UK Social Security and Child Support Commissioners' Decisions

 


CCS/4438/2001

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. To a very limited extent I allow this appeal but not to nearly the same extent for which the applicant has argued. In accordance with the provisions of section 24 of the Child Support Act 1991 I set aside the decision made by the Cambridge tribunal on 21^st June 2001. I substitute my own decision. This is that although the tribunal referred to three mortgages of £80,000, £55,000 and £55,000 (and later gave a total for these of £210,000) the correct figures are £90,000, £55,000 and £55,000 (giving a total of £200,000). The annual income to be taken into account on this corrected basis is £66,666.66 rather than the £70,000 calculated by the tribunal. These were clerical and/or arithmetical errors made by the tribunal rather than being based on any misunderstanding of the law or facts. In other respects I adopt the findings and confirm the decision made by the tribunal. I refer the matter to the Secretary of State for the necessary consequent calculations and implementation.

Background

2. The appellant is the father and non resident parent of two boys born on 4^th September 1991 and 8th August 1993. In my decision I refer to him as "the father". The second respondent is the boys' mother and person with care. The boys are qualifying children for the purposes of the child support legislation. The father appeals by my leave, granted on 27^th March 2002 after an oral hearing of this application on 6^th March 2002, against the decision made by the Cambridge tribunal on 21^st June 2001. That decision was to fix the applicant with a weekly net income of £1293 and to order that child support maintenance should be paid at the weekly rate of £173.03 from 9^th June 1999. The mother attended the tribunal hearing but the father neither attended nor was represented.
3. I need not go into great detail on the background to this case On 16^th May 2000 an order was made for child support maintenance at the weekly rate of £5.20 from 9^th July 1999. The matter has continued to be dealt with under the child support legislation. On 12^th June 2000 the second respondent applied for a departure direction on the grounds of inconsistent lifestyle and diversion of income. The Secretary of State referred the matter to the tribunal, which gave the decision indicated in paragraph 1 above. (The tribunal wrongly stated that the Secretary of State had refused to make a departure direction and that the mother had appealed to it against this refusal. However, nothing turns on this mistake). On 28th September 2001 the chairman of the tribunal refused the applicant leave to appeal to the Child Support Commissioner against the decision of the tribunal. As indicated above, I granted leave to appeal on 27^th March 2002.

The County Court Proceedings

4. The father and mother in this case were never married to each other. As the tribunal stated, "After the relationship failed relations clearly became bitter". The mother initiated proceedings for a lump sum payment and other orders under the Children Act 1989. The District Judge in the County Court heard evidence and issued a reserved judgment which is reproduced on pages 29-35 of the bundle of papers before me. The judge made various findings and orders and stated that:

"Having considered all the evidence I have no hesitation in rejecting that of the [father]. … I am satisfied that [he] has tried to mislead the court as to his means."

5. The judge gave his reasons for making such findings but I do not have to go into them. The judgment, together with much of the evidence given in the proceedings, was placed in evidence before the tribunal. Paragraph 4 of the tribunal's full statement referred to certain inconsistencies in the father's accounts of his financial affairs. Paragraph 5 stated:

"This apparent inconsistency, the previous judicial findings about the [father's] lack of veracity on matters financial and the [mother's] sworn evidence about his propensity to engage in unrecorded cash transactions and his ongoing involvement in rally driving satisfied the tribunal that prima facie there had indeed been a significant understating of income to the CSA".

Admissibility of Certain Documents

6. The first ground of appeal that I have to consider is that, in effect, the judgment of the district judge, and the other documents which had been placed before the judge, were inadmissible in evidence before the tribunal. The father relies on the provisions of rule 4.23 of the Family Proceedings Rules 1991 (SI No 1247 of 1991). Subject to exceptions which are not relevant in this case rule 4.23 provides that:

23 (1) Notwithstanding any rule to the contrary, no document other than a record of an order, held by the court and relating to proceedings to which this Part applies shall be disclosed other than to-

(a) a party,

(b) the legal representative of a party,

(c) the children's guardian,

(d) the Legal Aid Board, or

(e) a welfare officer or children and family reporter,

(f) an expert whose instruction by a party has been authorised by the court,

without leave of the judge or district judge.

