CS v CMEC (CSM) [2010] UKUT 182 (AAC)

UKUT-AAC
CS v CMEC (CSM)
[2010] UKUT 182 (AAC) · 2010-05-27
[1]This appeal came before me for an oral hearing on 25 May 2010. The appellant did not appear. I was satisfied that the appellant had been notified of the hearing. I considered that it was in the interests of justice to proceed with the hearing. In these circumstances under and in terms of rule 38 of the Tribunal Procedure (Upper Tribunal) Rules 2008 I did so.[2]Mr Bartos submitted, and I accepted his submission, that the decision under appeal by the second respondent to the First-tier Tribunal was a decision of 12 September 2008 refusing to supersede a decision of 4 June 2008 making a maintenance calculation. The refusal to supersede related to a refusal to allow a variation of the maintenance calculation. The decision of the tribunal on 13 March 2009 was to allow her appeal. It granted a variation under regulation 18(1)(a) of the Child Support (Variations) Regulations 2000 upon the basis that the appellant in this appeal had assets amounting in total to £104,300 and that these were assets in which he had a beneficial interest and the ability to control.[3]The appellant’s grounds of appeal are set out at pages 99 and 100. The first respondents in their written submission did not support the appeal. However, Mr Bartos accepted that there had been an error in law. The second respondent made a submission which did not deal with the merits of the issues under appeal but rather set out matters of fact which she wished to draw to my attention including the history of the financial dealings between her and the appellant subsequent to the tribunal hearing.[4]As is apparent from the tribunal’s decision there had been a variation allowed by them upon the basis that a case for the purposes of paragraph 4(1) of Schedule 4B of the Child Support Act 1991 had been established in relation to assets exceeding £65,000. It is I think important for the understanding of the issues of this case to set out the relevant regulation insofar as it is applicable in this case: “18. -(1) Subject to paragraphs (2) and (3), a case shall constitute a case for the purposes of paragraph 4(1) of Schedule 4B to the Act where the Secretary of State is satisfied there is an asset - (a) in which the non-resident parent has a beneficial interest, or which the non-resident parent has the ability to control; (b) which has been transferred by the non-resident parent to trustees, and the non-resident parent is a beneficiary of the trust so created, in circumstances where the Secretary of State is satisfied the non-resident parent has made the transfer to reduce the amount of assets which would otherwise be taken into account for the purposes of a variation under paragraph 4(1) of Schedule 4B to the Act; or(2) For the purposes of this regulation “asset” means - (a) money, whether in cash or on deposit, including any which, in Scotland, is monies due or an obligation owed, whether immediately payable or otherwise and whether the payment or obligation is secured or not and the Secretary of State is satisfied that requiring payment of the monies or implementation of the obligation would be reasonable; (b) a legal estate or beneficial interest in land and rights in or over land; (c) shares as defined in section 744 of the Companies Act 1985, stock and unit trusts as defined in section 6 of the Charging Orders Act 1979, gilt-edged securities as defined in Part 1 of Schedule 9 to the Taxation of Chargeable Gains Act 1992, and other similar financial instruments; or (d) a chose in action which has not been enforced when the Secretary of State is satisfied that such enforcement would be reasonable and includes any such asset located outside Great Britain.(3) Paragraph (2) shall not apply - [(a) where the total value of the assets referred to in that paragraph does not exceed £65,000 after deduction of - (i) the amount owing under any mortgage or charge on those assets; (ii) the value of any asset in respect of which income has been taken into account under regulation 19(1A);](4) For the purposes of this regulation, where any asset is held in the joint names of the non-resident parent and another person the Secretary of State shall assume, unless evidence to the contrary is provided to him, that the asset is held by them in equal shares.[5]The facts found by the tribunal were as follows:
“As at 03/09/08, the second respondent had a beneficial interest in and the ability to control the following assets: [Heritable Property], Livingston £ 30,500 net [Heritable Property], Bathgate £ 35,000 net Legal & General Policy £12,000 Norwich Union Policy £10,000 Standard Life Policy £15,000 Abbey/Santander shares £ 300 Standard Life share £ 1,500 Total £104,300”
[6]In giving reasons for their decision the tribunal said:
“The parties were divorced on 25 August 2008. The Sheriff’s Judgment produced in the Appeal Papers, confirmed the appellant’s evidence that the parties had agreed that two jointly owned heritable properties at [heritable property] and [heritable property], and their associated endowment policies would be transferred into the second respondent’s sole name. The Tribunal accepted on the basis of the documentary evidence and the evidence of the appellant, that the value of these assets at 03/09/08 was as stated in the Tribunal findings in fact and that the Second Respondent also had Abbey/Santander shares valued at £300 and Standard Life shares valued at £1,500. Regulation 18(4) of the Regulations provides that: “for the purposes of this Regulation, where any asset is held in the joint names of the non-resident parent and another person the Secretary of State shall assume, unless evidence to the contrary is produced to him, that the asset is held by them in equal shares.”
