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

The Appellant is the father of AH, IH and RH (together ‘the Children’). The Second Respondent is the Children’s mother and the Appellant’s former partner.

By a decision dated 24 November 2021, the First Respondent determined that the Appellant was liable to pay Child Maintenance (‘CM’) at a rate of £144.19 per week from 25 September 2021 in respect of the Children. CM was assessed on the basis of the Appellant’s historic annual income as declared to HMRC for the 2019/2020 tax year (£50,792) and on the basis of shared care ‘Band O’ for AH and ‘Band B’ for IA and RH.

The Appellant requested a Mandatory Reconsideration and variation of the decision dated 24 November 2021 on the grounds that (i) the First Respondent ought not to have used the income figures for the 2019/2020 tax year as he was trading in a partnership with the Second Respondent, the relationship with the Second Respondent had ended and she had left the business, he was now trading as a sole trader and the sole trader business had not yet produced any accounts; (ii) the band of shared care ought to have been ‘Band B’ for all the Children; and (iii) he had to incur additional costs in picking up and dropping off the Children during the relevant period and such costs ought to be taken into account.

On 3 February 2022, the First Respondent refused to vary the CM assessment on the grounds that the Appellant had to incur additional costs in picking up and dropping off the Children. The First Respondent determined that the request to vary did not meet the requirements of Regulation 57 of the Child Support Maintenance Calculations Regulations 2012 (‘the Regulations’).

By a Mandatory Reconsideration Notice dated 4 February 2022, the First Respondent found that the initial CM assessment was incorrect because the band of shared care for all Children ought to have been ‘Band A’. The First Respondent, accordingly, determined that the Appellant was liable to pay CM at rate of £152.67 per week from 25 September 2021 in respect of the Children. The First Respondent rejected the Appellant’s assertion that the income figures for the 2019/2020 tax year ought not to have been used on the basis that the Appellant had not provided a completed self-assessment tax return for any later period.

On 9 March 2022, the Appellant lodged an appeal against the Mandatory Reconsideration dated 4 February 2022. The appeal was heard by the First-tier Tribunal (‘the FtT’) sitting at Cardiff on 20 October 2023. The FtT treated the appeal as an appeal against the First Respondent’s decision dated 24 November 2021 (as revised on 4 February 2022) (together ‘the Decision’). The FtT allowed the appeal in part and set aside the Decision. The FtT concluded that: (i) it was unable to calculate the Appellant’s annual ‘Current Income’ as at the effective date 25 September 2021 because the financial information provided by the Appellant was insufficiently clear to comply with the requirements of Regulation 39 of the Regulations; (ii) the FtT was, therefore, “bound to apply the historic income figure”, namely the income figures for the 2019/2020 tax year; (iii) no shared care allowance was to be made in respect of AH; and (iv) the band of shared care for IA and RH was ‘Band B’. The FtT remitted the matter to the First Respondent to recalculate the weekly CM rate as at the effective date 25 September 2021 in accordance with its findings.

The Appellant then applied to the Upper Tribunal for permission to appeal. Following a remote oral hearing by Cloud Video Platform on 21 February 2025 and without formally limiting the grounds of appeal, Upper Tribunal Judge Fitzpatrick granted permission to appeal on broadly the following grounds:

In her written submissions on behalf of the First Respondent, Ms Lauren Foody confirmed that the First Respondent supports the appeal, does not require an oral hearing and invites the Upper Tribunal to set aside the FtT’s determination and to remake the decision itself.

Although the Second Respondent has made some very brief comments by email in response to the appeal before the Upper Tribunal, her comments do not go to the substance of any issues arising in the appeal.

The Appellant has filed a brief reply to the First Respondent’s submissions. The Appellant confirmed that he too does not require an oral hearing, is content for the Upper Tribunal to remake the decision if it is able to do so and that he is able to provide any further information or explanation that may be required.

As no party has asked for an oral hearing and the Appellant and First Respondent have provided detailed written submissions, I have decided that I can fairly determine the appeal on the papers and that it proportionate and in the interests of justice to do so.

Not least given the First Respondent’s support for the appeal, I am persuaded that the FtT erred in law for the reasons set out below.

The FtT’s reasons are primarily set out in the Decision Notice dated 20 October 2023 as opposed to in the separate Statement of Reasons. At paragraphs 3 and 4 of the Decision Notice, the FtT concluded as follows:

“3.

