UK Social Security and Child Support Commissioners' Decisions

DECISION OF THE CHILD SUPPORT COMMISSIONER

1. The non-resident parent's appeal is allowed. The decision of the Bexleyheath appeal tribunal dated 29 June 2007 is wrong in law, for the reasons given below, and I set it aside. The parent with care's appeal against the Secretary of State's decision dated 22 May 2006 is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraphs 26 to 28 below (Child Support Act 1991, section 24(3)(d)). The attention of the Secretary of State is drawn to paragraph 26 in particular.
2. In the terms of the child support legislation applicable to the "reformed" scheme in force for maintenance applications made on or after 3 March 2003, the appellant to the Commissioner is the non-resident parent. From now on I shall call him the father. I shall call the parent with care the mother.

The background

3. The appeal tribunal was concerned with the mother's appeal against a decision that the father was liable to pay £5 per week in child support maintenance for the two qualifying children from 30 March 2006. That calculation was based on his having net weekly earnings of £82. The mother asked on her appeal form, received on 25 August 2006, how he could afford to live in a property worth £250,000 and pay a mortgage of £700 per month and council tax of £100 per month on such earnings. She also said that he had visited Iran in the last two months, buying a property there and having cosmetic surgery, asking how that could have been afforded. She suggested that he was being paid cash-in-hand in addition by his employer, who was a friend. The mother also said that the appeal was outside the one-month time limit because she had sent an appeal within two weeks and only discovered that it had not been received when she telephoned to find out what was happening to it. The Secretary of State, through an officer of the Child Support Agency (CSA), granted an extension of time to 25 August 2006 under regulation 32 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999.
4. On 7 November 2006 the appeals officer of the CSA dealing with the mother's appeal wrote to her as follows:

"You may wish, as part of your appeal, to consider applying for a Variation on additional case grounds. I enclose a leaflet and application form in this respect. If you wish to apply, please complete the latter in the appropriate parts and return it to me within 14 days from the date of this letter.

From the points you have made, the grounds you may consider are Assets, Lifestyle and/or Diversion of Income - I have marked these on page 3 of the application form. Please note that [the father's] home cannot be included under `Assets'. Any comments you have made in your application may be sent to [the father] for contest."

5. The mother completed the lifestyle inconsistent part of the variation application form signed on 20 November 2006. Additional information given was that the father had earned £250 to £300 per week cash in hand when she was living with him and that he had spent £3,000 on hair implantation in Iran in June 2006. On 27 November 2006, having not contacted the father, the appeals officer wrote to the mother as follows:

"On 25/08/06 you made an application for a variation to the maintenance calculation. This letter tells you why the application has been denied.

We looked at your application and the evidence that you gave us to support your application.

The reason why your application has been denied is:

Insufficient evidence of [the father's] lifestyle for the application to succeed."

Nothing was said in the letter about any rights of appeal, although a telephone number was given for queries.

6. A written submission on the appeal against the decision of 22 May 2006 was then prepared and issued to the parents on 1 December 2006. The submission assumed that the appeal covered both the maintenance calculation of £5 per week and the issue of whether there should be a variation on the ground of lifestyle inconsistent with declared income. But it was submitted in the section on "the proposed effective date of the variation application" that since the application for a variation treated as made on 25 August 2006 was made more than one month after notification of the maintenance calculation on 22 May 2006 it had to be treated as an application for supersession. In that case the effective date of any variation agreed would be 24 August 2006.

