Petition challenging deductions from pension credit for 2006-7 crisis loans refused by Outer House

About this case:

• Citation:
  [2024] CSOH 79
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Lake

It was contended by petitioner Alan Houston that state pension credit was an inalienable benefit from which no deduction could be lawfully made. The deductions were said to be made on the basis that they were required to repay crisis loans from the Social Fund that had been previously paid to the petitioner, although he denied receiving any such loan.

The petition was considered by Lord Lake. The pursuer appeared as a party litigant, while the respondent was represented by Maciver, advocate.

Never applied for

In respect of his first argument, the petitioner relied on section 187 of the Social Security Administration Act 1992, under which any agreement to assign or charge state pension credit was said to be void. However, counsel for the respondent highlighted that section 78 of the 1992 Act stated that a social fund award which was repayable was recoverable by the Secretary of State, and state pension credit was prescribed as a benefit from which recovery might be made by regulation 3 of the Social Fund (Recovery by Deductions from Benefits) Regulations 1988.

The second issue raised by the petitioner was that any obligation to repay the loan, which he likened to the terms of a contract, had prescribed in terms of the Prescription and Limitation (Scotland) Act 1973, section 6. In response to this, the respondent’s counsel submitted that the obligation to repay a crisis loan did not fall into any of the specified categories capable of prescription.

In his third, most well-developed, line of argument, the petitioner submitted that he had never applied for or received the loans in respect of which deductions were made. He claimed that he was homeless at the time the loans were sought which meant that he would have had no use for the household items for the purchase of which the loans were made, such as a cooker and a single bed.

For the respondent it was submitted that the issue for determination was whether the actions in making the deductions were lawful rather than considering the merits of the deduction. The DWP computer system, supported by an affidavit by Raymond Baldwin, the DWP’s Deputy Director for Working Age and Move to Universal Credit, recorded that one crisis loan had been sought by and awarded to the petitioner in September 2006 and another in February 2007. The test for unfairness was not met in the present case.

Fortified conclusion

In his decision, Lord Lake briefly dealt with the first ground of argument: “There can be no doubt that making deductions from pension credit to secure repayment of social fund awards is permissible. In referring to assignment/assignation or charge under the heading of inalienability, section 187 of the 1992 Act appears to address the different situation in which the person entitled to benefits might voluntarily seek to transfer their right to receive them. On any view, the petitioner’s interpretation is inconsistent with the clear words of section 78.”

Turning to prescription, he said: “Section 6 of the 1973 Act applies to obligations of the type specified in Schedule 1. In addition to specifying a number of obligations which arise at common law it specifies obligations arising under a number of statutes. The 1992 Act is not among those specified. I have considered whether it could be said that there was a contract in terms of which the petitioner was paid the crisis loan and was obliged to repay it but have concluded that the terms of the 1992 Act preclude this.”

He explained further: “The funds advanced are described as an ‘award’ and the requirement that it is repaid is also created by statute. The fact that the loan was sought and offered in the context of the statutory framework excludes an intention to create private law rights and obligations. This means that the obligation to make repayment of a crisis loan is not one of the ones specified in Schedule 1 with the result that it is not subject to 5-year prescription.”

Addressing the final ground of challenge, Lord Lake said: “As the crisis loans had been paid to the petitioner in September 2006 and February 2007 and the last repayment prior to the letters appears to have been in April 2008, it is not surprising that he might recollect little of them in 2023. The position has been made much clearer, however, by Mr Baldwin’s affidavit.”

He concluded: “I accept the contents of the affidavit, and when the screenshots are examined with that knowledge, they provide a contemporaneous record of the petitioner applying for and receiving two crisis loans some time ago. This conclusion is fortified by the copy of the acceptance of the second loan which ties in with the computer records. As a result, there can be no doubt that there was a basis on which a decision could be taken that repayment was due and the determination that there should be repayment cannot be seen as irrational.”

Accordingly, the petition was dismissed.