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	UK Social Security and Child Support Commissioners' Decisions
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[2004] UKSSCSC CCS_1707_2003 (31 March 2004)

 


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 24 September 2002 is wrong in law, for the reasons given below, and I set it aside. It is expedient for me to make the necessary findings of fact and to give a decision on the parent with care's appeal against the decision of the Secretary of State dated 22 May 2001 (Child Support Act 1991, section 24(3)(b)). My decision, allowing the parent with care's appeal in part, is that (i) the Secretary of State's decision dated 31 October 2000 falls to be superseded with effect from 21 March 2001 on the ground of a material change of circumstances; and (ii) the superseding decision is that the absent parent is liable to pay child support maintenance calculated in accordance with paragraph 36 below with effect from 21 March 2001. If any party disputes the result of the process of recalculation directed in paragraph 36 (as opposed to challenging the basis on which I have directed that it is to be carried out) the case may be referred to me (or if necessary to another Commissioner) for further decision.

The background

2. By a decision of 31 October 2000 a maintenance assessment of £70.86 per week was in force with effect from 3 May 2000. In a letter received on 26 March 2001 the then absent parent applied for a supersession on the ground of change of circumstances. I shall call him the absent parent in the remainder of this decision, as that was his status at the time to which this case relates. He gave information of the birth of a child to him and his partner and continued:

"There is also a change to my mortgage repayments as from 20th November 2000 I have changed from an endowment to a repayment mortgage which includes a home improvement loan. This enabled us to fit a new bathroom and kitchen and to build another bedroom to meet our needs. New monthly payments are £694.79."

A mortgage statement for the year to 31 December 2000 was enclosed, showing the opening balance on 19 October 2000 as £40,000 and the balance on 31 December 2000 as £39,317.79, and confirming the level of monthly payments. I cannot tell from the papers before me exactly what housing costs had gone into the calculation of the maintenance assessment in effect from 3 May 2000, but at the end of 1998 the absent parent seems to have been paying about £290 per month on the endowment mortgage, which then had £34,631.47 capital outstanding, and about £65 per month on a home improvement loan, which then had £1,988.02 outstanding. I do not know the level of premiums on the endowment policy.

3. On 22 May 2001 the Secretary of State made a superseding decision under section 17 of the Child Support Act 1991 that the absent parent was liable to pay £36.79 per week. The then parent with care appealed. Very much in brief, she said that the absent parent had already carried out the bathroom and kitchen work, which had been paid for by an insurance payment and had not carried out or applied for permission to build an extra bedroom. In a letter dated 14 April 2002 the absent parent said that there was a balance of £2,700 to be met on the kitchen and bathroom works after the £1,500 insurance payment was taken into account. The new mortgage loan enabled him to repay his father the amounts loaned to allow him to complete those works. He said that the loan was also to enable him to buy the garage adjoining his home from the local authority, which was then to be altered to create a bedroom. He said that because of delays in obtaining approval for the alterations that purchase (for £6,500 plus solicitors' costs) took place on 5 January 2001. Thus, the only point in issue was the amount of new housing costs properly to be allowed in child maintenance formula.
4. The view taken in the Secretary of State's written submission to the appeal tribunal was first, and correctly, to refer to paragraph 4(1) of Schedule 3 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (the MASC Regulations) on the conditions on which amounts which are eligible to be housing costs are actually to be included as housing costs in a parent's exempt or protected income. Paragraph 4, as in force at the relevant time, provides:

"(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 purpose 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;

(b) [not relevant];

(c) [not relevant];

(2) [not relevant].

(3) Subject to sub-paragraph (4), payments on a loan shall constitute an eligible housing cost only if that loan has been obtained for the purposes specified in sub-paragraph (1)(a).

(4) Where a loan has been obtained only partly for the purposes specified in sub-paragraph (1)(a), the eligible housing costs shall be limited to that part of the payment attributable to those purposes."

