(Chandler v Secretary of State for Work and Pensions and another [2007] EWCA Civ 1211) CCS 2806 2006
| Jurisdiction | UK Non-devolved |
| Judge | Judge C. Turnbull |
| Judgment Date | 26 February 2007 |
| Court | Upper Tribunal (Administrative Appeals Chamber) |
| Subject Matter | Child support |
| Docket Number | CCS 2806 2006 |
| Appellant | (Chandler v Secretary of State for Work and Pensions and another [2007] EWCA Civ 1211) |
R(CS) 2/08
(Chandler v Secretary of State for Work and Pensions and another [2007] EWCA Civ 1211)
|
CA (Latham, Dyson and Jacob LJJ) 29 November 2007 |
CCS/2806/2006 |
Calculation of income – periodical payments to director from small family company in repayment of loan – whether income or capital
The non-resident parent was the sole director and majority shareholder in a company. He made a loan to the company and arranged for the company to pay him back at a rate of £2,500 per month. The maintenance assessment did not include those repayments as income and the parent with care appealed. The tribunal held that the payments should be treated as income. The non-resident parent appealed to the Commissioner, who held that the payments fell within paragraph 15 of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (the MASC Regulations) as “any other payments or other amounts received on a periodical basis …”. The non-resident parent appealed to the Court of Appeal
Held, allowing the appeal, that
1. the Child Support Act 1991 and Regulations draw a clear demarcation between capital and income and a periodical drawdown of capital is not “income” (Morrell v Secretary of State for Work and Pensions [2003] EWCA Civ 526 (reported as R(IS) 6/03), R v West Dorset DC ex parte Poupard (1988) 20 HLR 295 and Longsdon v Minister of Pensions and National Insurance [1956] 1 QB 587 distinguished) (paragraph 33)
2. paragraph 15 is a “sweep-up” provision for other kinds of income not specifically dealt with in other provisions and in that context cannot be read as including a periodical drawdown of capital. If Parliament had wanted to include periodic drawdown of capital it could have expressly so provided (paragraph 33);
3. the contrary interpretation would lead to irrational distinctions that could not have been intended by a reasonable legislator, as lump sum repayments or irregular repayments of varying amounts would not be caught by paragraph 15 (paragraph 38).
The Court remitted the case for a fresh determination to consider whether any of the anti-avoidance provisions in the MASC Regulations applied.
DECISION OF THE COURT OF APPEAL
Mr Martin Blount (instructed by Dutton Gregory) appeared for the appellant.
Ms Zoe Leventhal (instructed by the Solicitor, Department for Work and Pensions) appeared for the first respondent.
Mr Richard Drabble QC and Mr James Willan (instructed by Leigh Day) appeared for the second respondent.
Judgment (reserved)
LORD JUSTICE JACOB:
1. This is an absent parent’s appeal from a decision of Mr Commissioner Turnbull of 26 February 2007 (CCS/2806/2006). The Commissioner himself gave permission to appeal, rightly taking the view that an important point is involved.
2. In its broadest form the question is whether regular payments to an absent parent should be treated as his/her (I shall henceforth use “he”) income for the purposes of calculation of his liability for child maintenance even where those regular payments come purely out of capital. The Commissioner held they should. The appellant absent parent, supported by the Secretary of State for Work and Pensions, submits he was wrong. The parent with care supports the Commissioner’s decision.
3. The parties were represented by Mr Martin Blount for the absent parent, Miss Zoe Leventhal for the Secretary of State and Mr Richard Drabble QC and Mr James Willan for the parent with care. I would like to pay a tribute to all counsel for the great precision and economy with which they each advanced their arguments.
4. The facts are as follows. The absent parent is the sole director and majority shareholder in a company. The company needed money. This he raised by taking out a mortgage on his house and lending it to the company. He arranged for the company to pay him back at a rate of £2,500 per month. Although he works for the company he takes no remuneration at present. A dividend was declared in one year and Mr Blount rightly accepted that that would count as income even though it was credited directly to the absent parent’s loan account.
