However this was then appealed in November:
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BANKRUPTCY — Voluntary arrangement — Approval by creditors — Non-resident parent in arrears as to child support and having other debts — Child Maintenance and Enforcement Commission not attending creditors’ meeting endorsing debtor’s individual voluntary arrangement — Whether commission having status as creditor capable of voting on, or being bound by, voluntary arrangement — Whether commission having standing to seek to have approval of voluntary arrangement set aside — Insolvency Act, s 260(2)(b), 262(1)
Child Maintenance and Enforcement Commission v Beesley and another
[2010] EWCA Civ 1344; [2010] WLR (D) 304
CA: Ward, Etherton, Tomlinson LJJ: 26 November 2010
The Child Maintenance and Enforcement Commission was not a creditor of a non-resident parent of a child, who was in arrears as to payment of child support and had other debts, and was therefore not capable of being bound by his individual voluntary arrangement within the meaning of s 260(2)(b) of the Insolvency Act 1986.
The Court of Appeal so stated when, inter alia, (i) allowing the appeal of the claimant, the Child Maintenance and Enforcement Commission, from a decision of Judge Pelling QC who, sitting as a judge of the Chancery Division at Manchester District Registry on 11 March 2010 [2010] 2 FLR 164, had dismissed its claim pursuant to s 263(3) of the 1986 Act for a declaration that the first defendant, Mark Beesley (the supervisor of the individual voluntary arrangement (“IVA”) of the second defendant, Darren Whyman who was a non-resident parent in arrears as to child support and having other debts), had erred in deciding that the commission had been entitled to vote at a creditors’ meeting of 11 March 2009 (which the commission had not in fact attended) and had declared that the commission was a creditor capable of being bound by an IVA within the meaning of s 260(2)(b) of the Act; and (ii) allowing the second defendant’s cross-appeal against the judge’s order pursuant to s 262 of the Act revoking the IVA on the ground that it was unfairly prejudicial to the interests of the commission within the meaning of s 262(1) of the Act.
S 260(2) of the Act provided: “ 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”.
ETHERTON LJ said that it was only possible to make sense of the provisions of Part VIII of the Insolvency Act 1986, against the statutory background of the insolvency regimes of bankruptcy and debt relief orders, the discernible policy of the state in relation to the support and welfare of children, the purpose of an IVA and its function as a consensual agreement of creditors (bound by the decision of the requisite majority), if the creditors entitled to participate in the IVA, and who were bound by it, were restricted to creditors with the capacity to make compromises of debts and liabilities; and such a restriction was a necessary implication in the Act. Having had regard, furthermore, to R(Kehoe) v Secretary of State for Work and Pensions [2006] 1 AC 42, In re Bradley-Hole (A Bankrupt) [1995] 1 WLR 1097, Russell v Russell [1999] 2 FCR 137, In re a Debtor (No 488 IO of 1996); JP v A Debtor [1999] 2 BCLC 571, and Smith v Smith [2006] 1 WLR 2024, the conclusion was that the commission was neither a creditor entitled to vote at the creditors’ meeting called to consider the proposal for the second defendant’s IVA nor capable of being bound by the IVA, because the commission was not capable of compromising the second defendant’s liability in respect of arrears of child support. There would be substituted a declaration that the commission was not a creditor of the second defendant capable of being bound by his IVA within the meaning of s 260(2)(b) of the Act. Furthermore, the judge’s order as to unfair prejudice was to be set aside on the ground that, since the commission was not a creditor for the purpose of the second defendant’s IVA, it had no standing to apply to set aside the approval of the IVA.
TOMLINSON and WARD LJJ agreed.
