M & Ors, R (on the application of) v Revenue & Customs Secretary of State for Work & Pensions Manchester City Council, Birmingham City Council and London Borough of Hammersmith and Fulham

Article 2.2 of Regulation (EC) 881/2002 can prohibit funds paid to an unlisted person where, in the circumstances, they are indirectly made available to, or for the benefit of, a listed person. That includes benefits paid to a spouse sharing a household with a listed person where significant economic benefits, such as rent, utilities and ordinary household expenses, can reasonably be expected to result. Direct payment or transfer to the listed person is unnecessary. Humanitarian exceptions confirm the broad construction. The criminal character of the prohibition affects construction only where the language is ambiguous. Borderline cases require assessment of all relevant circumstances.

Three appeals were brought by M, A and MM, whose husbands were listed persons under United Nations counter-terrorism measures. The appellants received social security benefits and used them to meet shared household expenses, including accommodation, food and essential living items. HM Treasury required payment of the benefits under licensing arrangements, with controls on the accounts and withdrawals.

The High Court held that HM Treasury had power to impose that control: [2006] EWHC 2328 (Admin). The Court of Appeal considered whether payments made directly to the unlisted appellants were nevertheless funds made available indirectly to, or for the benefit of, their listed husbands.

1. Appeals dismissed. Maurice Kay LJ, with Wilson LJ and Sir Peter Gibson agreeing, upheld the High Court’s construction of the sanctions regime.
2. Article 2.2 of Regulation (EC) 881/2002 extends beyond funds paid directly to a listed person. Benefits paid to an unlisted spouse may be indirectly for the benefit of a listed person where it can reasonably be expected that the recipient will use them to confer significant economic benefits on that person. Examples include meeting rent, utility charges and ordinary household expenses for which the listed person would otherwise be responsible.
3. The court accepted that the appellants were not themselves listed persons and that the payments did not directly transfer funds to their husbands. Those points did not answer the separate statutory prohibition against making funds available for the benefit of a listed person. The amounts of benefit were also conditioned by, and increased because of, the household circumstances underlying the analysis.
4. The international context supported the wider construction. European measures implementing United Nations Security Council resolutions had to be interpreted consistently with the wording and aim of those resolutions. The deliberately stringent nature of Article 2.1 and the humanitarian exceptions introduced by Article 2a reinforced the conclusion that Article 2.2 covered the payments. If the narrower construction were correct, Article 2a would have been unnecessary.
5. The distinction between funds and economic resources created no anomaly. Funds had inherent liquidity and greater potential for misuse, whereas economic resources were controlled under Article 2.3 only to the extent that they could be converted into funds, goods or services. Although criminal consequences might affect construction where the language was ambiguous, Article 2.2 was clear and no presumptive construction favouring the appellants applied.
6. Borderline cases under legislation of this kind would require determination case by case, taking account of all relevant circumstances. The benefits were not withheld, although the licensing conditions were intrusive and inconvenient. Such conditions remained susceptible to judicial review on public law grounds; the challenge to them had been rejected below and was not pursued on appeal.

• Court of Appeal (Civil Division): In [2007] EWCA Civ 173, the three appeals were dismissed and the High Court’s construction was upheld.
• High Court of Justice, Queen’s Bench Division: In [2006] EWHC 2328 (Admin), the Deputy Judge held that HM Treasury had power to control and license payment of the appellants’ social security benefits. Permission to appeal was granted.