UK Social Security and Child Support Commissioners' Decisions

CCS 1997/97 [1999] UKSSCSC 1 (25th January, 1999)

Commissioner's File: CCS 1997/97
Mr Commissioner Howell QC
25 January 1999

CHILD SUPPORT ACTS 1991 AND 1995

APPEAL FROM DECISION OF CHILD SUPPORT APPEAL TRIBUNAL
ON A QUESTION OF LAW

DECISION OF THE CHILD SUPPORT COMMISSIONER

Appellant: [The parent with care]
Respondents: (1) Child Support Officer; (2) [The absent parent]
Appeal Tribunal: Central London CSAT
Tribunal date: 5 February 1997

1. The decision of the child support appeal tribunal given on 5 February 1997, in which it was held that an allowance of £40 per week was to be made to the father and absent parent from 18 April 1995 for property and capital transfers made by him under a court order of 19 February 1993, was in my judgment erroneous in point of law. I set it aside and exercise the power under s. 24(3) Child Support Act 1991 to substitute my own decision, as the relevant facts appear clearly from the findings of the tribunal and the documents in the appeal file.

2. My decision is that no allowance is to be made under Sch. 3A Child Support (Maintenance Assessments and Special Cases) Regulations 1992 SI No. 1815 for the two transfers at issue here, as the evidence shows that they were made expressly for the purpose only of compensating the parent with care for the loss of her right to apply for or receive capital provision in respect of herself within the meaning of para 1(1)(e) and this is sufficient to exclude them from counting as "qualifying transfers". The case is remitted to the child support officer to recalculate the relevant maintenance assessments over the period from 18 April 1995 accordingly.

3. This case concerns the maintenance for two children, now teenagers or nearly so, who have lived with their mother since their parents' marriage broke up some nine years ago. In January 1990 she petitioned for divorce, with claims for periodical maintenance, property adjustment and lump sum provision orders being included in her petition in the usual way. Negotiations through solicitors on financial matters were successful and led to an agreed order made by the district judge on 19 February 1993, at pages 41-44.

4. In particular, that order implemented a principle agreed between the parties that the family home was to be transferred into the sole ownership of the children's mother in satisfaction of her own capital claims, as distinct from those for maintenance for herself or the children. This was recorded expressly in the letter dated 22 August 1991 from the father's solicitors at page 40 of the file, saying that:

"The former matrimonial home is agreed to be worth approximately £75,000 subject to a mortgage of £45,000. It is, as it has been from the outset of these proceedings, our client's proposal that the former matrimonial home should be transferred into your client's sole name subject to his release from the covenants under the existing mortgage in consideration for which your client would consent to the dismissal of her claims for capital and property adjustment orders.

The District Judge of the ... County Court is not willing to dismiss a Petitioner wife's maintenance claims when she is dependent upon Income Support and we propose, therefore, that maintenance for your client should be in a nominal sum of, say, 0.5p per annum on the understanding that your client will not seek to vary this except in unforeseen circumstances in view of the fact that she had received the whole of the capital.

Our client would then propose to pay child maintenance at the rate of £40 per week per child payable to your client for the benefit of the children. Whilst such maintenance would be of little benefit in the short term whilst she remains on Income Support it would be a real benefit to her once she is able to obtain paid employment."

5. The order itself contained two separate recitals that

(1) the parties agreed that "the provision referred to hereafter is accepted in full and final settlement of all claims the petitioner and respondent may have against each other for capital and other property adjustment including all such claims arising under the Matrimonial Causes Act 1973 (as amended) the Married Women's Property Act dated 1882 (as amended) or any claim which each may have against the estate of the other under the Inheritance (Provision for Family and Dependants) Act 1995"; and

(2) the petitioner agreed that "save in unforeseen circumstances she shall not apply to the court to vary the periodical payment order herein made in her favour".

