UK Social Security and Child Support Commissioners' Decisions

 


[2006] UKSSCSC CCS_2018_2005 (17 August 2006)

CCS/2018/2005

DECISION OF THE CHILD SUPPORT COMMISSIONER

1. The decision of the Child Support Appeal Tribunal dated 12 April 2005 on Case No. U/01/138/2004/02994 is erroneous in law. I set that decision aside and direct that the Secretary of State's reference of the application for a variation in terms of regulation 20 of the Child Support (Variations) Regulations 2000 be heard again by a differently constituted tribunal.
2. The appellant is the father and, for the purposes of the Child Support Act 1991, the absent parent of children who are, for the purposes of the 1991 Act, qualifying children. The first respondent to the appeal is the Secretary of State. The second respondent is the mother and, for the purposes of the Act, the parent with care of the two children. The appellant has requested an oral hearing of the appeal but as I have, for reasons which coincide with arguments put by both the appellant and the second respondent, remitted the case for rehearing by a new tribunal no purpose would be served by an oral hearing before me.
3. The appeal is against the tribunal's decision on a reference by the Secretary of State of the second respondent's application for variations of the child support assessment in respect of the two children. The terms of the notice of the tribunal's decision are:-

"The appellant applied for a Variation Order on 30 June 2004 in relation to a maintenance calculation of £5.00 per week decided on 30 September 2003.

The basis thereof was:

(a) Diversion of income – Regulation 19 Child Support (Variation) Regulations 2000 which the Appellant/Claimant failed to prove and

(b) Life-style inconsistent with declared income – Regulation 20 – which was found proved.

On the latter basis the Respondent was found to have a weekly net income with which to meet his life-style at all material times of £292.07 per week. It was found that his income of £79.88 which had produced a maintenance calculation of £5.00 per week was substantially less then the level of income required to support the overall life-style of the Respondent – namely £292.07. That this meant, prima facie, £58.00 per week was payable but the Tribunal in consequence of applying the Just and Equitable test as required by section 28F Child Support Act 1991 and Regulation 21 Child Support (Variation) Regulations 2000 found that, from the effective date of 28 June 2004, the actual amount to be paid is £50.00 per week.".

4. Both parents applied for leave to appeal. I granted leave to both but in terms of regulation 18(2) of the Child Support Commissioners (Procedure) Regulations 1999 I directed that there should be one appeal with the absent parent as the appellant and the parent with care as the second respondent. A legal officer directed that the parent with care's statement of grounds of appeal and supporting documentation should be included in the appeal bundle. The appellant's case is, in short, that there should be no variation of the current assessment on either of the grounds put forward by the second respondent. The second respondent's case is that variations on both grounds should have been made and that the difference between the appellant's known income and that found by the tribunal to be required to support his life-style should not have been reduced on consideration of justice and equity.

The Appellant's Case

5. On the matter of the life-style variation the appellant's ground of appeal is that he does not have the additional weekly income of £292.07 with which the tribunal has fixed him. He supports that contention with his accountant's analysis of his drawings from his company which, he says, shows that the life-style is financed mostly by borrowing. As the Secretary of State's representative points out in his submission of 28 February 2006, a tribunal's decision is appealable only by way of identification of a point of law on which the decision is in error. Parties do not have the right to raise an appeal by challenging the tribunal's judgment on questions of fact. Although the calculation of the income required to support the appellant's life-style is not shown in the statement of the tribunal's reasons for its decision it is detailed in the record of the proceedings and is a question of fact, judgment on which was entirely for the tribunal. That judgment cannot be faulted by the post-decision production of evidence. Nevertheless, the accountant's analysis, as the Secretary of State's representative says in paragraph 14 of his submission, touches on a relevant issue raised, but not further pursued, by the tribunal. That issue is the extent to which the appellant's life-style is financed by borrowing. Borrowings of £4,500 from the appellant's parents and sister are noted in the statement of reasons. The Secretary of State's representative suggests that it is arguable that it was an error in law for the tribunal, having accepted the fact of those borrowings, not to have investigated whether a variation would be contrary to regulation 20(3) of the Variations Regulations to the extent that the life-style justifying the variation is financed by those borrowings.
6. I do not see the relevance of regulation 20(3). Paragraph (3) provides, in effect, that a life-style variation will not be made if the life-style is financed from certain specified resources. Three of those resources sources are income and two of them are assets. In the absence of any specific provision to the contrary borrowings are neither assets nor income. I do not, therefore, think that regulation 20(3) makes any provision that those aspects of a parent's life-style which are financed by borrowings are not to be taken into account for the purposes of a variation but I agree with the Secretary of State's representative that a parent should not be fixed with an income implied by his lifestyle when there is evidence that the life-style is financed from a resource other than income.
7. The fact that a particular aspect of a parent's life-style is financed by borrowing does not automatically exclude that aspect of his life-style from consideration because the ability to obtain and service a particular loan can indicate that the life-style is inconsistent with the declared income. For example, somebody who has borrowed £50,000 from a commercial lender to buy an expensive motorcar is more than likely to be making regular repayments out of income. On the other hand the parent in question may be able to show that to maintain a life-style which his declared income would not support the calls on the generosity of friends or relations who will not press him to repay loans until he is in a position to do so. That is probably improvident on the part of the parent but evidence that he does manage his affairs in that way rebuts the presumption that there must be more income than has been declared which underlies an application for a life-style variation. The consideration of justice and equity required by section 28F then comes into play to temper the rough justice of the presumption and the part of the life-style which is known to be financed by borrowing is excluded from the calculation. In saying that, I am not disagreeing entirely with the Secretary of State's representative's view, expressed in paragraph 9 of his submission, that the consideration of justice and equity is the last step in deciding on a variation. That consideration should inform the mind of the decision maker at each step in the process (CCS/3543/1998) including the last one. The tribunal should, therefore, have investigated the extent to which the absent parent's life-style was financed by borrowing. It is not clear from the statement of the tribunal's reasons that it took account of the borrowing which it noted in arriving at the required additional income of £292.07 per week and there is nothing to indicate that the tribunal investigated the question of whether or not there are any other borrowings which fund the appellant's life-style.

