Child Maintenance & Enforcement Commission v Mark Beesley & Darren Richard Whyman
| Jurisdiction | England & Wales |
| Judge | Lord Justice Etherton,LORD JUSTICE TOMLINSON,LORD JUSTICE WARD |
| Judgment Date | 26 November 2010 |
| Neutral Citation | [2010] EWCA Civ 1344 |
| Docket Number | Case No: A3/2010/0769 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 November 2010 |
[2010] EWCA Civ 1344
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Before: Lord Justice Ward
Lord Justice Etherton
and
Lord Justice Tomlinson
Case No: A3/2010/0769
Nicolas Caddick (instructed by Department for Work and Pensions) for the Appellant
David Casement Q.C. and Lisa Walmisley (instructed by Beesley & Co Solicitors) for the Respondents
Hearing dates: 27th October 2010
Lord Justice Etherton:
Introduction
This appeal concerns an important issue as to whether the appellant, the Child Maintenance and Enforcement Commission (“the Commission”), is a creditor capable of being bound by the individual voluntary arrangement (“IVA”) of a non-resident parent who has failed to pay periodical child support maintenance (“child support”) pursuant to the Child Support Act 1991 (“the CSA”).
The appeal is from an order dated 11 March 2010 of His Honour Judge Pelling QC, sitting as a High Court Judge, by which he declared that the Commission is a creditor capable of being bound by an IVA within the meaning of section 260(2)(b) of the Insolvency Act 1986 (“ IA”). By paragraph 1 of the same order, the Judge set aside the IVA of the Second Respondent, Darren Whyman, on the ground that it unfairly prejudiced the Commission within the meaning of IA section 262(1). There is a cross-appeal by Mr Whyman against that part of the order.
Background
The Commission, operating as the Child Support Agency, exercises the functions of the Secretary of State for Work and Pensions under the CSA.
Mr Whyman is the non-resident parent of a child (“NRP”). In February 2009 he put forward a proposal jointly with his wife for an IVA, which was approved by their creditors on 11 March 2009. At that date Mr Whyman was £25,610.90 in arrears with child support. His Statement of Affairs included those arrears. They represented some 94 per cent of his liabilities. The only creditor which voted at the meeting was British Waterways, which was owed £381 and which voted by proxy. The Commission did not attend the meeting because it took the view that it was not a creditor capable of voting on, or being bound by, an IVA. The proposal that was accepted was that Mr Whyman's creditors would receive a total of £0.27p in the pound over a period of 5 years in full and final settlement of his liabilities. The First Respondent, Mark Beesley, is the supervisor of Mr Whyman's IVA.
The Commission issued an application on 7 April 2009 pursuant to IA section 263(3) for an order that the First Respondent had incorrectly decided that the Commission was entitled to vote at the meeting on 11 March 2009, or alternatively an order pursuant to IA section 262 revoking the IVA on the ground that it was unfairly prejudicial to the interests of the Commission.
The legal setting
IVA
The statutory provisions concerning IVAs are contained in IA Part VIII. They are supplemented by the provisions in Part 5 of the Insolvency Rules 1986 (“IRR”). So far as relevant to the present case, and rather simplified, they currently provide as follows.
The debtor submits to the nominee, a qualified insolvency practitioner, a document setting out the terms of the voluntary arrangement which the debtor is proposing, and a statement of his affairs containing prescribed particulars of his creditors and of his debts and other liabilities and assets: IA s. 256A(2). The nominee, having received those documents, submits a report to the debtor's creditors, stating (a) whether, in his opinion, (i) the voluntary arrangement which the debtor is proposing has a reasonable prospect of being approved and implemented; and (ii) a meeting of the debtor's creditors should be summoned to consider the debtor's proposal; and (b) if in his opinion such a meeting should be summoned, the date on which, and time and place at which, he proposes the meeting should be held: IA s. 256A(3). The nominee then summons the meeting for that time and place: IA s. 257(1). The persons summoned to the meeting are every creditor of the debtor of whose claim and address the person summoning the meeting is aware: IA s. 257(2).
