Horton v Henry

An income payments order under section 310 of the Insolvency Act 1986 may capture pension payments actually made or to which a bankrupt has become entitled. It does not enable the court or trustee to compel a bankrupt to crystallise an uncrystallised pension or select among its contractual payment options. Until those elections are made, the bankrupt has no entitlement to a definite payment. Raithatha v Williamson was therefore not followed.

The applicant trustee in bankruptcy sought an income payments order against four pension policies belonging to the respondent bankrupt. The policies were outside the bankruptcy estate, but the trustee argued that section 310 of the Insolvency Act 1986 permitted an order requiring the respondent to crystallise them and draw specified lump sums and income.

The respondent contended that section 310 applied only when pension payments were in payment or had otherwise become payable. The issues were whether the court had power to make an order concerning uncrystallised pensions and, if so, what amount should be retained for reasonable domestic needs.

1. Application dismissed. Section 310 of the Insolvency Act 1986 did not provide a basis for an income payments order in respect of the respondent’s uncrystallised SIPP and personal pension policies.

2. The statutory reference to income included payments under a pension scheme and payments to which the bankrupt from time to time became entitled. In ordinary language, entitlement suggested a pension in payment under which definite amounts had become contractually payable. The policies here required elections among different forms, dates and amounts of benefit. A specific payment would become due only after those elections.

3. The court accepted that the pensions were excluded from the bankruptcy estate by section 11 of the Welfare Reform and Pensions Act 1999, while section 310 preserved the possibility of an order concerning pension income. That did not authorise the court to reverse the statutory protection by directing how contractual pension rights were to be exercised.

4. Section 333(1) of the Insolvency Act 1986 could not supply the missing power. The trustee’s argument was circular because it assumed that sums potentially payable under an uncrystallised pension were already within section 310.

5. A first-instance judge should generally follow another first-instance decision unless persuaded that it was wrong. After anxious consideration, however, the court declined to follow Raithatha v Williamson. The Court of Appeal had not reviewed that decision because the case had been compromised.

6. Had an order been available, no reduction would have been made under section 310(2), since the evidence did not establish that the respondent needed the pensions to meet his reasonable domestic needs. That alternative finding did not affect the dismissal.