IN THE UPPER TRIBUNAL	Appeal No.  CCS/1137/2008
ADMINISTRATIVE APPEALS CHAMBER

1.	This is an appeal by the non-resident parent (Mr J), brought with my permission, against a decision of an appeal tribunal sitting at St Helens on 20 December 2007. For the reasons set out below that decision was in my judgment erroneous in law and I set it aside. In exercise of the power in s.12 of the Tribunals, Courts and Enforcement Act 2007 I make the findings of fact set out below and substitute the following decision for that made by the Tribunal: 

The appeal by Mr J against the refusal, on or about 9 August 2000 and/or  4 November 2004, to revise the decision made on 28 July 2000, is dismissed

The appeal by Mr J against the decision, made on or about 4 November 2004, refusing to supersede the decision made on 28 July 2000, is allowed. The maintenance assessment is to be recalculated on the basis that with effect from 1 November 2001 down to 30 November 2005  Mr J’s exempt income included additional housing costs of £18 per week in respect of loan repayments made to Mr Lavery. 

Introduction
2.	Mr J and the parent with care (Ms J) separated in about 1995. They have two daughters, who are now aged 21 and 20 and were at all material times living with Ms J. 

3.	The main issue in the appeal is as to which, if any, of the repayments made by Mr J of a loan of £5398 made to him by a Mr Lavery, a friend of Mr J, are eligible to be treated as housing costs for the purpose of the calculation of his exempt income for child support maintenance assessment purposes. Under Schedule 3 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (“the MASC Regulations”) repayments of the capital of a loan taken out to enable the purchase of a home are eligible if the loan is secured by a mortgage. However, para. 3(6)(b) of Schedule 3 appears at first sight to exclude payments under a second or subsequent mortgage. 

4.	This appeal has generated a disproportionately large amount of documentation, a substantial part of it being letters and submissions written by Mr J. In addition I held an oral hearing of the appeal, at which Mr J appeared in person and the Secretary of State was represented by Mr Huw James of the Office of the Solicitor to the Department for Work and Pensions. I record that Mr J was courteous at the hearing, something which cannot be said in relation to his written submissions. At the end of the day there is really little dispute as to the material facts. I do not propose to make any findings of fact beyond those necessary for decision of the issues which I have jurisdiction to decide. Mr J has contended that he has on a number of occasions been given misleading information by the CSA, and some of those contentions have been upheld by the Independent Case Examiner. I have no jurisdiction to award compensation, or to adjudicate on issues of that nature, save in so far as they are material to the proper calculation of the child support maintenance payable by Mr J. 

The facts
5.	The first maintenance assessment was made with effect from 18 June 1996, and was a nil assessment (5B). A further assessment of nil was made with effect from 16 June 1998 (5). 

6.	In 1998 Mr J decided, if he could, to purchase a property to live in, rather than renting. However, it was difficult for him to arrange a mortgage as he was not working. However, Britannia Building Society indicated that Mr J might obtain a mortgage from them, and that his chances would be better if he opened an account with them and made regular deposits into this account. Mr Lavery lent sums to Mr J with the intention that they be credited to a Britannia Building Society account and be used to fund the deposit on a house, the loan to be interest free. £4,000 of the total loan was advanced on 25 January 1999. Mr Lavery also paid, by way of sums lent under the agreement, Mr J’s solicitors’ fees of £588, a Britannia Building Society arrangement fee of £245, and a valuation fee of £65. The total amount lent was £5398. (The facts found in this paragraph are taken primarily from Mr J’s and Mr Lavery’s statements at pp. 122-124; see also p.35)

7.	Mr J found a property to purchase and completion of the purchase took place on 1 February 1999. The purchase was completed with the aid of a loan from Britannia Building Society and the sum advanced by Mr J. Mr J was registered as proprietor of the property on 19 March 1999, and at the same time there was registered a charge over the property in favour of Britannia Building Society, dated 1 February 1999, to secure the sum advanced by it. (36-7).

