CCS/4056/2004

DECISION OF THE CHILD SUPPORT COMMISSIONER

1.	My decision is as follows.

1.1	The decision of the Cambridge appeal tribunal held on 5 March 2004 under reference U/42/140/2004/00034 is wrong in law.

1.2	I set aside the tribunal’s decision and remit the case to a differently constituted tribunal.

1.3	I direct the new tribunal to conduct a complete rehearing of the issues that arise for decision in accordance with the directions listed in paragraph 54 below and subject to any further directions issued by a District Chairman in the Appeals Service.

The history of the case

2.	In the terminology of the child support legislation, the appellant is the parent with care under the maintenance assessment, the first respondent is the Secretary of State and the second respondent is the non-resident parent.  I shall refer to them in those terms.

3.	This appeal has been brought by the parent with care.  She argues that the non-resident parent, by leaving his job, has intentionally deprived himself of income with a view to minimising his liabilities under the child support maintenance assessment.  That apparently simple point raises issues of some legal complexity.

4.	The parent with care also brought another appeal relating to the non-resident parent’s housing costs under the maintenance assessment.  That other appeal was heard by the appeal tribunal at the same time as this case, but under reference U/42/923/2003/00051.  The appeal tribunal’s decision on the other appeal is also challenged by the parent with care under Commissioner’s reference CCS/3188/2004.  In the parlance of the Office of the Social Security and Child Support Commissioners, the two appeals are ‘travelling together’.

5.	I have issued a separate Commissioner’s decision in respect of the legal issues in the housing costs appeal under the reference CCS/3188/2004.  Much of the chronology of the two cases is common to the two appeals and is dealt with more fully in that decision.

6.	In summary, the parent with care and the non-resident parent are the parents of a daughter now aged 13.  I understand that a Maintenance Enquiry Form was first issued back in 1993.  Over the years there have been frequent changes to the maintenance assessment.

7.	So far as the background to the present appeal is concerned, the non-resident parent (or, to be precise, his new partner, Mrs S) submitted a further application for a review on 4 August 2003, on the ground that he had ceased employment.  On 14 August 2003 the Secretary of State superseded the assessment then in place.  The decision on the new assessment was that the non-resident parent was liable to pay nothing (£0.00 per week) in child support with effect from 29 July 2003.  That decision was itself subsequently revised on 4 November 2003 as regards one matter of detail but with no change to the outcome.

8.	The parent with care lodged an appeal against both this decision and that relating to housing costs on an earlier assessment.  The two appeals were heard together by the Cambridge appeal tribunal on 5 March 2004.  The parent with care attended the hearing, as did a presenting officer on behalf of the Secretary of State.  The non-resident parent did not attend the tribunal hearing.

9.	The tribunal dismissed both appeals.  So far as this appeal was concerned, the Decision Notice stated that “the tribunal has to accept that [the non-resident parent] has a zero income, it cannot be satisfied that he has intentionally deprived himself of income”.  There was some confusion over the numbering allocated to each of these decisions but this need not concern me now.  I am satisfied that, where necessary, it is appropriate to consider the two Decision Notices and Statements of Reasons together.

The appeal to the Commissioner

10.	The parent with care appealed against the decision on the deprivation of income issue, arguing that the tribunal had used insufficient evidence and not given adequate reasons in reaching its conclusion on this point.  A tribunal chairman initially refused leave to appeal but this was subsequently granted by the Commissioner.

11.	Initially the Secretary of State’s representative, in a written submission, did not support the appeal in relation to the deprivation of income issue. The non-resident parent has taken no further part in these proceedings, other than to indicate that he did not wish to request an oral hearing of the appeal before the Commissioner. The parent with care sent in a further written submission and requested an oral hearing, which was duly granted in the light of the issues raised.

12.	The oral hearing took place on 22 June 2005 in London.  The parent with care, but not the non-resident parent, attended.  The Secretary of State was represented by Ms Gillian Harris of the Office of the Solicitor to the Department for Work and Pensions.  At the hearing, Ms Harris indicated that she supported this appeal (and indeed the housing costs appeal) and did not wish to stand by the original written submission on behalf of the Secretary of State.  I am grateful to both the parent with care and Ms Harris for their carefully argued submissions.

