Tuesday Law Report: `Qualifying transfer' for child support

4 November 1998 Secretary of State for Social Security v Henderson Court of Appeal (Lord Justice Simon Brown, Lord Justice Peter Gibson and Lord Justice Schiemann) 18 November 1998

A TRANSFER of part of a beneficial interest in property was a "qualifying transfer" for the purposes of paragraph 1(1) of Schedule 3A of the Child Support (Maintenance Assessments and Special Cases) Regulations 1992, as amended.

The Court of Appeal dismissed the appeal of the Secretary of State for Social Security against the decision of the Child Support Commissioner as to the treatment of the transfer of a part beneficial interest in the respondent's former matrimonial home.

The respondent and his ex-wife had divorced in 1987, when their son was aged six. Financial arrangements for the division of the matrimonial property were made in 1990 under a county court consent order. The order provided, inter alia, that the ex-wife and her son should occupy the family home, which was to be held on trust for sale.

On the sale of the property the net proceeds were to be applied in discharging the mortgage, and subject to that to be divided between the father "as to his appropriate share as hereinafter defined" and the balance to the mother. The "appropriate share" was to be a percentage which would vary according to a formula as follows:

(i) 20 per cent from the date hereof until 31 August 1989;

(ii) 21 per cent on 1 September 1989 and increasing thereafter on the first day of each month at the rate of 1/12 of 1 per cent until sale or other disposal of the property.

The terms were implemented and adhered to until September 1993 when the respondent's ex-wife claimed income support, and for that purpose was required to make a maintenance application under section 6 of the Child Support Act 1991.

The Child Support Appeal Tribunal directed that no adjustment should be made to the respondent's "exempt income" under Schedule 3A to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992, as amended, for any of the transfers and payments he made pursuant to the 1990 court order. The Child Support Commissioner set aside that decision, and the Secretary of State appealed.

Steven Kovats (Solicitor, Department of Social Security) for the Secretary of State; the respondent appeared in person.

Lord Justice Simon Brown said that the sole issue before the Court of Appeal was whether the transfer of part of the respondent's beneficial interest in the house was a "qualifying transfer" as defined in para 1(1) of Schedule 3A of the Regulations, or whether it was excluded by sub-para (d) of that definition because it was a transfer "the effect of which is that the parent with care or a relevant child is beneficially entitled (subject to any mortgage or charge) to the whole of the asset transferred".

It was the Secretary of State's case that the condition in sub-para (d) could not be met because the ex-wife had not become entitled to the entire beneficial interest in the house. The transfer was, therefore, a partial, not a whole, asset transfer. It was submitted that the Commissioner had erred in conflating the words "asset" in sub- para (d), which was intended to refer to a physical item in which it was possible to have legal and equitable interests and "property", which was defined elsewhere in para 1(1) as including "a legal interest or an equitable interest in land".

In Schedule 3A, however, "asset" was defined, in the context of "business asset" to include "an interest in land", and could not be given a wholly different meaning in sub-para (d). Moreover, sub-para (d) required that the transferee be left with "the whole of the asset transferred", not with the whole of something else of which the transferred asset formed part.

In the present case the respondent's ex-wife had become beneficially entitled to the whole of the asset transferred, provided only that the asset transferred was recognised as a 20 per cent beneficial interest in the house.