8.	On 8 July 2000 Mr J sent to the CSA a completed questionnaire relating to his then financial circumstances. In an accompanying typed note (35) he referred to his purchase of the house, and to the loan from Mr Lavery. 

9.	On 28 July 2000 a decision was made , by way of supersession of the existing maintenance assessment, assessing child support maintenance in the sum of £22.25 per week with effect from 11 July  2000 (5, 38-9). That assessment did not take into account any liability of Mr J in respect of repayments of the loan from Mr Lavery which Mr J was making by instalments. 

10.	At around this time the CSA wrote to Mr J the handwritten letter at pp.47-8 giving a breakdown of the maintenance calculation, and stating: “I will re-assess your case based on your loan as soon as I receive the relevant information.” 

11.	On about 1 August 2000 Mr J provided to the CSA, in support of his contention that the repayments which he was making to Mr Lavery should be taken into account, (a) a loan agreement in writing signed by himself and Mr Lavery in respect of a sum of £5400, requiring Mr J to repay that sum by instalments of “at least £20 per week ….the amount payable is to be discussed fom time to time, and that amount payable can be varied depending on the borrower’s financial circumstances”; (b) a letter from Mr Lavery dated 1 August 2000 confirming that he had lent the money and stating that it was interest free and repayable at £25 per week. (52-3)

12.	Although the written loan agreement was purportedly dated 4 October 1999, it is clear that it was not in fact drawn up or signed until July or August 2000: see, in particular, p.63B, and the fact that the written agreement is not mentioned at page 35. Mr J accepts that he drew up the written agreement after the event in order to provide the CSA with the information which they said that they needed. (The outcome of this appeal would not in fact have been any different if that agreement had been in place at the time of the purchase of the property in February 1999).

13.	On 9 August 2000 a decision maker decided not to revise the decision of 28 July 2000 so as to take into account repayments of the loan (see p.17, last line: “supse rejected as loan not secured”). On 21 August 2000 the CSA wrote to Mr J stating (see p.89B): 

“When your agreement with Mr Lavery is secured by a charge on the property, then it will be included in your maintenance assessment ............ Please let me know as soon as this has been arranged so that your maintenance can be reconsidered.” 

14.	As a result of the CSA’s contention that repayments of the loan could not qualify as housing costs unless the loan was a secured one, Mr J executed a legal charge of the property in favour of Mr Lavery, expressed to secure repayment of £5400 at the rate of £25 per week. The charge as executed at that time had a date of 29 January 2000. It is clear from the documentary evidence (e.g. 64B), and from Mr J’s evidence at the hearing, that the charge was not executed on 29 January 2000, but was only executed later and backdated. 

15.	The precise date of execution is not clear. It was clearly not executed until after the CSA’s letter of 21 August 2000 referred to above, and it had clearly been executed by 12 July 2001. On 17 July 2001 a new edition of the register relating to the property was opened at HM Land Registry, showing that there had been registered on 12 July 2001 a charge in favour of Mr Lavery dated 29 January 2000 (36-7). I find that the charge was executed in June 2001, but in view of my other conclusions below it would have made no difference to this appeal if it had been executed very soon after receipt by Mr J of the letter of 21 August 2000. 

16.	It appears from the documentation, and Mr J confirmed at the hearing, that the first occasion on which he told the CSA that a charge had been executed was when he wrote to the CSA on 1 November 2001 stating as follows: “I write to you regarding your letter of 21 August 2000. A charge has now been made on the property, but unfortunately Mr Lavery has informed me he has misplaced the document. As soon as he gives it to me I will forward it to you.” Mr J did not, however, provide a copy of the charge to the CSA until June 2004 (see p.393). 

