CCS 3674 2007

DECISION OF THE CHILD SUPPORT COMMISSIONER

1	I allow the appeal. For the reasons below, the decision of the tribunal is wrong in law. It is set aside.  The decision is referred back to the tribunal that took the decision under appeal for that tribunal to retake the decision in the light of the directions in this decision.

2	The appellant (“A”) is the father and nonresident parent of two children for whom a child support maintenance direction was made. The first respondent is the Secretary of State for Work and Pensions, who is responsible for the child support agency. The second respondent (“R”) is the mother and resident parent of the two children, and the person to whom the child support maintenance is payable.  A is appealing with my permission against the decision of the tribunal on 4 07 2007 under reference 209 06 00354. 

3	 DIRECTIONS FOR THE NEW HEARING

A	The appeal is to be reheard by the same tribunal (including the financially qualified member) that heard the appeal on 19 02 2007 and 4 07 2007. The tribunal may rely in its new hearing on any matter of fact considered by it at that hearing and on its record of proceedings from that hearing.  The rehearing is to be an oral hearing.
B	For the avoidance of doubt, this appeal is limited to the decision about any
	variation of the child support maintenance calculation with effect from 19 06 2006.
	The calculation itself is no longer part of this appeal. 
C	Any party that wishes to put any further documentary evidence or written submissions to the tribunal is to do so within one month of issue of this decision. All such submissions are to be copied to the other parties on receipt by the tribunal office. 
D	If by reason of disability or otherwise it is not possible for this to be reheard by the same tribunal within a reasonable time, then a district chairman may direct that it be heard by another tribunal. If another tribunal rehears it, then there must be a complete rehearing by an oral hearing.

These directions are subject to any later direction by a district chairman.

REASONS FOR THE DECISION 

Background to the appeal
4	The Secretary of State for Work and Pensions decided that A was liable to pay £118 weekly to R for the two children from 19 06 2006. A applied for a variation to that decision. This was because he considered that account should be taken of repayments he was still paying of a debt incurred as a joint liability by A and R during their marriage and to which R was not contributing. The monthly repayments – a mortgage on a property – were £567. 

5	R stated that A was still living at the property. The decision maker acting for the Secretary of State took the view that A had retained the property for his own use and benefit. Accordingly, no variation was made. A appealed.

The tribunal decision
6	The matter came before the tribunal as two appeals, although they were taken together. The first appeal was about whether the child support maintenance calculation with effect from 19 06 2006 was correct. The other appeal concerned the application to vary that calculation.

7	The tribunal heard the appeal over two days. It received full submissions from all three parties. It received evidence including a plan, sales details and photographs of the property. I call the property “Castle House” for the purposes of this decision.

8	Both A and R were present at the first day of the hearing, and the Secretary of State was represented. At the end of that day the hearing was adjourned, and the chairman directed that there be a further hearing with a financially qualified member present. The chairman also directed that accounts of a company be produced. After full details of the company had been produced, the chairman also directed that further financial information be produced by A. A produced the financial information. The maintenance calculation was then checked in the light of this information by the child support agency. It was confirmed for the Secretary of State that the calculation against which a variation was sought was correct. The case was then relisted and heard for another full day on 4 07 2007. Again both A and R were present and the Secretary of State was represented. 

9	The tribunal, in its decision, confirmed the maintenance calculation. It also confirmed the refusal by the Secretary of State to vary the calculation. There is an extensive record of proceedings of the two days of hearing and a full statement of reasons by the tribunal for its decision.

Grounds of appeal
10	For the avoidance of doubt, this appeal relates only to the application for variation. The tribunal confirmed the calculation, and no party has sought to challenge that decision in this appeal. I consider that aspect of the tribunal’s reasons no further.

11	A submitted a formal statement of grounds of appeal. In essence they are that the tribunal did not accurately determine to what property it was applying the relevant law about debts incurred during the marriage. In addition, the tribunal had misinterpreted or misapplied the test of “own use and benefit”. When I first considered the case I granted permission to appeal because I considered the grounds of appeal arguable. This was because the tribunal’s reasons were ambiguous on the important issue of the extent of Castle House.  I also took the view that the tribunal had not adequately dealt with other factual issues relevant to a full determination of the appeal. But I also took the view that the best course of action was to send the matter back to the tribunal, in effect to complete its work.