The creditors’ meeting decides whether or not to approve the proposed IVA, with or without modificiations: IA s. 258(1)(2). The meeting cannot approve modifications without the consent of the debtor, and there are certain modifications which are prohibited by statute: IA s. 258(2)(4)(5). Every creditor who has notice of the creditors’ meeting is entitled to vote at the meeting: IRR 5.21(1). Votes are calculated by reference to the amount of the debt owed to each creditor: IRR 5.21(2). A creditor may vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained, and, for the purpose of voting, any such debt is valued at £1 unless the chairman of the meeting agrees to put a higher value on it: IRR 5.21(3). A resolution to approve the proposal for an IVA or a modification of it requires a majority of three-quarters or more (in value) of those present and voting in person or by proxy: IRR 5.23(2).
If the meeting approves the proposed IVA, it binds every person who was entitled to vote at the meeting. IA s. 260 says:
“260 Effect of approval
260(1) This section has effect where the meeting summoned under section 257 approves the proposed voluntary arrangement (with or without modifications).
260(2) The approved arrangement –
(a) takes effect as if made by the debtor at the meeting, and
(b) binds every person who in accordance with the rules –
(i) was entitled to vote at the meeting (whether or not he was present or represented at it), or
(ii) would have been so entitled if he had had notice of it.
as if he were a party to the arrangement”
The person for the time being carrying out the functions of the nominee in relation to the IVA is known as the supervisor: IA s. 263(2).
If the debtor, any of the debtor's creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, they may apply to the court; and on such an application, the court may (a) confirm, reverse or modify any act or decision of the supervisor, (b) give him or her directions, or (c) make such other order as it thinks fit: IA s.263(3).
A creditor who was entitled to vote at the creditors’ meeting summoned under IA section 257, or who would have been entitled if they had had notice of it, may apply to the court on the ground that the IVA approved by the meeting unfairly prejudices their interests: IA s. 262(1) and (2). On such an application, the court, if satisfied of such unfair prejudice, may revoke or suspend any approval given by the meeting or give a direction for the summoning of a further meeting of the debtor's creditors to consider any revised proposal.
There is no general legislative definition of “creditor” for the purposes of the IVA provisions in IA Part VIII. There is, however, a partial definition in IA section 257(3) in Part VIII, which defines the creditors of a debtor who is an undischarged bankrupt, as follows:
“257(3) For this purpose the creditors of a debtor who is an undischarged bankrupt include—
(a) every person who is a creditor of the bankrupt in respect of a bankruptcy debt, and
(b) every person who would be such a creditor if the bankruptcy had commenced on the day on which notice of the meeting is given.”
“Bankruptcy debt” is defined in IA section 382, as follows (so far as relevant):
“382 “Bankruptcy debt”, etc
(1) “Bankruptcy debt” in relation to a bankrupt, means … any of the following—
(a) any debt or liability to which he is subject at the commencement of the bankruptcy,
(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy,
(c) …
(2) …
(3) For the purposes of references in this Group of Parts to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in this Group of Parts to owing a debt are to be read accordingly.
(4) In this Group of Parts, except in so far as the context otherwise requires, “liability” means (subject to subsection (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment and any liability arising out of an obligation to make restitution.”
“Creditor” is defined in IA section 383(1) to mean, in relation to a bankrupt, “a person to whom any of the bankruptcy debts is owed”, and, in relation to an individual to whom a bankruptcy petition relates, “a person who would be a creditor in the bankruptcy if a bankruptcy order were made on that petition”.
It is important to note that, notwithstanding those wide statutory definitions of “bankruptcy debt” and, for the purposes of bankruptcy, “creditor”, not every bankruptcy debt is provable in the bankruptcy. IRR 12.3(1) states the general rule that all claims by creditors are provable as debts against the bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages. IRR...
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