R(CS) 3/02

Mr. H. Levenson	CCS/2619/1999
12.12.00
Departure direction – debts incurred before becoming an absent parent – whether exclusion of a debt was reasonable
The absent parent applied for a departure direction in respect of the repayment of debts incurred before he became an absent parent. The Secretary of State refused to make a direction. The absent parent appealed to a tribunal. The absent parent alleged that the loan in question was for water rates and similar household expenses. The tribunal confirmed the decision of the Secretary of State because such day to day living expenses were taken into account in the formula assessment, and that it was reasonable to exclude any loan to pay for them under regulation 16(2)(m) of the Departure Direction and Consequential Amendments Regulations 1996. The absent parent appealed to the Commissioner.
Held, allowing the appeal, that:
1.	in the context of regulation 16(2) only extraordinary items of expenditure are to be excluded;
2.	the tribunal’s reasoning was illogical because the application for a departure direction was based on debts incurred before he became an absent parent whereas the formula assessment took account of debts incurred afterwards;
3.	in the circumstances of this case it was not clear whether the loan was taken out when the parents were “a married or unmarried couple who were living together” to satisfy the requirement of regulation 16(1);
4.	 the new tribunal will have to investigate that requirement as a pre-requisite to consideration of the loan under regulation 16(2).

DECISION OF THE CHILD SUPPORT COMMISSIONER

1.	This appeal by the absent parent succeeds to the extent that in accordance with the provisions of section 24 of the Child Support Act 1991 I set aside the decision made by the child support appeal tribunal on 24 November 1998. I refer the case to a completely differently constituted tribunal for a fresh hearing and decision in accordance with the directions given below. However, as will become clear, this course of action will not necessarily work out to the advantage of the absent parent.

2.	This appeal is brought by the absent parent and father of a daughter born on 7 June 1982 and a son born on 24 May 1985. The second respondent is his former wife who is the mother and person with care of the children. She has since remarried. At some stage an order had been made that the absent parent pay to the person with care the weekly amount of £66.42 by way of child support maintenance. On 7 February 1997 the absent parent made an effective application for a departure direction which would reduce the weekly amount of child support maintenance. On 16 September 1997 the Secretary of State made a departure direction on the basis that it was reasonable for the new husband of the person with care to make a contribution to the payment of her housing costs. The effect of this was to reduce the weekly child support maintenance liability by £4.99 from 2 December 1996. This departure direction is not the subject of any dispute and I make no further comment on it. Two other bases for making a departure direction were referred to at an earlier stage of the proceedings, but are now no longer relevant. However, on 9 January 1998 the absent parent appealed to the child support appeal tribunal against the refusal of the Secretary of State to make a departure direction in respect of the repayment of debts which the absent parent argued had been incurred before he became an absent parent. On 24 November 1998 the tribunal confirmed the decision not to make a departure direction on this basis and on 16 April 1999 the chairman of the tribunal refused the absent parent’s application for leave to appeal to the Child Support Commissioner against the decision of the tribunal. I granted leave on 7 September 1999. It is unfortunate that the subsequent proceedings have taken so long. Final submissions were received at the beginning of December 1999 but the case was not referred back to me for decision until 21 November 2000. 

3.	Aside from the main issue, the absent parent has also complained at the failure to provide him with certain information. I understand that all of the relevant information has now been provided and I make no further comment. Any further relevant points must be taken up before the new tribunal. 

4.	Section 28A of the Child Support Act 1991 provides, amongst other matters, that where a maintenance assessment is in force, the absent parent with respect to whom it was made may apply to the Secretary of State for a departure direction under section 28F. Section 28F provides as follows:-

	“28F.–(1) The Secretary of State may give a departure direction if –

		(a)	he is satisfied that the case is one which falls within one or more of the cases set out in Part I of schedule 4B or in regulations made under that Part; and

		(b)	it is his opinion that in all the circumstances of the case, it would be just and equitable to give a departure direction.” 

Section 28E sets out general principles to which the Secretary of State shall have regard in determining any application for a departure direction and provide that other considerations may be prescribed. Section 28F(2) provides that in considering whether it would be just and equitable in any case to give a departure direction, the Secretary of State shall have regard, in particular, to the financial circumstances of the absent parent and person with care and to the welfare of any child likely to be affected by the direction. I do not propose to go into these matters but I refer to them here for the convenience of the parties and of the tribunal.