The Secretary of State's Case

8. When I granted leave to appeal I queried whether or not it was within a tribunal's power to decide that a variation to a maintenance assessment should be made and then decide that the amount of the variation should be reduced. I had in mind the same point as that taken by the Secretary of State's representative in his submission. Firstly he sets out the terms of section 28F(1) which provides:-

"The Secretary of State may agree to a variation if –

(a) he is satisfied that the case is one which falls within one or more of the cases set out in Part I of Schedule 4B or in Regulations made under that Part; and

(b) it is his opinion that, in all the circumstances of the case, it would be just and equitable to agree to a variation.".

As already noted, the representative's view is that the last step in deciding whether or not to agree to a variation is to consider whether it would be just and equitable to agree to a variation with the effect calculated. If such a variation is just and equitable the Secretary of State, argues the representative, agrees to it but if it does not meet the section 28F(1)(b) criterion he must refuse to agree to the variation altogether. It is an all or nothing process, the Secretary of State or, on a reference, the tribunal having no power to modify the effect of the variation in the light of the consideration of justice and equity.

9. In support of his contention, the Secretary of State's representative explains the history of the former Departure Regulations and of the current Variation Regulations. Regulation 40(5) of the Child Support Departure Direction and Consequential Amendments Regulations 1996 provided that the effect of a "life-style" departure direction was that:

"…, the net income of the non-applicant who is a parent of a child in respect of whom the current assessment is made shall be increased by the difference between the two levels of income referred to in paragraph (1) of [regulation 25].".

That provision was amended by regulation 22 of the Child Support (Miscellaneous Amendments) Regulations 1998 with effect from 19 January 1998 to read:-

"………. shall be increased by the amount specified in that departure direction, being the whole or part of the difference between the two levels of income referred to in paragraph (1) of [regulation 25].".

10. The representative's submission goes on to say that regulation 20(5) of the Child Support (Variations) Regulations 2000, in providing for the effect of a variation, does not pick up the amendment to regulation 40(5) of the Departure Direction Regulations. Paragraph (5) of regulation 20 reads:-

"Where a variation on this ground is agreed to, the additional income taken into account under regulation 25 shall be the difference between the income which the Secretary of State is satisfied the non-resident parent requires to support his overall life-style and the income which has been … taken into account for the purposes of the maintenance calculation … .".

The enactment of regulation 20(5) in that form, argues the representative, means that the power to make a variation is, as was the power to make a departure direction prior to the 1998 amendment, restricted to a power either to make a variation which will alter the parent's liability by reference to the whole of the difference between the known and required incomes or to make no variation at all. Parliament must be taken to have been aware of both the original form of regulation 40(5) of the Departure Directions and the amended form and to have decided that the power to make a variation should be limited in the same way as was the original power to make a departure direction.