The background to the deprivation of income issue

13.	This case has been dealt with under what is known as the “old scheme” within the child support system.  In other words, it has been decided under the original formula in the Child Support Act 1991, before the amendments made by the Child Support, Pensions and Social Security Act 2000.  This distinction is important in the light of the very different legislative framework involved.  I touch on the implications for the new scheme below.

14.	On 4 August 2003 the non-resident parent’s new partner, Mrs S, rang the Child Support Agency to inform them that he had left his employment, and requested a change of circumstances review.  The non-resident parent rang the Agency himself the following day, confirming that he had left work and would not be in receipt of benefits. A few days later the Agency rang his employer, who stated that the non-resident parent was “on a six month career break”.  The firm’s assistant payroll manager confirmed this in writing, stating that the break “commenced 1.8.03 + takes him up to 31.1.04”.

15.	The parent with care appealed against the Secretary of State’s decision that the non-resident parent had a nil income and was liable to pay nothing by way of child support as from 29 July 2003.  She wrote “once again this needs a thorough investigation”.  She alleged that “false information” had been provided and complained further that “all of last year I had to go without any child support even though he was working.  This was because he changed his job twice and failed to inform the CSA of his new employer”.

16.	In a subsequent e-mail to the Agency’s central appeals unit, the parent with care wrote: “With the information that has been provided to me by the CSA and other parties I understand that [Mrs S] has reported that [the non-resident parent] gave up his job in order to care for her eighteen-year-old son, who is blind, and who has recently left full-time education.”  She went on to question whether entitlement to the carer’s allowance (formerly invalid care allowance) for the son had been transferred to the non-resident parent.

17.	Later still the Agency established that carer’s allowance was in fact in payment to Mrs S, and not the non-resident parent, as at the effective date.  She was therefore regarded as the main carer.

18.	This was effectively the sum total of the information before the tribunal on the deprivation of income issue.  In short, it had evidence from the non-resident parent and his employer that he had left his employment (which was not in dispute) and evidence from the employer that he had taken a “career break”.  It had hearsay evidence from the parent with care as to the alleged reason for this “career break”. It had no evidence from the non-resident parent as to the underlying thinking behind his decision to leave work.

19.	In the written submission to the tribunal, the Agency drew attention to the rules governing the intentional deprivation of income in paragraph 27 of Schedule 1 to the Child Support Maintenance Assessment and Special Cases) Regulations 1992.  After reviewing the limited information available, that submission concluded:

“As [the non-resident parent] has not indicated his reasons for leaving employment, the decision maker has been unable to confirm or deny whether the break in [his] employment was for the express purpose of caring for his partner’s son.”

20.	In a supplementary submission to the tribunal, the Agency produced evidence to the effect that Mrs S had started employment on 26 July 2003 but had finished in that job on 9 October 2003.  It appears from the tribunal’s Record of Proceedings that the Agency’s presenting officer reported that the non-resident parent had returned to work in November 2003 but had left again on 31 December 2003.  The tribunal did not have the benefit of any direct evidence from the non-resident parent, as he did not attend the hearing (he had earlier indicated that he wanted a hearing on the papers).

The appeal tribunal’s decision on the deprivation of income issue

21.	In its Statement of Reasons, the tribunal first dealt with this issue as follows:

“The tribunal finds that [the non-resident parent] did leave his employment in the form of a 6-month career break starting on 1 August 2003.  The tribunal finds that he was not in receipt of any income, benefit or otherwise at the effective date as a result of this change in circumstances.  With respect to [the parent with care, the non-resident parent] can choose to take a break and therefore save for the amendments that need to be conducted the result is a change of circumstances and a nil assessment.”

22.	In a subsequent passage, the tribunal continued:

		“the tribunal is asked to consider whether [the non-resident parent] has deprived himself of an income with the intention of reducing the maintenance assessment.  Notwithstanding the fact that [he] is not working and has no source of income, he forms part of a family unit in which his partner is working and in receipt of benefit and tax credits.  The tribunal accepts that [he] gave up his employment to take a career break and to look after the partner’s disabled son.  Such does not render him intentionally depriving himself of income, for the specific purpose of reducing a maintenance assessment, and the tribunal cannot be with [the parent with care] on this point.  There is income within the family from various sources sufficient to sustain in particular housing costs.  This is not a case in which there is no income within the family unit.  [The parent with care] must consider other avenues to address this point by way of a Departure or Variation hearing if it is argued that the lifestyle is substantially in excess of the family income.”