The tribunal found it was unable to calculate annual Current Income for [the Appellant], at the effective date of 25/9/2021. This was because the information provided by [the Appellant] was insufficiently clear to comply with the requirements of Regulation 39 of [the Regulations]. His work status remained being self employed, albeit his partnership with [the Second Respondent] changed from 1/4/2021.

4.

The decision of the Respondent used Historic Income for the tax year from HMRC 2019/20 of £50,792.00. The law says this Historic figure has to be used, unless the difference between the Current Income and Historical Income is at least 25%. Given there is no ability to calculate Current income, the Tribunal is bound to apply the historic income figure.”

The FtT went on to explain in its reasons at paragraphs 8(o) and (p) under the heading ‘Summary Reasons’ that: (i) whilst the Appellant had provided a 6 month summary of his financial information for the period April to September 2021, that did not cover the ‘relevant period’ as defined in Regulation 39 of the Regulations; (ii) whilst the Appellant had provided “significant amounts of other materials”, he had not provided all of the information requested by the FtT in its Directions Notice dated 11 January 2023; (iii) that made it “difficult to place reliance on the discrepancies between the summary and subsequently provided accounts, covering the financial year 1/4/2021 – 31/2/22”; and (iv) “The tribunal found it difficult to understand and reconcile the turnover with the documented state in the accounts”. The FtT went on at paragraphs 8(q) and (r) to conclude that, in the circumstances, it did not consider there was a “sufficiently clear basis” to calculate the Appellant’s ‘Current Income’ and so it had to use the Appellant’s ‘Historic Income’.

In considering and determining the appeal, the FtT was under a general duty to make adequate findings on relevant issues (Benmax v Austin Motor Co Ltd[1955] AC 370 at 373). That required the FtT to assess and evaluate relevant evidence.

The FtT was also under a general duty to give adequate reasons to explain how relevant findings were made and its conclusions. In Re B (Appeal: Lack of Reasons) [2003] FLR 1035 Thorpe LJ stated (at paragraph 11): “I would say that the essential test is: does the judgment sufficiently explain what the judge has found and what he has concluded as well as the process of reasoning by which he arrived at his findings, and then his conclusion?”. Similarly, at paragraph 2 of the decision in CCS/2152/04, the Tribunal noted that: “It is well established that even if a decision itself may be sound, it amounts to an error in law making it necessary for the decision to be set aside if sufficient findings and reasons are not spelt out to give the parties a reasonable understanding of the basis on which it has been reached. This is a necessary safeguard since otherwise it is not possible to know whether the tribunal may have misdirected itself or omitted to take account of some material consideration in the case”.

I am satisfied that the FtT failed to make adequate findings of fact and/or failed to give adequate reasons for its conclusion that it was unable to calculate the Appellant’s annual ‘Current Income’ because the financial information provided by the Appellant was insufficiently clear.

By way of example only, the FtT did not properly and adequately set out and explain: (i) how and in what respects the information provided by the Appellant was “insufficiently clear” and/or how and in what respects it did not comply with the requirements of Regulation 39 of the Regulations; (ii) precisely what information that had been requested by the FtT in its Directions Notice dated 11 January 2023 did the Appellant fail to provide; (iii) what was the significance of the missing information; (iv) how and why did the missing information prevent the FtT from calculating the Appellant’s Current Income; (v) what information and documents were included within the “significant amounts of other materials” provided by the Appellant; (vi) what it made of that material; (vii) how and why that material was insufficient to ‘plug’ any gaps created by the missing information so as to enable the FtT to calculate the Appellant’s Current Income; (viii) to what ‘discrepancies’ between the summary and subsequently provided accounts was the FtT referring; (ix) the precise nature, significance and relevance of the discrepancies; (x) how and why the discrepancies were of such a nature that they prevented the FtT from being able to calculate the Current Income; (xi) how and why did the FtT find it difficult to understand and reconcile the turnover with the documented state in the accounts; and (xii) what specific aspect(s) of the turnover and documented state of the accounts could the FtT not reconcile.

In short, whilst the FtT set out its conclusions, it did not properly and adequately explain the process of reasoning by which it arrived at those conclusions. This meant that it failed to give sufficient reasons so as to give the parties a reasonable understanding of the basis upon which it reached its conclusions.

I am satisfied that the FtT’s failures as set out above amount to errors of law.

