IN THE UPPER TRIBUNAL			Case No  CIS/2819/2011
ADMINISTRATIVE APPEALS CHAMBER
Before UPPER TRIBUNAL JUDGE WARD 

Attendances:	
For the Appellant:	Mr David Forsdick QC (pro bono, via the Free Representation Unit)	
For the Respondent:	Ms Zoe Leventhal, instructed by Treasury Solicitor		
Decision:  The appeal is dismissed.  The decision of the First-tier Tribunal sitting at Cambridge on 15 November 2010 under reference 034/10/03824 did not involve the making of a material error of law.
REASONS FOR DECISION
1. This case has taken a very long time. By no means all of the time taken was avoidable and when it was, it has not always been for the same reason nor the responsibility of the same person or body.  I say no more about that save to note that the claimant’s property is understood not to have been in jeopardy as a result and that in the end, both parties have been able to have their case argued by highly experienced counsel, to both of whom I am grateful.  It would, in particular, have been very difficult, indeed virtually impossible, for the claimant’s case to have been put by her unaided and Mr Forsdick's willingness to represent her pro bono is much appreciated.
2. The case raises two points in relation to the provision of support for mortgage interest (SMI) via income support:
(a) on its true construction, does the expression “loan” in paragraph 15 of Schedule 3 to the Income Support (General) Regulations 1987 (“the Regulations”) include deferred sale agreements imposed by court order in the course of divorce proceedings ? and
(b) if the answer to (a) is negative, does that amount to unlawful discrimination contrary to Article 14 of the European Convention on Human Rights, read with Article 1 Protocol 1?
3. The claimant (whose own mental health is not robust and who has had problems of alcohol misuse) and her late former husband, Mr L, purchased their then matrimonial home (“the Property”) in 1990, apparently jointly and therefore presumably in joint names with the aid of a mortgage from the Bradford and Bingley.  They separated in 1992.  Divorce proceedings ensued, in the course of which an order was made at unknown date in respect of the Property (“the Order”). The Order is not in evidence but it appears, and has not been challenged, that it provided that Mr L was entitled to 33% equity in the Property, which was to be sold when the claimant’s son J turned 18, so as to realise the value of Mr L’s interest.
4. The claimant began receiving income support on 18 December 2007. That conferred a prior entitlement to SMI in respect of her original mortgage of £34,000.
5. J turned 18 on 21 February 2008.  Around that time he became seriously ill and between May 2008 and January 2009 he underwent 7 heart operations and was admitted to hospital on 5 occasions, 3 of them by emergency ambulance.  A more exact chronology, in particular of the development of his illness, is not in evidence.  On his discharge from hospital in around January 2009, he continued to receive medical supervision, began to sleep in a ground floor room at the Property with double doors, which was converted to be a bedroom, and there was also a downstairs toilet.  He was cared for by the claimant with daily input from the District Nurses for specific tasks.
6. In February 2010 the claimant obtained a loan from Natwest by way of remortgage. The loan (“the 2010 Loan”) was used in part to redeem the existing mortgage from Bradford and Bingley, as to £55,000 so as to buy out Mr L rather than sell the property as per the Order, and as to £7,000 on repairs to the Property. It appears that Mr L’s interest was then released and the claimant and J at some point became joint tenants of the property, although the Secretary of State does not formally concede this.
7. The Secretary of State argues, rightly, that the exact circumstances as at February 2010 are not clear from the evidence.  J was at this time at home and had been for over a year.  It appears that he made steady but limited progress after his discharge.  He had however remained in bed for 6 months after his discharge i.e. to the middle of 2009.  By August 2011 he had recovered enough to commence work, although that then led to further serious cardiac difficulties.
8. The Secretary of State’s position on the facts is that while it is accepted on current evidence that sale of the Property was not feasible at the time of J’s 18th birthday, it is not accepted that in February 2010 the circumstances were such that the claimant and J could not have feasibly moved house to other accommodation equally suitable for their needs and paid off Mr L’s share that way, albeit this would have caused disruption and was not their preferred course.
