Northern Ireland - Social Security and Child Support Commissioners' Decisions

Decision No: CSC2/07-08

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 October 2005
DECISION OF THE CHILD SUPPORT COMMISSIONER
1. This is an appeal, with my permission, against a decision of the appeal tribunal sitting at Belfast on 19 October 2005 (the "appeal tribunal"). For the reasons which I give, that decision is not erroneous in law save in one respect. That relates to the effective date of the appeal tribunal's decision. The appeal tribunal directed that its decision was to take effect from 29 January 2004. It is now common ground that that date is incorrect and the date which the appeal tribunal should have used is 11 February 2004. I therefore allow the appeal. However, I go on to give the decision which I consider the appeal tribunal should have given. I do so without making any fresh or further findings of fact.
2. My decision is the same as that of the appeal tribunal save that the effective date from which the decision is to operate is corrected to 11 February 2004.
3. This is a child support matter. There are two qualifying children, both boys, who were born in February 2000 and November 2001. The appellant before me is their father. He is what is referred to in the legislation as the non-resident parent. I shall call him "the father". The first respondent is the Department for Social Development (the "Department"). The second respondent is the mother of the two qualifying children. She is what the legislation calls the parent with care. It is convenient to refer to her as "the mother".
4. Before the appeal tribunal the positions of the father and the mother were reversed. The mother was the person making an application to the appeal tribunal and the father was the second respondent. (Technically, the matter was not an appeal but a reference by the Department of an application which the mother had made. However, nothing turns on that for present purposes.)
5. The issue before me is whether the appeal tribunal erred in law when it disposed of the mother's appeal by giving a departure direction on the basis that the income of the father which had been taken into account for the purposes of the maintenance calculation was substantially lower than the level of income required to support his overall lifestyle. See regulation 20 of the Child Support (Variations) Regulations (Northern Ireland) 2001 (No. 20). The basic provision appears in paragraph (1) of the regulation:

"(1) Subject to paragraph (3) [which provides for a number of exceptions, none of which is relevant for present purposes], a case shall constitute a case for the purposes of paragraph 4(1) of Schedule 4B to the Order where –

(a) the non-resident parent's liability to pay child support maintenance under the maintenance calculation which is in force, or which has been applied for or treated as applied for, is, or would be, as the case may be –

(i) the basic rate;

(ii) ...

(b) the Department is satisfied that the income which has been, or would be, taken into account for the purposes of the maintenance calculation is substantially lower than the level of income required to support the overall life-style of the non-resident parent."

It may be worth pointing out immediately that (b) requires the Department, or a tribunal, to contrast "the income ... taken into account for the purposes of the maintenance calculation" with "the level of income required to support the overall life-style of the non-resident parent". The power to make a variation arises when the former is substantially lower than the latter. The power is subject to the proviso that the Department, or a tribunal, must be satisfied that it is just and equitable to make the variation.

6. This is a convenient point to set out the text of the appeal tribunal's unanimous decision as it appears in the decision notice which the appeal tribunal issued.

"Variation application of [the mother] is allowed in part. That part of the variation application in respect of assets, and also income not taken into account within the maintenance application, cannot be allowed.

It is nonetheless just and equitable to give a variation direction. The direction is based on the ground set out in Reg. 20 of the Child Support (Variations) Regulations (NI) 2001 (lifestyle inconsistent with declared income).

We direct that with effect from 29.01.04 the gross income of the non-applicant parent be increased by the sum of £496.79 per week (£709.59-£212.80) all subject to deduction of income tax, national insurance contributions and any allowable pension contributions and capital allowances claimed by the non applicant parent within 4 weeks of notification of this decision.

The figure of £709.59 equates to a deemed gross income of £37,000 p.a.

With effect from 29.01.04 a fresh child support maintenance assessment is to be made using the above figures."

