Steele, R (on the application of) v Birmingham City Council

MR JUSTICE GIBBS: The challenged decisions here are decisions by each defendant to recover overpaid benefit from the claimant, the decisions being respectively dated, in relation to the first defendant, 27th November 2003, confirmed on 12th September 2004, and in relation to the second defendant 19th November 2003. The claimant brings judicial review proceedings in relation to both of those decisions, with the permission of the judge considering these matters on paper. The first defendant is the Birmingham City Council and the second defendant the Secretary of State for Work and Pensions.

The claim raises questions of whether overpaid social security benefits constitute a "bankruptcy debt", and, if so, whether the benefits authorities are entitled to continue to recover overpaid social security benefits by way of deduction from ongoing entitlements after a claimant is discharged from bankruptcy.

The claimant was made bankrupt on his own application on 14th September 2001. He was discharged from bankruptcy two years later on 14th September 2003. The claimant was overpaid housing benefit by the first defendant over several periods between September 2000 and July 2003. Those periods thus included times before and after his bankruptcy order, but prior to his discharge. Notifications to the effect that the first defendant had decided that the overpayments were recoverable were issued at various dates between January 2002 and August 2003; that is to say between his bankruptcy and his discharge. The first defendant is continuing to recover the overpaid housing benefit by making deductions from the claimant's ongoing entitlement to that benefit. It is common ground that, but for the points taken in support of this claim, such a course would be lawful.

The second defendant overpaid to the claimant a benefit known as income-based jobseeker's allowance. It notified the claimant of the decision to recover overpayments from him on 1st March 2002, but those overpayments were all made prior to the bankruptcy proceedings, ie from December 1999 to March 2001. The second defendant is continuing to recover the overpaid jobseeker's allowance by making deductions from ongoing entitlement to another benefit, namely incapacity benefit. There is no dispute that, under statute and but for the points taken in support of this claim, such deductions would be lawful.

Overpayments of the social security benefits administered by the second defendant may be recoverable under section 1 of the Social Security Administration Act 1992. Section 71(1) provides as follows:

The benefits which are recoverable include the income-based jobseeker's allowance. Subsection (8) of section 71 provides as follows:

By virtue of Regulation 15(1) of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988, any amount which is recoverable under section 71 can be recovered from a claimant's ongoing entitlement to the benefits listed in Regulation 15(2). Those benefits include incapacity benefit. That is provided by Regulation 15(2)(f). Where this method of recovery is utilised, there is however a limitation on the amount which may be recovered. That is provided by Regulation 15(4).

I turn now to overpayments of housing benefit, with which the first defendant is concerned. These may be recovered under section 75 of the 1992 Act. That provides as follows:

"75. Overpayments of housing benefit.

By virtue of Regulation 102 of the Housing Benefit (General) Regulations 1987, a recoverable overpayment of housing benefit may be recovered from ongoing deductions from housing benefit entitlement. Again, in this instance, there is a limitation on the amount to be recovered. That arises under Regulation 102(2)(b), and is similar to that provided by the 1988 Regulations to which I have already referred.

There falls also to be considered in this case, alongside the legislation relating to social security benefits, the insolvency legislation. The Insolvency Act 1986, at section 279(1)(b), provides as follows:

Section 279(1)(a) is inapplicable in this case. The two-year period of the claimant's bankruptcy derives from subsection (2):

An important statutory provision, central to the determination of this case, is the definition of bankruptcy debt. That is contained in section 382(1) of the Act:

Subsections (3) and (4) of that section provide further explanation of the meanings of the words "debt" and "liability":

Section 187(1) of the 1992 Act provides that benefits under the Act received by a beneficiary shall not pass to:

The matter which this court has to resolve is whether the overpayments of benefit to the claimant continue to be "recoverable" within the meaning, respectively, of Regulation 15 of the 1988 Regulations in the case of jobseeker's allowance, and Regulation 102 of the 1987 Regulations in the case of housing benefit, after the claimant's discharge from bankruptcy. If they are no longer recoverable in that sense, the defendants would have no power to continue to withhold part of the claimant's entitlement in order to satisfy the overpayment.

