UK Social Security and Child Support Commissioners' Decisions

 


[2004] UKSSCSC CCS_623_2004 (16 September 2004)

DECISION OF THE CHILD SUPPORT COMMISSIONER

1. The Secretary of State's appeal to the Commissioner is allowed. The decision of the Fox Court appeal tribunal dated 21 August 2003 is wrong in law, for the reason given below, and I set it aside. The parent with care's appeal against the Secretary of State's decision dated 9 December 2002, declining to make a departure direction, is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraphs 14 to 16 below (Child Support Act 1991, section 24(3)(c)). The Secretary of State is to take note of paragraph 15 below.
2. The appeal tribunal (constituted by a legally qualified panel member sitting alone) was concerned with the parent with care's appeal against a decision that no departure direction was to be given on her application of 23 October 2002 putting forward several grounds. Her appeal was limited to the ground of unreasonably high housing costs (regulation 20 of the Child Support Departure Direction and Consequential Amendments Regulations 1996). The housing costs in the calculation of the current maintenance assessment, in effect from 16 May 2002, were £400.38 per week, stemming from a mortgage loan on which £220,477 was outstanding following a remortgage in January 2002. The appeal tribunal concluded, as it was entitled to on the evidence, that all three of the conditions in regulation 26 were met, including the condition that the housing costs were substantially higher than necessary. The appeal tribunal was therefore entitled to impose a departure direction and dealt briefly with the "just and equitable" test.
3. The direction imposed was that the amount of mortgage loan on which interest was to be allowed as a housing cost was to be restricted to £160,000 with effect from 20 September 2001. That was the amount that the appeal tribunal found the absent parent had had to increase his mortgage liability to in order to purchase the parent with care's interest in the former matrimonial home. The appeal tribunal calculated that that would reduce the absent parent's housing costs to be taken into account from £400.38 to £291.18 per week. The effective date was taken as 20 September 2001, because there had been a series of other maintenance assessments made on the same day as that taking effect from 16 May 2002 and covering the period from 20 September 2001. In those circumstances, regulation 46 of the Departure Direction Regulations allowed a direction given in relation to the current assessment to take effect in relation to earlier assessments as well.
4. The Secretary of State's appeal, with leave granted by a district chairman, is on the ground that the appeal tribunal's direction was not in accordance with regulation 40(6) of the Departure Direction Regulations:

"(6) In a case to which regulation 26 applies (unreasonably high housing costs) the amount of housing costs included in exempt income and the amount referred to in regulation 11(1)(b) of the Maintenance Assessments and Special Cases Regulations shall not exceed the amounts set out in regulation 18(1)(a) or (b), as the case may be, of the Maintenance Assessments and Special Cases Regulations (excessive housing costs) and the provisions of regulation 18(2) of those Regulations shall not apply."

The limit in regulation 18(1)(a) and (b) of the MASC Regulations is the higher of £80 or half of the relevant parent's net weekly income as calculated for the purposes of the assessment. The absent parent's net income here for the purposes of the assessment with effect from 16 May 2002 was £455.28. Accordingly, the restriction under regulation 40(6) on the appeal tribunal's findings of fact should have been to £227.64 per week, not to a capital amount probably giving rise to housing costs of £291.18.

5. That was all clearly set out on the submission dated 11 February 2004 on the Secretary of State's application for leave to appeal. I directed that that was to stand as his submission on the appeal. The absent parent did not make any comments on the submission. Unfortunately, there was a delay after the absent parent's month ran out before the parent with care was asked for comments. Her comments, dated 16 July 2004, were mainly about the issue of enforcement of current payments and arrears. Although I understand her concern about that, it is not the subject of the present appeal or anything that Commissioners have power to deal with. Her request for an oral hearing on that issue is accordingly refused. The appeal to the Commissioner can properly be determined without an oral hearing.
6. For the reason given above, the decision of the appeal tribunal is wrong in law and I set it aside.
7. The question then arises of whether I should send the parent with care's appeal against the decision of 9 December 2002 to a new appeal tribunal for rehearing or substitute a decision of my own. The Secretary of State's submission of 11 February 2004 left both alternatives open, I think because it was submitted that the appeal tribunal had given inadequate reasons for finding that it was just and equitable to make the departure direction. Initially, and especially since the absent parent did not attend the hearing on 21 August 2003 or make any response to the Secretary of State's appeal to the Commissioner or himself make any appeal against the appeal tribunal's decision to make a departure direction, I wished to give a decision simply substituting the limit of £227.64 per week in the terms of the direction given by the appeal tribunal. However, on further consideration I have concluded that it would not be right to do that.
8. That is for two main reasons. First, the effect of a departure direction could potentially go back to 20 September 2001, as the appeal tribunal's direction did. However, the information given in the Secretary of State's written submission to the appeal tribunal was only about the assessment current at the date of the parent with care's application, that in effect from 16 May 2002. The evidence suggested that, before a remortgage in January 2002, the capital outstanding on the absent parent's mortgage was less (£203,465), but still substantially more than the £160,000 used by the appeal tribunal as the benchmark. Thus, it may have been acceptable for the appeal tribunal not have investigated the circumstances prior to 16 May 2002 more thoroughly, although the balance on the "just and equitable" issue (on which, see below) would have been different. But to apply the rule in regulation 40(6), the amount of the absent parent's net income needs to be known. Some of what the parent with care has written suggests that amounts other than £455.28 were used in the assessments effective before 16 May 2002. Thus I could not give a departure direction taking effect from 20 September 2001 without the delay of seeking information about the absent parent's net income as used in the earlier assessments, and probably seeking comments from both parents.
9. Second, there is quite a significant difference between the restriction on housing costs required by regulation 40(6) of the Departure Direction Regulations - to £227.64 per week - and the restrictive effect that the appeal tribunal thought its direction would have - to £291.18 per week. Regulation 40(6) does not give any discretion to allow housing costs above the level of the restriction. Thus, the choice when asking whether it is just and equitable to make a departure direction is either to make the direction imposing the restriction required by regulation 40(6) or not to make a departure direction on the ground of unreasonably high housing costs at all (or possibly to make a direction in relation to some period, but not another). I cannot be confident, especially in the light of the absence of any real reasoning on the issue in the statement, that the appeal tribunal would still have thought it just and equitable to impose the more severe restriction. Therefore, if I were to substitute a decision, I would have to make a fresh judgment on the issue, also knowing what restriction regulation 40(6) would throw up for the period prior to 16 May 2002. Again I would have to seek further information and comments from both parents.
10. There is an additional factor here. There is some doubt whether, on the proper application of the law as now understood (following a number of Commissioners' decisions including one of mine in CCS/1707/2003), the absent parent should have been allowed all of his mortgage payments, following remortgaging, as housing costs for child support purposes. The original loan for the purchase of the former matrimonial home, the home improvement loan, loans taken out which paid off those loans, and the loan to cover the cost of acquiring the parent with care's share of the former matrimonial home would all no doubt be allowed. But there would be doubt whether additional amounts of loan could get within the test in paragraph 4(1)(a) of Schedule 3 to the MASC Regulations:

"(a) they are necessarily incurred for the purpose of purchasing, renting or otherwise securing possession of the home for the parent and his family, or for the purpose of carrying out repairs and improvements to that home;"

The rule which was apparently often applied by the Child Support Agency, that if a loan was secured on a parent's home the resulting costs were necessarily incurred for securing its possession, has been rejected in law as the decisions now stand.

11. An appeal tribunal, or a Commissioner, considering an appeal about a departure direction decision has no power to make any change to the working out of the ordinary formula in terms of the child maintenance assessments relevant to the departure direction application. There are also many difficulties in making retrospective changes to past assessments under the powers of revision, especially as the definition of "official error" excludes errors revealed as such by decisions of courts or Commissioners. However, it seems to me that it would be legitimate, when considering both whether under regulation 26 of the Departure Direction Regulations housing costs are unnecessarily high and whether it is just and equitable to give a departure direction giving effect to the restriction under regulation 40(6), to take account of a conclusion that the relevant maintenance assessments allowed higher housing costs than they ought to have done on the ordinary formula.
12. Thus, to make a proper decision in the present case, I would have to seek further information from the Secretary of State about what evidence was already held by the Child Support Agency about the loans secured on the absent parent's home during the relevant periods and what all of the money loaned was spent on. It might well be the case that additional evidence would have to be sought from both parents, and submissions on the law invited.
13. All those factors point towards my not substituting a decision, but referring the case to a new appeal tribunal, which can apply a fresh judgment after considering further information, evidence and submissions. Accordingly, I refer the parent with care's appeal against the Secretary of State's decision of 9 December 2002 to a differently constituted appeal tribunal for determination in accordance with the following directions.

Directions to the new appeal tribunal

14. There must be a complete rehearing of the appeal on the submissions made and evidence produced to the new appeal tribunal, which will not be bound by any findings made or conclusions expressed by the appeal tribunal of 21 August 2003. That means that the new appeal tribunal must re-examine afresh the question of whether the conditions in regulation 26 of the Departure Direction Regulations are met from any relevant date, as well as the question, if it arises, of whether it is just and equitable to make a departure direction with the effect required by regulation 40(6).
15. Before the rehearing, the Secretary of State must produce a fresh written submission dealing with the matters mentioned in paragraphs 8 to 12 above and their effect in the present case. In particular, the fresh submission should give details of all the maintenance assessments in effect from 20 September 2001 down to 15 May 2002, showing the amount of the absent parent's net income as used in the calculation and the amount of his housing costs as actually used in the calculation. It must then set out what the effect would be of a departure direction imposing the restriction required by regulation 40(6) of the Departure Direction Regulations in relation to each assessment, both in terms of the reduction in the amount of housing costs allowed and of the altered amount of child support maintenance that would be payable. Further, the fresh submission must set out what are submitted to be the absent parent's proper housing costs under the ordinary formula in accordance with the legal principles stated in CCS/1707/2003. The existing evidence, as mentioned in paragraph 12 above, should be attached, but the Secretary of State may need to seek further evidence as to the purpose and use of loans obtained by way of remortgage from the absent parent or his mortgage lenders.
16. That fresh submission should then provide the basis on which the new appeal tribunal can approach the questions of whether the conditions of regulation 26 of the Departure Direction Regulations are met from any date or dates and of whether it is just and equitable to make a departure direction from that date. It should also provide a basis on which both parents can decide whether to submit any further documentary evidence, either about specific issues or about general matters like the absent parent's overall financial circumstances in the period from September 2001 to December 2002. I am sure that the new appeal tribunal would be greatly assisted if both parents could attend to give evidence and answer questions in person. The evaluation of all the evidence will be entirely a matter for the judgment of the new appeal tribunal.

(Signed) J Mesher

Commissioner

Date: 16 September 2004