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	Upper Tribunal (Administrative Appeals Chamber)
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[2009] UKUT 8 (AAC) (14 January 2009)
Main Category: Child support

INTERIM DECISION OF THE CHILD SUPPORT COMMISSIONER

1. The parent with care's appeal to the Commissioner is allowed. The decision of the Oxford appeal tribunal dated 1 March 2007 is wrong in law, for the reasons given below, and I set it aside. It is expedient for me to substitute a decision on the parent with care's appeal against the Secretary of State's decision dated 4 September 2006, as agreed by both parents. I adjourn consideration of that appeal until the parties have had the opportunity to make the submissions directed in paragraphs 18 and 19 below in the light of the rulings as to the relevant law made in this interim decision.
2. In the terms of the child support legislation applicable to the "unreformed" child support scheme, the appellant to the Commissioner is the parent with care of the two qualifying children. From now on I shall call her the mother. I shall call the other parent, the absent parent, the father.
3. There was an oral hearing of the appeal to the Commissioner, at the request of the father, at Manchester Civil Justice Centre on 16 July 2008. The mother attended and was represented by her father, Mr W. The father attended and represented by his present wife, Mrs H. The Secretary of State was represented by Mr Huw James, solicitor, instructed by the Solicitor to the Department for Work and Pensions. I am grateful to all the representatives for their contributions in what is a complicated case. It was agreed at the end of the hearing that I should, if possible, substitute a decision on the mother's appeal against the decision of 4 September 2006, partly because of the practical difficulty of finding a venue for a rehearing by a new appeal tribunal that would be convenient for both parents. It was then also agreed that it would be helpful for the Secretary of State to have the opportunity to comment on the arguments of fact put forward for the parents at the oral hearing. I have given effect to that in my directions.
4. The appeal tribunal was concerned with the mother's appeal against the decision given on 4 September 2006 making a child support maintenance assessment of nil for the two qualifying children from 4 August 2006. Prior to that decision the maintenance assessment was £75.94 per week. The father had applied for a supersession in a letter received on 9 August 2006 reporting that on 17 July 2006 he and his wife and recently-born daughter had moved from a two-bedroomed flat to a three-bedroomed house and the mortgage payments had gone up from £770.32 per month to £1,648.51, but his and his wife's income remained as previously given. The appeal tribunal also had before it at the same session the father's appeal against a departure direction decision that had the effect of increasing his liability to £138.46 per week with effect from 3 March 2006. That appeal was disallowed. There has been no application for leave to appeal to the Commissioner against that decision. Accordingly, I say no more about the effect of any departure directions or about the effect of any other applications for supersessions that might be outstanding.
5. The mother's appeal was on the ground that the full amount of the liability to pay interest and repay capital on the mortgage advance of £300,000 did not satisfy the condition in paragraph 4(1)(a) of Schedule 3 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (the MASC Regulations):

"(1) Subject to the following provisions of this paragraph the housing costs referred to in this Schedule shall be included as housing costs only where--

(a) they are necessarily incurred for the purposes 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."

By the time of Mr W's last written submission before the appeal tribunal's hearing, it was argued that, in view of the other resources that the father and his wife had, a mortgage of £150,000 would have been sufficient, in particular because their previous home had not been sold, but was let out. There was also reliance on the decision of the Court of Appeal in Pabari v Secretary of State for Work and Pensions [2004] EWCA Civ 1480, reported with the Commissioner's decision that it upheld as R(CS) 2/05. I shall not go into the detailed arguments about the evidence here, but return to them in outline later. I note for the moment that the £300,000 mortgage was in Mrs H's name alone, but that the payments could count as the father's housing costs under paragraph 4(1)(b) because a member of his family was responsible for them.

