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[2005] UKSSCSC CCS_1129_2005 (27 October 2005)

PLH Commissioner's File: CCS 1129/05
 


CHILD SUPPORT ACTS 1991-1995

APPEAL FROM DECISION OF APPEAL TRIBUNAL

ON A QUESTION OF LAW

DECISION OF THE CHILD SUPPORT COMMISSIONER

Appellant: [the person with care]

Respondents: (1) Secretary of State

(2) [the non-resident parent]

Appeal Tribunal: Colchester

Tribunal Case Ref:

Tribunal date: 20 January 2005

Reasons issued: 20 January 2005

1. This appeal by the person with care succeeds. The tribunal chairman who decided the case at Colchester on 20 January 2005 plainly misdirected himself in law and misapplied the new provisions about variation of a child support maintenance calculation by taking account of the wealth of the (resident) father in deciding whether a variation was just and equitable, when regulation 21(2)(e) Child Support (Variations) Regulations 2000 SI 2001/156 expressly forbade him to do that. I set the decision aside and remit the case to a freshly constituted tribunal to redetermine the appeal against the refusal by the Secretary of State to vary the maintenance calculation of a nil liability from the effective date of 17 March 2004.
2. This case concerns the maintenance for two children now aged 13 and 11 whose parents' marriage broke up in 1999. Since then their father has remarried and they live with him and their stepmother, the person with care. The case arose out of an application for child support maintenance she made against their own mother, the non-resident parent, which resulted in the Secretary of State calculating the maintenance liability as nil from an effective date of 17 March 2004. The stepmother was dissatisfied with this and applied for a variation of the normal calculation rules on the grounds that the children's mother was possessed of substantial assets, had or was diverting income which was not taken into account, was pursuing a lifestyle inconsistent with the nil income attributed to her in the calculation, and could well afford to pay something for her own children's maintenance.
3. Although the tribunal chairman failed to record any detailed findings of fact as a basis for his decision there is no doubt from the material before him that the children's mother did indeed have substantial sums of money invested, having received a total of something over £600,000 from her share of a former matrimonial property and a cash settlement in her favour paid by the children's father under a clean-break consent order made on the divorce. According to her evidence which was not disputed her main assets at the material time were the cottage in which she now lives, and something over £400,000 invested in capital bonds for the purpose of providing her with regular income or capital payments to meet her living expenses. It is also apparent from the evidence that the father was even better off, being the owner of numerous dental practices, a large house and expensive cars. At least therefore there is no shortage of available funds to provide for these children's maintenance: the question is what if any contribution ought to be made by their mother out of the lump sum settlement she received for her own maintenance on the divorce.
4. The answer given by the new formula calculation is nothing at all. Although there is some suggestion in the papers of her hoping to set up a small business importing handicrafts from South Africa there was, as the tribunal chairman rightly concluded, no real evidence of this having got off the ground or of her having any earned income from that or any other source. Such income as she has is all unearned, and neither that nor the capital drawings she uses to supplement it are taken into account in the calculation at all: as she has no reckonable income, the formula produces no liability.
5. The possibility of a non-resident parent having large capital or income resources out of which he or she could quite well afford to pay child support maintenance, though without any earned income to give rise to a liability under the normal rules, is to some extent recognised and dealt with in the provisions for what is now called a "variation" from the normal rules for calculation under section 28A-F Child Support Act 1991 and Part V of the Variations regulations cited above. Under those provisions it is a case for a variation if the non-resident parent has a beneficial interest in, or is able to control, "assets" of certain classes as defined, to a total value of over £65,000, in which case an assumed weekly value by applying a statutory rate of interest is added to that parent's income to be taken into account for the formula calculation. Alternatively if is shown that the non-resident parent has the ability to control the amount of earnings he or she receives and has unreasonably reduced the income that would be taken into account for the calculation, or has only a minimal liability under the formula but is in fact pursuing an overall lifestyle implying an income substantially higher than that taken into account, then again an additional income may on various conditions be included in the calculation by way of variation of the normal rules. All such variations are however subject to the requirements of section 28F that in all the circumstances of the case it would be just and equitable to agree to a variation, and in determining that question there are certain prescribed factors which must, or conversely must not, be taken into account: for example it is always material whether a variation would be likely to result in a relevant person ceasing paid employment, and conversely whether the non-resident parent or the person with care was responsible for the breakdown of the relationship is to be ignored. By regulation 21(2)(e) there are also to be left out of account on the "just and equitable" question (with one exception not material here)

"(e) the income or assets of any person other than the non-resident parent, …"

