UK Social Security and Child Support Commissioners' Decisions

 


[2005] UKSSCSC CCS_3757_2004 (02 February 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 Bolton appeal tribunal, held on 28 June 2004 under reference U/06/122/2004/00708, because it is wrong in law.

I REMIT the case to a differently constituted appeal tribunal and DIRECT as follows.

The appeal tribunal must investigate and determine the parent with care's application for a departure direction.

The appeal tribunal must 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.

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 give appropriate directions for the evidence to be produced by the parties and the timetable for doing so.

The appeal to the Commissioner

2. This case concerns an application for a departure direction from the formula assessment of child support maintenance. The application was made by the parent with care and concerned the financial position of the absent parent and his partner. The Secretary of State referred it to an appeal tribunal. The tribunal gave a departure direction on three grounds: assets capable of producing a higher income, diversion of income, and partner's contribution to housing costs. The tribunal refused to give a direction on the grounds of life-style inconsistent and unreasonably high housing costs.
3. The absent parent appealed against the tribunal's decision. The Secretary of State has supported his appeal. The parent with care has criticised the tribunal for not giving a departure direction on the other grounds of her application. She has also asked for an oral hearing.
4. I have not held an oral hearing of this appeal. I have decided the two issues of law raised by the appeal and set aside the tribunal's decision. There will be a rehearing before an appeal tribunal at which the parent with care's application for a departure direction will be considered afresh. Both parents will be able to raise at that hearing any points of fact or law relevant to that application.

Partner's contribution to housing costs

5. The absent parent had not provided details of his partner's income to the Child Support Agency. As a result, he was subject to an interim maintenance assessment.
6. The parent with care asked the tribunal to require the absent parent to produce this information. The chairman said this:

'Contrary to [the parent with care's] understanding, the tribunal has no power to make anyone give information or produce documents. The tribunal can direct a person to give information or to provide a document but if the person refuses to do so the tribunal has no power to oblige the person to give the information or to produce the document. If a person refuses to comply with a direction given by a tribunal, the tribunal may respond by forming an adverse inference. It was most unlikely that [the absent parent] or his partner would provide the tribunal with the information which they had declined to provide to the CSA. I drew the inference, from their having refused to supply to the CSA information about [the absent parent's] partner's income that her income was high. … As [the absent parent] and his new partner are living together it is reasonable that each should pay one-half of the housing costs.'

7. There are three defects in this reasoning.
8. First, the absent parent is a solicitor. It may be that he would take a different attitude to directions given in legal proceedings before a tribunal from his attitude towards the request from the administrative agency.
9. Second, the tribunal had two powers that it could use to obtain information. One was the power to give directions, to which the chairman referred. The other was the power to issue a summons to require the absent parent to attend in order to answer questions and to produce documents. The tribunal itself could not punish the absent parent if he failed to answer that summons. But as the absent parent is a solicitor, he might consider that his position required him to comply. And the parent with care could, if she wished, seek assistance from the courts to impose a penalty for failing to comply. This additional risk and its impact on the absent parent's reputation might encourage compliance. As far as I can tell, the tribunal did not consider using this power.
10. Third, the tribunal misunderstood or misapplied the use of adverse inferences. I deal with this in detail, because tribunals hearing child support cases regularly make draw adverse inferences from a parent's failure to comply with directions. I hope that this guidance will assist the tribunal that rehears this case and tribunals generally.

Adverse inferences

11. The word 'inference' is used in two senses. In one sense, it refers to the process of reasoning by which a fact is found through induction or deduction rather than from direct evidence. In the other sense, it refers to the fact so found.
12. Finding facts by inference is always a consequence of the lack of direct evidence. The parties may or may not be responsible for the lack of evidence. The appropriate inference to draw depends on the evidence that is available, the burden of proof and the circumstances of the case. If one of the parties is responsible for the lack of evidence, this is one of the circumstances that may be taken into account in the reasoning process, but it does not alter the essential nature of that process.
13. The following examples show the approach to take and the principles to apply in drawing inferences. In this case, I am concerned with inferences that may be drawn because of one party's failure to co-operate in providing the evidence required by a decision-maker or an appeal tribunal. However, it is convenient to begin with the issue of whether an adverse inference is necessary at all.