12	The Secretary of State’s representative made a written submission supporting the appeal and agreeing that further findings needed to be made and the ambiguity resolved.
The representative also made submissions on the relevant law in response to issues raised in my directions. R offered some short answers to the questions of fact I had indicated needed answers. A had no further comments.

The law
13	A applied for the maintenance calculation to be varied. Section 28A of the Child Support Act 1991 allows variation on application of the parties on specific grounds. Schedule 4B to the Act provides that one ground is that there are specified special expenses. One of those special expenses is, in simple terms, a debt incurred during the marriage that the nonresident parent still has to pay. The scope of that provision, and the accompanying conditions are outlined in paragraph 2(c) of Schedule 4B. They are:

“(c) debts of a prescribed description incurred before the nonresident parent became a nonresident parent in relation to a child with respect to whom the maintenance calculation has been applied for (or treated as having been applied for) –
	(i)	for the joint benefit of both parents;
	(ii)	for the benefit of any such child; …”

14 	Regulation 12 of the Child Support (Variations) Regulations 2000 repeats those provisions and provides necessary further detail and prescription. Regulation (12)(2) makes a general provision about debts the repayment of which that may be used as the basis for a variation. Regulation 12(3) then lists various kinds of debt the repayment of which are not within the regulation. Only a few of the items in that list can be relevant here. They are:

(a)	a debt which would otherwise fall within paragraph (1) where the nonresident parent has retained for his own use and benefit the asset in connection with the purchase of which he incurred the debt …

(h) 	amounts payable by the nonresident parent under a mortgage or loan taken out on the security of any property except where that mortgage or loan was taken out to facilitate the purchase of, or to pay for repairs or improvements to, any property which is the home of the person with care and the qualifying child…

(k)	a loan obtained by the nonresident parent other than a loan obtained from a qualifying lender or the nonresident parent’s current or former employer …

(m)	any other debt which the Secretary of State is satisfied it is reasonable to 
exclude.

If a loan falls within any one or more of these provisions, then it cannot be a debt on which a variation may be based.

15	Regulation 12(4) also excludes a debt if the nonresident parent has taken responsibility for repayment of that debt as, or as part of, a financial settlement with the person with care. It is not clear if this is relevant to this appeal. 

16	The decision for the Secretary of State was that A’s debt was excluded under paragraph (a) of regulation 12(3) because he had retained Castle House for his own use and benefit. No other provision was considered in that decision. Nor was any specific provision mentioned by either A or R in their submissions to the tribunal. The tribunal itself did not identify any specific paragraph of regulation 12(3) although the substance of its decision is clearly directed to paragraph (a) only. In my directions I drew attention to the relevance of paragraph (h) also. The secretary of state’s representative agreed that that paragraph was also relevant to the decision before the tribunal. Neither A nor R commented on this. I must consider each in turn. 

Paragraph (a)
17	The application of this paragraph requires a tribunal to make findings about each of the following issues, in so far as they are in dispute:
•	To what debt does the application refer?
•	Was the debt incurred by the applicant?
•	For the purchase of what assets did the applicant incur the debt?
•	Does the applicant retain the assets at the date of application?
•	Were they retained for the applicant’s own use and benefit?

18	There are two primary areas of dispute between A and R about these provisions. First, to what assets does this apply? Is it Castle House including all the land and outbuildings that form part of the hereditament or total holding of which the house is part, or is it the residential part of the property only? The tribunal dealt with this issue with some ambiguity in its decision. The answer must be found by reference to the questions to be answered in order to apply the regulation: if the debt was incurred to purchase an asset, what was that asset?  That question has not been answered adequately.

19	The second area of contention is whether A retained the assets for his own use and benefit. To be caught by this test, it is not enough that A has retained the assets. That may be simply because – as was one contention here – someone must retain them until they are sold, but they are retained solely to ensure an orderly sale. It must be considered whether that retention was, at the time of the retention, for the retainer’s own use and benefit (emphasis mine). That is a question of fact, but it involves forming a view on the facts about the retainer’s intention at the relevant time. It is not enough that the retainer has some use and benefit at some later time. Nor is it enough the other way to show that someone else has some use and benefit at some later time. Again, the tribunal did not deal with this adequately.

