THE CHILD SUPPORT COMMISSIONERS

Commissioner’s Case No: CCS/4722/1998

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 Horsham Child Support Appeal Tribunal held on 24th March 1998 is wrong in law: see paragraph 8.
1.2	Accordingly, I set it aside and refer the case to a differently constituted Appeal Tribunal for determination.
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 accordance with my decision in CIB/213/1999.

The parties
2.	This case concerns the child support maintenance payable with respect to Alistair. In the terminology of the child support legislation, the appellant is the absent parent, and the second respondent is the parent with care. I shall refer to them in those terms.
3.	The first respondent was originally the child support officer. On 1st June 1999, the title and status of child support officer were abolished and the duties of those officers were transferred to the Secretary of State. From that date, the Secretary of State became the first respondent.
History of the case
4.	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 Mr Commissioner Henty. The Secretary of State supported the appeal. The parent with care has not responded to the invitation to make observations on the appeal.
5.	The appeal to the tribunal was against a refusal by a child support officer to review under section 18 of the Child Support Act 1991 an assessment of child support maintenance made on a periodical review under section 16 of that Act. The assessment was at the weekly rate of £40.05 from the effective date of 30th December 1996. Although the child support officer identified in the submission to the tribunal some possible mistakes in the assessment, the tribunal dismissed the appeal.
6.	The absent parent has appealed against that decision to the Commissioner. He has raised two issues. First, he argues that the wrong evidence of earnings was used. Second, he argues that the costs of a loan should have been included as an eligible housing cost.

