Official Receiver v Baker
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 29 November 2013 |
| Neutral Citation | [2013] EWHC 4594 (Ch) |
| Docket Number | Case No: CH/2013/0166 |
| Court | Chancery Division |
| Date | 29 November 2013 |
[2013] EWHC 4594 (Ch)
IN THE HIGH COURT OF JUSTICE
Chancery Division
Royal Courts of Justice
Strand
London, WC2A 2LL
Mr Justice Warren
Case No: CH/2013/0166
Mr Parfitt appeared on behalf of the Claimant
Mr Baker appeared in person
The appellant, the Official Receiver, is the trustee in Bankruptcy of the respondent, Mr Baker. The OR is represented by Mr Parfitt of counsel, Mr Baker has appeared today in person. He is not represented. He has been unable to afford to instruct counsel, although he did, I believe, visit an individual in June or July.
The OR appeals from a decision of Deputy District Judge Campbell in the Brighton County Court on 22 February 2013 when he dismissed the OR's application for an income payments order coupled with an IPO under section 310 of the Insolvency Act 1986. The relevant facts can be briefly stated:
A Bankruptcy order was made against Mr Baker on 10 November 2011. The OR became trustee of the bankruptcy estate on 19 December 2011 following the filing of a notice under section 293 of the Act that there would be no meeting of creditors.
On 23 January 2012 the OR wrote to Santander bank requesting details of Mr Baker's accounts with the bank. In May he received a reply when Santander confirmed that Mr Baker held four accounts with balances totalling £10,196, which had been credited post bankruptcy. These sums are currently being retained by Santander to the OR's order.
It is not clear from the papers which I have read whether these amounts in the account represented earnings from Mr Baker's activities prior to or after (or a mixture of both) the bankruptcy order. Nothing turns on that for present purposes because I shall be making my decision today on the basis that these monies do not fall within either section 306 or 307 of the Act. If when it comes to rehearing, if that is what the result of my judgment is, then Mr Baker will be able to take any points under those sections which he wishes, although I know that he has told me that his recollection is that these monies were all derived from his activities after the bankruptcy order.
On 26 September 2012 Mr Baker attended on the OR for interview. He stated that his only source of income was as a professional gambler, although he has told me today that he had also income from a wedding business and other sources of income. He said that the balance in the Santander accounts has accrued through the accumulation of gambling winnings but in the light of what he has told me it may be that they derived also from other activities.
On 27 November 2012 the OR wrote to Mr Baker enclosing a suggested income payments agreement under section 310A comprised of a single payment of £9,415, which was the sum in the accounts less £781, which the OR estimated to be the cost of Mr Baker's essential outgoings for one month.
Having no response to that letter, on 14 January 2013 the OR made an application for an IPO under section 310 in the amount of £9,415. As I have said the application was heard by the deputy district judge on 22 February and he dismissed the application.
I now turn to the legislation and make a few preliminary comments as I set out the relevant provisions. Section 306(1) is concerned with the vesting of the bankrupt's estate in the trustee on his appointment. Property does not vest in anyone on the making of the bankruptcy order itself. This would not catch the money in the Santander account.
Section 307 which is headed 'After Acquired Property' provides in subsection (1):
"Subject to this section and section 309 the trustee may by notice in writing claim for the bankrupt's estate any property which has been acquired by or has devolved upon the bankruptcy's commencement to the bankruptcy."
And subsection (5) reads:
"References in this section to property do not include the property which as part of bankrupt's income may be the subject of an income payments order for the section 310."
So, on its face, it appears to catch all "property" and would thus include income once received paid after the bankruptcy order. While subsection (5) excludes the property described in that subsection, clearly if an IPO is made income received after the date of that order does not fall within subsection (1). The status of income received after the date of the bankruptcy award but before the IPO is a matter which I will come to later.
Section 309 provides for the time limit for notices under section 307 and 308. If no notice is served after the period of 42 days or any extended period the relevant property does not vest in the trustee in bankruptcy.