5. Paragraph 2 of Schedule 3 defines "repairs and improvements" to mean major repairs necessary to maintain the fabric of the home and any of a number of listed measures undertaken with a view to improving the fitness of the home for occupation. The list does not specifically include the addition of any extensions to the home, but does include "other improvements which the Secretary of State considers reasonable in the circumstances" (head (k)). Paragraph 1 of Schedule 3 includes in the list of amounts which are eligible to be housing costs amounts payable by way of mortgage interest (sub-paragraph (b)), interest payments on loans for repairs and improvements to the home (sub-paragraph (d)) and amounts payable in respect of a loan to pay off another loan so far the first loan produced eligible amounts (sub-paragraph (t)). However, it is a general condition in paragraph 1 that the payments should be "in respect of the provision of a home". Paragraph 3(2) makes repayments of capital on a mortgage eligible for the purpose of calculating exempt income.
6. The Secretary of State's written submission went on (page 4) to say that as the absent parent was required to pay his mortgage, and failure to pay that mortgage could result in him losing possession of his home, the full amount that he was required to pay under his mortgage agreement was accepted as an allowable housing cost.

The appeal tribunal's decision

7. The parent with care did not attend the hearing on 24 September 2002. She had sent in photographs of the absent parent's home to support her contention that no building works had taken place. The absent parent did attend. The appeal tribunal dismissed the appeal and found that the calculation of the absent parent's housing costs was correct. The key paragraphs in the statement of reasons were these:

"11. The second respondent is entitled to housing costs in respect of any loan charged against his property by way of mortgage.

14. The second respondent had not improved the property although he had indicated some time previously that he might be looking to do so and had merely changed his mortgage to a repayment mortgage upon which the decision maker had allowed his housing costs.

15. There was no separate home improvement loan or any other loan secured on the property included with the housing costs assessment.

16. The second respondent was entitled to housing costs as allowed as if his mortgage were not paid his property would be liable for repossession."

The appeal to the Commissioner

8. The parent with care now appeals against that decision with my leave. When granting leave, I suggested that the appeal tribunal did not give adequate consideration to the question of whether all the housing costs were "necessarily incurred" within paragraph 4(1)(a) of Schedule 3 to the MASC Regulations.
9. The representative of the Secretary of State supported the appeal in the submission dated 1 July 2003. The absent parent and the parent with care commented in response, but those comments did not take the legal questions any further forward. Because of the existence of a number of conflicting Commissioners' decisions, including one from a Commissioner in Northern Ireland, I directed an oral hearing, together with a further written submission in advance from the Secretary of State (dealing with the various decisions). That further submission was delayed, so that the oral hearing had to be postponed from the first date fixed. The hearing took place on 13 January 2004. The parent with care did not attend. The absent parent attended with his partner. The Secretary of State was represented by Mr Leo Scoon of the Office of the Solicitor to the Department for Work and Pensions.
10. At the hearing, the absent parent said that, if I were to set the appeal tribunal's decision aside (in accordance with the provisional view that I had expressed), he would prefer me to deal with the whole case rather than refer it to a new appeal tribunal for rehearing. He had given further oral evidence about the circumstances and thought that some confirmatory documentary evidence would be readily available. I therefore directed, as confirmed in a written direction dated 13 January 2004, that he was to have 14 days in which to send in originals or copies of specified documents, and the other parties were then to have the opportunity to comment on the documents and whether I should substitute a decision. Unfortunately, when the absent parent sent in some documents (received on 26 January 2004) he said that he did not want them disclosed to the parent with care. On being told that evidence could not be considered by the Commissioner if it was withheld from any party, the absent parent withdrew the documents. After being informed of what had happened, neither the Secretary of State nor the parent with care has objected to my substituting a decision on the facts.
11. I am afraid that there has been a further delay in issuing this decision. It was almost ready to issue when I learnt that an application for leave to appeal to the Court of Appeal against the decision of Mr Commissioner Jacobs in decision CCS/4994/2002 was to be heard on 9 March 2004 (under the name of Pabari). The result of the hearing was that Lord Justice Keene granted the parent with care in that case leave to appeal, although it is not clear to me how following either of the two other decisions referred to rather than CCS/4994/2002 would help the parent with care in that case. The three decisions are those mentioned in paragraphs 9 above and 13 to 23 below and discussed at the oral hearing.
12. I have decided after considering the issue for some time not to defer the present case to wait for the outcome of the appeal in Pabari and not to ask for the views of the parties about a possible deferral. In social security cases there will often be a deferral in similar circumstances, because there are administrative mechanisms by which the Secretary of State can prevent a claimant from gaining any practical benefit from a favourable decision by a Commissioner while a case on the same issue is pending in the Court of Appeal. Those mechanisms are not present in child support cases, where inevitably a decision in favour of one parent will be unfavourable to the other parent. For any Commissioner's decision to be challenged on a point of law a party has to go to the Court of Appeal, so that the existence of another case pending before the Court of Appeal does not seem in itself a good reason for delaying a decision. In addition, it is not known when the decision in Pabari will be made, on the assumption that the parent with care in that case does lodge an appeal, but it is not likely to be for many months. I have not sought views on whether I should defer making a decision. The most important views would be those of the two parents involved, but their views would probably depend a great deal on whether they had won or lost in my decision and they could not know the result in advance. It is better, for the resolution of the present case and generally, for me to state the clear view which I have formed of the law.

