England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHILD SUPPORT APPEALS TRIBUNAL
COMMISSIONER CHARLES TURNBULL

		Royal Courts of Justice Strand, London, WC2A 2LL
		27/02/2009

Lady Justice Arden :

1. The Child Support Act 1991 ("the CSA") enables a parent with care of a child to apply to the Secretary of State for assistance in obtaining maintenance for the child from a parent who is no longer living with the child ("the non-resident parent"). On receipt of the application, the Secretary of State makes a maintenance calculation. The amount of child support maintenance is fixed by reference to this calculation, but an application for a variation can be made. The question on this appeal is whether a variation could lawfully be made by reference to dividend income which the non-resident parent had received before the application for a variation was made, or which was paid before the statutory provision enabling a variation to be made to take account of dividend income had come into force.
2. An application for a variation may be made where there has been a change in the circumstances of the non-resident parent. The Secretary of State can agree to a variation if he is satisfied that the case is one which falls within one of the cases set out in Part 1 of schedule 4B or in regulations made under that Part. He must also be of the opinion that it is just and equitable to agree to the variation (s 28F). Para. 1-3 of schedule 4B to the CSA set out a number of cases where an application for a variation can be made. Para. 4 of that schedule then confers a power on the Secretary of State by regulation to prescribe other cases in which a variation may be agreed. Para. 4(2) provides that the regulations may, for example, make provision with respect to cases where a person has income which is not taken into account in a maintenance calculation. The maintenance calculation is made in accordance with regulations made by the Secretary of State (ss 28F(4) and 11, para.11 schedule 1 to the CSA).
3. The power in para. under para. 4(1) of schedule 4B of the CSA was exercised by reg 8 of the Child Support (Miscellaneous Amendments) Regulations 2005. Reg 8 came into force on 6 April 2005. It amended reg 19 of the Child Support (Variation) Regulations 2000 ("the Variation Regulations") to enable dividends from a company controlled by the non-resident parent to be taken into account in a maintenance calculation by inserting a new (1A):

"(1A)    Subject to paragraph (2), a case shall constitute a case for the purposes of paragraph 4(1) of Schedule 4B to the Act where—

(a)    the non-resident parent has the ability to control the amount of income he receives from a company or business, including earnings from employment or self-employment; and

(b)    the Secretary of State is satisfied that the non-resident parent is receiving income from that company or business which would not otherwise fall to be taken into account under the Maintenance Calculations and Special Cases Regulations."