11. The Secretary of State's representative says that at the date of writing his submission the same point was in issue in the pending appeal CCS/1495/05 and suggests that I stay my determination of this appeal until the decision on that appeal is known. He has supplied me with a copy of the submission for the Secretary of State which was put to the Commissioner dealing with CCS/1495/05. In that submission the Secretary of State's representative concerned took the same line as does the author of the submission to me. In addition he referred to Commissioner's decision CCS/3151/1999. That case dealt with the interpretation of regulation 37(1) of the Departure Direction Regulations which made provision for the effect of a direction that a parent had special expenses which should be taken into account in calculating his exempt income. The wording of the original regulation 37(1) and of the 1998 amendment to it were similar to the wording of the original regulation 40(5) and of the 1998 amendment to it. The original version of the paragraph provided that the parent's exempt income would be increased by the amount of the special expenses which the tribunal found that the parent incurred. The 1998 amendment was to the effect that the increase in the exempt income would be "the amount specified in that departure direction being the whole or part of the amount constituting the special expenses".
12. The Commissioner who decided CCS/3151/1999 said that on the face of it the pre-1998 version of regulation 37(1) was mandatory and would seem to prevent the making of a departure direction which, by reason of the consideration of justice and equity, sought to increase the amount of the exempt income by less than the whole of the additional expenses attributed to the parent in question. That seeming problem had been solved by the 1998 amendment. However, the Commissioner's view was that if the unamended version of the regulation had the effect of preventing the modification, by reason of the consideration of justice and equity, of the amount of a departure direction it would be ultra vires of the then section 28F(1)(b) of the 1991 Act. It would have been imposing a restriction on the power to take account of the justice and equity consideration but the Act did not confer any power on the Secretary of State to make a regulation to that effect.
13. The Secretary of State's representative who made the submission to the Commissioner on the appeal on CCS/1495/05 argued that if Parliament had not thought that the version of section 28F of the 1991 Act which provided for departure directions prevented the modification of such a direction it would not have thought it necessary to amend regulation 40 of the Departure Direction Regulations to allow such modifications. The explanatory note to the amending regulations stated that the purpose of the amendment to regulation 40(5) was to make it clear that a departure direction could be given for less than the full amount which might have been applicable in the particular case. In addition section 5 of the Child Support, Pensions and Social Security Act 2000 repealed section 28F of the 1991 Act and replaced it with a new section 28F which authorises the making of variations. In enacting the requirement for decision-makers and tribunals to consider the justice and equity of variations the new section 28F(1) is in the same terms as the old one. The new provision was given Royal Assent on 28 July 2000. The decision on CCS/3151/1999 was made on 4 July 2000 and received in the Department for Work and Pensions on 19 July 2000. Therefore it could not possibly have been taken into account in the drafting of section 5 of the 2000 Act. Also, in making the Variation Regulations Parliament evidently deliberately decided not to reproduce the "in whole or in part" provisions introduced to the original departure directions by way of amendment in 1998. The representative's conclusion was, therefore, that regulation 20(5) of the Variation Regulations required the tribunal to apply the "all or nothing" approach in taking the justice and equity of a variation into account.
14. I stayed my decision on this appeal until the decision on CCS/1495/05 was issued. In the event, although he remarked that he was quite clear that a tribunal could not in consideration of the justice and equity of a variation make a variation for an amount greater than the amount which it found to be the difference between the known income and the required income, the Commissioner did not have to decide for the purposes of the appeal before him the question of whether or not a tribunal could in the light of the same consideration make a variation for less than the difference between the two levels of income. I have, therefore, had to decide the question for myself. I have arrived at the same conclusion as the two representatives of the Secretary of State but for different reasons. In doing so I have considered the interpretation of only the primary and subordinate legislative provisions which are relevant to variations on the grounds of inconsistent life-style.
15. The current section 28F(1) of the 1991 Act is set out in paragraph 7 above. Sub-section (6) is also relevant. It provides:-

"In determining whether or not to agree to a variation, the Secretary of State shall comply with regulations made under Part II of Schedule 4B.".

Paragraph 4 of Schedule 4B is in Part I of the schedule and confers on the Secretary of State a wide power to prescribe cases for variation in addition to those specified in the rest of Part I. It also specifies, as one example of what may be prescribed, the case of inconsistency between a person's life-style and the income on which the calculation of a maintenance assessment in accordance with Part I of Schedule 1 to the Act has been based Paragraph 5(1), which is in Part II of Schedule 4B provides:-

" (1) The Secretary of State may by regulations make provision with respect to the variations from the usual rules for calculating maintenance which may be allowed when a variation is agreed.".

16. Paragraph (1) of regulation 20 of the Variations Regulations prescribes a life-style inconsistent with the income on which the maintenance assessment is based as a case for the purposes of Schedule 4B. Paragraph (5) of regulation 20, insofar as relevant to this appeal, provides:-

"Where a variation on this ground is agreed to, the additional income taken into account under regulation 25 shall be the difference between income which Secretary of State is satisfied the non-resident parent requires to support his overall life-style and the income which has been or, but for the application of paragraph 4(1)(b) or 5(a) of Schedule 1 to the Act, would be taken into account for the purposes of the maintenance calculation ...".