6. The Secretary of State's decision of 28 September 2004 rejected all the grounds put forward for a variation of the formula calculation rules. There being as already noted no real evidence of the non-resident parent having any significant undisclosed business income, and nothing to show that the provisions for "diversion" of relevant (i.e. earned) income could apply, the case came down to the two questions of whether the lump sums she retained from the divorce settlement should be taken into account as "assets" yielding notional additional income under regulation 18, or whether a variation on "lifestyle" grounds under regulation 20 should be made if not.
7. The Secretary of State answered both of these questions in the negative, on the grounds that:

(1) although she had assets derived from the divorce settlement worth a total of well over the £65,000 minimum, now represented by her cottage and the £400,000 or so of capital bonds she was using to live on, those "assets" within the primary definition in regulation 18(2) were nevertheless to be left out of the reckoning by virtue of regulation 18(3)(b), since the Secretary of State was satisfied she was retaining them to be used for a purpose which was reasonable in all the circumstances of the case, namely to provide herself with a home and an income to live on;

(2) the conditions for a variation on "lifestyle" grounds were not satisfied either, since her lifestyle was not excessive and was being paid for from the income or drawings from her investments: as such income was "income which is or would be disregarded" for the purposes of a normal maintenance calculation, regulation 20(3)(a) excluded the case from a variation on lifestyle grounds. (The decision as recorded at page 40 referred only to sub-paragraph (a) of regulation 20(3), by which a lifestyle variation is not to apply where the Secretary of State is satisfied that the lifestyle of the non-resident parent is paid for from income disregarded for a maintenance calculation under the regulations; however insofar as the later evidence might have cast doubt on whether the mother's drawings from her capital bonds all strictly counted as income, sub-paragraph (c) also excludes cases where the lifestyle is paid for from "assets as defined for the purposes of regulation 18, or income derived from those assets" so the result is the same.)

8. It is unfortunate that the tribunal chairman's very short statement of reasons incorporated in the notice of decision issued on the day of the hearing (page 77) did not address the relevant provisions for variation specifically as the Secretary of State had done, but instead dealt with the case only in rather broad terms focusing on whether he considered it just and equitable for there to be any variation which would have the effect of requiring the non-resident parent to fund her children's maintenance out of the capital settlement she had received for herself on the divorce. He said in particular:

"…Why should an absent parent with such a large capital figure escape liability for her children? In this case the monies have come from a divorce settlement. One of the factors that I must consider is whether it is just and equitable to conclude that from the monies paid out as a clean break the respondent should be fixed with a liability to maintain. It is clear that the resident father is a man of considerable substance, otherwise the divorce settlement would not have been so large, and in such circumstances would it be just and equitable to require the absent mother to be made liable to pay maintenance? I am not satisfied that it would be at this juncture since it would in fact be an attack on the sum arrived at as the equitable share for the non-resident mother to have from the former family pot."

9. In my judgment, that passage makes it as clear as it can be that the chairman misdirected himself by taking account of the means of the children's father as a factor in deciding whether it was just and equitable to make a variation, which is something he was expressly forbidden to do by regulation 21(2)(e) already cited. However justified or otherwise the chairman's overall view of the merits of a variation application (or for that matter an application for maintenance at all) having been pursued in the circumstances of this case, he was not of course entitled to disregard the express terms of the regulation. I would add that his decision also appears to me to have been at fault in failing to make and record sufficient findings of fact of his own as to the relevant assets, income and lifestyle issues under regulations 18 to 20 raised by the appeal so as to determine what, if any, case for any variation under those provisions had actually been made out.
10. In those circumstances I must accept the combined submissions of the person with care and the Secretary of State that the tribunal chairman's decision was defective as a matter of law and has to be set aside; and I further accept the Secretary of State's submission that the case has to be remitted to another tribunal for rehearing in order for proper findings of fact to be made and the relevant issues on whether there should be any variation on any of the grounds put forward redetermined. In view of the course I am taking I decline the appellant's request for an oral hearing of the appeal before me, as there will now be a full rehearing of the case before a differently constituted tribunal which will have the ability to go into the various factual points both she and the non-resident parent are concerned to raise, so far as these are relevant to the outcome of the appeal (the scope of that is of course limited by the terms of the legislation).
11. I direct the new tribunal that in considering whether a case is made out for a variation on the ground of "assets" under regulation 18 there is nothing to prevent them taking account of the financial circumstances of both parents, and the purpose for which the mother was given her lump sum settlement, in determining what is "reasonable" under regulation 18(3)(b), as for this purpose all the circumstances are to be taken into account and the restrictions in regulation 21 do not apply. It may be thought one of several puzzling features of these regulations, but that is the clear effect.
12. The appeal is allowed and the case remitted for rehearing accordingly.

(Signed)

P L Howell

Commissioner

27 October 2005

12.