UK Social Security and Child Support Commissioners' Decisions

 


DECISION OF THE CHILD SUPPORT COMMISSIONER

Commissioner's Case No: CCS/4378/2001

1. My decision is as follows. It is given under section 24(2) and (3)(d) of the Child Support Act 1991.
2. 1. The decision of the Hull appeal tribunal, held on 14^th August 2001, is wrong in law.
3. 2. I set it aside and remit the case to a differently constituted appeal tribunal.
4. 3. I direct that appeal tribunal to conduct a complete rehearing of the issues that arise for decision in accordance with my analysis of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 and my directions in paragraphs 24 to 26.

The appeal to the Commissioner

5. This case concerns the child support maintenance payable with respect to Sam and Ben. In the terminology of the child support legislation, the appellant is their absent parent, and the second respondent is their parent with care. I shall refer to them in those terms.
6. This is an appeal to a Commissioner against the decision of the appeal tribunal brought with the leave of a district chairman. The Secretary of State does not support the appeal.

The issue

7. The relevant facts of the case are not in dispute. The absent parent was employed at a particular salary and his liability for child support maintenance was assessed on that salary. He took a new job with the same employer, which carried a lower salary. However, by mistake, the employer did not reduce payments of salary. The child support maintenance continued to be calculated on the basis of the salary paid rather than the salary to which the absent parent was entitled. When the employer realised the mistake, the absent parent's salary was reduced to its proper level and the overpayment was recovered by deduction from salary in monthly instalments. The absent parent asked for these deductions to be taken into account. However, the Secretary of State decided that there was no power to take account of the deductions in order to reduce the absent parent's income. The appeal tribunal confirmed that decision on appeal.
8. The absent parent complains, not surprisingly or unreasonably, that he has suffered a double penalty. He was treated as having the income when he was overpaid, but can receive no relief when it is recovered.
9. The amount involved is substantial. Recovery is at the rate of £250 a month over a period of 5 years.

Is there power to take account of the deduction from salary?

10. No, there is not. The tribunal came to the correct conclusion on this issue.
11. Earnings and deductions for purposes of the child support formula are governed by Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992.
12. 1. The whole of the absent parent's salary before deduction was 'earnings' within paragraph 1(1). It was the 'remuneration or profit derived from … employment'. That is supported by the structure of Part I of the Schedule. It treats salary as earnings even if it never comes into the hands of the parent, for example because it is deducted before payment is made. So, there is no way in which the deduction can be disregarded by treating it as falling outside the basic definition of earnings in paragraph 1(1).
13. 2. Some payments are expressly excluded from earnings. They are exhaustively defined in paragraph 1(2) of the Schedule. None covers a deduction to recover an overpayment of salary. The closest is an advance of salary, but that cannot be interpreted to cover the recovery of an overpayment.
14. 3. Finally, some deductions are expressly taken into account. These are exhaustively defined in paragraph 1(3) of the Schedule. They cover deductions for income tax, national insurance and pension contributions.
15. I have considered whether paragraph 2 of the Schedule is relevant. This defines the period by reference to which earnings are to be calculated. Disregarding the period when the overpayment was recovered would not help the absent parent, because his earnings would be calculated by reference to his salary without the deduction. Disregarding the period when the salary was being overpaid would not help him either. Earnings have to be calculated by reference to a period. Viewed as at the time of the overpayment, only an earlier period could be taken into account, during which the absent parent was earning the higher salary appropriate to his previous job. Paragraph 2 is concerned only with the choice of period used for calculating earnings. It does not allow part of a parent's earnings to be ignored.

Was the overpayment part of the absent parent's earnings when it was made?

16. No, it was not.
17. The solution to the apparent unfairness identified by the absent parent is that the overpayment of salary did not form part of his earnings at the time when it was made. The reason lies in paragraph 1(1) of Schedule 1. The absent parent was not entitled to the overpayment of salary. It was paid by mistake. The amount of the overpayment was not 'remuneration or profit derived from … employment'.
18. It is not necessary to refer to authorities for this conclusion. It follows from the wording of the legislation itself. However, the Secretary of State has referred to a decision of the Court of Appeal and I gave directions for observations on another. I comment on those authorities as submissions have been received.
19. The Secretary of State relied on the decision of the Court of Appeal in R v Bolton Supplementary Benefits Appeal Tribunal, ex parte Fordham [1981] 1 All England Law Reports 50. The issue was whether an overpayment of salary was a resource of the claimant for the purposes of the supplementary benefit legislation. The overpayment arose as a result of an industrial dispute. The claimant was a fire-fighter. He was paid on 15^th of each month. Each payment covered four weeks – the two weeks before the date of payment and the two week after it. The overpayment occurred because the claimant went on strike during the period covered by the payment. The Court of Appeal held that the overpayment was nonetheless a resource available to the claimant in the weeks in respect of which it was paid. The obligation to repay was irrelevant. As Lord Denning MR explained at page 53:

'I take a different view from the judge. He seemed to think that Mr Fordham's obligation to repay meant that he had not earned anything during the relevant period, and that he had not had any payment in advance, and the like. I take a different view because of the indefinite, uncertain and almost unforeseeable obligation to refund the money. It was so far ahead that it would not affect the immediate resources available to Mr Fordham.'

