THE CHILD SUPPORT COMMISSIONERS

Commissioner’s Case No: CCS/8/2000

CHILD SUPPORT ACTS 1991 AND 1995
SOCIAL SECURITY ACT 1998

APPEAL FROM A DECISION OF AN APPEAL TRIBUNAL ON A QUESTION OF LAW

DECISION OF THE CHILD SUPPORT COMMISSIONER

MR COMMISSIONER JACOBS

Decision:
1.	My decision is as follows. It is given under section 24(2) and (3)(d) of the Child Support Act 1991.
1.1	The decision of the Colwyn Bay appeal tribunal held on 27th July 1999 is wrong in law.
1.2	Accordingly, I set it aside and refer the case to an appeal tribunal for determination. The district chairman who was the sole member of the tribunal may deal with the rehearing, provided that she does not sit with another panel member.
1.3	I give the following directions to the  appeal tribunal that rehears this case. The appeal tribunal must investigate and determine all of the issues raised by the parties that are within its jurisdiction, together with all other issues arising from the evidence or the circumstances of the case. In particular, the appeal tribunal must apply my analysis of the legislation.
The appeal to the Commissioner
2.	This case concerns an application for a departure direction from the formula assessment of child support maintenance. In the terminology of the child support legislation, the appellant is the absent parent and the non-applicant for the departure direction, and the second respondent is the parent with care and the applicant for the direction. I shall refer to them in those terms.
3.	This is an appeal to a Commissioner against the decision of the appeal tribunal brought by the absent parent with my leave. The Secretary of State supports the appeal.
4.	I directed an oral hearing of the appeal, because of the complex and difficult issues of interpretation raised by regulation 23 of the Child Support Departure Direction and Consequential Amendments Regulations 1996. I issued a detailed Direction setting out those in order to focus discussion at the hearing. It was held before me in Cardiff on 16th January 2001. The absent parent attended and was represented by Ms S Deas of counsel. The parent with care did not attend and was not represented, although she made written observations. The Secretary of State was represented by Mr H James. I am grateful to Ms Deas and Mr James for their helpful discussion on the interpretation of regulation 23.
5.	Following the hearing, I directed a further written submission explaining the Secretary of State's approach to the calculation of the value of a joint interest.
Regulation 23
6.	In Ms Deas’ catchy phrase, the departure direction scheme was introduced to reach the parts that the formula assessment could not reach. In particular, this case concerns the power to attribute to a parent income from an asset that is not producing the income that it could. The relevant provisions are contained in regulation 23.  They read:
	‘(1) Subject to paragraph (2) ..., a case shall constitute a case for the purposes of paragraph 5(1) of Schedule 4B to the Act where-
	(a)	the Secretary of State is satisfied that any asset in which the non-applicant has a beneficial interest, or which he has the ability to control-
		(i)	is capable of being utilised to produce income but has not been so utilised;
		(ii)	has been invested in such a way that the income obtained from it is less than might reasonably be expected;
		...
		(v)	has not been sold where the Secretary of State is satisfied that the sale of the asset would be reasonable;
		...
	(2) Paragraph (1) shall not apply where-
	(a)	the total value of the asset or assets referred to in that paragraph does not exceed £10,000 after deduction of the amount owing under any mortgage or charge on that asset; or
	(b)	the Secretary of State is satisfied that any asset referred to in that paragraph is being retained by the non-applicant to be used for a purpose which the Secretary of State considers reasonable in all the circumstances of the case.
	...
	(4)	For the purposes of this regulation the term “asset” means-
	(a)	money, whether in cash or on deposit;
	(b)	a beneficial interest in law and rights in or over land;
	(c)	shares as defined in section 744 of the Companies Act 1985, stock and unit trusts as defined in section 6 of the Charging Orders Act 1979, gilt edged securities as defined in paragraph 1 of Schedule 2 to the Capital Gains Tax Act 1979, and any other similar financial instruments.’
