Chandler v Secretary of State for Work and Pensions
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jacob,Lord Justice Dyson,Lord Justice Latham |
| Judgment Date | 29 November 2007 |
| Neutral Citation | [2007] EWCA Civ 1211 |
| Docket Number | Case No: C3/2007/1652/1652(A) |
| Court | Court of Appeal (Civil Division) |
| Date | 29 November 2007 |
[2007] EWCA Civ 1211
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHILD SUPPORT COMMISSIONERS
COMMISSIONER CHARLES TURNBULL
CCS/2806/2006
Royal Courts of Justice
Strand, London, WC2A 2LL
The Rt Hon Lord Justice Latham
The Rt Hon Lord Justice Dyson and
The Rt Hon Lord Justice Jacob
Case No: C3/2007/1652/1652(A)
Martin Blount (instructed by Dutton Gregory) for the Appellant
Zoe Leventhal (instructed by Department of Work and Pensions) for the First Respondent
Richard Drabble QC and James Willan (instructed by Leigh Day) for the Second Respondent
Hearing date: 13 November 2007
Judgement
This is an absent parent's appeal from a decision of Commissioner Turnbull of 26 th February 2007 (CCS/2806/2006). The Commissioner himself gave permission to appeal, rightly taking the view that an important point is involved.
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.
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.
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.
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 para. 15 of Schedule 1 of The Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (SI 1992 No. 1815) (“the MASC Regulations”). The key words for this case are “any other payments or other amounts received on a periodical basis …”
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
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). Para. 15 is within Part III of Schedule 1 of the Regulations headed “Other Income.” It follows a whole series of other provisions clearly dealing only with income, e.g. para. 9 (periodic payment of pension), para. 11 (student income), para 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.
The argument is elaborated in various ways. First by reference to the primary Act. Sched. 1, setting out how a maintenance assessment is to be calculated, works on income. Para. 2 of Sched. 1 sets out the general rule. It depends on the respective parents' income. Para. 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.
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 (Sched. 1 Para. 9(e) and (f)).
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.
Going next to the MASC Regulations para. 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 para. 7 you add the amount of earnings (para. 7(1)(a)—Part I of Sched. 1), benefit payments (para. 7(1)(b)—Part II of Sched. 1),other income (para. 7(1)(c)—Part III of Sched. 1), amount of a relevant child's income which is to be treated as that of the parent (para. 7(1)(d)—Part IV of Sched. 1) and any amount which is to be treated as the income of the absent parent under Part V of Sched. 1 (para. 7(1)(e)). So at this point what is to be added together are various sorts of income—not capital. Para. 7 goes on in subparas (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.
By para. 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.
The structure of the Schedule to the Regulations follows through and is that foreshadowed by para. 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.”
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 para. 13 about interest derived from capital particularly. The same point can be made about para. 27 (intentional deprivation of “income or capital which would otherwise be a source of income”).
So, when one comes to para. 15 and its language “any other payments or other amounts received on a periodical basis” the context must be “payments or other amounts” by way of income. Just regular payments from a capital sum are outside the intended meaning and scope of the language. A reasonable reader of para. 15 in the context of the Act and the remainder of the MASC Regulations would not take the reasonable legislator to have intended to include such payments in what, after all, is just a sweep-up clause.
The appellants and Secretary of State also urge that the court need not and should not strain to conclude that regular payments by way of reduction of capital should be counted as income out of a supposed purposive construction in favour the provision of child maintenance. For the Regulations themselves have anti-avoidance provisions under Part V. If what is really income is dressed up so as to appear not to be so, Regs. 26 (working for no payment with the principal purpose of reducing assessable income) and 27 are there for that purpose.
Further, the provisions about departure directions support this conclusion. A departure direction is another anti-avoidance mechanism. Such a direction is provided for by ss.28A-I of the Act, introduced by amendment in 1996. Under the regulations made thereunder if a parent has a life-style beyond his declared income then he can be ordered to pay more. But, and this is the important bit, not if that lifestyle is financed out of capital. So clearly the draftsman of this provision did not think that regular payments out of capital already counted for the purposes of assessment of N.
Finally the appellants and Secretary of State took us to the authority of two Commissioners. In CCS/3671/2002 Commissioner Mesher rejected a suggestion that repayment of a loan to a company by an absent parent was a profit derived from employment by the company or as holder of the office of director. He said:
“Although there is power in paragraph 9 of Schedule 1 to the Child Support Act 1991 for regulations to be made treating capital as income, general words like those quoted above should not lightly be given that effect.”
Clearly by implication he regarded regular re-payments by way of reduction of a loan from a director's loan account as outside the MASC Regulations.
In CCS/3499/2004 Commissioner Jacobs set out the Secretary of State's submissions:
“[9]… the representative of the Secretary of State supported the appeal on a number of grounds, but in particular that the contents of the director's loan account were in effect the absent parent's investment in the company and as such fell to be regarded as his capital that could be drawn on as required, so that the appeal tribunal had failed to give an...
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