The appeal tribunal's decision

7. Following a hearing on 16 March 2007, the chairman of the appeal tribunal directed the father to provide various documents and information, including bank account and credit card statements and details of amounts received from his father's estate, and to complete an outgoings questionnaire. It was stated that it was necessary for the purposes of the variation application to know about the father's lifestyle and what he was living on in August 2006. The father produced a lot of bank account and credit card statements and property documents and completed an outgoings questionnaire as at August 2006.
8. Both parents attended the next hearing on 29 June 2007. The father gave evidence that in 2006 he had brought £12,000 to £13,000 from Iran, about £12,000 of that being an inheritance from his father (or possibly that was in addition). He said that a letter dated 4 January 2006 (page 33) was evidence of £6,000, that a receipt on page 34 was evidence of £5,000 on 4 April 2006 and that he had brought a further £1,000. The father said that he had also borrowed about £9,000 from friends and had paid off those loans by raising money on credit cards. He said that a balance transfer of £8,660 shown on 7 December 2006 represented what had been needed to pay off those loans. He had spent £1,300 on cosmetic surgery. When it was put to him that his outgoings questionnaire showed weekly expenditure of about £500 per week, he said that he had since reduced some expenditure, but had at the time lived on money from Iran and loans, which he hoped to clear off by selling his flat. The mother repeated many of her previous points and generally queried where all the money had come from and how it had moved through the father's accounts. There was, though, agreement that in March 2006 the father had care of the children for one night a week.
9. The presenting officer for the CSA submitted that the appeal was against the whole decision and in particular the refusal of a variation. He submitted that the father had in effect stated that he required £501.69 per week in August 2006 and that under regulation 20(3) of the Child Support (Variations) Regulations 2000 only assets over £65,000 could be considered in asking whether the lifestyle was financed from that source.
10. The appeal tribunal allowed the mother's appeal. It decided that the maintenance calculation should include a one-seventh shared care allowance from 30 March 2006 and that a variation was to be granted under regulation 20 of the Variations Regulations with effect from 24 August 2006 increasing the father's net income from £82 per week to £330. The decision notice continued as follows, after an explanation of the decision on shared care, which would be relevant on the new amount of income:

"As regards [the father's] lifestyle at 24.08.06, the Tribunal had the benefit of his oral evidence and the questionnaire as to his outgoings at that date. From the questionnaire, it was calculated that he spent approximately £500.00 per week (£26,000 per year) to support his life-style. There was clear evidence from him that (on top of his income of £82.00 per week) he had supported that life-style partly on funds received from Iran - £6,000.00 in January and £5,000.00 in April, and the balance from borrowings from friends whom he ha repaid in December, but only by transferring the £8660.00 debt to his Abbey credit card, and that amount still has to be repaid. From the weekly figure of £500.00 is to be deducted the weekly equivalent of his borrowing of £8660.00, namely £170.00 per week, leaving a Net Weekly Income of £330.00. The Tribunal calculated that this would result in a liability of £66.00 per week (calculated at 20% of Net Weekly Income). In addition, the Shared Care Allowance of £9.43 per week (one seventh of £66.00) results in a net figure of £56.57 per week with effect from 24.08.06.

Regulation 20(3)(c) excludes from inclusion in the calculation of life-style, that part of the life-style that is supported by `assets' as defined in Regulation 18. Regulation 18 defines assets as those over £65,000 in value, and the Tribunal found as fact that [the father's] assets did not amount to that sum, and accordingly that part of his life-style supported by his assets could not be ignored.

However, the Tribunal did accept that it was just and equitable that the amounts borrowed from friends to support his life-style and which required to be repaid (apparently from the intended sale of his flat) should not be taken into account in calculation of the assessment.

Having taken into account those matters referred to in section 28E Child Support Act 1991 and excluding those matters not to be taken into account, there are no factors brought to the Tribunal's attention in this case regarding the financial circumstances of either party or the welfare of the children affected, that would lead it to conclude that it would be unjust or inequitable to make a Direction as set out above."

The statement of reasons later produced added nothing of substance, except an invitation to the father to apply for a "review" of the "assessment" if his lifestyle had changed.

The appeal to the Commissioner

11. The father now appeals against the appeal tribunal's decision with my leave. The representative of the Secretary of State agreed in the submission dated 15 January 2008 that the appeal tribunal had gone wrong in law, accepting a suggestion that I had made when granting leave that the appeal tribunal had had no jurisdiction to deal with an appeal against a refusal of the application for a variation in the form of an application for supersession, because there had been no appeal against the refusal to supersede. However, with respect to the author of that submission, the rest of it did not get to grips with the dreadful complexities of the legal situation when suggesting that the case should be referred to a new appeal tribunal to consider whether the conditions for a variation were met as at 22 May 2006. As will emerge, I think that suggestion is fundamentally right, but it takes some working out. The mother's observations understandably focused on her central contention that the father was obtaining significantly more than his declared £82 per week from his employment and that was the only explanation of how he could afford his expenditure. The father's representative, Sally Goldman of Ahmed & Co Solicitors, eventually made a no further comment reply on 22 April 2008.