6. Copious written submissions and copies of documents were put in. Both parents and their representatives attended the appeal tribunal's hearing in Oxford. The appeal tribunal disallowed the mother's appeal. It noted that in R(CS) 2/05 the non-resident parent had bought out the parent with care's interest in the former matrimonial home by taking out a repayment mortgage to replace the previous endowment mortgage, but for a term of 12 years, rather than the usual 25, to expire at the same date as the endowment mortgage would have done. Its statement of reasons continued:

"In this matter the challenge was to the expense of the house purchased and not the costs of the particular mortgage or the term, ie it was argued that housing costs had been inflated at the expense of maintenance of the relevant children.

With respect to [Mr W], the case law he relies on relates to the cost of the financial device used to acquire a home and not the fact that a more expensive home has been acquired. For excessive housing costs in relation to property acquired by an absent parent there is a limitation of £80 or one half of the absent parent's net income whichever is the higher figure (see reg 18(1) of [the MASC Regulations]) save where an exemption applies (see reg 18(2)) one of which applies in this case namely that [the father] and present spouse child lives in their household.

In consequence there is no basis to direct a recalculation of the formula on the basis of excessive housing costs. There was and is the option of applying for a departure direction on the grounds of excessive housing costs but they still cannot be set at less than half the absent parent's net income or £80 per week whichever is higher."

7. The mother now appeals against that decision with leave granted by Mr Commissioner Levenson. In the submission dated 13 August 2007 the representative of the Secretary of State agreed that the appeal tribunal had gone wrong in law. It was submitted that the appeal tribunal had not dealt properly with the question of whether housing costs had been necessarily incurred. Mrs H in her reply on behalf of the father did not really challenge that conclusion, but concentrated on a highly detailed argument that the costs should be allowed under paragraph 4(1)(a) of Schedule 3 to the MASC Regulations.
8. In my judgment the appeal tribunal went wrong in law in its general approach in two ways. First, it appeared to take the view that the sole provision controlling excessive housing costs in the ordinary maintenance formula was regulation 18 of the MASC Regulations, which could not be applied in the present case because of the father's and Mrs H's new child. In paragraph 37 of his decision in R(CS) 2/05 Mr Commissioner Jacobs expressly stated that regulation 18 was not to be interpreted as the exclusive safeguard against unnecessary housing costs. The test in paragraph 4(1)(a) of Schedule 3 is a different one and must be applied regardless of whether or not regulation 18 applies. The Court of Appeal did not disagree with that and must have endorsed that approach by entering into its discussion of the proper interpretation of paragraph 4(1)(a).
9. Second, the appeal tribunal went wrong in dismissing the relevance of the cases relied on by Mr W for the mother. It is true that R(CS) 2/05 and the other Commissioners' decisions discussed by the Court of Appeal concerned cases where the absent parent had not moved home but had changed the mortgage arrangements for the existing home. What was said in those cases was naturally geared to that situation, with a focus on the nature and term of the new mortgage and the rate of interest charged. However, none of those decisions purported to set out the exhaustive limits of the application of paragraph 4(1)(a). They merely considered how that provision applied to the circumstances of the particular cases in issue. Paragraph 4(1)(a) sets out a general test to be applied to all housing costs and must, subject to what I say in paragraphs 13 and 14 below, be applied as such.
10. Indeed, there are positive indications in that direction. For instance, Mr Commissioner Jacobs' general discussion in paragraphs 45 to 53 of his decision plainly related both to the initial purchase of a home and to re-mortgaging. Paragraph 48 was as follows:

"48. If the purpose was solely to acquire the home, the costs are eligible for child support purposes, provided they were necessarily incurred for that purpose. Typically, they will be necessary. But it is possible that they may not be. For example, a parent may have had sufficient capital to purchase the home outright."

Once again, the Court of Appeal did not say anything to the contrary, although Holman J's express approval of the Commissioner's analysis in paragraphs 36 to 53 (paragraph 43 of the Court of Appeal's decision) was limited to the identification of the criterion laid down by the term "necessarily incurred".

