Berry v Child Support Agency & Ors [2016] EWHC 1418 (CH)

WTLR Issue: October 2016 #163

JEFFREY BERRY

V

CHILD SUPPORT AGENCY AND ORS

Analysis

The claim was by the administrator of the estate of Norman Tovey (the deceased), seeking directions as to whether the estate should accept and make provision for four alleged liabilities. The deceased’s assets amounted to around £160,000, with £83,000 uncontested liabilities. The alleged liabilities, if valid, would exceed £500,000.

Following the renunciation of the two executors appointed under the deceased’s last will dated 4 November 2011, the deceased’s mother, Mrs Tovey, was appointed administrator of the estate. Because of her age, Mrs Tovey appointed the claimant Jeffrey Berry as her attorney, who is therefore the nominal claimant.

The first liability was a claim by Mrs Tovey that the deceased owed her £325,000. In 2005 Mrs Tovey transferred her property into the joint names of herself and the deceased, but retained absolute beneficial ownership. Mrs Tovey and the deceased obtained a mortgage of £325,000 over the property.

That money was used by the deceased to invest in a company which failed in 2008. Mrs Tovey claimed that the deceased had promised to meet the monthly payments. The deceased stopped the payments in July 2011 due to financial difficulties. As a result, Mrs Tovey felt obliged to sell the property, as well as her flat in London, to pay off the mortgage. The issue was whether the £325,000 was loaned to the deceased by Mrs Tovey, or whether it was her own decision to speculate in the company.

If Mrs Tovey was entitled to repayment of £325,000 the estate would be insolvent. In the circumstances, a further issue arose as to whether two other liabilities were provable debts in the deceased’s estate. The second liability arose from a consent order following the deceased’s divorce from his first wife in July 2006. The deceased breached the agreement in the consent order by stopping payments on his life insurance policy in 2012 and failing to notify his first wife so that she could pay the premiums herself. As a result the policy lapsed caused the loss of £100,000 that would otherwise have been payable on his death. The third liability arose from arrears of £103,000 of child support maintenance payable to the Child Support Agency (the CSA).

The fourth liability concerned a guarantee liability and the question for the court was whether those entitled to the benefit of a guarantee would have an enforceable right against the PRs or other creditors once the estate was distributed

Held

  1. 1) The documentation, including independent correspondence from two solicitors and a document entitled ‘loan agreement’, was more consistent with Mrs Tovey making a loan to the deceased than her personally making a risky investment. The debt claimed against the estate by Mrs Tovey was payable, and it follows that the estate was insolvent.
  2. 2) By virtue of r4.1 of the Administration of Insolvent Estates of Deceased Persons Order 1986 (the 1986 Order), certain provisions of the bankruptcy regime will apply to the insolvent estate of a deceased person. However, it is unclear how much of those provisions apply where there has been no formal bankruptcy process: there appears to be a potential gap in the drafting of the 1986 Order. A living bankrupt is discharged from liability for provable bankruptcy debts but not from liability for non-provable debts. Under r12.3(2)(a) of the Insolvency Rules 1986, non-provable debts include a fine imposed for an offence, an order made in family proceedings or an obligation under the Child Support Act 1991. A living bankrupt cannot walk away from such obligations: the policy is that he remains liable and must work them off. Yet the policy considerations which render court ordered maintenance a non-provable debt for a living bankrupt do not apply to the insolvent estate of a deceased person. By definition, the deceased person cannot work off the financial obligations.
  3. 3) The debt of £100,00 is a liability which the estate must meet, whether or not it is a provable debt. This is because it would be bizarre if the statutory provisions relating to non-provable debts designed to ensure that a parent always pays 100% of a debt relating to child maintenance is turned on its head to say that a parent does not pay at all once he has died. Further, r4.1 of the 1986 Order can be interpreted with regard to the analysis in Child Maintenance and Enforcement Commission v Beesley [2010] EWCA Civ 1344, which favours the preservation of an obligation where the order is for the benefit of a child.
  4. 4) The child support maintenance arrears owed to the CSA are enforced through a statutory regime contained in the Child Support Act 1991, which is a self-contained statutory regime. By virtue of s43A of the 1991 Act, arrears are recoverable as a ‘debt’ from a deceased’s estate. The arrears are a provable debt owed by the estate because they are conceptually different from the non-provable ‘obligation arising under a maintenance assessment’ as referred to by r12.3(2)(a) of the Insolvency Rules 1986. In other words the arrears are not caught by r12.3(2)(a). It makes no difference whether the deceased’s estate is insolvent or solvent. In any event, the above analysis of r4.1 of the 1986 Order as applied to the life insurance debt would also apply to these arrears to produce the same result because the arrears are unambiguously for the maintenance of a child.
  5. 5) As to the fourth liability, given there had been full advertisement in newspapers and the London Gazette seeking claims from creditors against the estate and no claim had been made by those entitled to enforce the guarantee, such persons will have no enforceable right either against the personal representatives, or against the other creditors once the estate had been distributed.
JUDGMENT HHJ McCAHILL QC: Introduction: the deceased, the family and matrimonial proceedings [1] There is before the court a Part 8 claim by the personal representative of Norman Tovey (the deceased) seeking the court’s directions pursuant to CPR Part 64 as to whether the deceased’s estate should accept and make provision for or pay four …
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Counsel Details

Jody Atkinson (St John’s Chambers, 101 Victoria Street, Bristol BS1 6PU, tel 0117 923 4700, e-mail jody.atkinson@stjohnschambers.co.uk), instructed by AMD Solicitors (100 Henleaze Road, Henleaze, Bristol BS9 4JZ, tel 0117 962 1205, e-mail info@amdsolicitors.com), appeared on behalf of the claimant.

Sarah Harman (4 Stone Buildings, Lincoln’s Inn, London WC2A 3XT, tel 020 7242 5524, e-mail clerks@4stonebuildings.com), instructed by Government Legal Department, appeared on behalf of the defendant.

Cases Referenced

  • Child Maintenance and Enforcement Commission v Beesley [2010] EWCA Civ 1344
  • Department of Social Security v Butler [1995] 1 W.L.R. 1528
  • K (Deceased), Re [2007] EWHC 622 (Ch)
  • Symmons v Symmons [1993] 1 F.L.R. 317

Legislation Referenced

  • Administration of Insolvent Estates of Deceased Persons Order 1986
  • Child Maintenance and Other Payments Act 2008
  • Child Support Act 1991, s43A
  • Civil Procedure Rules 1998
  • Insolvency Act 1986, s281, s382
  • Insolvency Rules 1986