Can entering into an Individual Voluntary Arrangement ('IVA') reduce the liability of the non-resident parent ('NRP') for child maintenance? That was essentially the question in Child Maintenance and Enforcement Commission v Beesley & Anor  EWHC 485 (Ch), decided this week.
The facts were that the NRP owed some £25,000 in arrears of child maintenance. On the 11th March 2009 an IVA was approved by his creditors, under which they would receive a total of £0.27p in the pound over a period of 5 years, in full and final settlement of his liabilities. At that date, the arrears of child maintenance represented 94% of his debts. The Child Maintenance and Enforcement Commission ('CMEC') were aware of the proposed arrangement, but did not attend the meeting at which it was approved because it contended that child maintenance is not a debt which can be included within an IVA. Had CMEC attended and voted, it would have been able to defeat the approval of the IVA, assuming that it was entitled to vote.
The NRP contended that CMEC was bound by the terms of the IVA. Obviously, CMEC were concerned by this, as if they were bound then it would provide a relatively easy means by which an NRP in arrears could evade his or her liability to pay all the arrears that had accrued. CMEC therefore claimed that it is not a creditor for the purposes of an IVA or, if it was, it sought an order pursuant to s.262 Insolvency Act 1986 revoking the approval given to the NRP's proposal, on the ground that the terms of this particular IVA were unfairly prejudicial to CMEC.
His Honour Judge Pelling QC found that CMEC was to be regarded as a creditor for the purposes of the IVA. However, he went on to find that CMEC had been unfairly prejudiced by the approval of the IVA because it had been deprived of its right to collect or enforce the arrears in full, irrespective of whether the NRP was made bankrupt. Accordingly, the s.262 application succeeded, and an order was made revoking of the approval of the proposal given at the creditors meeting held on 11th March 2009.
And what of the parent with care ('PWC') and the child or children? Well, they do get a mention in relation to any shortfall between the amount owed and the amount that is actually recovered: "To the extent that the sum outstanding exceeds the amount of relevant benefits received by the PWC in this case that is a prejudice in respect of which the real loser is the PWC and the child or children for whose ultimate benefit the child maintenance calculation had been made." Quite.