R(Cs) 4/00

Mr. E. Jacobs 	CCS/2066/1999
27.3.00 
Departure direction - transfer of property in consequence of which the amount payable by an absent parent by way of maintenance of his children was less than would otherwise have been the case (paragraph 3(1)(b) of Schedule 4B to the Child Support Act 1991 (as amended by the Child Support Act 1995)) - admissible evidence and relevant considerations in determining the causation question
The absent parent applied for a departure direction under three heads, the third of which was in respect of a property or capital transfer, namely the transfer to the parent with care of his share in the former matrimonial home. That transfer had been made pursuant to the second of three court orders, the order being a consent order. The Secretary of State, on reconsideration, accepted the application under this head. The parent with care appealed to a child support appeal tribunal and the tribunal allowed her appeal and held that the absent parent had not satisfied the conditions for the making of a departure direction. The absent parent appealed to the Commissioner. 
Held, dismissing the appeal, that: 
1.	the definition in paragraph 3(1)(b) of Schedule 4B to the Child Support Act 1991 precluded construing “maintenance” to extend to the provision of a home as a stable base for the absent parent’s children’s development and schooling;
2.	in a case involving a court order the following will be admissible as evidence, and relevant as considerations in determining whether an absent parent’s maintenance for his children was less than would have otherwise have been the case as a consequence of a transfer of capital or property: (i) the terms of the court order; (ii) any contemporaneous documents relating to the making of the order (which will include correspondence between the parties and their legal advisers, documents filed in court or made by a party’s advisers for their own use, and the terms of any judgment that was given to explain why the order was made); (iii) the legal context in which the order was made, including the range of orders that may be made and the factors to which a judge must have regard; and (iv) the oral evidence of the parties to the tribunal or to the Commissioner. The Commissioner also gave guidance as to the weight to be given to each of these items of evidence. In the present case the evidence showed that the absent parent’s maintenance payments were limited by his financial position and not by the transfer of his interest in the matrimonial home. 
	
DECISION OF THE CHILD SUPPORT COMMISSIONER

1.	My decision is that the decision of the Bristol child support appeal tribunal held on 24 November 1998 is not wrong in law.
The parties
2.	This case concerns an application for a departure direction in respect of a child support maintenance assessment. In the terminology of the child support legislation, the appellant is the absent parent and the applicant for the direction, and the second respondent is the parent with care and the non-applicant. I shall refer to them as the absent parent and the parent with care.

The appeal
3.	This is an appeal to a Commissioner against the decision of the child support appeal tribunal brought by the absent parent with the leave of a Commissioner. The Secretary of State supports the appeal, although not in a way that would benefit the absent parent. The parent with care has made observations on the appeal.
4.	An oral hearing of this appeal was directed by the Commissioner who granted leave to appeal. The hearing took place before me in Cardiff on 22 March 2000. The absent parent attended without representation. The parent with care did not attend and was not represented. The Secretary of State was represented by Mr. H. James.
The history of the case
5.	The absent parent applied for a departure direction under three heads. 
5.1	The first head was in respect of debts incurred before the absent parent became an absent parent. The debt was a joint overdraft. The Secretary of State refused the application under this head. This head has not been pursued and it is not necessary to mention it further.
5.2	The second head was in respect of an asset capable of producing income. The asset was a nearly new Volvo estate car that was purchased for the parent with care in 1993 by her local church for a few pounds less than £15,000. The Secretary of State refused the application under this head. The ground for refusal was that it was not reasonable to expect the parent with care to sell the car.
5.3	The third head was in respect of a property or capital transfer. The transfer was the absent parent’s share in the former matrimonial home. At first the Secretary of State refused the application under this head, but later on reconsideration accepted the application under this head, and gave a departure direction for a lesser amount than was permissible on the ground that it was not just and equitable to allow a higher figure.
6.	The parent with care appealed to a child support appeal tribunal against the direction.
7.	The tribunal allowed her appeal and held that the absent parent had not satisfied the conditions for the making of a departure direction. It dealt with both the second and the third heads of the application.
8.	The absent parent has appealed to the Commissioner against the tribunal’s decision. The question for me is: was the tribunal’s decision wrong in law?
The Volvo car
9.	According to the submission to the tribunal, the Secretary of State refused the application in respect of the parent with care’s car on the ground that it was not reasonable to expect her to sell it. This must have been in reliance on regulation 23(2)(b) of the Child Support Departure Directions and Consequential Amendments Regulations 1996. As the car was being used as family transport, including the qualifying children, the Secretary of State was entitled to refuse the application on this ground.