6. The material parts of the order, expressed to be made by consent, were that:

"1. The Respondent do pay or cause to be paid to the Petitioner periodical payments at the rate of five pence (£0.5p) per annum during their joint lives or until her earlier death or remarriage or cohabitation for a period in excess of three months whereupon the Petitioner's claims for periodical payments and secured periodical payments do stand dismissed...

2. That the Respondent do pay to the Petitioner for the children of the family [then followed their names and dates of birth] weekly periodical payments as from the date hereof at the rate of £30.00 per week per child...." [adjusted to £40 per child if she remarried or re-entered full time employment, when the payments would no longer be likely to be offset by income support]

3. The Respondent do within 28 days ...

(a) Transfer to the Petitioner all his legal estate and beneficial interest in the former matrimonial home known as [... ...] ("the Property") subject to the mortgage thereover ... And it is certified for the purposes of the Civil Legal Aid (General) Regulations 1989 that the Property has been recovered for the Petitioner for use as a home for herself and her dependants

(b) Assign to the Petitioner his interest in [the first of two endowment policies they owned]

4. The Petitioner do within 28 days assign to the Respondent her interest in [the second policy]

5. Upon compliance by the parties with paragraphs 3 and 4 hereof the Petitioner's claims for secured periodical payments property adjustment and a lump sum order contained in her Petition dated 23rd January 1990 and the Respondent's claims for periodical payments, secured periodical payments, lump sum order and a property adjustment order ... be dismissed ... "

7. As shown by evidence in the divorce proceedings which was before the tribunal (page 53), the matrimonial home was owned by the two spouses as beneficial joint tenants at the date of the order and they had a joint endowment mortgage. There is no dispute that following the making of the order the children's father did duly transfer his interests in the house and the first endowment policy to their mother pursuant to para 3.

8. That order had been made on 19 February 1993. Subsequently the child support legislation came into force, and at some time after that the children's mother applied for a maintenance assessment. I imagine she will have been required to do so as an income support claimant, but the exact details do not matter. The only issue on this appeal arises because from 18 April 1995 the father's maintenance obligations were reduced by the child support officer making him an allowance of £40 per week on the basis that his transfers under para 3 of the court order had been "qualifying transfers" under Sch. 3A. That schedule gave absent parents an extra allowance in their "exempt income" from 18 April 1995 for certain property or capital transfers under pre-6 April 1993 court orders or maintenance agreements that had not been expressly confined to the personal claims of the parent with care and thus detached from questions of child maintenance.

9. The calculation showing how that amount was reached is at pages 14-16. The only point that makes any practical difference is that the children's father was credited with having made a "qualifying transfer" of the whole value of the former matrimonial home as though he had been the sole owner of it before the court order, when in fact (see para 7 above) the beneficial ownership had been joint so that his actual interest was less.

10. The children's mother appealed against any allowance at all being made, on the ground the transfers had nothing to do with child maintenance when agreed between her and their father and approved by the court, and should not suddenly start affecting the money he paid for his children now. The tribunal which heard the case on 5 February 1997 accepted the first part of this argument but not the second. They considered they were bound to confirm the allowance, because the definition of a "qualifying transfer" in Sch 3A required them to look only at what was explicitly stated in the court order itself and ignore the other evidence showing that the transfers had in fact been attributed to her own personal claims only.

11. This appears from the following passage in the very clear and well laid out record of their decision on pages 61-62:

"... The Tribunal, therefore, are quite satisfied that the transfer to her of the matrimonial home was made on the basis that she should not pursue her own personal claim but that [the father] would continue to pay a full level of Child Maintenance.

