Northern Ireland - Social Security and Child Support Commissioners' Decisions

[2006] NISSCSC CSC1_04_05 (16 October 2006)

Decision No: CSC1/04-05

THE CHILD SUPPORT (NORTHERN IRELAND) ORDERS 1991 AND 1995
Appeal to a Child Support Commissioner on a question of law from a Tribunal's decision dated 19 February 2003
DECISION OF THE CHILD SUPPORT COMMISSIONER
1. This is an appeal, leave having been granted by a Commissioner, by the mother and resident parent against a decision dated 19 February 2003 of an appeal tribunal sitting at Belfast. The mother is hereby designated as the appellant, the Department as the first-named respondent and the father and non-resident parent as the second-named respondent. My decision is given in the final paragraph.
2. The tribunal allowed the father's appeal in connection with a departure application made on 4 November 2002 on the grounds of (1) assets capable of producing income, and (2) diversion of income. It remitted the matter back to the Child Support Agency of the Department to recalculate the child support maintenance assessment for the relevant children adding the sum of £2291.66 per annum (net) to the net income of the mother. The figure of £2291.66 was income which the tribunal found to have been derived from a trust (the C trust) which had existed and of which the mother had been a trustee and beneficiary. The father contended that trust had been in existence and that the mother had diverted funds derived from it "to ensure that maintenance payments were not reduced". He acknowledged that no income was dispersed to the mother since 1993 but stated that this was because it would affect the maintenance payments. He stated in his application form:

"… You should also note that in the past [the mother] also failed to declare her [bank] A/C to the C.S.A. Perhaps the monies are invested in an account with another financial institution.

As [the mother] is a Trustee she is capable of controlling all funds.

If the Trusts are closed up where is all the money? It cannot go unaccounted for. I have consistently raised this matter since 1993 with the C.S.A and hope this matter will be thoroughly investigated.

Should you require any additional information I will be happy to oblige.

Please see all enclosures."

3. The father had also made the departure direction application on the grounds that housing costs could be paid by the mother's partner who, he claimed operated a business from the dwelling house. This was withdrawn by the father.
4. The father had also made the departure direction application on the grounds that the mother's lifestyle was inconsistent with her declared income. It does not appear that a direction was made on these grounds and in any event the matter has not formed part of the appeal to me and I comment no more on these last two grounds.
5. The mother, who did not attend the tribunal, acknowledged that the said trust fund had existed, that it had been set up by her grandfather in April 1989 with capital of £137,000. However she contended (by letter dated 5 February 2003) that all the investments within the trust fund were sold towards the end of 1997 and "winding up" of the trust was commenced. Capital distributions were made to the beneficiaries in January 1998. Final taxes of £11,000 approximately and accountants "winding up" fees of £1,500 approximately were paid in 1998.
6. The mother also contended that the trust funds had been subject to a large Capital Gains Tax liability. She also produced a letter from Price Waterhouse Cooper, Accountants dated 22 November 1999. That letter, written in reply to a letter from the mother's father (acting as her representative), refers to an earlier tribunal's request for certain information relating to the said trust. It states:

"We refer to your letter of 16 November 1999 in which you ask us, as a former Trustee, for an estimate of our fees for complying with the discovery request for information from the Child Support Agency concerning the above former settlement.

After the winding up and completion of all income tax compliance matters in connection with the above settlement, all our records have been put to store. In fact, as we store outdated papers as we go along, records dating back to 1987, after two major mergers in our firm, the relevant information will be scattered through a number of different storage facilities. The assembling of this material and the perusal, in order to extract the information requested by someone not familiar with the case would be a lengthy and exacting task.

Our fee would be based on the necessary time spent but we would anticipate that it would be in the region of £1,000 to £1,500 including VAT and incidental expenses.

Before undertaking such a task we would require confirmation that such a fee would be paid. The settlement no longer exists and so cannot be responsible for any fee, and it does not seem likely or reasonable that [the mother] could do so.

We await further instruction and confirmation of who would be responsible for our fees."