In connection with that question, two issues arise. First, do the overpayments of benefit to the claimant constitute a "bankruptcy debt" within the meaning of the Insolvency Act? Secondly, does the 1992 Act, including the Regulations made under it, permit the defendants to continue to recover the overpayments notwithstanding the claimant's discharge from bankruptcy? I turn first in some detail to the way in which the claimant puts his case on these issues.

It is pointed out by Mr Stagg, on the claimant's behalf, that benefits are generally overpaid because of a decision to award a claimant too much benefit. This may be due to an error on behalf of the authorities; an error on behalf of the claimant; or fraud on behalf of the claimant. Here, it was due to a misrepresentation by the claimant. Fraud is not alleged. This is important for the following reason: that it is specifically provided in the Insolvency Act that liabilities or debts, which arise as a result of fraud on the part of the bankrupt, survive the discharge of the bankruptcy and may still be enforced.

It is pointed out on the claimant's behalf that the purpose of sections 71 and 75 of the 1992 Act is to give a remedy to the Secretary of State and the local authority respectively in relation to overpaid benefit. The nature of that remedy is an important issue in this case. It is submitted on behalf of the claimant that it is, in essence, a restitutionary remedy given to the Secretary of State in statutory form. Mr Stagg points out that, once identified, overpayments require the issue of a decision on the part of the authority in order to make them recoverable. Reliance is placed upon the decision of Warwick District Council v Freeman [1994] 27 HLR 616. A decision having been issued, the authority in question may recover the overpaid benefit as a debt by various means, including a deduction from ongoing entitlement to benefit.

There are four theoretical categories into which overpayment can fall in a case of a person such as the claimant, who was made bankrupt and was discharged during a period when the issue of overpayment arises:

Category (1): benefits which were awarded and paid to a claimant prior to the date of bankruptcy and the bankruptcy order, and in respect of which a decision that they were recoverable was issued also prior to that date.

Category (2): benefits which were awarded and paid to the claimant prior to the date of the bankruptcy order, but in respect of which a decision that they were recoverable was issued after that date.

Category (3): benefits which were awarded prior to the date of the bankruptcy order, but which were paid, and in respect of which a decision that they were recoverable was issued after that event.

Category (4): benefits which were awarded, paid and in respect of which a decision that they were recoverable was issued, all after the date of the bankruptcy order.

As a matter of fact, none of the payments in issue here fall within category (1). As regards category (4), the claimant concedes that recovery under sections 71 and 75 of the 1992 Act can be made lawfully, notwithstanding the bankruptcy.

Submissions are made on the claimant's behalf in relation to each of the first three categories. On category (1) it is submitted that the overpayments fall clearly within the definition of 382(1)(a). It is submitted that there is no basis in the legislation or otherwise for concluding that overpaid benefit in this category cannot be a "bankruptcy debt". It is pointed out that, by section 382(4) of the 1986 Act, "liability" includes a liability under an enactment. There is nothing in the 1986 Act, so it is submitted, including section 281, which sets out specific exclusions to the categories of debt which are extinguished on the discharge of the bankruptcy, or the 1992 Act to exclude overpaid benefit from the definition of bankruptcy debt in section 382 of the 1986 Act.

Submissions are made on category (2) of the overpaid benefit. Substantial proportions of the overpaid benefit do on the facts fall within this category. Mr Stagg relies on two possible routes for his submission that overpayments within this category fall within section 382. The first route relied upon is based upon the proposition that, because there is a liability to repay the overpaid benefit, which only needs to be crystallised by a formal decision to recover, there is a contingent liability within section 382(3). The contingency which is relied upon is the issuing of what Mr Stagg describes as a "formal decision". In support of that interpretation, reliance is placed on the wide definition of that expression to be found in the House of Lords decision in a Scottish case, Winter v IRC; In Re Sutherland Deceased [1963] AC 235, on appeal from the Court of Session. Mr Stagg relies upon on words "sums which will only become payable if certain things happen and which otherwise will never become payable" as providing a broad definition for a contingent liability.

