UK Social Security and Child Support Commissioners' Decisions

[1999] UKSSCSC CCS_1410_1998 (18 June 1999)

 


R(CS) 10/99

Mr. P. L. Howell QC CCS /1410/1998
18.6.99

Maintenance assessment – calculation of protected or disposable income – whether payments of school fees in respect of children of a previous marriage being made pursuant to an undertaking to a court can constitute "maintenance under a maintenance order"

The parent with care of a child made a maintenance application in 1996 against the absent parent, who was a married man who had been previously married and had children by the first marriage. In making the maintenance assessment, the question arose as to whether any deduction should be made in the calculation of the absent parent's protected or disposable income under the provisions of regulations 11-12 of the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 in respect of his liability to maintain the children of his first marriage.

That liability arose under two provisions in a court order made in 1987 by consent in divorce proceedings brought by the absent parent's first wife. The operative part of the order required the absent parent to make periodical payments of specified amounts to each of the children. The terms of the order also included an undertaking to the court by the absent parent "to be responsible for the school bills ….. for each of the three children". The two provisions had been negotiated and approved by the court in conjunction with one another, and the order for periodical payments would have been much higher if the undertaking had not been given.

The child support officer decided that the specified sums for periodical payments should be deducted in the calculation of disposable income but not the payments for school fees which the absent parent was still making, on the grounds that payments in accordance with an undertaking did not constitute "maintenance under a maintenance order" as specified in regulation 11(2)(a)(ii) of the Maintenance Assessment and Special Cases Regulations. The absent parent appealed to a child support appeal tribunal. The tribunal (by a majority) confirmed the decision of the child support officer regarding the payments for school fees. The absent parent appealed to the Commissioner on this issue.

Held, allowing the appeal, that:

the term "maintenance" in regulation 11(2) of the Maintenance Assessments and Special Cases Regulations includes the fees and other expenses of a child's education – re Breed's Will Trusts (1875) 1 Ch D 226 followed (paragraph 23);

terms of regulation 11(2) of the Maintenance Assessments and Special Cases Regulations because the undertaking could be considered to be an integral part of the 1987 order for this purpose – Gandolfo v. Gandolfo (1981) QB 359, CA, applied (paragraph 31).

The Commissioner substituted his own decision, giving a direction to the child support officer that account should be taken of the school fees in the calculation of the absent parent's disposable income.

DECISION OF THE CHILD SUPPORT COMMISSIONER

1. My decision is that the decision of the child support appeal tribunal given on 7 October 1997 was erroneous in law in the directions given on the absent parent's protected income and I therefore set it aside. I substitute my own decision that in calculating his "disposable income" for this purpose under reg. 12 Child Support Maintenance Assessments and Special Cases Regulations 1992 SI No. 1815 for relevant maintenance assessment weeks from 13 January 1997 onwards, he is entitled to a deduction for payments actually being made by him in respect of school fees and other educational expenses to the age of 18 for his children by his first wife, pursuant to the terms of his undertaking contained in an order of the court dated 5 February 1987 a copy of which is at pages 186-188 of the appeal file. In all other respects I confirm the directions of the tribunal and I remit the case to the Secretary of State for the child maintenance assessments for the relevant periods to be recalculated accordingly.
2. This case concerns the maintenance for a boy now aged 13 whose father, the absent parent, had been previously married and also has children by his first marriage. I held an oral hearing of the appeal at which the boy's father who is the appellant appeared and conducted his case in person. The respondents are the child support officer who appeared by Leo Scoon of the solicitor's office, Department of Social Security, and the boy's mother who did not appear. The proceedings arose out of a maintenance application she made on 12 August 1996 and a maintenance assessment made in respect of him from the effective date 10 January 1997, as explained in the child support officer's submissions to the tribunal at pages 3-24.
3. For the material facts and the issues so far as this appeal is concerned I can do no better than repeat the exemplary statement provided by the tribunal explaining the reasons for their decision of 7 October 1997 at pages 232-234. (I would comment that it is lucky there is such a good statement of the tribunal's findings of fact and reasons in this case; as the tribunal service has regrettably failed to provide anything like a legible record of the actual proceedings. Such failures continue to be all too common despite the Commissioners' remarks in cases CDLA/4110/1997 and CIB/3013/1997 well over a year ago now: there is no reasonable excuse for them and I hope they will cease.)
4. In the words of the tribunal:

"1. The appellant and the respondent are the separated parents of M born 20 May 1986.