7.	The positions of the Secretary of State and the absent parent have evolved over the course of the written observations and the discussion at the oral hearing. I concentrate on my conclusions rather than the arguments presented at different stages, unless it is important to mention the details of a particular argument. 
Is regulation 23 authorised by statute?
8.	Regulation 23 could only be made under the authority of paragraph 5 of Schedule 4B to the Child Support Act 1991:
	‘(1) The Secretary of State may by regulations prescribe other cases in which a departure direction may be given.
	‘(2) Regulations under this paragraph may, for example, make provision with respect to cases where-
		(a)	assets which do not produce income are capable of producing income;
		...’
9.	Ms Deas argued, without much confidence, that this paragraph did not authorise regulation 23 in so far as that regulation dealt with cases in which assets were producing some income, but not as much as they might.
10.	Mr James argued that paragraph 5(1) contained a general power to make regulations and paragraph 5(2) merely contained examples of the possible operation of that general power. Paragraph 5(2) exemplified, but did not limit, the scope of paragraph 5(1).
11.	I accept Mr James’ argument. It is what paragraph 5 clearly says.
What item or items should be considered?
12.	I use the word ‘item’ as a general word in order to avoid using ‘asset’, which is defined in regulation 23(4).
13.	The tribunal was concerned with some farm land and a farm house. There are three items to which regulation 23 might be applied: (a) the farm house; (b) the farm land; (c) the farm house and land taken together as a smallholding. I asked how a tribunal should have decided which of these three items to consider.
14.	Ms Deas argued that it all depended on the circumstances of the case whether individual items should be considered separately or collectively as a parcel.
15.	Mr James argued that it was for the decision-maker to decide which item or items to consider. So, the tribunal could have considered (a), (b) or (c).
16.	I accept Mr James’ argument. The application for a departure direction under regulation 23 will identify one or more items. The nature of those items will determine whether some of them are capable sensibly of being considered as a parcel. Some items cannot be sensibly considered as a parcel. For example: an application may identify a house and shares in a company. Other items could be sensibly considered as a parcel. This case is an example. In cases like this, the tribunal was entitled to treat the items individually or collectively. 
The meaning of ‘asset’
17.	The meaning of some parts of regulation 23 will vary according to the meaning given to ‘asset’. This is defined in regulation 23(4).
18.	There are, broadly, three types of definition used in legislation.
19.	The presumptive definition: ‘unless the context otherwise requires, X means Y’. In this type of definition, X is presumed to mean Y, unless in its context a different meaning is necessary.
20.	The extending definition: ‘X includes Y’. In this type of definition, X bears its normal meaning and, additionally, Y.
21.	The exhaustive definition: ‘X means Y’. In this definition, X means Y and nothing else, although there is always implied a contextual element in that this meaning can be displaced if the context requires it. See the comments of Lord Selborne in Meux v Jacobs (1875) LR 7 HL 481 at page 493 and Robinson v Local Board of Barton-Eccles, Winton and Morton (1883) 8 App Cas 798 at page 801.
22.	The definition in regulation 23(4) is of the exhaustive type. So, when the word ‘asset’ is used in regulation 23, it must mean one of the types of asset set out in paragraph (4), unless it is necessary to give it a different meaning. 
23.	Regulation 23 is a short provision with its own definition. That makes it unlikely that a word will have been used without regard to the definition. I would need a compelling reason before concluding that it was necessary to depart from the definition. 
24.	This case provides at least one obvious example of the need to give ‘asset’ a different meaning. The absent parent has a beneficial interest in land. That is an asset within the definition in paragraph (4). Reading the relevant part of that definition into regulation 23(1)(a) produces this: ‘the Secretary of State is satisfied that any beneficial interest in land in which the non-applicant has a beneficial interest ...’ That is nonsense. Clearly, if the asset is a beneficial interest in land, paragraph (a) has to be read: ‘the Secretary of State is satisfied that the non-applicant has a beneficial interest in land ...’
