CH_1672_2007 [2008] UKSSCSC CH_1672_2007 (01 April 2008)

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UK Social Security and Child Support Commissioners' Decisions

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Cite as: [2008] UKSSCSC CH_1672_2007

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CH 1672 2007

DECISION OF THE SOCIAL SECURITY COMMISSIONER

The appeal is allowed. For the reasons below, I set aside the decision of the tribunal and replace it with the decision that the tribunal should have given. This is:

Appeal allowed. The appellant's income is for the purposes of his claim for housing benefit his weekly income after taking into account the monthly sums he is required to pay to his wife under the High Court order of 16 02 2004.

The Council is to recalculate the amount of housing benefit to which the

Appellant is entitled in accordance with this decision. If the parties do not

agree the weekly amount to be paid then either party is at liberty to refer

the matter back to me (or to another Commissioner if I am not available)

for decision, provided that any such application must be made within one month of the issue of the calculation of entitlement by the Council to the appellant or his representative.

The claimant and appellant, Mr K, is appealing with permission of a chairman against the decision of the Enfield tribunal on 2 02 2007. The tribunal confirmed a decision of the Westminster City Council ("the Council") that Mr K was entitled only to £133 housing benefit a week.

I held an oral hearing of the appeal on 28 02 2008 in London. The appellant attended and was represented by Sally Robinson of counsel. The Council was represented by Kevin Burke, Director of Finance and Resources of the Council. I am grateful to both for their focussed but thorough analyses of the issues in dispute.

It was agreed at the oral hearing that if I considered that the tribunal had erred in law then I should take the decision that the tribunal should have taken without referring the matter back to the tribunal or the parties.

REASONS FOR THE DECISION

Background to the appeal

The facts were not in dispute before the tribunal or me. Mr K was at all relevant times over 60. He claimed housing benefit from the Council when, after an unfortunate set of circumstances, he was housed by the Council in a homeless persons' hostel. He was awarded a weekly level of housing benefit considerably below the weekly rent he was charged at the hostel. He appealed.

Only one aspect of the decision limiting Mr K's benefit was in issue before the tribunal and before me. This concerned the refusal of the Council to take into account, in calculating Mr K's income, sums paid out by him under a court order to his wife.

There is a decree absolute of judicial separation in effect between Mr K and Mrs K. As part of the arrangements associated with the issue of the decree, Mr K was ordered by the High Court on 12 02 2004 to pay to his wife a monthly sum that I am told was one half of the occupational retirement pension he received monthly. The court order directs that he must maintain a direct debit payment out to his wife. It also directs automatic variation of the monthly order to reflect annual variations in the amount of pension received by Mr K. I note also that the recital of the agreement between the parties in the order expressly refers to a satisfaction of any claim for a pension sharing order.

The issue in dispute

Mr K maintains that his weekly income should be calculated after taking into account the deduction of the sum he is compelled to pay to Mrs K. The Council maintains that Mr K's income is his full pension income and that no account can be taken of sums he pays Mrs K.

The tribunal agreed with the view taken by the Council. It gave an admirably clear and thorough statement of the facts of the case and of its reasons for agreeing with the Council.

Miss Robertson emphasised that she rested her arguments about the tribunal decision only on the question of law that arises from the tribunal decision. This was whether the Council and tribunal were correct not to take the payment to Mrs K into account when calculating Mr K's income for housing benefit purposes. I intend no disrespect to the tribunal chairman in addressing in this decision only the question of law that arises from that decision. If the tribunal took the right view of the law, then its decision stands. And it was agreed that if it did not I should take the decision the tribunal should have taken based on its findings of fact.

The key facts

Miss Robertson's presentation of the appeal usefully stripped away all irrelevant facts, and I adopt her approach in this decision.

The case concerns monthly receipts by B from A out of which B is obliged to pay smaller monthly amounts to C.