10.	The tribunal confirmed the Secretary of State’s approach. In addition, the tribunal decided that after the sale of the car and the purchase of a cheaper replacement, the parent with care would have been left with no more than £10,000. This must have been in reliance on regulation 23(2)(a). The tribunal was entitled to refuse the application on this additional ground. At the hearing before me the absent parent accepted that by the time he made his application for a departure direction the car would have been worth less than £10,000.
11.	The Secretary of State has submitted to the Commissioner that a car does not come within the definition of “asset” in regulation 23(4). That is correct and a third ground on which the application could have been refused.  
12.	If there are a number of ways in which a decision can be reached, a tribunal is entitled to refer to one or more of them. This is what the tribunal did. The fact that there was another, perhaps easier way, in which the tribunal could have come to the same conclusion does not make its decision wrong in law. 
The transfer of the absent parent’s interest in the former matrimonial home
Background
13.	The child support scheme as originally enacted made no allowance for transfers of capital or property that had been made by absent parents before the scheme came into force. In an attempt to remedy this, the legislation was amended to provide for a limited allowance to be made in the formula assessment: see Schedule 3A to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. However, Schedule 3A was narrow and turned on the terms of the court order or written maintenance agreement. When departure directions were introduced, further provision was made by inserting Schedule 4B into the Child Support Act 1991. This allows a departure direction to be given on account of a capital or property transfer. In contrast to the formula allowance, the departure legislation is concerned more with the substance of the arrangement than its terms. This, in part, explains the breadth of the provisions. (for further reasons, see paras. 18 and 27.)
14.	Before me, the absent parent argued that it was difficult to apply to the courts orders in this case legislation that did not exist at the time when they were made and was not in the anticipation of the court or the parties at that time. He argued that the orders would have been differently worded if the present legislation had been in force at the time. He argued that a common sense approach had to be taken to the interpretation and application of the law. The background set out in paragraph 13 shows why the legislation has to be applied to court orders that were not written with the legislation in mind. That is its purpose.
Paragraph 3 of Schedule 4B
15.	The law relevant is contained in paragraph 3 of Schedule 4B to the Child Support Act 1991 as amended by the Child Support Act 1995. The relevant parts of that paragraph are:
 “(1) A departure direction may be given if-
	(a)	before 5th April 1993-
(i)	a court order of a prescribed kind was in force with respect to the absent parent and either the person with care with respect to whom the current assessment was made or the child, or any of the children, with respect of whom the assessment was made; or
(ii)	an agreement of a prescribed kind between the absent parent of any of those persons was in force;
(b)	in consequence of one or more transfers of property of a prescribed kind-
(i)	the amount payable by the absent parent by way of maintenance was less than would have been the case had that transfer or those transfers not been made; or
(ii)	no amount was payable by the absent parent by way of maintenance; and 
(c)	the effect of that transfer or those transfers, is not properly reflected in the current assessment.
 (2)	For the purposes of sub-paragraph (1)(b), ‘maintenance’ means periodical payments of maintenance made (otherwise than under this Act) with respect to the child, or any of the children, with respect to whom the current assessment is made.”
16.	The definition in paragraph 3(2) explains why I must reject the absent parent’s argument on the meaning of maintenance. He argued that (i) maintenance included the provision of a home as a stable base for his children’s development and schooling and (ii) the transfer of his interest in the matrimonial home ensured this. That may be true in a general sense, but the provision of a stable base by a transfer of an interest in property is not a periodical payment and cannot, therefore, be maintenance as defined by paragraph 3(2).
The issue for decision
17.	Specifically, the issue in this case is: was the amount of maintenance paid for his children by the absent parent less than it would otherwise have been as a consequence of the transfer of his interest in the matrimonial home to the parent with care? 
Admissible evidence and considerations
18.	In this case, the transfer was made pursuant to a court order and the amount of maintenance was fixed by court order. Paragraph 3 is wide enough to cover transfers and maintenance that were neither ordered by a court nor incorporated into an agreement. This ensures that it covers all possible forms of arrangements that may lead to a transfer. However, typically the transfer will be made pursuant to, and the maintenance fixed by, a court order, as in this case, or under an agreement. My comments are limited to cases involving court orders. 