Ownership and control
25.	Regulation 23(1)(a) applies if the non-applicant has a beneficial interest in, or the ability to control, an asset. 
26.	Ms Deas was concerned to link ownership and control, because the absent parent is a joint tenant of the property with his wife and would require her consent or a court order in order to sell (or do anything else with) the property. Ms Deas repeated a written argument that 
‘the word “or” in sub-paragraph (a) of Regulation 23 is conjunctive rather than disjunctive and that “beneficial ownership” and ability to control are mutually descriptive rather than mutually exclusive definitions. If not, an asset in which a non applicant has a beneficial interest but no ability to control ... would be brought into account.’
27.	I am not sure exactly what Ms Deas meant by ‘mutually descriptive’. To be honest, after discussing it with her at the oral hearing, I am not sure that she did. She certainly did not argue that ownership of a beneficial interest was essential, so that an asset which a non-applicant controlled but did not own fell outside the scope of the regulation. As I understand the point she was making, it was this: a beneficial interest owned by the non-applicant only falls within regulation 23(1)(a) if the non-applicant also has the ability to control it. So, the provision includes control without ownership, but not ownership without control. 
28.	The natural reading of regulation 23(1)(a) is that it covers two different cases. First, it covers cases of beneficial ownership. As control is an attribute of ownership, the two are closely related. However, the owner’s ability to control will always be subject to the general law (e.g. planning control and occupier’s liability) and may be limited by other interests (e.g. a mortgage). Second, it covers cases where someone controls an asset without having a beneficial interest in it. An example is a shadow director’s control over shares. 
29.	The language does not support a different interpretation. If Ms Deas’ argument were correct, the reference to ownership would be redundant, as all cases would be covered by the ‘ability to control’ limb.
30.	Nor does the natural meaning of the language produce the unfairness for a non-applicant suggested by Ms Deas. She argued that it would be unfair to attribute to the absent parent income that he could not realise because of wife’s joint ownership.
31.	In considering the supposed unfairness to the absent parent, it is important to keep in mind the asset that is being considered and the departure direction scheme as a whole. 
The asset being considered
32.	If the whole beneficial interest in the property is being considered as the asset, the first question is: does the absent parent have control over his wife’s joint interest? He may have control over that interest in law or in practice. To have control in law, he needs a court order. The current legislative authority for an order is section 14 of the Trusts of Land and Appointment of Trustees Act 1996. To have control in practice, his wife must be willing to act according to his wishes in dealing with her joint interest.
33.	A wife is perhaps likely to say that she will not consent to any dealing with the property. But the appeal tribunal would have to decide whether to accept that evidence. (I have deliberately put the matter in general terms (a wife) and make no comment on the integrity or motives of the absent parent's wife in this case.)
34.	The existence of a power for a court to order a sale is not sufficient to give the absent parent control in practice over his wife’s joint interest. An order is not available merely for the asking. The court will take account of the intentions of the partners when they bought the property and the purposes for which it was bought: see section 15(1)(a) and (b) of the 1996 Act. The welfare of minors must also be considered, but only those who occupy or might reasonably occupy the property: see section 15(1)(c). No doubt, the interests of other children might be considered as part of the court’s general discretion, but they are likely to carry little weight outside an order made in family proceedings.
35.	So, if the absent parent has the ability to control the whole interest in the asset, the suggested unfairness does not arise.
36.	If the absent parent does not have the ability to control his wife’s joint interest, only his joint interest can be considered as the asset. 
The departure direction scheme as a whole
37.	This leads on to a consideration of the departure direction scheme as a whole. The value of a joint interest may very low. It is possible that the value will be below the threshold of £10,000 set by regulation 23(2)(a). If it is not, the income attributed to the parent under regulation 40 will reflect the value. Finally, in view of the nature of the interest, it may not be just and equitable to give a departure direction.