23.	Finally, the tribunal returned to the same issue in a later section of its Statement of reasons:

“the tribunal is not satisfied that [the non-resident parent] deliberately deprived himself of income for the specific purpose of reducing the maintenance assessment.  He was clearly persuaded by other issues, the need for a career break, the need to ‘take time out’ and the need to assume the responsibility of carer.  These do not amount to intentional deprivation, and as indicated a Departure/Variation may be the way forward for [the parent with care].”

Child support law governing the deprivation of income issue

24.	A non-resident parent’s income for the purposes of an old scheme case under the child support legislation is the aggregate of various sums calculated in accordance with Schedule 1 to the 1992 Regulations (see regulation 7).  There are five broad categories: earnings (Part I of Schedule 1), benefit payments (Part II), “other” income (Part III), children’s income treated as that of the parent (Part IV) and “amounts treated as the income of a parent” (Part V).

25.  Part V essentially contains “anti-avoidance” provisions designed to limit the scope for parents to avoid (or, perhaps more accurately, to evade) the impact of the child support legislation (see the observations of Mr Commissioner Williams in CCS/4912/1998 at paragraph 16).  There are two principal provisions under Part V: paragraph 26, which deals with situations in which someone is deliberately working for less than the market rate, and paragraph 27, which is concerned with the intentional deprivation of income or capital.

26.	There is no suggestion that paragraph 26 applies on the facts of this case.  The parent with care’s allegation is that the non-resident parent deliberately gave up work to avoid paying child support, not that he was deliberately working at below the market rate.  There is no need to discuss paragraph 26 in detail any further.  However, I note the force of the argument made by Ms Harris at the oral hearing – if the legislation provides for a person to be treated as having an income where he works at below the market rate, it would be odd if there were no provision to cover the case where a person deliberately gives up work altogether to avoid paying child support.

27. Paragraph 27 (as amended) provides as follows:

“27.    Subject to paragraphs 28 to 30, where the Secretary of State is satisfied that, otherwise than in the circumstances set out in paragraph 26, a person has intentionally deprived himself of— 
 (a) any income or capital which would otherwise be a source of income;
 (b) any income or capital which it would be reasonable to expect would be secured by him,
with a view to reducing the amount of his assessable income, his net income shall include the amount estimated by the Secretary of State as representing the income which that person would have had if he had not deprived himself of or failed to secure that income, or as the case may be, that capital.”

28.	As already stated, paragraph 26 has no application to this case.  Similarly, the provisions of paragraphs 28 to 30 are not relevant on these facts.  The question for the tribunal, therefore, was whether the non-resident parent had “intentionally deprived himself of — (a) any income … which would otherwise be a source of income…with a view to reducing the amount of his assessable income.”  If so, then his net income should be increased accordingly.

29.	There has been relatively little discussion of the scope of paragraph 27. However, Mr Commissioner Mesher deals with paragraph 27 in the context of the deprivation of potential income from capital in R(CS) 3/00 (at paragraphs 15-19).  He noted that the statutory provision is “not very helpfully drafted”.  The Commissioner went on to observe as follows:

“The crucial factor is whether or not that deprivation was ‘with a view to reducing the amount of his assessable income’. That makes the test the person’s intention, which can be determined on direct evidence or by inference from all the circumstances of the transaction constituting the deprivation. I have not had any detailed submissions on this point, but, for the guidance of the new appeal tribunal I should say that my view is that the intention which has to be shown is to reduce income which might be relevant to a child support assessment which is being made or is reasonably expected to be made. That makes the timing of any deprivation important. I also draw attention to the authority on a similar phrase (‘with a view of’) in the now-repealed section 44 of the Bankruptcy Act 1914, on when a fraudulent preference was given to one creditor over others. It was held that that phrase required it to be established what the person’s dominant intention was (e.g. Peat v. Gresham Trust Ltd [1934] AC 252, Re Cutts (a bankrupt) [1956] 1 WLR 728 and Re FLE Holdings [1967] 1 WLR 1409).”

30.	This would suggest that the test in paragraph 27 is set at a higher threshold than the rule governing notional income and capital in the income support scheme.  In that context it is sufficient that the aim of securing entitlement to benefit (or increasing the amount of benefit) is a significant operative purpose – it need not be the sole or even the main reason.

