Secretary of State for Work & Pensions v Balding

A determination under section 71(1) of the Social Security Administration Act 1992 creates a statutory liability to repay the full amount of an overpaid benefit. The available method of recovery does not determine whether that liability exists.

The liability is a bankruptcy debt within section 382(4) of the Insolvency Act 1986. Unless an express exception applies, discharge from bankruptcy releases the recipient from that debt under section 281. The Secretary of State therefore cannot recover it after discharge by deductions from prescribed benefits. Any different treatment requires legislation rather than judicial alteration of the statutory scheme.

An adjudication officer determined that the respondent had received excess income support after failing to disclose material facts. The overpayment was recoverable under section 71 of the Social Security Administration Act 1992. The respondent subsequently obtained his discharge from bankruptcy, but the Secretary of State continued recovering the balance by deductions from prescribed benefits.

The Administrative Court held that the repayment liability was a bankruptcy debt released upon discharge. It quashed the Secretary of State’s decision to continue recovery and ordered repayment of sums deducted after discharge. Its decision was reported at [2007] 1 WLR 1805.

The central issue on the Secretary of State’s appeal was whether the statutory deduction mechanism remained available after the underlying repayment liability had been released by discharge from bankruptcy.

1. Appeal dismissed. Mummery LJ held that the Administrative Court had correctly decided that the liability to repay the overpaid benefit was released upon discharge from bankruptcy. Thomas and Lloyd LJJ agreed.

2. Section 71 of the Social Security Administration Act 1992 provides methods for recovering an overpayment. Those methods presuppose a pre-existing right in the Secretary of State to recover the amount determined under section 71(1), with a corresponding liability on the recipient to repay it. A determination under section 71(1) therefore creates a liability to repay the full determined amount. It is not merely a procedural condition for employing a recovery mechanism.

3. The liability arises under statute rather than contract or a general restitutionary obligation. It is consequently a liability to pay money under an enactment within section 382(4) of the Insolvency Act 1986 and is a bankruptcy debt.

4. The character of the liability does not depend upon the Secretary of State’s chosen recovery method. Recovery by execution through the county court under section 71(9) and recovery by deductions from prescribed benefits under section 71(8) both enforce the same statutory liability. Making a net benefit payment after a deduction does not transform the liability or place it outside the insolvency regime.

5. Section 281 of the Insolvency Act 1986 released the respondent from the bankruptcy debt upon discharge. No relevant statutory exception applied, and fraud had not been alleged. The Secretary of State therefore had no entitlement to continue deductions from prescribed benefits after discharge.

6. Mummery LJ observed that any perceived legislative gap could be corrected by Parliament. The courts could not create an exception to the clear operation of the existing insolvency legislation.

1. Court of Appeal (Civil Division): The Secretary of State’s appeal was dismissed. The court affirmed that the repayment liability was a bankruptcy debt released upon discharge.

2. Administrative Court: The respondent’s judicial review claim succeeded. The court quashed the Secretary of State’s decisions to continue deductions after discharge and ordered repayment of sums withheld from that date. The decision was reported at [2007] 1 WLR 1805.