Mr Stagg relies further on Australian authorities relating to an identical Australian definition. Those authorities are Colquhoun v Simpson [1990] NSWLR 306, a decision of the common law division of the court of New South Wales, and the case of Forshaw v Thompson [1992] 106 ALR 633. An example of a liability which was held to be a contingent liability in the latter case was liability arising under a guarantee which had not been called in against the guarantor on the critical date. Reliance further was placed upon the case of Secretary of State for Trade and Industry v Frid [2004] 2 AC 506, and the observations made in that case in the speech of Lord Hoffmann.

Mr Stagg seeks to distinguish the present cases and the situations which arose in the authorities to which I have just referred from the facts of the case of Glenister v Rowe [2000] Ch 76. That case was relied upon by the defendants in this case, Mr Kolinsky submitting that the facts of that case were a guide to this court as to whether the liabilities here were truly contingent liabilities. I shall return to the case of Glenister v Rowe in due course in this judgment. Mr Stagg's submission is that the facts of that case are clearly distinguishable from those in the present case.

The second route relied upon by Mr Stagg in connection with category (2) relies on the existence of an obligation, which rested upon the claimant under the common law, to make repayment of the overpaid benefit by way of restitution after he had received it. This obligation, submits Mr Stagg, was "an obligation incurred before the commencement of the bankruptcy" and the overpayments are accordingly a "bankruptcy debt" pursuant to section 382(1)(b). He submits that the provisions for recovery relied upon by each defendant were provisions which put in statutory form the underlying restitutionary obligation which the claimant always had after receipt of the overpaid benefits.

The claimant relies on the dictum of Nourse LJ in the case of Sherriff R(IS) 14/96, decided in the Court of Appeal on 4th May 1995, reference CIS/545/1992. This was an appeal from the Social Security Commission and it concerned the recovery of overpayments, made in the absence of fraud, to a person with a severe disability. The facts of the case are not in point in relation to the present claim, but the question arose as to the principles of recoverability of the overpaid benefit. In the course of his judgment, at the foot of page 5 of the transcript with which I have been provided, Nourse LJ said as follows:

I turn now to the submissions made on the claimant's behalf in relation to category (3). These are overpayments awarded before, but paid after, the bankruptcy order. It seems that most of the balance of the overpayments of which recovery is sought fall within this category. It is accepted that, since the payments were actually made after the bankruptcy order, and since the date of the bankruptcy order is for this purpose material, the claimant cannot rely on the restitutionary principle in support of his claim under category (3). But Mr Stagg nevertheless contends that there was here a contingent liability at the time of the bankruptcy order. He relies on the proposition that there may still be a contingent liability under section 382(3), even where the crystallisation of the debt is dependent upon more than one contingency. He relies on observations in the case of Glenister and Rowe at page 83F, and also on the case of Winter v Inland Revenue Commissioners.

It is submitted, on the basis of that proposition, that in relation to awards of benefit which were made prior to the bankruptcy order, benefits overpaid under those awards subsequently can be a bankruptcy debt. The reason advanced for that was that there was an obligation to repay benefit at that date on the occurrence of two contingencies: first, the actual payment of benefit pursuant to the award, and, secondly, the issue of the recovery decision by the first or second defendant as appropriate. Accordingly, although no overpayments have been made at the date of the bankruptcy order, it is submitted that the obligation should still be regarded as a bankruptcy debt.

I turn now to the claimant's submissions on the second issue, namely whether discharge precludes recovery. The simple submission is made by Mr Stagg that if the overpayments are properly to be interpreted as "bankruptcy debts", then sections 281(1) and (6) of the 1986 Act have the effect, on the face of it, of rendering the overpayments irrecoverable. If Parliament intended otherwise, it could have legislated further exceptions to the general rule, but it has not done so, despite having had the opportunity.