7. The background to the matter can be briefly stated. The father and the mother were married but, unfortunately, their marriage broke down. When that happened the two children of the marriage were very small. They went to live with the mother. They continue to live with her although they spend time with the father. On 29 January 2004, the mother made an application for child support maintenance under Article 7 the Child Support (Northern Ireland) Order 1991, as amended. The father was sent a maintenance enquiry form on 11 February 2004. (This is the date which the appeal tribunal should have used.) He completed and returned the form on 24 March 2004. The Department decided that he was liable to pay £22.29 per week in respect of the two qualifying children from the effective date of 11 February 2004. The mother was aggrieved by the smallness of the weekly sum and, on 1 April 2004, she made an application for variations under Article 28A(1) of the Child Support (Northern Ireland) Order 1991. She based her application on three grounds. First, that assets owned by the father had not been taken into account. Secondly that income which the father was receiving had not been taken into account. Thirdly that the income which he had admitted to was substantially lower than the level of income required to support his overall lifestyle. The appeal tribunal rejected the first two of these three grounds and there has been no appeal against its decision to do so. The only live ground before me is the third and I shall not concern myself with the other two. The Department informed the father of the application and invited him to make representations. His representations, by which he sought to argue that no variations were appropriate, were received on 10 June 2004. The Department then decided that, rather than try and deal with the mother's application itself, it would refer it to a child support tribunal under Article 28D(1) of the Child Support (Northern Ireland) Order 1991. The mother and the father both expressly asked for an oral hearing.
8. There was a directions hearing prior to the substantive hearing on 19 October 2005. On all occasions the composition of the appeal tribunal was the same. Namely, the same legally qualified chairman sat with the same financially qualified member. It is, therefore, appropriate to simply refer to the "appeal tribunal" throughout. The matter first came before the appeal tribunal on 26 January 2005. The mother and the father were both present together with their representatives and the Department was represented. It quickly became clear that further financial information was required to enable the appeal tribunal to determine the matter. In the event, the appeal was adjourned so that the father could supply detailed evidence of his income and the cost of his life-style and so that all parties could read the very substantial amount of evidence which the mother had lodged in support of her case. Paragraph 2 of the appeal tribunal's directions was as follows.

"2. [The father], assisted by his representative, is required:

(a) to complete the checklist in respect of lifestyle handed to [the father] at today's hearing.

(b) to provide copy income tax return for 2003/2004.

(c) to provide detail of share holdings and savings deposits at the effective date of 11.2.2004 and also currently.

(d) to provide copy bank statements of all accounts held in the months January-March 2004, inclusive.

(e) to provide, if readily available, copies of the 2 deeds of transfer of farm land apparently executed in mid 2004."

9. In the statement of reasons which followed the hearing on 19 October 2005, the appeal tribunal recorded that the father did not provide any of the documents which he had been directed to produce. I note that these included a checklist in respect of his lifestyle. I mention this because the appeal tribunal has been criticised for failing to have regard to such a checklist. However, one was issued to the father but he declined to supply any of the information sought by it. The criticisms that have been made of the appeal tribunal about the use of a checklist are, therefore, unfair and I reject them.
10. The matter then came back before the appeal tribunal on 19 October 2005. The mother was present together with her representative and the Department was also represented. The father did not appear either in person or by way of a representative. The mother gave evidence to the appeal tribunal and her representative made submissions on the documents which she had lodged in advance of the hearing. As already recorded, the appeal tribunal rejected two of the mother's grounds. However, it then went on to deal with the question of the father's life-style. The decision, as recorded in the decision notice, appears in paragraph 5 above. The reasons for that decision are explained in the following passage in the appeal tribunal's statement of reasons.

"However we considered that there was merit in the variation ground of life-style inconsistent with declared income. [The father's] bank statements showed no pattern of financial strain. There was a pattern of regular saving and the pattern of spending was not obviously constrained. [The mother's representative], pointed to the size of the house [in which the father lived] and to the quality of fittings used; these had been paid for wholly by [the father]. [The mother's representative] said he knew that [the father] had bought a laptop for over £1000, something that might not have been a priority for a person earning only £10682 pa (gross). [The mother's representative] pointed to other assets, such as a recently purchased trailer that a struggling business was unlikely to afford. He produced comparable earnings rates in the building industry which were substantially higher than the income declared by [the father] on his tax return.

On all the evidence the Tribunal concluded that [the father] had significantly under declared his actual income in the relevant period within the terms of the lifestyle inconsistent ground in Reg 20 (1) (b) of the Child Support (Variations) Regulations (NI) 2001. But it was evidence as to the manner in which money had been raised following the ancillary relief order of Gillen J which was most influential in the Tribunal's decision. Following that judgment, [the father] had been ordered to pay £70000 within 6 weeks of the judgment and a final balance of £41000 within 12 weeks. [The father] raised that money within the time limits imposed by the High Court although payment of the final instalment was delayed because of a dispute over the persons named as transferees on the transfer deed.