Paragraph (h)
20	This is a general exclusion of any amount payable by the nonresident parent under a mortgage or loan taken out on the security of any property. There is an exception where the mortgage or loan was taken out for an approved purpose as defined in the provision. On the facts, the exception cannot apply here. I drew attention in my direction to the reported decision R(CS) 5/03 on the analogous provision in regulation 16(2)(h) of the Child Support (Departure Directions and Consequential Amendments) Regulations 1996. That decision and the authorities surveyed by the Commissioner in it appear to be the only consideration of the wording of regulation 16(2)(h), the predecessor to the current provision. That appeal concerned the exception to the exclusion, and the date from which matters have to be decided. That date is the date of the application to have the provision applied.

21	Leaving aside the exception, the exclusion is a wide one with regard to secured debts, or debts secured when taken out. It applies to “a mortgage or loan taken out on the security of any property” and to “amounts payable by the nonresident parent” under that mortgage or loan. Does it apply only to mortgages or loans taken out by the nonresident parent, or does it also apply to mortgages taken out by both parents together? It is clear from the facts of R(CS) 5/03 that regulation 16(2)(h) was considered without argument to apply to a joint mortgage in that case. It was also applied, again without argument, by another Commissioner to a joint mortgage in CCS 1645 1999. The wording of regulation 12(3)(h) is based closely on that of regulation 16(2)(h). The only variations in drafting reflect a decision to clarify the wording a little by replacing “applicant” with “nonresident parent”, and “parent with care” with “person with care”.  

22	This paragraph must also be read alongside regulation 12(2). To qualify under the general provisions of the regulation, a debt must have been incurred either for the joint benefit, in this case, of A and R, or for the benefit of R where A remains legally liable to repay all or some of it.  In that context, I take the view that paragraph (h) applies to joint mortgages and loans as well as loans taken out only by the nonresident parent. Paragraph (h) is clearly relevant to this appeal, although it is for the tribunal to make all necessary findings of fact to establish if it does apply.

Paragraph (k)
23	This is relevant here, although no point was taken on it. Regulation 12(6) defines “qualifying lender” by reference to section 376(4) of the Income and Corporation Taxes Act 1998. That is a lengthy, technical definition now maintained in place for income tax purposes only to deal with claims for tax relief on a loan taken out before April 1999 by someone then aged over 65 to purchase a life annuity. It is now a rather curious list for the purposes of this child support provision. And it presents practical problems in application, not least because Her Majesty’s Revenue and Customs has seen no reason to update its published register of qualifying lenders since 1998. I assume it applies to the mortgagee in this case, although that is by no means clear without further enquiry, as it is a major clearing bank. 

Paragraph (m)
24 	This clearly provides a discretionary power exercisable in connection with any application under regulation 12 that does not fall within the listed debts (a) to (l) but where the Secretary of State considers the debt should be excluded. This might, for example, be because a debt was technically not of a kind in the list but the substance of the underlying transaction fell fairly within the list. I heard no argument on this, and can see no other decision on it, but would consider that that provision is open on appeal to be considered also by a tribunal. All parties would however have to be put on notice that this was in issue. It was not put in issue here.

Application to this appeal	 
25	The tribunal therefore needs to revisit the evidence it has heard, and consider any further evidence, to clarify and then make findings about the application of both paragraphs (a) and (h) of regulation 12(3), and any other provision considered relevant. In general terms, the evidential burden is on the appellant to bring the payment within the scope of the regulation, but on the respondents to establish any exclusion, but again back on the appellant to establish any exception to an exclusion. In practice, the tribunal will need to take a broad view across all the evidence. But it must then make clear findings of fact from that evidence.

26	The tribunal took a considerable time looking at this appeal. Some of the issues it decided are no longer under appeal, but they help establish the reliability of the evidence, including witness evidence, on which it must base further findings. Given the lengthy hearings that have already taken place with all parties present and given also that the essential problem with the previous decision was a lack of, or lack of clarity in, findings, I take the view that this is one of those unusual cases where it is most efficient, and also fair, to send the matter back to the tribunal that reached the initial decision. As that included two members, those two members must continue to be members of the tribunal. (I have made a necessary direction in case that proves not to be practicable.)  That tribunal is free to draw on all the evidence it considered in its previous hearings when taking this decision again. 

									David Williams
									Commissioner 
									17 03 2008

[Signed on the original on the date stated]