11. The decision of Mr Commissioner Henty in CCS/1855/2004 (attached to the Secretary of State's submission of 13 August 2007) points in the same direction. The absent parent bought a new home while the former matrimonial home was being sold on divorce. He borrowed the maximum amount he was allowed on mortgage, plus a loan from his father for the bulk of the rest of the purchase. When he got his share of the proceeds of sale of the former matrimonial home he repaid some of the loan. On the question of whether the repayments on the remainder were eligible as housing costs, counsel for the Secretary of State submitted that paragraph 4(1)(a) entailed a "searching enquiry" into whether the absent parent could have purchased the new home without the assistance of his father's loan or whether he should instead have disposed of other assets that he may have had. The Commissioner asked himself whether the absent parent could have purchased the new house without his father's assistance and got the plain answer "no". He said that he did not think that whatever principles could be found in the Court of Appeal's decision in R(CS) 2/05 were applicable, as it was a quite different case. But I have no doubt that the Commissioner there was referring to the sort of considerations that were relevant in deciding whether the "necessarily incurred" test of paragraph 4(1)(a) was met. He accepted without debate that the test was to be applied to the purchase of the new home.
12. For those reasons I set aside the decision of the appeal tribunal of 1 March 2007 as wrong in law. But before I can consider what decision ought to be substituted on the mother's appeal against the decision of 4 September 2006, I need to determine some other issues of law.
13. The first of those other issues is whether paragraph 4(1)(a) of Schedule 3 to the MASC Regulations requires consideration of the price of the new home. Mr W submitted that that had not been part of his argument to the appeal tribunal, despite the impression that might otherwise have been gained from its statement of reasons, and that he did not wish to rely on behalf of the mother on any arguments that the new home was too big or in too expensive an area or that Mrs H had paid over the odds for it. However, Mr James for the Secretary of State submitted that such questions had to be looked at. He relied I think on the generality of the test in paragraph 4(1)(a), submitting that in asking whether housing costs had been necessarily incurred it had to be relevant if adequate housing for the parent and family could have been acquired at a lower price. In answer to the objections that the level of enquiry required to investigate such factors would be unduly intrusive and time-consuming and that the judgments to be made would be exceptionally difficult, he replied that if legislation requires something it must be done, however difficult and sensitive, and that the interests of the qualifying children for whom child maintenance was to be paid should be paramount. Mrs H for the father disagreed in principle and also submitted that the new home was suitable in location and was not unduly large (for their current family and visits from the qualifying children and other relatives) or expensive for the area, and indeed was smaller in terms of bedrooms and size of garden than they would have liked.
14. I reject Mr James' submission. The flaw in it, it seems to me, was in not looking at the context of the "necessarily incurred" test. The question under paragraph 4(1)(a) is not simply whether housing costs were necessarily incurred, but whether they were necessarily incurred "for the purpose of purchasing [etc] the home for the parent and his family". Thus, one starts with the acceptable purpose, if it is established, of purchasing etc not "a" home, but "the" home for the parent and his family. Then the question is whether the housing costs were necessarily incurred for that purpose. That excludes the considerations put forward by Mr James. It is also what I think Mrs Commissioner Brown was concerned with in decision CSC4/02-03 when she said that it appeared to her that paragraph 4(1)(a) related to purpose. She went wrong, as I suggested in decision CCS/1707/2003 and as accepted by the Court of Appeal in R(CS) 2/05, in saying that the concentration on purpose meant that whatever liability for mortgage interest, say, that was incurred for that purpose had to be accepted as eligible. But she was right in the conclusion that if the housing costs were incurred for the purpose of purchasing the particular home, a comparison with the costs of acquiring an alternative property or of staying put was not to be made under paragraph 4(1)(a). As Mr Commissioner Jacobs pointed out in paragraph 35 of his decision in R(CS) 2/05, there are controls on excessive expenditure in regulation 18 of the MASC Regulations and in the possibility of departure directions on the grounds of unreasonably high housing costs (and partner's contribution to housing costs).
15. The second issue of law is the extent of the enquiry into the question of whether housing costs had been necessarily incurred in the light of other resources available to the parent in question. At the current stage of the proceedings I must keep my conclusions on this issue at a fairly general level, because it is the issue on which further submissions about the evidence, especially from the Secretary of State, are required. The £300,000 mortgage obtained by Mrs H was for a 25 year term at an ordinary rate of interest and Mr W for the mother makes no complaint about those matters. The points of dispute are over whether other resources should have been used to fund the purchase of the new home in place of some proportion of the £300,000 advance and what the extent of those resources was. Mr W and Mrs H have already made considered submissions about that at the oral hearing.
16. It follows from my conclusions in paragraphs 9 to 11 above that the availability of other resources, not involving the incurring of what would be housing costs for child support purposes, is a relevant factor. That means available as a practical reality in the circumstances of the particular case. Thus, in principle the resources of a parent's partner are not excluded from consideration. In some cases, the evidence might show that a partner's financial resources are kept apart from those of the parent and that the partner is not prepared to allow them to be used to fund the housing of the family. However, in the present case, the housing costs in question were in fact incurred by the father's partner, Mrs H. They counted as his housing costs because they were the responsibility of a member of his family. In those circumstances it seems to me that he cannot be heard to argue that the nature and extent of Mrs H's resources was not relevant. The nature and net value of all the properties owned by the father and Mrs H would have to be taken into account, including in particular their former home and the decision not to sell it when the new home was acquired.
17. The difficult question will be how to apply the test of "necessarily incurred" once the facts have been established. The approach of the Court of Appeal in R(CS) 2/05 must be followed. The father and Mrs H of course pointed out that by retaining the previous home and other properties income would be earned by him that would count in the child support assessment. They also argued that, if the previous home had been sold and the net proceeds of sale put towards the purchase of a new home, they would have put the increased capital sum (which at one point in their written submissions they had put at £90,000) towards buying a house of the size that they really wanted (eg four bedrooms and a larger garden), ending up with a mortgage of the same size. I am not sure, subject to further submissions that might be made, that that is a legitimate line of argument. It seems to me that the focus must be on the property that was actually acquired and whether the housing costs associated with that purchase were necessarily incurred. For similar reasons, I am not sure how far Mrs H's arguments to show that the equity in their previous home was not used to acquire any other investment property gets them in that particular context.

