Thomas (trustees in bankruptcy of Edmondson) v Edmondson
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Asplin |
| Judgment Date | 12 May 2014 |
| Neutral Citation | [2014] EWHC 1494 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CH/2013/0674 |
| Date | 12 May 2014 |
[2014] EWHC 1494 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Asplin
Case No: CH/2013/0674
In the Matter of Stephen John Edmondson and in the Matter of the Insolvency Act 1986
Reuben Comiskey (instructed by Royds LLP) for the Appellants
John Briggs (instructed by Irwin Mitchell) for the Respondent
Hearing date: 29 April 2014
This is an appeal by Messrs Simon Thomas and Nicholas O'Reilly, the present Joint Trustees in Bankruptcy of the Respondent, Mr Edmondson, ("the Joint Trustees") against an order of District Judge Jones made on 20 th November 2013 in the Slough County Court. Mr O'Reilly was substituted as Second Appellant in place of Ms Shelley Bullman by an order which I made on 17 th December 2013.
The District Judge made a declaration that the then Joint Trustees in Bankruptcy were not entitled to an Income Payments Order against Mr Edmondson pursuant to section 310 Insolvency Act 1986 and the Joint Trustees appeal on the basis that the District Judge erred in law in determining that the Court had no jurisdiction to make an income payments order under section 310 Insolvency Act 1986 ("an Income Payments Order") in circumstances where the bankrupt had previously entered into an income payments agreement pursuant to section 310A of that Act, ("an Income Payments Agreement").
Background
The Respondent was made bankrupt on 21 August 2012, on the petition of HMRC. As a result of the bankruptcy order his tax code was changed to "NT", meaning that income tax was not deducted from his earnings. On 7 th December 2012, the Respondent entered into an Income Payments Agreement pursuant to section 310A Insolvency Act 1986 with the Official Receiver by which he agreed to pay to the Official Receiver or any person appointed as trustee of his bankrupt estate the amount by which his take home pay was increased by virtue of this NT tax coding, by way of contribution to his bankruptcy. The Income Payments Agreement was expressed to continue until the end of the tax year, in other words, until 5 April 2013.
In fact, Mr Thomas and Ms Bullman had been appointed as the Respondent's Trustees in bankruptcy on 6 December 2012. Ms Bullman was replaced by Mr O'Reilly as the Respondent's Joint Trustee on 20 th November 2013. In May 2013 the then Joint Trustees sought to establish the Respondent's income and expenditure for the purpose of finalising a further Income Payments Agreement. In subsequent correspondence the Respondent refused to agree a further Income Payments Agreement, contending that there was no surplus income available. As a result, on 19 August 2013 they applied in the Slough County Court for an Income Payments Order pursuant to section 310 Insolvency Act 1986 in the amount of £10,000 per month for the duration of three years from the date of the Order. It was this application which led to the Order which is the subject of this appeal.
As a result of District Judge Jones' Order, the Joint Trustees have applied to amend their original application notice to include in the alternative, an application to vary the Income Payments Agreement reached on 7 th December 2012 and to do so out of time. The application is to be heard in the Slough County Court in May 2014.
I am not concerned with the details of the Income Payments Order or the variation of the Income Payments Agreement which are sought, nor with the question of the exercise of discretion in that regard. I am concerned purely with the question of statutory construction which arises from District Judge Jones' order. Should sections 310 and 310A Insolvency Act 1986, upon their proper construction be read to mean that in the light of the fact that an Income Payments Agreement was made, there is no jurisdiction in the court to make an Income Payments Order in respect of the Respondent?
The Relevant provisions and the argument in summary
The relevant parts of sections 310 and 310A Insolvency Act 1986 in their present form are as follows:
"310.-Income payments orders.
(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.
(1A) An income payments order may be made only on an application instituted —
(a) by the trustee, and
(b) before the discharge of the bankrupt.
…
(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.
