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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Dennison v Krasner [2000] EWCA Civ 112 (6 April 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/112.html
Cite as: [2000] Pens LR 213, [2001] Ch 76, [2000] 3 WLR 720, [2000] OPLR 299, [2000] 3 All ER 234, [2000] BPIR 410, [2000] EWCA Civ 112

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CASE NO: CHBKF 99/0780/b3, CHBKF 99/1280/B3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
On appeal from THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (IN BANKRUPTCY)
ROYAL COURTS OF JUSTICE
STRND, LONDON WC2A 2LL
Thursday 6 April 2000

Before:
LORD JUSTICE OTTON
AND
LORD JUSTICE JUDGE
__________________________
JOHN WILLIAM ALEXANDER DENNISON
-AND-

Appellants
GERALD MAURICE KRASNER

Respondents
LESLIE HUGH LESSER
-AND-

Appellants
PETER ANTHONY LAWRENCE

Respondents
_________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
_________________________

Mr Leolin Price QC & Mr David Schmitz (instructed by Messrs Porter & Co for the Appellant in first appeal)
Mr Christopher Brougham QC & Mr John Briggs (instructed by Messrs Brooke North & Goodwin for the Respondent in the first appeal)
Mr Robin Howard (instructed by Messrs Marcus Baum for the Appellant in the second appeal)
Mr Adam Deacock (instructed by Messrs Kenneth Elliott & Rowe for the Respondent in the second appeal)
_________________________
Judgment
As Approved by the Court
Crown Copyright ©


LORD JUSTICE CHADWICK:
1. These two appeals raise common questions: whether the rights to a retirement annuity and associated benefits under an annuity contract or personal pension arrangements effected by an individual in respect of whom a bankruptcy order is subsequently made under the Insolvency Act 1986 vest in his trustee in bankruptcy; and, if so, whether payments derived from those rights can be the subject of an income payments order under section 310 of that Act. The first of those questions was answered by Mr Justice Ferris in the affirmative in In re Landau [1998] Ch 223; the second was answered in the negative. His decision has been followed consistently in the Chancery Division. The present appeals provide the first opportunity, so far as I am aware, for this Court to consider whether or not that decision was correct. Notwithstanding the enactment of section 11 of the Welfare Reform and Pensions Act 1999 - which will, in effect, reverse the decision in In re Landau in relation to bankruptcies commencing after the section is in force - the question remains of practical importance in relation to bankruptcies which commence before that date.
The underlying facts: Krasner v Dennison
2. Mr Dennison was formerly a chartered accountant and a partner in Geo H Jackson & Co. In the 1970's the partners of that firm formed a company, Jackson Financial Services Limited, for the purpose of taking deposits from clients of the firm and lending on to other clients. The company was not authorised to carry on banking or deposit taking business. On 3 June 1992 it was wound up by the High Court on a petition presented by the Bank of England. Mr Dennison found himself personally responsible for the liabilities of the company. Following presentation of the petition, Mr Dennison resigned from the partnership; although he remained a consultant until October 1993. On 3 June 1994 his proposals for an individual voluntary arrangement were rejected by his creditors. He presented his own petition for bankruptcy; and a bankruptcy order was made on that petition on 8 June 1994. On 10 June 1994, Mr Krasner, a licensed insolvency practitioner who had been the Nominee in relation to the proposed voluntary arrangement, was appointed trustee in bankruptcy (with effect from the date of the bankruptcy order) by the Secretary of State. Mr Dennison was then 65 years of age.
