Decision No: CSC2/98

APPELLANT:  MRS C... S
1ST RESPONDENT:  CHILD SUPPORT OFFICER
2ND RESPONDENT:  MR N... G...

	THE CHILD SUPPORT (NORTHERN IRELAND) ORDERS 1991 AND 1995

	Appeal to the Child Support Commissioner
	on a question of law from the decision of the
	Belfast Child Support Appeal Tribunal
	dated 9 February 1998

	DECISION OF THE CHILD SUPPORT COMMISSIONER

1.	This is an appeal by the Parent with Care (leave having been granted by the chairman) against the decision dated 9 February 1998 of a Child Support Appeal Tribunal (herein after called "the Tribunal") sitting at Belfast.  That Tribunal had allowed an appeal by the Parent with Care against the decision of a Child Support Officer.  The appeal was correctly described as being "allowed" because the decision of the Child Support Officer was altered but in fact the Tribunal's decision was less favourable to the Parent with Care.  It directed that interest payments on a total sum of £76,500 should be allowed as part of the housing costs of the Absent Parent.  No effective date was given.  The Tribunal found that the Absent Parent had eligible housing costs based on two mortgages, the first for £42,500 and the second for £34,000.  It found further that the loan of £34,000 was to replace the mortgage which was in existence around the time of the divorce and the second was taken out to pay the sum of £42,000 to the Parent with Care representing her share of the equity in the former matrimonial home.  By my direction the Child Support Officer was specified as the first respondent in this appeal and the Absent Parent was specified as the second respondent.

2.	The Parent with Care applied for leave to appeal by letter of 13 February 1998 and leave was granted by the Tribunal chairman.  By letter of 31 July 1998 the Child Support Officer made observations and both the Parent with Care and the Absent Parent commented on same by letters dated 26 August 1998 and 10 September 1998 respectively. 

3.	My decision is that the Tribunal's decision is in error of law and is set aside.  The matter is remitted to a differently constituted Child Support Appeal Tribunal which should rehear the matter bearing in mind the views set out below.

4.	I am setting the Tribunal's decision aside primarily because I consider it failed to adequately investigate issues which were raised on the evidence:-

	1.	How much of the sum of £34,000 borrowed by way of one mortgage on the matrimonial home, was for the provision of a home?

	2.	How much of the sum of £42,500 borrowed by way of a second mortgage on the matrimonial home, was for the provision of a home?

5.	The Ancillary Relief claim was settled on terms that the Absent Parent would pay to the Parent with Care a sum of £36,400 and would obtain her release from and indemnify her from all liability to the Northern Bank on foot of various accounts and pay the Parent with Care's costs in the sum of £6,000 plus VAT.  In return, inter alia, the Parent with Care accepted the sum of £36,400 plus the Absent Parent's interest in an insurance policy in full and final settlement of her claim to lump sum and property adjustment.  

6.	The Tribunal found that the Absent Parent had to borrow a sum of £42,000 [sic - possibly an error to read £42,500] to pay the Parent with Care her share of the equity in the matrimonial home.  Bearing in mind the terms of the settlement of the Ancillary Relief claim it is by no means clear how the Tribunal reached that conclusion, and it does not appear that any investigation was done or findings  made relating to how the balance of £6,100 (£42,500 minus £36,400) was made up.

7.	The Absent Parent owned his home before the re-mortgaging.  He owned it subject to mortgage.  The re-mortgaging appeared to be for a much greater total sum than the original mortgage debt and the sum of £36,400.  It appears to cover sums borrowed to discharge other loans and if so, the new Tribunal will have to determine whether or not those loans were in respect of the provision of a home.  The instant Tribunal appears to have misconstrued the terms of paragraph 1 of Schedule 3 of the Child Support (Maintenance Assessments and Special Cases) Regulations (Northern Ireland) 1992 which allowed certain costs as eligible housing costs provided they were in respect of "the provision of a home".