9. On 8 June 2010 the Secretary of State refused the claimant’s claim for SMI in respect of that part of the 2010 Loan which had been used to pay off Mr L.  SMI was awarded on the amount borrowed and used to repay the original loan and on a relatively small additional amount in respect of the loan used for home improvements.  The claimant’s subsequent appeal was dismissed by the First-tier Tribunal on the papers.  That has left a number of gaps in the evidence which, unless I find there to have been an error of law, I am not in a position to fill.  In the event I do not consider the gaps matter.  On 13 August 2013 I gave permission to appeal.   
10. Income support includes an element on respect of SMI where schedule 3 of the Regulations so provides.
11. Para 1 of sch 3 as it stood at the date of decision provided:
	“(1) Subject to the following provisions of this Schedule, the housing 	costs applicable to a claimant are those costs—
	(a) which he or, where he is a member of a family, he or any member 	of that family is, in accordance with paragraph 2, liable to meet in 	respect of the dwelling occupied as the home which he or any other 	member of his family is treated as occupying, and
	(b) which qualify under paragraphs 15 to 17.”
12. Para 15 provided:
	“(1) A loan qualifies under this paragraph 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; or
	(b) paying off another loan to the extent that the other loan would have 	qualified under head (a) above had the loan not been paid off.
	(2) For the purposes of this paragraph, references to a loan include 	also a reference to money borrowed under a hire purchase agreement 	for any purpose specified in heads (a) and (b) of sub-paragraph (1) 	above.
	(3) Where a loan is applied only in part for the purposes specified in 	heads (a) and (b) of sub-paragraph (1), only that portion of the loan 	which is applied for that purpose shall qualify under this paragraph.”
13. Para 4 contains complex rules under which, to simplify, a loan which would otherwise have qualified under para 15 does not qualify if, inter alia, a loan is incurred while a person is entitled to income support.  Para 4(7) creates exceptions from the para 4 regime, one of which, by para 4(9), is to the effect that:
	“The condition specified in this sub-paragraph is that the loan was 	taken out, or an existing loan increased, to acquire alternative 	accommodation more suited to the special needs of a disabled person 	than the accommodation which was occupied before the acquisition by 	the claimant.”
14. Para 16 sets out that loans taken out for the purpose of carrying out “repairs and improvements” (as defined) may qualify.  “Repairs and improvements” include, by para 16(2)(k), “adapting a dwelling for the special needs of a disabled person.”  Similar provisions about  loans used to pay off earlier loans exist to those in para 15(1)(b).
15. Article 14 of the ECHR provides
	“The enjoyment of the rights and freedoms set forth in this Convention 	shall be secured without discrimination on any ground such as sex, 	race, colour, language, religion, political or other opinion, national or 	social origin, association with a national minority, property, birth or 	other status.”
It is common ground that the right to income support falls within Article 1, Protocol 1: see R(RJM) v SSWP [2009] 1 AC 311.
(a) Deferred sale agreement by Court Order as a “loan”
16. Mr Forsdick's submission is that by para 15 a loan qualifies where (a) it was taken out to defray monies applied for acquiring an interest in the dwelling ; or (b) it was taken out to pay off another loan which would qualify under (a).  In order to bring the disputed part of the 2010 Loan within (b), he needs to show that the deferred order for sale of the Proeprty qualified under (a).  If it was a loan, it was one in respect of which the claimant was not disqualified from receiving SMI because it was taken out in 1992, thus predating the restrictions imposed by sch 3, para 4 and in any event at that time the claimant was not in receipt of income support.  Further, he submits, it was a loan to acquire an interest in a dwelling – in that it prevented a forced sale from occurring for the period of J’s minority.  By virtue of the Order,  Mr L was forced to defer receipt from the claimant of his share of the property.  Therefore, submits Mr Forsdick, the effect of the order was a forced loan to the claimant and her family unit until J turned 18.  This analysis, he suggests, is unaffected by (i) the fact that the value of the “loan” was not defined; and (ii) the fact that the claimant did not have to incur day to day costs in paying for the “loan”.  Nether is of any consequence under the statutory scheme  and is in any event a consequence of the Order.  “Loan” is not a defined term in the present context and so it is open to give the term its plain and everyday meaning.  If the forced deferral of Mr L’s interest is regarded as a loan to the claimant, then para 15(1)(b) applies to the loan taken out to pay off that loan.