However, looking at the provisions of Schedule 3A of the Maintenance Assessments and Special Cases Regulations, we note that in order to be a qualifying transfer sub-paragraph (e) says that the transfer "was not made expressly for the purpose only of compensating the parent with care for the loss of any right to apply or receive periodical payments or a capital sum in respect of herself". We have considered in this case whether the transfer could be construed as being expressly made for that purpose. Certainly the effect of the solicitors' letter is quite clear that that was the purpose of the transfer. However, it appears to the Tribunal that the correct interpretation of Schedule 3A was whether the court order itself or the maintenance agreement, if that was the instrument used, stated that the transfer was expressly for the purpose only of compensating .... there is no question that this was the case although the court order provided for the transfer of the property and the nominal maintenance for [the mother], it did not expressly state that the transfer was in compensation for her giving up her rights in that respect and we, therefore, consider that this transfer fulfilled all the conditions of this schedule and is, therefore, a qualifying transfer. We consider, therefore, that the allowance given by the Child Support Officer is correct because clearly the transfer was for more than £10,000 and that is not in dispute."

12. This appeal, brought by the children's mother with the leave of the tribunal chairman, is one of a number in which similar questions arise. The next few paragraphs attempt to summarise in general terms how I think they should be answered.

[The summary that follows is common to several decisions and I hope those who have to read more than one of them will forgive some repetition for the sake of uniformity. I should like here to express my thanks for the intelligent and helpful submissions I have received in many of the cases, particularly from the child support officers concerned. It is not their fault that the legislation is difficult, or that - most regrettably in such a sensitive area - some government "guidance" has failed to reflect what the regulations actually say, and caused extra mistakes to be made.]

13. Under Sch 3A an allowance in favour of absent parents is to be made for certain transfers of "property" (as defined) under pre- 6 April 1993 divorce or separation arrangements subject to meeting a number of conditions. The one that has caused most difficulty in interpretation, and the only one needing to be set out here, is in para 1(1)(e) by which the transfer must have been one

"(e) which was not made expressly for the purpose only of compensating the parent with care for the loss of any right to apply for or receive periodical payments or a capital sum in respect of herself".

14. The issues that arise in this and similar cases are first, whether the tribunal were right in the way they understood what was required by the words "made expressly for the purpose only"; second, what meaning should be given to "the loss of any right"; and third, if condition (e) is answered in favour of the absent parent so that an allowance is due to him, what is to be taken for this purpose as the "property transferred" when the subject matter is an interest in a larger asset held in joint or shared beneficial ownership such as the family home.

First issue: "made expressly for the purpose only"

15. The meaning of this expression has been considered in several Commissioners' decisions now. All are in my judgment wholly consistent on the principles to be applied, and the following propositions can be extracted:

(1) The words must be construed in the context of the purpose of Sch 3A, which is that a (limited) reduction of child support should be made for past property or capital transfers which may have had some effect on child maintenance awarded or agreed before 6 April 1993: CCS 1554/97 para 3; CCS 14368/96 paras 13-14.

(2) The presumption is that all past clean-break transfers will have had some such effect, so that condition (e) is answered in favour of the absent parent without further inquiry except where the purpose of the transfer was expressly confined to the claims of the parent with care herself: ibid; CCS 1554/97 paras 8-10; CCS 1788/97 paras 17-20.

(3) Conversely if the purpose as expressed does satisfy the wording, that is also the end of the inquiry: this time it must be answered in favour of the parent with care, and the transfer cannot be a qualifying transfer.

(4) Nothing requires that express purpose to be discerned from the terms of the relevant court order, maintenance agreement or transfer document alone. If it appears clearly and explicitly from other surrounding documents or evidence that is sufficient: CCS 16814/96 para 13; CCS 1788/97 paras 14-17.

(5) Since all that matters is whether or not the express purpose falls within the terms of condition (e), all of the following are alike irrelevant:

(a) subjective evidence of intention or motive ("I only let her have the house for the sake of the children");

(b) speculation or inference ("the child maintenance was the same before and after the transfer so it must have been for the wife alone");

(c) calculations of who may have derived some direct or indirect benefit.

