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Mr Justice Sullivan today granted permission to apply for judicial review in the case of R (Steele) v Birmingham City Council and Secretary of State for Work and Pensions.
The claimant was made bankrupt in September 2001 and discharged from bankruptcy two years later. He was overpaid HB and JSA over a number of periods between 2000 and 2003 and decisions issued during the period of bankruptcy seeking recovery of those overpayments. The council and the DWP is recovering the overpayments by deduction from
His argument is that while it is not possible to prevent recovery during the period of bankruptcy (see Taylor and Chapman in England and Wales, and Mulvey in Scotland), since overpayments of benefit are "bankruptcy debts", the effect of discharge is to release him from those debts and make the overpayments non-recoverable.
The case will now proceed to a full hearing. The issues raised are of general importance to any claimant who has been overpaid and recovery is being made by deductions from benefit, since if recovery must stop after discharge, bankruptcy might well become an attractive option.
Another test case which could be considered is a case involving a claimant who was overpaid and who had a decision issued against them, BOTH before the making of the bankruptcy order. That would eliminate one of the issues in the Steele case, namely whether it makes a difference that the decision is issued after the bankruptcy order is made.
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