Housing costs "necessarily incurred": the law

13. It is convenient to deal first with the one Commissioner's decision which might be thought to support the appeal tribunal's conclusion in paragraph 16 of its statement of reasons. That is the decision of Mrs Commissioner Brown in Northern Ireland in CSC4/02-03. In that decision the Commissioner disagreed with the earlier decision of Mr Commissioner Williams in Great Britain in CCS/2742/2001. Later, in CCS/4994/2002, Mr Commissioner Jacobs, also in Great Britain, disagreed with the conclusions of CSC4/02-03. I was also referred to a short decision (CCS/3223/2001) where, before CSC/4/02-03, the Commissioner gave directions that were inconsistent with what was later said there. But CCS/3223/2001 does not really add to the competing reasoning. At the oral hearing Mr Scoon for the Secretary of State submitted that CSC4/02-03 was wrongly decided and that the better view was set out in CCS/4994/2002.
14. In CSC4/02-03 the absent parent had had a mortgage on the home with the Halifax Bank, at a discounted interest rate for a period. After the expiry of that period, the absent parent remortgaged with the Alliance and Leicester Building Society, apparently for a shorter term, with the result that there was an increase in the amount of his monthly payments. The appeal tribunal went wrong in ways that I do not need to examine. What matters is what legal principles Mrs Commissioner Brown concluded should apply in such circumstances. She took the view first that the payments on the new mortgage were in respect of the provision of the home within paragraph 1 of Schedule 3. She said (paragraph 27):

"The mortgage was for the purchase of a home, the fact that the lender has changed does not, in my view, mean that the house was not being purchased by means of a mortgage. It is still being so purchased. That being so, and leaving aside the other relevant conditions of Schedule 3 the amounts payable to the Alliance and Leicester by way of mortgage interest on the amount of the mortgage needed to purchase the home is eligible to be taken into account as a housing cost being in respect of the provision of a home and being listed at paragraph 1(b)."

15. The Commissioner then said of the condition in paragraph 4(1)(a) of Schedule 3 (paragraph 30):

"It imposes no limit on the amount to be allowed other than that it is the amount payable. It appears to me that paragraph 4(1)(a) relates to purpose, ie in this case the purpose of purchase. If mortgage interest was necessarily incurred for the purpose of purchasing the home then the amount of that mortgage interest is to be included as a mortgage cost subject only to the other provisions of paragraph 4."

The Commissioner applied the same test to repayments of capital (allowed for purposes of exempt income only in paragraph 3(2) of Schedule 3) as to payments of mortgage interest and, in answer to the point that her test might allow parents to manipulate the amount of housing costs going into the formula, pointed out that there were controls on excessive housing costs in regulation 18 of the MASC Regulations.