Neither a payment by A nor its receipt by B, nor a payment by B or its receipt by C, has the quality of being capital. It is common ground that at all stages the payments and receipts are of an income nature.

The payments by A to B are unconditional, as are the payments by B to C. The case is to be distinguished from cases where A's payment to B (or B's payment to C) is conditional or revocable and so cannot be regarded as an unconditional resource in the hands of the recipient. Such payments are, in reality, payments from A to B (or B to C) that are reversible and so can become self-cancelling.

The payment from B to C is dependent upon but is separate from the receipt by B of the payment from A. This is not a case of a payment from A to C directly (whether or not it is made on behalf of B). Nor is it a case where the payment to C by B can be regarded in any way as made on behalf of A. I am told that this is because no mechanism existed in this case for A (the trustees of the pension fund) to make the payments directly to C (Mr K's separated wife). I return to that issue below.

I agree with Miss Robertson that it is necessary to keep these points in mind because most of the cases in this area of law concern other kinds of payment and receipt and not the precise kinds of payment and receipt in issue here.

The arguments of the parties

It was common ground that Mr K's case is an unusual one. The payment is in effect the result of a court order imposing a pension-splitting arrangement as a result of the judicial separation of Mr K and Mrs K. Had Mr K and Mrs K divorced, or had their marriage been annulled, then the pension splitting arrangements that apply on divorce could have been used. This is enabled by sections 19 and 21 of the Welfare Reform and Pensions Act 1999 from late 2000. I accept for the purposes of this case Miss Robertson's submission that these could have had the effect of deflecting receipt of the relevant part of Mr K's pension from Mr K to Mrs K. She then argued that this would not have been Mr K's income at all. But no such provision had been made for judicial separation, so instead Mrs K had to rely on a court order. That is what she had done. I have seen no policy statement about why these arrangements did not apply to judicial separations.

Mr K was therefore in as near a position as could be attained under existing law to an ex-husband who forfeited some of his pension income to his ex-wife under a pension splitting order. It was submitted therefore that he should therefore be treated in the same way as if there had been a pension splitting order. I note, from the latest judicial statistics published by the Ministry of Justice, that there were 133,157 decrees absolute of divorce in England and Wales in 2006, but only 353 for judicial separation. So occasions for pension sharing as part of judicial separation will be rare. It was therefore not surprising to hear Mr Burke state that despite his long experience handling housing benefit disputes he could not recall any previous dispute involving the consequences of a judicial review, nor seeing any guidance on this point.

Miss Robertson buttressed her argument by reference to relevant caselaw and also by an analogy to the position of someone who entered into a voluntary arrangement with creditors as compared with someone who was subject to a bankruptcy order. In particular she relied on decisions of Commissioners to the effect that payments under such arrangements should be excluded from the income of the individual subject to such arrangements. I deal with her analysis of the caselaw below. She also noted that one effect of the treatment to which Mr K was subject was that the sum he paid to Mrs K could be treated as income of Mrs K at the same time as being treated as income of Mr K.

Mr Burke's response was brief but to the point. Mr K's income included the whole of his occupational pension. There was no provision in housing benefit law to deal with this kind of payment. So the payment by Mr K to Mrs K could not be taken into account. He accepted in argument that it was therefore possible for a situation to arise where the Council would regard the sums paid by Mr K to Mrs K as being the income at the same time of both Mr K and Mrs K. That could also occur, he suggested, in other cases. For example, someone paying child support maintenance would not be allowed to deduct the amount of the maintenance payments from income although the recipient of the child support maintenance would have to declare the maintenance as part of income received. If this was double counting, it was because Parliament had directed that there should be double counting. The tribunal was therefore right in upholding the decision of the Council.

The relevant law

It was common ground that Mr K's housing benefit entitlement was to be calculated in accordance with the provisions of the Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 (SI 2006 No 214)("the Regulations"). It is also common ground that Mr K is not entitled to any payment of state pension credit.