3. Mr Dennison had made provision for his retirement. On 21 April 1983 he had entered into a "Personal Pension Plan" (policies 3899161A/V) with Standard Life Assurance Company, under which he paid annual premiums of £11,000 (22 x £500) from 25 March 1983 until 25 March 1994. On 31 March 1989 he entered into a "Personal Pension Scheme" (policies K199167001/5), again with Standard Life, in return for a single premium of £10,000 paid on 3 April 1989. On 16 December 1993 he purchased from Equitable Life Assurance Society (policy ANN0010929/1) an immediate annuity of £12,750 for the remainder of his life, with a further annuity equal to half that amount for his widow, should she survive him. On the following day, 17 December 1993, he elected that the benefits under the Standard Life policies should vest with immediate effect. As a result, both Standard Life policies are now, also, in payment. The annuity payable under policies 3899161A/V is £27,525 gross (with a widow's pension of £9,175 p.a.); and the amount payable under policies K199167001/5 is £1,590 (with a widow's pension of £530 p.a.).
4. On 8 June 1997 Mr Dennison was discharged from bankruptcy under the automatic provisions in section 279 of the Insolvency Act 1986.
The underlying facts: Lawrence v Lesser
5. Mr Lesser is also a former chartered accountant. On 18 August 1994 he was adjudged bankrupt on his own petition. He was then 60 years of age. An insolvency practitioner was appointed trustee in bankruptcy at a meeting of creditors held on 27 October 1994. The present trustee, Mr Lawrence, was appointed in his place on 6 April 1998. Mr Lesser was discharged from bankruptcy on 18 August 1997 under the automatic provisions.
6. At the date of the bankruptcy order, Mr Lesser was in receipt of the following vested annuities: (i) annuities of (together) £2,983 under Scottish Widows' policies 1805821 and 2200459; (ii) an annuity of £854 under London Life policies V781988P and VF23184R (renumbered XF23184B); (iii) annuities of (together) £4,494 under Royal Insurance policies CP4948736 and CP4948711; (iv) an annuity of £1,782 under Prudential Holborn policy 0912 572110; and (v) an annuity of £935 under Sun Life of Canada policy 30614606A. In addition, he was entitled to benefits under five Crusader Life policies, LB6070168, LB6070169, LK6070170, LD6070171 and LB6070172, purchased on 28 November 1986 in consideration for the payment of annual premiums of £3,500 (5 x £700); and under Commercial Union policy A12159840 purchased on 2 August 1986 in consideration for a single premium of £1,000. Benefits under those policies were not in payment at the date of the bankruptcy order. In 1996 Mr Lesser, without reference to the trustee, elected to receive cash sums under the Crusader Life policies (together £10,448) and to take fixed five year annuities (together £3,165). The annuity contracts, issued by Britannia Life as successor to the undertaking of Crusader Life were renumbered 631962, 631982, 631992, 632009A and 632100J. The benefits under the Commercial Union policy A12159840 vested, at the trustee's election, on 7 April 1998. The trustee received a cash sum of £975 on that date; and there is now an annuity payable of £279 or thereabouts.
The annuity contracts
7. The policies taken out by Mr Dennison and Mr Lesser before 1 July 1988 were written as annuity contracts for approval under Section 226 of the Income and Corporation Taxes Act 1970 ("ICTA 1970"). Those policies are (i) Mr Dennison's Standard Life policies 3899161A/V, (ii) Mr Lesser's Crusader Life policies 6070168/72, (iii) Mr Lesser's London Life policies V781988P and VF23184R, (iv) Mr Lesser's Commercial Union policy A12159840 and (v) Mr Lesser's Sun Life policy 0614606.
8. Section 226, together with the other sections in Chapter III ("Retirement Annuities") of Part IX ICTA 1970, gave valuable relief from tax in respect of annuity contracts taken out by way of provision for old age. Relief from income tax was given (to the extent prescribed in section 227 ICTA 1970) in respect of a "qualifying premium" paid by an individual, who was (or would have been, but for an insufficiency of profits or gains) chargeable to income tax in respect of relevant earnings from any trade, profession, vocation, office or employment, under an annuity contract "for the time being approved by the Board [of Inland Revenue] as having for its main object the provision for the individual of a life annuity in old age". Further, any annuity payable to the same individual was to be treated as earned income of the annuitant to the extent to which it was payable in return for any amount on which qualifying premium relief had been given. An insurance company was exempt from tax on income and chargeable gains in respect of investments and deposits of so much of its annuity fund as was referable to pension annuity business (that is to say, the making of annuity contracts approved under section 226 ICTA 1970) - see section 314 ICTA 1970.
