Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No. CCS/1184/2010

ADMINISTRATIVE APPEALS CHAMBER

 

Before: Judge of the Upper Tribunal: E A Jupp

 

Decision: The decision of the First‑tier Tribunal given on 11 December 2009 under Registration No. 209/09/00545 was erroneous in law. Accordingly, the tribunal’s decision is set aside under section 12(2)(a) and (b)(i) of the Tribunals, Courts and Enforcement Act 2007. Although the appellant mother has certainly asked for an oral hearing, and the non-resident parent, the father may have done so, as further findings of fact are necessary the First‑Tier Tribunal is a more appropriate forum. I remit the appeal for reconsideration by a differently constituted tribunal of the First‑tier Tribunal of the Social Entitlement Chamber.

 

Directions: My directions and guidance are set out in paragraphs 15 and 17 to 21 below.

 

REASONS FOR DECISION

 

1. This is an appeal under the “old scheme”. The parties are the parents of two qualifying children who live with the parent with care, their mother. The non‑resident parent, their father, was liable to pay child support maintenance in respect of the children of £22.54 per week from the effective date of 2 December 2008, under a decision given on 6 December 2008.

 

2. On 17 December 2008, after becoming aware of an error, the Secretary of State revised the assessment and thereafter the father became liable to pay the revised amount of £30.20 per week from 2 December 2008. The mother appealed, challenging the amount of the father’s eligible housing costs to be included in the calculation of the father’s assessment. The decision was reconsidered but not revised, and the appeal continued.

 

3. At the effective date of 2 December 2008 the Secretary of State calculated the amount outstanding on the father’s mortgage as being £120,420.00. However, at an earlier tribunal hearing on 23 April 2007, the tribunal then dealing with an effective date of 21 March 2006 (in respect of an appeal by the mother against a maintenance assessment, of which there are few details on the file), had directed that under paragraph  2 of Schedule 3 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (the 1992 Regulations) the father’s eligible housing costs were to be recalculated by substituting the sum of £101,500 in place of £120,420. The father had remortgaged his home in or about September 2005, increasing his borrowing, but that tribunal found that only £6700 of the extra borrowing was eligible to be included as housing costs (£5,500 for a new kitchen together with £1,200 for work to make the garden more appropriate for use by the children). Calculations thereafter were made on that basis.

 

4. There was a problem in obtaining confirmation from the father of the details of his mortgages. Eventually information was obtained as to the mortgage balance, the interest rate, the monthly repayment and the amount of mortgage protection payments at the effective date of 2 December 2008. These showed that the amount outstanding on the 2005 mortgage had reduced to £117,131.89, as would be expected in a repayment mortgage, and that the father had remortgaged the property, borrowing a further £40,699 giving a total outstanding of £157,830.89 at 2 December 2008.

 

5. The tribunal was held on 7 December 2009, the mother being present with her husband and the father being present with his brother. The father confirmed that he had increased the mortgage on his home by borrowing £40,699 to buy out his ex‑partner’s share in the property which was thereafter transferred into his sole name. The tribunal noted that the calculation made by the decision‑maker on 6 December 2008 and revised on 17 December 2008 had used the sum of £120,420 for eligible housing costs, rather than £101,500 as directed by the tribunal of 23 April 2007.

 

6. The tribunal found that the balance of the father’s mortgage at 2 December 2008 was £157,830.89, but that as a result of the tribunal’s direction of 23 April 2007 the figure should be reduced by £18,920. The tribunal directed the amount of the child support assessment to be recalculated on the basis of the father having eligible housing costs of £138,910.89.

 

7. The mother appealed with my permission, querying whether the increase of £40,699 in the father’s mortgage was eligible under paragraph 4(1)(a) of Schedule 3 of the 1992 Regulations as being necessarily incurred for the purpose of purchasing, renting or otherwise securing possession of the home. In support she cited the decision of Mr Commissioner Jacobs, as he then was, in CCS/1418/2003.

