Summary

Court of Appeal has confirmed that a bankrupt cannot be compelled to draw down pension rights for the benefit of creditors.

Facts

Following the supportive High Court decision in the case of Raithatha v Williamson [2012] EWHC 900 (Ch), the trustee in bankruptcy in this case applied for an order compelling a discharged bankrupt to draw down his pension rights for the benefit of his creditors.

The High Court at first instance in this case and in the case of Hinton v Wotherspoon [2016] EWHC 623 (Ch) disagreed with the Raithatha decision.

The trustee argued that the bankrupt’s ability to exercise rights under his pension, resulting in lump sum payments, constituted income under the insolvency legislation that the trustee could claim for the benefit of creditors and that the bankrupt could be compelled to exercise those rights.

Judgment

The Court of Appeal disagreed and dismissed the appeal, overturning the Raithatha decision and holding that the bankrupt’s contractual rights to draw down his pension were not income and to allow such an argument would be contrary to pension legislation that has excluded occupational pensions from vesting in trustees in bankruptcy since 2000.

The Court of Appeal has therefore finally resolved conflicting High Court authority, albeit to the detriment of trustees in bankruptcy and we understand that no appeal to the Supreme Court is planned. However, we have seen activity at the Insolvency Service looking at realising pensions for individuals made bankrupt before the law change in 2000.