(6A) An income payments order may (subject to subsection (6)(b)) be varied on the application of the trustee or the bankrupt (whether before or after discharge)."
"310A Income payments agreement
(1) In this section "income payments agreement" means a written agreement between a bankrupt and his trustee or between a bankrupt and the official receiver which provides —
(a) that the bankrupt is to pay to the trustee or the official receiver an amount equal to a specified part or proportion of the bankrupt's income for a specified period, or
(b) that a third person is to pay to the trustee or the official receiver a specified proportion of money due to the bankrupt by way of income for a specified period.
(2) A provision of an income payments agreement of a kind specified in subsection (1)(a) or (b) may be enforced as if it were a provision of an income payments order.
…
(4) The following provisions of section 310 shall apply to an income payments agreement as they apply to an income payments order —
(a) subsection (5) (receipts to form part of estate), and
(b) subsections (7) to (9) (meaning of income).
(5) An income payments agreement 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 agreement is made.
(6) An income payments agreement may (subject to subsection (5)(b)) be varied —
(a) by written agreement between the parties, or
(b) by the court on an application made by the bankrupt, the trustee or the official receiver.
(7) The court —
(a) may not vary an income payments agreement so as to include provision of a kind which could not be included in an income payments order, and
(b) shall grant an application to vary an income payments agreement if and to the extent that the court thinks variation necessary to avoid the effect mentioned in section 310(2)."
In summary, the Respondent contends that the Income Payments Order regime created by s.310 of the Insolvency Act, and the Income Payments Agreements regime created by s.310A of the Insolvency Act 1986, are parallel but mutually exclusive. It is said that the legislative intention is that income payments by a bankrupt should last for no more than 3 years and that if one can move between regimes, that intention would be flouted, causing anomaly. Thus, it is said that since the Respondent entered into the Income Payments Agreement, albeit for a period of only five months, for that reason the Court may not now make an Income Payments Order against him.
On the other hand, the Trustees in Bankruptcy's position is that mutual exclusivity is not borne out by the wording of ss. 310 and 310A of Insolvency Act 1986. On the contrary, it is said that the wording is clear and the previous existence of an Income Payments Agreement is no bar to the exercise of discretion by the court to grant an order under section 310. Mr Comiskey on behalf of the Joint Trustees says that the wording of the relevant sections is straightforward and obvious and on a plain reading, the fact that a person has entered into an Income Payments Agreement does not operate to deprive the court of the jurisdiction it would otherwise have to make an Income Payments Order. Had that been the intention of the legislature, Mr Comiskey submits that it would have said so.
He referred me to an extract from the speech of Lord Reid in Pinner v Everett [1969] 1 WLR 1266 at 1273 which is referred to under the heading "The plain meaning rule" at section 195 in Bennion on Statutory Interpretation 6 th ed, in which his Lordship stated that it was only when the natural and ordinary meaning of the words in their context in the statute leads to a result which cannot reasonably be supposed to have been the intention of the legislature that it is proper to look for some other possible meaning. Mr Comiskey says that this is not the case here.
Secondly, Mr Comiskey submits that although section 310A was inserted into the Insolvency Act 1986 by section 260 Enterprise Act 2002 and at the same time, section 310 Insolvency Act 1986 was amended by section 259 of the 2002 Act, by express omission of the words "on the application of the trustees" from section 310(1), the insertion of a new section 310(1A) and the substitution of a new sub-section (6) and (6A) for the original sub-section (6), it is significant that no express amendment was made of the kind for which the Respondent argues by way of interpretation.
He says that as section 310 was not been amended expressly or indirectly by means of another statute in order to render the Income Payment Agreement and Income Payment Order regimes mutually exclusive, an amendment can only have come about impliedly and that is not the case here. In this regard, he referred me to extracts from the judgments of Bramwell and Brett LJJ in A-G v Lamplough (1878) 3 Ex D 214 at 227 and 229 and to the speech of Lord...
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