Child Maintenance & Enforcement Commission v Mark Beesley & Darren Richard Whyman
| Jurisdiction | England & Wales |
| Judgment Date | 11 March 2010 |
| Neutral Citation | [2010] EWHC 485 (Ch) |
| Court | Chancery Division |
| Date | 11 March 2010 |
| Docket Number | Case No: 3488 of 2009 |
[2010] EWHC 485 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
MANCHESTER DISTRICT REGSISTRY
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
Before :his Honour Judge Pelling Qc
Sitting As A Judge Of The High Court
Case No: 3488 of 2009
Mr Nicholas Caddick (instructed by DWP Legal Service) for the Applicant
The First Defendant did not appear and was not represented
Mrs Lisa Walmisley (instructed by Beesley & Company, Solicitors) for the Second Defendant
HH Judge Pelling QC: :
Introduction
1. Since 1 st November 2008, the Applicant has exercised the functions of the Secretary of State for Work and Pensions (“the Secretary of State”) under the Child Support Act 1991 (“CSA”). The CSA makes provision for the assessment collection and enforcement of periodical maintenance payable by parents of children not in that parent's care. Such parents are referred to by the Applicant as non-resident parents (“NRPs”) and are so described in this judgment. The Second Respondent (“Mr Whyman”) is a NRP who is liable to pay child maintenance for his child by a previous relationship. As at the 11 th March 2009, Mr Whyman was £25,610.90 in arrears with the periodical maintenance payable by him. On that date an Individual Voluntary Arrangement (“IVA”) was approved by Mr Whyman's creditors. The supervisor of Mr Whyman's IVA is the First Respondent. 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.
2. Over 94% of Mr Whyman's total debts at the date when the proposal for an IVA was first put forward were represented by arrears of child maintenance. The Applicant was aware of the proposal but did not attend the meeting at which the proposal was approved because it contends that child maintenance is not a debt which can be included within an IVA. Had the Applicant attended and voted, it would have been able to defeat the approval of the IVA, assuming that it was entitled to vote.
3. The position adopted by Mr Whyman and the First Respondent is that the Applicant is bound by the terms of the IVA. This is a source of concern to the Applicant because it contends that if Mr Whyman and the First Respondent are correct in this assertion it would provide a relatively easy means by which a NRP in arrears could evade his or her liability to pay all the arrears that had accrued.
4. The Applicant's primary case is that it is not a creditor for the purposes of an IVA, in consequence that it is not entitled to vote at a creditors meeting called to approve the IVA and thus is not bound by its terms. Accordingly, pursuant to s.263((3) of the Insolvency Act 1986 (“IA”), the Applicant challenges the decision of the First Respondent that the Applicant is such a creditor. In the alternative, if the Applicant is to be treated as a creditor for the purposes of the IVA, then the Applicant seeks an Order made pursuant to IA, s.262 revoking the approval given to Mr Whyman's proposal on the ground that the terMrs of this particular IVA are unfairly prejudicial to the Applicant.
The Statutory and Legal Framework
5. The Child Support Act 1991
Section 1 of the Child Support Act 1991 (“CSA”) imposes a duty on each parent to maintain a qualifying child and on the NRP to pay child maintenance by periodical payments assessed in accordance with the Act. By CSA s.4 a parent may apply to the Secretary of State for a “ maintenance calculation” in relation to a qualifying child. Where such a calculation has been made, the Secretary of State may on the application of the applying parent arrange for collection of the sums due from the NRP following the making of a maintenance calculation and enforcement of the duty imposed on the NRP by CSA s.1(3) to pay in accordance with the calculation. It is common ground that the parent with care (“PWC”) in this case applied for such a calculation and has applied to the Secretary of State for collection and enforcement.
6. CSA ss.29–41B contains detailed provisions concerning collection and enforcement. There are broadly two routes by which payment may be enforced – the making of a Deduction from Earnings Order (“DEO”) ( CSA s.31) and an application to a Magistrates Court for a Liability Order ( CSA s.33). The PWC has no right to enforce. All rights to collect and enforce are vested in the Secretary of State – see R(Kehoe) v. Secretary of State for Work and Pensions [2005] UKHL 48 [2006] 1 AC 42 per Lord Bingham at Paragraphs 4 and 7. The CSA and the regulations made pursuant to it create a comprehensive code for collection (by the making of a DEO) and enforcement (by application for a Liability Order) – see R(Kehoe) (ante) and Department of Social Security v. Butler [1995] 1 WLR 1528 per Evans LJ at 1531–2. The duty to pay imposed by CSA s.1(3) does not create a civil debt because it can only be enforced by the Secretary of State and then only in the restricted ways identified in the CSA – see Department of Social Security v. Butler (ante) per Evans LJ at 1531–2 and Morritt LJ (as he then was) at 1540–1. There is no power that enables the Secretary of State to agree to accept a lesser sum in satisfaction of an accrued liability under a maintenance calculation unless the calculation is first reviewed superceded or appealed in accordance with CSA, ss.16, 17 and 20.