When is an adverse inference necessary?

14. Tribunals often draw adverse inferences when this is not necessary.
15. Suppose that the issue is shared care and the absent parent is asked where the qualifying children stayed over the Easter period some years earlier. The parent can no longer remember and has no records to consult. In this case, there is no lack of co-operation that can be taken into account in deciding whether to draw an inference and, if so, what inference. There are three possible ways that the issue of shared care may be resolved. One possibility is that the parent with care may be able to give direct evidence on the issue. The second possibility is that it may be possible to draw an inference from other evidence, such as the terms of a court order for contact or the usual pattern of contact during holidays. The third possibility is that, if there is no direct evidence and no basis in the evidence from which an inference can be drawn, the issue will be decided on the burden of proof. As the burden is on the absent parent to prove entitlement to a reduced assessment on account of shared care, the lack of evidence will have the effect that that entitlement cannot be shown.
16. Suppose that the issue is housing costs and the absent parent refuses to provide details. There is no other evidence available from which they can be proved directly or inferred. In this case, there is lack of co-operation, but it is not necessary to take it into account. Evidence of housing costs is relevant to the application of the formula assessment. However, it operates only to reduce the amount of child support maintenance payable by the absent parent. The refusal to co-operate prevents the absent parent obtaining that advantage. This result is based on the absence of the necessary evidence. It is not based on an inference, because there is no need to draw any inference. It is based directly on the lack of evidence from a party that deprives that party of an advantage. It is the same as if the absent parent could not provide the information.
17. Suppose that the issue is the absent parent's income, but the absent parent refuses to provide details. There is no other evidence available from which it can be proved directly or inferred. In this case, there is lack of co-operation, but it is not necessary to take it into account. Evidence of income is relevant to the application of the formula assessment. Unlike housing costs, it is essential if a formula assessment is to be made. However, the scheme provides for the possibility that an absent parent may not co-operate in providing evidence of income. In these circumstances, the scheme provides for an interim maintenance assessment in place of the formula assessment. This operates without the need for an inference.
18. Suppose that the issue is the absent parent's income. The absent parent provides some details, but refuses to make full disclosure. However, the parent with care provides some evidence of the absent parent's former income. In this case, there is lack of co-operation. There is, however, some evidence available from the parent with care. The absent parent's lack of co-operation may allow an adverse inference that can be taken into account in deciding whether to accept that evidence. Even this may not be sufficient to allow the tribunal to making a finding on the absent parent's income. It may, for example, be out-of-date or limited. If this is so, the adverse inference can be taken into account in deciding what inferences to draw in order to update and complete the evidence.

How is an adverse inference taken into account?