20. That case was distinguished by the Court of Appeal in Leeves v Chief Adjudication Officer, reported as R(IS) 5/99. I directed observations on this decision. The issue was how a student's grant income was to be treated for the purposes of the income support legislation. The overpayment occurred when the claimant abandoned his course. The Court of Appeal held that his grant was to be treated as his income until he came under an immediate obligation to repay upon being invoiced by the local authority. Before the invoice was issued, the claimant had a potential obligation to repay, but it did not give rise to an immediate liability. Once the invoice was issued, the claimant was under an immediate obligation to repay and the grant lost its character as income. The claimant had given an undertaking to the local authority, but this was only that he would 'repay such sum as may be determined' if he ceased to attend his course. The Court held that that was too vague to found an immediate obligation.
21. One point is clear from both decisions. The interpretation of the statutory language depends on its context.
22. The issue in Fordham was whether, viewed week by week, money paid to the claimant was a 'resource'. The Court of Appeal's decision is understandable, because the money was clearly available to the claimant in order to meet his day-to-day living expenses until he had to repay it. No issue of how the recovery would be treated under the legislation arose.
23. That issue did arise in Leeves in the context of how grant fell to be treated as 'income'. The Court of Appeal expressly stated that Fordham was decided on different legislation and had not been concerned with a comparable issue. It also expressly stated that it was concerned with 'ordinary notions as to nature of income' and the 'ordinary understanding of the word'.
24. In contrast, the child support legislation has a precise phrase that has to be interpreted – 'remuneration or profit derived from that employment'. That is different from both 'income' and 'resources'. That phrase has to be interpreted in the context of the Schedule as a whole, specifically in the context of Part I. The purpose of the calculation is to identify the net earnings that are available to the absent parent and from which the parent's liability for child support maintenance must be met. Given that there is no power to take account of the deduction by way of recovery, there is obvious sense in excluding the overpayment itself from the scope of the parent's earnings in order to prevent a double penalty. There is some, albeit limited, support for that conclusion in paragraph 1(2)(d), which excludes advances of salary from earnings.
25. Again in contrast, the overpayment to the absent parent in this case was immediately recoverable from him. Apart from any express or implied term in his contract of employment, his employer was entitled to recover the overpayment in restitution as paid by mistake. In the circumstances of this case, the absent parent knew immediately by how much he had been overpaid and he would have no defence to the action for recovery. That is different from Fordham, where the claimant only knew one day at a time that he had been overpaid. It is also different from the vague undertaking given by the student in Leeves.

Conclusion

26. The tribunal was correct in law on the argument put to it by the absent parent. It went wrong in law by not considering the possibility that the overpayment did not form part of the absent parent's earnings in the first place. I make no criticism of the tribunal for overlooking that possibility.
27. As the tribunal went wrong in law, its decision must be set aside.
28. I have considered whether to give my own decision, to refer the case to the Secretary of State or to direct a rehearing before the tribunal. In view of the limited information before me, it is impossible to tell whether the tribunal had jurisdiction that would allow it to correct the absent parent's past liability for child support maintenance. The history on page 6 is obviously inaccurate (it refers to a decision given in February 1998 with an effective date of November 1998) and may be incomplete. So, I cannot give my own decision. In view of the lack of a complete history, I cannot be sure of the directions that the Secretary of State would need in order to implement my decision. The same difficulty arises if I direct a rehearing before a tribunal. On balance, in those circumstances a reference back to the tribunal is the least unattractive option.
29. I give the following directions for the rehearing.
30. The starting point is an accurate and complete history of the decisions that have been given on the absent parent's liability by the Secretary of State. That must be provided by the Secretary of State.
31. The tribunal must consider that history in order to identify whether the absent parent's application gives it jurisdiction over a decision that governed all or part of the period during which the overpayment occurred.
32. If it does, it must consider whether it has power to alter that decision to remove the overpayment from it. The difficulty that the tribunal will have is finding an effective date that will allow it to give a decision favourable to the absent parent. The relevant legislation is in regulation 23 of the Child Support (Maintenance Assessment Procedure) Regulations 1992. If the change of decision is based on a change of circumstances, the tribunal may not be able to fix an effective date that covers the whole, or even a part, of the overpayment period. A change of decision based on a mistake of fact or law could produce a more favourable effective date, but the decision to be changed would have to be one that was given after the overpayment had begun.
33. If the tribunal does not have jurisdiction over a relevant decision, the absent parent may apply to the Secretary of State for a revision or supersession. But the Secretary of State will have the same problems with effective dates as would the tribunal.

Signed on original

Edward Jacobs Commissioner 27th March 2002