UK Social Security and Child Support Commissioners' Decisions

 


[2005] UKSSCSC CCS_2045_2005 (10 October 2005)

DECISION OF THE CHILD SUPPORT COMMISSIONER
1. My decision is given under section 24(2) and (3)(d) of the Child Support Act 1991. It is:

I SET ASIDE the decision of the Brighton appeal tribunal, held on 8 April 2005 under reference U/45/177/2005/00043, because it is wrong in law.

I REMIT the case to a differently constituted appeal tribunal and DIRECT that tribunal to conduct a complete rehearing of the issues that are raised by the appeal and, subject to the tribunal's discretion under section 20(7)(a) of the 1991 Act, any other issues that merit consideration. In particular:

The appeal tribunal must deal first with issues relating to the maintenance calculation under Schedule 1 to the Child Support Act 1991. It must deal with: (i) the Secretary of State's submission on the effective date of the calculation; and (ii) the parent with care's evidence and arguments on the non-resident parent's income.

The tribunal must then deal with any issues that the parent with care wishes to pursue under the variation application. If the tribunal agrees to a variation, it must decide whether to give effect to it by revision or supersession. This, in turn, will determine the date from which the variation takes effect.

Before this case is listed for rehearing, it must be put before a district chairman to consider whether it is necessary or appropriate to give directions under regulation 38(2) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999. In particular, the district chairman may wish:

To consider whether the Secretary of State should make a new submission for the benefit of the parents and the tribunal. This may not be necessary in view of the Secretary of State's observations to the Commissioner (pages 160 to 164) and whatever of value is contained in this decision.

To give directions on the evidence to be produced by the parents and to set a timetable for that to be done before the hearing.

Depending on the evidence produced, to consider whether a financially qualified panel member should sit on the tribunal.

To ensure that the masking of evidence is only applied within the authority of regulation 44 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999.

I direct both parents to provide the tribunal with whatever evidence it requires, whether it is identified in advance of or at the hearing.

References to legislation

2. In this decision, I refer to relevant legislation as follows:

section numbers refer to the Child Support Act 1991;

'the Variations Regulations' refer to the Child Support (Variations) Regulations 2000;

'the Decisions and Appeals Regulations' refer to the Social Security and Child Support (Decisions and Appeals) Regulations 1999.

The issue

3. This case concerns the child support maintenance payable in respect of Darcie. Her mother is her parent with care and her father is her non-resident parent.
4. The child support scheme was reformed by the Child Support, Pensions and Social Security Act 2000. This case illustrates the importance of understanding the structure of the reformed scheme. In particular, it illustrates the need to understand the relationship between the assessment of liability under Part I of Schedule 1 to the Child Support Act 1991 and the variation scheme. That relationship is different from that between the former child support formula assessment and its departure direction scheme. The reformed law has removed the difficulties that existed in the relationship between assessments and departure directions: see my discussion in R(CS) 3/01 at paragraphs 25 to 34. The tribunal made a number of specific mistakes, which I identify below. I suspect that underlying them was a failure to appreciate the relationship between calculations and variations in the reformed scheme. I know that many chairmen of tribunals are impatient of issues of procedure and advocate 'just getting on with it.' However, they cannot get on with it, unless they identify what 'it' is. All too often in child support law, 'it' depends on issues of procedure.