9. Section 226(2) ICTA 1970 required that the Board should not approve a contract unless certain conditions were satisfied. Those conditions included the requirement that the contract should include "provision securing that no annuity payable under it should be capable in whole or in part of surrender, commutation or assignment".
10. It is a feature of all the annuity contracts which I have described that they contain a restriction on alienation. By way of example it is sufficient to refer, first, to provisions 15(i) and (iii) of the Policy Provisions contained in Standard Life booklet ML9 which are incorporated in Mr Dennison's Standard Life policies 3899161A/V:
"15 Inland Revenue Requirements
(i) This policy is approved as an Annuity Contract by the Commision- ers of Inland Revenue under section 226 of the Income and Corporation Taxes Act 1970 as amended and no alteration shall be permitted unless approved by the Commissioners of Inland Revenue.
...
(iii) This policy and the benefits payable hereunder shall not be capable in whole or in part of commutation or surrender (except as provided under section 226(2) Income and Corporation Taxes Act 1970 or section 26 Finance Act 1978) nor shall any annuity be capable of assignment (except by Will) away from the Person Assured , . . ."
11. The purpose of that restriction, as paragraph 15(i) suggests, was to ensure that those policies - which were purchased in April 1983 - qualified, and continued to qualify, for approval under section 226 ICTA 1970. There is a similar restriction in condition 7 of the Conditions relating to Mr Lesser's Crusader Life policies; in clause 9 of his London Life policies; in section 2 of the policy provisions annexed to his Commercial Union policy; and in the General Provisions annexed to his Sun Life policy.
12. Section 226 ICTA 1970 was replaced (in relation to contracts made before 1 July 1988) by sections 619 and 620 in Chapter III ("Retirement Annuities") of Part XIV of the Income and Corporation Taxes Act 1988 ("ICTA 1988"). In effect, the "section 226 regime" was continued in relation to existing contracts; but was not available in relation to contracts made on or after 1 July 1988.
The personal pension arrangements
13. Chapter IV ("Personal Pension Schemes") of Part XIV ICTA 1988 introduced, with effect from 1 July 1988, a new regime in relation to provision for old age made under "personal pension arrangements". Personal pension arrangements are arrangements made by an individual in accordance with a "personal pension scheme". A personal pension scheme, in that context, is a scheme whose sole purpose is the provision of annuities, income withdrawals or lump sums under arrangements made by individuals in accordance with the scheme. Provision is made in Chapter IV, Part XIV ICTA 1988 for approval of a personal pension scheme by the Board of Inland Revenue. Tax relief is given in respect of contributions paid by an individual under approved pension arrangements - see section 639 ICTA 1988. An insurance company is exempt from corporation tax on income and chargeable gains in respect of so much of its long term business fund as is referable to pension business - see section 438 ICTA 1988. Pension business includes the making of contracts approved under section 620 ICTA 1988 (existing section 226 ICTA 1970 contracts) and contracts made under approved pension arrangements within Chapter IV, Part XIV ICTA 1988 - see section 431B ICTA 1988.
14. The requirements for the approval of a personal pension scheme under Chapter IV, Part XIV ICTA 1988 are similar to those formerly contained in section 226 ICTA 1970. The relevant provisions are in section 633 ("Scope of benefits"), section 634 ("Annuity to member") and section 635 ("Lump sum to member") ICTA 1988. Section 634(6) ICTA 1988 provides that an annuity payable under an approved scheme must not be capable of assignment or surrender (except that an annuity for a term certain may be assigned by will or by the annuitant's personal representatives in the distribution of his estate). Section 635(5) ICTA 1988 provides that the right to payment of a lump sum payable under an approved scheme must not be capable of assignment or surrender.