16. When giving directions to a new appeal tribunal the Commissioner did, though, suggest that (as no repairs or improvements were involved in that case) mortgage interest and repayments of capital would count as housing costs only in relation to the amount of the remortgage loan that had been needed to pay off the old mortgage and to cover any arrangement fees or costs included in the remortgage. Thus, even CSC4/02-03 would not have supported the appeal tribunal's approach in the present case. It would have required at least some investigation of what the £40,000 was used for, since there appeared only to be about £34,600 needed to pay off the old endowment mortgage.
17. I do not accept the analysis of the legislation in CSC4/02-03. It is simplest for me to explain what seems to me the right analysis before going on to CCS/4994/2002. I must say at the outset that the various parts of Schedule 3, especially as they have been amended over time, do not fit well together, so that any analysis is likely to leave some loose ends and/or to involve giving a strained meaning to some words or other. However, I think that the legislation can properly be interpreted to give a workable and reasonable scheme.
18. There is a general condition in paragraph 1 of Schedule 3 that to be eligible to be counted as a housing cost a payment must be "in respect of the provision of a home". In Commissioner's decision R(CS) 12/98 it was said that that would cover the initial acquisition of a home, repairs and improvements and actions which are necessary to consolidate the right to occupancy of the home. However, that seems too narrow a view when applied to the current provisions of Schedule 3. That is partly because paragraph 1 must be interpreted so as to include the case of a loan taken out to pay off an existing loan under paragraph 1(t) (which in many cases would not come within the strict test of R(CS) 12/98 because the right to occupy the home is already secure). And at the dates relevant in R(CS) 12/98, paragraph 4(1)(a) merely required housing costs to have been incurred in respect of the parent's home and there was no other provision in Schedule 3 to apply any limitation in terms of the purpose of incurring the costs such as mortgage interest or the repayment of capital on loans secured on the home. There is now no need to put too great a weight on the general condition in paragraph 1 because of the new form of paragraph 4(1)(a) from January 1997. In addition, paragraph 1 is subject to the following paragraphs of Schedule 3, so that payments not falling within paragraph 1 are capable of being housing costs (such as repayments of capital for the purpose of exempt income: paragraph 3(2)). For those reasons, the general condition in paragraph 1 should operate only in a fairly broad way to exclude payments which are completely unconnected with the continuing provision of a home, such as the taking out of a mortgage or other loan secured on the home to raise capital for business purposes or personal expenditure like a holiday or a wedding. So far, my analysis is consistent with CSC4/02-03.
19. I also agree that paragraph 4(1)(a) is concerned with the purpose of a housing cost, but I do not agree that that requires ignoring questions of the amount of the cost involved. Paragraph 4(1)(a) must be read so as to be consistent with paragraph 1(t). Therefore, the restriction (outside repair and improvement cases) to the purposes of purchasing, renting or otherwise securing possession of the home cannot be given its most natural meaning, which would I think be limited to securing the initial possession of the home. That would exclude any mortgages or loans taken out to pay off existing mortgages or loans, and possibly any second mortgages or further loans except where some additional interest in the home is purchased. That cannot be right, as it would mean that paragraph 1(t) could not have any practical application. Therefore, in my judgment paragraph 4(1)(a) must be interpreted in remortgage-type cases as imposing a two-stage test. The first stage is met in so far as the new loan is for the purpose of paying off an existing loan that qualified for housing costs under the legislation as it applied when the question first arose for child support purposes. The first stage would also be met in so far as the new loan was for the purpose of purchasing etc some part of the home or for carrying out repairs and improvements. However, if the first stage of the test is satisfied, the second stage is to ask, looking at the new transaction as a whole, including all its terms and conditions, especially as to the interest rate, term of the loan and level of periodical payments required, whether the housing costs that would otherwise be calculated on the new mortgage or loan were necessarily incurred.
20. The second-stage question has to be asked in the context of the child support scheme as a whole, with its emphasis on the responsibility of any parent for the maintenance of a qualifying child. The question is not whether the incurring of the particular housing costs is absolutely necessary, but whether it is necessary in a common sense and reasonable way, bearing in mind the interests of all concerned in a child support case and not merely the personal interests of the parent concerned. The absent parent in the present case submitted that it would be unfair if a parent could move to a new and more expensive home and have all of the mortgage payments allowed as housing costs necessarily incurred for the purpose of purchasing the home (subject to a maximum limit), but a more stringent rule were applied to parents who stayed in the same home and took out loans for improvements etc. That might just be one of the loose ends mentioned above. But I think that there is not an unfair difference, as even in the case of a purchase of a new home, when the first stage of the test in paragraph 4(1)(a) of Schedule 3 is satisfied, the terms of the mortgage might be examined at the second stage of the test (although I do not have to decide the point).
21. I therefore disagree with the approach in CSC4/02-03, which would have excluded my second-stage question. In my view, the words of the legislation do not bear the narrower meaning given to them by Mrs Commissioner Brown. Nor do I agree that restricting the amount of housing costs to be allowed by reference to what would have been paid if some other loan arrangement has been made or had stayed in existence would amount to allowing notional or former housing costs. It is simply providing a measure of how much of actual housing costs have been necessarily incurred.
22. It follows that I agree in general with Mr Commissioner Jacobs' analysis of the legislation in CCS/4994/2002, and in particular with what was said in paragraphs 44 and 45 of that decision about CSC4/02-03. I have found it necessary in paragraphs 19 and 20 above to divide the relevant questions into two stages, in a way which Mr Commissioner Jacobs did not do. However, it seems to me that paragraphs 46 to 49 of CCS/4994/2002 (which I do not need to set out here) can be read quite consistently with my slightly more complicated two-stage approach.
23. I should also briefly mention decision CCS/2742/2001. There Mr Commissioner Williams upheld an application of paragraph 4(1)(a) of Schedule 3 to the MASC Regulations and a finding that the full housing costs were not necessarily incurred, where a parent had reduced the outstanding term of a 25 year mortgage with 23 years to run to 10 years. That result is entirely consistent with my analysis above. However, the decision was slightly misleading in suggesting that R(CS) 12/98 said anything about the terms of paragraph 4(1)(a) and that paragraph 3(6)(a) of Schedule 3 was relevant. Paragraph 3(6) is only concerned with the allowance of payments of capital as housing costs for the purposes of exempt income and excludes the allowance of the payments listed. In particular, under sub-paragraph (a) it excludes the allowance of capital payments in excess of those required to be made under the mortgage or loan agreement. In the context, the purpose is plainly to exclude voluntary payments to reduce the amount of capital outstanding on existing mortgages or loans. Paragraph 3(6)(a) does not add anything to the test in paragraph 4(1)(a) relating to the purpose of taking out a mortgage or loan.