19.	In a case involving a transfer pursuant to a court order, the following will be admissible as evidence, and relevant as considerations, in determining whether an absent parent’s maintenance for his children was less than would otherwise have been the case as a consequence of a transfer of capital or property.
20.	First, the terms of the court order must be considered. It is unlikely that the effect of a transfer of property on maintenance payments will be spelt out, but the order must be considered for any clues that it contains.
21.	Second, any contemporaneous documents relevant to the making of the court order must be considered. These will include the following:
1.	There will almost certainly have been correspondence between the parties or, more likely, their legal advisers. This has to be treated with caution. It will be partisan and will represent negotiating positions or posturing.
2.	The documents filed in the court or created by a party’s advisers for their own use are likely to be less partisan, but cannot be treated as an entirely reliable basis for determining the effect of a transfer. 
3.	The best information would come from the terms of any judgment that was given to explain why the judge made the order. This is only likely to be available in the form of a note of the judgment taken by counsel or a solicitor.
22.	Third, the legal context in which the court order was made for (a) the transfer of the property and (b) the maintenance of the children must be considered. This includes (i) the range of orders that may be made, including an order for the capitalised payment of maintenance and (ii) the factors to which a judge must have regard when making particular orders. Specifically relevant to maintenance orders for children is section 25(1), (2) and (3) of the Matrimonial Causes Act 1973, which provides: 
“(1)	It shall be the duty of the court in deciding whether to exercise its powers under sections 23, 24 and 24A above and, if so, in what manner, to have regard to all the circumstances of the case, first consideration being given to the welfare while still a minor of any child of the family who has not attained the age of eighteen.
(2)	As regards the exercise of the powers of the court under section 23(1)(a), (b) or (c), 24 or 24A above in relation to a party to the marriage, the court shall in particular have regard to the following matters:
(a)	the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b)	the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c)	the standard of living enjoyed by the family before the breakdown of the marriage;
	...
(e)	any physical or mental disability of either of the parties to the marriage;
	....
(3)	As regards the exercise of the powers of the court under section 23(1)(d), (e) or (f), (2) or (4), 24 or 24A above in relation to a child of the family, the court shall in particular have regard to the following matters-
(a)	the financial needs of the child;
(b)	the income, earning capacity (if any), property and other financial resources of the child;
(c)	any physical or mental disability of the child;
(d)	the manner in which he was being and in which the parties to the marriage expected him to be educated or trained;
(e)	the considerations mentioned in relation to the parties to the marriage in paragraphs (a), (b), (c) and (e) of subsection (2) above.”
If a transfer of property had an effect on the amount of maintenance payable in respect of a child, it must be possible to explain that effect in terms of the factors that the judge was required to take into account when fixing the amount of the maintenance. This consideration carries less weight if the order was made by consent, but even in this case the order will have been approved by the judge and not merely rubber stamped.
23.	Fourth, the parties may give oral evidence to the tribunal or the Commissioner. This evidence is likely to be of limited value, as it may be partisan and it may reflect a party’s misunderstanding or later rationalisation of what happened and why.
The evidence available in this case
24.	In this case, three court orders were made. I have the text of each of them. As two of them were consent orders, judgment was not delivered in respect of them. The final order was not made by consent. A judgment must have been delivered, but no copy or note of it is in the papers. The parent with care’s solicitor has supplied the correspondence between the solicitors before the first and second orders were made. Although the absent parent told me that he had filed a statement of his means, no copy of that or of any other document is before me. The chairman’s record of proceedings at the hearing before the tribunal contains oral evidence by both parents and I heard oral evidence from the absent parent. 
The link between the transfer and the amount of maintenance
25.	I deal first with an argument made on behalf of the parent with care. The solicitor who represented her in the divorce and ancillary relief proceedings wrote to the Child Support Agency that:
“I would advise you that the County Court would not sanction a transfer of the property to the [parent with care’s] sole name in lieu or partly in lieu of periodical payments for children as such a decision would be regarded by the Court as contrary to public policy.
I have been a solicitor for twenty sseven years and have dealt with family matters throughout that period on behalf of a variety of clients. I have never known a situation whereby a former matrimonial home was transferred to one of the parties to the marriage in lieu of periodical payments for the children.”