Evidence of earnings
7.	The assessment with which the tribunal was concerned was made on a periodical review under section 16 of the Child Support Act 1991. In order to carry out a periodical review, it is necessary to determine the parents’ earnings under Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. The starting point for that exercise is each parent’s ‘average earnings at the relevant week’: see paragraph 2(1) of the Schedule. The ‘relevant week’ is the period of 7 days immediately preceding the request for the information from the parent: see head (b) of the definition in regulation 1(2) of the Regulations. In this case, the information was not requested from the parents at the same time. This meant that the relevant week for the parent with care was in late November and early December 1996, while the relevant week for the absent parent was in May 1997. This compared with an effective date of late December 1996. That would not matter if the earnings used were also those in payment at the effective date. The absent parent argues that they were not. 
8.	The ‘average earnings at the relevant week’ is only the starting point in the calculation of a parent’s earnings. The legislation recognises that this may produce an inaccurate result. So, paragraph 2(4) of Schedule 1 allows the use of a different period so that the parent’s ‘normal weekly earnings’ may ‘be determined more accurately’. The tribunal should have considered the use of that provision in this case. It did not and that makes its decision wrong in law.  
9.	The child support officer asked me to consider whether there was a gap in the legislation in that the same relevant week should be defined for both parties. I do not think that there is a gap in the legislation. The problem arose from the administrative decision to request the necessary information at different times. So, the solution is also administrative - ask for the information from both parents at the same time. Also, any problem can be overcome by the flexibility given by paragraph 2(4) of Schedule 1.
Housing costs
10.	The absent parent argues that his loan should count as an eligible housing cost, as it was taken out to repay debts incurred in improving his home. The child support officer draws my attention to the evidence given at the hearing before the tribunal. The absent parent is recorded as saying that: (i) the loan was to repay credit card debts and an overdraft; (ii) the credit cards were used for other purchases as well; (iii) he had no credit card statements. The officer argues that, on that evidence, the absent parent could not satisfy the burden of showing that a particular amount was eligible expenditure. However, the absent parent’s grounds of appeal at page 125 give a slightly different account, suggesting that part of the expenditure at least could be identified as eligible.
11.	Eligible housing costs include ‘interest payments on loans for repairs and improvements to the home’ and ‘payments in respect of a loan taken out to pay off’ those loans: see paragraph 1(d) and (t) of Schedule 3 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. Repayments of capital are also eligible in the exempt income calculation: see paragraph 3(2A) of the Schedule. ‘Repairs and improvements’ are defined in paragraph 2 of the Schedule, subject to paragraph 2A.
12.	The facts raise this issue: is (i) a bank overdraft and (ii) a credit card debt a ‘loan’?
13.	The common law recognises two types of credit transaction, although some transactions are difficult to classify and many of the consequences of the distinction have been removed, principally under the Consumer Credit Act 1974. One type is loan or lender credit. This is a loan of money that may or may not be linked to a particular use, and may be given with or without security. Repayment may be by agreed instalments or as a lump sum. The other type is sale or vendor credit. This is the deferment of the purchase price, which is payable in instalments. It may be given with or without security. The security takes the form of withholding ownership of the item purchased until payment has been made in full. 
 Bank overdraft
14.	A bank overdraft is treated as a loan. See the authorities cited in note 1 to paragraph 1235 in Volume 7(2) of Halsbury’s Laws of England (4th edition 1996 Reissue). By the way, there are cases cited in section (2) under Loan in Volume 3 of Stroud’s Judicial Dictionary (5th edition) as authority that an overdraft does not involve borrowing. Those cases were overruled in the 1880s: see the note to paragraph 1235.
Credit card debt
15.	As far as I know, there is no authority in the British courts on the classification of a debt owed by a customer to a credit card issuer. 
16.	The nature of some of the contracts involved in the use of a credit or charge card was considered by the Court of Appeal in Re Charge Card Services Ltd [1988] 3 All England Law Reports 702. But the classification of the contract between the customer and the issuer of the credit card was not discussed.
17.	As a matter of general principle, I see no difference between a debt owed to credit card issuer and a debt owed under a classic contract of loan. The credit card issuer has advanced money for the benefit and use of the customer who is under a duty to repay according to the terms of the agreement. The fact that the money is paid to a third party to the contract is a matter of form and convenience rather than substance. Definitions of a contract of loan recognise that payment of the money may be made either to the debtor or to a third party. This is how a loan is defined by Professor Goode, the leading academic author on credit and security, in Commercial Law (1982 1st edition) at page 707, and by the practitioner editors of the Consumer Credit section in Volume 9(1) of Halsbury’s Laws of England (4th edition Reissue).
18.	As a matter of analogy, I see no difference between a credit card debt and other transactions that have been accepted as loans. A bank overdraft is treated as a loan: see paragraph 14. Also a check trading agreement has been treated as a loan for the purposes of the moneylending legislation: see the decision of the Newport County Court in Premier Clothing and Supply Co. v. Playfair, reported in the [1969] Current Law Year Book 2279a. A different approach has been taken in applying taxing legislation (Potts’ Executors v. Inland Revenue Commissioners [1951] 1 All England Law Reports 76), but that is not relevant here.
19.	The Crowther Committee Report on Consumer Credit (1971 Cmnd. 4596) treated a credit card debt as a hybrid transaction which it tentatively considered involved loan credit: see paragraph 4.1.66 in Volume 1 of the Report. Professor Goode also treats the debt owed on a credit card as loan credit: see Commercial Law at page 707.
20.	The child support officer’s submission to the Commissioner argued that a credit card debt was not a loan, citing the decision of the Commissioner in R(SB) 3/87, paragraph 7. The Commissioner there mentioned an arrangement under which payment of money was deferred to be paid by instalments. He held that this arrangement did not involve borrowing money. I respectfully agree with that decision and with the Commissioner’s reasoning. The arrangement was an example of sale credit rather than loan credit.
21.	So, my conclusion is that the debt owed by the absent parent on his credit cards did involve a loan between himself and the issuers of the cards.
22.	There are, however, considerable practical difficulties facing the absent parent. He has to show first that he used the credit cards to make specific payments. Next, those payment must relate to repairs and improvements to his home. Then, he has to show that the money borrowed was still owing on his credit card when his overdraft and credit card debts were repaid by the new loan. In the absence of credit card statements, he may find that he cannot satisfy the burden of proof on some or all of these points.
Conclusion
23.	The decision of the Child Support Appeal Tribunal is wrong in law and must be set aside. It is not appropriate for me to give my own decision on the factual issues that arise, as further investigation of the facts is needed. So, there must be a rehearing. As Child Support Appeal Tribunals have been abolished by the Social Security Act 1998 and their existing cases transferred to the new Appeal Tribunal, the rehearing will be before a new Appeal Tribunal. It is likely that the tribunal will consist of a legally qualified panel member sitting alone under regulation 36(1) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999. 

Signed on original     							    Edward Jacobs
Commissioner
12th July 2000