Appeals, applications for variations, revisions and supersessions

12. The legal position as I see it is as follows. If an application for a variation is not made before the Secretary of State has made a decision on an application for a maintenance calculation (which application would fall under section 28A(3) of the Child Support Act 1991 and regulation 22 of the Variations Regulations), an application may be made under section 28G when a maintenance calculation is in force. This then takes effect as if it were an application for a revision or a supersession.
13. When a mother, say, appeals against a decision making a maintenance calculation, an acceptable practice has grown up of treating the appeal, if it raises matters that could justify the making of a variation, as impliedly including an application for a variation. I think that that practice is acceptable, first, because an application for a direction does not have to be in writing (section 28A(4)(a)). If an implied application is regarded as not in writing, the Secretary of State may accept it as such (in which case it is made on the date notification by the parent: regulation 4(2) of the Variations Regulations) or direct that the application be made in writing, on an application form or some other sufficient written form. If that form is received back within 14 days or without further avoidable delay, the application is treated as made when notification of the wish to apply was received (regulation 4(1), (4) and (5)). If, which seems the more likely, the implied application is regarded as having been made in writing, as part of a written appeal, it is in an acceptable form and is treated as made on the date of receipt (regulation 14(3)).
14. In so far as the application raises matters that were applicable as at the effective date of the maintenance calculation, it may be regarded as an application for revision. Since there cannot be a revision of a decision on the grounds in regulation 3A(1)(a) to (d) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 in respect of a change of circumstances that occurred after the date on which the decision had effect (regulation 3A(2)(a)), in so far as an application for a variation raises such changes of circumstances it can only be regarded as an application for a supersession. It is a ground of supersession that the Secretary of State has received an application for supersession by way of an application for a variation under section 28G of the Child Support Act 1991. There appears to be nothing in regulation 7B of the Decisions and Appeals Regulations to oust the normal rule under section 17(4) that any superseding decision takes effect from the beginning of the maintenance period in which the application was made (regulation 7B(6) applies only to grounds for variation expected to come into being in the future).
15. In so far as an application for variation as part of an appeal takes effect as an application for revision, if the decision-maker declines to revise the decision, the appeal continues in being against the original decision. That appeal then encompasses the issue of whether a variation direction should be given on the circumstances as at the effective date of that decision. In so far as an application for a variation takes effect as an application for a supersession, a decision to refuse to supersede under section 17 must be notified to both parents in accordance with section 20(3), including notification of the right of appeal under section 20(1)(b). The appeal against the original decision making the maintenance calculation continues in being, but does not encompass the question of whether a variation direction should be given on the application for supersession. There has to be a separate appeal against the refusal to supersede.
16. The circumstances of the present case throw up some additional complications. The first stems from the terms of the letter of 7 November 2006 from the appeals officer to the mother. By inviting her to make an application for a variation, the letter gives the impression that she had not yet made such an application. However, since the appeals officer was inviting her to make an application as part of her appeal and asked for the form to be returned within 14 days, in my view the letter can only fairly be interpreted either as a direction under regulation 4(1) of the Variations Regulations or as a request for further information. The application form, although signed on 20 November 2006, appears to have been received back on 27 November 2006, more than 14 days after the date of the letter, but the delay in the circumstances (it being unknown when the letter actually reached the mother, who then had some important things to think about) could legitimately have been regarded as unavoidable. Accordingly, it was proper to regard the application for variation as having been made on 25 August 2006, as stated in the appeals officer's letter of 27 November 2006.
17. However, the author of the written submission to the appeal tribunal was wrong to conclude that the application could only be treated as an application for a supersession. The normal month from notification for applying for a revision under regulation 3A(1) of the Decisions and Appeals Regulations can be extended under regulation 4, but only in highly restricted circumstances. On the view that the appeals officer took on 27 November 2006, the condition in regulation 4(4)(b) (that the application for revision has merit) was not met. But it was overlooked that the time for appealing against the decision of 22 May 2006 had been extended. Accordingly, the ground of revision under regulation 3A(1)(cc) was available. An appeal had been made against the decision of 22 May 2006 within the time extended under regulation 32 and had not been determined. In my judgment, when that ground of revision was available to the decision-maker with which to implement a variation, subject to the exclusion of consideration of changes of circumstances after 30 March 2006, and there was an express rejection of the application for a variation, the continuing appeal against the original decision effective from 30 March 2006 encompasses the issue of whether a variation should be made. Thus, here, contrary to what I suggested when granting leave to appeal, the appeal tribunal did have jurisdiction to consider the question of variation on the ground of life-style inconsistent with declared income, but only in relation to the circumstances as at and before 30 March 2006. It had no jurisdiction to consider the question of variation with effect from 24 August 2006, on the basis of the circumstances as at that time. Such a variation could only be imposed by way of a supersession of the decision of 22 May 2006 and there had been no appeal against the decision of 27 November 2006 in so far as it was a refusal to supersede. I come back in paragraph 26 below to where that leaves the mother in relation to that decision.
18. Accordingly, the appeal tribunal went wrong in law in considering the question of a supersession with effect from 24 August 2006 and in considering the circumstances as at that date rather than as at 30 March 2006.