17. Ms Leventhal submits that the word “loan” in the statutory context with which we are concerned cannot extend so as to admit of Mr Forsdick’s interpretation.  Her argument is based on several grounds:
	a. Para 15 refers to a loan being “taken out”.  That, she submits, 	indicates that a “loan” is envisaged as being an advance of a sum of 	money procured at the recipient’s request.  The words “taken out” 	would 	be otiose if the inclusion of other arrangements, including those 	imposed by Court order, was contemplated;
	b. The judgment of Black LJ in Secretary of State for Work and 	Pensions v Mohammad [2011] EWCA Civ 135, which had rejected an 	argument from a claimant for an wider reading of para 15, likewise in 	the circumstances of marital breakdown.  In Mohammad, a court order 	provided that Ms Mohammad should indemnify her former husband for 	secured loan repayments and that the husband should transfer his 	interest in the property to her absolutely. An argument for Ms 	Mohammad that “taken out” in para 15 should be extended so as to 	include “taken over” was rejected as being an “unacceptable extension” 	of para 15.
	c. The existence of para 15(2) specifically dealing with hire purchase 	agreements indicates that the term ”loan” would not of itself have 	captured such agreements.  Court-imposed orders are yet further 	away from loans as ordinarily understood and there is no equivalent 	saving provision.
	d. Para 15 is only engaged by loans taken out to defray “monies” 	advanced for a specific purpose (rather than financial obligations or 	obligations capable of financial expression). The interpretation on 	behalf of the claimant goes beyond any requirement for the defraying 	of monies.
	e. The claimant’s interpretation is such that para 15 would be engaged 	by any obligation capable of being expressed in monetary terms, even 	where the obligation is unliquidated.  If the legislator had intended such 	a wide range of obligations to be covered he would have said so in 	clearer terms.
18. Ms Leventhal further seeks to rely on the policy intentions as set out in a witness statement by Mr Roskamp of the DWP, filed essentially in order to address the human rights arguments in the case.  So far as matters of statutory interpretation are concerned, I rely rather on her above arguments in relation to the wording of the regulation, all of which I consider well-founded.  I therefore reject the claimant’s ground (a).
(b) Discrimination contrary to art 14/A1P1
19. It is undoubtedly not easy to identify the differential treatment nor whether the grounds for such differential treatment as there may be amount to an “other status”.  One can approach it from the perspective of considering a household needing to provide for the accommodation needs of one of its members, a very ill teenager, or from that of considering a household forced to sell up in consequence of an order made in divorce proceedings, which happens to contain a very ill teenager.  In the result, I consider it makes no difference, though the analysis to get to that conclusion may vary.
20. As to the former, I bear in mind the observations of Lord Nichols in R (Carson) v SSWP [2005] UKHL 37; [2006] 1 AC 173 at para 3:
	“the essential question for the court is whether the alleged 	discrimination, that is, the difference in treatment of which complaint is 	made, can withstand scrutiny. Sometime the answer to this question 	will be plain. There may be such an obvious, relevant difference 	between the claimant and those with whom he seeks to compare 	himself that their situations cannot be regarded as analogous. 	Sometimes, where the position is not so clear, a different approach is 	called for. Then the court's scrutiny may best be directed at considering 	whether the differentiation has a legitimate aim and whether the means 	chosen to achieve the aim is appropriate and not disproportionate in its 	adverse impact.”