19. If an adverse inference can be drawn, how it is taken into account?
20. The adverse inference operates as an additional consideration in the processes of assessing the probative worth of the evidence as a whole and of drawing inferences from the evidence available. It does not operate in the absence of evidence. Some examples of recent adverse inferences drawn by the courts show how adverse inferences operate.
21. In Re O (Care proceedings: Evidence) [2004] 1 Family Law Reports 161, the issue was alleged violence by a mother towards her children. The mother refused to give evidence and Mr Justice Johnson held (paragraphs 13 and 16) that it was possible to infer from this that the allegations of violence were true. In Secretary of State for Work and Pensions v Jones [2004] 1 Family Law Reports 282, the issue was paternity. The mother alleged that a man was the father of her child, but he refused to take part in DNA testing. The court held (paragraphs 11 to 15) that this refusal allowed the court to accept the mother's evidence of paternity. And in Secretary of State for Health v C (Tribunal: Failure to draw inference), reported in The Times on 30 January 2003, the issue was whether a man was unsuitable to work with children. A woman alleged that he had raped her. On medical advice, she did not give oral evidence. The man did not attend to give evidence. The Court of Appeal held that, in those circumstances, the tribunal was entitled to conclude that the man had decided that his account could not withstand oral examination. And in Re S (Unco-operative mother) [2004] 2 Family Law Reports 710, the issue was whether the mother was willing to participate in family therapy in order to help her children establish a relationship with their father. Lord Justice Thorpe said (paragraph 21) that the weak reasons given by the mother could be used as the basis for an adverse inference that she lacked commitment to this process.
22. The analysis of Mr Justice Munby in Al-Khatib v Masry [2002] 1 Family Law Reports 1053 is instructive. The issue was ancillary relief on divorce. The wife alleged that the husband had assets in excess of £200,000,000. The husband failed to make anything like an accurate and complete disclosure. Mr Justice Munby held (paragraph 96) that the evidence was not sufficient to allow him to find that the husband had the amount alleged, but that it was sufficient to infer that he had sufficient assets to allow the court to make a settlement at the level that the wife was claiming. This was based on the analysis, put by counsel for the wife, that it was permissible to infer that the husband had calculated that he would obtain a more favourable settlement on this basis than if he made full disclosure. The judge used as a cross-check on this inference the evidence of the scale of the husband's business activities over 20 years and the commission he had been capable of earning.
23. All of these cases involved the use of adverse inferences as part of the reasoning process leading to the findings of facts. In none of them was the party's lack of co-operation used simply as a basis for imposing a penalty. In all the cases, it was used to allow an inference that the unco-operative parties could not answer the case against them. This then allowed the courts to make findings of fact, sufficient for the courts' purpose, either directly or by inference.

When is an adverse inference permissible?

24. So far I have not explained when an adverse inference is permissible. I have dealt first with how an adverse inference is taken into account, because it is necessary to understand that in order to understand when an adverse inference is permissible and appropriate.
25. As the key factor is the inference that the party's lack of co-operation is indicative of an inability to answer the opposing case, it is always relevant to consider whether there is another explanation for the lack of co-operation. In Re A (A minor) (Paternity: Refusal of blood test) [1994] 2 Family Law Reports 463, Lord Justice Waite (at page 473) said of an alleged father who, within his rights, refused to provide blood samples for testing:

'the inference that he is the father of the child should be virtually inescapable. He would certainly have to advance very clear and cogent reasons for this refusal to be tested - reasons which it would be just and fair and reasonable for him to be allowed to maintain.'

Likewise in Secretary of State for Health v C (Tribunal: Failure to draw inference), Lord Justice Latham said that the tribunal could have drawn the inference as a result of the man's failure to give evidence 'without any reason'.

26. The reasons given need not be sufficient to prevent an adverse inference being drawn. They may also reduce the effect of the inference in the circumstances of the case. In R v Inland Revenue Commissioners, ex parte T C Coombs & Co [1991] 2 Appeal Cases 283, Lord Lowry explained (at page 300):

'In our legal system generally, the silence of one party in face of the other party's evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party's failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified.'

27. A relevant factor in deciding the significance of a failure to co-operate is whether the party understood the risk involved in this stance. It may be relevant whether or not there was a warning that this might happen. In Al-Khatib v Masry, Mr Justice Munby emphasised (at paragraph 93) that the husband had been given clear and specific warnings at an earlier hearing that the court might draw the inferences that it did.
28. Tribunals regularly include a warning when directing the parties to a child support case to provide evidence. In the cases I have seen, this is put in general terms. I have never seen anything as clear and specific as the warnings given in Al-Khatib v Masry.
29. A warning is not always necessary. In this case, for example, the absent parent is a partner in a firm of solicitors, so he must have realised the risk. Nor it the mere recitation of a formula warning attached to directions necessarily sufficient. The tribunal must take into account all the circumstances of the case. This includes the reasons that have been given, now or in the past, for not co-operating. It also includes a sensible and realistic assessment of the reality of the likelihood that the party concerned would have understood the significance of the risk that the warning conveyed.