Regulation 25 of the Regulations provides that assessment of income and capital are to be made in accordance with the rules set out in Part 6 of the Regulations. Regulations 28 signposts the regulations applying to those who do not receive state pension credit as being regulations 29 to 49.

Regulation 29 defines "income" for the purposes of the Regulations by reference to a lengthy list of specific items. The only item in that list of relevance to this appeal is:

"(c) retirement pension income within the meaning of the State Pension Credit Act"

The definition of "retirement pension income" is in section 16 of the State Pension Credit Act 2002. The relevant phrase is in section 16(1)(f):

` "income from an occupational pension scheme or personal pension scheme".

I note that that is defined by reference to the receipt, not the payment. However, regulation 42, noted below, stops this being used to avoid income being counted by not claiming a pension.

Regulation 30(1)(a) of the Regulations provides for calculation of income "by calculating or estimating the amount which is likely to be his average weekly income in accordance with this Part". This is subject to regulations 29(2), 31, 34, 61 and 62. None of those other regulations are relevant here.

Regulation 33 makes further provision for the calculation of weekly income.

The only relevant part of that regulation in this appeal is paragraph (9). This provides that income specified in Schedule 5 is to be disregarded in the calculation of a claimant's income.

Regulation 35 deals with earnings of employed earners. Regulation 35(2)(c) expressly states that earnings shall not include any occupational pension.

Regulations 41 and 42 deal with other income (that is, income other than earnings of employees and the self-employed). Although no part of those regulations was put in issue before me, I note that regulation 41(1)(a) requires any amount of retirement pension which an individual has not claimed but might expect to receive it was claimed to be treated as income that the individual possesses. Regulation 41(1)(b) imposes the same treatment on occupational pensions that a claimant has elected to defer.

Regulation 42(1) requires that any payment of income to a third party "in respect of the claimant" shall be treated as possessed by the claimant. Paragraph (2), however, provides a specific exception to this rule in respect of a payment of income made under an occupational pension scheme or personal pension scheme where, in summary, (a) a bankruptcy order has been made against a claimant, (b) the payment is to the trustee in bankruptcy or someone acting for the creditors and (c) the claimant has no other income. I mention that because Miss Robertson sought to rely on an analogy with bankruptcies and schemes of arrangement. I am not sure that this assists her, but I do not consider that regulation 42(1) assists either. It is targeted, using the standard phraseology, at payments made by A to C "in respect of" B. I take that as meaning that the payment to C is for B's purposes.

Schedule 5 lists 24 kinds of amounts to be disregarded in the calculation of income other than earnings. Neither Miss Robertson nor Mr Burke considered that any of these kinds of amount assisted the determination of this appeal. I find some help in the list in the sense that it deals with some kinds of what I have termed charges on income. For example, paragraphs 18 and 19 allow deductions in certain circumstances for a parental contribution to a student child's maintenance. In other words, Schedule 5 makes provision not only for the exclusion of sums paid to a claimant but also for the exclusion of sums paid by a claimant.

While these provisions lay down the regulatory context within which the decision in this case has to be made, I accept from this analysis that the central point is the meaning of "average weekly income" in regulation 30. No specific aspect of the definition of "income" or in the other provisions surveyed above directly deals with a payment under a High Court order of the kind that applies to Mr K.

Chandler v Secretary of State, R(CS) 2/08

Miss Robertson first took me to the most recent case of relevance. In Chandler the Court of Appeal were concerned with the question whether regular payments received by an absent parent were part of his income for child support maintenance purposes. The central issue was therefore, in the terminology I have adopted above, about the nature of the receipt by B of a payment that was of a capital and not income quality when made by A. It was contended by counsel for the parent with care to be an example of the proposition that a sum may be paid by A as a payment of the nature of capital and be received by B as a sum of the nature of income. The Court rejected that argument and found that the sum was both paid out by A as capital and received by B as capital. That, of course, was not in issue here. But the Court did spend time examining the meaning of "capital" and "income". And it also emphasised the danger of using authorities that interpreted one statutory provision to assist in the interpretation of another provision.