26.	I accept those statements as accurate, subject to the possibility that a transfer represents capitalised payments of maintenance. However, they are not directed at the issue before me or to the terms of the legislation that I have to apply. The issue is not whether the transfer of property was accepted by the judge as being in lieu of maintenance in respect of the children. The issue is whether the maintenance in respect of the children was less than it would otherwise have been in consequence of the transfer.
27.	It is no doubt the case that each of the financial orders that may be made on a divorce are independent with separate considerations relevant to each. However, this does not mean that there is no connection between them. Take this simple example. A husband and wife have a child. They separate and divorce. The court may order the husband to transfer his share in the family home to his wife. If this is done, the capital available for the husband to use as a deposit in buying a home for himself will be less than if he had received some of the capital from the former family home. In determining the appropriate level of maintenance that the husband should pay in respect of his wife and child, the court will have to take account of the amount of the husband’s income and of the other legitimate demands on that income. His monthly mortgage payment will be one of those demands and it will be higher than otherwise because of the size of the deposit that he could afford to put down on the property. So, the maintenance payments will be lower than if the capital transfer had not been made. It is the knock-on effect that a transfer may have on maintenance that has to be considered under paragraph 3 of Schedule 4B. This is a further reason why that paragraph is worded as broadly as it is.
28.	The solicitor does, though, highlight one feature of paragraph 3 of Schedule 4B. That paragraph cannot be limited to the immediate consequences of the transfer. If it were, it would never be satisfied, for the reason set out by the solicitor. It must be interpreted to cover the less immediate consequences of a transfer. For example, it must cover at the least the impact of a transfer on the considerations that are taken into account by a court when fixing maintenance in respect of children. In the context of this case, it must cover the reduction in the absent parent’s outgoings that resulted from the absent parent being freed of mortgage payments following the transfer.
The first court order
29.	The first court order was made by consent in February 1990. Undertakings were made by both parties. The absent parent undertook to pay the mortgage on the former matrimonial home and half the interest on the parties’ joint overdraft. The parent with care undertook to pay the other half of the interest on the overdraft and gave a series of undertakings in respect of the matrimonial home. On the basis of those undertakings, the order provided for the absent parent to make nominal maintenance payments of 5 pence a year as maintenance for the parent with care and each of their children and for the matrimonial home to remain in joint names with the absent parent receiving 50% of the equity on eventual sale, subject to clearing the overdraft. The sale was postponed conditional upon various events, most of which would not occur in the short term.
30.	This order made no provision for the transfer of the property. That was covered by the second order, which was made some 20 months later. It is possible for maintenance fixed in advance of a transfer of property to be affected by that transfer, but it must have been in the contemplation of the court at the time when the maintenance was fixed. The possibility of the parent with care receiving the proceeds of sale of the property was discussed in the correspondence following the parties’ separation. However, the contents and nature of the court order shows that it was not in contemplation of the court that this would occur: the order preserved the absent parent’s interest and, as the order was made by consent, it could only be varied or set aside in very limited circumstances. So, in the legal context of a consent order, a transfer was not in contemplation at all, let alone sufficiently in contemplation to affect the amount of maintenance in respect of the children under that order.
The second court order
31.	The absent parent told me that the mortgage payments on his former matrimonial home were met from his new wife’s bank account, while he paid for his new family. When his wife became pregnant, it was clear to him that he would not be able to afford the mortgage payments on the former matrimonial home. So, he applied again to the court.
32.	This led to the second court order. It was made by consent in October 1991. Essentially, the parties were released from their undertakings under the first order. The absent parent became responsible for the whole of the interest payments on the overdraft, with the parent with care being responsible for the capital. The absent parent was to transfer his interest in the matrimonial home to the parent with care, and this was done. No mention was made of the nominal maintenance payments and these must have remained unaffected by the new order. 
33.	Although the second order did not deal with maintenance in respect of the children, I have considered whether the nominal maintenance payments might have been increased had it not been for the transfer. My conclusion is that they would not. There is nothing to suggest this in the order itself. Moreover, this was again a consent order. Although the judge would not rubber stamp the terms put forward by the parties, matters not covered by the new order would not be given a great deal of consideration. The contemporaneous correspondence shows that maintenance was not discussed, no doubt because the absent parent’s motive in making the application to the court was to reduce the outgoings of himself and his new wife. He told me that in 1991 his “pure aim” was to reduce his monthly outgoings as much as possible and that he could not have afforded to pay for the children in 1991. Despite the caution with which later oral evidence needs to be treated, I accept this statement as it is consistent with the contemporaneous correspondence. Also, there is nothing to suggest that the transfer was a capitalised payment of maintenance. 