The history of the case

5. On 4 May 2004, the parent with care applied for a calculation of the non-resident parent's maintenance liability in respect of Darcie. The non-resident parent was contacted on 13 May 2004 and interviewed on 7 July 2004. A calculation of his maintenance liability was made on 23 August 2004. He was found liable to pay £23.14 from the effective date of 7 July 2004. This liability was based on his declared earnings from self-employment.
6. On 13 September 2004, the parent with care lodged an appeal against that decision. She alleged that the non-resident parent had income from five properties: pages 84 to 88.
7. In response to this appeal, the Secretary of State wrote to the parent with care on 9 October 2004, inviting her to apply for a variation. She submitted a completed application form on 20 October 2004. In it, she repeated her allegations about the non-resident parent's rental income and added that he had a life-style inconsistent with his declared income.
8. On 4 January 2005, the Secretary of State made a decision. Quite what that decision was is not clear. It is sufficient for the moment to say that the parent with care's application was not successful. I shall have to be precise later.
9. As the Secretary of State had not agreed to a variation, the parent with care's appeal was forwarded to the Appeals Service. No new appeal was made following the rejection of her variation application. The tribunal allowed the appeal in the absence of the parties. It did so under regulation 18 of the Variations Regulations, relying on the evidence of property valuation and rental income provided by the parent with care. It agreed to a variation from 13 May 2004. That was the date which, on the Secretary of State's submission to the tribunal, was the correct effective date for the maintenance calculation.
10. I gave the non-resident parent leave to appeal to a Commissioner. The Secretary of State has supported the appeal and the parents have both made observations. I am grateful to the representative of the Secretary of State for his perceptive analysis of the procedural aspects of this case.

Variations

11. It is convenient to begin my analysis with the variation scheme.
12. This scheme has replaced the former departure direction scheme. It is in many respects similar, but the procedure is different. A departure direction decision was freestanding from the formula assessment and appealable as such. If a direction was given, it was implemented by a separate assessment decision, which was also appealable. A variation decision is not freestanding. It takes effect as a decision on the calculation and is only appealable as such. This is made clear by section 28D(1)(a), which links agreeing or not agreeing to a variation with a decision under section 11 (a maintenance calculation) or 12(1) (a default maintenance decision). See also the wording of regulation 6(1) of the Variations Regulations.
13. An application for a variation may be made at two stages:
14. First, an application may be made before the maintenance calculation is made, either at the same time as the application for the calculation or later: section 28A(3). The Secretary of State makes a decision under section 11, which incorporates the maintenance calculation and any variation that is agreed to. The effective date of the variation is governed by regulation 22 of the Variations Regulations.
15. Before making a decision under section 11, the Secretary of State may make an interim maintenance decision: section 12(2). This allows the Secretary of State to make a maintenance calculation before considering whether to agree to a variation. When the application for a variation is decided, the Secretary of State makes a decision under section 11. This replaces the interim maintenance decision and causes any appeal against that decision to lapse: section 28F(5).
16. Second, an application may be made when a maintenance calculation is in force: section 28G(1). The decision on the application for a variation is given on revision or supersession. The decision is given on revision if it is made within one month of the date of notification of the maintenance calculation decision or such longer period as may be allowed on application: regulations 3A(1)(a)(ii) and 4 of the Decisions and Appeals Regulations. The effective date is governed by section 16(3) and (4). Otherwise, the decision is given on supersession: regulation 6A(6) of those Regulations. And the effective date is governed by section 17(4) and (5).
17. There is also power for the effect of a variation to be carried forward without the need for an application: section 28G(3). I do not need to refer to that.

The scope of the variation application

18. As I have said the parent with care applied for a variation on two grounds: (i) the non-resident parent's life-style was inconsistent with his declared income; and (ii) he had assets worth more than £65,000. The Secretary of State's decision referred only to ground (ii). I cannot see that the Secretary of State ever considered or dealt with ground (i).
19. The tribunal did not deal with ground (i) either. It may be that it considered that this was not necessary, as it was not an issue raised on the appeal: section 20(7)(a). If that was the tribunal's reasoning, it failed to take account of the fact that the letter of appeal was written before the variation application was made. The parent with care was never given the chance to supplement her grounds of appeal once the variation application was dealt with.
20. The tribunal must deal with ground (i) at the rehearing, unless the parent with care does not wish to pursue it.