17.	Following further correspondence with Mr J, the CSA referred the case to its Monitoring and Guidance Unit for technical guidance. The Unit responded on 18 November 2004 advising that since the private loan agreement was dated 4 October 1999, whereas the charge on the property from the main mortgage lender was secured on 19 March 1999, it considered that the loan could not have been taken out for the purpose of paying a deposit on Mr J’s home.

18.	The CSA telephoned Mr J to advise him of this and Mr J lodged an appeal on 3 December 2004.

19.	In May 2005 Mr J procured alteration of the date shown on the charge as the date of execution so that it read “1 February 1999”, and that alteration was acknowledged by the Land Registry (see the copy of the charge at p.90B). In the event, nothing turns on this. 

The Tribunal’s decision
20.	The Tribunal made its decision following an oral hearing at which the Secretary of State was represented and Mr J appeared in person. 

21.	The Tribunal allowed the appeal to the extent of remitting the case to the Secretary of State to recalculate the amount of the maintenance assessment in accordance with the following directions (298): 

“The tribunal accept that [Mr J] took out an interest free private mortgage with Mr Lavery for £5398 to enable him to purchase his property on 1 February 1999. He agreed to pay capital at the rate of £10 per week from 1 February 2000 until 30 September 2004 and then the rate of £25 until 15 October 2005. These housing costs are allowable from the effective date of 11 July 2000.” 

Analysis and conclusions
(a)	The errors of law in the Tribunal’s decision
22.	I granted permission to appeal (348) on the ground that, in the light of Mr J’s evidence that the loan had been completely repaid, it was arguable that the Tribunal had erred in law in apparently not checking that the repayments which it had found to have been made totalled approximately £5398, rather than (according to my rough calculations) some £1,000 less than that. 

23.	In his detailed submission in this appeal Mr J submits (367) that the Tribunal should have found the repayments to have been as follows:

“I was paying the loan back at the rate of £10 per week from 1 April 2000 until the effective date of 11 July 2000, then it increased to £25 per week, and that I continued to pay £25 per week until the Respondent used a defective Deduction from Earnings Order on 29 August 2001. After this, the amount varied from week to week depending on my financial circumstances on any given week, although I was able to increase the amount after the Respondent discharged the defective DEO in August 2004, the loan was fully repaid in November 2005. Which roughly works out that, I was paying about £18 per week off the balance over the period between September 2001 and November 2005.” 

24.	In his submission in this appeal the Secretary of State submits, in my judgment rightly, that the Tribunal did err in law in the respect which I identified as arguable when giving permission to appeal. In the light of my conclusions below the Tribunal’s decision was in my judgment further erroneous in law in holding that repayments made before the loan became secured, and before the effective date of a supersession application, were eligible. The Tribunal’s decision must therefore be set aside as erroneous in law. 

(b)	Should I re-make the decision?
25.	It is in my opinion clearly appropriate that, rather than remitting the appeal to a new First-tier tribunal, I should make the necessary findings of fact and re-make the decision. As I have said, Mr J has set out his contentions in exhaustive detail in writing, and in addition I have had the benefit of his evidence and submissions at a hearing. I warned the parties when directing that hearing that I would be minded to substitute my own decision if I were to set aside the Tribunal’s decision. 

26.	I have set out most of my findings of fact in recounting the facts above. In addition, I find that the amounts of the loan repayment made by Mr J were in accordance with his evidence as set out in para. 23 above. 

(c)	The decision(s) of the Secretary of State under appeal; was the appeal within time?
27.	The Secretary of State’s written submission to the tribunal stated that the decision under appeal to the Tribunal was a decision made on 4 November 2004 refusing to revise a decision dated 28 July 2000, and that Mr J remained liable to pay £22.25 per week from the effective date of 11 July 2000. 