The claimant challenges the defendants' reliance on the decision of Keene J, as he then was, in R v Secretary of State for Social Security ex parte Taylor [1996], reported in The Times on 5th February, of which I have a transcript, and further challenges the defendants' reliance on the decision of the House of Lords in the Scottish Appeal Mulvey v Secretary of State for Social Security [1997] SLT 753. It is submitted that in neither of those cases was there any consideration of the vital questions in this case. There was, it is argued, no dispute in those cases that the overpayments were "recoverable" from the claimants. There was no consideration of whether the overpayments were a "bankruptcy debt", or whether there was anything in the 1986 or 1992 Acts to exempt them from being released by the discharge from bankruptcy. Indeed, it is pointed out that neither case dealt with the position after discharge. Mr Stagg indeed calls in aid one finding in the case of ex parte Taylor, namely that social security legislation could not be taken to override insolvency legislation. On the contrary, they must be read together. Mr Stagg submits, therefore, that there was no reason to imply any exclusion in connection with benefits from the general release conferred by the insolvency legislation from debts upon discharge from bankruptcy.

Mr Stagg relies on two further cases before the Social Security Commissioners, references CSIS/37/1994 and CIS/683/1994. He calls in aid those decisions as authority for the proposition that external events can affect whether a debt is recoverable. In those cases, discharge of the debt was effected by other means, or by a third party, in each case thereby barring the right of recovery.

The general submissions made by Mr Stagg on behalf of the claimant, therefore, are: that all the overpayments in categories (1), (2) and (3) are bankruptcy debts; that the claimant was released on his discharge; and that conclusions to that effect are entirely consistent with the purpose of bankruptcy law in permitting relief from debt following co-operation with the trustee.

Mr Kolinsky's submissions on the defendants' behalf rely strongly on the proposition that the defendants, in making recovery, are exercising a specific statutory right to make deductions in respect of overpaid bankrupts; the nature of that right, he submits, is unaffected by either the claimant's bankruptcy or his discharge. In each case, as he uncontroversially observes, the determination which gave rise to the overpayment postdates the bankruptcy, therefore I need not and should not make a decision on category as requested by Mr Stagg. The nature of the determination which gives rise to the right to recover is, submits Mr Kolinsky, important. Under each of the statutory schemes relating to the first and second defendants, the decision was criteria-based.

Mr Kolinsky relies on the fact that each decision was more than simply a formal decision, as the claimant has argued. In the case of housing benefit, the decision involved a determination that the overpayment fell within the category of recoverable overpayments in that it was not caused, for example, by an official error. In the case of recovery by the second defendant of income based job seeker's allowance, the determination involved decisions on (i) whether there had been a misrepresentation, and (ii) whether that misrepresentation had caused the overpayment.

It is submitted by Mr Kolinsky that it was clear from the Taylor and Mulvey cases that the claimant's bankruptcy had no effect on his entitlement to benefit or the recovery of overpaid benefit under the statutory scheme. Given that this was made clear in both of the cases it would, submitted Mr Kolinsky, be surprising if the discharge from bankruptcy had the effect for which the claimant argues. It is submitted that such a result would be at odds with the thrust of the social security legislative scheme read as a whole, which indicates an intention to separate entitlements under bankruptcy and under social security. This, submits Mr Kolinsky, is emphasised by section 187 of the 1992 Act, which exempts benefit from passing to the trustee in bankruptcy.

Mr Kolinsky accordingly submits that the right of recovery by the first and second defendants against the claimant was not a bankruptcy debt within section 382(1) of the 1986 Act. He supports this submission by arguing that the defendants' respective statutory rights to recover, properly interpreted, did not exist at the date of bankruptcy because no determination had then been made that there had been a recoverable overpayment. He submits that, before such a determination is made, there can be no liability or contingent liability within the meaning of section 382(3) of the 1986 Act. The possibility that in future the defendants might make such a determination, if the criteria were satisfied, does not give rise to any liability at the date of bankruptcy and is too remote to be described as a "contingent liability".