The Court of Appeal (through the judgment of the Court given by Jacob LJ) focussed on the "other income" provisions in the relevant legislation determining the income of an absent parent. It accepted the argument that the scheme carefully differentiated between income and capital. And it further accepted the argument that the Court should not strain to conclude that regular payments by way of reduction of capital should be counted as income out of a supposed purposive construction in favour of the provision of child maintenance. It specifically rejected a literal argument put to it for the parent with care that "any other payments or other amounts received on a periodical basis" literally apply. And it rejected counsel's argument that other authorities suggested that this was the appropriate interpretation of income in that context.

Jacob LJ specifically rejected the approach by analogy taken for the parent with care:

"36 I think there is considerable danger in jumping from one statute to another. It does not help. Each statute and its associated regulations fall to be construed as a whole. The context for construing a particular word or phrase is that statute, not some other statue. This statute is clearly drawn on the basis that there is clear distinction between capital and income. That distinction is pursued right through into the detail of the Schedule to the MASC Regulations…

Morrell v Secretary of State, R(IS) 6/03

This case concerned the meaning of "income" in the income support legislation. Using the terminology from above, it was a case concerning regular payments from A to B (and from A to C on behalf of B) that were conditional. The payments were said to be by way of loan from A to B and therefore repayable by B to A. On the facts, A was B's mother. Accordingly it was argued that the sums received by B were not income but capital. Miss Robertson relied on passages in the case that were cited by the Court of Appeal in Chandler. I note however that this is an example of the point made by Jacob LJ. While the Court of Appeal in Chandler clearly considered it important to note the status of the payment made by A when considering whether its receipt by B was income in the context of child support law, the Court of Appeal in Morrell, together with the Commissioner deciding the case below as CIS 5140 2002, appear to have put no weight at all on the nature of the payment made by A in the context of income support law.

It is also clear that the Court of Appeal in this case considered itself to be following the then recent decision of that court in Leeves v Adjudication Officer, R(IS) 5/99. Richards J gave a judgment with which Sedley LJ and Thorpe LJ agreed. He applied to guidance in Leeves to decide that:

"Subject to the effect of the repayment obligation, I think it clear that the sums received by the appellant from her mother, being regular monthly receipts, towards her rent and other living expenses, has the character of income.

The fact that they were loans and therefore subject to a repayment obligation does not automatically give them a different character. As with the student grant in Leeves, so with a loan it is necessary to examine the nature of the repayment obligation."

In his judgment the obligation to repay was on the facts of that case an uncertain and future obligation and not sufficient to deprive the receipts of their character as income. And he considered that reference to the statutory scheme strongly favoured the conclusion that the receipts were income.

Miss Robertson drew on these authorities to contend that it was important to look at any particular payment or receipt in the specific context of the particular legislation, and also to apply the ordinary meaning of income to such payment or receipt in that context. In Morrell that context was the sums that the claimant had available to meet outgoings. And she submitted that in Chandler the Court did not criticise that focus but instead ensured that its own focus was on the different scheme. What both Courts had done was to look to the substance of the provisions relevant to the cases and to avoid an over-literal interpretation. She accepted the logic of the point I put to her in argument that on that approach the application of the "ordinary" meaning of income could vary from one context to another.