5. This appeal is not concerned with whether these arrangements do or might fall within the various anti-avoidance provisions of the legislation. It is confined to the issue of whether the regular payments (“re-payments” might be a better term) fall within paragraph 15 of Schedule 1 to The Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (SI 1992/1815) (the MASC Regulations). The key words for this case are “any other payments or other amounts received on a periodical basis …”.
6. The legislative basis and background to the MASC Regulations is rather lengthy. I set it out so far as relevant in an annex to this judgment so as make the judgment itself more digestible.
The contentions of the absent parent and Secretary of State
7. I start with the argument for the appellant and Secretary of State. In short it is this: that the Act and implementing regulations draw a clear distinction between capital (not available for maintenance) and income (available). Paragraph 15 is within Part III of Schedule 1 to the Regulations headed “Other Income.” It follows a whole series of other provisions clearly dealing only with income, eg paragraph 9 (periodic payment of pension), paragraph 11 (student income), paragraph 13 (income derived from capital – particular reliance is placed on this) and so on. “Any other payments” in clause 15 is to be construed eiusdem generis with all the other forms of income and is limited to payments which can properly be called income in contrast to payments which are clearly just of capital.
8. The argument is elaborated in various ways. First by reference to the primary Act. Schedule 1, setting out how a maintenance assessment is to be calculated, works on income. Paragraph 2 of Schedule 1 sets out the general rule. It depends on the respective parents’ income. Paragraph 5 is all about the absent parent’s income – the key figure for present purposes is N – the amount of the absent parent’s net income. It is to be assessed in accordance with the regulations to be made, but its underlying characteristic is income properly so called.
9. It is significant also that, again in the primary legislation, Parliament has specifically considered capital as being distinct from income – see the express power to make regulations under which one is to be treated as the other (Schedule 1 paragraph 9(e) and (f)).
10. When one comes to the delegated legislation it must follow that “income” and “capital” continue to have the same meaning as in the primary, enabling, Act and in particular that “income” is used in contradistinction to “capital”. The delegated legislation must, unless one is convinced otherwise, use words with the same meaning as the primary, enabling, legislation.
11. Going next to the MASC Regulations, paragraph 7 is about the calculation of N (the net income of the absent parent). It brings in the Schedule to the Regulations for the detail. Under paragraph 7 you add the amount of earnings (paragraph 7(1)(a) – Part I of Schedule 1), benefit payments (paragraph 7(1)(b) – Part II of Schedule 1), other income (paragraph 7(1)(c) – Part III of Schedule 1), amount of a relevant child’s income which is to be treated as that of the parent (paragraph 7(1)(d) – Part IV of Schedule 1) and any amount which is to be treated as the income of the absent parent under Part V of Schedule 1 (paragraph 7(1)(e)). So at this point what is to be added together are various sorts of income – not capital. Paragraph 7 goes on in sub-paragraphs (2) and (3) to set out types of income to be disregarded – the detail does not matter for present purposes save to say that they are all obviously income and not capital.
12. By paragraph 8 the same rules apply to the assessment of M (income of parent with care). The scheme is looking to see what each parent’s income is.
13. The structure of the Schedule to the Regulations follows through and is that foreshadowed by paragraph 7 of the Regulations. Part 1 deals with “Earnings”, Part II with “Benefit Payments”, Part III with “Other Income”, Part IV with “Income of Child treated as Income of Parent” and Part V with “Amounts Treated as the Income of the Parent.”
14. Focussing now on Part III of the Schedule itself, it is headed “Other income” and one expects it to be concerned with income properly so called and nothing else. Moreover in this very Part the draftsman is obviously working on a distinction between capital and income – see paragraph 13 about interest derived from capital particularly. The same point can be made about paragraph 27 (intentional deprivation of “income or capital which would otherwise be a source of income”).
15. So, when one comes to...
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