(6) It follows from (5)(c) that the condition may exclude a transfer from being a "qualifying transfer" notwithstanding

(a) any incidental benefit to a child, such as going on living at the family home after the transfer: the inquiry is concerned only with the financial claims to which the transfer is attributed: CCS 16518/96 para 11; CCS 1554/97 para 7; or

(b) any mere statement of intention not affecting the actual interest taken or the terms on which the property is held: e.g. the standard certificate to postpone a legal aid charge, that the house is to be used by the parent with care as a home for herself and/or her dependants: ibid; CCS 1788/97 para 18.

16. (I would add that I am not sure it is right in any case to regard the living arrangements after the typical clean-break transfer, of a jointly-owned family home to the parent with care, as a benefit to the children from the transfer: even if there had been no transfer at all and the ownership was still joint, what court would order the house sold so as to put the children out on the street? But in view of para (6)(a) above it is not necessary to pursue this. Nor is it necessary to try and define here the exact dividing line between mere statements of intention to which para (6)(b) applies, and those rarer cases where provisions included in e.g. a continuing trust of the property can be relevant: cf. CCS 14368/96 paras 3, 18).

Second issue: "the loss of any right"

17. The questions on this issue can be shortly stated. For condition (e) to operate in favour of a parent with care, is it sufficient if any right among those listed is "lost" to her or must they all be; does the word "only" mean that (e) can never operate in her favour if the transfer included an element of compensation for a right not listed (e.g. to apply for a property adjustment order); and what in any case is meant by "loss" in this context?

18. The first of these points was considered by the Commissioner in CCS 16518/96 where he held that the words used were capable of only one meaning and compelled him to what he plainly considered an unjust result. This was that "any" had to be read as "all"; with the consequence that a transfer attributed solely to claims of the parent with care having nothing to do with child maintenance still had to cause a reduction in child support if all such claims were not lost at the same time by reference to the transfer. The mere preservation of a token 50p "periodic maintenance" for the parent with care was sufficient to cause this result even though it too had been for her own exclusive benefit. However in CCS 1554/97 the point was revisited at para 6, where the Commissioner refrained from expressing any view on the actual conclusion in the earlier case but considered that in the one before him the preservation of a right to substantial periodical payments for some time after the transfer would not have prevented (e) from operating.

19. In view of the reservations about the conclusion in the earlier case and the different approach evident in the later one I have felt it necessary to reconsider this point for myself. I differ with extreme reluctance from the Commissioner in CCS 16518/96, especially in a field where certainty is of the highest importance for all concerned. However I have to say that I think his conclusion too pessimistic. To my mind, contrary to the argument accepted in para 12(1) of his decision that "any" meant "all" and "cannot sensibly mean anything else", the language does contain a genuine ambiguity. It is like one of those optical puzzles that seem to turn themselves inside out as you stare at them: if you suffer "the loss of any right" it can mean that you have lost any right you ever had; but it can equally mean you have lost any one of your rights.

20. Given that ambiguity I have no hesitation in choosing the meaning which assists, rather than frustrates, the manifest purpose of Sch 3A. In my judgment, child support officers and tribunals should apply sub-para (e) on the footing that a total loss of the entirety of the rights of the parent with care is not essential before the condition can operate in her favour. If a transfer was expressly confined to the sole purpose of compensating her in respect of her rights to the exclusion of any element of child maintenance, it should not be brought back artificially into the child support reckoning just because one among her several rights mentioned in sub-para (e) may have been dealt with separately or has been vestigially preserved.

21. Nor in my judgment should the word "only" be read here as imposing a condition that if the compensation package is not confined to the rights enumerated, the answer to sub-para (e) must always be in favour of the absent parent. Again it would stultify the purpose of Sch 3A to read it in that way. The most obvious example is that sub-para (e) fails to mention the right to apply for a property adjustment order, almost universally covered in the normal clean-break arrangement in the same breath as lump sum capital provision but in fact a separate right: see ss. 23, 24 Matrimonial Causes Act 1973. The function of "only" is not to draw artificial distinctions between different claims of the parent with care but to separate out transfers that were confined to her own claims from those that may have affected the children: cf. CCS 1554/97 paras 8-10; CCS 1788/97 para 20. The word must in my view be read here with its emphasis thrown forward over the whole of the intervening phrase, to the final and perhaps most important word in the whole of sub-para (e): "herself".