It is submitted that the contention that the claimant may have had a common law obligation to make restitution in respect of any overpaid benefits prior to bankruptcy does not assist him in his case. Mr Kolinsky submits that this right would be quite separate and distinct from the Secretary of State's right to recover under statute and should be regarded as such. Mr Kolinsky also expresses a doubt as to whether the common law obligation would exist at all in those circumstances having regard to the existence of a specific statutory scheme for recovery.

Mr Kolinsky relies on the reasoning of Keene J in the ex parte Taylor case to the effect that the claimant's entitlement to payment under the social security legislation is restricted to payment of his net entitlement to benefit after the defendants' statutory right of deduction, and once it has been determined that a recoverable overpayment has been made. He relies also on the proposition argued for by Mr Crampin in the ex parte Taylor case, that overpaid benefit may properly be regarded as "benefit payments in advance" for the purposes of recovery. On that basis, the claimant would have no "entitlement" to more than the net amount.

Further, the defendants, through Mr Kolinsky, rely on the decision in Glenister v Rowe. Here a potential liability for costs in legal proceedings was held not to be a contingent liability for the purposes of sections 382(1) and (3) of the 1986 Act.

In arriving at a decision on this claim, I think, as a starting point, it is clear that, prior to his discharge, a bankrupt in receipt of social security benefits cannot complain that ongoing benefits are subjected to periodical deductions in order to recover previous overpayments. These deductions do not affect the bankrupt's general creditors. Section 187 of the 1992 Act means that the social security benefits never come into the hands of a trustee. There is no material distinction between the deductions permitted in favour, for example, of the tenant against the bankrupt landlord in the decision of Bradley-Hole v Cusen [1963] 1 QB 300 CA, and the deductions made prior to discharge from the benefit payments to a bankrupt.

The logic of this proposition is supported by the reasoning of Keene J in the case of ex parte Taylor. However, as Mr Stagg has pointed out, the issues here are different. Here the court has to decide whether the liability of the claimant to repay the defendants is a bankruptcy debt. That issue was not considered in the decisions relied upon, which were concerned with different facts and with a different part of the statute.

In the ordinary natural meaning of the words, the liability to repay the first and second defendants in relation to previous overpayments is in relation to category (2)), in my judgment, a:

Furthermore, it seems to me that the liability falls into the category of a "contingent debt or liability" for the purposes of subsection (3) of that section.

In my judgment, the liability to repay on the part of the claimant is a liability which has already arisen. In that sense it can be contrasted with a liability to pay costs which arises in future. Only the extent of enforcement of the liability and the method of enforcement are to be determined by the defendants as actual or potential creditors of the claimant.

I now turn to the arguments based on the fact that the determination of the first of the issues is "criteria-based" and, further, that the method and extent of the enforcement is within the defendants' discretion.

These features of the present case are to be compared and contrasted with the potential liability under a future costs order considered in the case of Glenister v Rowe. The criteria on which the determinations in the present case are based relate to ascertainable facts which have already occurred. Given that the objective factual basis which gave rise to the right of recovery already existed, the right of recovery was plainly established. The only questions which remained related to the extent and method of enforcement; that was in the hands of the defendants as creditors. They had the choice of doing nothing; alternatively they could enforce the whole amount under statute by demanding it and seeking recovery in the county court; alternatively they could deduct the overpayments, as they here chose to do, from ongoing benefits.

In my judgment, the liability that arose was within the definition of a contingent one. The width of the expression of contingent liability was considered in the case of Winter v Inland Revenue Commissioners by Lord Reid at page 249. In the course of his speech, in the first full paragraph of that page, he said as follows:

The width of the expression "contingent liability" is emphasised in the speech of Lord Hoffmann in the case of Secretary of State for Trade and Industry v Frid. At paragraph 10, page 511 of the report, Lord Hoffmann says as follows:

Lord Hoffmann went on to say that he agreed that the principle set out by Millett J was firmly established.