CIS 22 1993

Miss Robertson relied strongly on this decision of Commissioner Morcom. She accepted that again this was not a direct authority on the facts in this appeal but she presented it as a useful and appropriate analogy. It was, using the terminology above, a case of a payment from A to B that was followed by a payment from B to C. It was therefore a closer authority than the other more general cases that she had found on surveying the authorities. In that case the immediate context was that B had entered into a voluntary arrangement with creditors in order to avoid bankruptcy. As part of this, the claimant was required, on clearing cheques paid to him in his bank account, to pay them out again under the terms of the agreement. Had he not done that, then he could have been made bankrupt. The Commissioner accepted that in those circumstances the cheques were not to be included as the claimant's income for income support purposes. That decision had not been appealed and has been accepted by the then Secretary of State. Further, Commissioner Mesher had cited the decision on more than one occasion, and in particular in R(IS) 4/02, without criticism.

This was therefore authority for the proposition that it was consistent with the ordinary meaning of income that sums channelled through the bank account of an individual under an obligation such as that applying to the claimant in CIS 22 1993 were not the income of the individual for income support purposes. This was so notwithstanding that the sums were received by the individual as of an income nature.

CIS 683 1993

Miss Robertson accepted that this authority appeared to go against her. It was a case of a payment to an ex-wife before the pension sharing provisions had become law. But it was not a fully argued case. The claimant had conceded that the receipts in question were income in full, and the point had not been argued. Further, this was a case of a literal interpretation of the relevant legislation taken without the same attention to context as the Court of Appeal had indicated to be important in more recent cases.

Leeves v Chief Adjudication Officer, R(IS) 5/99

This was the case followed by the Court of Appeal in Morrell. This case concerned the repayment of a student loan by a mature student who abandoned a course of study. The particular focus was on the receipt of the grant for the period after the claimant ceased to be a student. It was therefore a case of a conditional payment from A to B in the circumstances where the conditions required repayment by B to A. An adjudication officer and a tribunal both decided that the grant remained part of the student's income throughout the original period of the grant for income support purposes. But a social security commissioner disagreed. The commissioner distinguished the case from that of another commissioner and from the previous decision of the Court of Appeal in ex parte Fordham [1981] 1 All ER 50.

Potter LJ, with whom Ward LJ and Roch LJ agreed, did not agree with the analysis of the commissioner. He took the view that the receipts in question were not income "in any ordinary sense of the term" at the date of the decision made by the adjudication officer. But he considered that the regulations required the view to be taken at the dates of the notional receipts by the student of the grant, not the actual date of payment. He considered that monies received by way of grant towards maintenance that were not repayable were plainly income but that if there was a certain obligation of immediate repayment then they were not income. Applying this to the facts of the case, the Court of Appeal concluded that for the earlier part of the period under appeal the adjudication officer was right to take the sums into account. But before the matter went to the tribunal the character of the sums had changed and that the appeal should be allowed from the time when the character changed. The essential change occurred when the obligation to repay became an immediate obligation. Using the general terminology the notional receipts by B were therefore initially income but became capital as a result of the underlying obligations to repay A as interpreted in the context of the specific statutory regime applied.

This decision was followed by Commissioner Mesher in R(H) 5/05 when applied to loans incurred by a claimant in drawing down a bank overdraft. These were not "income" in the ordinary sense of the word. Further, on another point, sums paid into the claimant's account as loans voluntarily by someone else and not made or due to be made regularly were also not income. There was no intention to create a legal relationship and on the facts a specific provision in the Housing Benefit Regulations applied to treat the payments as capital. Again, this is an A to B case.

Other authority

For the sake of completeness I mention the other cases put in submission by Miss Robertson or during the written exchanges before the oral hearing. These were CIS 5479 1997, CIS 78 2001, R(IS) 4/01, R(IS) 1/03, R(TC) 2/03, CIS 1064 2004, and R(IS) 7/07. These included all cases in which CIS 22 1993 were mentioned, even in passing. In her general submission, none of these cases advanced the argument either for her or against her to any material extent. They served to illustrate the variations in interpretation in the authorities between the literal approach and the importance in recent authority of taking the language into account in the full context of the specific regulations.