2. The appellant has 3 children from a previous marriage and on 5 February 1987 by way of final settlement of his matrimonial proceedings an order was made providing, inter alia, for periodical payments for the 2 younger children of that marriage.

3. There was no dispute before this tribunal that a number of errors existed in the second (reviewing) child support officer's calculations of 22 May 1997, and that the matter required remittance to a child support officer for the maintenance assessment to be revised.

4. The original maintenance assessment should have an effective date of 10 January 1997, the provisions giving the appellant a period of eight week's grace applying, since he returned the completed form MEF within 28 days of it being issued to him.

5. The appellant agreed with the calculation of his own housing costs within both his exempt and protected incomes, this having previously been a matter at issue.

6. The appellant accepted that at the relevant time he was not paying additional voluntary contributions to his pension, and therefore they were not to be taken into account in his net income calculation.

7. An error occurred in the submission in referring to a multiple assessment calculation as having been made. It was not in fact done in this case, and neither is such calculation appropriate as the appellant was not an absent parent in relation to more than one family unit within the Child Support Agency Scheme.

8. There was no dispute that an error existed in the protected income calculation of the appellant, and further the Tribunal could not be satisfied that correct calculations had been made in the assessable incomes of either party as the figures were not fully set out in the bundle of documents.

9. The main part of the hearing centred upon the court order of 5 February 1987 in relation to the children of the appellant's previous marriage, and the applicability of that order in relation to this maintenance assessment.

10. The order, set out at R6 to 8 of the bundle was made by consent of the parties in that matter. There was a preamble to the order in the form of various undertakings. Relevant was an undertaking by the appellant (the respondent in the matrimonial proceedings) to be responsible for "school bills" for all three of the children. The oldest child ceased full-time education prior to the relevant time in these proceedings, and the two younger children remain in private schools for which the appellant pays the fees. The appellant's daughter is at a day school and his son at a boarding school.

11. After the preamble the order continued by consent "it is ordered that", and various provisions including an order that the appellant make periodical payments for the two younger children at the rate of £2,335 per annum for each child. There is no dispute that that amount is equivalent to £89.81 per week as a total payment.

12. Child support legislation provides for maintenance payable under a court order for children of a previous relationship to be taken into account in the absent parent's disposable income calculation. That income then forms part of the protected income calculation.

13. The child support officer correctly included the periodical payments in the sum of £89.81, those being maintenance payable under a court order within the Maintenance and Special Cases Regulations 1992, Regulation ll(2)(a)(ii) within the appellant's disposable income calculation.

14. The question for the tribunal was whether any further amount, either the full sum or any lesser appropriate sum, should be allowed under that Regulation since the appellant had within the matrimonial proceedings undertaken to be responsible for the school fees.

15. Other than Maintenance and Special Cases Regulation 11 there is no provision within the child support legislation for payment under a court order to be taken into account.

16. The view of the majority of the tribunal was that the undertaking was not in law equivalent to the terms of the order, and that the wording of the regulation, being maintenance payable under a maintenance order, did not permit monies payable under an undertaking to be included.

17. The appellant contended that the order and undertaking would be seen as a "package" inseparable from each other and that both should be considered eligible as maintenance. He stated that the full amount of the school fees should be considered maintenance for the children, since were he not paying those fees his periodical payments would have been higher. The amount of periodical payments for each child was fixed at £2335 per annum since that was the personal allowance at the relevant time for taxation purposes. The order was therefore drafted in that way to be tax efficient. The Tribunal had no reason to doubt the appellant's factual evidence as to the making of the order, nor that he receives tax relief upon the periodical payments and a proportion of the school fees themselves.

18. In deciding that the undertaking was not the same as an order the majority of the tribunal considered strictly the wording of the regulation and further the child support legislation in general terms concerning the eligibility of court orders for consideration under the transitional provisions limiting payment of maintenance, and the qualifying transfer provisions. In each case court orders have been taken into account in a highly qualified way and strictly in relation to the orders themselves and the statutes under which such orders have been made.