15. The policies taken out by Mr Dennison and Mr Lesser after 1 July 1988 were by way of arrangements under approved personal pension schemes within Chapter IV, Part XIV ICTA 1988. Those policies are (i) Mr Dennison's Standard Life policies K199167001/5 (written under the Standard Life Personal Pension Scheme for the Self-Employed), (ii) Mr Dennison's Equitable Life policy ANN0010929 (written under the Equitable Personal Pension Scheme), (iii) Mr Lesser's Scottish Widows' policy 2200459 and, I think, also his policy 1805821 (written under Scottish Widows' Appropriate Personal Pension Scheme), (iii) Mr Lesser's Prudential Holborn policy 0912 572110 (written under the Prudential Holborn Personal Pension Scheme), and (iv) Mr Lesser's Royal Insurance policy CP4948736 and, I think, also his policy CP4948711 (written under the Royal Life Personal Retirement Plan).
16. Each of the personal pension schemes to which I have referred includes a rule prohibiting alienation of benefits. An example is Rule 14.2 of the Rules governing the Standard Life scheme, under which policy K199167001 was issued to Mr Dennison in May 1989:
"14.2 Assignment
Rights to a lump sum retirement benefit under the Scheme may not be assigned or surrendered.
No pension secured with a Member's Fund may be assigned or surrendered. The only exception is that a pension which continues to a person's estate after his or her death may be assigned by his will or by his personal representatives in distributing his estate . . ."
17. The same prohibition appears (as rule 14.2) in the Integrated Model Rules annexed to Mr Dennison's Equitable Life policy ANN0010929; and in the Rules governing Mr Lesser's Scottish Widows' policies. A similar restriction is found in Condition 1(iii) of Mr Lesser's Royal Life Personal Retirement Plan; and in provision 14.2 of the Prudential Holborn Scheme.
These proceedings
18. On 2 May 1996 Mr Krasner issued an originating application in the Croydon County Court - to which Mr Dennison and Standard Life were respondents - seeking a declaration that the Standard Life policies 3899161 and K199167001/5 formed part of the bankrupt's estate and had vested in the trustee; and an order that Standard Life pay to the trustee all monies due under those policies. The proceedings were transferred to the High Court on 22 August 1996. On 8 May 1997 the application was amended to claim a similar declaration in respect of the Equitable Life policy ANN010929/1; and Mrs Margaret Dennison and Equitable Life were added as respondents. On 1 September 1997 the application was adjourned to the Judge. Neither Standard Life nor Equitable Life have taken any active part in the proceedings.
19. The application in Krasner v Dennison came before Mr Justice Blackburne on 7 July 1999. At the invitation of both parties, he took the view that he should follow the decision of Mr Justice Ferris in In re Landau [1998] Ch 223; and, accordingly, made the declarations sought by the trustee in bankruptcy. He granted permission to appeal to this Court.
20. Mr Lesser's trustee commenced proceedings on 8 March 1999, by originating application in the Southend County Court. He sought a declaration that the rights and benefits under the policies which I have described (and any other policies to which Mr Lesser was entitled at the date of the bankruptcy order) vested in the trustee; and an order requiring Mr Lesser to pay over to the trustee monies received by him under those policies (said to amount together to £36,764). The application in Lawrence v Lesser was heard by His Honour Judge Yelton on 6 September 1999. In the light of the decision in In re Landau he made the declaration and the order sought. Mr Lesser appealed to a single Judge of the High Court, under section 375(2) of the Insolvency Act 1986 and rule 7.48(2) of the Insolvency Rules 1986. That appeal came before Mr Justice Jacob on 16 November 1999. He dismissed the appeal, but granted permission to appeal to this Court.

21. It is in those circumstances that there are now before us (i) an appeal by Mr Dennison from the order made by Mr Justice Blackburne on 7 July 1999 in the proceedings Krasner v Dennison, and (ii) an appeal by Mr Lesser from the order made by Mr Justice Jacob on 16 November 1999 in the proceedings Lawrence v Lesser. In neither appeal (for reasons which are understandable) do we have the benefit of a reasoned judgment in the court below. The reasons for the orders which are the subject of these appeals are to be found in the judgment of Mr Justice Ferris in In re Landau.