The decision maker had determined that because some of the assets remained in joint names only one-half of the value was to be taken into account when considering the variation application. On the basis of the valuation used by the decision maker, this produced a value of £53,252.20 which was below the £65,000 prescribed threshold. The Tribunal accepted the appellant’s evidence that the Second Respondent was deliberately delaying the transfer of jointly owned assets into his sole name in order to defeat her application for a variation and that she was willing to do anything necessary to achieve the transfer. The Tribunal accordingly formed the view that Regulation 18(1)(a) applied in respect that these were assets “in which the non-resident parent (had) a beneficial interest or which the non-resident parent had the ability to control”. Accordingly, the full value of the assets fell to be taken into account. On this basis, the value of the Second Respondent’s assets was in excess of the £65,000 threshold. Having regard to the provisions of Section 28F of the Child Support Act 1991, the Tribunal was of the opinion that it would be just and equitable to agree to a variation and the appeal was accordingly allowed.”[7]It is apparent that the valuations of the property referred to in the findings in fact as assets by the Tribunal had as their basis the figures given in the Sheriff’s notes at page 32. It is apparent upon reading that note that what the Sheriff was doing in his interlocutor was giving effect to his view, in the context of submissions made to him, as to how the matrimonial property should be divided. In so doing he made an order for sale of the matrimonial home. He granted decree ordaining the second respondent to transfer her whole right, title and interest as the joint heritable proprietor of the property at [heritable property], Livingston and [heritable property], Bathgate to the sole title of the appellant. He ordered the second respondent to make, execute and deliver to the appellant a valid disposition of both the heritable properties and any other deeds as may be necessary to give the appellant a valid title to the subjects. In the event of the second respondent failing to make, execute and deliver such dispositions and other deeds authorises he ordained the Sheriff Clerk to subscribe on behalf of the second respondent the disposition of the said subjects as adjusted at his sight and such other deeds as may be necessary to give the appellant a valid title to the subjects in terms of section 5A in the Sheriff Court (Scotland) 1907. He also granted decree for the assignation of the second respondent’s one-half pro-indiviso right title and interest in the jointly held endowment policies with Standard Life Legal & General and Norwich Union to the appellant. He ordained the second respondent to execute and deliver to the appellant valid assignations of her interest in these policies and such other deeds as may be necessary to give the appellant a valid title to each of the entire policies. He also awarded the second respondent a capital sum of £67,864 payable by the appellant. Although not pertinent to the issues which were before the tribunal I ascertained from the second respondent that in respect of the heritable property in Livingston she executed a disposition in favour of the appellant on 6 November 2009. The Standard Life and Norwich Union Insurance policies were assigned by her on 21 April 2009 and the Legal & General policy was assigned on 13 February 2010. The capital sum was paid to the second respondent by the appellant. It is important to bear in mind that under section 20(7) of the Child Support Act 1991 that in deciding the appeal the First-tier Tribunal is directed not to take into account any circumstances not obtaining at the time when the decision was made.[8]For a case to be established there requires to be an asset in which the non-resident parent has a beneficial interest or which the non-resident parent has the ability to control. The word asset is defined in sub-paragraph 2 of the regulations and in this case the principle concerned is whether the asset is one as defined by sub-paragraph (b) and sub-paragraph (d).[9]I accept Mr Bartos’ submission that in terms of regulation 18(1)(a) it is not necessary for the non-resident parent to be the owner of the asset. He merely has to have the ability to control it. In relation to the two heritable properties which were taken into account in this case it is without doubt the fact that he had a beneficial interest in his own share of each property and this was an asset as defined by regulation 18(2)(b). I accepted Mr Bartos’ submission that he did not however have a beneficial interest in the second respondent’s share. It is clear that at the material time the second respondent had the ownership of her share and she accordingly retained the beneficial interest therein. The crucial question in this appeal, on the argument presented by Mr Bartos, was whether the appellant had the ability to control that share. The position of both Mr Bartos and the second respondent was that he