19. The minority decision was that the undertaking imposed similar obligations upon the appellant as would a court order. The document from the court should be looked at as a whole, and therefore it fell within regulation 11. Following this decision of the minority of the tribunal it fell to be considered whether or not the payment of school fees constituted maintenance and the minority decision was that some element of the boarding fees as relating to board and lodging should be considered as maintenance although not expressed as such. The view taken was as a matter of commonsense, the child support legislation attempting to take into account obligations which had existed in relation to other children prior to the commencement of the legislation.

20. The other matters not being in dispute, the element of dissent within the tribunal was limited to the issue concerning the applicability of regulation 11 of the MASC Regulations.

21. The Chairman of the tribunal gave leave to appeal at the conclusion of the case."

5. Before me, it was common ground that the only point at issue on the appeal was whether the majority of the tribunal were right that no deduction could be made for the absent parent's obligations for school fees for the children of his first marriage. So far as the other matters dealt with by the tribunal in paras. 3-8 inclusive of their statement are concerned, it is accepted that the directions they gave were correct; and I therefore simply confirm them.
6. To understand the relevance of the point about school fees it is necessary I am afraid to look at some obscure and complicated provisions of the child support legislation about "protected income", which under para. 6 Sch. 1 Child Support Act 1991 are apparently intended to ensure that maintenance assessments under the Act do not have the effect of reducing an absent parent's income so far that he himself is left without enough to live on (in which case he might end up having to ask for assistance from public funds so that the whole process could become circular).
7. By para. 6, where one or more maintenance assessments have been made with respect to an absent parent and payment by him of the amount or amounts assessed would otherwise reduce his disposable income below his protected income level, the amounts of the assessment or assessments are to be adjusted in accordance with provisions to be prescribed by regulations

"with a view to securing so far as is reasonably practicable that payment by the absent parent of the amount ... so assessed will not reduce his disposable income below his protected income level."

Paras. 6(4) and (6) provide that an absent parent's "disposable income" and "protected income level" are each to be calculated in accordance with regulations.

8. The relevant regulations for the present purpose are in regs. 11-12 of the Maintenance Assessments and Special Cases regulations already cited. Reg. 11 prescribes that the "protected income level of an absent parent" is to be the aggregate of a number of separate amounts (a personal living allowance, housing costs and so forth) set out in a succession of sub-paragraphs (a) to (kk). Finally by sub-paragraph (l) there is an additional allowance of 15% of any amount by which the absent parent's "income" exceeds the total of the calculation under (a) to (kk).
9. For this purpose, it is prescribed by reg. 11(2) that "income" shall be calculated "in the same manner as N (net income of absent parent) is calculated under regulation 7"; but subject to a number of specified exceptions, of which the only one material is:

" (ii) There shall be deducted the amount of any maintenance under a maintenance order which the absent parent or his partner is paying in respect of a child in circumstances where an application for a maintenance assessment could not be made in accordance with the Act in respect of that child;"

Regulation 7 provides for the normal calculation of net income of an absent parent by reference to earnings and so forth. It does not itself contain any provision for allowing a deduction for the kind of maintenance payments in the passage just quoted.

10. All of this is however subject to an overriding provision under reg. 11(6) by which an absent parent's protected income level can never be less than 70% of his "net income" as calculated in accordance with regulation 7 itself; that is the "raw" calculation under regulation 7 without taking off anything for the maintenance payments identified in reg. 11(2)(a)(ii). I was told that although the final calculations have not been done in this case it was thought likely that reg. 11(6) does apply in this case so that the absent parent's protected income level will be 70% of his "net income" under reg. 7 as eventually calculated.
11. Nevertheless, the meaning of "income" and the specified deduction for "maintenance" under reg. 11(2)(a)(ii) remain relevant on either footing, as they come into the calculation of "disposable income" which is the other element in the comparison required by para. 6 of Sch. 1 to the Act.
12. By reg. 12(1) it is provided that:

"12. (1) For the purposes of paragraph 6(4) of Schedule 1 to the Act (protected income), the disposable income of an absent parent shall be –

(a) except in a case to which regulation 11(6) ... applies, the aggregate of his income and any income of any member of his family calculated in like manner as under regulation 11(2);

(b) subject to sub-paragraph (c), in a case to which regulation 11(6) ... applies, his net income as calculated in accordance with regulation 7 and

(c) in a case to which regulation 11(6) applies and the absent parent is paying maintenance under an order of a kind mentioned in regulation 11(2)(a)(ii)  ..., his net income as calculated in accordance with regulation 7 less the amount of maintenance he is paying under that order."