31.	The only other decision of the Child Support Commissioners on the ambit of paragraph 27 appears to be CCS/7967/1995.  I deal with the relevance of this decision, which is concerned with income rather than capital, further below.

32.	There is also, of course, the invaluable commentary on the provision in E. Jacobs and G. Douglas, Child Support: The Legislation (1999) at page 345.  This observes that it is for the person in question (in this context presumably the non-resident parent) to prove that the capital or income has been disposed of (applying Commissioner’s decision R(SB) 38/85).  The commentary continues: “If deprivation is proved, it is necessary to investigate whether it was done intentionally with a view to reducing assessable income.  The test is a subjective one, although the reasonableness of the person’s action will be a relevant factor in assessing any evidence by that person on the reasons for so acting.”  I accept that passage as an accurate analysis of the effect of the provision.

Why the tribunal erred in law on the deprivation of income issue

33.	I agree with the parent with care and Ms Harris that the tribunal’s Statement of Reasons is wrong in law on the deprivation of income point.  It is wrong for the following reasons:

34.	First, the tribunal had insufficient evidence to reach the findings that it purported to make.  I recall that there was precious little information before the tribunal.  In particular, there was no evidence whatsoever relating to the non-resident parent’s “need for a career break, the need to ‘take time out’ and the need to assume the responsibility of carer”.  This was pure supposition on the tribunal’s part.  It may or may not have been the case, but there was no clear evidence before the tribunal about the non-resident parent’s motivation or its reasonableness. As Mr Commissioner Williams noted in CCS/2676/2001 (at paragraph 10), the tribunal “is not entitled to speculate or guess”.  On the evidence available, about the only finding of fact that could safely be made was that the non-resident parent had left work on 1 August 2003 for what his employer had described as a “career break”.

35.	Secondly, the tribunal failed to give adequate reasons for its decision.  For example, the reasoning cited at paragraph 22 above is defective.  The tribunal stated: “There is income within the family from various sources sufficient to sustain in particular housing costs.”  This is to miss the point.  The structure of the child support scheme is such that the maintenance liability attaches to the non-resident parent.  Any earnings his new partner may have are irrelevant (except in calculating his protected income).  This means that a non-resident parent may minimise his liabilities by reversing roles with his new partner.  The fact that the non-resident parent could ‘afford’ to give up work does not, of itself, justify the decision without more.  Indeed, if anything a decision by a non-resident parent and his new partner to ‘swap’ roles should at least raise the possibility that there has been an intentional deprivation of income (although there, may, of course, be an entirely proper explanation). 

36.	The tribunal’s failure to explain its reasons adequately is also shown by its omission to deal with the point about carer’s allowance.  The undisputed evidence was that this benefit was payable to Mrs S, rather than the non-resident parent.  At the very least, this raised a question mark about the purported justification for the “career break”. 

37.	Arguably, it would not have been reasonable for the tribunal to find against the non-resident parent on the deprivation of income point at the hearing, given that he had asked for a hearing on the papers.  But given both that intentional deprivation was a live issue, and the paucity of the evidence on the point, the tribunal should have adjourned the hearing to give the non-resident parent the opportunity to attend in order to explain the reason why he had given up employment.  If he failed to attend, or to provide documentary evidence on the point, it would then be for the tribunal to make the best decision it could on the evidence available.

38.	Thirdly, the tribunal erred in law by failing to apply the test in paragraph 27 properly.  In two places the tribunal described the test as being whether the non-resident parent had deprived himself of an income with “the intention of reducing the maintenance assessment”.  Strictly, the legal test is whether the deprivation was “with a view to reducing the amount of his assessable income”, which is not quite the same thing.

39.	These errors of law mean that I must set aside the tribunal’s decision under section 24(2) of the Child Support Act 1991.  Given the paucity of both the evidence and findings of fact, I am not in a position to substitute my own decision for that of the tribunal.  It follows that I have no option but to remit the appeal for rehearing by a new tribunal under section 24(3)(d) of the 1991 Act.  The new appeal tribunal must conduct a complete rehearing of the issues in accordance with the directions set out below at paragraph 54.