Assets for the purposes of "life-style inconsistent"

19. There were further errors of law, leaving aside those identified above. The CSA presenting officer and the appeal tribunal were wrong about the effect of regulation 20(3)(c) of the Variations Regulations in relation to assets worth less than £65,000.
20. Regulation 20(1) allows a variation to be made when the income that has been or would be taken into account for the purposes of the maintenance calculation is substantially lower than the level of income required to support the overall life-style of the non-resident parent. Then paragraph (3)(c) provides:

"(3) Paragraph (1) shall not apply where the Secretary of State is satisfied that the life-style of the non-resident parent is paid for from--

...

(c) assets as defined for the purposes of regulation 18, or income derived from those assets;"

Regulation 18(1) allows, subject to paragraphs (2) and (3), a variation when a non-resident parent has control over an asset. Regulation 18(2) provides that for the purposes of the regulation "asset" means various things, including money in cash or on deposit (sub-paragraph (a)). Regulation 18(3) provides:

"(3) Paragraph (2) shall not apply--

(a) where the total value of the assets referred to in that paragraph does not exceed £65,000 after deduction of--

(i) the amount owing under any mortgage or charge on those assets;

(ii) the value of any asset in respect of which income has been taken into account under regulation 19(1A);

[(b) to (f) other exclusions, including assets retained for a reasonable purpose and the home of the non-resident parent]."

21. In my judgment, the reference in regulation 20(3)(c) to assets as defined for the purposes of regulation 18 can only be taken to refer to the list of types of asset in regulation 18(2). Although regulation 18(3) rather confusingly provides that paragraph (2), ie the definition paragraph, is not to apply in the circumstances set out, in my judgment that does not alter the essential definition of what is an asset. It is providing that assets within that essential definition are not to be brought into the assessment under paragraph (1). That is why paragraph (1) is made subject to paragraph (3) as well as to paragraph (2). Thus, for the purposes of regulation 20(3) anything that is an asset within regulation 18(2) must be considered as a potential source of financing of the non-resident parent's life-style. It is irrelevant whether the total amount of the non-resident parent's assets after deductions is below or above £65,000.
22. That error of law was material to the appeal tribunal's decision in the present case. If the amounts of capital brought from Iran by the father had been financing, at least in part, his life-style at the relevant date, there was an argument that, when other assets in the form of amounts of capital borrowed from friends or through credit card debt were taken into account, the whole of the life-style at that date was paid for from sources within regulation 20(3) in addition to the income taken into account in the maintenance calculation. If that argument were to be made out, no variation could have been agreed.