13. I should add that as helpfully pointed out by the child support officer in a written submission dated 8 September 1998 at page 262, that last sub-paragraph (c) was only inserted by an amending regulation [1996 SI No. 3196] with effect from 13 January 1997, with the result that while it potentially affects all weeks of assessment in the present case from 17 January 1997 onwards, it does not apply to the very first week from the original effective date of 10 January 1997: cf. reg. 33 Child Support Maintenance Assessment Procedure Regulations 1992 SI No. 1813.
14. Under the protected income provisions the question in this case is whether in the relevant period the absent parent was paying anything that counted as "maintenance" within reg. 11(2)(a)(ii). If he was, then its amount was to be deducted from his net income after it had been calculated in the normal way under regulation 7, so as to reduce what counted as his "disposable income" under either (a) or (c) of reg. 12(1). Further provisions under reg. 12(2) and (3) prescribe how the allowance is actually to work in such circumstances, but I need not be concerned with them: the question is whether the particular payments being made by the absent parent can come into the reckoning at all.
15. The court order at issue is referred to in the tribunal's statement and set out at pages 186-188 and for the present purpose I only need note a few of its provisions. It was an order dated 5 February 1987 made by Mr. Registrar Kenworthy-Browne in the principal registry of the Family Division, in the proceedings brought against the absent parent by his first wife for divorce and ancillary relief. In it, the parties were recorded as acknowledging that the provision "referred to hereafter" was accepted in full and final settlement of all capital or income claims they might have against one another under the matrimonial or family inheritance legislation. It also recorded undertakings by each of them as to the transfer of property interests, the release of the absent parent from his liability under a subsisting mortgage and the surrender of jointly held insurance policies.
16. The two further undertakings given by the children's father and material for the present appeal were in the following terms:

"And Upon the Respondent undertaking to be responsible for the school bills, including specified extras, for each of the three children ...[then followed their names] until each shall have attained the age of 18 years, ...

And Upon the Respondent further undertaking to discharge his liability in respect of the children's school bills promptly when each term's fees fall due ..."

Immediately after those undertakings the order continued:

"By consent it is ordered that:

As from the 1 day of January 1987 the Respondent do make periodical payments to each of the children of the family ... until they shall respectively attain the age of 18 years or further order at the rate of £2,335 per annum payable monthly in advance on the 28 day of each month by way of standing order into an account nominated by the Petitioner".

