08/12/2011

Taken out does not mean taken over

Secretary of State for Work and Pension v Neera Mohammad [2011] EWCA Civ 1358 [not available on Bailii yet]

This is a case which turns very much on its facts and as far as the Income Support claimant is concerned, turned out badly.

Mrs. M. was the divorced wife left in occupation of the matrimonial home. Her husband had first acquired the home without a mortgage for the sum of £69,950 in 1987. 15 years later he took out a borrowing charged on the property in the sum of £114,000. In the ancillary relief proceedings in 2007, Mrs M agreed to indemnify her husband against this borrowing for the transfer of the home to her. She was at that time claiming Income Support. She was unable to obtain the necessary re-finance to release her husband from his liability but continued paying the contractual monthly instalment.  In December 2008 she applied for this housing cost to be taken into account as part of her Income Support claim. The Decision Maker refused. Her appeal to the First Tier Tribunal (Social Entitlement Chamber) was allowed.  The Secretary of State’s appeal to the Upper Tribunal was refused. The Secretary of State appealed to the Court of Appeal.

Their decision turns on the interpretation of paragraph 15 of Schedule 3 of the Income Support (General) Regulations SI 1987/1967 (ISGR). This provides at (1) that:- “A loan qualifies under this paragraph [for housing costs] where the loan was taken out to defray monies applied for any of the following purposes – (a) acquiring an interest in the dwelling occupied as the home.” Paragraph 4(2)  of Schedule 3 provides that a loan which would otherwise qualify under paragraph 15 “shall not so qualify where the loan was incurred during the relevant period”. [ie. while the person was entitled to Income Support]. The Court of Appeal asked itself 2 questions:- Was the loan taken out to acquire an interest in the home or to pay off another loan that was taken out for that purpose and if so, was that loan incurred before 2003 (when Mrs. M. was not entitled to Income Support).

The Court found that the loan for which Mrs. M. was liable remained her husband’s loan. Therefore she had not taken it out to acquire an interest in the dwelling. They considered she had not taken it over either and that even if she had, this would be an unacceptable extension of the wording in paragraph 15(1). Further, they were not prepared to draw a distinction between “taking out” the loan and incurring the loan so that even if she had “succeeded in establishing that she had taken out the loan at the time of the ancillary relief proceedings ….. she would necessarily have incurred it whilst she was on income support and paragraph 4(2) would have disqualified her from benefit.”

This is one of the few cases on this area of law to have reached the Court of Appeal. For Mrs. M. reliance was placed on AH v Secretary of State for Work and Pensions [2010] UKUT 353 (AC) but the Court found that concerned refinancing permitted under 4(6) insofar as it does not exceed the original borrowing. In the Court’s words: “There is little even tangentially relevant authority on any of the issues that arise for our determination… “. 

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