28.	However, the Secretary of State’s submission in this appeal stated that “the Commissioner may wish to consider the validity of this appeal.” The representative goes on to say that the decision under appeal was notified on 28 July 2000 and that Mr J’s appeal was not received until 3 December 2004 – i.e. outside the absolute time limit of 13 months for making an appeal. This was not a point which the Secretary of State had taken before the Tribunal – indeed, on the contrary, the CSA had requested the Tribunals Service to treat the appeal as within time. There has been considerable discussion in the submissions as to precisely what decisions were made by the Secretary of State, and what decision or decisions  were under appeal to the appeal tribunal. The identification of the decision under appeal is important not merely in relation to time limits for appealing, but also because of the provision in s.20(7)(b) of the Child Support Act 1991 that an appeal tribunal “shall not take into account any circumstances not obtaining at the time when the decision or assessment appealed against was made.” 

29.	The Independent Case Examiner, in his determination dated 30 April 2008, found (see 395), in my judgment correctly, that the CSA did not at the time properly document or notify Mr J of its decision, on or about 9 August 2000 (see paragraph 13 above), refusing to revise the maintenance assessment made on 28 July 2000. Mr J was not notified of that decision, and of his appeal rights, until a letter from the CSA of 4 November 2004 (393; 412). 

30.	An appeal against a refusal to revise is treated by the regulations as an appeal against the original decision, not as an appeal against the refusal to revise: see R(IB) 2/04 at paras. 38, 53 and 188. However, the time for appealing does not begin to run until notification of the refusal to revise: reg. 31(2) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999. Looked at as an appeal against the decision of 28 July 2000, Mr J’s appeal was therefore within time, because it was made within a month of the notification on 4 November 2004. If the letter of 4 November is treated as the first refusal to revise the decision of 28 July 2000, the appeal was again against the original decision of 28 July 2000, and was again within time. 

31.	However, it is in my judgment right, on a correct analysis, to treat as also being before the appeal tribunal an appeal against a decision made on 4 November 2004 refusing to supersede on the ground of a change of circumstances (i.e. the loan becoming secured) the decision of 28 July 2000 assessing child maintenance in the sum of £22.25 per week. By the time of the decision on 4 November 2004 Mr J had informed the CSA that a charge had been executed, and had requested that the matter should be reconsidered. That was in effect an application for supersession. 

(d) Did the loan repayments fall within para. 1(g)?
32.	Because the loan from Mr Lavery was interest free, the repayments were entirely repayments of capital and so did not fall within para. 1(b) of Schedule 3 to the MASC Regulations (“amounts payable by way of mortgage interest”). Mr J contends, however, that they fell within para. 1(g): “amounts payable in respect of, or in consequence of, the use and occupation of the home.” In my judgment it is quite clear that they did not fall within that provision. It is true that the loan was made in order to enable Mr J to purchase the home, and that the purpose of purchasing it was to enable him to occupy it. However, the loan is repayable regardless of whether he occupies the home. It is in no way related to his use or occupation of the home. The concept of sums payable for “use and occupation” has an established meaning in landlord and tenant law. It refers to sums payable where a person has been given permission to occupy land of another without any binding terms having been agreed about payment. It is a sum to compensate the owner on account of his land having been occupied by another: see R v Bristol City Council, ex parte Jacobs (2000) 32 HLR 841. It was held by Mr Commissioner Rowland in R(CS) 6/98 not to cover repayments by an employee to his employer of an advance of salary which had been made to enable the employee to purchase a home. 

(e) Did the loan repayments fall within para. 3(2)? 
33.	Paragraph 3(2) of Schedule 3 to the MASC Regulations, which relates only to exempt (and not protected) income, covers capital repayments pursuant to a mortgage of the parent’s home. However, para. 3(6)(b) excludes “amounts payable under any second or subsequent mortgage on the home to the extent that they would not be eligible to be taken into account as housing costs.” The question is whether the repayments made to Mr Lavery were prevented by para. 3(6)(b) from being taken into account as housing costs for exempt income purposes. There is no doubt that the charge in favour of Mr Lavery was a second charge. It was executed and registered long after the charge in favour of Britannia Building Society, and indeed expressly states on its face that it is subject to the Building Society’s charge (p.99). 

