AE v The Secretary of State for Work and Pensions & Anor

For a variation based on assets exceeding the prescribed value, regulation 69A of the Child Support Maintenance Calculation Regulations 2012 is not limited to cases where the whole asset can reasonably be paid or enforced. Partial payment or enforcement may suffice, provided it is reasonable and the resulting variation is just and equitable. A director’s loan is ordinarily a chose in action rather than money, because a further step is required before repayment becomes due. In assessing whether a variation is just and equitable, the decision-maker must consider relevant associated liabilities as well as assets.

The appellant challenged a First-tier Tribunal decision concerning the child-maintenance liability of the second respondent, the non-resident parent. The dispute concerned a director’s loan of £748,858 owed to him by a company which he owned and controlled.

The First-tier Tribunal accepted that partial enforcement could fund an increased maintenance liability, but held that regulation 69A did not permit a variation unless enforcement of the whole chose in action, or payment of the whole debt, would be reasonable. It therefore made no asset-based variation. The central issues before the Upper Tribunal were the proper characterisation of the loan, whether regulation 69A permitted partial enforcement, and what had to be considered under the just and equitable requirement.

1. Appeal allowed. The First-tier Tribunal’s decision involved an error of law. It was set aside under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007, and the case was remitted under section 12(2)(b)(i) to a fresh First-tier Tribunal panel.
2. The director’s loan was a chose in action within regulation 69A(2)(h), not money under regulation 69A(2)(a). A further step, such as a demand or the occurrence of contractual repayment conditions, was required before payment became due.
3. Regulation 69A(2)(a) and (h) do not require payment or enforcement of the whole asset. Partial payment or enforcement may form the basis of a variation where partial enforcement is possible, practical and reasonable. The First-tier Tribunal wrongly treated the provisions as requiring whole-asset payment or enforcement. The approach is informed by the principle in section 28E(2)(a) of the Child Support Act 1991 that parents should maintain their children whenever they can afford to do so (paras [45]-[58]).
4. The reasonableness approach is not more robust merely because regulation 71 concerns diversion of income. The same statutory principles inform both provisions. The observations in AB v Secretary of State for Work and Pensions and RS (CSM) [2021] UKUT 129 (AAC) were non-binding dicta, but provided a permissible and compelling approach.
5. Whether a variation is just and equitable under section 28F of the Child Support Act 1991 involves a broad discretion. Relevant liabilities must be considered alongside assets. A variation based on an asset wholly funded by an equal borrowing liability would not be just and equitable. The Tribunal had failed to make findings about the borrowing used to fund the loan, outstanding liabilities and the terms on which the loan could be enforced (paras [59]-[64]).
6. Further fact-finding was required, and the Upper Tribunal lacked the financially qualified members available to the First-tier Tribunal. Remittal for rehearing by a new panel was therefore required.

• First-tier Tribunal (Social Entitlement Chamber): on 24 July 2023, allowed the maintenance appeal in part but declined to make a variation under regulation 69A in respect of the director’s loan.
• Upper Tribunal (Administrative Appeals Chamber): allowed the appeal, set aside the First-tier Tribunal’s decision for error of law, and remitted the case for rehearing by a fresh panel.