7. The tribunal found that the trust still existed. It reasoned with regard to this finding as follows:

"7.4 We have formed a view that the [C] Trust is still existent because there are official documents and the papers before us clearly indicate and confirm that the Trust was set up and ongoing. An assertion has been made by [the mother] that the Trust has been closed down. The nearest that we can come to, by way of evidence to corroborate this view is the passing assertion of PricewaterhouseCooper's letter 22 November 1999, which might, on one reading support this view. We do not however accept this. There are a number of reasons why.

7.5 The author of the PricewaterhouseCooper's letter at B16 and B17 of the papers herein, dated 22 November 1999 we believe has ambiguously framed the letter. The only certain thing that would appear to have been "wound up" is the income tax compliance matters in connection with the [C] Settlement. This is not the same as saying that the Trust has been wound up. Furthermore the truly exorbitant fees suggested by PricewaterhouseCooper of £1000.00 to £1500.00 for retrieving a file we believe is designed to assist [the mother] the rouse [sic] that the Trust has been closed and/or wound up. This figure cannot properly be justified for the simple exercise of retrieving a file. In our collective experience the Tribunal members find that figures suggested by the accountants is truly exorbitant. We can only assume that it was pitched at so high a level to assist [the mother] in deflecting attention from the [C] Trust and the paper work germain to it. Formal evidence before us we find is more preferable."

8. Having reached the conclusion that the trust still existed the tribunal went on to make a finding as to the income derived and which could be derived by the mother from it. This it did on the basis of past income payments. It found the income to be £2291.66 net. The tribunal did not explain whether it thought this income had been paid to the mother or diverted by her to another source or could have been obtained by her. It allowed departure directions on the two grounds of diversification of income and assets capable of producing income or greater income.
9. The mother appealed. Her grounds of appeal were contained on an OSSC1 form and enclosures (two letters from her father dated 15 July 2003 and one letter dated 20 July 2003) received in the Commissioners Office on 22 July 2003.
10. Essentially these grounds were that (1) the tribunal had not been entitled to its conclusion that the trust was still in existence and had acted perversely and unfairly in so concluding; and (2) the tribunal had erred in attributing significance to the non-attendance of the mother and her father as representatives.
11. The Department supported the appeal. The Department was represented by Mr Conlon of its Decision Making Services branch who commented on the appeal in a most helpful letter dated 31 October 2003. Mr Conlon submitted that the tribunal had erred in law. He submitted that it was uncertain whether the father was alleging that the trust still existed or whether he was alleging that it had been wound up but the mother nonetheless had an asset that could produce an income or more income. Mr Conlon further submitted that there was an irrationality in the father's contentions. The father contended simultaneously that the mother had an asset capable of producing income or more income and simultaneously that that income was being diverted.
12. Mr Conlon submitted also, relying on decision in CSC2/02-03, that the burden of proof that the mother had an asset capable of producing income or more income and that income was being diverted lay with the father as the appellant. In this case the tribunal's reasoning appeared to indicate that, because it considered the mother to have been obstructive, it had shifted the burden to her to show that the trust did not exist.
13. Mr Conlon contended further that the letter from the accountants dated 22 November 1999 contained the unambiguous sentence:

"The settlement no longer exists …"

This plainly meant that the trust no longer existed. This was evidence from a reputable accountancy firm and at no time had the father produced disinterested evidence to support his contention. The tribunal had, in Mr Conlon's submission failed to take account of what the letter from the accountants actually said.