The application of the law to the appeal tribunal's decision

24. It is absolutely plain that both the Secretary of State in making the decision of 22 May 2001 and the appeal tribunal adopted a wrong legal approach. Taking the view that, because a parent has to make the payments legally due under a mortgage on the home, with a threat in the background of repossession if payments are not made, the payments are necessarily incurred for the purpose of securing possession of the home within paragraph 4(1)(a) of Schedule 3 to the MASC Regulations is inconsistent with all of decisions CCS/2742/2001, CSC4/02-03 and CCS/4994/2002 as well as with my view of the law. A result of taking that wrong approach is that the appeal tribunal failed to investigate and deal with the question of how the test of "necessarily incurred" actually applied in the circumstances of this case and failed to make the necessary findings of fact. It wrongly thought that the case was concluded by the fact that the absent parent had a mortgage under which he was liable to pay £694.79 per month. For all those reasons, the appeal tribunal's decision must be set aside as wrong in law.
25. As noted in paragraph 10 above, there is general acceptance among the parties that I should substitute a decision on the parent with care's appeal against the decision of 22 May 2001. I do not have the benefit of the additional documents sent in and then withdrawn after the oral hearing, but I am satisfied that the absent parent's evidence given at the oral hearing gives an adequate basis for a decision. Accordingly, I substitute the decision explained below.