The cost of the father's life-style

23. It was crucial to the question, and indeed to the amount of additional net income that should have been taken into account if the grounds for a variation were made out, to quantify the cost of the father's life-style at the relevant time. I agree with Ms Goldman in the grounds of the application for leave to appeal on behalf of the father that the appeal tribunal failed to give an adequate explanation of how it reached the figure of £500. The expenditure listed in the father's outgoings questionnaire, even on the assumption that the situation might well have been the same in March 2006, did not add up to £500 per week. Ms Goldman makes it £451.99. My rough calculation was £466.24. The CSA presenting officer had, according to the record of proceedings, submitted that "including mobile phones and £30 for the children" the father's expenditure was £501.69 per week, or £26,000 per year. The father had said in evidence that he paid about £30 a week for the children, with more for toys etc. But it was not clear whether he was talking about June 2007 and in any case the outgoings questionnaire had included £25 per week for children's needs, plus £36.40 and £20 monthly for child maintenance and clothing respectively and £120 annually for presents. It is therefore far from clear how £30 for the children was in addition to what was already in the questionnaire. The father had accepted that in 2006 he had three mobile phone accounts, as was suggested by direct debits from his bank accounts. The questionnaire only listed £20 per month for telephone and £15 per month for mobile phone. But neither the presenting officer nor, more importantly, the appeal tribunal explained just how it got from the outgoings questionnaire to an expenditure of £500 per week. In the circumstances sketched in above that was an error of law.

The Commissioner's decision and directions

24. For those reasons I set aside the decision of the appeal tribunal of 29 June 2007 as wrong in law. There are a number of other difficult questions of law about the operation of regulation 20 of the Variations Regulations (life-style inconsistent) and in particular about the relationship with the test under section 28F(1)(b) of the Child Support Act 1991 that a variation may only be agreed if, in all the circumstances, it is just and equitable to do so. However, I do not know whether those questions will or will not turn out to be relevant before the new appeal tribunal. It is best that I do not speculate on those questions.
25. The differences of fact in this case must be resolved after both parents have had an opportunity to put forward new evidence and argument at an oral hearing. The mother's appeal against the decision of 22 May 2006 is accordingly referred to a differently constituted appeal tribunal for determination in accordance with the following directions.
26. I have explained above why the issues arising on that appeal are limited to the correctness of the maintenance calculation with effect from 30 March 2006 (including the mother's arguments that the father was in fact receiving more income from his employment than declared or stated in the letter of 10 May 2006) and to the question of whether a variation on the ground of life-style inconsistent with declared income should be imposed with effect from the same date. In relation to the application for a variation made on 25 August 2006, in so far as it consists of an application for supersession of the decision of 22 May 2006, in my judgment no notification of a decision refusing the application for supersession that complies with the requirements of section 20(3) of the Child Support Act 1991 has yet been given. Accordingly, the time for the mother to appeal has not yet started to run. The Secretary of State should now, unless there have been developments that I do not know about, give notice to both parents of the decision refusing to supersede apparently made on 27 November 2006 including notice of the rights to appeal against that decision. Both parents will then have the normal one month under regulation 31 of the Decisions and Appeals Regulations in which to make any appeal to an appeal tribunal.
27. Before a date for the rehearing is fixed, the case will in the normal course of events be considered by a district chairman. That district chairman may wish to take steps to obtain information from the CSA about the issuing of a new notification in accordance with the previous paragraph and about the lodging of any appeal, so that any appeal against the supersession decision or refusal can be heard at the same time as the appeal against the decision of 22 May 2006. The district chairman may also wish to consider whether any further directions need to be given prior to the rehearing, for instance about the production of evidence or information about the circumstances as at the end of March 2006.
28. There is to be a complete rehearing of the appeal against the decision of 22 May 2006 on the evidence presented and submissions made to the new appeal tribunal, which will not be bound by any findings made or conclusions expressed by the appeal tribunal of 29 June 2007. I direct the new appeal tribunal to apply the approach to the meaning of "assets" in regulation 20(3)(c) of the Variations Regulations set out in paragraphs 19 to 22 above and to avoid the error mentioned in paragraph 23 above. The evaluation of all the evidence and submissions will be entirely a matter for the judgment of the new appeal tribunal. The decision on the facts in this case is still open.

(Signed) J Mesher

Commissioner

Date: 19 June 2008