7. There is no doubt that, by virtue of rule 4.1(2), rule 4.23 applies to the proceedings that took place in the County Court in this case. Equally, there can be no real doubt that the full judgment and the other documents were more than "a record of an order", that they were disclosed to the tribunal and the Secretary of State, and that neither the tribunal nor the Secretary of State comes within the list in (a) to (f) above. The mother accepts that she did not seek the leave of any judge to produce the documents. Thus, there were breaches of rule 4.23. It is also clear that the tribunal placed weight on the evidence given in the County Court and on the judge's findings. If this evidence was admissible than the tribunal was entitled to do that. However, the next question is whether the breaches of rule 4.23 rendered the judgment and the other documents inadmissible before the tribunal.
8. In Webster –v- Chapman & Co [1989] 3 All ER 939 a report commissioned by the plaintiff's solicitors for the purposes of civil proceedings for negligence had been inadvertently sent by the plaintiff's solicitors to the solicitors for the defendant. The case raised questions relating to the operation of legal professional privilege but, in giving judgement as Vice Chancellor of the County Palatine, Mr Justice Scott also considered disclosure of confidential information generally. He said (at pages 945 and 947):

" The court must, in each case where protection of confidential information is sought, balance on the one hand the legitimate interests of the plaintiff in seeking to keep the confidential information suppressed, and on the other hand the legitimate interests of the defendant in seeking to make use of the information. There is never any question of an absolute right to have confidential information protected."

"It must be highly relevant to consider the manner in which the privileged document has come into the possession of the other side. It must be highly relevant to consider the issues in the action and the relevance of the document to those issues. It must be highly relevant to consider whether, under any Rules of the Supreme Court, the document ought in one way or another to have been disclosed anyway. All circumstances will have to be taken into account, as it seems to me, in deciding how the balance should be struck".

9. Clibbery –v- Allan [2002] 1 All ER 865 concerned proceedings following the breakdown of a relationship between the two parties in which the plaintiff claimed certain property rights. The plaintiff was unsuccessful in the action but had her story published in the newspapers. The defendant was granted injunctions restraining her from disclosing, other than to her legal advisers, any affidavit, statement, other document, oral evidence or the judgment in the proceedings. However, the judge refused to continue those injunctions in force and the Court of Appeal dismissed an appeal by the defendant against that refusal. The Court's reasoning was essentially that there was no basis for distinguishing these proceedings from proceedings in other litigation when it came to considering the confidentiality of proceedings. In her judgment, Dame Elizabeth Butler-Sloss also indicated obiter (at paragraph 75) that in the types of proceedings covered by the 1991 rules, information about children cases "is indisputably covered by privacy and secrecy and no information can be disclosed after the end of the case without the leave of the court".
10. In my view it is important to appreciate the following factors in the case with which I am dealing:

(a) the County Court proceedings related to property and lump sum orders and not to the care of the children

(b) the relevant documents were not obtained by any fraud, deceit, trick dishonesty or underhand means

(c) there is no question of disclosure of the County Court documents to the media or the public or for purposes other than those of legal proceedings which the parties are entitled to take. (It seems to me that the comments made by Dame Elizabeth Butler-Sloss were not intended to apply to other proceedings but to public disclosure).

(d) disclosure was made only to the tribunal (at a private hearing) and the Secretary of State (and now to the Commissioner) and their staffs, all of whom are governed by specific statutory requirements as to confidentiality

(e) in that disclosure of the documents was intended to lead to a higher rate of child support maintenance, it was in the interests of the children for disclosure to be made

11. Accordingly, I have reached the conclusion that the tribunal was entitled to admit the documents into evidence and to take them into account in making its findings of fact and its decision. To the extent that the findings of the tribunal rest on the evidence from the County Court documents which had been produced, I adopt them as my own for the purposes of this decision. It remains for the County Court itself to deal with any sanctions that arise from the breach of its rules.

The Tribunal's Findings

12. Most of the tribunal's findings on the substantive issue are in paragraph 4 of its full statement as follows:

" The basis of [the assessment of £5.20 per week] was accounts to 31^st July 1998. Those accounts show profitability of the business collapsing yet despite this apparent adverse trading situation the [father] chose to purchase land and build his own premises thereon. In order to do so he raised a commercial mortgage … of @£80,000 in addition to carrying a mortgage of £55,000 on domestic premises. Even allowing for the collateral value of turning a brown field site into commercial premises the lending institution had to be satisfied that the [father] was able to service his indebtedness. Subsequent to the effective date it would appear that the [father] managed to raise a further £55,000 this demonstrating a capacity to service a total of £205,000".

13. As I have indicated in paragraph 1 above, the figure of £80,000 should be replaced by £90,000. The total of £205,000 was later referred to by the tribunal as £210,000 but should be £200,000.
14. In paragraph 6 of its full statement the tribunal explained that it could find no other explanation for the lifestyle and expenditure other than "undisclosed and diverted income". The tribunal then made an allowance for the collateral advantage of site enhancement and assumed that the father could raise sums of 3 times his annual income. This suggested an annual income of £70,000 (one third of £210,000). Of course the correct figure on this basis would be £66,666.66 (one third of £200,000). Subject to this correction I adopt the tribunal's approach and findings. The tribunal then went on to consider whether it would be just and equitable to make a direction on the basis of the maintenance assessment of £173 per week produced from this income. It explained why it was just and equitable to do so and again I adopt its findings in this respect, subject to a correction of the weekly figure to a figure to be calculated by the Secretary of State on the basis of my new figure for the annual income.