8.	It is necessary to give guidance to the new Tribunal on the interpretation of the phrase "the provision of a home" in the said paragraph 1.  That paragraph provides for certain payments "in respect of the provision of a home" to be eligible to be taken into account as housing costs for the purposes of the Regulations.  Useful guidance on the construction of the phrase has been given by GB Commissioner Rice in CCS/11591/85 at paragraphs 9 and 10.  I approve of those paragraphs.

9.	At paragraphs 9 and 10 Commissioner Rice states:-

		"9.  I fully see that the provision of a home must mean something 
		rather more than the mere initial acquisition.  It must extend to 
		take in matters which serve to preserve the home with which the 
		person in question has already been provided.  Accordingly, it must 
		embrace repairs and improvements.  But does it go further, and 
		encompass acts done simply to consolidate, as distinct from initiate, 
		the right to occupancy of the home?

		10.  It would seem to me that it is all a matter of degree.  If a 
		person has an unchallengeable right to the occupancy of a home, he 
		has been provided with that home, and any unconnected action on his 
		part resulting in the payment of mortgage interest is, as regards 
		qualifying for housing costs (as that term is to be understood in the 
		relevant provisions of the child support legislation) wholly 
		unnecessary.  For example, if a person has a long lease of the 
		property, he does not need to acquire the freehold.  The lease in 
		itself is sufficient interest to bring about the provision of a home.  
		The subsequent acquisition of the freehold does not change the 
		position.  However, if the lease is on the point of expiry, then the 
		acquisition of the reversion could be said to be an action directed 
		to the provision of a home in the broad sense  of the word.  The 
		acquisition of this further interest would operate to prevent the 
		loss of the home, and I consider that the word "provision" in the 
		context in which it appears is wide enough to cover this situation."

	I would add, however, that loans for repairs and improvements can only be eligible where they fall within paragraph 2 as well as paragraph 1 of the said Schedule.

10.	It should be noted that Commissioner Rice states:-

		"If a person has an unchallengeable right to the occupancy of a home, 
		he has been provided with that home, and any unconnected action on 
		his part resulting in the payment of mortgage interest is, as regards 
		qualifying for housing costs (as that term is to be understood in the 
		relevant provisions of the child support legislation) wholly 
		unnecessary."

	He is, of course, correct.  Where a loan had not been used to purchase the whole of, or an interest in the home nor for qualifying repairs, I fail to see how that loan or that part of any new loan or mortgage which is to discharge such a loan, is for the provision of a home.  It is not open to an adjudicating authority to permit borrowings to be classed as eligible housing costs, being for the provision of a home, which are not reasonably necessary for the acquisition either initially of the home or of a further interest necessary for retention of the home or to finance qualifying repairs.  A party who arranges or re-arranges borrowings which were unconnected with the provision of a home cannot have those borrowings counted as housing costs simply by reason of charging them on the home.  It appears to me that it is possible to have included as eligible housing costs under paragraph 1 of Schedule 3 interest on any sums borrowed to acquire the home, to discharge the other parent's interest in the home (including costs of so doing) and to fund qualifying repairs and any loans to discharge existing loans used for any of the above purposes.  

11.	A party cannot have borrowings not in respect of the provision of a home counted under paragraph 1 simply by reason of charging them on the home.  That would be to completely subvert the intention of the legislation and the meaning of the phrase "in respect of the provision of a home".

12.	It appears to me that in the present case and on the evidence before me under paragraph 1 of the said Schedule 3 it is possible to have included as eligible housing costs interest on any mortgage taken out to acquire the interest of the Parent with Care in the home (as that was necessary to enable the Absent Parent to continue to reside there) and this could include both the actual cost of buying out that interest and any costs of so doing.  It is also possible to have included interest on any loan (I think loan must include mortgage in this respect) which falls within paragraph 1(p) of Schedule 3.  Paragraph 1(p) relates to a loan taken out to repay another loan but only to the extent that it was incurred for that purpose and only to the extent that that other loan was in respect of the provision of a home.  The new Tribunal will have to make findings on the extent to which the Absent Parent's borrowings can qualify under the said paragraph 1.  The above list is not exhaustive as regards what can qualify.  It relates to the areas where it appears likely to me that issues arise for the Tribunal's determination.