Directions

18. I direct that within one month of the date on which this interim decision is issued, the Secretary of State is to make a further written submission as to the decision that should be made on the mother's appeal against the decision of 4 September 2006, in the light of the rulings of law above. The submission must take account of the arguments made for the parents at the oral hearing about what housing costs were necessarily incurred, including Mr W's written submission (a copy of which will be issued with this interim decision), as well as anything else considered relevant. The submission should make clear (given the margin of exempt income (£479.48) over net income (£415.82) in the figures used in the decision of 4 September 2006) how far the amount of allowable housing costs would have to be decreased to produce a formula maintenance assessment of more than nil. The opportunity should also be taken to make a definite submission about the point about the mortgage protection policy raised in paragraph 3(iii) of the Secretary of State's written submission to the appeal tribunal (page 9), including consideration of whether the evidence on page 51 was of the date from which premiums were payable or merely of the date from which a direct debit arrangement was in place. If the Secretary of State considers that specific further evidence needs to be provided by or on behalf of either parent, he should point that out, so that the parents can take that into account in their responses.
19. The father or his representative is to have one month from being sent a copy of the Secretary of State's further written submission in which to make any submission. The mother or her representative is to have one month from being sent a copy of the submission for the father (or being informed that the father has not made a submission within time) in which to make any submission in reply. The parents should as far as possible restrict themselves to comment on the Secretary of State's submission, to the provision of further evidence mentioned in that submission and to any changes to the arguments of law they have already put forward. There is no need to repeat things covered at the oral hearing. I hope that no further oral hearing before the Commissioner will be necessary, but any party may make a reasoned request for an oral hearing in their submission.