The vesting of a bankrupt's estate in his trustee
22. Before turning to the judgment in In re Landau it is convenient to refer to the provisions in Part IX ("Bankruptcy") of the Insolvency Act 1986 ("IA 1986") relevant to the vesting of property in the trustee in bankruptcy.


23. Section 306 IA 1986 provides for the vesting of the bankrupt's estate in the trustee immediately on his appointment. It is in these terms:
"306(1) The bankrupt's estate shall vest in the trustee immediately on his appointment taking effect or, in the case of the official receiver, on his becoming trustee.
(2) Where any property which is, or is to be, comprised in the bankrupt's estate vests in the trustee (whether under this section or under any other provision of this Part), it shall so vest without any conveyance, assignment or transfer."
24. In that context the "bankrupt's estate" is defined by section 283(1) IA 1986:
"283(1) Subject as follows, a bankrupt's estate for the purposes of any of this Group of Parts [Parts VIII to XI IA 1986] comprises -
(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and
(b) any property which by virtue of any of the following provisions of this Part [Part IX IA 1986] is comprised in that estate or is treated as falling within the preceding paragraph.
. . .
(4) References in any of this Group of Parts to property, in relation to a bankrupt, include references to any power exercisable by him over or in respect of property . . . and a power exercisable over or in respect of property is deemed for the purpose of any of this Group of Parts to vest in the person entitled to exercise it at the time of the transaction or event by which it is exercisable by that person (whether or not it becomes so exercisable at that time).
. . .
(6) This section has effect subject to the provisions of any enactment not contained in this Act under which any property is to be excluded from a bankrupt's estate."
25. In that context, the commencement of the bankruptcy means the day on which the bankruptcy order is made - see section 278 IA 1986. "Property" is defined, in section 436 IA 1986, to include:
". . . money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property;"
26. The basic provision, therefore, is that all property (including things in action, present or future, vested or contingent) belonging to or vested in the bankrupt at the date of the bankruptcy order vests in the trustee immediately on his appointment - sections 283(1)(a) and 306(1) IA 1986. In the interim, between the making of the order and the appointment of a trustee, the official receiver is receiver and manager of the bankrupt's estate - see section 287(1) IA 1986. Property not belonging to or vested in the bankrupt at the date of the bankruptcy order, but acquired by him subsequently ("after-acquired property"), does not vest in the trustee unless and until it becomes comprised in the bankrupt's estate by virtue of some other provision in Part IX IA 1986 - see section 283(1)(b) IA 1986.
27. After-acquired property becomes comprised in the bankrupt's estate under the provisions in section 307 IA 1986. The section is in these terms, so far as material:
"307(1) Subject to this section and section 309, the trustee may by notice in writing claim for the bankrupt's estate any property which has been acquired by, or has devolved upon, the bankrupt since the commencement of the bankruptcy.
(2) . . .
(3) Subject to the next following subsection, upon the service on the bankrupt of a notice under this section the property to which the notice relates shall vest in the trustee as part of the bankrupt's estate; and the trustee's title to that property has relation back to the time at which the property was acquired by, or devolved upon, the bankrupt.
(4) ...
(5) References in this section to property do not include any property which, as part of the bankrupt's income, may be the subject of an income payments order under section 310."

28. Section 309 IA 1986, to which section 307 IA 1986 is made subject, requires that, except with the leave of the court, a notice under section 307 shall not be served after the end of the period of 42 days beginning with the day on which it first came to the notice of the trustee that the property in question had been acquired by, or had devolved upon, the bankrupt. Section 307(4) IA 1986, to which section 307(3) is made subject, protects the title of persons who themselves acquire after-acquired property from the bankrupt in good faith, for value and without notice of the bankruptcy.


29. Section 307(5) IA 1986 excludes from the operation of section 307(3) "property which, as part of the bankrupt's income, may be the subject of an income payments order under section 310 IA 1986". Section 310 is in these terms, so far as material:
"310(1) The court may, on the application of the trustee, make an order ("an income payments order") claiming for the bankrupt's estate so much of the income of the bankrupt during the period for which the order is in force as may be specified in the order.