22. Finally the word "loss" is in my judgment impossible to read literally in this context. This is for two main reasons. First, sub-para (e) must be intended to have meaningful operation where the transfer was under a written maintenance agreement within (a) rather than a court order, and this would be impossible if "loss" is taken literally because as is well established the right to apply to the court cannot actually be lost or extinguished by this means at all: Minton v Minton [1979] AC 593, 605; De Lasala v de Lasala [1980] AC 546. Second, it must also be intended to apply to awards of capital or property transfers ordered or agreed in satisfaction or fulfilment of a claim by the parent with care, though in normal language that is not really compensation for the loss of a right to apply to the court, but the result of the right being exercised. "Compensation for the loss" has therefore in my judgment to be read broadly, to include all such cases. Specifically, "loss" must include cases of capital provision by lump sum payment or property transfer order, as such orders can only be made on a once-for-all basis and automatically extinguish all further possibility of applying for such provision: de Lasala, supra. But given the first point and following CCS 1554/97 para 6, I would also read it so as to include a partial loss, and a payment or transfer in or towards satisfaction of a right of the kind referred to even where it is not totally extinguished. It cannot have been intended that fine distinctions about exactly what is "lost" should distort the real question for which sub-para (e) is testing: was this transfer related solely and expressly to the parent with care herself?

Third issue: the property transferred

23. The value of the transfer to be used as the starting point for the calculation of any allowance under Sch 3A is that of the actual interest or other property transferred by the absent parent out of his own beneficial ownership, not any larger underlying asset if his interest is a joint or shared one: Secretary of State v Henderson, (CA 18 November 1998, affirming CCS 14368/96). That this is the plain effect of the regulations is not open to doubt and in my view it never was: cf also CCS 1788/97 para 22.

Application to the present case

24. Applying the principles outlined above to the present case, the tribunal on 5 February 1997 did in my judgment err in law in holding themselves bound to look only at the terms of the court order itself and to ignore other evidence in deciding whether the transfers were confined expressly to the claims of the parent with care: para 15(4) above and the cases there cited. On the basis of their findings, with which I entirely agree, that the purpose of the transfer was in fact confined solely to her rights in respect of herself and was expressly recorded in the solicitors' letter referred to (paras 4 and 11 above), their decision on "expressly" should have been in favour of the parent with care.

25. That makes it necessary to consider the second issue, with particular reference to the fact that for the reasons recorded in the letter the transfers were expressly attributed to her claims for capital and property provision, and her own claim for periodic maintenance was dealt with in a different way. For the reasons given in paras 17-22 above I would hold that condition (e) does operate in favour of the parent with care on the facts in this case, and is not prevented from doing so by the token 5p order.

26. For the sake of completeness though on the view I take of the other questions it does not arise, I record that the tribunal also erred (understandably, given the way it was put to them) in approving the child support officer's calculation of the £40 weekly allowance. Their declaration that "clearly the transfer was for more than £10,000" is based on the child support officer's mistaken assumption that the value to be used as the starting point for the reckoning was that of the whole house even though the absent parent was the joint, not sole, owner of it. The correct method of calculation in such cases is explained in case CCS 14638/96 Henderson supra; as the house here was in joint beneficial ownership and the nature of such ownership is that neither party has any greater interest than the other, the correct starting figure for the calculation was only half what the child support officer assumed it to be. On that basis if any allowance had been due it should have been only £20 a week.

27. In the result therefore I allow the appeal by the parent with care and substitute my own decision set out in paragraph 2 above that no allowance is to be made to the absent parent in respect of the property and capital transfers at issue in this case.

(Signed)

P L Howell
Commissioner
25 January 1999

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