Krasner v Dennison and Others Lawrence v Lesser

JurisdictionEngland & Wales
Judgment Date06 April 2000
Judgment citation (vLex)[2000] EWCA Civ J0406-14
Docket Numbercase no: CHBKF 99/0780/b3
CourtCourt of Appeal (Civil Division)
Date06 April 2000
John William Alexander Dennison
Gerald Maurice Krasner
Leslie Hugh Lesser
Peter Anthony Lawrence

[2000] EWCA Civ J0406-14


lord Justice Otton And

Lord Justice Judge

case no: CHBKF 99/0780/b3

CHBKF 99/1280/b3

In the supreme court of judicature

court of appeal (civil division)

on appeal from the high court of justice

chancery division (in bankruptcy)

Mr Leolin Price QC & Mr David Schmitz (instructed by Messrs Porter & Co for the Appellant in first appeal)

Mr Christopher Brougham QC & Mr John Briggs (instructed by Messrs Brooke North & Goodwin for the Respondent in the first appeal)

Mr Robin Howard (instructed by Messrs Marcus Baum for the Appellant in the second appeal)

Mr Adam Deacock (instructed by Messrs Kenneth Elliott & Rowe for the Respondent in the second appeal)


These two appeals raise common questions: whether the rights to a retirement annuity and associated benefits under an annuity contract or personal pension arrangements effected by an individual in respect of whom a bankruptcy order is subsequently made under the Insolvency Act 1986 vest in his trustee in bankruptcy; and, if so, whether payments derived from those rights can be the subject of an income payments order under section 310 of that Act. The first of those questions was answered by Mr Justice Ferris in the affirmative in In re Landau [1998] Ch 223; the second was answered in the negative. His decision has been followed consistently in the Chancery Division. The present appeals provide the first opportunity, so far as I am aware, for this Court to consider whether or not that decision was correct. Notwithstanding the enactment of section 11 of the Welfare Reform and Pensions Act 1999 – which will, in effect, reverse the decision in In re Landau in relation to bankruptcies commencing after the section is in force – the question remains of practical importance in relation to bankruptcies which commence before that date.

The underlying facts: Krasner v Dennison


Mr Dennison was formerly a chartered accountant and a partner in Geo H Jackson & Co. In the 1970's the partners of that firm formed a company, Jackson Financial Services Limited, for the purpose of taking deposits from clients of the firm and lending on to other clients. The company was not authorised to carry on banking or deposit taking business. On 3 June 1992 it was wound up by the High Court on a petition presented by the Bank of England. Mr Dennison found himself personally responsible for the liabilities of the company. Following presentation of the petition, Mr Dennison resigned from the partnership; although he remained a consultant until October 1993. On 3 June 1994 his proposals for an individual voluntary arrangement were rejected by his creditors. He presented his own petition for bankruptcy; and a bankruptcy order was made on that petition on 8 June 1994. On 10 June 1994, Mr Krasner, a licensed insolvency practitioner who had been the Nominee in relation to the proposed voluntary arrangement, was appointed trustee in bankruptcy (with effect from the date of the bankruptcy order) by the Secretary of State. Mr Dennison was then 65 years of age.


Mr Dennison had made provision for his retirement. On 21 April 1983 he had entered into a "Personal Pension Plan" (policies 3899161A/V) with Standard Life Assurance Company, under which he paid annual premiums of £11,000 (22 x £500) from 25 March 1983 until 25 March 1994. On 31 March 1989 he entered into a "Personal Pension Scheme" (policies K199167001/5), again with Standard Life, in return for a single premium of £10,000 paid on 3 April 1989. On 16 December 1993 he purchased from Equitable Life Assurance Society (policy ANN0010929/1) an immediate annuity of £12,750 for the remainder of his life, with a further annuity equal to half that amount for his widow, should she survive him. On the following day, 17 December 1993, he elected that the benefits under the Standard Life policies should vest with immediate effect. As a result, both Standard Life policies are now, also, in payment. The annuity payable under policies 3899161A/V is £27,525 gross (with a widow's pension of £9,175 p.a.); and the amount payable under policies K199167001/5 is £1,590 (with a widow's pension of £530 p.a.).


On 8 June 1997 Mr Dennison was discharged from bankruptcy under the automatic provisions in section 279 of the Insolvency Act 1986.

