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Income within a bankruptcy estate - Official Receiver v Baker [2013] EWHC 4594 (Ch)

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This case concerned an appeal of a decision made in the Brighton County Court when the Official Receiver’s application for an income payments order was dismissed.

A bankruptcy order had been made against Mr Baker on 10 November 2011 and the Official Receiver became the Trustee on 19 December 2011.  On 23 January 2012 the Trustee wrote to Santander requesting details of accounts held by the bankrupt and their response confirmed the existence of 4 accounts with a credit balance totalling £10,196.  These funds had been credited to the account post bankruptcy.  Mr Baker advised that these funds were gambling winnings.

The Trustee had approached the bankrupt in November 2012 with a suggested income payment agreement detailing a lump sum of £9415 but he received no response from the bankrupt and issued the application to court.  The Deputy District Judge dismissed the application on the following basis –

  • orders of this nature can only attach to the period after the income order is made.
  • the only income which can be claimed is that received after the making of the order.
  • the court did not have jurisdiction to make an order with the effect of claiming income which had accrued prior to the making of the income payment order.

The Trustee submitted that this approach was incorrect and his appeal came before Mr Justice Warren who considered in detail the provisions of section 310 and that if such income could not be caught via an income payments order then there was a real possibility it would be lost to the estate.

His focus was on section 310(1) and whether a Trustee could claim income received by the bankrupt after the date of the bankruptcy order but before the making of an income payments order.  He concluded that he could. This was not a retrospective order but one which provides for income received in the period between the making of the bankruptcy order and the making of the income payments order to be captured.

He went on to consider the effect of section 307 of the Insolvency Act 1986 in respect of after acquired property and the fact that this does not include income under section 310. He concluded that income can be in the form of an irregular one off sum and an income payments order will capture income received post bankruptcy but before the making of the income payments order, if it did not there was a real possibility that such income could not be claimed for the benefit of the estate under any other provision. This was the correct construction of section 310.

This is something that insolvency practitioners and individuals need to be aware of.  If any income payments order is made, or presumably an income payments agreement entered into, this is capable of including all income post bankruptcy.

By Kathryn Maclennan, insolvency solicitor

 

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