 

8. It may be helpful to set out here the relevant legislation. Prior to 13 January 1997 the relevant part of Schedule 3 to the 1992 Regulations read:

 

“1.  Subject to the following provisions of this Schedule, the following payments in respect of the provision of a home shall be eligible to be taken into account as housing costs for the purposes of these Regulations—

(a) ………

………….

4.—(1) Subject to the following provisions of this paragraph the housing costs referred to in this Schedule shall be included as housing costs only where—

(a)they are incurred in relation to the parent’s home;

(b)the parent or, if he is one of a family, he or a member of his family, is responsible for those costs; and

(c) the liability to meet those costs is to a person other than a member of the same household.”

From 13 January 1997, paragraph 4(1) was amended to read:

“ 4.-(1) Subject to the following provisions of this paragraph the housing costs referred to in this Schedule shall be included as housing costs only where –

 

(a) they are necessarily incurred for the purpose of purchasing, renting or otherwise securing possession of the home for the parent and his family ……

…………..”

 

9. The Child Maintenance and Enforcement Commission (CMEC) which has succeeded to the functions of the Secretary of State in relation to child support, supports the appeal. After setting out paragraph 4(1)(a) of Schedule 3 to the 1992 Regulations as in force from 13 January 1997 the representative then quotes in full the relevant part of the decision in CCS/1418/2003. There the absent parent, the father, raised £42,500 in order to pay the parent with care a lump sum on divorce. The money was raised by mortgage on the former matrimonial home which was always in his sole name, the parent with care having registered a caution against it. The Commissioner said:

 

“The £42,500 issue

17.                        This is governed by paragraph 4(1)(a) of Schedule 3 to the [1992 Regulations].……………

18.        There is no evidence of the basis on which the parties agreed to, or the district judge confirmed, the sum of £42,500. The court had power to transfer the whole, or part, of the absent parent’s interest in the property to the parent with care regardless of the fact that it was in his sole name. So, it is possible to surmise that, at least in part, the sum stood in the place of the transfer of an interest to her. However, there is no evidence. All that the evidence shows is that there was a debt that arose from the court order and that it was discharged by means of money raised on mortgage. It may be that the absent parent could only have raised the money by selling or mortgaging his home. But that does not mean that it was raised for the purpose of securing possession of the home within the meaning of paragraph 4(1)(a). I read those words as requiring that the possession should be in doubt or at risk before the expenditure is incurred. Without that doubt or risk, there is no basis for it being ‘secured’. The debt arose separately from the home. The money was raised to discharge it. It could, let us suppose, only be raised by being secured on the property. On that basis, the most that can be said is that the absent parent could only avoid selling his home by incurring the mortgage costs. But merely avoiding having to sell his home is not the same thing as securing possession of it. His possession is only at risk by virtue of the funding arrangement that he has chosen to pursue. It is not sufficient that the possession should be at risk as a result of the very transaction that gives rise to the cost the eligibility of which is in issue.

19.        Another way of looking at this issue, with the same result, is that the decision to raise the money by mortgage rather than by sale was one of choice. And that element of choice means that the cost was not ‘necessarily’ incurred.

I direct the tribunal that this sum is not an eligible housing cost”

 

10. The CMEC representative however then draws attention to an earlier, and reported, decision in R(CS) 12/98. That decision considered paragraph 1 of Schedule 3 to the 1992 Regulations, set out above, which has applied throughout. There, Mr Commissioner Rice held:

 

“ 11. But in the present instance, was it necessary for the absent parent to acquire the share in the property owned by the parent with care? Crucial to the absent parent’s position was the preservation of his right to occupancy of the home. And was he at risk of losing it if the parent with care decided to exercise her rights under section 30 of the Law of Property Act 1925 and seek an order for sale In order to liquidate her interest at the proper price she would need exclusive possession, so that she could sell with vacant possession. And in order to obtain exclusive possession she would have to get an order from the Court. Was she likely to get such an order?