4. Regulation 19(2) is not relevant in this case.
5. Crucially, reg 19(1A) uses the present tense. It speaks of a non-resident parent "having" the ability to control the amount of income he receives from the company ((a)). Para. (b) requires that the Secretary of State "is satisfied" in terms of that paragraph, and most importantly it is a requirement that the non-resident parent "is receiving" income from the relevant company.
6. The facts may be briefly stated. Mr Wincott is a non-resident parent of two qualifying children for the purposes of the CSA. The parent with care applied for maintenance calculation and the Secretary of State determined that Mr Wincott's income was £104.20 per week. On 30 March 2005, Mr Wincott received a distribution (less tax) of £27,400 from his company. The parent with care became aware of this subsequently and on 20 December 2005 made an application for a variation of Mr Wincott's contribution. As there was a maintenance calculation in force, this was technically treated as an application for supersession of the maintenance calculation. The Secretary of State determined that, to take account of the dividend, the maintenance calculation should be varied and that the amount of maintenance payable by Mr Wincott should be increased (the exact amounts do not matter) for the period from the commencement of the week in which the application was made (15 December 2005) down to 29 March 2006. (There is no issue as to whether the increased maintenance payments should have started on the date of the application rather than the start of the week in which the application was made). The payments would then be for a prorated part of the dividend, treating the dividend as paid by equal weekly instalments over the year from 30 March 2005. The Child Support Appeal Tribunal accepted this determination. Mr Wincott appealed from the decision to the Child Support Commissioners. On 9 January 2008, Child Support Commissioner Turnbull allowed his appeal.
7. In a careful decision, Commissioner Turnbull held that the natural meaning of reg 19(1A) was that one had to look at the period from the effective date of the application for a variation down to the date of the decision (i.e. in this case the period between 15 December 2005 and 7 April 2006). He did not consider that there was any provision which enabled him to treat the dividend as paid over a period and he did not think that reg 19(1A) could be interpreted as having that effect. It followed, therefore, that the conditions in reg 19 (1A) had ceased to be fulfilled by the date of the application for the variation. Commissioner Turnbull did not consider that it was possible to hold that, during the period from the date of the application on 20 December 2005 to 7 April 2006, Mr Wincott was receiving income from the company. He did not see any basis for spreading the dividend over a period of one year from its date of payment. In the opinion of the Commissioner, there were only two possibilities, namely that the dividend was treated as paid in the company's accounting year of 1 August 2004 to 31 July 2005 or that it was treated as paid in Mr Wincott's tax year 6 April 2004 to 5 April 2005. As both those periods had ended before the date of the application, reg 19(1A) was not applicable.
8. Mr Clive Sheldon, for the Secretary of State, submits that the Commissioner was in error in holding that the dividend could not be treated as "income" received by Mr Wincott during the period of one year after the date on which it was paid. He submits that the Commissioner has defeated the purpose of regulation 19(1A) of the Variation Regulations. He submits that the objective of regulation 19(1A) was to fill a lacuna identified by Commissioner Mesher in R(CS) 4/05 where a dividend payment of £9,600 was not treated as income for child support purposes. Commissioner Mesher pointed out that the dividend was just as freely available to the non-resident parent as a bonus and therefore ought to be taken into account. If Commissioner Turnbull's decision is right, and a dividend is paid towards the end of the company's relevant financial year or shortly before 5 April in any year, it will be too late for the parent with care to make an application if he or she only found out about the payment later. Mr Sheldon submits that in those circumstances Commissioner Turnbull's construction gives no practical effect to reg 19(1A).
9. Mr Sheldon further submits that, if the interpretation of Commissioner Turnbull is correct, the natural and ordinary meaning of the words of reg 19(1A) should give way to some other meaning because the meaning given by Commissioner Turnbull leads to a result which cannot reasonably be supposed to be the intention of the legislature: see Pinner v Everett [1969] 1WLR 1266 at 1273.
10. Mr Sheldon further submits that his interpretation is consistent with regulation 19(5)(c) of the variation regulations:

"(5)     Where a variation on this ground is agreed to—

…

(c) in a case to which paragraph (1A) applies, the additional income taken into account under regulation 25 shall be the whole of the income referred to in paragraph (1A)(b)."

11. Reg 25, set out below, refers to "the weekly amount" of the additional income. Mr Sheldon submits that the year to which "the weekly amount" relates must necessarily be a year going forward from the date of the payment. Otherwise it cannot be added to the net weekly income already established for the purposes of the maintenance payment.
12. Mr Wincott seeks to uphold the decision of Commissioner Turnbull. He submits that the dividend was paid before the amendment to reg 19(1A) came into force. He accepts that if the income had been received on 30 April 2005 it could have been added to the existing weekly amount. Mr Wincott submits that there is nothing in reg 19(1A) which enables the Secretary of State to attribute the dividend in this case to the period from the date of the application.
13. In my judgment, this appeal should be allowed. The interpretation placed by Commissioner Turnbull on reg.19(1A) was not correct. The function of reg 19(1A) is merely to identify a "case", or state of affairs, in which the Secretary of State may determine that there should be a variation. Because what is described is a state of affairs, there is good reason to use the present tense and there is no need, in the generality of cases, to read reg.19(1A) otherwise than according to its natural and ordinary meaning. The state of affairs described in reg 19(1A) is prescribed by regulation in order that it can be used as the basis for an application for a variation and the exercise by the Secretary of State of his discretion to direct a variation. Therefore it must obviously be applied to a past set of facts and, on any application for a variation, the question to be asked is whether the prescribed state of affairs existed as of the relevant past date. An example will make this clear. It would make no difference to the application of reg 19(A1) if the non-resident parent had sold the company and ceased to control it before the application was made. The fact that he no longer "has the ability to control the amount of income he receives from the company" at the time of the application would be irrelevant. The state of affairs in a case such as this would still be capable of being fulfilled at the date of receipt of the income in question.
14. The structure of reg 19(A1), together with the use of the word "and" in its ordinary conjunctive sense, shows that the conditions in reg 19(A1)(a) and (b) must both be fulfilled at the same time. The words "is receiving" in reg 19(1A)(b) are apt for income consisting of regular payments. The expression "income" would, however, cover a payment in the nature of income which is received as a single sum, such as a gratuity or superannuation allowance. Where the income consists of a single payment, the words "is receiving" have to be interpreted simply as "receives" or "is in receipt of". This does not affect the requirement of reg 19(1A) that both conditions must be fulfilled at the same time, and is merely an interpretation to give effect to the obvious purpose of the provision.
15. By prescribing a state of affairs which can constitute the basis for a variation, reg 19(1A) merely sets the scene. It is the later provisions of the Variation Regulations which provide the machinery for assessing whether there should be a variation in the amount to be paid by the non-resident parent. This involves two stages: first the recomputation of the new maintenance calculation and then the recalculation of the liability of the non-resident parent. The former is governed by reg 25, which is referred to in reg 19(1A). Reg 25 provides as follows:

"25 Effect on maintenance calculation - additional cases

Subject to regulations 26 and 27, where the variation agreed to is one falling within regulations 18 to 20 (additional cases), effect shall be given to the variation in the maintenance calculation by increasing the net weekly income of the non-resident parent which would otherwise be taken into account by the weekly amount of the additional income except that, where the amount of net weekly income calculated in this way would exceed the capped amount, the amount of net weekly income taken into account shall be the capped amount."

16. It is clear from reg 25 that the Secretary of State must ascertain the weekly amount of the additional income. This does not need any elaboration. It merely involves dividing the amount of the dividend by 52.
17. It was noted, in the course of argument, that reg 19(3) (which has to be read with reg 19(2)) expressly provides for the establishment of a weekly amount by taking an annual amount and dividing by 52:

"(2)     Paragraphs (1) and (1A) shall apply where—

(a)     the income referred to in paragraph (1)(b) is net weekly income of over £100; or

(b)     the income referred to in paragraph (1A)(b) is over £100; or

(c)     the aggregate of the net weekly income referred to in sub-paragraph (a) and the income referred to in sub-paragraph (b) is over £100,

as the case may be.

(3) Net weekly income for the purposes of paragraph (2), in relation to earned income of a non-resident parent who is a student, shall be calculated by aggregating the income for the year ending with the relevant week (which for this purpose shall have the meaning given in the Maintenance Calculations and Special Cases Regulations) and dividing by 52, or, where the Secretary of State does not consider the result to be representative of the student's earned income, over such other period as he shall consider representative and dividing by the number of weeks in that period."

18. However, this provision is not establishing a "case" for the purposes of para. 4(1) of schedule 4B to the CSA. It is providing a means of spreading the income of a student over a year, and then finding an average net weekly income, for the purposes of the exception in reg 19(2). Therefore, this provision does not undermine my interpretation of reg 19(A1).
19. It follows that there is no need for the Secretary of State to consider the period with respect to which the dividend was stated by the company to be paid or, as Mr Wincott contends, Mr Wincott's fiscal year. Furthermore, the weekly amount must be notionally related to the weeks succeeding the date of payment because it cannot otherwise be added to any future payment, as reg 25 clearly contemplates. (We are not concerned with the "capped amount" in this case.)
20. Regulations 26 and 27 explain in some detail how the liability of the non-resident parent is established from the new maintenance calculation. I need not set those provisions out. Normally reg 26 will simply require the addition of the existing weekly amount at the relevant rate to the weekly amount of the additional income again at the relevant rate. If the Secretary of State agrees to the increased amount, child maintenance will be payable at that increased rate.
21. Reg 19(A1) imposes no requirement that a dividend payment should be of a regular amount, and accordingly, subject to any question of retrospectivity, it is capable of applying to the single payment of a dividend on 30 March 2005.
22. The application of reg 19(1A) to dividend income received prior to the commencement date of reg 19(1A) does not in my judgment offend the principle against the retrospective application of legislation. The mere fact that reg 19(1A) affects income already received does not mean that it operates retrospectively for the purposes of the principle against retroactivity (see generally per Lord Rodger in Wilson v First County Trust (No 2) [2004] 1 AC 816 at [186] to [192]). It only affects such income after the commencement date and therefore is taken to operate prospectively only. There was no suggestion that the variation should affect any weekly proportion of the dividend treated as received before the commencement date.
23. Finally, regard may be had to a broader consideration of reg 19 (1A) in its legislative context. Section 1 of the CSA makes each parent of a qualifying child responsible for providing maintenance for his or her child. That important duty predated the payment of the dividend. All that reg 19(1A) does is to explicate that duty with respect to dividend income.