The relevance of Commissioner’s decision CCS/7967/1995

40.	The Secretary of State’s representative, in the written submission, relied heavily on the decision of Mr Commissioner Sanders in CCS/7967/1995 to support the original contention that the tribunal had not erred in law on the deprivation of income point.  At the oral hearing, however, Ms Harris (rightly, in my view) sought to distinguish the decision in CCS/7967/1995 as being not directly in point on the facts of the present case.

41.	In CCS/7967/1995 there was some uncertainty as to whether the non-resident parent had been dismissed from, or had resigned from, his employment as managing director in his family’s business.  The tribunal found as a fact that he had “ceased employment” in the business and that he had not taken up an offer of (less well-paid) alternative employment with the same family firm.  The tribunal then decided that paragraph 27 applied to these facts.

42.	Mr Commissioner Sanders allowed the non-resident parent’s appeal.  He concluded (at paragraph 8):

“a refusal to take up an offer of employment is not a deprivation of income or a deprivation of income which it would be reasonable to expect the person in question to secure so as to bring any hypothetical amount of income which might have been earned as a result of taking up such an offer within the meaning of ‘income’ in paragraph 27.”

Likewise, at paragraph 10 the Commissioner stated: “I conclude that paragraph 27 does not apply in a case where there has been a failure or refusal to take up an offer of employment”.

43.	Put in those terms, I am satisfied that the decision in CCS/7967/1995 can be distinguished – that is, the principle of law it sets out does not apply in the instant case as the material facts are different.  In CCS/7967/1995 the non-resident parent had failed to take up a potential job opportunity.  As Mr Commissioner Sanders noted, ‘a refusal to take up an offer of employment is just that.  It is not, in itself, a deprivation of income” (at paragraph 8).  In the present case, in contrast, the issue concerned the non-resident parent’s decision to leave employment, rather than not to take up an offer of employment.  So the circumstances are not the same.

44.  Having said that, the reasoning of Mr Commissioner Sanders in CCS/7967/1995 suggests that he took the view that the same principle would apply to a case, such as this, of leaving employment, and so paragraph 27 would not apply.  There are two reasons for thinking as much.

45.	First, the Commissioner pointed to paragraph 32, which states that income under paragraph 26 is treated as earnings from employment, whereas income under paragraph 27 is calculated “as if it were other income to which Part III” of the Schedule applies.  This would mean that paragraph 16 applies (‘other’ income to be assessed over previous 26 weeks).  The Commissioner took the view that paragraph 16 is “quite inappropriate for the determination of the amount of hypothetical earnings from employment” (at paragraph 6 of his decision).

46.	Secondly, the Commissioner observed that the benefits system contains express provisions which penalise claimants who leave employment without just cause or fail to take up employment.  He concluded “had it been intended to penalise an absent parent for leaving or failing to take up employment I would have expected a precise penalty” to that effect within the child support scheme.

47.	With respect to the Commissioner, I am not persuaded that these arguments are well-founded in the context of leaving an actual job (as opposed to declining to take up a possible job).  As to the first, there is no difficulty in assessing the appropriate level of earnings, as the individual’s actual earnings would be a matter of record.  That sum could be readily assessed over a 26 week period in line with paragraph 16(1) of Schedule 1.  

48.	As regards the second reason, the contexts are somewhat different.  The benefits system includes penalties as a means of deterring claimants from giving up or refusing to take jobs with no good reason (or ‘just cause’) and so putting the burden of supporting themselves on the state.  Paragraph 27, however, is clearly an anti-avoidance provision, designed to ensure that non-resident parents do not evade their responsibility to support their children and place that burden wholly on others (the parent with care and/or the state).  This is achieved, not by a sanction, but by effectively deeming the parent concerned to have a certain level of income.

49.	Moreover, as Ms Harris argued, it would certainly be strange if a non-resident parent could be deemed to have a certain level of income where he was working at below the market rate with the intention of reducing his assessable income (paragraph 26), but not where he had given up employment altogether with the same intent (paragraph 27).

50.	For these reasons I disagree with the implication in CCS/7967/1995 that paragraph 27 has no application where a person gives up employment with a view to reducing the amount of his assessable income.  Depending on the circumstances, such conduct may amount to an intentional deprivation of income for the purpose of paragraph 27.

