Insolvency Act 1986, section 346

Enforcement procedures

Part IX Bankruptcy

(1)Subject to section 285 in Chapter II (restriction on proceedings and remedies) and to the following provisions of this section, where the creditor of any person who is [F909madeF909] bankrupt has, before the commencement of the bankruptcy—

(a)issued execution against the goods or land of that person, or

(b)attached a debt due to that person from another person,

that creditor is not entitled, as against the official reciever or trustee of the bankrupt’s estate, to retain the benefit of the execution or attachment, or any sums paid to avoid it, unless the execution or attachment was completed, or the sums were paid, before the commencement of the bankruptcy.

[F910 (1A)For the purposes of this section, Her Majesty's Revenue and Customs is to be regarded as having attached a debt due to a person if it has taken action under Part 1 of Schedule 8 to the Finance (No. 2) Act 2015 (enforcement by deduction from accounts) as a result of which an amount standing to the credit of an account held by that person is—

(a)subject to arrangements made under paragraph 6(3) of that Schedule, or

(b)the subject of a deduction notice under paragraph 13 of that Schedule.F910]

(2)Subject as follows, where any goods of a person have been taken in execution, then, if before the completion of the execution notice is given to the [F911enforcement officerF911] or other officer charged with the execution that that person has been [F909madeF909] bankrupt—

(a)the [F911enforcement officerF911] or other officer shall on request deliver to the official receiver or trustee of the bankrupt’s estate the goods and any money seized or recovered in part satisfaction of the execution, but

(b)the costs of the execution are a first charge on the goods or money so delivered and the official receiver or trustee may sell the goods or a sufficient part of them for the purpose of satisfying the charge.

(3)Subject to subsection (6) below, where—

(a)under an execution in respect of a judgment for a sum exceeding such sum as may be prescribed for the purposes of this subsection, the goods of any person are sold or money is paid in order to avoid a sale, and

(b)before the end of the period of 14 days beginning with the day of the sale or payment the [F911enforcement officerF911] or other officer charged with the execution is given notice that a [F912bankruptcy application has been made or aF912] bankruptcy petition has been presented in relation to that person, and

(c)a bankruptcy order is or has been made [F913as a result of that application orF913] on that petition,

the balance of the proceeds of sale or money paid, after deducting the costs of execution, shall (in priority to the claim of the execution creditor) be comprised in the bankrupt’s estate.

(4)Accordingly, in the case of an execution in respect of a judgment for a sum exceeding the sum prescribed for the purposes of subsection (3), the [F911enforcement officerF911] or other officer charged with the execution—

(a)shall not dispose of the balance mentioned in subsection (3) at any time within the period of 14 days so mentioned or while [F914proceedings on a bankruptcy application are ongoing or (as the case may be)F914] there is pending a bankruptcy petition of which he has been given notice under that subsection, and

(b)shall pay that balance, where by virtue of that subsection it is comprised, in the bankrupt’s estate, to the official receiver or (if there is one) to the trustee or that estate.

(5)For the purposes of this section—

(a)M27an execution against goods is completed by seizure and sale or by the making of a charging order under section 1 of the Charging Orders Act 1979;

(b)an execution against land is completed by seizure, by the appointment of a receiver or by the making of a charging order under that section;

(c)an attachment of a debt is completed by the receipt of the debt.

(6)The rights conferred by subsections (1) to (3) on the official receiver or the trustee may, to such extent and on such terms as it thinks fit, be set aside by the court in favour of the creditor who has issued the execution or attached the debt.

(7)Nothing in this section entitles the trustee of a bankrupt’s estate to claim goods from a person who has acquired them in good faith under a sale by [F915an enforcement officerF915] or other officer charged with an execution.

(8)Neither subsection (2) nor subsection (3) applies in relation to any execution against property which has been acquired by or has devolved upon the bankrupt since the commencement of the bankruptcy, unless, at the time the execution is issued or before it is completed—

(a)the property has been or is claimed for the bankrupt’s estate under section 307 (after-acquired property), and

(b)a copy of the notice given under that section has been or is served on the [F911enforcement officerF911] or other officer charged with the execution.

