SG v Secretary of State for Work and Pensions and CL (CSM)

Factual and Procedural Background

This case concerns a long-standing dispute over child support liability dating back to 2002. The parties separated around 1993, and the matter has been subject to multiple hearings and appeals before the Child Support Agency (now the Secretary of State), the First-tier Tribunal (FTT), and the Upper Tribunal. The father, referred to as the Appellant, initially reported unemployment in 2002, but the Agency later revised its decision, finding that he had a substantial income of approximately £80,000 per annum, including rental income and earnings from property dealings. The father appealed this revision. The case has seen two substantive hearings before the FTT (FTT1 and FTT2), with conflicting findings on the father's income and credibility, and has involved complex procedural directions and appeals, including a prior Upper Tribunal decision and a Court of Appeal refusal of permission to appeal. The current decision concerns the appeal by the father against the FTT2 decision, which allowed his appeal but made an error of law, particularly regarding deductions for income tax and national insurance and the applicable time for assessing income.

Legal Issues Presented

1. Whether the First-tier Tribunal erred in law by refusing to deduct income tax and national insurance contributions from the father's gross income when recalculating child support liability.
2. Whether the First-tier Tribunal improperly considered circumstances occurring after the relevant date of the original decision, contrary to section 20(7)(b) of the Child Support Act 1991.
3. The appropriate procedural disposition following the setting aside of the FTT2 decision: whether to remit the case for rehearing or for the Upper Tribunal to re-make the decision.
4. Whether the father's income should be assessed as including capital receipts from property dealings and rental income, and whether such income constitutes earnings from self-employment for child support purposes.
5. Whether there was a valid ground for revising the original 2004 nil liability decision based on misrepresentation or official error under the Child Support (Maintenance Assessment Procedure) Regulations 1992.

Arguments of the Parties

Appellant's Arguments

• The father, represented by counsel, argued that the FTT2 decision involved errors of law, particularly that income tax and national insurance contributions should be deducted from the gross income figure.
• He challenged the treatment of capital receipts from re-mortgaging as income and argued against their classification as earnings from self-employment.
• The father contended that the statements on mortgage application forms were misleading and that the Agency's assessment was flawed.

Secretary of State's Arguments

• The Secretary of State, represented by Attorney Powell, supported the view that the FTT2 decision contained errors of law regarding the non-deduction of income tax and national insurance.
• She agreed with the analysis that the case should be remitted for rehearing before a fresh First-tier Tribunal.
• She supported the classification of income from property dealings as earnings from self-employment and the inclusion of rental income as other periodical income under the old scheme rules.

Mother's Arguments

• The mother supported the FTT2 decision and opposed the appeal by the father.
• She requested an oral hearing before the Upper Tribunal but also sought an expeditious resolution.
• She focused on the father's alleged evasion of financial responsibility rather than engaging with the technical legal issues raised.

Table of Precedents Cited

Court's Reasoning and Analysis

The Upper Tribunal identified two principal errors of law in the FTT2 decision: first, the refusal to deduct income tax and national insurance contributions from the father's gross income of approximately £80,000, and second, the impermissible consideration of circumstances arising after the original decision date in March 2004, contrary to statutory provisions.

The court applied the principles established in Gray v Secretary of State for Work and Pensions, which clarified the necessity of deducting tax and national insurance from gross income in child support calculations. The tribunal's failure to do so constituted a legal error.

Regarding the timing of evidence and facts considered, the court emphasized section 20(7)(b) of the Child Support Act 1991, which restricts tribunals to considering only circumstances existing at the date of the original decision. The FTT2 was found to have improperly considered later events, undermining its jurisdiction and the legality of its decision.

The court undertook a detailed factual analysis to determine the father's income at the relevant date, relying on mortgage applications, tax returns, and other evidence, applying the balance of probabilities standard. It found that the father's gross income was around £80,000 per annum, including rental income and income from property dealings.

The court accepted that the father's earlier representation to the Agency that he had no income was a misrepresentation, justifying the revision of the original nil liability decision under regulation 17(1)(d) of the Child Support (Maintenance Assessment Procedure) Regulations 1992.

In addressing procedural disposition, the court weighed the factors for remitting the case for rehearing against those for re-making the decision itself. Given the extensive factual findings already made, the historic nature of the case, and the interests of finality, the court exercised its discretion to re-make the decision rather than remit it.

On secondary grounds, the court found that capital receipts from remortgaging properties were properly treated as income from self-employment under the old scheme rules, consistent with prior authorities. Rental income was treated as other periodical income, not self-employed earnings, in line with the regulatory framework applicable at the time.

Holding and Implications

The Upper Tribunal's final ruling is to ALLOW the father's appeal on the two identified points of law, SET ASIDE the First-tier Tribunal's decision dated 14 February 2012, and RE-MAKE the decision under appeal.

The re-made decision dismisses the father's appeal against the Agency's revised decision of 27 June 2007, confirming that the Agency correctly assessed the father's gross income at approximately £80,000 per annum and correctly deducted income tax and national insurance contributions.

The effect of this decision is to uphold the child support liability assessment with appropriate deductions, thereby correcting the legal errors of the First-tier Tribunal. No new precedent is established beyond the application of existing legal principles, and the decision provides finality to a long-running dispute by resolving the substantive appeal without remitting for further hearing.