51.	It is important that Agency decision makers appreciate the potential scope of paragraph 27, given the original submission on this point by the Secretary of State and the considerable volume of cases still be dealt with under the old scheme.  In addition, the parent with care told me that she had been advised by Agency staff that paragraph 27 applied only where, for example, a company director had diverted income from himself to another employee, who happens to be his new partner.  If she was so advised, she was badly advised.  Paragraph 27 also has the potential to apply in a case such as the one under appeal.  

52.	I also note in passing that the Secretary of State’s original submission, and the advice that the parent with care apparently received, is not actually in accord with the guidance contained in the Agency’s Decision Makers Guide (1999), which envisages that paragraph 27 covers cases of intentional deprivation of earnings (see Guide, paragraph 4814).

Directions to the new tribunal

53.	The tribunal that conducts the rehearing of this appeal should do so in accordance with these directions.  These are subject to any further directions which a District Chairman may decide to issue on reviewing the file prior to the case being relisted for rehearing.

54.	My directions to the new tribunal are as follows:

(1)	The tribunal must decide, on the evidence before it, whether or not the non-resident parent “intentionally deprived himself of any income… with a view to reducing the amount of his assessable income”.

(2)	The tribunal should bear in mind, so far as it is relevant, the case law on notional income and notional capital in the income support scheme.  Thus “deprive” is an ordinary English word and is not to be given any special legal definition (R(SB) 38/85, R(SB) 40/85).  It follows that a person deprives himself of a resource if he ceases to possess it.

(3)	If the tribunal concludes that the non-resident parent has indeed “intentionally deprived himself of any income” by leaving his employment, the tribunal must then consider his reason(s) for so doing.  In particular, did he do so “with a view to reducing the amount of his assessable income”?  The comments of Mr Commissioner Mesher in R(CS) 3/00 should be borne in mind.

(4)	In deciding the issue of motivation, the tribunal must decide the case on the basis of the evidence, not speculation.  It must take into account all the relevant circumstances, including the following:
•	What type of job did the non-resident parent have?
•	Is it the sort of job in which career breaks are common?
•	What arrangements were in place for the care of Mrs S’s disabled son when the non-resident parent was previously in employment?
•	Was there some reason that necessitated a change of carer?
•	What level of care does the son actually require – for example, was he attending school or college at the material time?
•	Who was in receipt of carer’s allowance in respect of the son at the effective date?
•	Did the non-resident parent return to work in November and December 2003 and, if so, why? Does this shed any light on his reasons for leaving employment in July 2003?

(5) In dealing with the final bullet point, the tribunal should bear in mind the terms of Child Support Act 1991, section 20(7)(b), which states that the tribunal “shall not take into account any circumstances not obtaining at the time when the decision or assessment appealed against was made”.  However, this does not stop the tribunal considering evidence of what happened after the date of the decision if that sheds light on what happened before that date.

(6)	The tribunal may also take into account the timing (and sequence) of events: see R(CS) 3/00, discussed above.  The Agency’s Decision Makers Guide accurately states that “The timing of the disposal of income should be considered.  For example, a PWC claims CS maintenance or asks for a review of a MA soon after disposing of income,  The timing of the claim or request for supersession could indicate that a reduction in AI is a significant reason for disposal” (paragraph 4813).  The same principle applies where it is the non-resident parent who has deprived himself of income.

(7)	The tribunal is also entitled to have regard to the fact that the non-resident parent has a liability under the child support legislation to support his natural children, including the qualifying child living with the parent with care.  There is no evidence that he is under any legal duty to support his new partner’s child.

(8)	In the last resort the question as to whether the non-resident parent intentionally deprived himself of income “with a view to reducing the amount of his assessable income” is a question  of fact.  The test is a subjective one, although the reasonableness of the person’s action will be a relevant factor in assessing any evidence by that person on the reasons for so acting.

(9)	If the tribunal finds that there was a relevant intentional deprivation of income by reason of leaving employment, it should direct the Secretary of State to include in the assessment the income that the non-resident parent would have received had he remained in employment.

(10)	If the tribunal finds that this test is not satisfied, it should go on to consider in the alternative whether paragraph 27(b) applies on the basis that it would have been reasonable to expect the non-resident parent to apply for carer’s allowance.  In this context the tribunal should have regard to Social Security Contributions and Benefits Act 1992, section 70(7).  If paragraph 27(b) applies, it may make no difference to the end result given the level at which carer’s allowance is paid.  In other words, there may still be a nil assessment.