7. Personal Insolvency
There are three possible regimes to which resort can be had in circumstances of personal insolvency – bankruptcy, Debt Relief Orders and the IVA regime. In relation to Debt Relief Orders (“DRO”) [a new low cost regime introduced by the Tribunals Courts and Enforcement Act 2007 from 24 th February 2009 by the insertion into the IA of a new Part 7A], an individual who is unable to pay his debts may apply for a DRO in respect of his “ qualifying debts”. A “ qualifying debt” is defined as being a liquidated sum payable either immediately or at a certain future date that is not an “ excluded debt” – see IA, s.251A(1) and (2). Any obligation arising under a maintenance assessment under the CSA is an “ excluded debt” for the purposes of IA Part 7A – see r. 5A.2(a) of the Insolvency Rules 1986 (“IRs”). In relation to bankruptcy, although such arrears are a “ Bankruptcy debt” by operation of IA, s.382(1)(a) and s.382(4), such arrears are not provable in the bankruptcy – see IRs, r.12.3(2) —and (absent a direction from the Court) discharge from bankruptcy does not release the bankrupt from any bankruptcy debt arising under a maintenance calculation made under the CSA – see IA, s.281(5)(b). Since arrears are not provable IA s.285(3) is of no application and thus the making of a bankruptcy order does not preclude the making of either a DEO or an application for a liability order.
9. At the meeting, every creditor to whom notice has been given is entitled to vote – see IRs 5.21(1). In order for a proposed IVA to receive approval there must be a majority of three quarters by value of those voting either in person or by proxy – see IRs, r.5.23(1) – unless more than half by value of those voting who are not associated with the debtor vote against the resolution —see IRs r.5.23(4). If approved, then (subject to any challenge under IA, s.262) the IVA becomes binding on every person who was entitled to vote or would have been entitled to vote if that creditor had received notice of the meeting as if that creditor was a party to the arrangement – see IA s.260(2)(b). Thus if the Applicant is to be regarded as being a creditor then the IVA (if and when approved) becomes binding on it whether or not it had notice of the meeting or if it had notice whether it voted or not.
8. In relation to IVAs the position is different. The regime is contained in IA, Part The basic principles are not controversial between the parties. Where a debtor wishes to enter into an IVA he must submit details of his proposal and a statement of affairs to an insolvency practitioner – see IA s.256(2) (where an interim order has been made) and s.256A(2) (where no interim order is made). The statement must include all “ … his debts and other liabilities …”. Since by IA s.382(4), “ liability” means “ … a liability to pay money or money's worth including any liability under any 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” it is common ground between the parties that on any view the debtor must include any child maintenance arrears in his statement of affairs. Once the nominee has reported to the court that a creditors meeting should be convened, the nominee is required to convene such a meeting on the date and at the time and place specified in the report – see IA, s.257(1). The timing of the meeting is prescribed by IRs, 5.17(1) and in a case where no interim order has been made must take place not less than 14 days or more than 28 days from the date when the report was filed with the court. The persons required to be summoned to the meeting are “ … every creditor of the debtor of whose claim and address the person summoning the meeting is aware” – see IA s. 257(2).
10. The meaning of “ creditor” in this context receives only a partial definition being that to be found in IA s.257(3). This definition applies only to “ … the creditors of a debtor who is an undischarged bankrupt …”. Mr Whyman is not and was not at any time material to these proceedings an undischarged bankrupt so that this definition does not assist directly. However, the creditors of such a person are defined as being those who are creditors of the bankrupt “ … in respect of a bankruptcy...
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Child Maintenance & Enforcement Commission v Mark Beesley & Darren Richard Whyman
...commission, from the dismissal in part by Judge Pelling, QC, sitting as a Chancery Division judge at Manchester District RegistryFLR ([2010] 2 FLR 164), of its claim by declaring that the commission was a creditor capable of being bound by an individual voluntary arrangement within the mean......