Secretary of State for Work And Pensions v Mohammad

Housing costs qualify for income support only if the claimant is liable to meet them and the relevant loan or cost satisfies the qualification provisions in Schedule 3 to the Income Support (General) Regulations SI 1987/1967. A claimant who assumes responsibility under ancillary-relief arrangements for payments on a mortgage remaining in a former spouse’s name has not thereby taken out or taken over that loan. The extended concept of liability in Schedule 3 does not make the claimant legally liable to the lender. Further, a single loan is taken out and incurred at the same time for the purposes of paragraphs 15 and 4. A loan incurred during the relevant period is therefore excluded unless an applicable exception applies.

The respondent sought income support to cover interest payments on a mortgage secured against her home. The mortgage had been taken out by her former husband before the parties separated. In ancillary-relief proceedings, she undertook to make the payments and indemnify him, and the property was later transferred to her. The lender nevertheless remained entitled to enforce the mortgage against the former husband.

The First-tier Tribunal allowed her appeal. The Upper Tribunal upheld that decision and granted permission for the Secretary of State to appeal. The central issues were whether the respondent had taken out or taken over a qualifying loan under paragraph 15 of Schedule 3 and, if so, when the loan had been incurred for paragraph 4.

1. Appeal allowed. The Upper Tribunal had wrongly overlooked paragraph 15 of Schedule 3. The December 2008 refusal to include the mortgage interest payments in the respondent’s income support was restored.
2. The statutory scheme imposes two cumulative requirements. The claimant must be liable to meet the housing costs under paragraph 1(1)(a), in the circumstances specified by paragraph 2. The costs must also qualify under paragraphs 15 to 17 pursuant to paragraph 1(1)(b).
3. The Secretary of State conceded the first requirement. The extended liability recognised by paragraph 2(1) does not coincide with legal liability for the underlying debt. The respondent’s liability was to her former husband under the indemnity, whereas the mortgage remained his liability to the building society.
4. The only loan relevant to paragraph 15 was the mortgage taken out by the former husband in 2002. It was not taken out to defray money applied to acquire an interest in the home, and the respondent had neither taken out nor taken over it when she assumed responsibility for the payments or acquired the property.
5. The expressions “taken out” in paragraph 15(1) and “incurred” in paragraph 4(2) describe the same timing for a single loan. The different wording does not indicate a deliberate separation of the concepts. Even if the respondent had taken out the loan during the ancillary-relief proceedings, paragraph 4(2) would have excluded it because she was then receiving income support.
6. AH v Secretary of State for Work and Pensions and CIS/762/1994 did not assist. The former was confined to the refinancing exception in paragraph 4(6). The latter concerned a genuinely new loan used to discharge an earlier mortgage and acquire the former husband’s interest, and also involved no paragraph 4 issue.

• Court of Appeal (Civil Division) — Appeal allowed on [2011] EWCA Civ 1358; the refusal to include the mortgage interest payments in the income support calculation was restored.
• Upper Tribunal (Administrative Appeals Chamber) — Appeal dismissed on 7 September 2010 and the respondent held entitled to the claimed income support: [2010] UKUT 326AA.
• First-tier Tribunal (Social Entitlement Chamber) — Appeal allowed by decision dated 2 October 2009.