The application of the law to the facts of the present case

26. The general background is set out in paragraphs 2 and 3 above. I shall not repeat that here, but add some relevant details from the absent parent's evidence to me, which I accept, and from documents which were before the appeal tribunal. His evidence was that before the remortgage in October 2000 he had received information from the insurance company administering his endowment policy that the projected proceeds of £22,000 would be below what would be needed to pay off the capital outstanding at the end of the mortgage term. It appears that there was at that time about £34,600 outstanding. I do not have a copy of the relevant letter, but I have no difficulty in accepting from general public knowledge of the performance of endowment policies that there would be such a substantial projected shortfall on realistic assumptions about growth rates. In October 2000 the existing endowment mortgage had about 13 years to run. The home improvement loan mentioned at the end of paragraph 2 had by then been paid off. The absent parent was advised by a friend who was a financial adviser to change to a repayment mortgage, which would ensure that the capital was paid off over the term and could produce some extra capital for purposes mentioned below. The absent parent took out a mortgage of £40,000 on 19 October 2000 and kept the endowment policy running as a savings plan. I shall come back to the terms of the mortgage below.
27. One purpose of the new mortgage was to pay off the existing mortgage. Other purposes included the following. The absent parent had carried out works to the kitchen and bathroom. These were partly paid for by the proceeds of an insurance claim, but he had also borrowed £2,000, interest-free, from his father to start the works and there was another £700 to be met. When the absent parent got the balance of capital from the new mortgage, he repaid his father. The absent parent had been in negotiation with the local authority from January 2000 or before to buy the garage and driveway attached to his home. The home had been bought from the local authority, but at that time the garage and driveway had remained in the local authority's ownership and were rented to the absent parent. The sum agreed, I am not sure exactly when, was £6,500. The intention was for the garage to be altered so as to create an additional bedroom. Because the local authority was not prepared to exchange contracts until it had approved the plans for alteration, completion did not take place until January 2001. The alterations have not yet been done.
28. The new mortgage was for a term of 10 years. The absent parent explained that he had in October 2000 recently started a new job building golf courses, which brought in good money, but involved very long hours. He therefore wanted to pay off the mortgage as soon as possible, in case he was unable to keep up with the demands of the job, and felt that he was at the time financially able to meet the level of mortgage payments and to provide for his children. That explains the considerable increase in the level of monthly payments on the conversion from a loan with £34,600 outstanding to one of £40,000, because there were very substantial repayments of capital each month (see the calculation on pages 9 and 10 of the papers).
29. Applying the first stage of the test under paragraph 4(1)(a) of Schedule 3, there is no problem with the £34,600 or so, plus costs, to pay off the existing mortgage. That would fall within paragraph 1(t) and the extended meaning to be given to paragraph 4(1)(a) as explained in paragraph 19. There is a potential problem with the other expenditure, which comes to quite a bit more than the balance of the £40,000. The paying off of the £2,000 loan from the absent parent's father, which happened before the £6,500 for buying the garage had to be paid out, would arguably not qualify under paragraph 1(t). The interest-free loan had given rise to no amounts that could have qualified as housing costs. If the paying off of the £2,000 loan was said to be for the purpose of carrying out repairs and improvements to the home, there might be a difficult question whether that could be so when the repairs and improvements to the kitchen and bathroom had already been carried out. But I do not need to grapple with those questions. I am satisfied that one of the purposes of taking out the £40,000 mortgage in October 2000 was that the absent parent would have sufficient funds to buy the garage and driveway whenever that transaction was completed. Some sensible flexibility must be used in deciding what the purposes of a loan are and I conclude that that did not cease to be a purpose of the £40,000 mortgage because of the repayment of the £2,000 loan. Further, I am satisfied that as at 19 October 2000 and immediately thereafter the garage and driveway was part of the absent parent's home, especially as it was already being occupied as part of the dwelling as a whole. That is within the definition of "home" in regulation 1(2) of the MASC Regulations. Therefore, a purpose of taking out the mortgage of £40,000 was the purchase of a part of the home, which in my judgment is within the meaning of paragraph 4(1)(a) of Schedule 3.
30. As the sum of £34,600 and £6,500 exceeds £40,000, I conclude that the whole of the mortgage of £40,000 satisfied the first stage of the test under paragraph 4(1)(a). But how far is the second stage of the test satisfied?
31. Looking at the overall purposes of the new mortgage, and adopting the approach in CCS/2742/2001 and CCS/4994/2002, I am satisfied that the change from an endowment mortgage to a repayment mortgage does not in itself take the circumstances outside the category of housing costs necessarily incurred. Parents should not be penalised for taking steps to ensure that mortgages and loans secured on the home can be paid off by the end of the term of the loan.