13.	As regards capital repayments forming part of housing costs, I would refer to paragraph 3 of the said Schedule and give specific approval to the approach adopted by GB Commissioner Howell in decision CCS/012/94.  At paragraphs 34 to 43 the Commissioner states:-

		"34.	The problem with adopting a purely literal approach to the 
		child support legislation, and leaving it to Parliament to sort out 
		any unintended discrepancies if or when it thinks fit, is that the 
		people likely to suffer most in this class of cases are not the 
		general body of taxpayers, but the individual children or parents who 
		until the discrepancies are put right may be deprived of fair 
		maintenance, or made to pay irrational amounts.  That cannot in my 
		view be right, and for that reason alone a more positive role has to 
		be adopted than in some other areas of the statute law.  In my 
		judgment therefore, the general approach to interpreting the child 
		support legislation should be practical and purposive, rather than 
		detached and literal.  I gratefully acknowledge this phrase from the 
		landmark judgment of Warner J in Mettoy Pension Trustees v Evans 
		[1990] 1 WLR 1587 at 1610 (another context altogether, but also one 
		where ill drafted documents are to be encountered, and complex and 
		difficult questions affecting ordinary people arise).

		Detailed issues on this appeal: eligibility of housing costs under 
		Sch. 3 para 1.

		35.  The overriding requirement in Sch. 3 para 1 is that payments 
		falling within one of the sub-paras (a) to (t) must also be "in 
		respect of the provision of a home" if they are to count as eligible 
		housing costs.  In my judgement, this means that they must be for 
		costs reasonably necessary for providing a home, or such things as 
		repairs and improvements to it.  It follows that it is not sufficient 
		merely to show that the payments, though incurred for other purposes 
		than housing, are secured on the home so that it may be at risk if 
		they are not paid.  That would not give adequate force to the 
		word "provision".

		36.	In addition, the apparent purpose of the regulations is to 
		include the normal and reasonable housing costs of each parent in the 
		basic living expenses to be regarded as the "exempt" part of their 
		income for the maintenance assessment.  It would not be consistent 
		with this purpose if it were possible for one parent or the other to 
		include as "housing costs" the cost of borrowings for quite different 
		reasons: perhaps business liabilities, or personal credit card 
		spending as here.  If it were, the legislation would yield different 
		answers according to whether the parent's bank, finance company, or 
		other lender happened to have secured a charge on his or her property 
		for such other borrowing.  That would in my view be irrational and not 
		what Parliament should be taken to have intended.

		37.	Accordingly, in my judgment, the interest payments attributable 
		to the "uplift borrowing" of £24,000 by the children's father in this 
		case do not qualify as eligible housing costs under Sch. 3 para 1(b), 
		even though this loan is covered by the "all moneys charge" to the 
		bank which secures all his present and future indebtedness to them on 
		any one or more accounts:  see pages T131 to 133 of the case papers.

		38.	Nor, in my judgment, are either income or capital payments in 
		respect of this loan "payments in respect of, or in consequence of, 
		the use and occupation of the home" so as to fall within para 1(g).  
		They are not in any sense for use and occupation and they are 
		the consequence of financial arrangements unconnected with it.  Nor 
		does the fact that the bank is the father's employer, and has lent 
		him the money, amount in my view to the bank providing him with the 
		home itself, so as to bring the payments within para 1(r).  Whatever 
		para 1(s) meant when in force, it had been deleted from 5 April 1993 
		before any of the assessments in this case started to run, so that it 
		cannot in any event apply.  Although para 1(t) is not relied on by 
		the children's father, I should say for completeness that in its 
		original form it plainly did not apply to the disputed payments, and 
		I do not consider it does so in its truncated form either.

