BANKRUPTCY

R (Steele) v Birmingham City Council and another: [2005] EWCA Civ 1824

CA: May, Arden LJJ and Sir Martin Nourse: 16 December 2005

In December 1999 the claimant was awarded jobseeker's allowance. In September 2001, on his own petition, he was adjudged bankrupt. In March 2002 the Secretary of State made a determination, pursuant to section 71 of the Social Security Administration Act 1992, that the claimant had been overpaid jobseeker's allowance between December 1999 and March 2001. The Secretary of State began to recover the overpayment by means of a weekly deduction from the claimant's incapacity benefit. When the claimant informed the Secretary of State of his bankruptcy, repayments were suspended until the bankruptcy was discharged in September 2003. The Secretary of State then gave notice of his intention to continue to recover the overpayment. The claimant applied for judicial review of that decision, contending that the liability to repay was a contingent liability and therefore a bankruptcy debt under section 382 of the Insolvency Act 1986, from which, following his discharge from bankruptcy, he was released. The judge allowed the application.

The Secretary of State appealed.

The Court of Appeal held:
Until the Secretary of State had made his determination under section 71(1) of the Social Security Administration Act 1992 the claimant was under no obligation or liability to repay the overpaid benefit. Accordingly, a person who might become subject to a determination under section 71(1) but who was not so subject at the date of his bankruptcy was not subject to a contingent liability for the purposes of section 382 of the Insolvency Act 1986, and thus the overpayment was not a "bankruptcy debt" for the purposes of a release on discharge from bankruptcy under section 281(1) of the Act.

The appeal was allowed.

Appearances: Daniel Kolinsky (Solicitor, Department for Work and Pensions) for the Secretary of State; Paul Stagg (Solicitor, Birmingham Money Advice & Grant) for the claimant.