17. There then followed provision for some separate payments to the petitioner, and common form provisions extinguishing any claims by the two spouses against one another for further financial provision on the divorce or on the subsequent death of either of them.
18. As the tribunal correctly held and is not disputed by the child support officer, the specified sums the children's father was directed to pay from 1 January 1987 under the operative part of this order were payments of "maintenance" for which a deduction under reg. 11(2)(a)(ii) applies. It is common ground that the circumstances of this case meet the last part of the conditions under that sub-paragraph, namely that an application for a maintenance assessment could not have been made in respect of the children of the first marriage. I assume that is because this order has remained in force throughout and their mother was not on an income related benefit: cf. s. 4(10) Child Support Act 1991.
19. The father however maintained before me, as he had before the tribunal, that he was also entitled to have a deduction for the school fees he has continued to pay pursuant to his obligations under the undertaking recorded in the same order. As a matter of construction, this was in my judgment an undertaking being given by him to the court even though the order was made by consent and recorded the terms agreed between the parties. The provision to be made for the benefit of the children is of course a matter with which the court itself is concerned, quite independently of what the adult parties before it may agree between them.
20. According to the submissions and material provided by the boy's father which Mr. Scoon did not dispute and I accept, the financial obligations imposed on him by the undertaking to pay the school bills and the cash periodical payments for the children specified in the operative part of the order were interlocked, and complementary to one another. What had been negotiated between the parties for the court's approval, and accepted by it, was of course an overall provision for the maintenance and welfare of the children: it was part of the agreed terms that they should continue at their existing schools which were fee paying. The arrangement thus ensured that their education would continue without disruption, or uncertainty about where the money for it was coming from. The comparatively small amount of cash income in their own right had been determined mainly by the level of personal relief for income tax in force at the time. The children's father told me that he understood the financial provision approved by the court to have been done in this way so as to be "tax efficient"; and no doubt many other divorce court orders at that time were being structured in a similar way.
21. In order for the school fee payments to qualify for a deduction under the provision with which I am concerned in the child support regulations, the payments in question have to meet a number of specific conditions as well as being, as I accept they are, part of an overall financial arrangement made for their benefit on divorce. First a deduction is only allowable for "maintenance", second that must be "under a maintenance order" and third they must be amounts which the absent parent is actually paying in the relevant period for the assessment. The fourth condition, as to it not being possible to apply for a maintenance assessment for the children in question, is accepted as satisfied here as noted above.
22. "Maintenance" for this purpose is not given its own definition but in my judgment there is no doubt that what is being referred to here are periodical payments by way of maintenance or support to or for the benefit of the children in question: compare the expressions used in the definitions of "maintenance order" and "maintenance agreement" in ss. 8(11) and 9(1) Child Support Act 1991.
23. The maintenance of a child in the sense used here is again not given a special definition in the Act, but is a very well established concept in family, trust and inheritance law. In my judgment it bears here the same broad meaning as it does in the context of s. 31 Trustee Act 1925, s. 21 Matrimonial Causes Act 1973 and s. 1(2) Inheritance (Provision for Family and Dependants) Act 1975. There is no doubt that this meaning includes the fees and other expenses of a child's education: re Breed's Will Trusts (1875) 1 Ch D 226, 229 per Jessel MR..
24. Both the school fees and the incidental expenses required to be met by the children's father under the undertaking thus fall within the first condition. To qualify for a deduction he must of course produce satisfactory evidence of the amounts he has actually been paying, but that is a matter the Secretary of State will have to go into on the recalculation and no point of law arises on the third condition.
25. Everything therefore turns on the second: whether these payments were being made "under a maintenance order". There is no doubt that the order on pages 186-188 was such an order, and no doubt that the amounts payable by standing order under the first paragraph of its operative part (of £2335 a year for each child) met the condition. But was this also true of the payments made under the undertaking? As the child support officer points out and the absent parent agrees is beyond dispute, this was a different form of legal obligation: it stemmed from a promise given to and accepted by the court, not a direct order for payment actually made by it. For the difference, which is a well established one, see the judgment of Buckley J in re Hudson, [1966] Ch. 209.
26. I was referred to several authorities to assist me on this question. The one most directly in point is the judgment of the Court of Appeal in Gandolfo v Gandolfo [1981] QB 359. In that case, the facts of which bear some similarity to the present, the financial provision for the child of the marriage under a divorce court order consisted of an undertaking by his father to continue to pay his school fees coupled with a cash periodical payment order of £250 a year in his favour. The father fell behind on the school fees as well as the cash payments and the question was whether the court had jurisdiction to make a garnishee order in respect of both. This depended on whether all the payments, or only the direct payments under the operative part of the order, were the subject of "a judgment or order for the payment of money" for the purposes of what was then Order 27 Rule 1, County Court Rules 1936 and corresponding provisions then in Order 45 Rule 5 of the Rules of the Supreme Court.
27. It was held unanimously by the Court of Appeal that the terms of such an undertaking, interlocked as it was with a direct periodical payments order being made by the court at the same time, did fall within the expression "judgment or order for the payment of money". After referring to earlier authorities showing the well established practice of the court (particularly the Chancery Division which took a practical attitude in these matters) of treating an undertaking as equivalent to an order, Browne L J said at page 366H to 367C:

"Having regard to those authorities, it is in my view appropriate in a particular case to treat an undertaking as being equivalent to an Order for the purposes of Ord 27, r. 1 of the County Court Rules or the corresponding Rules of the Supreme Court. I am not saying that it would be appropriate in all cases, but in my judgment this is a case in which it would be appropriate. It is quite plain from the [court order at issue in that case] that the undertaking was an integral part of the Order.