34.	The legal context in which maintenance would have to be considered confirms that an increase was unlikely. A judge considering maintenance in respect of children has to take account of a father’s income and financial resources. The making of the transfer itself would not affect the absent parent’s income. However, the consequence of the transfer, although it was not spelt out in the order, was that the absent parent would no longer have to meet the mortgage payments. This would reduce the absent parent’s monthly expenditure. In these circumstances, an increase in maintenance was more likely than a reduction. Of course, the court would also have to take account of the reduction in the absent parent’s property as a result of the transfer and the reduction in the income of his new family. As to the reduction in his property, this was very much a future consideration. The terms of the first order did not contemplate the sale of the property for some time. The most likely event to trigger the sale in the short term was the parent with care’s remarriage, but in this event a sale required the leave of the court. This is unlikely to have persuaded a judge to fix a lower amount of maintenance in respect of the children. As to the overall reduction in the income of the absent parent’s new family, the judge would have to take account of his obligations and responsibilities. So, with his wife leaving employment to give birth, this would neutralise the benefit to him of his release from the mortgage. Anyway, that reduction in income was in no way a consequence of the transfer of the property.
35.	The parent with care’s property, income, obligations and responsibilities must also be considered in fixing maintenance for the children. As to her property, that had been increased by the transfer, but it was of no immediate use in producing income for the children. Indeed, the transfer increased her financial obligations and she had the responsibility of providing a home for the children. Her obligation to meet the mortgage payments would point towards an increase in the maintenance paid by the absent parent rather than to a reduction. However, as I was told by the absent parent that it was expected that the mortgage payments would be met through the parent with care’s entitlement to income support, I disregard this consideration.
The third court order
36.	The third order was made in June 1993. The absent parent was ordered to pay £8 a week maintenance for each of their children. Shortly after this, the absent parent came within the child support scheme. 
37.	In the case of this order, there is no correspondence or other contemporaneous documents. The only contemporary information before me is the terms of the order itself. The absent parent also told me that his income and other circumstances had not changed.
38.	The fact that this order was made some 20 months after the second does not mean that the terms of the order cannot have been affected by the transfer. The passage of time alone is not significant. All that matters is whether there is a link between the transfer of the property and the considerations affecting the amount of maintenance in respect of children that is sufficiently proximate to show that the transfer has resulted in a reduction in the maintenance that would otherwise be payable.
39.	On the basis that the absent parent’s circumstances had not changed between the second and third orders, my analysis of the second order applies equally to this order. That analysis shows that, if anything, either the effect of the transfer was neutral or it created circumstances in which an increase in maintenance was more likely than a reduction. This is what occurred. It is also possible that, by the time of this third order, the judge may have considered that child care arrangements could be made (the child was approaching two) so that the wife could again contribute to the income of the absent parent’s new family. This, however, is speculation. What is clear is that there is nothing in the evidence before me, or that I can conclude from the legal context in which the third order was made, to show that the amount of the maintenance fixed by this order was less than it would otherwise have been in consequence of the transfer. 
The tribunal’s reasoning
40.	In short, the position is this. The first order fixed a nominal amount of maintenance in respect of the children. Probably this was because the absent parent was paying the mortgage instalments and could not afford to pay maintenance as well. The second order left the nominal maintenance payments in place. Almost certainly this was because the absent parent could not afford to pay more. The third order increased the amount of maintenance payable. The reasoning behind that order is unclear, but there is nothing to show, or even suggest, that the amount was less than it would otherwise have been in consequence of the transfer. The tribunal’s analysis was not as detailed as I have made. However, the tribunal homed in on the essential flaw in the absent parent’s case, that his maintenance payments for his children were limited by his financial position and not by the transfer of his interest in the former matrimonial home. This was the essence of the matter. It was clearly explained in the reasoning of the tribunal. It’s decision was not wrong in law. 
Summary
41.	The tribunal analysed the evidence rationally and in accordance with common sense. It directed itself correctly on the law to be applied in respect of each head of the application for a departure direction that was in issue before it. It applied that law correctly to the circumstances of the case. It gave a clear explanation of the reasons for its decision. There was no breach of the principles of natural justice. The tribunal’s decision is not wrong in law.

Date: 27 March 2000	(signed) Mr. E. Jacobs 	Commissioner