14. I am in agreement with Mr Conlon that the tribunal did err in law in that it does appear to have ignored the accountants' statement that the settlement no longer existed. Their letter stated categorically that the settlement no longer existed. The tribunal's reading of their letter was not reasonable. Since that tribunal the mother has produced additional evidence relating to the winding up of the trust. This is by way of a letter dated 19 June 2003 from her father with enclosures, a letter dated 8 November 1999 from the accountants stating that the trust had been wound up and that in the years 1998 and 1999 the mother did not receive any income from the trust and would not so do in the future, a letter from the Inland Revenue dated 5 August 2003 confirming that the Revenue had been advised on the 1997/98 Trust and Estate Tax return that the trust had ceased on 4 April 1998, a letter from the accountants dated 28 August 2003 stating that according to their information the trust was wound up and no Inland Revenue returns had been issued. The accountants also referred to their letter of 8 November 1999 and reiterated it.
15. These latter documents were not of course before the tribunal but even on the evidence before it the tribunal was not, in my view, entitled to its conclusion that the C trust remained in existence. It had evidence that the trust had been in existence. It had an allegation by the father that the mother had assets capable of producing income from the C trust. It is unclear whether or not the father was claiming that the C trust remained in existence. He produced no evidence to that effect other than to say (which was not disputed) that it had been in existence. The mother had produced a letter from the accountants saying the settlement had been wound up and a statement from herself and her father as trustees. The tribunal never appears to have asked the father what, if such was his allegation, was his evidence for showing that the trust still existed. Any prima facie case raised by the setting up and running of the trust for some time was certainly answered by the mother and particularly by the letter from the accountants.
16. I am driven to the conclusion that Mr Conlon is correct when he submits that the wrong burden of proof was applied by the tribunal. I set its decision aside for those reasons.
17. I come then to consider whether or not I should give the decision which the tribunal should have given.
18. It is necessary to consider whether the evidence is such as to enable me to do so. As regards the continued existence of the C trust, I am of the view that it has not been established (if indeed it was ever asserted) that said trust remained in existence at the date of the departure application on 4 November 2002. The father asserted that the mother had capital assets (whether in the form of trust funds or otherwise) which were capable of producing income or higher income and/or the income from which had been diverted. There is some support for this in that trust funds had existed and the mother had for some years prior to the marriage break-up been paid an income from same. The mother was a trustee for the trust, whether or not she took an active part in its management. There is some substance to the submission that it is suspicious that the documents (the trust accounts) which might have verified the distribution of the trust funds from 1993 onwards and of what happened to those funds after distribution are missing. The mother has, however, given a statement as to the distribution. The mother's father, co-trustee and representative has indicated that capital distributions were made annually and that in 1997 all assets were sold and the proceeds distributed to the main beneficiaries. The mother has given a statement as to how what she received was dispersed. If the capital sum distributed to her is correct, this is not an unreasonable account.
19. While, as I mentioned above, the absence of the relevant documents is suspicious and I do not regard either the mother or her father as giving disinterested evidence, I do conclude that the trust was wound up in 1997/98. I accept PricewaterhouseCoopers' letter and the supportive letter from the Inland Revenue to that effect.
20. The application for a departure direction was made in November 2002, over 4 years later. The burden of proof lies on the father. While the tribunal may have had some understandable suspicions as to the mother's veracity, it has in my view erred in placing the burden of proof on her and its decision must be set aside for that reason. The father had no evidence as to what had happened to the trust, nor as to whether or what funds were distributed or where.
21. In such circumstances it could not reasonably be considered that the father had shown on the balance of probabilities that the mother had assets capable of producing an income or a higher income nor that she had diverted income. I did afford the father an opportunity by means of a Direction dated 18 May 2006 to obtain from the accountants documents including profit and loss accounts, balance sheets and statements of distribution for 1993 to date or to winding up as appropriate and a closing statement. He informs me that PricewaterhouseCooper have no such documentation. The father has no other evidence to offer and I can find no evidence of intentional deprivation within paragraph 27 of Schedule I to the Maintenance Assessment and Special Cases Act. In all the circumstances I consider that I can give the decision which the tribunal should have given. This is that the father is not entitled to a departure direction on foot of the application dated 4 November 2002.
22. Apart from the two grounds dealt with above, there were two other grounds comprised in the departure application and dealt with the tribunal's decision. I consider the tribunal's decision to have been correct in respect of them and that there should be no departure direction on those grounds either. The application for a departure direction dated 4 November 2002 is not successful. No departure direction is to be made on foot thereof. The mother wins her appeal.

(signed): M F Brown

Commissioner

16 October 2006