		39.	Accordingly in my view the tribunal made no error in law in the 
		way they dealt with the issues arising under Sch. 3 para 1.  The 
		children's father places reliance on the tribunal's recorded finding 
		that "if he had not taken the additional borrowing by way of the 
		consolidating loan he could not have remained in the matrimonial home" 
		but this has to be read in the context of the submission by the child 
		support officer recorded above at page T99 as "Accept had to take 
		up-lift to be able to buy house".  In my view it primarily relates to 
		the other loan of £25,000, used to buy out his wife's interest 
		on the separation.  Even if it is to be read as saying (without any 
		real evidence, in my view) that he substituted secured for unsecured 
		borrowing as a means of avoiding having to sell the house for some 
		reason connected with the accumulated personal loans, this did not 
		provide the home in any relevant sense.

		Alternative route to eligibility for capital payments: Sch 3 para 3

		40.	However the tribunal did in my judgment err in law in failing to
		consider the most powerful argument advanced by the children's father: 
		that the capital payments on the £24,000 loan fell within Sch. 3 
		para 3(2).  There is no doubt that they were periodical payments to 
		reduce the capital of the loan secured by the bank's mortgage on his 
		house.  As is apparent from pages T53 and T85, this is a term loan 
		repayable over 24 years and the monthly payments do include a 
		capital element.  There is no copy of any loan conditions among the 
		case papers but I am prepared to assume what is almost bound to be 
		the case, that the monthly instalments over 24 years are made payable 
		by the loan terms.  Hence they fall within the class of payments which 
		it appears Sch 3 para 3(2) may make "eligible" regardless of whether 
		the purpose of the loan was anything to do with housing, and they are 
		not excluded from housing costs by para 3(6).

		41.	A serious issue therefore arose on whether the capital payments 
		should be allowed under para 3, even if outside para 1; and this 
		issue had to be considered by the tribunal before it could be said 
		that they had dealt with the claimant's appeal properly.  For that 
		reason I hold their decision erroneous in law and I set it aside.

		42.	I must therefore decide whether para 3 has to be read in its 
		statutory context as dealing only with costs incurred for housing, or 
		taken literally and by itself so as to turn all capital payments under 
		a mortgage or related insurance policy, pension plan etc., into 
		"housing costs", regardless of the actual purpose of the borrowing 
		itself.  The solution cannot be as simple as suggested by the child 
		support officer in his submission at page 162, where he says paras 1 
		and 3 are to be read "in tandem" and that para 1 provides for 
		"eligible" housing costs while para 3 provides for additional 
		provisions relating to "eligible" housing costs for the purposes of 
		calculating exempt income.  This must be wrong, as para 3 deals 
		with payments which quite plainly cannot fall within para 1 at all.  
		It must therefore extend the scope of "eligibility" to some extent, 
		and so provide its own separate and alternative route to allowance of 
		costs as exempt income.

		43.	I have however reached the conclusion that in the context of
		regulations 9(1)(b), 14 to 18, and Sch. 3 itself, para 3 cannot be 
		read so as to extend exemption for "housing costs" to payments that 
		cannot in any reasonable sense be said to be incurred in respect of 
		housing at all.  This limitation, it seems to me, is necessarily to 
		be inferred from the opening words of reg 9(1)(b) "an amount in 
		respect of housing costs" from which all the possible routes to 
		eligibility stem.  In my judgement the wording of reg. 14 that 
		"Sch. 3 shall have effect for the purpose of determining the costs 
		which are eligible to be taken into account as housing costs" is 
		intended to define which costs falling within that general category 
		are to be allowed as eligible, and not to extend the category 
		artificially so as to include costs which are not housing costs in 
		any ordinary sense at all.  Accordingly, in my judgment, although the 
		tribunal were in error in failing to consider this issue, it does not 
		provide a ground for saying that the housing costs of the children's 
		father have been wrongly calculated."

	The new Tribunal should bear this construction in mind when re-hearing this case.

(Signed): M F Brown

COMMISSIONER

(Date): 22 March 1999