The underlying facts: Lawrence v Lesser


Mr Lesser is also a former chartered accountant. On 18 August 1994 he was adjudged bankrupt on his own petition. He was then 60 years of age. An insolvency practitioner was appointed trustee in bankruptcy at a meeting of creditors held on 27 October 1994. The present trustee, Mr Lawrence, was appointed in his place on 6 April 1998. Mr Lesser was discharged from bankruptcy on 18 August 1997 under the automatic provisions.


At the date of the bankruptcy order, Mr Lesser was in receipt of the following vested annuities: (i) annuities of (together) £2,983 under Scottish Widows' policies 1805821 and 2200459; (ii) an annuity of £854 under London Life policies V781988P and VF23184R (renumbered XF23184B); (iii) annuities of (together) £4,494 under Royal Insurance policies CP4948736 and CP4948711; (iv) an annuity of £1,782 under Prudential Holborn policy 0912 572110; and (v) an annuity of £935 under Sun Life of Canada policy 30614606A. In addition, he was entitled to benefits under five Crusader Life policies, LB6070168, LB6070169, LK6070170, LD6070171 and LB6070172, purchased on 28 November 1986 in consideration for the payment of annual premiums of £3,500 (5 x £700); and under Commercial Union policy A12159840 purchased on 2 August 1986 in consideration for a single premium of £1,000. Benefits under those policies were not in payment at the date of the bankruptcy order. In 1996 Mr Lesser, without reference to the trustee, elected to receive cash sums under the Crusader Life policies (together £10,448) and to take fixed five year annuities (together £3,165). The annuity contracts, issued by Britannia Life as successor to the undertaking of Crusader Life were renumbered 631962, 631982, 631992, 632009A and 632100J. The benefits under the Commercial Union policy A12159840 vested, at the trustee's election, on 7 April 1998. The trustee received a cash sum of £975 on that date; and there is now an annuity payable of £279 or thereabouts.

The annuity contracts


The policies taken out by Mr Dennison and Mr Lesser before 1 July 1988 were written as annuity contracts for approval under Section 226 of the Income and Corporation Taxes Act 1970 (" ICTA 1970"). Those policies are (i) Mr Dennison's Standard Life policies 3899161A/V, (ii) Mr Lesser's Crusader Life policies 6070168/72, (iii) Mr Lesser's London Life policies V781988P and VF23184R, (iv) Mr Lesser's Commercial Union policy A12159840 and (v) Mr Lesser's Sun Life policy 0614606.


Section 226, together with the other sections in Chapter III ("Retirement Annuities") of Part IX ICTA 1970, gave valuable relief from tax in respect of annuity contracts taken out by way of provision for old age. Relief from income tax was given (to the extent prescribed in section 227 ICTA 1970) in respect of a "qualifying premium" paid by an individual, who was (or would have been, but for an insufficiency of profits or gains) chargeable to income tax in respect of relevant earnings from any trade, profession, vocation, office or employment, under an annuity contract "for the time being approved by the Board [of Inland Revenue] as having for its main object the provision for the individual of a life annuity in old age". Further, any annuity payable to the same individual was to be treated as earned income of the annuitant to the extent to which it was payable in return for any amount on which qualifying premium relief had been given. An insurance company was exempt from tax on income and chargeable gains in respect of investments and deposits of so much of its annuity fund as was referable to pension annuity business (that is to say, the making of annuity contracts approved under section 226 ICTA 1970) – see section 314 ICTA 1970.


Section 226(2) ICTA 1970 required that the Board should not approve a contract unless certain conditions were satisfied. Those conditions included the requirement that the contract should include "provision securing that no annuity payable under it should be capable in whole or in part of surrender, commutation or assignment".


It is a feature of all the annuity contracts which I have described that they contain a restriction on alienation. By way of example it is sufficient to refer, first, to provisions 15(i) and (iii) of the Policy Provisions contained in Standard Life booklet ML9 which are incorporated in Mr Dennison's Standard Life policies 3899161A/V:

"15 Inland Revenue Requirements

(i) This policy is approved as an Annuity Contract by the Commision— ers of Inland Revenue under section 226 of the Income and Corporation Taxes Act 1970 as amended and no alteration shall be permitted unless approved by the Commissioners of Inland Revenue.

(iii) This policy and the benefits payable hereunder shall not be capable in whole or in part of commutation or surrender (except as provided under section 226(2) Income and Corporation Taxes Act 1970 or section 26 Finance Act 1978) nor shall any annuity be capable of assignment (except by Will) away from the Person Assured, …"


The purpose of that restriction, as paragraph 15(i) suggests, was to ensure that those policies – which were purchased in April 1983 – qualified, and...

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    • Singapore Academy of Law Journal No. 2008, December 2008
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