Of those cases I should mention R(IS) 4/01. This was a case where part of the occupational pension of a claimant was diverted to his former wife, following a court judgment against him, under an attachment of earnings order. The Secretary of State and a tribunal found that the claimant's income included his full occupational pension notwithstanding the attachment of earnings order. The Commissioner allowed the appeal. He applied the decision of the Court of Appeal in Leeves to the extent of giving the term "income" its ordinary meaning in the context of the income support regulations, in the absence of any specific provision. He therefore held that the ordinary meaning of income in this context was money paid regularly to a recipient or to his order. But it did not include sums paid to the recipient that the recipient could not prevent being paid directly to a third party. In the terms used above this was a case where part of the payment to be made by A to B was, without B's agreement, made instead to C, so received by C not B.

Mr Burke had looked at the cases cited. But as a housing benefit officer and not a professional lawyer he was not in a position to match that analysis of the authorities. He noted that the payments made by Mr K to Mrs K were not payments for any specific purpose. He was therefore not clear how a decision such as Leeves could apply to this case. He did not see any significance in the analogy between, on the one hand, voluntary arrangements as compared with bankruptcy, and, on the other hand, judicial separation as compared with divorce.

Conclusion

This review of the cases shows the difficulty that courts, tribunals and the Secretary of State have had in drawing a line between receipts by a claimant that are properly regarded as income as against those that are not income (and are termed by default of any alternative as capital). And within the category of payments that on receipt are regarded as income there is a further difficulty in deciding in what circumstances those receipts should be reduced fully or partly by reference to payments made by the recipient from those receipts, whether to the original payer or to some third party. That is the central problem in this case.

The cases also show a difficulty that has also long affected the treatment of these problem receipts for tax and benefit purposes. This is the extent to which the focus in on the payments by A rather than the receipts by B. In other words, using the terminology above, is it relevant to look at the nature of the payment by A when looking at the way this is to be regarded as received by B? Was the payment by A, for example, conditional, or was it drawn on A's capital? In my view Leeves, Morrell and Chandler are all primarily concerned with the problem of the total relationship between A and B, and not with the central problem in this case, which is the commitment by B to pay C. They came to conclusions that took into account the nature of the payment as well as the receipt.

Of the cases cited above, CIS 22 1993 and R(IS) 4/01 are the only two that focus to any extent on the question whether account can be taken of a payment from B to C, or by A directly to C rather than to B, when determining the amount received by B. And both take a view that "income" can look at the net amount left to B after the payment by B to C and not only at the gross amount received by B from A.

The cases also all show the importance of noting the immediate statutory context of the questions to be asked, and the terms to be applied. And they show the importance of noting, in those contexts, the precise financial transactions taking place. They also show the importance of distinguishing between informal arrangements such as those in Morrell and formal liabilities such as those covered by the latter part of the decision in Leeves and the decisions in R(IS) 4/01 and R(H) 5/05.

The cases also echo the general principle that in the absence of specific statutory provision ordinary words are to be given their ordinary meanings. But I draw from all these cases the need to be cautious in taking some broad view of a term such as "income" at any generalised level that ignores the specific and detailed statutory framework within which it is used. As Jacob LJ stressed in Chandler, attention must be paid to the individual statute and the proper interpretation and application of that, and not other, legislation.

Application to this appeal

What is the context here? The statutory context is of an application by a claimant of retirement age for housing benefit in a context where he is not relying on either of the two forms of state pension credit. These have now replaced, for those in the position of the appellant, any previous entitlement to income support. And they have done so by reference to a separate benefit regime that has some links with income support and jobseeker's allowance but is now a universal separate scheme for those at or near retirement age. And Mr K has no direct entitlement so far as I am aware under that scheme.

