Commissioner’s file: CCS 1040 2002

DECISION OF THE CHILD SUPPORT COMMISSIONER

1	I allow the appeal. But I do so on grounds that may not be to the advantage of the appellant.  

2	This is an appeal by the father and absent parent (whom I call A)  of two qualifying children. The appeal is against a decision of the Manchester appeal tribunal on 17 December 2001 under reference U 40 072 2001 03187 making departure directions against A increasing the maintenance to be paid by A for the children. The Secretary of State referred the applications of the mother and parent with care (whom I call C) to the tribunal for decision and made no initial decision.

3	For the reasons below, the decision of the tribunal is erroneous in law. I set it aside. The appeal is referred to a new tribunal for a full rehearing. The previous tribunal was constituted to include a financially qualified panel member in addition to a legally qualified panel member. I recommend a similar constitution for the new tribunal.

4	  The appeal to the Commissioner was heard at an oral hearing at Bury County Court on 6 January 2003. A did not attend, was not represented, and made no specific submissions related to the hearing. C attended and represented herself. The Secretary of State was represented by Ms D Haywood of the Office of the Solicitor to the Department for Work and Pensions. 

Background to the appeal 

5	C applied to the Secretary of State on 18 September 2000, on advice, for departure directions against A on five grounds. These were the five “additional cases” under the Child Support Departure Direction and Consequential Amendments Regulations 1996 (the 1996 Regulations) considered relevant by those advising C. The grounds were:

	assets capable of producing income or higher income (regulation 23)
	diversion of income (regulation 24)
	lifestyle inconsistent with declared income (regulation 25)
	unreasonably high housing costs (regulation 26)
	partner’s contribution to housing costs (regulation 27).

6	The Secretary of State determined that the applications were valid for departure from the then existing assessment of £5.30 a week with effect from 9 May 2000. But the Secretary of State did not decide the applications on any grounds, deciding instead to refer the applications to an appeal tribunal. The reference was put before an appeal tribunal on 7 August 2001. Both A and C appeared. It heard evidence on oath and it received written evidence. But it adjourned the reference without deciding it. This was because A admitted on oath before the tribunal that he had given false evidence to the Child Support Agency. The tribunal considered that there should be a fraud investigation before matters proceeded. It appears that, despite the fact that A admitted under oath that he had produced forged documents, there was no fraud investigation. The matter was therefore referred without further investigation to another tribunal.
The second tribunal held an oral hearing. C was present and the Secretary of State was represented. A was neither present nor represented, although he had been notified of the hearing. The tribunal made a departure direction under regulation 24 (diversion of income) and under regulation 25 (lifestyle inconsistent with declared income). 

Grounds of appeal 

7	A submitted a series of grounds of appeal. But his main grounds were clearly wrongly put. He tried to introduce new evidence, having failed to attend at, be represented at, or put that evidence to, the tribunal at its oral hearing. Those are not proper grounds of appeal as they do not involve any error of law by the tribunal. He also contended that natural justice had not been observed, but again the only indication of that failure was that the tribunal went ahead and decided the case in his absence. It cannot be overemphasised that an appeal tribunal has the right to decide a departure direction in cases such as this on the evidence put before it at the oral hearing. A party who has proper notice of a hearing and who chooses neither to attend at the hearing nor to be represented before it cannot later complain that the tribunal reached a conclusion on the evidence that was put before it. Nor can a party challenge evidence after a hearing that could have been challenged at the hearing.  The tribunal had evidence both from the child support agency and C on which it was entitled to act. I reject the grounds of appeal put forward by A in so far as they were belated attempts by A to raise matters that should have been raised by or for him at or before the hearing. 

8	The secretary of state's representative supported the application to the Commissioner on other grounds. Ms Haywood summarised those grounds as raising two separate points: the tribunal failed to deal fully with the housing costs applications, and the tribunal failed to deal with regulation 40 of the Child Support Departure Direction and Consequential Amendments Regulations 1996.

9	C stressed to me her desire to pursue the applications in the interests of the two qualifying children, now aged 14 and 12. She also stressed that she had appeared on all occasions on which she was asked to appear, and asked specifically that I note the non-attendance of A both at the December 2001 tribunal hearing and at the oral hearing before me. C was concerned to obtain proper financial maintenance for the children, but was unable to comment in detail on the complexities of the law in this area. She confirmed that she had applied for directions related to housing costs and a partner’s contribution to housing costs, and she submitted that the tribunal did not appear to have dealt with that aspect of her applications.

Housing costs

10	I indicated at the oral hearing that I accepted the submissions of both C and the secretary of state's representative as to the housing costs issues. C was entitled to apply for consideration of both excessive housing costs and for a partner’s contribution to those costs. The appeal tribunal was dealing with a reference, not an appeal, so had to reach a clear decision on each aspect of the applications before it. While it appeared to have reached a decision under regulation 26 (unreasonably high housing costs), it failed to make that decision entirely clear. Regulation 26 required the tribunal to establish not only A’s housing costs but also if those housing costs were excessive. That refers to the limits in regulation 18 of the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. That limit is the greater of £80 and an alternative figure. I assume that the tribunal had this in mind in finding the housing costs to be £75 a week and that those were the allowable housing costs, at the end of its decision. On that basis, there were no excessive costs, although it would be better had the tribunal made this clear. 