The liability being considered in this case is, in my opinion, quite different from the future potential costs order. Such a potential future costs order is dependent not on any currently or readily ascertainable facts, it is dependent on the outcome of future events, namely the course of the legal proceedings and a future decision, not of the creditor himself, but of a court in the exercise of its discretion, having regard to the future course of the case. Thus the decision in Glenister v Rowe is based upon a finding that the potential for a future costs order gave rise to no liability at all, whether contingent or otherwise. It is, in my judgment, clearly distinguishable from the present case. Further, I am unable to find any express provision, in the statutory schemes to which I have referred, which would exclude the liability to repay from the definition of bankruptcy debt, nor any grounds for implying such an exclusion.

For the reasons given, I find that in relation to category (2) overpayments, the liability to repay is a bankruptcy debt within the statutory definition. I can find no basis in the authorities cited, given that it is a bankruptcy debt, for holding that the claimant is not released by virtue of section 281(1) on his discharge from bankruptcy. In this context, I have considered the argument that the overpayments can properly be regarded as "advance payments of benefit which may fall due in the future". That argument, if correct, would neatly sidestep the awkward issues which arise from the existence of a liability on the part of the claimant to repay. I cannot, however, accept that argument. The statutory language indicates that the right of recovery is by way of deduction from that to which the claimant would otherwise have been entitled. Further, the reality is that these were not advance payments. They were payments intended to be related to specific periods, but which, as a result of misrepresentation, amounted to overpayments in relation to those periods. Thus, notwithstanding this argument, the discharge from bankruptcy, in my judgment, operates to release the claimant from debts in category (2).

What of category (3)? Here the overpayments were actually made after the date of the bankruptcy and before discharge, but on the basis of an award before bankruptcy. The date of bankruptcy is critical in this matter, having regard to the definition of bankruptcy debt in section 382. As at that date, the claimant could have had no restitutionary obligation to reimburse the overpayments, since none had been made. The obligation to repay the defendants was not an obligation incurred before the commencement of the bankruptcy, since he had not as yet received the overpayment. The real question is: was it a contingent debt or liability at the time of the bankruptcy?

In my judgment, on a sensible construction of the law as related to the facts of this case, the answer to that question is no. It is true that an award had been made prior to bankruptcy on the basis of an over-calculation of benefit, but it is important, in my judgment, that the actual payments made under category (3) were made after the bankruptcy. At any stage the mistaken calculation could have been corrected by the claimant disclosing, or the defendants discovering, the correct basis for calculation. Had that happened, the ongoing benefit would simply have been paid on the correct basis.

It cannot be assumed that the error, or whatever it was that led to the overpayment, would simply continue. It is true that there are observations in the authorities cited which indicate that a contingency may consist of a double contingency; but in my judgment the facts here disclose at the date of the bankruptcy no liability, contingent or otherwise, in relation to the payments in category 3. In my judgment a contingent liability only arose when overpayment was actually made. The contingency at that stage was the future decision of the defendants to reinforce recovery. Thus I would hold that the deductions in relation to overpayments after the bankruptcy are recoverable.

In the light of the factual position in this case, I do not find it necessary to make specific findings on category. As agreed by counsel, I make no specific findings on category (4), the issue having been conceded by Mr Stagg. To the extent of the overpayments under category (2), the claimant succeeds and the decision to recover those overpayments is quashed. With the agreement of both counsel, I intend to say no more than that and do not intend to seek to quantify the amount of those overpayments, whether periodical or in total. I leave that matter for uncontroversial calculation by the parties in due course.