(Signed) J Mesher

Commissioner

Date: 18 August 2008
 


FINAL DECISION OF THE UPPER TRIBUNAL

ADMINISTRATIVE APPEALS CHAMBER

The decision of the appeal tribunal of 1 March 2007 having been set aside as erroneous in point of law in my interim decision dated 18 August 2008 as a Child Support Commissioner, I now re-make the decision on the parent with care's appeal against the decision dated 4 September 2006 of the Secretary of State having made the appropriate findings of fact (Tribunals, Courts and Enforcement Act 2007, section 12(2)(b)(ii) and (4)(b)). The decision as re-made is as follows:

(a) the parent with care's appeal is allowed;

(b) the Secretary of State's decision dated 10 May 2006 is superseded with effect from 4 August 2006 on the ground that there had been a material change of circumstances since that decision took effect (Child Support (Maintenance Assessment Procedure) Regulations 1992, regulation 20(3)(a)(i) and (b)) and with effect from 13 October 2006 on the ground that it was expected that a material change of circumstances would occur (Child Support (Maintenance Assessment Procedure) Regulations 1992, regulation 20(3)(a)(ii) and (b));

(c) the superseding decision with effect from 4 August 2006 is that the formula maintenance assessment is to take account of the absent parent's increased housing costs on the basis of a mortgage with £240,000 capital outstanding, rather than £300,000, and of the other issues directed by the appeal tribunal of 1 March 2007 to be determined by the Secretary of State, but is not to take account of premiums payable on the mortgage protection policy;

(d) the superseding decision with effect from 13 October 2006 is that the formula maintenance assessment is to take account in the calculation of the absent parent's housing costs of the monthly premium of £46.26 on the mortgage protection policy;

(e) The Secretary of State is to make the necessary calculations to determine the amount of the formula maintenance in accordance with (c) and (d) above, and if there is any disagreement on the arithmetic of the calculations the case may be referred back to the Upper Tribunal for further decision.

This decision is without prejudice to the continued application of the existing departure direction operative from 4 August 2006 to the newly calculated maintenance assessments.

REASONS FOR DECISION

20. The general background and essential conclusions of law are set out in my interim decision signed on 18 August 2008 following the oral hearing on 16 July 2008. I do not repeat them here. I continue to refer to the parent with care as the mother and to the absent parent as the father. Unfortunately, the further written submissions directed in the interim decision, with the opportunity to put forward further evidence, have not taken matters much further forward. I apologise for the long delay since those submissions were completed at the end of October 2008.
21. In the submission dated 16 September 2008, the representative of the Secretary of State suggested that I should direct the father to produce further evidence, for instance as to any additional property that he owned and as to the date on which payment of premiums on the mortgage protection policy began, if that was before 17 October 2006. I did not make any specific direction, but left it to the father to come forward with whatever evidence he wished, in the light of what had been submitted for the Secretary of State. In the event, the father said nothing about the mortgage protection policy or about any other property he owned. In his reply, the mother's representative, Mr W, accepted that there was no evidence of the father owning any properties other than those already taken into account in argument.
22. The issue to be decided is what should be allowed in housing costs in the maintenance assessment calculated with effect from 4 August 2006 on the father's application for supersession on the ground of relevant change of circumstances. The change was the move to a three-bedroomed house with the taking on of a £300,000 mortgage by the father's wife. In his letter received on 9 August 2006 the father said that the monthly mortgage payments would increase to £1,648.51 from £770.32 on their previous two-bedroomed flat. He also reported as household expenses premiums of £46.26 per month would be payable on a mortgage protection policy.

Were the mortgage payment housing costs necessarily incurred?