[F916 (9) In this section “enforcement officer” means an individual who is authorised to act as an enforcement officer under the Courts Act 2003 . F916]

Definitions used in section 346 1

attachment

(3) In subsection (1) “attachment” includes a hold notice or a deduction notice under Part 1 of Schedule 8 to the Finance ( No. 2) Act 2015 (enforcement by deduction from accounts) and, if subsection (1) has effect in relation to a deduction notice, it also has effect in relation to the hold notice to which the deduction notice relates (whenever the hold notice was given).

Defined in s.128(3) · see it in the full Act

Cases considering section 346 9

Michael Wilson & Partners Ltd v Sinclair & Ors

[2021] EWCA Civ 505 · 16 April 2021Defines

A creditor which attached a debt before bankruptcy cannot retain the attachment against the official receiver or trustee unless it was completed before bankruptcy. The interim third party debt order fell within this rule. (see paras [28]-[29]) An attachment of a debt is completed only when the debt is received. As MWP had not received the debt by the commencement of bankruptcy, its attachment was incomplete. (see para [28]) The power to set aside the effect of section 346(1) is exceptional. The applicant must show unfairness sufficient to justify displacing pari passu distribution; MWP had no realistic prospect because it had itself caused the intervening bankruptcy. (see paras [48]-[57]; [68]-[69])

Nationwide Building Society v Wright & Anor

[2009] EWCA Civ 811 · 29 July 2009Interprets

Cited only. The court interpreted section 346(1) as protecting a creditor’s completed execution against land where completion occurred before the bankruptcy order. The protection is subject to the separate section 3(5) discretion, which bankruptcy alone does not trigger. (See paras [11]; [18]–[20].) The court treated section 346(5)(b)’s inclusion of the making of a charging order as decisive confirmation that a final pre-bankruptcy charging order is protected from bankruptcy alone. (See paras [3]; [19].)

Clarke v Coutts & Co (A Firm)

[2002] EWCA Civ 943 · 17 June 2002Interprets

Section 346(1) addresses when a creditor may retain the benefit of execution against a bankrupt’s estate. The court construed the related completion concept consistently with Roberts, requiring finality beyond a defeasible charging order nisi. (see under “(1) Was leave needed?”) Section 346(5) deems execution against land complete by making a charging order, but that reference was construed consistently with Roberts as requiring finality rather than a merely provisional order nisi. (see under “(1) Was leave needed?”)

What each judgment says about section 346 is in the case-law panel in the full Act.

Amendments and notes

9 notes from legislation.gov.uk

Amendments

  1. F909Word in s. 346(1)(2) substituted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 39(2); S.I. 2016/191, art. 2 (with art. 3)
  2. F910S. 346(1A) inserted (18.11.2015) by Finance (No. 2) Act 2015 (c. 33), Sch. 8 para. 32
  3. F911Words in s. 346(2)(3)(b)(4)(8)(b) substituted (15.3.2004) by Courts Act 2003 (c. 39), ss. 109(1), 110, Sch. 8 para. 297(2); S.I. 2004/401, art. 2 (with art. 3)
  4. F912Words in s. 346(3)(b) inserted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 39(3)(a); S.I. 2016/191, art. 2 (with art. 3)
  5. F913Words in s. 346(3)(c) inserted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 39(3)(b); S.I. 2016/191, art. 2 (with art. 3)
  6. F914Words in s. 346(4)(a) inserted (6.4.2016) by Enterprise and Regulatory Reform Act 2013 (c. 24), s. 103(3), Sch. 19 para. 39(4); S.I. 2016/191, art. 2 (with art. 3)
  7. F915Words in s. 346(7) substituted (15.3.2004) by Courts Act 2003 (c. 39), ss. 109(1), 110, Sch. 8 para. 297(3); S.I. 2004/401, art. 2 (with art. 3)
  8. F916S. 346(9) inserted (15.3.2004) by Courts Act 2003 (c. 39), ss. 109(1), 110, Sch. 8 para. 297(4); S.I. 2004/401, art. 2 (with art. 3)

Marginal citations

  1. M271979 c. 53.