(2) The court shall not make an income payments order the effect of which would be to reduce the income of the bankrupt [when taken together with any payments to which subsection (8) applies] below what appears to the court to be necessary for meeting the reasonable domestic needs of the bankrupt and his family.
(3) An income payments order shall, in respect of any payment of income to which it is to apply, either -
(a) require the bankrupt to pay the trustee an amount equal to so
much of that payment as is claimed by the order, or
(b) require the person making the payment to pay so much of it as is
so claimed to the trustee, instead of to the bankrupt.
(4) . . .
(5) Sums received by the trustee under an income payments order form part of the bankrupt's estate.
(6) An income payments order shall not be made after the discharge of the bankrupt, and if made before, shall not have effect after his discharge . . .
(7) For the purposes of this section the income of the bankrupt comprises every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled, including any payment in respect of the carrying on of any business or in respect of any office or employment [and any payment under a pension scheme but excluding any payment to which subsection (8) applies.
(8) This subsection applies to -
(a) payments by way of guaranteed minimum pension; and
(b) payments giving effect the bankrupt's protected rights as a
member of a pension scheme.
(9) In this section, "guaranteed minimum pension" and "protected rights" have the same meaning as in the Pension Act 1993.]"
[The words within the square brackets, in subsections (2), (7), (8) and (9), were added by the Pensions Act 1995]
30. At first sight the scope of section 310 IA 1986 seems reasonably clear. It applies to property ("income of the bankrupt") which would not, but for an order under the section, form part of the bankrupt's estate. It does not apply to property which already (absent any order under the section) does form part of the estate. There are four factors which point to that conclusion. First, the order is made on the application of the trustee. There would be no need for the trustee to apply for an order "claiming for the bankrupt's estate" property that was already comprised in the estate. Second, the effect of the order is that sums received by the trustee under it form part of the bankrupt's estate - see section310(5) IA 1986. There would be no need for that provision if the property was already comprised in the estate. Third, section 310(3) IA 1986 provides that the order must be addressed either (a) to the bankrupt, requiring him to make a payment to the trustee of an amount out of the payment which he has received or (b) to the person who would otherwise be making the payment to the bankrupt, requiring him to make a payment to the trustee instead of to the bankrupt. That provision clearly contemplates that the monies to be paid to the trustee pursuant to the order would not be payable to him but for the order. Fourth, there is nothing in the section which enables the bankrupt to apply for an order against the trustee; as there would need to be if the section was intended to apply to property which (absent any order under the section) was already part of the estate.
31. It follows that the property to which section 310 applies ("income of the bankrupt") is not property within section 283(1)(a) IA 1986 ("property belonging to or vested in the bankrupt at the commencement of the bankruptcy"). Property belonging to or vested in the bankrupt at the commencement of the bankruptcy does form part of the bankrupt's estate; unless it is expressly excluded from the estate by some other provision in section 283 itself - see, for example, section 283(2) (tools of the trade), section 283(3) (property held on trust), section 283(3A) (assured, protected and secure tenancies) - or by some other enactment (section 283(6) IA 1986). Property excluded under sections 283(2) and (3A) is the subject of specific "claw-back" provisions -see section 308 and 308A IA 1986. Section 310 IA 1986 is not part of that scheme. The section is plainly intended to apply to after-acquired property, to which the bankrupt had no entitlement at the date of the bankruptcy order. Further, the property to which the section does apply ("income of the bankrupt") is taken out of the provisions of section 307 IA 1986 by subsection (5) of that section. So it is after-acquired property which can only be claimed for the estate by means of an income payments order.
32. With these considerations in mind it is not difficult to identify the nature of the property which is within section 310 IA 1986. It is described in section 310(7) as originally enacted:
" .. . . every payment in the nature of income which is from time to time made to [the bankrupt] or to which he from time to time becomes entitled, including any payment in respect of the carrying on of any business or in respect of any office or employment . . ."