Conclusions on the case before me

30. In the case before me, the chairman reasoned from failure to co-operate to adverse inference to conclusion on contribution to housing costs. She did not show that an adverse inference was appropriate. She did not take account of the particular circumstance that the absent parent is a solicitor. This might have produced a co-operative response if a direction had been given or a summons issued. Nor did the chairman show by what reasoning she made her findings of fact. As far as I can tell, she used the adverse inference to pick a figure out of the air. At least, she did not set out an process of rational argument by which she reached the conclusion that the absent parent's partner could pay half of their housing costs. She simply drew an adverse inference and then stated her conclusion.

Diversion of income

31. The tribunal gave a departure direction on this ground on the basis of income diverted by the absent parent from cash to the benefits of a 'company car'. The chairman explained:

'As a partner, [the absent parent] can control whether he receives his share of the profits of the business in money or in kind. Had he chosen to do so, [he] could have taken more income from the firm instead of having the private use of the car. Had he done so, his declared income would have been higher. I calculate that it would have cost him £10,000 out of net income to pay for private use of the car and £10,000 net is therefore the amount which I directed he was to be treated as having as income in addition to his declared income.'

32. The tribunal's decision on this ground raises two issues.

Is taking a company car a diversion of income?

33. This is governed by regulation 24 of the Child Support Departure Direction and Consequential Amendments Regulations 1996. This allows a departure direction if two conditions are satisfied:

'(a) the non-applicant has the ability to control the amount of income he receives, including earnings from employment or self-employment and dividends from shares, whether or not the whole of that income is derived from the company or business from which his earnings are derived; and

'(b) the Secretary of State is satisfied that the non-applicant has unreasonably reduced the amount of his income which would otherwise fall to be taken into account under regulation 7 or 8 of the Maintenance Assessments and Special Cases Regulations by diverting it to other persons or for purposes other than the provision of such income for himself.'

34. In this case, the absent parent has taken the benefits of a company car instead of cash. Both would be to his benefit in different ways. He has not diverted his potential income to someone else. However, paragraph (b) makes clear that the issue is whether he has reduced the amount of income that would be taken into account under regulations 7 and 8 by diverting it to another purpose. Cash is taken into account in the formula assessment of liability and so falls within regulation 7(1)(a). However, the benefit of a company car is a benefit in kind, which is not taken into account as income in the formula assessment. What the absent parent has done is to take a benefit in a form that is outside the formula assessment instead of in a form that is within the formula assessment. I consider that that amounts to diverting income to another purpose for the purposes of regulation 24(b).
35. So, the absent parent's company car arrangements fell within the scope of regulation 24.

Did the tribunal apply regulation 24 correctly?

36. The Secretary of State submits that the chairman did not explain how she reached the figure of £10,000 a year. I accept that submission. I also consider that the tribunal has made another mistake. What the tribunal should have done is to apply regulation 40(4), which requires the tribunal to identify an amount that is capped at the amount by which the absent parent reduced his income. What the tribunal appears to have done is to identify the amount that the absent parent would have had to pay if he had provided the car from his own income. That was the wrong figure. The correct figure was the loss of income diverted, not the cost avoided. It does not necessarily follow that the absent parent's income would have been higher by the amount of the costs avoided if he had taken cash instead of a company car.

Reporting the absent parent to the Lord Chancellor

37. The parent with care has asked me to report the absent parent's conduct in these proceedings to the Lord Chancellor. She is, of course, free to take any steps in respect of the absent parent's conduct that she wishes. However, I consider that reporting his conduct would be premature, given the course that the proceedings have taken, specifically the lack of directions. He has certainly not shown that openness in conducting legal proceedings that I would expect from someone of his profession, but any final conclusion on his conduct should await his response to any directions that the district chairman or tribunal may give.

Disposal

38. I allow the appeal and direct a rehearing.

Signed on original on 2 February 2005

Edward Jacobs Commissioner