Regulation 25, insofar as relevant to this appeal, provides:-

"…, where the variation agreed to is one falling within regulations 18 to 20 (additional cases), effect shall be given to the variation and the maintenance calculation by increasing the net weekly income for the non-resident parent which would otherwise be taken into account by the weekly amount of the additional income except that, the amount of net weekly income calculated in this way would exceed the capped amount, the amount of the net weekly income taken into account shall be the capped amount.".

17. It seems to me that paragraph (1) of regulation 20 is made in exercise of the power specified in paragraph 4(1) of Schedule 4B to the Act and that paragraph (5) of that regulation and regulation 25 are made in exercise of the powers specified in paragraph 5 of the Schedule to the Act. The Schedule is, of course, enacted by section 28F(1)(a) and (b). Therefore the provisions made in regulations 20 and 25 are made in exercise of powers conferred on the Secretary of State by that provision. Paragraph (6) of section 28F(1) might, if read in isolation, be taken to enact an overriding consideration which cannot be restricted in its effect by subordinate legislation, as was decided in CCS/3151/1999. However, the current version of section 28F is different from that considered by the author of CCS/3151/1999. When the section is read as a whole the overriding nature of the consideration enacted in sub-section (1)(b) is modified by the sub-section (6) provision that the Secretary of State will comply with the regulations made under Part II of Schedule 4B in determining whether or not to agree to a variation. That means that he can agree to a variation only if it both complies with regulation 20(5) and is just and equitable. Paragraph (5) of regulation 20 is, to my mind, unambiguous in its provision that what is to be taken into account under regulation 25 in order to vary the assessment is the difference, not part of the difference, between the known income and the required income. That means that if the Secretary of State, having found (by the process enjoined by CCS/3543/1998) that the parent's life-style would require an income in excess of that on which the assessment has been based, decides that it would not be just and equitable to agree to a variation which would have the effect of increasing the parent's income by the amount of the excess he has no choice but to refuse to agree to a variation. In agreeing to a modification of the effect of the variation on the appellant's weekly income the tribunal in this case erred in law and that is a second reason for my having to set its decision aside.

The Respondent's Case

18. The second respondent's grounds for appealing the tribunal's decision are, briefly, that:-

1. At the tribunal hearing she was at a disadvantage because she was the only woman present,

2. the tribunal discounted the entirety of her evidence and was clearly biased against her,

3. there is nothing in the statement of the reasons for the tribunal's decision to explain how considerations of justice and equity resulted in the modification of the variation calculated by the tribunal to reduce the additional maintenance resulting from the variation from £58.00 per week to £50.00 per week.

19. As regards the second respondent's feeling that she was at a disadvantage through being the only woman at the tribunal hearing she should understand that there is no provision for gender representation on the tribunals in the legislation under which those tribunals are constituted. If a particular tribunal thought that in a particular case it was desirable that its membership should include somebody of the same sex as one of the parties to the appeal it could adjourn to allow arrangements for that to be made. However, in a case such as this where the issues related solely to the financial resources of the appellant there was no reason for any member of the tribunal or the representative of any party to be of the same sex as the second respondent and there is nothing in the record of the tribunal's proceedings to show that the second respondent raised the matter at the hearing. There is nothing in the record of proceedings nor in the statement of reasons for the tribunal's decision to support the second respondent's allegation that the tribunal was biased against her. Why would the tribunal have been biased against her? She does not say that either member of the tribunal had any previous dealings with her which could have given rise to an animus against her.
20. It is understandable that the second respondent, having made what is described in the statement of the tribunal's reasons for decision as clear and forceful contentions, will be dismissive of the tribunal's conclusion that the appellant's account of his business was credible but the evaluation of evidence in order to arrive at conclusions of fact is primarily a matter for the tribunal. I agree with the Secretary of State's representative that there is no obvious fault in the tribunal's reasoning or findings in fact in relation to that matter. There is, therefore, no reason for me to set aside the tribunal's decision on the reference of the application for a diversion of income variation.
21. On the question of the modification of the life-style variation arrived at by the tribunal, apart from my own view that such a modification is not permissible in terms of the Variation Regulations, I agree with the second respondent and the Secretary of State's representative that the tribunal has given no explanation as to how the considerations of justice and equity required such a modification.
22. As I say in paragraph 1 above, the reference of the second respondent's application for a life-style variation has to be remitted for rehearing. Both parents' submissions are lengthy. It would assist the tribunal, and that would be to the benefit of both parents, if before the new tribunal's hearing each parent submitted a summary, consisting of not more than two pages, of the points that he or she wishes the tribunal to consider.
23. For the foregoing reasons the appeal and the second respondent's case on the life-style variation succeed, inasmuch as I have set the tribunal's decision aside, and my decision and directions are in paragraphs 1 and 20 above.

(Signed) R J C Angus

Commissioner

17 August 2006