 

12. The operation of section 30 in circumstances similar to the present was considered in Bernard v. Josephs (CA) [1982] 2 WLR p. 1052. There it was held that, where a house was held in equal shares on trust for sale, and the purpose of that trust was exhausted, as when the parties separated, the normal course was for a sale to be ordered under section 30 unless the Court considered that this course of action was inequitable. In the words of Kerr LJ at p. 1069:

 

‘Once the purpose of the trust has come to an end, it seems clear that a sale can be insisted upon by any of the beneficiaries unless the court considers that it is inequitable for him to want to realise his investment: see the decision of the majority of the court in Jones v. Challenger [1961] 1 QB 176; Rawlings v. Rawlings [1964] p. 398 (albeit under section 17 of the Married Women’s Property Act 1882) and Bedson v. Bedson [1965] 2 QB 666, 6786, per Lord Denning MR. The fact that these cases were between married couples does not appear to make any difference; on the contrary, when property is bought otherwise than as a matrimonial or family home, it seems to me even more difficult to find grounds for refusing an order for sale.’

 

Although in Bernard v. Josephs the court accepted that the purpose of the trust had come to an end, this was not the view taken by the court in Gordon v. Douce (CA) [1983] 1 WLR 563. In the words of Fox LJ (at p. 567):

 

‘… there were children and the woman (the plaintiff) is still living in the house with the children. Further, in his evidence the defendant stated that he expected the house ‘to be a home for her and the children’. It is not his intention, so I understand, to seek an order for sale while the children are still living in the house. In my opinion, therefore, the purposes of the trust have not come to an end. They are still very much in existence.’

 

Has the trust come to an end in the case with which I am concerned?

 

13. Presumably it has, in that there are no children left in the house, and it would seem that the parties purchased the property for a joint home. Once they had separated, it would seem to me that the purpose behind the trust was exhausted. If that was the case, then the absent parent needed the share in the house owned by the parent with care to avoid a sale with vacant possession. And the purchase of that interest was clearly to ensure that he continued to be provided with a home.”

 

11. On behalf of CMEC it is submitted that the evidence before the tribunal clearly indicates that the father remortgaged his property in order to buy out his ex‑partner’s share of the property and on that basis, taken without more, following CCS/1418/2003 £40,699 of the mortgage should not be treated as an eligible housing cost under paragraph 4(1)(a). Nonetheless, as a result of R(CS) 12/98, if the father could only continue to secure occupation of his home by purchasing the interest of his ex‑partner in that home, then such borrowing would fall within the scope of paragraph 4(1)(a), and would fall to be included as an eligible housing cost. As the tribunal simply found that the extra borrowing was necessarily incurred to enable the father to buy out his ex‑partner’s share in the home he occupied but without going into further detail, it is submitted that finding was inadequate to establish whether or not the further loan of £40,699 should in fact be treated as an eligible housing cost.

 

12. The father has responded that he raised this sum by adding to his mortgage to secure accommodation so that his children would have somewhere to stay with him, but that circumstances have changed. (The circumstances under consideration are those as at the effective date, 2 December 2008, and any subsequent change in circumstances should be the subject of a separate application for supersession if appropriate.) The mother has responded by submitting that it was a matter of choice on the part of the father to buy out his partner’s share of the home and that there has been no documentary evidence to show that he could only continue to occupy his home if he purchased his partner’s interest in it, nor is there any evidence to show that he did pay over the sum of his ex‑partner.

 

13. I note that in CCS/1418/2003 there had been divorce proceedings, the father’s home was always in his sole name and the court order was made under the Matrimonial Causes Act 1973. The Commissioner specifically recorded that “[a]ll that the evidence shows is that there was a debt that arose from the court order and that it was discharged by means of money raised on mortgage”.