32. There is, however, a question mark over the balance of the £40,000 remaining after the paying off of the existing mortgage of £34,600. The parent with care has complained throughout that the absent parent has not carried out any alterations after buying the garage and has provided evidence to that effect. She has described the absent parent's letter of 17 March 2001 as in effect an attempt to deceive by giving the impression that a new bedroom had already been built. I think that that last point loads far too much on small matters of grammar or language when the letter was giving no more than a brief summary of what had happened. It was certainly the case that by 17 March 2001 the garage and driveway had been bought and the £6,500 had been spent. However, it could possibly be argued that the absent parent had not established any real point in buying the garage and driveway, which he already occupied under a lease, and that there was no real intention to carry out the alterations. I reject that argument. The copies of letters from the local authority and the absent parent's solicitors (see pages 42 to 47 of the papers) show clearly that approval of the proposed alterations was an issue from before November 2000. It can be inferred that the proposals were genuine, as, if they were not, there would have been no point in complicating what would otherwise have been a straightforward transaction to buy the garage and driveway to continue their use in that form. I conclude that therefore, in terms of purpose, there is not a problem with the second stage of the test in paragraph 4(1)(a) of Schedule 3.
33. Finally, the terms of the new mortgage must be examined. Here, I conclude that the second stage of the paragraph 4(1)(a) test is not met. That is because of the short period of the term of the new mortgage, which is reflected in the substantial increase in the monthly payments made by the absent parent. The 10-year term was three years shorter than the period outstanding on the old mortgage and on the endowment policy. I appreciate the reasons why, from a purely personal point of view, the absent parent wished to pay off the new mortgage as quickly as possible while he thought that his earning capacity could stand the expenditure. That would mean paying considerably less interest in total and he would then keep the proceeds of the endowment policy free of any liability to pay off the mortgage. However, as explained in paragraph 20 above, the question of whether housing costs have been necessarily incurred must be asked in the child support context and holding a balance of the interests of all concerned. And although I make no finding that this was part of his express intentions, a substantial increase in his expenditure on housing costs would, if accepted in its entirety, inevitably have a substantial effect on the amount of child support maintenance he was required to pay. In my judgment, the absent parent has not shown that the levels of interest and capital repayments required by a mortgage over a 10-year term were necessarily incurred.
34. The difficult question is then to set the level at which the housing costs can be accepted as necessarily incurred and the excess disallowed. I accept that when taking out a mortgage at the stage of life reached by the absent parent many people would not want to undertake a full 25-year term. On the other hand, this is not a case like CCS/4994/2002, where the absent parent had had to transfer the endowment policies to the parent with care. Here, the absent parent had a choice of taking a mortgage term extending beyond the maturity date of his endowment policy and using whatever proceeds he got from the policy to pay off all or a large part of the capital which would then have been outstanding on the mortgage. Instead, he chose an arrangement which would give him the whole of the proceeds of the policy as an investment gain. The premiums on the policy would no longer qualify as a housing cost, but the capital value of the policy while it was running would not affect his child support liability. Weighing up all the circumstances, I conclude that the housing costs stemming from the £40,000 mortgage were necessarily incurred only to the extent that they would have been incurred if the absent parent had taken out a mortgage with a 20-year term on 19 October 2000.
35. I have not forgotten that the absent parent has said that before he took out the new mortgage he spoke to an officer in the Child Support Agency and was told that the increase in housing costs was in order. It is credible that such information might have been given on the basis of the view of the law taken in the Secretary of State's written submission to the appeal tribunal. However, I have already explained why that view of the law was mistaken. I must set out what in my judgment are the correct legal principles and determine the case accordingly.
36. I therefore allow the parent with care's appeal against the Secretary of State's decision of 23 May 2001 and direct that the Secretary of State is to recalculate the amount of the child support maintenance with effect from 21 March 2001 on the basis that the absent parent's housing costs are to be limited to the amounts of mortgage interest and repayment of capital which would have been made from that date if the mortgage taken out on 19 October 2000 had been for a 20-year term instead of for a 10-year term. The formal decision to that effect is set out in paragraph 1 above. If any party disputes the result of that process of recalculation (as opposed to challenging the basis on which I have directed that it is to be carried out) the case may be referred to me (or if necessary to another Commissioner) for further decision.

(Signed) J Mesher

Commissioner

Date: 31 March 2004