Regulation 23(1)(a)(i)
38.	Regulation 23(1)(a)(i) covers cases where an interest in land is owned but the land is not being used to produce any income at all. Does land that is producing some income, but could produce higher income, fall within that head or another part of regulation 23(1)?
39.	Does it fall within regulation 23(1)(a)(i)? Ms Deas argued that it did not. The Secretary of State's written observations argued that it did. Mr James backed away from this argument at the oral hearing. 
40.	My conclusion is that an asset that is producing some income, but not as high an income as it might, does not fall within head (i). This possibility is not covered by the wording of head (i). And there is no justification for extending the meaning of the words used. The possibility of an asset being under-utilised is an obvious one. It must have been considered when the legislation was made. And it could easily have been covered by slightly different wording. 
Regulation 23(1)(a)(ii)
41.	It might at first sight appear that head (ii) covers cases where land is being under-utilised to produce income. However, on a closer reading it does not. The reason lies in the tenses. Head (ii) applies if:
	‘any asset in which the non-applicant has a beneficial interest has been invested in such a way that the income obtained from it is less than might reasonably be expected’.
42.	Applying the definitions in paragraph (4), that means that the non-applicant must currently have something that, as invested, has the status of an asset. And it must have been an asset within paragraph (4) immediately before it was invested. 
43.	The obvious case to which this applies is money that is invested in a bank or building society account. Money in cash is an asset as defined. When invested on deposit, it is also an asset as defined. So, money is an asset that can be invested and still retain its status as an asset.
44.	Is it possible for an interest in land to be invested? I do not know of any form of investment in which this is possible, but I do not rule out the possibility. However, it has not been done in this case.
45.	I have considered two other possible interpretations of head (ii). Neither is what the legislation says. So, it would need to be justified. 
46.	One possible interpretation would read: ‘any asset in which the non-applicant had a beneficial interest has been invested in such a way that ...’ The change of tense would move the focus from the nature of the investment to the nature of what was invested. Another possibility is to abandon the definition of ‘asset’ in paragraph (4) and interpret ‘any asset’ as referring to the value underlying the investment. So, in the case of land, the asset would be the money that was invested to buy it.
47.	Both these possibilities in different ways depart from the definitions in paragraph (4). I have explained my reluctance to depart from those definitions except for a compelling reason. I see no compelling reason here. 
Is my interpretation incoherent, irrational or unworkable?
48.	My interpretation differs from the received understanding of how regulation 23 works. That is a good reason to consider whether my interpretation is correct. I would doubt whether my interpretation was correct, if it produced an incoherent structure to regulation 23, could only be based on an irrational policy or would make the legislation administratively unworkable for the officials of the Child Support Agency or for appeal tribunals. It does not. Quite the reverse. In evaluating my interpretation, regulation 23(1) has to be considered as a whole. Looking at heads (i), (ii) and (v) together, my analysis produces a coherent, rational and workable result.
49.	Land that is not producing income has to be considered under head (i). The issue is whether it could produce income. That is a fairly straightforward question to answer.
50.	Land that is producing income has to be considered under head (v). The issue is whether it would be reasonable to sell it. Again that is a fairly straightforward question to answer. 
51.	If land that was producing some income had to be considered under head (i) or (ii), the issues would be less straightforward. It would involve evaluating the merits of other arrangements that might have been made. The questions would be less justiciable than under my interpretation. How, for example, could an appeal tribunal decide whether an owner should have preferred a long lease guaranteeing continuity of income from a low rent to a short lease providing higher income but with no guarantee beyond the end of the lease? There is also this consideration. If land has been let, the tenant acquires an interest that cannot be terminated before the term has expired or, if there is security of tenure, perhaps not at all. So, the only way for a parent to release the value tied up in the land would be to sell it – a possibility covered by head (v).
52.	Money has to be considered under head (ii). But different considerations apply to money. First, the comparative advantages of different forms of investment at a particular date are more easy to evaluate. Second, moving from one form of investment to another is easier than with land. 