34.	At the hearing 	Mr James helpfully referred me, in support of the Secretary of State’s contention, to the history of the amendments to the relevant parts of Schedule 3. I shall set out the current version of the directly material parts, showing the amendments which have been made since the original version: 

“1.	Subject to the following provisions of this Schedule, the following payments amounts payable in respect of the provision of a home shall be eligible to be taken into account as housing costs for the purposes of these Regulations – 

(b)	mortgage interest payments amounts payable by way of mortgage interest; 
(t)	payments in respect of a loan taken out to pay off another loan but only to the extent that it was incurred for that purpose and only to the extent to which the interest on that other loan would have been met under this paragraph amounts payable in respect of a loan taken out to pay off another loan but only to the extent that it was incurred in respect of amounts eligible to be taken into account as housing costs by virtue of other provisions of this Schedule.

3.(1)	The additional provisions made by this paragraph shall effect only for the purposes of calculating or estimating exempt income. 

   (2)	Subject to subparagraph (6), where the home of an absent parent or, as the case may be, a parent with care, is subject to a mortgage or charge and that parent makes periodical payments is liable to make periodical payments to reduce the capital secured by that mortgage or charge of an amount provided for in accordance with the terms thereof, the amount of those payments those amounts payable shall be eligible to be taken into account as the housing costs of that parent. 

    (6)	For the purposes of subparagraphs (2) and (3), housing costs shall not include 

	(a)	any payment of arrears or any payments in excess of those required to be made under or in respect of a mortgage, charge or agreement to which either of those subparagraphs relate; 
	(b)	payments amounts payable under any second or subsequent mortgage on the home to the extent that they are attributable to arrears or would otherwise not be eligible to be taken into account as housing costs; 
	(c)	premiums payable in respect of any policy of insurance against loss caused by the destruction of or damage to any building or land. 

4.(1)	Subject to the following provision of this paragraph the housing costs referred to in this Schedule shall be included as housing costs only where – 

(a)	they are incurred in relation to the parent’s home they are necessarily incurred for the purpose of purchasing, renting or otherwise securing possession of the home for the parent and his family, or for the purpose of carrying out repairs and improvements to that home; 
(b)	the parent or, if he is one of a family, he or a member of his family, is responsible for those costs;  
(c)	the liability to meet those costs is to a person other than a member of the same household.” 

35.	What causes the difficulty is the words “to the extent that they would not be eligible to be taken into account as housing costs.” It is submitted by the Secretary of State that those words indicate that if the capital repayments under a second or subsequent charge do not fulfil the general conditions relating to eligible housing costs set out in para. 4 of Schedule 3 (and in particular that the costs are incurred for the purpose of purchasing, renting or otherwise securing possession of the home), they do not qualify as housing costs. The difficulty with that construction is that it gives no effect whatever to the specific exclusion in respect of payments under a second or subsequent mortgage: the general conditions in para. 4 are clearly applicable to all payments, whether of interest or capital, and whether under a first or subsequent mortgage. For that reason I was initially of the view that the preferable meaning is that the purpose of the words “to the extent that ….” is to make it clear for the avoidance of doubt that, while amounts payable under a second or subsequent mortgage cannot qualify as housing costs under para. 3 (i.e. if they are capital repayments), they can qualify if they fall within any of the heads in para. 1 (e.g. if they are interest payments). That would involve implying the word “otherwise” into the provision, so that it reads as follows:

“to the extent that they would not otherwise be eligible to be taken into account as housing costs.” 

