Azuonye v Kent

An income payments order made under section 310 of the Insolvency Act 1986 can continue after the bankruptcy is discharged. Future payments under the order are not provable debts because the court may vary the order, so they lack the necessary finality and conclusiveness. A later bankruptcy does not itself extinguish the earlier order or prevent it operating against income arising after the later bankruptcy. Section 335(2) addresses the different case of an undischarged bankrupt and does not create an opposite rule for discharged bankrupts. The appropriate protection for the later estate is an application to vary the earlier order or an application for a new order.

This was an appeal from an order of District Judge Coonan in the Croydon County Court. Dr Azuonye had first been made bankrupt in April 2015. An income payments order was subsequently made under section 310 of the Insolvency Act 1986. He was automatically discharged in April 2016, but the order continued and was later increased.

Dr Azuonye made a second bankruptcy order on 4 December 2017 and argued that it discharged or suspended the earlier income payments order. The trustee argued that future payments were not provable debts and that the order therefore survived. The central issue was whether future obligations under an income payments order survived a later bankruptcy where the earlier bankruptcy had been discharged.

1. Appeal dismissed. The income payments order made in the first bankruptcy remained capable of enforcement after the second bankruptcy order.
2. Section 310 of the Insolvency Act 1986 permits an income payments order to continue after discharge, subject to the statutory maximum period. The court retains power to vary the order before or after discharge. Sums received under it form part of the first bankrupt estate.
3. Discharge under section 281 releases provable bankruptcy debts but does not affect the trustee’s functions or the operation of Part 9. An income payments order made during the bankruptcy is not itself a bankruptcy debt within section 382. Section 281 therefore does not remove its continuing effect.
4. Section 285(3) does not prevent enforcement of future payments under the earlier order. Those payments are not provable debts. Their amount may be varied by the court, so they lack the finality and conclusiveness required for provability. This conclusion was supported by the reasoning discussed in Cartwright v Cartwright [2002] EWCA Civ 931 and distinguished from the treatment of accrued arrears in Booth v Mond [2010] EWHC 1576 (Ch).
5. Section 335(2) applies where the later bankruptcy order is made against an undischarged bankrupt. It assumes that amounts payable under an earlier income payments order continue to be payable, while providing that they form part of the later estate. Its silence concerning discharged bankrupts does not extinguish the order or produce the opposite result.
6. The earlier order is not confined to income arising before the second bankruptcy. The appropriate protection for the second estate is an application to vary the order or, where appropriate, an application for a new order. The court rejected the argument that the order could operate only against funds attributable to the first estate.

1. High Court (Chancery Division): appeal from the Croydon County Court order of 16 January 2018 dismissed. Permission to appeal had been refused by the district judge and granted out of time by Rose J on 29 June 2018.
2. Croydon County Court: District Judge Coonan held that the earlier income payments order survived the second bankruptcy.