General observations on the deprivation of income issue

55.	Finally, I reiterate that this appeal is concerned with an old scheme case, dealt with under the system in place before the new scheme came into force on 3 March 2003.  A non-resident parent’s income under the new scheme is calculated in accordance with Schedule 1 to the Child Support (Maintenance Calculation and Special Cases) Regulations 2000.  This contains no parallel provisions to paragraph 26 and 27 of the old scheme Schedule to the 1992 Regulations.  It is true that there are some circumstances under the new scheme where income which is not covered by the standard formula may be brought into account by applying for a variation.  Although the grounds for a variation include, for example, the diversion of income, none of those grounds deal with a parent who gives up employment (or works at below the market rate) in order to evade his child support liabilities.

56.	In this context I note that in January 2005 the House of Commons Select Committee on Work and Pensions recommended that “new powers be granted by Parliament to ensure compliance by self employed NRPs [non-resident parents] including the prevention of deprivation of income deliberately to evade CSA liability” (The Performance of the Child Support Agency, HC 44-I, paragraph 94). In response, the Government has introduced the Child Support (Miscellaneous Amendments) Regulations 2005.  These provisions have been discussed by Mr Commissioner Jacobs in CCS/29/2005 (at paragraphs 17-20).

57.	It appears that these amendments, which are primarily directed at employees and self-employed parents who are paid by way of dividends, will have no impact on the type of scenario with which the present appeal is concerned.  It follows that there would seem to be no provision within the new scheme to prevent an employed non-resident parent from giving up employment with a view to minimising his child support liabilities.

58.	Whether the new scheme should contain a parallel provision to paragraphs 26 and 27 of Schedule 1 to the 1992 Regulations is not a matter for the Child Support Commissioners.  It is ultimately a policy issue to be determined by ministers on the advice of their civil servants.  There may well be operational as well as policy issues to consider.

59.	That said, it may be observed in passing that both the court-based American child support system and the Agency-based Australian child support scheme include provisions to deal with voluntary reductions in income.  Both jurisdictions are prepared to use earning capacity as the basis for child support awards. The underlying policy for these provisions is evident in the decision in Rohloff v Rohloff (411 N W 2d 484),  in which the (female) non-resident parent remarried and then gave up work to act as a ‘homemaker’.  According to the Michigan Court of Appeals (at 488):

“we do not believe that plaintiff is entirely free to make financial decisions which are allegedly in the best interest of her new family, but which abrogate her responsibilities to the pre-existing family.  It would be inequitable to allow the children of her first marriage to suffer merely so that her second marriage can purportedly prosper.”

60.	The US case law was discussed by the Full Court of the Family Court of Australia in DJM v JLM [1998] FamCA 97.  This was because section 117 of the Australian Child Support (Assessment) Act 1989 provides that the court, in determining whether it is just and equitable to make an order for departure from child support, has to take into account “the income, earning capacity, property and financial resources” of each parent.  The Full Court wisely observed that “how one treats the question of voluntary unemployment or under employment is, however, fraught with difficulty” (at paragraph 17.21).

61.	Lest it be thought that the provisions discussed above are a peculiarity of overseas common law jurisdictions, the issue of earning capacity is also relied upon much closer to home.  The county courts and the High Court, when dealing with ancillary relief matters, must have regard amongst other issues to the parties’ “earning capacity” (Matrimonial Causes Act 1973, section 25(2)(a)).  For example, in  Hardy v Hardy ([1981] 1 F.L.R. 321) the husband worked in his father’s racing stables for much less than he could have earned elsewhere – a classic paragraph 26 scenario.  According to Ormrod L.J., “if it suits him and is to his long-term financial advantage to accept so low a payment, so be it, but it does not follow that his wife and children have similarly to be depressed” (at page 329).

Summary

62.	I allow the parent with care’s appeal. The decision of the Cambridge appeal tribunal held on 5 March 2004 is wrong in law. I set the tribunal’s decision aside and remit the case to a differently constituted tribunal. The new appeal tribunal should conduct a complete rehearing of the issues that arise for decision in accordance with the directions listed in paragraph 54 above and any subject to any further directions issued by a District Chairman in the Appeals Service.

	(signed on the original)	N J Wikeley
		Deputy Commissioner

		1 July 2005