36.	The original version of para. 3(6)(b) referred to “amounts payable under any second or subsequent mortgage on the home to the extent that they are attributable to arrears or would otherwise not be eligible to be taken into account as housing costs.” The words “or would otherwise not be eligible to be taken into account as housing costs” in my judgment meant that repayments of capital under a second or subsequent mortgage were only disqualified if they failed to satisfy the requirement that the costs should have been incurred in respect of the provision of housing. That requirement was implicit in the original para. 3, by virtue of the reference to “housing costs” : see CCS 12/94. I think it likely that second and subsequent mortgages were specifically referred to because a loan taken out at some time after the first mortgage was much less likely to have been used for a housing purpose. That requirement has now been more closely defined by the amendment which has been made to para. 4(1)(a). 

37.	When para. 3(6)(b) was amended in order to remove the reference to arrears, the word “otherwise” was removed. The legislative history in my view makes clear that, contrary to my initial impression, it is not right to construe the provision as if it read: “amounts payable under any second or subsequent mortgage to the extent that they would not otherwise be eligible to be taken into account as housing costs.” In other words, the effect of para. 3(6)(b) is not that amounts payable under a second or subsequent mortgage are disqualified unless they would fall within one of the heads of para. 1. It is that repayments of capital under a second or subsequent mortgage do not qualify unless they satisfy the general conditions, now more clearly spelt out in para. 4. The objection still remains that this construction renders para. 3(6)(b) entirely redundant. But it does avoid the main criticism of the meaning which I initially preferred, namely that it is difficult to see why the mere fact that a mortgage is a second or subsequent mortgage should make any difference in a case (such as the present) where the loan secured by a second or subsequent mortgage was taken out for the purpose of purchasing the home. 

38.	The repayments of capital made by Mr J are therefore not disqualified merely because they were made pursuant to a second mortgage. 

(f) Conclusions
39.	So far as Mr. J’s appeal against the decision made on 28 July 2000  is concerned, it is in my judgment clear that that must fail. The appeal tribunal should have so held. That is because the loan from Mr Lavery was not secured as at the date of that decision in 2000. It only became secured later. In deciding an appeal an appeal tribunal (and therefore the Upper Tribunal on appeal from the tribunal) cannot take into account circumstances not obtaining at the date of the decision under appeal: s. 20(7)(b) of the of the Child Support Act 1991.

40.   As regards Mr J’s appeal against the decision on 4 November 2004 refusing to supersede the decision of 28 July 2000, changes of circumstance down to 4 November 2004 can of course be taken into account. I have found in para. 15 above that the charge was executed in June 2001. However, a supersession, pursuant to an application by a party under reg. 20(3) of the Maintenance Assessment Procedure Regulations 1992, on the ground of a change of circumstances, has effect only from the first day of the maintenance period in which the application for a supersession was made: reg. 23(4) of those Regulations. 

41.	It is therefore necessary to determine when Mr J’s application for supersession, on the ground that the loan had become secured, was first made. I have found in paragraph 16 above that Mr J did not notify the CSA that a charge had been executed until his very brief letter of 1 November 2001, the terms of which I there set out. Further, he did not actually send the CSA a copy of the charge until June 2004. In the light of the fact that the letter of 1 November 2001 referred back to the CSA’s letter of 21 August 2000, in which the CSA had invited Mr J to let them know when a charge had been executed, “so that your maintenance can be reconsidered”, I think that the letter of 1 November 2001 did amount to an application for supersession. 

42.	That means that the supersession has effect from 1 November 2001 (or a few days earlier), but not before, so that in calculating Mr J’s exempt (but not his protected) income repayments of the loan made since 1 November 2001 (but not those made before that date) qualify as housing costs. I have found (paras. 23 and 26 above) that from about September 2001 Mr J was repaying the loan at the rate of about £18 per week, and continued to do so until November 2005, when the loan was paid off. His exempt income should therefore be recalculated on that basis. 

43.	I estimate that my decision will result in some £250 more of the repayments to Mr Lavery being eligible as housing costs for exempt income purposes than would have been the case under the Tribunal’s decision. 

44.	I have set out in paragraph 1 above decisions giving effect to my above findings and conclusions. 

Charles Turnbull
Judge of the Upper Tribunal
9 February 2009