The decision on the application

21. According to the form at pages 79 to 82, the Secretary of State rejected application. That language is appropriate to a decision under section 28B. But according to the typed decision at page 41, the 'application had been sent for contest under Regulation 9 Child Support (Variations) Regulations 2000'. And the papers confirm that representations were obtained from the non-resident parent. The procedure in regulation 9 only operates if the application has not been rejected: regulation 9(1). That suggests that the Secretary of State determined the application. However, the typed decision concludes by saying that the application was rejected under section 28B. Both forms record the same ground for decision: that the parent with care had not provided sufficient evidence to substantiate her allegations.
22. The language and actions are not entirely consistent. I have concluded that the Secretary of State acted under section 28B and rejected the application on preliminary consideration. That accords with both the legislation cited in support of the decision and the grounds given for it.

Revision or supersession?

What decision did the Secretary of State make?

23. It seems that the Secretary of State treated the decision on the variation as made on revision. This is clear from the submission to the tribunal at page 20. That page cites section 16 as the relevant legislation and deals with the effective date appropriate to a revision.

Why did the Secretary of State make that decision?

24. In this case, the parent with care did nothing that could be treated as an application for a variation until the Secretary of State had made a calculation under section 11. So, the variation application was made under section 28G(3). But when was it made? The application form for a variation was submitted on 20 October 2004. That is more than one month after the section 11 section was notified and I cannot find any application by the parent with care for the time to be extended. If that was the application, the decision on the variation could not be made on revision; it could only take effect on supersession. But could the parent with care's letter of appeal be treated as the application?
25. The Commissioners, and their predecessors in the social security jurisdiction, have encouraged the Secretary of State to be realistic and not to expect claimants to understand the adjudication procedures. This allows letters to be treated as applications for whatever course of action is most appropriate in the circumstances of the case. This allows the Secretary of State to deal with a letter from a claimant by reference to its substance rather than its form. It has also been used to allow any contact by the claimant to be treated as an application if this will be advantageous in terms of the effective date.
26. The same considerations that apply in social security apply in child support. However, the context is different. In the social security jurisdiction, the only parties are the Secretary of State and the claimant, and the Secretary of State is not a contentious party. In the child support jurisdiction in contrast, there will usually be two parties in addition to the Secretary of State; their involvement is contentious and their interests conflict. An interpretation of a letter that works to the benefit of one of those parties may work to the detriment of the other. That behoves a greater degree of restraint than is appropriate in the social security context. I suggest that in applying this approach in child support two qualifications are appropriate.
27. First qualification It is appropriate to interpret letters by reference to their substance rather than their form. This is especially so if the writer is not represented and is not familiar with the child support adjudication procedures. However, it is not appropriate simply to treat any point of contact as an application just because that will be advantageous to the person concerned. To do so may operate to the disadvantage of the other party.
28. Second qualification The approach can only be applied with the limits allowed by the legislation. In the case of an application for a variation, that means that it must be applied consistently with the Variations Regulations. The form in which an application may be made in governed by regulation 4. Regulation 5 allows an application to be amended and regulation 8 allows the evidence and information to be supplemented. Both those provisions show that it is not necessary for an application to be complete before it is made.
29. Bearing that in mind, it is possible that the Secretary of State could have treated the letter of appeal as an application for a variation. The letter was not worded as an application for a variation. It was worded as an appeal. But the Secretary of State treated the matter raised in the letter as appropriate to the variation scheme and invited the parent with care to make an application. That invitation makes it difficult to say that the Secretary of State treated the letter of appeal as the application. However, the letter could be treated as an invitation to allow it to be treated as an application and to provide further details and evidence. Although this is possible, I can see nothing to show that that is what the Secretary of State did.

What decision did the tribunal make?

30. By fixing the effective date as 13 May 2004, the tribunal must have implemented the variation by way of revision. However, it did not expressly deal with the issue. It did not identify revision as the procedure by which its decision had been made. It did not identify the document that constituted the application for a variation. If that was the letter of appeal, it did not explain why. If it was the application form, it did not explain why it extended time under regulation 4 of the Decisions and Appeals Regulations. In those respects the tribunal went wrong in law. If the tribunal agrees to a variation at the rehearing, it must deal with these matters.