 

14. The decision in R(CS) 12/98 was followed and confirmed by Commissioners in several other cases such as CCS/346/1997 and CCS/1316/1997 in respect of the initial legislation and in CCS/1412/1998 after paragraph 4(1)(a) was amended. In CCS/1707/2003 Mr Commissioner Mesher, as he then was, said:

 

“18. There is a general condition in paragraph 1 of Schedule 3 that to be eligible to be counted as a housing cost a payment must be "in respect of the provision of a home". In Commissioner's decision R(CS) 12/98 it was said that that would cover the initial acquisition of a home, repairs and improvements and actions which are necessary to consolidate the right to occupancy of the home. However, that seems too narrow a view when applied to the current provisions of Schedule 3. …….And at the dates relevant in R(CS) 12/98, paragraph 4(1)(a) merely required housing costs to have been incurred in respect of the parent's home and there was no other provision in Schedule 3 to apply any limitation in terms of the purpose of incurring the costs such as mortgage interest or the repayment of capital on loans secured on the home. There is now no need to put too great a weight on the general condition in paragraph 1 because of the new form of paragraph 4(1)(a) from January 1997.”

 

Although the above decisions, other than CCS/1707/2003, focused on paragraph 1 of Schedule 3, and considered the requirement for the provision of a home for the absent parent, their emphasis was on the consideration of whether the mortgage interest and capital payments were necessary for the parent to retain possession of his/her home. Essentially in that respect therefore, the approach does not differ from that of Mr Commissioner Jacobs in considering paragraph 4(1)(a) in CCS/1418/2003. However, the outcome was different in that case.

 

15. In this appeal the father and his ex-partner owned the property jointly. Although in R(CS) 12/98, the Commissioner referred to section 30 of the Law of Property Act 1925 the relevant legislation is now contained in sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996, under which, inter alia, the Court has power to order the sale of a property. According to the father’s evidence to the tribunal, the negotiations for the “buy out” were conducted by solicitors at arms’ length. This being the case, (unlike the situation in CCS/1418/2003 as it appears) evidence should be available as to the nature of the arrangement between the father and his ex-partner and the degree of compulsion, or otherwise, upon the father to make satisfactory payment to his ex‑partner to secure possession of his home. In my view it is unlikely there would be many cases involving this point where at least some evidence could not be made available, and it should be obtained and submitted wherever possible (see my observations in paragraph 17), and the approach in R(CS) 12/98 is, in my respectful view, the one to be preferred.

 

16. In my judgment therefore, the tribunal did not go far enough with its enquiries and thus failed to make adequate findings of fact. As was said in paragraph 18 of CCS/1418/2003 what the tribunal needed to know was whether, when the father borrowed the further sum of £40,699, he did so, as the Commissioner said:

 

“for the purpose of securing possession of the home within the meaning of paragraph 4(1)(a). I read those words as requiring that the possession should be in doubt or at risk before the expenditure is incurred. Without that doubt or risk, there is no basis for it being ‘secured’.”

 

The tribunal did not consider the father’s circumstances overall in the context of the legislation. It is appropriate for the decision to be set aside and for the appeal to be remitted for reconsideration.

 

DIRECTIONS

 

17. The father will appreciate that it is in his interest to produce as much evidence as he can of the circumstances of the transfer of his home from joint names into his sole name, including the availability of other assets and resources from which funds could have been made available to make payment to his ex−partner. Should he fail to do so, he will also understand that the new tribunal which rehears the case will be entitled to make an adverse finding. I make this observation given the previous history in the case and the father’s responses to the directions which have previously been given to him.

 

18. The new tribunal must hold an oral hearing and conduct a complete reconsideration of the issues that arise for decision in this appeal. It should proceed on the basis that £18920 is to be excluded from the eligible housing costs, as directed by the tribunal of 23 April 2007. It must make and record full findings of fact on all necessary points, with reasons for its acceptance of the evidence which is preferred and why the other evidence is rejected.

 

19. Both parents are advised to attend the new hearing again.

 

20. They will also bear in mind that my decision is limited to matters of law; the new tribunal will make its decision on the evidence before it.

 

21. General as they are, these directions may be varied by a tribunal judge of the First‑tier Tribunal.

 

22. For the reasons stated, the mother’s appeal succeeds. As further findings of fact are necessary I am not in a position to remake the decision under section 12(2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007, and it is more appropriate that I remit the appeal for reconsideration by a differently constituted tribunal.

 

 

 

(Signed on the Original)

E A Jupp

Judge of the Upper Tribunal

29 September 2010