The factual context is that the appellant and his wife have chosen to end their former matrimonial arrangements by judicial separation in an arrangement that involves what is in practical terms a pension split. As part of this, the appellant has been ordered to make regular payments of part of his occupational pension to his wife. That is a High Court order and is enforceable against him. By far the greatest number of married couples who chose to terminate their relationship do so by a divorce. That is, however, a matter of common practice and not of law. Couples are entitled if they wish to choose instead the option of judicial separation. Few do. But in this case the solution was for Mrs K to seek and obtain a High court order against Mr K. That is mandatory on Mr K, and I do not accept the suggestions that this is something that Mr K voluntarily continues to accept but could choose to ignore.

At the same time, I accept that the circumstances of Mr and Mrs K were such that the trustees of the pension fund had no power or discretion to make a payment direct to Mrs K rather than paying the entire pension to Mr K.

I accept that had Mr K and Mrs K had their marriage ended by divorce, or had it annulled, then the relevant income from the pension would have been Mrs K's income. Following R(IS) 4/01, and on the assumption that the arrangement was not one that could be attacked as a diversion of income to increase benefit, that would remove the payment to Mrs K from Mr K's income and make it her income and not his income.

I accept that a literal interpretation of the rules here mean that the income transferred by Mr K to Mrs K is, for the purposes of this scheme, to be regarded both as his income and as her income at the same time. I have seen no caselaw analysing the significance of this reading of the law, namely that the receipt by B from A is B's income in full without regard to the payment by B to C, while the payment by B to C from that receipt is also C's income at the same time as B's income for the purposes of the same scheme. This is not a factor discussed in any of the authorities outlined above. But in my view it does militate against introducing an "ordinary" meaning of income that allows the same income to be counted twice in the hands of different recipients as equally income of both of them.

I also note that the only authority cited to me that directly involved argument that a payment from B to C could reduce the weekly income of B in an analogous situation and in which the point was argued was found to be one where the income of B in the ordinary sense was net of the sum required to be paid to C (CIS 22 1993).

I agree with Miss Robertson that CIS 683 1993 does not consider the correctness of the concession made during the case in the opposite direction. Most of the authority is concentrated on another issue, namely whether payments made by A to B that B then has, or may have, to pay back to A are B's income.

I am persuaded by that authority and those arguments that the proper interpretation of the relevant statutory test of income, in its ordinary sense, but also in the context of these arrangements, is that Mr K's income should be regarded as the amount he has left from his occupational pension after he has passed on to Mrs K the sums he is required to pay to her from that pension under the High Court pension-splitting order. It is important in this context to appreciate that the High Court order was at the initiative of Mrs K and that, although Mr K consented to it at the time it was made, it is not in any meaningful sense a voluntary disposal of his income or a diversion of it for his own purposes either then or at any later stage. While he may have received sums from the pension trustees of an income nature, that is not of itself decisive. The sums he is required to pay Mrs K from that pension under that order are not in any ordinary sense of the word his income. Those sums are her income. And the rules in question will treat them as her income. They should not be read to treat them also as his income when he has no practical power to treat them as his income. And I see no specific provision in the Regulations that requires me to do that. The statutory scheme includes provisions to add back to income sums that are diverted from income for various reasons and in various ways, but none of them are specifically relevant to this case. And, in particular, I interpret the order as one moving the sums from Mr K to Mrs K for Mrs K's purposes, not those of Mr K, and of being a transfer in respect of her and not of him. And I take that view because it is accepted that the scheme so regards the receipt by Mrs K of those sums.

I do not regard that application of the meaning of income as one of any wide import. This case arises from the most unusual situation where a court order achieves the next best arrangement for Mr and Mrs K (and in particular for Mrs K) for a couple who have undertaken a judicial separation as could be achieved in parallel to, but not under, the pension splitting provisions that would have been available to her and them if they had chosen to end their relationship by divorce or nullity rather than judicial separation. And it rests on the central fact that the order under which Mr K pays part of his pension to Mrs K is a mandatory High Court order that has the effect of splitting his pension by transferring part of the sums he receives to her in a way that makes them her income.

David Williams

Commissioner

1 04 2008

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