The trustee in bankruptcy may well decide not to serve a notice if the relevant property is onerous and such that under the old law he would simply have had to disclaim following its automatic vesting in him.
Section 310 is the section which deals with IPOs. Subsection (1) reads that:
"The court may make an order ("an income payments order") claiming for the bankrupt's estate so much income of the bankrupt during the period which the order is in force as may be specified in the order."
Subsection (3) provides for the extent of the order and, paraphrasing, it can require the payment by the bankrupt of an amount equal to so much of the relevant payment as is claimed by the order or it can require a third party, such as an employer, who might be making a payment to the bankrupt, to pay it instead direct to the trustee.
I will read subsections (6):
"An income payments order must specify the period during which it is to have effect; and that period -
(a) may end after the discharge of the bankrupt but -
(b) may not end after the period of three years beginning with the date on which the order is made."
Subsection (7) defines what is meant by "income of the bankrupt" for the purposes of section 310. I will not read it into the judgment. There is no issue in the present case that the money that we are dealing with is income within that section. If there is any point to take about that it would be for another occasion.
The central issue in this appeal turns on the meaning of subsection (1) and it is whether the trustee can claim any income received after the date of the IPO itself or whether he can also claim income received after the date of the bankruptcy order but before the IPO.
As to subsection (7), in the present case the OR contended and the district judge accepted that the winnings of the gambling activities fell within the subsection and as I have said if there is any point to take about that it can be dealt with if this matter is ever to get back before the district judge.
Section 333 deals with the duties of the bankrupt. Under subsection (1) there is a general duty to give the trustee information and to do all things that the trustee needs to get on with his job.
Subsection (2) provides:
"Where at any time after the commencement of the bankruptcy any property is acquired by or devolves upon the bankrupt or there is an increase of the bankrupt's income, the bankrupt shall, within the prescribed period, give the trustee notice of the property or, as the case may be, of the increase."
And the rules provide that the period there is 21 days.
Subsection (4) provides:
"If the bankrupt, without reasonable excuse, fails to comply with any obligation imposed by this section, he is guilty of contempt of court and liable to be punished accordingly (in addition to any other punishment to which he may be subject)."
In relation to subsection (2) there is no provision similar to section 307(5) but the reference to property, which is "acquired by or devolves upon", and to "an increase in income" appear to me to reflect precisely the division between property within section 307 and income within section 310.
The decision of the district judge was simple in its reasoning. In summary he said this:
1) First, the period during which the order is in force, referred to in section 310(1), means the period after an income payment order is made by the court.
2) Secondly, the only income that can be claimed under an income payments order is income received by the bankrupt after the making of the order.
3) Thirdly, a court therefore has no jurisdiction to make an income payments order which has the effect of claiming for the bankrupt's estate any income of the bankrupt which accrued prior to the making of the income payment's order.
4) And fourthly, as the income in this case accrued prior to the date on which an order might have been made the court had no jurisdiction to make an order in respect of that income.
So the application was dismissed.
He rejected, also, the proposition that the court could make an order with retrospective effect, treating the order as coming into effect on the date of the bankruptcy order rather than on the date of the IPO itself, so that it could be said that it was in force from the date of the bankruptcy order.
Mr Parfitt submits that the deputy district judge's conclusion is wrong. He does not submit that the court can make a retrospective order in the way I have just mentioned. Instead he makes three submissions which can be subsumed under the single head of construction, although there are separate points in them, as it were, in descending order.
Before considering those submissions I wish to say a little about the policy behind section 310 and to consider the authorities to which Mr Parfitt...
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Dr Ikechukwu Obialo Azuonye v Imogen Kent (in her capacity as trustee of the bankrupt estate of Dr Ikechukwu Obialo Azuonye)
...should refer to two other cases relied on by the appellant. They are Pike v Cork Gully [1997] BPIR 723 and Official Receiver v Baker [2013] EWHC 4594 (Ch). Those cases were relied on by the appellant to support his submission that an IPO attaches to income arising after a bankruptcy order a......