To impose a blanket ban on any kind of social security or social assistance, irrespective of personal need, that we say is manifestly disproportionate

Stephen Knafler Counsel for Mr Othman

The Palestinian refugee is better known as Omar Abu Omar - or Abu Qatada - and appeared on the list of suspected Islamic terrorists issued by the United Nations after 11 September.

His counsel Stephen Knafler argued Mr Othman had been wrongly deprived of income support of �213 a fortnight because of the find.

As a result of losing income support, he also lost housing benefit, Mr Knafler told the court.

This meant Mr Othman was in danger of losing his home and being unable to care for his pregnant wife and four children, his counsel told the judge.

In an action supported by emergency legal aid, Mr Knafler argued Work and Pensions Secretary Alistair Darling's decision to suspend Mr Othman's income support from 9 October was both irrational and unlawful.

'Disproportionate ban'

The "source of Mr Othman's misfortune" was that his name had been added to the UN list of suspected Islamic terrorists in mid-October, and as a result all funds and other financial resources belonging to him had been frozen.

The regulations also required that "no funds or other financial resources may be made available, directly or indirectly, to or for, his benefit".

Mr Knafler said: "We accept that it is proportionate for the Secretary of State to freeze a person's surplus assets and prevent him from engaging in economic activity when he has been designated by the UN, as Mr Othman has.

"One obviously recognises the importance of taking effective steps to combat terrorism.

"But to go so far as to impose a blanket ban on any kind of social security or social assistance, irrespective of personal need, that we say is manifestly disproportionate."

Mr Knafler described how the Secretary of State took his decision after police found �180,000 in cash and foreign currency at Mr Othman's home on 13 February.

'Merely a suspect'

Mr Othman disputed the amount, which far exceeded the �8,000 maximum an applicant for income support was allowed to possess.

Mr Knafler said Mr Othman was "merely suspected" of terrorist activity in Britain and had not been convicted of any crime in this country - "far less than a crime involving terrorism".

The regulations not only froze his assets but also prevented him from entering into any economic activity, so that he could not work or trade.

Mr Othman was arrested following the police raid but then released from detention and not charged with any offence. The cash was not returned.

In his ruling, Mr Justice Collins added that he used the expression 'bare necessities' advisedly because "the claimant is not entitled to anything more than that".

He also warned that "it was at least arguable" that failing to provide "the means (for Mr Othman) to avoid suffering" could be a breach of Article 3 of the European Convention on Human Rights, which prohibits "inhuman and degrading treatment".