23. I remind myself that the test to be applied under paragraph 4(1)(a) of Schedule 3 to the MASC Regulations is whether the housing costs were "necessarily incurred for the purposes of purchasing ... the home for the parent and his family" and that in accordance with the decision of the Court of Appeal in Pabari, R(CS) 2/05, the test is not what was reasonable or sensible or justifiable or reasonably necessary, but what was necessary in the circumstances of the absent parent concerned. But neither does "necessarily" mean absolutely essential or inescapable or unavoidable, otherwise housing costs for a lot of repairs and improvements could never be allowed. And, providing that the test remains necessity, a common sense and reasonable approach is to be taken. I adhere to what I held in paragraphs 15 and 16 of my interim decision, that in principle the financial resources of an absent parent's partner form part of the circumstances to be considered, especially where, as here, the housing costs were incurred by the partner. It is also clear that this test is, contrary to some of the father's submissions, quite independent of the rule in regulation 18 of the MASC Regulations capping the amount of allowable housing costs for certain absent parents (excluding those with children in their new families). I must also apply it independently of whatever the effect is of departure directions made in other decisions that do not form part of the appeal before me.
24. There is no complaint about the terms of the mortgage itself. I have held in my interim decision that questions of the size, location or price of the new home fall outside the scope of paragraph 4(1)(a). What is in issue is what housing costs it was necessary for the father and his wife to incur in order to purchase the new home, in all the circumstances, including the overall financial circumstances of both of them.
25. The other properties owned by the father and his wife immediately prior to the purchase of their present home must be considered in some detail.
26. One was a flat in Liverpool owned by the father, where he had lived in the 1980s, which had been retained and was let out to tenants. On 22 February 2005, the remaining mortgage on that property was paid off by increasing the debt outstanding on 3 H Court, the home of the absent parent and his wife prior to 17 July 2006 (see below), by £15,876.23. In April 2006 (in the fact-find for a remortgage of 3 H Court), the value of the flat was estimated at £55,000 to £60,000, although in an application for the mortgage mentioned in the following paragraph it had been estimated at £25,000.
27. The second was 40 H Court, another flat in the same complex, which was bought in June 2005 by the father and his wife for £175,500 with the assistance of a buy-to-let mortgage of £142,846. According to the completion statement, a cash balance of £35,346 was required for the balance of the purchase prices, fees etc. That flat was let on an assured tenancy.
28. The third, and by far the most important, property was 3 H Court. This was bought by the father for £160,000 on 16 October 2001 with the assistance of a mortgage of £135,000 from Cheltenham and Gloucester. The outstanding capital on that mortgage was paid off on 31 July 2003 when the flat was put into joint names. There was a new mortgage advance of £120,000 from the Woolwich (Barclays). On the application form for that mortgage the value of 3 H Court was put at £210,000. The terms of the mortgage allowed "reserve overdraft borrowing" to be added to the debt. A statement on 30 September 2005 showed an outstanding balance on the original loan of £115,209.15 and £32,236.96 reserve overdraft borrowing. That appears to have been made up mainly of the £15,876 to pay off the mortgage on the Liverpool flat and other expenses for the maintenance and improvement of 3 H Court, said to total £13,748.27. On 8 May 2006 the Woolwich mortgage was paid off by a RBS First Advance interest-only mortgage loan of £160,000. According to the completion statement, £139,137.15 was needed to redeem the Woolwich mortgage (it seems that the reserve overdraft borrowing had been reduced to around £25,000). After some fees, £20,833.47 was due to the father and his wife. The value of 3 H Court was stated in the fact-find for the mortgage advance to be £190,000.
29. On 17 July 2006 the father's wife bought their present home for £355,000, with the assistance of the £300,000 mortgage. 3 H Court, their previous home, was not sold, but was let out from August 2006. The main explanation of the financing of that purchase has been in the comprehensive written submission on behalf of the father dated 10 September 2007. I have not needed to go into some of the more sophisticated illustrations in that submission, but have taken a rather simpler view. The remortgage of 3 H Court had released cash of about £20,800. The father's wife liquidated investments and savings in this country and the USA amounting to nearly £45,000 to cover the remaining £55,000 plus a substantial amount for stamp duty, fees and disbursements (apparently another £10,000).
30. Now, plainly it would have been possible for the father and his wife to have sold up all of their three properties, or borrowed against the equity in them, to put the proceeds towards the purchase of their new home. That could have released, on the figures above and taking a rough and ready account of expenses, say £50,000 from the Liverpool flat and £30,000 from 40 H Court, in addition to whatever might be regarded as available from 3 H Court (see below). But it seems to me that to take account of that would be to apply the meaning of "necessarily" rejected as too strict in Pabari. One would not ordinarily consider the possibility of selling up a portfolio of income-producing assets acquired before the taking on of the housing costs in question, and Mr W did not seek to argue such a case. On the other hand, it cannot be ignored as part of the background that those capital assets existed and that within the 18 months before the purchase of the new home the father and his wife had put some £50,000 into them.