During consultation at the High Court [the mother] had learned, through her barrister, that [the father] would be raising £70000 on a mortgage loan and £10000 by sale of an endowment policy. [The mother] did not know how the final payment of £31000 had been raised. For the tribunal the key question was how someone apparently earning only £10682 of profit, before tax and NI, could raise a secured loan of £70000, let alone £111000 on the strength of that income? Notionally we decided to apply a lender's multiplier of a loan equivalent to 3 times gross income in place of the more usual twice or 2.5 times single income multiplier. This was at the adventurous end of market lending criteria but a conservative means of gauging [the father's] income. On this thinking [the father's] income was at least £23333 – i.e. £23333 x 3 = £70000 – assuming he raised £41000 of the settlement by asset sales or by borrowing money from family members. However, assuming he had raised £111000 entirely by borrowing from a commercial lender then on a multiplier of 3 his income had to be at least £37000. Using a more common, and comfortable, single income loan multiplier would have implied that [the father] had a higher income.

[The father] had provided none of the information required of him by the Tribunal. However, on the substantial evidence made available by [the mother] and her representative we were of the view that £37,000 p.a. reflected [the father's] income at the date of the variation application as closely as could reasonably be determined. The variation was to take effect from 29 January 2004."

11. The father then sought leave to appeal. He was refused leave by the chairman. The application was renewed and came before Mrs Commissioner Brown. She sought submissions on the application from the Department. As I understand those original submissions, the Department submitted that the appeal tribunal's decision was erroneous in law in two respects which I shall explain in a moment. It submitted that the father's other grounds of appeal were without merit and it did not support the application on such grounds. The two grounds on which the Department supported the appeal were, first, that the appeal tribunal had misapplied the relevant regulatory provisions and, secondly, that the tribunal's decision had chosen the wrong date as the effective date. In support of the first of these grounds, the Department relied on a short decision of Mr Commissioner Jacobs, a GB Commissioner, namely CCS/4135/2003. (Mr Commissioner Jacobs was concerned with a departure direction under the old child support scheme. The appeal has proceeded on the basis, which I accept for present purposes, that his remarks are of equal application to the corresponding power to make a variation under the new scheme.)
12. I think it is fair to say that, in relation to the first of these grounds, Mrs Commissioner Brown was concerned as to the correctness of the Department's submissions. The Commissioners' Office wrote a letter which resulted in a further set of submissions being lodged by the Department supporting its original stance. In Mrs Commissioner Brown's absence I then gave leave to appeal but warned that my doing so did not necessarily mean that the appeal would succeed. I also directed an oral hearing of the appeal.
13. Let me dispose of one matter which can be dealt with fairly easily. That is, the effective date chosen by the appeal tribunal. It will be recalled that the mother made her application for child support maintenance on 29 January 2004, and that a maintenance enquiry form was sent to the father on 11 February 2004. It was this latter date which was used as the effective date in the decision dated 24 March 2004. The appeal tribunal's decision notice, however, refers to the date of the mother's application for child support maintenance. That is, 29 January 2004. In paragraph 25 of its original submissions, the Department submits:

"25. In my submission, [the father] is correct when he states that the tribunal used the incorrect effective date of 29 January 2004 for the variation. I submit this was the date that [the mother] made her application for child support maintenance. I respectfully submit that the actual effective date of the variation is the same as that of the MC, 11 February 2004, in accordance with the provisions of Article 28G(1) and (2) of the 1991 Order as amended, regulation 2 of the Child Support (Variations) (Modification of Statutory Provisions) Regulations (Northern Ireland) 2001 and regulation 3A(1)(a) of the Social Security and Child Support (Decisions and Appeals) Regulations (Northern Ireland) 1999. The Regulations allow the normal rules of the revision of a MC to be applied where an application for a variation under Article 28G has been made after a MC has been carried out in a case, and they also allow the provisions of Article 28A to 28F and Schedules 4A and 4B to be modified to allow them to apply to variations applications in such circumstances."

14. Those submissions are correct and I accept them. For this reason I give the decision which I do. In effect, I am correcting the appeal tribunal's decision to show the date which should have been selected.
15. I next turn to the other ground put forward by the Department. I have already set out the appeal tribunal's reasoning in respect of the ground on which the mother succeeded. I begin with decision CCS/4135/2003, on which reliance is placed. The decision is no more than a page and a half although the Commissioner did direct that the new tribunal, to which he remitted the matter, should follow the approach which he had set out in R(CS) 3/01. See paragraphs 18 to 24 of that decision and note Mr Commissioner Jacobs comment at paragraph 21 that the "tribunal should have reasoned from the life-style to the income needed to support it". In CCS/4135/2003, Mr Commissioner Jacobs, who was remitting the matter for rehearing and who clearly was not addressing his remarks outside the context of the particular appeal, did not refer to the facts but, instead, went straight to what he considered to be the issue. Under a heading to that effect, the learned Commissioner said this.