So far as the child is concerned, the part of the order which I have already read provides that 'upon the basis of the [husband] undertaking to the court to continue to pay the school fees' the husband is to make periodical payments of £250 a year to and for the boy, a receipt of the wife to be a good and sufficient discharge on behalf of the child.

It is quite plain, for example, that if the undertaking had not been given, periodical payments for the boy would almost certainly have been increased, in order to cover the school fees."

He concluded at page 367F that "every argument of good sense and convenience" was in favour of the garnishee order made by the judge which had included the school fee obligations, and that there had been jurisdiction to make it.

28. It is inherent in that last point about jurisdiction that the school fee payments pursuant to the undertaking did count as payable under an "order for the payment of money" since this was a county court order: the jurisdiction to make it had to depend on the terms of CCR O. 27 r. 1, not on any wider concepts of inherent jurisdiction that might have come into play if it had been the High Court.
29. The authority of what was said by the Court of Appeal in Gandolfo has not so far as I am aware ever been doubted, and has been applied in other cases since: see for example Symmons v Symmons [1993] 1 FLR 317, a decision of Judge Hunter sitting as a deputy judge in the Family Division. This also concerned an order with an undertaking about school fees that interlocked with a small periodical payments provision. The judge concluded at page 322H that the circumstances brought the case within the principle of Gandolfo, since as he said: "I conclude that the undertakings as to periodical payments are an integral and indivisible part of the order and as enforceable by a judgment summons, therefore, as the rest of the order."
30. In the child support field, my attention was drawn to two Commissioners' decisions on very different forms of undertaking, neither of which was held on the particular facts to amount to a maintenance order in force at the relevant time for the purposes of the transitional provisions to prevent an unmanageable number of immediate applications under the Act during its initial phasing-in period: see Child Support Act 1991 (Commencement No. 3 and Transitional Provisions) Order 1992, SI No. 2644.
31. While not dissenting from the results reached in either of those cases I did not find the observations made in either of great assistance on the questions I have to decide. The provisions before me are in different terms and have a different purpose. What is at issue for reg 11(2)(a)(ii) on the facts of the present case is not whether there was any maintenance order at all but the quantification of the father's obligations under an order which undoubtedly is such an order within s. 8(11) of the 1991 Act. For this purpose, this order being an interlocking or "integrated" type of order of exactly the kind considered by the Court of Appeal in Gandolfo's case and there being no doubt in my judgment that, here as there, the direct payment part of it would have been greatly increased if the provision for the children's benefit by way of school fees had not also been there in the undertaking, it seems to me that the principle laid down by the Court of Appeal is of direct application as well as being good sense, and I ought to follow it.
32. I note that the Commissioner in CCS/8328/1995 at para. 13 accepted that there was nothing in principle making the authority of Gandolfo inapplicable to child support legislation, and in my judgment that is right. (So far as the jurisdiction to make orders for payment to third parties for the benefit of children is concerned I am not sure I follow what is said in para. 11 of that decision, in view of the express terms of s. 23 Matrimonial Causes Act 1973; the two cases cited were concerned with adults.) As regards case CCS/13462/1996, I would agree in particular with what the Commissioner says in para. 19 that whether an obligation set out in an undertaking can be treated as one "under" an order of the court is a matter for the interpretation of the legislation in relation to which the issue arises: and, I would add, the terms and circumstances of the particular undertaking and order in question. Mr. Scoon relied on the apparent breadth of what is said in the central sentence in para. 22 and in particular the words "even where the undertaking is an integral part of a court order": but that remark made in a different context, and in a case where there was actually no question of an "integrated" form of order of the Gandolfo type, cannot in my judgment provide a ground for not applying the Court of Appeal's reasoning where the order is of that type, as it is here.
33. For those reasons I allow the appeal and substitute the decision in paragraph 1.

Date: 18 June 1999 (signed) Mr. P. L. Howell QC

Commissioner