31. A more critical examination is needed of the retention of 3 H Court. In the ordinary course of things, where the concern is for somewhere to live, the old home is sold and the net proceeds put towards the purchase (sometimes including renovation or improvement or extension) of the new home. It is the fact that the old home was not sold, but was retained and let after a re-mortgaging, that is the unusual feature of this case. In the submission of 10 September 2007 (see page 317) and at the oral hearing it was accepted for the father that if 3 H Court had not been retained he and his wife could (on their valuation of the property) have put down a deposit of about £90,000 instead of about £50,000 on their new home. That was coupled with the argument that in that event they would have bought a more expensive house closer to their ideal in terms of space and so ended up with a mortgage of the same amount. That particular argument cannot be admitted. The focus must be on the home that was in fact acquired. On the broader question, it might well have been reasonable or sensible or justifiable to retain 3 H Court as an appreciating asset, the income from which would hopefully be sufficient to cover the interest payments on the RBS First Advance mortgage. However, in my judgment that could not be said to have been necessary in the sense approved in Pabari.
32. The question then arises of what additional resources for the purchase of the new home could have been available if 3 H Court had been sold. The valuation of those premises in summer 2006 is a crucial factor. Mr W submitted, by reference to an estimated value produced by a website, that the market value was £225,000. But that was a valuation of the property as a three-bedroomed flat (as it was being described for letting purposes), when the third sleeping area appears to be a dining area that could be used in addition to the two proper bedrooms. And the confidence level given was low. The father has dismissed that figure as sight unseen and submits that the market value was £190,000, as on the RBS First Active mortgage offer of 19 April 2006 (page 246). He has said that that was the value accepted by an independent surveyor acting for the mortgage lender. However, no copy of such a survey or document directly emanating from the surveyor has been put forward. It may be that the lender was simply prepared to accept a minimum value of £190,000 when considering a loan of £160,000. It is certainly the case that neither Mr W's valuation nor the father's has actually been tested in the market.
33. So far as that goes, the only real test is the £160,000 paid by the father in October 2001. Since then, the Halifax house price index has shown a smaller increase for the south-east than for the United Kingdom as a whole, but totalling together the annual year-on-year percentage increases for the years 2002 to 2006 produces a total of figure of just over 50%, not allowing for the effect of compounding. Thus, on the regional trend, one would expect a property with a value of £160,000 in 2001 to be worth about £240,000 by the end of 2006. There is nothing to suggest that anything had happened to make the area around 3 H Court any less desirable and the father had spent money on maintaining and improving the flat. I simply cannot believe that the flat worth £160,000 in October 2001 was worth only £190,000 in summer 2006. I note that in 2003 the father had said to a lender that it was worth £210,000. Making some allowances for the dangers of using average regional figures, I find that the market value of 3 H Court in summer 2006 was £220,000. Accordingly, I conclude that the net proceeds of sale after paying off the Woolwich mortgage would have been £80,000, rather than the £50,000 accepted on behalf of the father.
34. I then proceed on the basis that the father's wife would have been able to put in the same amount of capital as she in fact did, ie £45,000. I have considered whether there ought to be a more extensive examination of her financial situation. In paragraph 16 of my interim decision I said that the nature and extent of her resources, especially since the mortgage on the new home was in her sole name, was in principle relevant. However, I did not give any specific directions for the father's wife to provide information on her general financial situation in summer 2006. Nothing was said about that in the father's submission of 16 October 2008, the Secretary of State only having suggested a direction for the father to state whether he owned any additional properties. Mr W did not make any specific point about the father's wife's resources in his reply of 20 October 2008, although he had in earlier submissions floated the possibility of her having more savings and investments here or in the USA. In the circumstances, I think that the fair outcome is to proceed as above, especially as directing the provision of more information would lead to even further delay. However, in other similar cases or even, in the present case, in relation to different decisions and different effective dates, a more searching enquiry may be proper.
35. If £125,000 had been available to go towards expenditure of £365,000 (purchase price of £355,000 plus stamp duty, fees etc), a mortgage of £240,000 would have been necessary. In effect I accept the calculation made in the submission on behalf of the father dated 16 October 2008 - that if 3 H Court had been sold the mortgage on the new home could have been £270,000 - with the exception that I find the market value of 3 H Court to have been £30,000 higher. Only the proportion of housing costs attributable to a loan of £240,000, rather than £300,000, are allowable as necessarily incurred.

