Court considers income payments orders and pensions—Hinton v Wotherspoon

Court considers income payments orders and pensions—Hinton v Wotherspoon

Can a bankrupt’s pension income which is the subject of a drawdown arrangement be taken into account when a trustee in bankruptcy applies for an income payments order? Peter Shaw, of 9 Stone Buildings, explains the Chancery Division’s answer in Hinton v Wotherspoon.

Original news

Hinton (trustee in bankruptcy of Wotherspoon) v Wotherspoon [2016] EWHC 621 (Ch), [2016] All ER (D) 43 (Jun)

The Chancery Division granted a trustee in bankruptcy an income payments order pursuant to section 310 of the Insolvency Act 1986 (IA 1986) for the bankrupt’s surplus income to be used to meet the claims of the creditors. IA 1986, s 310(7) provides that, for the purposes of an order, a bankrupt’s income includes payments to which he from time to time becomes entitled. The court held that the maximum sums which a bankrupt was entitled to draw down as income from his self-invested personal pension (SIPP) fell within IA 1986, s 310(7). Applying the reasoning in Horton v Henry [2014] EWHC 4209 (Ch), [2014] All ER (D) 193 (Dec), the court held that the bankrupt had become entitled to the payments when he elected to receive an income from the drawdown fund. Accordingly, the court made the order, after deducting an amount from the bankrupt’s income to represent his reasonable domestic needs.

What was the background to the case?

The bankrupt was a retired property developer. He had been made bankrupt on the petition of HMRC in respect of substantial tax liabilities. His trustee in bankruptcy applied to the court for an income payments order that for a period of three years, the bankrupt make contributions out of his income into the bankruptcy. For the purposes of IA 1986, s 310, ‘income’ is defined as every payment in the nature of income which is from time to time paid to the bankrupt or to which he becomes entitled.

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.