Bankruptcy - Bankrupt's estate - Vesting in trustee
Raithatha (as Trustee in Bankruptcy of Michael Roy Williamson) v Williamson: Chancery Division (Bernard Livesey QC sitting as a Deputy Judge of the Chancery Division): 4 April 2012
Section 310 of the Insolvency Act 1986, so far as material, provides: '(1) The court may... make an order ('an income payments order') claiming for the bankrupt's estate so much of the income of the bankrupt during the period for which the order is in force as may be specified in the order... (7) For the purposes of this section the income of the bankrupt comprises every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled, including any payment in respect of the carrying on of any business or in respect of any office or employment [and (despite anything in section 11 or 12 of the Welfare Reform and Pensions Act 1999)] any payment under a pension scheme but excluding any payment to which subsection (8) applies.'
The respondent was one of two shareholders and directors of a company (PCL), a quasi-partnership company. The other director and shareholder was M. In 2007, the relationship between them broke down and M issued a petition, pursuant to section 994 of the Companies Act 2006, complaining of unfair and prejudicial behaviour by the respondent towards him as a shareholder and seeking an order that the respondent should be ordered to purchase his shares in PCL. In 2010, a judge ordered the respondent to purchase the shares and for the costs of the action to be paid by the respondent on an indemnity basis. M presented a bankruptcy petition in respect of those costs and a bankruptcy order was made against the respondent.
The applicant in the instant proceedings (the trustee) was appointed the trustee in bankruptcy. The total indebtedness amounted to £1,249,653. The major creditor was M. The sums which the trustee had been able to get were insufficient to discharge the indebtedness. The respondent disclosed in his bankruptcy questionnaire that he had various pension policies and other pension entitlements amounting to between £900,000 and £990,000. However, the respondent, aged 59, had not exercised his right to elect to take a pension and had no intention of doing so in the foreseeable future. The trustee applied for an income payments order (IPO), pursuant to section 310 of the Insolvency Act 1986 (the application).
The trustee also applied without notice for, and was granted an injunction (the injunction) preventing the respondent from dealing with the rights, interests and entitlements under a pension scheme of which he was a member. The respondent, who was discharged from his bankruptcy in November 2011, resisted the application. He contended that the court had no jurisdiction to enable an IPO to be made and that an IPO would violate his rights under the European Convention on Human Rights.
The issues for consideration were: (i) whether pension entitlements, which a bankrupt was entitled to receive but had not yet elected to receive, constituted a 'payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled...', within the meaning of section 310(7) of the 1986 act and therefore constituted 'income' entitling the court to make an IPO; and (ii) whether it had, in all the circumstances, been appropriate for the trustee to apply without notice for, and to obtain the injunction.
The court ruled: (1) On the proper interpretation of section 310(7) of the act, a bankrupt did have an entitlement to a payment under a pension scheme not merely where the scheme was in payment of benefit but also where, under the rules of the scheme, he would be entitled to payment merely by asking for payment. That interpretation was not to an unjustifiable interference with his rights to property in breach of the Convention. Further, there was nothing to prevent a one-off payment, or a number of one-off payments on different occasions from different sources as a result of different entitlements, being regarded as payments in the nature of income from time to time made to him. (see , , of the judgment). Applying that interpretation to the instant case, the trustee's contentions were correct (see  of the judgment). The application would be granted (see  of the judgment).
Supperstone v Lloyd's Names Working Party  All ER (D) 685 considered.
(2) On the facts, there were more than sufficient grounds to justify an application to the court without notice for an injunction to be granted. It was appropriate for the injunction to be continued until the final determination of the case (see  of the judgment).
Christopher Brougham QC and David Eaton Turner (instructed by Spearing Waite LLP) for the trustee; Alaric Watson (instructed by EMW Law LLP) for the respondent.