had. In his written ground of appeal the appellant’s position was that he did not. What Mr Bartos is asking me to accept is that as the court had ordered the second respondent to dispone the heritable properties to the appellant the result was that the appellant had an ability to control her share by making an application to the Sheriff Court, in the event of the second respondent having failed to grant a disposition, to get the Sheriff Clerk to do so in terms of section 5A of the Sheriff’s Court (Scotland) Act 1907. It does however appear to me that the ability to request a third party to do something with the asset negates the concept that one has the ability to control it. The ability to control imports the notion of independent control of it to sell it or otherwise deal with it. I am satisfied that in these circumstances the tribunal erred in law in making a finding in fact that the appellant had a beneficial interest in and control of each of the heritable properties. They erred in law in proceeding to find a case made on that basis. There was no asset within the definition of regulation 18(2)(b) in respect of the second respondent’s share of the heritable properties. The separation of the interests of the appellant and the second respondent is I think implied by the provisions in regulation 18(3).[10]In relation to the insurance policies the question is whether they are a chose in action which has not been enforced when the Secretary of State is satisfied that such enforcement would be reasonable. A “chose in action” is not a phrase which is known in the law of Scotland but Mr Commissioner Gamble in CCS/2499/2006, in the context of insurance policies, put what its effect was into plain English when he said:
“In respect of the insurance policies referred to in paragraph 8.4 above, the new tribunal should investigate under the terms of regulation 18(2)(d) whether enforcement of those policies i.e. by cashing them in to receive their surrender values is reasonable.”
Mr Bartos in his submission properly accepted what Mr Commissioner Gamble said. On that basis the insurance policies in this case were not assets in terms of the regulation at all. Without assignation to him of the second respondent’s share he could not cash them in to receive their surrender values. He could not even do that with his own share. Further, in relation to the second respondent’s share he again had no ability to control it independently. If she did not grant the assignation then his only remedy was to go to the court and seek implement, failing which to find the second respondent in contempt. Without assignation of her share he had no beneficial interest in it and he had no independent control of it. The tribunal did not consider these issues in relation to the insurance policies. They erred in law in making the findings they did in relation to the insurance policies. Even if they had been entitled to make the finding they did they did not have regard to the question as to whether cashing the policies in would have been reasonable. As Mr Commissioner Gamble put it in the case to which I refer:
“It may well be that the non-resident parent will submit that it would be reasonable, on the other hand, as being to her financial benefit, for her to retain those policies until maturity. These matters will have to be carefully investigated by the new tribunal. If they consider that enforcement by the non-resident parent is indeed reasonable, then the policies should be treated as part of her assets for the purposes of regulation 18. If, on the other hand, they take the view that deferring enforcement is appropriate then, by virtue of regulation 18(2)(d), the value of these policies will not count as part of her assets.”
Thus they would have erred in law in that regard also.[11]I am further not satisfied that the tribunal dealt with the issues as to whether or not it was just and equitable to allow a variation satisfactorily. It is quite clear that the transfer of property to the appellant was part of a more general divorce settlement and one in which the appellant had a decree against him for a capital sum in excess of £67,000. It does not seem to me that the general settlement on divorce is one which is excluded by regulation 21(2) of the Child Support (Variations) Regulations 2000. Mr Bartos reserved his position on this and it is not necessary to set out a definitive view on this having regard to the manner in which I have disposed of the case.[12]In relation to disposal of the appeal I consider that I can remake the decision of the tribunal. As I have taken the view that the second respondent’s share of both the insurance policies and the heritable properties is not one which falls within the definition of regulation 18(1) it follows upon the valuations accepted in the case that the appellant’s assets for the purposes of that regulation do not exceed the statutory limit. In these circumstances I remake the decision and find that a case for variation under regulation 18 has not been established. (Signed) D J MAY QC Judge of the Upper Tribunal Date: 27 May 2010

Cited in 2 later judgments