The appeal

31. The parent with care's letter of appeal was written in response to the maintenance calculation. It was not forwarded to the Appeals Service pending the outcome of the variation application. Once that application was rejected, the appeal was forwarded. The Secretary of State's submission to the tribunal dealt with the maintenance calculation and the variation. By implication, it invited the tribunal to correct the effective date of the calculation. Essentially the tribunal dealt only with the variation, although, by fixing the effective date as 13 May 2004, it implicitly also dealt with the maintenance calculation.

The tribunal's powers of the appeal

32. On my analysis, the Secretary of State decided to reject the variation application under section 28B(2)(b). The tribunal was entitled to decide whether that was correct. But if the tribunal decided that it was not correct, what could it do? Did it have power to proceed to determine the application? Or could it only refer the case back to the Secretary of State to make a decision under section 28D?

Rejections and determinations

33. A rejection under section 28B is not a determination of the application. That is shown by the stage at which the rejection operates, the grounds on which it may be given, and the language of the legislation.
34. Stage Section 28B allows the Secretary of State to dispose of a case on a preliminary consideration. If and only if the application passes this stage, it is subject to the procedure set out in regulation 9 of the Variations Regulations. It is only then that the determination procedure begins.
35. Grounds The grounds on which the Secretary of State may reject an application are set out in regulation 28B(2). They share this common characteristic: on the information provided it will be bound to fail. The evidence may be complete and show that no variation could be agreed to, or it may be incomplete and therefore insufficient to allow a variation to be agreed to. In either case, it is not appropriate for the application to be considered further.
36. Language Section 28B provides that the Secretary of State may 'reject' a variation application. That is in contrast to section 28D, which applies only if the application has not 'failed'. 'Failed' is defined by section 28D(2); it includes a rejection under section 28B. Section 28D(1) provides for the determination of an application by agreeing or not agreeing to a variation. (There is also power to refer an application to an appeal tribunal.) By virtue of those provisions, rejection and determination are mutually incompatible concepts. In other words, there can be no determination if an application is rejected.

Implementing a variation decision

37. But does this make any difference to the tribunal's powers on appeal? This depends on the form of decision given by the Secretary of State and the powers of the tribunal on appeal against that decision.
38. What is the correct form of decision if the Secretary of State rejects a variation application? This is governed by regulation 6(1) of the Variations Regulations. If the application was made under section 28A(1), the Secretary of State must make a decision on the application for a maintenance calculation. That will be made under section 11 or 12. If the application was made under section 28G(1), the Secretary of State must revise or not revise under section 16, or supersede or not supersede under section 17.
39. As the Secretary of State had decided not to agree to a variation, this decision could (and perhaps should) have been implemented by deciding not to supersede on the application. That would have given the parent with care the right to appeal under section 20(1)(b). However, instead the Secretary of State decided not to revise the maintenance calculation decision. There is no appeal against a decision not to revise. But the parent with care had the right to appeal against the decision as originally made.
40. The parent with care had already made an appeal on 13 September 2004. It may appear that this appeal was made too early to allow the tribunal to consider the refusal to revise. The reason is that the period within which an appeal may be brought following a decision not to revise does not begin until the date when that decision is notified: regulation 31(2) of the Decisions and Appeals Regulations. However, this appearance is wrong. The appeal is against the decision as originally made. This is so regardless of whether there has ever been an application to revise or not. Regulation 31(2) is only necessary in order to ensure that an appeal is not out of time if there has been an application for revision. It has no relevance if an appeal has already been brought. It does not restrict the scope of the appeal or the powers of the tribunal on the appeal. If this reasoning is wrong, there is an alternative analysis that produces the same result: the appeal is inchoate until the decision not to revise is made.
41. On either analysis, the parent with care had made an appeal and was not required to add to it. The Secretary of State was entitled simply to forward it to the Appeals Service. However, this approach has a potential disadvantage. The parent with care's appeal was written against the calculation decision. It was not updated to take account of the rejection of the variation application. A tribunal is entitled to limit its consideration to issues that are raised by the appeal: section 20(7)(a). The result is that a tribunal at a paper hearing may properly refuse to consider an issue that was not identified in the original appeal because it did not arise until the decision was made on the variation application. (See my comments in paragraph 19.) The Secretary of State may wish to consider in cases like this whether to allow an appeal to be supplemented before it is forwarded to the Appeals Service.