5.	Paragraph 1 of schedule 4B to the Act provides that regulations may be made setting out cases in which a departure direction may be given. Paragraph 2 provides that a departure direction may be given in respect of special expenses of the applicant which were not, and could not have been, taken into account in determining the current assessment. “Special expenses” means the whole or any prescribed part of expenses which fall within a prescribed description of expenses. In prescribing descriptions of expenses for these purposes the Secretary of State is authorised to make provision with respect of debts incurred before the absent parent became an absent parent in relation to the child with respect to whom the current assessment was made. The prescription is to be found in regulation 16 of the Child Support Departure Direction and Consequential Amendments Regulations 1996. Regulation 30 sets out further factors to be taken into account in determining whether it would be just and equitable to give a departure direction in any case. 

6.	It is necessary to set out the whole of regulation 16 in full:-

	“16.–(1) Subject to paragraphs (2) and (4), repayment of debts incurred–

	(a)	for the joint benefit of the applicant and the non-applicant parent; 

	(b)	for the benefit of the non-applicant parent where the applicant remains legally liable to repay the whole or part of that debt;

	(c)	for the benefit of any person who at the time the debt was incurred–

		(i)	was a child;

		(ii)	lived with the applicant and non-applicant parent; and

		(iii) of whom the applicant or the non-applicant parent is the parent, or both are the parents; or

	(d)	for the benefit of any child with respect to whom the current assessment was made,

	shall constitute expenses for the purposes of paragraph 2(2) of Schedule 4B to the Act where those debts were incurred before the absent parent became an absent parent in relation to a child with respect to whom the current assessment was made and at a time when the applicant and the non-applicant parent were a married or unmarried couple who were living together. 

	(2) Paragraph (1) shall not apply to repayment of–

	(a)	a debt which would otherwise fall within paragraph (1) where the applicant has retained for his own use and benefit the asset the purchase of which incurred the debt;

	(b)	a debt incurred for the purposes of any trade or business;

	(c)	a gambling debt;

	(d)	a fine imposed on the applicant;

	(e)	unpaid legal costs in respect of separation or divorce from the non-applicant parent; 

	(f)	amounts due after use of a credit card;

	(g)	a debt incurred by the applicant to pay any of the items listed in sub-paragraphs (c) to (f) and (j);

	(h)	amounts payable by the applicant 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 parent with care and any child in respect of whom the current assessment was made;

(i)	amounts payable by the applicant in respect of a policy of insurance of a kind referred to in paragraph 3(4) or (5) of Schedule 3 to the Maintenance Assessments and Special Cases Regulations (eligible housing costs) except where that policy of insurance was obtained or retained to discharge a mortgage or charge taken out to facilitate the purchase of, or to pay for repairs or improvements to, any property which is the home of the parent with care and any child in respect of whom the current assessment was made;

(j)	a bank overdraft except where the overdraft was, at the time it was taken out, agreed to be for a specified amount repayable over a specified period; 

(k)	a loan obtained by the applicant, other than a loan obtained from a qualifying lender or the applicant’s current or former employer;

	(l)	a debt in respect of which a departure direction has already been given and which has not been repaid during the period for which that direction was in force except where the maintenance assessment in respect of which that direction was given was cancelled or ceased to have effect and, during the period for which that direction was in force, a further maintenance assessment was made in respect of the same applicant, non-applicant and qualifying child with respect to whom the earlier assessment was made; or

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

	(3) Except where the repayment is of an amount which is payable under a mortgage or loan, or in respect of a policy of insurance, which falls within the exception set out in sub-paragraph (h) or (i) of paragraph (2), repayment of a debt shall not constitute expenses for the purposes of paragraph (1) where the Secretary of State is satisfied that the applicant has taken responsibility for repayment of that debt, as, or as part of, a financial settlement with the non-applicant parent or by virtue of a court order.

	(4) Where an applicant has incurred a debt partly to repay a debt or debts repayment of which would have fallen within paragraph (1), the repayment of that part of the debt incurred which is referable to the debts repayment of which would have fallen within that paragraph shall constitute expenses for the purposes of paragraph 2(2) of Schedule 4B to the Act.