The application of my interpretation to this case
53.	In this case, my interpretation works out like this. The house was not let. So, if the tribunal considers the absent parent's interest in the farm house as an asset, it can do so under head (i) or (v). But the land was let. So, if the tribunal considers the absent parent's interest in the land alone or in the smallholding of which it is a part as an asset, it must do so under head (v).
Regulation 40 and joint ownership
54.	If the case falls within regulation 23, income is attributed to the non-applicant. This is fixed by regulation 40(2). It does this by reference to ‘the net value of the asset’. What is the asset in the case of joint ownership?
55.	The reference to ‘asset’ in regulation 40 must refer back to that term in regulation 23. 
56.	If the absent parent is able to control his wife’s interest, no difficulty arises. The ‘asset’ is the combined beneficial interest of the couple and value of the asset is the value of the land, house or smallholding.
57.	If the absent parent is not able to control his wife’s interest, the ‘asset’ is the non-applicant’s beneficial interest in land. How is his interest to be valued? The Secretary of State has not identified a statutory provision governing this. I was referred to decisions by Mr Commissioner Howell under Schedule 3A to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. However, that is a different legislative context and I do not find those decisions relevant here.
58.	The issue of valuation of a joint interest has arisen in social security law. There the courts have recognised, subject to express provisions, the realities of joint ownership. In Chief Adjudication Officer v Palfrey (reported as R(IS) 26/95), the Court of Appeal was concerned with the joint ownership by father and daughter of a property that had been the family home since the early 1950s. The issue was the value of the father’s interest when he moved out of the home into residential care. The Court recognised that, as an order for sale was unlikely, the probable value of the father’s joint interest was nil. In contrast, in Wilkinson v Chief Adjudication Officer (reported as R(IS) 1/01), the Court of Appeal was concerned with a property that was inherited jointly by brother and sister. Neither had lived in the property, although the brother later moved into it. The issue was the value of the sister’s interest. The Court recognised that an order for sale would probably be obtainable and that the starting point for valuing the sister’s joint interest was half of the market value of the property.
59.	I follow the approach taken by the Court of Appeal in those cases. It is possible for legislation to deem an asset to be something different from what it is or to have a value different from what it has. But that requires a deeming provision or clear language. Regulation 40(2) is not a deeming provision. It deals with value, not deemed value. And the language does not support treating the asset as if it were something else. So, there is no justification for valuing an asset as though it were a different asset or giving it a value it does not have. If the absent parent genuinely cannot obtain his wife’s consent and could not obtain an order for sale, the value of what he owns is either nothing or next to nothing.
The just and equitable requirement
60.	A departure direction cannot be given unless the Secretary of State or the appeal tribunal is of the opinion that it would be just and equitable: see section 28F(1)(b) of the Child Support Act 1991.
61.	The calculation of income derived from an asset is notional one. The parent is not required to sell the asset or invest it in a particular way, although that may be the only way that the parent can afford to pay the assessment. However, the just and equitable requirement is broad. The tribunal must take account of the realities of whether the absent parent could in practice raise the money by disposing of the asset or putting it to a more profitable use.
Was the tribunal’s decision wrong in law?
62.	Yes, it was. It did not apply my interpretation of the law and appears not to have taken account of whether the absent parent could in practice raise more money from his assets. For those reasons, the decision must be set aside.
Is a rehearing necessary?
63.	Yes. I have considered whether to give my own decision without the need for a rehearing. However, there are issues of fact that require further investigation. I could not pursue them at the oral hearing, as neither the absent parent's wife nor the parent with care attended.
64.	In the past, it has been customary for Commissioners to direct that a case be reheard by a differently constituted tribunal. Power to direct otherwise is given by section 24(5) of the Child Support Act 1991. I have exercised that power in this case. I can see no reason why the parties could doubt the objectivity of the chairman at the rehearing, although she will no doubt consider on their merits any representations that are made to her about whether or not she should sit.

Signed on original								    Edward Jacobs
Commissioner
19th February 2001