The tribunal's power to change the Secretary of State's decision

42. Two related questions arise on this issue. As the appeal came before the tribunal, would it have power to substitute a decision based on a determination (section 28D) for one based on a rejection (section 28B)? And would it have power to substitute a supersession for a revision? The answer is yes to both, for two reasons. First, this is authorised by section 20(8)(a) which provides that 'the appeal tribunal may itself make such decision as it considers appropriate'. Second, the nature of an appeal allows a tribunal to act as the Secretary of State should have acted. This was explained by the Tribunal of Commissioners in R(IB) 2/04:

'24. … As a matter of principle, on such an appeal the tribunal may make any decision which the officer below could have made on the legal questions properly before that officer. That principle encompasses dealing with new questions so as to reach the right result on an appeal, within the limit that the appeal tribunal has no jurisdiction (in the absence of express legislation to that effect) to determine questions which fall outside the scope of that which the officer below could have done on the proper legal view of the issues before him, by way of a claim or an application or otherwise.

'25. … The appeal tribunal in effect stands in the shoes of the decision maker for the purpose of making a decision on the claim.'

The treatment of the parent with care's evidence

43. This evidence has been dealt with wrongly from the outset. The Secretary of State began by advising the parent with care that this evidence could only be considered under a variation, because it was income other than earnings: page 42. The tribunal dealt with the evidence in the same way. As the Secretary of State now submits, that was wrong. The tribunal should have considered whether the properties were held by the non-resident parent as part of a trade or business. This was relevant for two reasons.
44. The first reason relates to the variation application. The tribunal agreed to a variation under regulation 18 of the Variations Regulations on the basis that the properties were assets with a net value of more than £65,000. However, there is an exclusion for 'any asset used in the course of a trade or business': regulation 18(3)(d). The tribunal overlooked this provision.
45. The second reason relates to the maintenance calculation. It is correct that income other than earnings is generally not taken into account under Schedule 1 to the 1991 Act: see the Schedule to the Child Support (Maintenance Calculations and Special Cases) Regulations 2000. However, earnings as a self-employed earner are taken into account: Part III of the Schedule to those Regulations. The parent with care alleged that the non-resident parent owned a number of properties and was receiving rental income from them. The Secretary of State and the tribunal should have considered whether the non-resident parent was a self-employed earner, as defined by regulation 1(2). That definition adopts the definition in the Social Security Contributions and Benefits Act 1992. Section 2(1)(b) of that Act defines a self-employed earner as 'a person who is gainfully employed in Great Britain otherwise … than in employed earner's employment'. And section 122(1) defines 'employment' and 'employed' as including 'any trade, business, profession or vocation'.
46. Although the legislation is not drafted in these terms, its overall effect is this. The capital value of business assets is outside the scope of the child support scheme, but the income generated by them is included as earnings from self-employment. Investment capital is not covered by Schedule 1 to the 1991 Act, but is covered by the variation scheme.
47. Mr Commissioner Goodman considered ownership of rented property in R(FC) 2/92. Relying on long-standing authority, he decided:

'12. … it cannot be said that the carrying on of a business is constituted by the ownership by an individual of a tenanted house, the collection of rent, the execution of repairs and the carrying out of other landlord's duties.'