5. I can deal with the case briefly. The tribunal made a mistake which tribunals repeatedly make, despite regularly being set aside for making it.

6. The tribunal was concerned with an application for a departure direction. The Secretary of State referred the application to the appeal tribunal. The tribunal gave a direction under regulation 25 of the Child Support Departure Direction and Consequential Amendments Regulations 1996, on the ground that the absent parent's life-style was inconsistent with his declared income.

7. The tribunal's task under regulation 25 was set by the terms of that regulation. First, the tribunal had to investigate and determine the nature of the absent parent's life-style. It then had to consider whether the absent parent could fund that life-style from his declared income. If not, it had to make a decision on the amount of the shortfall in income necessary to support that life-style.

8. For some reason, tribunals are unwilling or unable to draw inferences about income from life-style, which is what the legislation requires. Instead, they embark on a general investigation of the absent parent's income from all evidence. That is what the tribunal did in this case. That is a task appropriate under a formula assessment. But it is wrong under a regulation 25 departure direction.

The Department's submissions then go on as follows.

" 18. … I submit that similar considerations apply to the issue of life-style inconsistent under the Variations scheme as were relevant under the Departures scheme. In this case, I submit that, rather than determining the level of income required to fund [the father's] life-style, the tribunal embarked on an investigation of his actual income. This would have been appropriate if the area of contention had been the amount of the [father's] net income in the maintenance calculation, but I respectfully submit that such action has no place in the context of a variations application. Consequently, I respectfully submit that the tribunal erred in its treatment of the issue of life-style inconsistent with declared income. I submit that, as there are facts to be established concerning the [father's] life-style and the level of income required to support it, this case should be remitted back to a fresh tribunal for rehearing to allow this to be carried out."

16. Mrs Commissioner Brown was clearly troubled by that submission and so was I. Despite persuasive arguments on the part of Mr Crilly for the Department and Mr Laverty for the father I am unable to see that the appeal tribunal's approach is inconsistent with that set out by Mr Commissioner Jacobs in either CCS/4135/2003, or, indeed in R(CS) 3/01, where he stated the relevant principles more generally. The appeal tribunal has been criticised for not taking other matters, such as would be found in a life-style questionnaire, into account. However it had attempted to do this but its attempts were frustrated by the father's refusal to co-operate and in particular to complete a checklist. The tribunal was sitting in the real world. It had to reach a decision one way or another and it had to do so on the basis of the material before it. Its members were neither omniscient nor did they have the funds to employ a good detective agency. They could adjourn and give directions. However, they had already done that and been faced with non-compliance by the father. Indeed, his explanations to me as to why he had taken no part in the proceedings after 26 January 2005, made it quite plain that a further adjournment would have been pointless.
17. The appeal tribunal did not, in my judgment, embark on a general investigation of the absent parent's income from all the evidence. Instead it looked at what it knew of his life-style, which was not a great deal, and then worked out what was necessary to fund it bearing in mind that his declared income was "only £10,682 of profit before tax and NI". I consider that it adopted the correct approach. The point which Mr Commissioner Jacobs was making, which I accept, was that a tribunal exercising this particular jurisdiction to make a variation is not to embark on an attempt to work out a non-resident parent's actual income from the, often very scanty, evidence. It is concerned with the usually rather simpler task of determining the level of income required to support his or her overall life-style. Subject to certain deductions and exclusions and subject to the very important consideration that the tribunal must form a positive view that it is fair and equitable to use the notional figure it has arrived at, that figure will be used as the basis for the variation. A very important part of a person's life-style is where they live and how they came to acquire and pay for their accommodation. I see nothing to preclude the appeal tribunal from embarking on the exercise which it did. Nor do I think it was attempting to work out the father's actual income.
18. I accept that the appeal tribunal said it was "of the view that £37,000 p.a. reflected [the father's] income at the date of the variation application as closely as could reasonably be determined" – my italics. However, I do not read those words as meaning that the appeal tribunal was trying to work out the father's actual income. The calculations in the preceding paragraph make it clear to my mind that the appeal tribunal was simply seeking to work out the notional income needed to support an important part of the father's life-style – namely, the accommodation in which he lived.
19. The other grounds of appeal without merit for the reasons which have been explained very clearly in the Department's original submissions.
20. I therefore allow the appeal but give the decision which I do in paragraph 2 above. In practice, the appeal only succeeds in relation to the date from which the variation is to take effect.

(signed) J P Powell

Deputy Commissioner

18 September 2008