Disposition

24. For the reasons given above, I would allow this appeal. There will be no order for costs in this case as the Secretary of State has agreed not to seek costs.

Lord Justice Longmore:

25. I agree with Arden LJ. Since we are differing from Mr Commissioner Turnbull I will put my reasons in my own words but I do not believe they differ in either substance or form from those of my Lady.
26. The Commissioner has decided that the dividend is to be treated as paid in respect of either the Company's accounting year (ending 31^st July 2005) or Mr Wincott's own tax year (ending 5^th April 2005). No doubt that is a correct answer if one asks the question: In respect of what year is the dividend to be treated as paid?
27. With respect, however, that is not the relevant question for the purpose of Regulation 19(1A)(b). Relevantly the Secretary of State has to be satisfied that

"the non-resident parent is receiving income from that company or business…."

The question therefore is whether, at the time when the resident parent makes an application to vary an original order, the non-resident parent "is receiving" income from the company or business.

28. It is clear that the non-resident parent is not receiving the dividend before it is paid. So there was no receipt of income for this purpose before 30^th March 2005 (the actual date of payment to Mr Wincott), however much it might be right to say it was paid in respect of a period ending on 5^th April 2005 or 31^st July 2005. The question must be for what period, subsequent to 30^th March 2005, the non-resident parent "is receiving" the dividend.
29. One view might be that he "is receiving" the dividend only on the day he received it. That would mean that, in order to succeed, an application to bring the dividend into account would have to be made by the resident parent on the very day on which the non-resident parent received the dividend. I cannot believe that the framers of the regulations intended the regulation to be so construed since no application would ever be likely to be successful.
30. The words "is receiving" must therefore be construed to mean that the non-resident parent "is receiving" the dividend for longer than a day.
31. It would be almost as odd if one construed the words "is receiving" as confined to a period of a week or a month because the resident parent is hardly likely to be in a position to launch an application in the very week or even the very month in which the dividend is paid. Usually the resident parent will have no idea when any dividend is paid. From her point of view any payment (let alone any date of payment) will be a matter of conjecture usually to be derived (as it was in the present case) from a perception of the kind of life style led by the non-resident parent.
32. It is to my mind difficult to fix any termination date for the phrase "is receiving income" in para 19 (1A) of the regulations. No termination date is mentioned. The words "is receiving" are cast in the continuous present, to use what I believe is the correct term for the grammatical construction used by the draftsman. The true position is that once the non-resident parent receives income, he continues to receive it and therefore he "is receiving" it. "Receipt" is itself a continuing concept not a time-related concept in the sense that one can say it ceases at any particular time.
33. I do not, therefore, think that the Commissioner was correct to hold that the question whether the non-resident parent "is receiving" income in the form of a dividend is to be answered by reference to the period in respect of which the dividend is to be treated as paid. The non-resident parent might, after all, receive a dividend after the period, in respect of which it is to be treated as having been paid, has expired. One has to ask instead the question whether the non-resident parent "is receiving" the income at the date of the application.
34. In the present case about 9 months had elapsed between 30^th March and 20^th December 2005 (the date of the application for the variation). To my mind Mr Wincott was still receiving the income on the date of the application and it ought therefore to be brought into account. I would restore the decision of the Tribunal.

Lord Justice Sedley:

35. I agree with the judgments of both Lady Justice Arden and Lord Justice Longmore.