order began recovery of the loan at a rate of £23.59 per week. After the intervention of the Citizens Advice Bureau that was reduced to £11.64 per week. Ultimately these proceedings were taken.


Legislative Framework


Recovery of overpaid benefit


4. Overpayment of social security benefit may be recovered under section 71 of the Social Security Administration Act 1992, which reads 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 misrepresentation 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 received,

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.”

Section 71(8) of that legislation provides:

“Where any amount paid … is recoverable under (a) subsection (1) above; … it may, without prejudice to any other method of recovery, be recovered by deduction from prescribed benefits”

Incapacity benefit is a prescribed benefit for the purpose of section 71(8): Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988, SI 1988/664, regulation 15(1) (“the 1998 Regulations”). In addition to deductions from ongoing benefit overpayments can also be recovered by instalments, a lump sum or civil proceedings. For those who are in receipt of benefit the Secretary of State's preferred recovery method is by way of deductions from that person's benefit.

5. A maximum rate for overpayment recovery for deductions from income related benefits is prescribed. The current maximum weekly rate for recovery of non-fraud debt from income based benefits is £9.90. For other benefits only the maximum deductible rate for contribution based jobseeker's allowance is prescribed, set at one-third of the personal rate of the benefit. To ensure consistency the maximum rate of deduction for other non-income related benefits is set administratively at one- third of the personal rate of the benefit or pension concerned. Within these maximum rates the Secretary of State's policy is to set the actual rate of recovery so as to avoid undue hardship and to take account of the financial and personal circumstances of the recipient.

Social Fund loan repayments

6. Provision is made in section 138(1)(b) of the Social Security Contributions and Benefits Act 1992 for social fund budgeting loans and Directions 2, 3 and 8 of the Social Fund Directions made by the Secretary of State provide for details. A determination may be made that a social fund budgeting loan is to be repayable. Section 139(4) provides that if it is repayable it is to…

“…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.”

The applicant for a loan must agree the terms and conditions as to repayment: Social Fund (Applications and Miscellaneous Provisions) Regulations 2008, SI 2008/2265, regulation 7

7. Section 78 of the Social Security Administration Act 1992 provides for the recovery of social fund loans.

Subsection 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 deduction from prescribed benefits…”

Under section 78(3) a recovery may be from, amongst other persons, the person to whom it was made. Income support is a prescribed benefit for the purposes of recovery under section 78(2): Social Fund (Recovery of Deductions from Benefits) Regulations 1988, SI 1998/35, regulation 3.

Debt relief orders

8. Debt relief orders are one of the new forms of debt relief constituted by Part V of the Tribunals, Courts and Enforcement Act 2007. As a result of section 108 of that legislation, Part 7A and Schedule 4ZA were inserted in the Insolvency Act 1986. The Insolvency Amendment Rules 2009, SI 2009/642, were made under Part 7A and insert new provisions into the Insolvency Rules 1986, SI 1986/1924 (“the Insolvency Rules”). Section 251A(1) of the Insolvency Act 1986 provides:

“An individual who is unable to pay his debts may apply for an order under this Part (‘a debt relief order’) to be made in respect of his qualifying debts.”

Qualifying debts are debts for liquidated sums payable immediately or in the future and which are not “excluded debts” (section 251A(2). Excluded debts are listed in the Insolvency Rules, rule 5A.2. Overpaid social security benefits and social fund loans do not fall within the categories of excluded debt set out there, although there seems no reason why they should not be so specified. Applications for debt relief orders are made under 251B and are determined by the Official Receiver (section 251C). In practice, the functions of the Official Receiver are exercised by the Insolvency Service.

9. The conditions that must be satisfied for the making of a debt relief order are specified in schedule 4ZA. Monetary limits are prescribed in the Insolvency Proceedings (Monetary Limits) Order 1986, SI 1986/1996, as amended by SI 2009/465. In particular, an applicant must not have been the subject of a debt relief order within the previous six years (paragraph 5); the applicant's debt must not exceed the prescribed amount (paragraph 6), currently £15,000; the debtor's monthly surplus income must not exceed the prescribed amount (paragraph 7), currently £50; and the value of the debtor's property must not exceed the prescribed amount (paragraph 8), currently £300.

10. A debt relief order has the effect of imposing a moratorium on the obligation to pay “qualifying...

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3 cases
  • R (Cooper) v Secretary of State for Work and Pensions
    • United Kingdom
    • Supreme Court
    • 14 December 2011
    ...of Appeal (Smith and Toulson LJJ) have held in this case that the Secretary of State cannot continue to make these deductions: [2010] EWHC 2162 (Admin), [2010] BPIR 1389 and [2010] EWCA Civ 1431, [2011] 1 WLR 1723. But Keene J in the High Court has held that such deductions can continue ......
  • Places for People Homes Ltd v Sharples
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 15 July 2011
    ...The principal elements of the DRO regime were described recently in R(Payne and Cooper) v Secretary of State for Work and Pensions [2010] EWHC 2162 (Admin), [2010] BPIR 1389 (Cranston J) and on appeal Secretary of State for Work and Pensions v Payne and Cooper [2010] EWCA Civ 1431, [2011] B......
  • R (Cooper) v Secretary of State for Work and Pensions
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 14 December 2010
    ...Mummery Lord Justice Mummery: Introduction 1 This appeal is from orders of Cranston J dated 26 July 2010 based on his judgment [2010] EWHC 2162 (Admin) in two test cases. He allowed judicial review applications made by the respondents challenging the lawfulness of deductions made from thei......
2 firm's commentaries
  • Having Your Cake and Eating it: Debt Relief Orders and the Public Purse
    • United Kingdom
    • Mondaq United Kingdom
    • 23 November 2010
    ...of the debtor to enforce his security." The recent test case of R (Cooper and Payne) v Secretary of State for Work and Pensions [2010] EWHC 2162 (Admin) addressed the question of whether recovery of 'accidental' - as opposed to fraudulently obtained - overpayments of benefits during a DRO m......
  • The Court Of Appeal Considers Debt Relief Orders
    • United Kingdom
    • Mondaq United Kingdom
    • 4 January 2011
    ...EWCA Civ 1431 As flagged in our earlier article 'Having your cake and eating it' The Secretary of State appealed against a decision ((2010) EWHC 2162 (Admin)) that he had unlawfully deducted sums from the social security benefits of the respondents (C and P). That appeal has now been decide......

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