By paragraph 2 of the Directions Notice dated 11 January 2023, the FtT directed the Appellant to provide various financial information and documents. The Appellant argued in relation to the 2021/2022 tax year (which is the year in respect of which he claimed a significant reduction in his earnings), that he had provided all the information the FTT had requested, including that requested at paragraph 2(f) of the Directions Notice, namely details of other income, staff costs, cost of raw materials and consumable and other charges. At paragraph 8(p) of the Decision Notice, the FtT noted that whilst the Appellant had provided “significant amounts of other materials”, he had not provided “all” of the information and documents requested by the FtT in its Directions Notice dated 11 January 2023. The FtT did not, however, set out or explain what information and documents that had been requested by the FtT in its Directions Notice dated 11 January 2023 the Appellant did, in fact, provide.

I note that the Appellant had at least provided some of the requested information and documents and that these were in the FtT bundle at pages 55-68. The FtT did not specifically refer to those pages of the bundle and/or the information contained therein. There is nothing in the Decision Notice or Statement of Reasons to suggest that that the FtT considered or engaged with the relevant information and documents in any meaningful way. Even if the FtT considered the relevant information and documents, it did not explain what it made of the same. The Decision Notice and Statement of Reasons do not include any analysis of the information and documents at pages 55-68 of the bundle. As noted earlier, the FtT did not adequately explain the particular relevance of the missing information and documents, taken in the broader context of the Appellant having provided “significant amounts of other materials”.

In short, the FtT failed to properly acknowledge that the Appellant had provided at least some of the information and documents requested by the FtT in its Directions Notice dated 11 January 2023, take such evidence into account and/or give proper and adequate reasons as to what it made of that evidence.

I am satisfied that the FtT’s failures as set out above amount to errors of law.

The FtT had not formally directed the Appellant to provide a summary of his accounts for the 2021/2022 tax year in the Directions Notice dated 11 January 2023. He nevertheless provided a 6 month summary of his financial information for the period April to September 2021. At paragraph 8(p) of the Decision Notice, the FtT acknowledged that the Appellant had done so but concluded that that did not cover the ‘relevant period’ as defined in Regulation 39 of the Regulation.

The Appellant says that the FtT did not ask him to provide an estimate or summary for the remainder of the relevant tax year and that had it done so, he would have instructed his accountant to provide the same and that this may have enabled the FtT to calculate his Current Income.

The extent of the Appellant’s income for the 2021/2022 was, on the FtT’s own conclusions, a relevant matter. In those circumstances and in the context of the Appellant having provided some of the information and documents requested in the Directions Notice dated 11 January 2023, “significant amounts of other materials”, and a 6 month summary of the Appellant’s financial information for the period April to September 2021, if the FtT felt that the information was still insufficient for it to calculate the Current Income, the FtT ought, in the exercise of its inquisitorial jurisdiction, to have at least considered adjourning the matter with directions that the Appellant provide specific missing information (for example - a full 12 month a summary of his accounts for the 2021/2022 tax year) and, for example, explain any particular inconsistencies in the financial documents and records. If, having considered the matter, the FtT decided against adjourning, it ought to have given reasons for and explained why it had so decided. It appears, however, that the FtT did not apply its mind to whether the matter should be adjourned with directions.

I am satisfied that the FtT’s failures as set out above amount to errors of law.

I am satisfied that the errors of law identified above are material. The failures identified above go to the heart of the FtT’s decision making process and reasoning. Had the FtT further explored the matter and/or adjourned the matter with directions, it might possibly (and I put it no higher than that) have been able to calculate the Current Income.

As this is enough to allow and so dispose of the appeal to the Upper Tribunal, I need not and do not express any view on the other grounds of appeal and matters raised by the Appellant.

Accordingly, I allow the appeal and set aside the FtT’s decision.

Having carefully considered the evidence and issues that fall to be determined, I am satisfied that it is not appropriate for me to re-make the decision on paper.

The issue of whether it is possible to calculate the Current Income and, if so, to calculate the same, requires facts to be found. The tribunal making those findings of fact will likely require further oral and documentary evidence from the Appellant. The Appellant may need to explain aspects of the financial information and documents and any inconsistencies therein. The FtT will be best placed to make those findings.

Further, the FtT will have the benefit of sitting with a Financially Qualified Member and so will be better placed to evaluate the financial information and documents.

There will need to be a fresh hearing of the appeal before a new FtT. I should make it clear, that the Appellant’s success on this appeal to the Upper Tribunal on error of law says nothing one way or the other about whether the appeal will succeed on the facts before the new FtT. That will be a matter for the new FtT to assess in accordance with the law and on the basis of its findings of fact.

I therefore conclude that the decision of the FtT involves a material error of law. I allow the appeal and set aside the FtT’s decision dated 20 October 2023 (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a)). The case must be remitted for re-hearing by a new FtT subject to the directions above (section 12(2)(b)(i)).