Capital and Income

15. I now turn to the grounds of appeal dealing with the above calculations and findings. The father argues that the tribunal confused capital with income. There seem to be two aspects to this argument. One is that the County Court proceedings were dealing with capital needs and not day to day needs. However, the tribunal referred to the County Court proceedings mainly in relation to the credibility of the father's evidence in general and I do not see how the point raised by the father is relevant here. The second aspect seems related to the fact that the tribunal derived a figure for income based on assumptions about the claimant's ability to raise capital. In principle I see nothing wrong with this approach if the results of adopting it are consistent with evidence accepted by the tribunal. I accept that, as suggested by the Secretary of State, it would be wrong to make a departure direction in relation to income when expenditure is financed by capital, but that is not what happened here.

The First £55,000 Mortgage

16. It is agreed that a mortgage of £55,000 on commercial terms was taken out some years ago. The father argues that this was based on his income and circumstances at the time. However, the ability to continue to service such a loan in addition to the later loans (which the tribunal found had also to be serviced) was a relevant consideration for the purposes of calculating income at a later stage.

The Second £55,000 Mortgage

17. The father next argues that the tribunal treated a private loan as a mortgage. This relates to one of the sums of £55,000. He has now produced a letter dated 4^th March 2002 from solicitors confirming that they received a cheque for £55,000 on 13^th October 2000 to credit to the father's client account with the firm, and that this cheque was from as person with the same surname as the father. (The father has indicated that the cheque was from his own mother). This letter is addressed to the father's accountant. I see no reason why this evidence (which is still not very detailed, for example as to the reason for the cheque being sent and the terms on which it was obtained) could not have been obtained for the tribunal hearing. The decision cannot be rendered erroneous in point of law by virtue of evidence which was obtained nearly a year after the hearing took place.
18. The father accepts that the tribunal was not aware that this was a private loan, but argues that it also had no evidence to suggest that it was a loan obtained on commercial terms. However, it is not disputed that there was such a loan, it is reasonable to assume that unsecured interest free loans of £55,000 are rarely made and, in the absence of evidence to the contrary the tribunal was entitled to find that this loan was made on commercial terms.
19. The father argues that the timing of this loan means that it was wrong to take it into account for the purposes of the departure direction. However, on the facts found by the tribunal, the ability to raise and service such a loan on top of the other loans was a relevant consideration for the purposes of calculating income.

The One-Third Assumption

20. The father has now produced a letter dated 5^th March 2002 from the mortgagees of the £90,000 mortgage confirming that it was granted on 29^th January 1998 based on accounts showing a net annual profit of £19,600 and the saving of annual rent of £12,000. The mortgagee states: "The amount advanced was not solely based on 3 times the net profit agreed". This letter is also addressed to the father's accountant and again I see no reason why this evidence could not have been obtained for the tribunal hearing. I repeat that the decision cannot be rendered erroneous in point of law by virtue of evidence which was obtained nearly a year after the hearing took place. The father has also suggested that the letter shows that the mortgage figure was based on something like 5 times the income. This is a misleading suggestion because it was also based on the saving of rent – which would have increased the profits.
21. The one-third calculation was admitted by the tribunal to be crude but seems to me to be reasonable in the absence of any evidence to contradict it being found by the tribunal to be credible. (In fact, when the saved rent is taken into account the result of this crude basis of calculation does not seem to be so far off the actual relationship between the two figures).

The Approach To Regulation 25

22. Regulation 25(1) of The Child Support Departure Direction and Consequential Amendments Regulations 1996 provides that, subject to regulation 25(2), a departure direction may be made where the Secretary of State (or the tribunal or the Commissioner):

25(1) ... is satisfied that the current assessment is based upon a level of income of the non-applicant which is substantially lower than the level of income required to support the overall life-style of that non-applicant.

Regulation 25(2) provides that this shall not apply where the life-style is paid for out of his capital or by his partner (which the tribunal found was not the case here).

23. The Secretary of State has suggested that the tribunal was in error in not following the approach indicated by Mr Commissioner Jacobs in paragraph 30 of CCS/2623/1999. However, those guidelines do not require as a matter of law, and I am sure were not intended to require, the use of any particular formula of words or the spelling out of matters which are obvious from he tribunal findings. It is quite clear that the tribunal regarded the raising of mortgages of such a large aggregate amount to be part of the father's life-style. Perhaps it should also have referred explicitly to the evidence of lifestyle that was accepted by the County Court Judge, but this is clear in the papers and is referred to and accepted implicitly. It is obvious that that the original assessment was based on a relatively low income as specified in the documentation and that, on the findings of the tribunal, such an income could not support the life style and was substantially lower than the income found by the tribunal.

H. Levenson

Commissioner

12th August 2002