21. It is true, as Mr Forsdick submits, that a loan taken out to “acquire alternative accommodation”  which was “more suited” to the needs of a disabled person than the accommodation which was occupied before the acquisition would by virtue of para 4(9) of schedule 3 have escaped the prohibition on SMI on loans taken out while a claimant was entitled to income support. However, the 2010 Loan did not give rise to the acquisition of “alternative accommodation” but to securing the right to remain in the existing accommodation; and, as it was the same as it had been before, it could not be said to be “more suited”, merely “as suited”, to the needs of the disabled person.  Putting the claimant’s case at its highest, I assume (but without deciding) that in 2010 circumstances were, in particular by reason of J’s disability, such that it was in practical terms not possible for the claimant to move.  There does not appear to be any evidence that there were in fact problems in meeting J’s needs in their existing accommodation.  The comparison in my view is between someone who does not need to move to another property in order to secure more suited accommodation for a disabled person and cannot in any event do so and some one who can move and does so, to more suitable accommodation for that purpose.
22. Assuming the existence of such a difference of treatment, is it on the grounds of status?  While I bear in mind the observations of Lord Neuberger of Abbotsbury in RJM at paras 42-46 in support of the need to give a “generous meaning” to the words “on other status”, I am driven to the conclusion that the less favourable treatment received in comparison with a person who does take out a loan to acquire alternative accommodation that is more suited is to base the argument for status on the very treatment that is being complained about.  The point was helpfully put by Mr Timothy Brennan QC, sitting as  Deputy High Court Judge, in R(Clulow) v Independent Review Service [2013] EWHC (Admin) 3241 at [29]:
	“Further, the relevant "personal characteristic" is not to be defined by 	the very differential treatment of which a person complains (R (Clift) v 	Secretary of State for the Home Department [2006] UKHL 54, [2007] 1 	AC 484 at [28] (Lord Bingham of Cornhill). If it were, any difference of 	treatment between the claimant and another person which is explained 	by a factual difference might be said to be based on the "other status" 	which is identified by that difference, and all differential treatment would 	(subject to justification) be prohibited by Article 14 . But Article 14 does 	not prohibit discrimination on any ground whatsoever. That this is 	correct can be seen from R (S) v Chief Constable of the South 	Yorkshire Police [2004] UKHL 39, [2004] 1 WLR 2196 at [49]-[52] (Lord 	Steyn).”

23. It is not that it is households containing a person with a disability that are treated disadvantageously (for many are not), but rather those whose circumstances and actions do not enable them to meet the statutory tests.  I regard the case to that extent as different from that of the child in my decision in CM v SSWP (DLA) [2013] UKUT 0027 (on appeal to the Supreme Court at the time of writing) because the present case concerns additionally particular actions undertaken (or not undertaken) by the claimant in response to a person’s (J’s) disability.  I would conclude that on this analysis, any differential treatment there may have been was not on the grounds of status.
24. However, as noted above, there is an alternative approach, which is to start from the position that, as will be seen below, the SMI system does not make provision for the buying out of interests consequent upon Court orders made in divorce proceedings having run their course, nor indeed in other circumstances connected with matrimonial breakdown.  The underlying assumption would seem to be that, in such a situation, as in others where SMI offers insufficient coverage, parties would have to take their own steps i.e. by moving and buying somewhere smaller, or by renting (cf. para 12 of the evidence of Mr Roscamp, set out at [29] below).
25. However, I am persuaded, not without hesitation, that (if it can be shown) the disability of a member of the household such that the household is unable  to move following expiry of a Court order is capable of amounting to a “status” for this purpose.  If that is so, what is involved is a claim under Thlimmenos v Greece (2000) 31 EHRR 411, i.e. one that arises
	“when states without an objective and reasonable justification fail to 	treat differently persons whose situations are significantly different 	based on the failure of the State to make provision differentiating a 	person with such a status from a person without such status.”
26. Ultimately, however, the point is of limited significance, as I am satisfied that  if there was by that route discrimination on the grounds of status, it is justified.
27. There were in evidence before me two witness statements by Mr Timothy Roscamp of the DWP.  He is the policy lead responsible for policy relating to mortgage interest payments in the income-related benefits and is clearly well-placed to give his evidence, which I accept.