48. In CCS/2128/2001, Mr Commissioner Mesher was concerned with the ownership of and rental income from 'industrial units known as Heritage Park'. He considered Mr Goodman's decision and said:

'8. … But there will come a point, depending on the circumstances of individual cases, at which the amount of administration and/or activity involved even in the letting out of a single property would amount to the carrying on of self-employment. I have concluded in the end that I have insufficient evidence about the exact nature of Heritage Park, the terms of its letting and the activities required of both the parent with care and the absent parent beyond receiving the rent, to make a final decision.'

49. I respectfully agree with Mr Mesher. It is possible that in this case the rental of the properties and the related powers and duties constituted a business. The tribunal went wrong in law by not dealing with this issue. The tribunal must investigate this issue at the rehearing. The authorities relied on by Mr Goodman show that the issue is one of the proper use of language: is what the non-resident parent does fall within the normal signification of the word 'business'? It is not just a matter of the number of people that are involved, or the number of properties that are owned, or of the number of units that are let. The tribunal must consider all the relevant circumstances of the case.

The effective date

50. The tribunal agreed to a variation. It set the effective date in accordance with the Secretary of State's submission at page 20. The reference there to 13 May 2004 was to the effective date of the maintenance calculation. The tribunal used that date. However, the full statement of the tribunal's decision leaves unclear whether the tribunal was dealing with the calculation, the variation or both. It does not show that it realised that it had jurisdiction over both. It suggests that the tribunal implemented the variation by way of revision, but does not explain why it did so. These deficiencies seem to me to be manifestations of a failure to come to terms with the relationship between the maintenance calculation and the variation.

Assessing evidence

51. The tribunal accepted and relied on the evidence of the parent with care. There is nothing wrong in principle with accepting evidence from one parent about the property owned by the other or about its value. However, the tribunal has to assess evidence before it can accept it. And it cannot assess evidence that it cannot read. The identity of the properties in this case had been masked before the appeal papers were provided for the tribunal by the Secretary of State. Without knowing the addresses of the property, the tribunal could not assess the parent with care's evidence on its rental income. If the parent with care had attended the hearing to give oral evidence, this would not have been a problem. But without her the tribunal could not perform this essential task. The only proper course for the tribunal to take was to adjourn for the parent with care to attend or for unmasked copies of the papers to be provided. The tribunal went wrong in law by relying on evidence that it was not able to assess.
52. Some of the masked evidence has now been provided without masking, but the evidence was not available in that form to the tribunal.
53. This is another example of over-zealous masking of appeal papers. The purpose of masking is to prevent information about one person from being disclosed to another who does not already know it. Since the evidence about the non-resident parent was provided by the parent with care, there was no point in preventing its disclosure. I shall be dealing with the masking of papers in CCS/1086/2005. An oral hearing will be held on 9 November 2005.

Disposal

54. I allow the appeal. I have some sympathy for the tribunal, which may have been misled by the way in which the case had developed and was presented, with an emphasis on the variation application. Nevertheless, the tribunal went wrong in law in a number of respects and I must set its decision aside.
55. I direct a rehearing. I have considered whether to substitute a decision for that of the appeal tribunal. However, a rehearing before a tribunal is more appropriate. Unlike a Commissioner, the tribunal can sit with a financially qualified panel member. That power may be important, as this case may involve the analysis of accounts.
56. The non-resident parent has asked for a private oral hearing of his appeal. I have not found it necessary to hold an oral hearing. However, he will have a chance to attend the rehearing of his appeal before the appeal tribunal. I encourage both parents to attend and I have directed them to provide any evidence that the tribunal may require. The non-resident parent has already learnt that the tribunal has power to accept evidence about his circumstances from the parent with care and that it may draw adverse inferences if he does not co-operate.

Signed on original on 10 October 2005

Edward Jacobs Commissioner