Official Receiver v Baker

Income received after a bankruptcy order but before an income payments order may be claimed under section 310 of the Insolvency Act 1986. The relevant phrase is not confined to income received after the order itself takes effect.

Section 310 must be construed alongside sections 307 and 333. Income falling within section 310(7) is excluded from the property capable of being claimed under section 307, whether or not an income payments order is ultimately made. A construction which avoids a serious gap in the statutory scheme is preferred where the statutory language permits it.

The Official Receiver, trustee in bankruptcy, appealed from the decision of Deputy District Judge Campbell in the Brighton County Court on 22 February 2013. The deputy district judge dismissed an application for an income payments order under section 310 of the Insolvency Act 1986.

The bankrupt had received sums credited to bank accounts after the bankruptcy order but before the application and proposed order. The central issue was whether section 310 permitted an order in respect of income received during that period, or only income received after the income payments order had been made.

1. The appeal was allowed. The deputy district judge had erred in concluding that the court had no jurisdiction to make an income payments order in respect of income received after the bankruptcy order but before the order was made.

2. Section 310(1) provides for an order claiming income during the period for which the order is in force. Read in isolation, that wording might suggest that only income received after the order is made can be claimed. Section 310(3), however, permits the order to require payment of an amount equal to sums already received. That mechanism is consistent with an order covering income received before the order but after the bankruptcy order.

3. Section 307(5) excludes from after-acquired property property which, as part of the bankrupt’s income, may be the subject of an income payments order. The exclusion depends on the property falling within section 310(7), not on whether an order can ultimately be made in the particular circumstances. Income within section 310(7) therefore remains outside section 307 even if it has already been received.

4. Section 333(2), requiring the bankrupt to notify the trustee of acquired property or an increase in income, supports that construction. The notice requirement is intended to enable the trustee to claim after-acquired property, seek an income payments order, or seek variation of an existing order. It would be irrational for a one-off payment received before the trustee could apply to fall outside both statutory regimes.

5. The court rejected any suggestion that the income payments order should be treated as retrospectively coming into force on the date of the bankruptcy order. Rather, the order operates prospectively while claiming income arising after the bankruptcy order. The purposive approach to statutory interpretation described in Inland Revenue Commissioners v McGuckian [1997] 1 WLR 1991 supported the conclusion, although no distortion of the statutory language was required.

The judgment records an appeal from the Brighton County Court decision of Deputy District Judge Campbell dated 22 February 2013, which dismissed the Official Receiver’s application for an income payments order. The High Court allowed the appeal.