28. Mr Roscamp explains (at para 6 of his first statement) that:
	“It is important to be clear at the outset that the policy aim of SMI is not 	to meet a claimant’s contractual mortgage repayments.  Rather, the 	aim is to make a contribution towards the eligible interest on a 	claimant’s home loan, the intention being that the contribution should 	be sufficient, in the majority of cases, to help claimants remain in their 	homes.  It is, however, recognised that SMI payments will not prevent 	repossession in every case.”

29. He amplifies the policy rationale at  paras 10-12 (emphasis in original):
	“10. It has never been the intention that SMI would cover all of a 	person’s housing liabilities.  The policy intention enshrined in the 	Regulations is that, given the limited financial resources available, 	and the desire to fairly balance the needs of owner-occupiers 	claiming SMI against the interests of tax payers (many of whom 	cannot afford to become homeowners), the level of help provided 	must be limited.  No help is provided towards mortgage capital 	repayments or arrears, or endowment or insurance premiums.
	11. This is because the policy intention is simply to provide a 	base-line level of financial support to help protect against the risk of 	repossession, rather than to assist homeowners to pay off any 	outstanding capital balances on loans.  It is important to remember that 	the purchase of a home involves the acquisition of a valuable capital 	asset and, as mentioned above, a fair balance has to be struck 	between the needs of homeowners and the cost to taxpayers.
	12. Owner-occupiers claiming SMI will usually have entered into 	mortgage arrangements whilst they were in paid work and the policy 	intention is that, for most claimants, SMI payments should provide 	support only in a short-term sense, with owner-occupiers aiming to 	move into remunerative work, or exploring other options such as down-	sizing, equity-release schemes, or selling their homes (often at a profit) 	to allow them to fulfil their mortgage commitments in the longer term.”
30. Similarly, he explains that the overall capital limit which exists, up to which mortgage interest can be met, is subject  to one exception only, namely where a loan is taken out to adapt an existing dwelling to meet the special needs of a disabled person.
31. While limited exceptions are made with regard to claims for SMI in respect of new loans, including where there is a specific need by the claimant to incur further financial liability to secure specific suitable accommodation for needs arising from disability, “the scheme does not provide unlimited scope for those with disabilities necessarily to remain in their existing homes on an ongoing basis regardless of whether this is reasonable or otherwise.”
32. I note from his evidence that, based on the 2011 English Housing Survey, approximately 90% of adaptations to a home to meet the needs of a disabled person are estimated to cost around £10,000 or less, the mean cost being £5,410.
33. The government’s position is that it was necessary to draw a line in terms of what arrangements would be exempted from the rule prohibiting receipt of SMI for a loan taken out while on benefit, trying to establish a fair balance between the needs of homeowners and the costs to taxpayers.  Options for broader exemptions were considered but it was not considered reasonable or practicable to seek to cover all possible circumstances, bearing in mind the limited resources available.  Recent analysis to consider the cost to the DWP if SMI were to be made available when a claimant re-mortgaged their property when already in receipt of benefit  shows that, if all claimants re-mortgaged to the maximum allowed, the total annual cost across all means-tested benefits would be £1.2bn, as opposed to the current level of expenditure on SMI of £370m.
34. In a second witness statement, Mr Roscamp exhibits the report by the Social Security Advisory Committee (“SSAC”) (made pursuant to section 174 of the Social Security Administration Act 1992) concerning what became the Income Support (General) (Amendment) Regulations 1994/1004.  It was these Regulations which introduced the prohibition on SMI for loans taken out while on benefit and the limited exceptions therefrom.  The SSAC made comments on various aspects of the proposed regulations, among them (at paras 45-49) their implications where partners separate, concluding (at para 50) that:
	“Although some of us have reservations, we recommend that the 	Department should consider an exception to pay income support to 	allow the claimant to buy out the absent partner’s share in the home 	following separation or divorce, where there are dependent children 	remaining in the home, and where the alternative is the forced sale 	which would lead to homelessness.”