From what date are housing costs for mortgage protection policy premiums allowable?

36. Paragraph 3(4) of Schedule 3 to the MASC Regulations provides that "the amount of the premiums payable" under certain insurance policies is eligible to be taken into account as a housing cost, including "such a policy of insurance whose purpose is to secure the payment of monies due under the mortgage or charge in the event of the unemployment, sickness or disability of the insured". The letter dated 26 July 2006 to the father's wife from the insurance company confirming the setting up of a direct debit arrangement stated that collection of monthly premiums would start on 17 October 2006. The representative of the Secretary of State, in the submission dated 16 September 2008, submitted that costs only become allowable from the date on which they became payable, which appeared to be 17 October 2006. As the decision under appeal was as to the maintenance assessment effective from 4 August 2006, it would appear that the monthly amount of £46.26 should not have been included as a housing cost in the calculation of the maintenance assessment effective from 4 August 2006, as had been allowed in the decision of 4 September 2006. The father has in response put forward no evidence of premiums being payable prior to 17 October 2006 (the point also having been raised in the Secretary of State's written submission to the appeal tribunal). Accordingly, I proceed on the basis that they were not.
37. Therefore, I must direct that the maintenance assessment effective from 4 August 2006 made on supersession cannot include housing costs attributable to the premiums on the mortgage protection policy.
38. However, that is not the end of the matter, as was suggested in the written submission to the appeal tribunal. Under regulation 20(3)(a)(ii) of the Child Support (Maintenance Assessment Procedure) Regulations 1992, it is a ground for supersession that it is expected that a change of circumstances will occur, as well as that a change has occurred (regulation 20(3)(a)(i)). Here, the father's application, when fleshed out by the letter from the insurance company, could only fairly be interpreted as an application for supersession on the ground that it was expected that a change of circumstances would occur on 17 October 2006. As the policy had been taken out at the date of the application and the decision of 4 September 2006, and the date and the amount of the first payment was clearly fixed, that ground is made out. The superseding decision, taking account of the payment, would then take effect from the first day of the maintenance period (ie week) in which the change was due to occur (regulation 23(5)). The only potential obstacle would be the general rule in regulation 21 that decisions of the Secretary of State are not to be superseded when the difference between the old and the new maintenance assessment is less than £10 per week. However, that rule does not appear to apply when an appeal tribunal (or a Commissioner/Upper Tribunal substituting a decision for the appeal tribunal's) is making both the old decision and the new decision. In addition, the modification in regulation 22 would appear to apply, at least by analogy. Regulation 22 applies where a change of circumstances is relevant to more than one maintenance assessment and provides that then the £10 rule is to be applied to the aggregate effect of the superseding decisions. I do not see why that should not apply to more than one change of circumstances (one or more past and one or more expected) notified in the same application. As there appears no doubt that the aggregate effect on the amount of the maintenance assessment of both the changes here exceeds £10, both can be given effect in the substituted decision.
39. The Upper Tribunal's decision giving effect to those conclusions of fact and law is as set out at the head of this document.

(Signed on original): J Mesher

Judge of the Upper Tribunal

Date: 14 January 2009