By way of a postscript, I would add that there may well be good policy reasons why the framework of statutory benefits should be separated from the insolvency legislation. Further, there may well be good reasons why the right to deduct overpayments should be exempted from the effects of the Insolvency Act. However, doing the best I can on the basis of the law as it exists, I am not able to extract such a principle from the statutory language and the authorities to which I have been referred. Mr Stagg?

MR STAGG: My Lord, in terms of relief, could I take your Lordship to page 7 of the case papers, where I set out the relief I was seeking.

MR JUSTICE GIBBS: Yes.

MR STAGG: Subject to one modification, I would ask for the quashing order set out in paragraph 1. In terms of your Lordship's judgment, we should substitute 2001 for 2003. I think it is only category (2) which your Lordship has ruled is irrecoverable. Subject to that, I would ask for that relief. I do not think I need to ask for an injunction because I am sure that the defendants will implement your Lordship's judgment according to its terms. Interim relief does not arise. I do not think I need any other formal relief at this time, save to ask, I think, for liberty to apply in relation to your Lordship's judgment, in case there are any difficulties. But I am sure we can sort it out.

MR JUSTICE GIBBS: Some bits of quantum might be able to be clarified, I suppose.

MR STAGG: Yes, I am sure it will be fine.

MR JUSTICE GIBBS: Liberty to apply, yes.

MR STAGG: I am grateful, and obviously I ask for my costs and for assessment of my publicly funded costs.

MR JUSTICE GIBBS: Thank you.

MR BULEY: My Lord, may I just take instructions on one matter?

MR JUSTICE GIBBS: Yes. (Pause).

MR BULEY: My Lord, I am grateful for that. My Lord, I cannot resist the costs. I am grateful.

MR JUSTICE GIBBS: Well, just for the avoidance of doubt, costs to be subject to a detailed assessment if not agreed, and an assessment for the purposes of the -- whatever it is these days.

MR BULEY: My Lord, I do have an application for leave to appeal.

MR JUSTICE GIBBS: Yes.

MR BULEY: My Lord --

MR JUSTICE GIBBS: I will just go to Mr Stagg for a moment, and indeed address both of you. It does seem to me that this is a case in which, really, if either party wished to appeal -- because I have only granted you limited relief -- it is one which the Court of Appeal should consider.

MR STAGG: My Lord, I have no strong objection to that. The only thing I would say is that, because I have not sought an injunction formally -- and my learned friend and I did discuss this before you came in -- that the defendants should undertake not to carry out any further recovery of any category (2) overpayments pending any further order of the court. That is just for the avoidance of doubt so everyone knows where they stand.

MR JUSTICE GIBBS: Mr Buley, would you be prepared to give that undertaking?

MR BULEY: My Lord, we are prepared to give that undertaking. I have to say, in my submission, we do not think it necessary, we think it follows almost automatically from the terms of your Lordship's judgment, but if your Lordship would like to see it, then --

MR JUSTICE GIBBS: I think perhaps a formal undertaking is rather too heavy a matter to require, but if you can give your assurance to the court, then there is, of course, a liberty to apply in any event.

MR BULEY: Indeed, my Lord.

MR JUSTICE GIBBS: I think that is sufficient, is it not?

MR STAGG: I am content with that, my Lord.

MR JUSTICE GIBBS: I think that is sufficient, yes. Mr Buley, this is a matter which I think ought to be decided by a Court of Appeal if either of the parties so wish. I note from the papers that the Insolvency Service is of the view that these liabilities do constitute a bankruptcy debt. That is a view with which the first and second defendants disagree.

MR BULEY: Indeed.

MR JUSTICE GIBBS: I think I am right in saying that -- and Mr Stagg, or you, will correct me if I am wrong -- there is no direct authority bearing upon the issue which I have had to decide. Both sides' submissions were, I think, eminently arguable.

MR BULEY: I am grateful, my Lord.

MR JUSTICE GIBBS: I hope I have made that point clear.

MR STAGG: Thank you, my Lord.

MR JUSTICE GIBBS: Thank you both.