35. The Secretary of State, as required by s174(2) of the 1992 Act, made a statement addressing the SSAC’s recommendations.  As to the above recommendation, the response was:
	“We believe that this would give Income Support recipients an 	unjustifiable advantage over people in work on low incomes who 	cannot get a loan.  Courts have other options available to them and 	should be informed if the partner remaining in the home is unable to 	buy out their former partner’s share prior to any order being made.  If 	an order has been made and cannot be complied with the parties 	should return to Court and request that its terms be varied.”
36. Unequal treatment will only be found to be lacking in justification where social security benefits are concerned if the treatment is “manifestly without reasonable foundation”: see Humphreys v HMRC [2012] 1 WLR 1545 at para 19.  I bear in mind that this is a complex field of policy where many different considerations are in play.  There is, of course, the availability of public expenditure.  There are considerations of fairness as between those who are in receipt of means-tested benefits and potentially in receipt of SMI and those who are not.  There is the involvement of third parties, in that the policy has to take account of the likely responses of commercial lenders and, particularly where marital breakdown is concerned, of the courts.
37. In my view, the Secretary of State has amply justified the general exclusion of interest on payments to buy out the absent partner’s share on divorce. Even, it appears, within the SSAC, there was not unanimity that such a step would be desirable.  In his response the Secretary of State faced up to the issue and for two substantial reasons  - considerations of equity and the possibility of varying any order through the courts- decided to maintain the exclusion.
38. What though of the disabled person whose condition is such that, we are assuming, he is unable to move house at the time a court order operates so as to require sale?  Difficult though such a person’s circumstances might be, they would equally be so if he lived in the household of a person who was a low wage earner (and so not entitled to income support), thus the Secretary of State’s point about equity as between those who are, or are not, on means- tested benefits still holds good.
39. Nor can I see that it would not in principle still be open, up to when a Court order requires sale, to apply for a variation of the order under section 31 of the Matrimonial Causes Act 1973 and I note that section 29(3) of Matrimonial Causes Act 1973 enables the normal upper age limit of 18 years to be disapplied where there are “special circumstances”.  No doubt there would be cases in which considerable opposition might be expected from a person who, having already waited to realise their share of the proceeds, found themselves asked to wait even longer.
40. That leaves the practical difficulties which would arise if a person is too unwell to be able to move house and (whether because of the Court’s order in a particular case or because of legal difficulties, perhaps linked to questions of chronology) if a variation of the order cannot be achieved.  By this stage, one is getting into circumstances which are highly case specific and also rather subjective: how ill does a young person have to be before it would be reasonable to expect the household not to move?  What is the relevance, if any, of their carer’s circumstances and ability to cope?  At this point, one is getting into the territory of cases which because of their particular facts fall the “wrong” side of a bright line.  The legitimacy of bright line rules in the social security context is well established : see e.g. Baroness Hale in Humphreys at para 26.  One still has to consider why the line is drawn where it is, but as indicated above, the Secretary of State has amply done so.  I conclude that, notwithstanding the difficulty which it may cause in individual cases, the Secretary of State has discharged the burden of justification in showing why he is not required to make an exemption from the general position applicable to divorce settlements in cases such as this.
41. If I am wrong in the view earlier expressed that there is no discrimination on the ground of status in failing to allow SMI in respect of interest taken out  on a loan in order to remain in an existing home suitable for the needs of a disabled person when it would have been available had the decision been taken to move to a different property that was more suitable, I conclude that that, too, would be justified on the basis that the Secretary of State had taken steps to meet the reasonable needs of certain categories of disabled people (those whose homes required repairs and improvements in consequence, those who moved to accommodation that was more suited to their needs) and thus has provided for the allocation of resources to people with disabilities when resources were finite and the potential exposure of public funds, were SMI not subject to limitations, very large.
42. Because  the First-tier Tribunal proceedings proceeded on the papers and without legal representation, the arguments which Mr Forsdick has put on behalf of the claimant were not raised.  Having heard them and considered the evidence as to justification now provided by the Secretary of State, I have concluded that even if the tribunal had raised them for itself, it would have made no difference to the outcome.  I accordingly dismiss the appeal.

CG Ward
Judge of the Upper Tribunal
15 May 2015