	(5) For the purposes of this regulation–

	(a)	“married” or unmarried couple” has the meaning set out in regulation 1 of the Maintenance Assessments and Special Cases Regulations;

	(b)	“non-applicant parent” means–

		(i)	where the applicant is the person with care, the absent parent;

		(ii)	where the applicant is the absent parent, the partner of that absent parent at the time the debt in respect of which the application is made was entered into;

	(c)	“qualifying lender” has the meaning given to it in section 376(4) of the Income and Corporation Taxes Act 1988;

	(d)	“repairs and improvements” means major repairs necessary to maintain the fabric of the home and any of the measures set out in sub-paragraphs (a) to (j) of paragraph 2 of Schedule 3 to the Maintenance Assessments and Special Cases Regulations (eligible housing costs) and other improvements which the Secretary of State considers reasonable in the circumstances where those measures or other improvements are undertaken with a view to improving fitness for occupation of the home.”

7.	The tribunal found that the absent parent had taken out a loan of £5,000 on 14 March 1996. This was repayable over 5 years at £123.24 monthly from 2 May 1996. The tribunal recited that the absent parent alleged that the loan was for water rates, community charge, electricity, telephone bills and food shopping. “Part of this was disputed” by the person with care. The tribunal recorded that:

	“…the evidence was conflicting, but in the event it was not necessary to determine whether or not [the absent parent] had discharged a greater or lesser proportion of the household expenses than he alleged, or, as the bank loan referred to had been used to discharge day to day living expenses and the tribunal had no doubt that it was entirely reasonable to exclude that debt under regulation 16(2)(m). As the Secretary of State’s representative explained, the day to day living expenses were matters which were taken into account in the formula which led to the assessment from which the departure was sought, there was no other provision within the regulations to take into account loans to pay for day to day expenses.”

8.	In my opinion the tribunal was mistaken in law in its approach to this issue. The items listed in regulation 16(2)(a) – (l) are all fairly tightly and specifically defined. It seems to me to be inadequate for the tribunal to exclude the debt in this case on the very broad general ground that the money was used for day to day living expenses. It was incumbent on the tribunal to make more detailed findings as to the purposes for which the debt was incurred and in respect of each purpose to make a clear decision as to whether it was reasonable to exclude that part of the debt. I find it difficult to accept that money spent on ordinary day to day living expenses could reasonably be excluded from account. It seems to me that in the context of regulation 16(2) it is the extraordinary items of expenditure which are candidates for exclusion. It is not appropriate for me to give very specific guidance, but I would expect tribunals to take the view that it is reasonable to exclude debts which were incurred to provide an extravagant lifestyle or to purchase items not reasonably required. 

9.	In this particular case there was a logical flaw in the approach of both the Secretary of State and the tribunal. The formula relates to expenditure after the parties have separated. The debt is incurred in respect of expenditure before the parties have separated. It is only the repayment of the debt that is relevant to the period after separation. There is no logical connection between the application of the formula and the items for which previous debts were incurred.

10.	However, there is a more fundamental matter which was not addressed prior to the proceedings before the Commissioner. Regulation 16 can only apply to debts which were incurred before the absent parent became an absent parent and at a time when the two parents were “a married or unmarried couple who were living together”. There is explicit provision to this effect in regulation 16(1). Regulation 16(5) provides that for the purposes of this regulation “married or married couple” has the meaning set out in regulation 1 of the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. In that regulation “married couple” is defined as a man and a woman who are married to each other and are members of the same household. “Unmarried couple” means a man and a woman who are not married to each other but are living together as husband and wife. In the present case the decree nisi was apparently issued on 7 September 1994. The two parents continued to live at the same address. The loan was taken out on 14 March 1996. The parents stopped living at the same address on 30 May 1996. I do not know when the decree was made absolute. It is necessary to establish whether, on 14 March 1996 the parents were still married. If they were, it is necessary to decide whether at that time they were members of the same household and also whether they were in fact living together at that time. It is possible for two people to be members of the same household but temporarily parted, in which case they would not actually be living together for the purposes of regulation 16(1). If the decree of divorce had been made absolute by 14 March 1996, then it is necessary to decide whether the parents were an unmarried couple which means deciding whether they were living together as husband and wife. In making this decision there are more factors to take into account than there are in deciding whether a couple who are still married actually count as a married couple for the purposes of the regulations. However, it is still necessary to decide whether two people who are not married to each other are living in the same household. It is well established that two people can be living at the same address, in the same house, in the same flat or, (in certain extreme circumstances) in the same room and still not be living in the same household. These matters were not investigated by the tribunal. The new tribunal must consider these matters which, logically, come before consideration is given to regulation 16(2).

Date: 12 December 2000				           (signed) Mr. H. Levenson
Commissioner