11	The tribunal does not appear to have considered a contribution from A’s partner under regulation 27 at all. To decide that issue, it had to decide whether A had a partner; whether that partner occupied A’s home with him; and whether it was reasonable for the partner to contribute to the payment of A’s housing costs. While the tribunal in December 2001 decided the weekly housing costs it failed to decide any of these additional issues. For that reason, I accept the submission of the secretary of state's representative that the tribunal erred in law in failing to deal fully with the application before it. I must, for that reason, uphold the appeal and refer the matter to a new tribunal to make the necessary findings of fact and to decide the application under regulation  27.     
	
Regulation 24 and regulation 40

12	The tribunal was satisfied on the evidence that it should make a departure direction grounded in both regulation 24 (diversion of income) and regulation 25 (lifestyle inconsistent with declared income). The secretary of state's representative did not object to the tribunal making those directions, but submitted that it failed fully to carry out the requirements of the regulations in making those directions. 

13	With regard to regulation 24 (diversion of income) the secretary of state's representative submitted that the tribunal had failed to show that A had diverted income and had also failed to comply with the requirements of regulation 40(4) of the Child Support Departure Direction and Consequential Amendments Regulations 1996. I do not accept the first of these submissions by the secretary of state's representative. There are two conditions to be met for regulation 24 to apply: that A had the ability to control his income, and that he has unreasonably reduced his income “by diverting it to other persons or for purposes other than the provision of such income to himself”. The tribunal records not only that A had total control of the relevant company, but also that the dividends from that company were removed from the accounts. The tribunal clearly concluded that it must have been A that removed the dividends, so to that extent as a matter of fact it must follow that A diverted the dividends to some person or purpose other as payment of those dividends to himself. I find no error of law in that aspect of the tribunal decision.

14	Regulation 40(4) requires the Secretary of State or tribunal to exercise a discretion. In this case, that requires that the direction must specify the amount by which the net income of A shall be increased. The increase is to be “the whole or part of the amount” of the income reduction. The tribunal's decision notes precisely how much should be treated as diverted in respect of the dividends, including - in my view rightly - the tax implications of the diversion. It also produces a net weekly income figure for that diversion. I see nothing wrong with that. I accept the submission of the secretary of state's representative only on one aspect. Having decided what had been diverted, the tribunal has the discretion to decide if it should increase the net income of A by the whole of the amount or only part of it. Given the blatant attempt by A to distort the accounts in this case, there were grounds on which the tribunal could readily decide to attribute the whole diverted income to A, including the tax implications. But it did not expressly exercise its discretion to do this. To this limited extent I accept the submission by the secretary of state's representative. 

Regulation 25 and regulation 40

15	With regard  to regulation 25, the secretary of state's representative refers to a number of Commissioners’ decisions, including one of mine. Regulation 25 is not easy territory for a tribunal, especially where it is asked to decide a reference rather than deal with the matter on appeal. Nonetheless, the requirements of regulation 25 and regulation 40 have to be met.  A tribunal must find that the income of the individual is “substantially lower” than the level of income required to fund the lifestyle that the individual enjoys. To do this it must find the income of the individual (which the tribunal did) and at least the band of income implied by the individual’s lifestyle (which the tribunal did not do). It must then apply regulation 40(5) to establish the amount of income to be added to the individual’s income for assessment purposes).

16	The secretary of state's representative correctly observes that the tribunal did not do that. Rather, it sought to establish A’s total income rather than his lifestyle. In doing so, it appears to be making a direction that could have been based in part on regulation 23 (assets capable of producing income). It concluded that A could have been (and perhaps was) receiving a commercial rate of interest on the inheritance from his late mother. The tribunal found the total value to be in excess of £10,000, so the precondition of regulation 23 appears to apply. But it did not expressly apply it. However, that was another part of the application made by C so was to be considered.

Directions to the new tribunal

17	The new tribunal must consider again each aspect of the application made by C, and reach a conclusion on each part of it. In doing so, I expressly direct it that it may take into account all evidence given to, and findings of fact made by, the tribunals in August 2001 and December 2001. In particular, the record of the evidence given on oath to the tribunal in August 2001 should form part of the evidence considered by the new tribunal. It must, of course, also take into account any other relevant evidence or submissions put before it when deciding if it can adopt any findings of fact made by the previous tribunals. It must therefore consider the application to depart from the assessment made against A in respect of the children on the basis of each of regulations 23 to 27 of the Child Support Departure Direction and Consequential Amendments Regulations 1996. In considering regulation 23, it must also consider regulation 40(2) and regulation 40(3) of those Regulations. And it must consider, respectively, regulation 40(4) with regulation 24, regulation 40(5) with regulation 25, regulation 40(6) with regulation 26, and regulation 40(7) and regulation 40(8) with regulation 27.

								David Williams
								Commissioner

								20 January 2003
[Signed on the original on the date shown]