33. The section is clearly intended to apply to income to which the bankrupt had no entitlement at the date of the bankruptcy order; but to which he becomes entitled during the course of his bankruptcy - say, as earnings from his profession or employment. That income is to be made available to meet the claims of his creditors in the bankruptcy; save to the extent that it is needed to meet the reasonable domestic needs of the bankrupt and his family - see section 310(2) IA 1986. The bankrupt is not to be the slave of his trustee; but, if he is earning during the bankruptcy, he may be required to provide for his creditors out of his earnings. The income to which the section applies is not restricted to earnings; it includes other income which the bankrupt may receive during the bankruptcy - say, an allowance from a parent or other relative, or income under a discretionary trust. But the section is not intended to apply to income which the bankrupt receives by virtue of some right to which he was entitled at the date of the bankruptcy order. In such case the right, and the income received by virtue of that right, forms part of the bankrupt's estate under the provisions of section 283(1)(a) IA 1986. There is no need for the trustee to have recourse to section 310 IA 1986 in those circumstances.
In re Landau (a bankrupt)
34. It is convenient, now, to examine the decision in In re Landau [1998] Ch 223. At the date of the bankruptcy the bankrupt was entitled to a pension, payable in the future on his attaining the age of 65 years, under a policy which had been approved as an annuity contract for the purposes of section 226 ICTA 1970. The bankrupt, a former solicitor, was aged 61 years when the bankruptcy order was made in 1990. He was discharged under the automatic provisions in 1993. The annuity became payable when he attained age 65 years in the following year. He claimed the annuity payments. The trustee, after some equivocation, claimed to be entitled to elect under the policy to commute part of the annuity for a tax free lump sum; and to take that lump sum and the reduced annuity as part of the bankrupt's estate. The policy contained the familiar restriction against alienation; required as a condition of Revenue approval.
35. Mr Justice Ferris, at [1998] Ch 223, 231E-G, identified three main issues for decision: (i) whether, if the restriction on alienation were disregarded, the policy would constitute "property belonging to or vested in [the bankrupt] at the commencement of the bankruptcy", so as to form part of the estate by virtue of section 283(1)(a) IA 1986; (ii) if so, whether that result was precluded by the restriction on alienation in the policy; and (iii) whether, if the policy vested in the trustee as part of the bankrupt's estate, was it nevertheless within the scope of section 310 IA 1986 so as to be available to meet the claims of creditors only if and insofar as an income payments order were made. The bankrupt having been discharged from his bankruptcy, it was too late to make such an order - see section 310(6) IA 1986.
36. The judge decided the first of those issues in favour of the trustee. He pointed out that the `bundle of contractual rights' under the pension policy to which the bankrupt had been entitled at the commencement of the bankruptcy fell within the description `things in action . . . whether present or future or vested or contingent'; and so had to be regarded as within the definition of `property' in section 436 IA 1986. It was immaterial that the policy was not in payment at the commencement of the bankruptcy. At the commencement of the bankruptcy the bankrupt had a present right to require the pension provider to make payments under the policy in the future. It was that right - and the associated rights to elect when payments should commence - which formed part of the bankrupt's estate for the purposes of section 283(1)(a) IA 1986; and which vested in the trustee immediately on his appointment, under the provisions of section 306 IA 1986.
37. There is no challenge, on the present appeals, to the conclusion reached by Mr Justice Ferris on the first of the issues which he decided. If I may say so, Mr Justice Ferris was plainly right to reach the conclusion which he did; and for the reasons which he gave. The decision not to challenge that conclusion was correct.
38. Mr Justice Ferris decided the second of those issues in favour of the trustee also. He pointed out, correctly in my view, that the provisions of section 226 ICTA 1970 - under which the policy with which he was concerned had been written - were of limited relevance to the question which he had to decide. Those provisions did not, of themselves, purport to make the rights under the policy inalienable; they simply provided the background against which the policy itself fell to be construed. The policy was plainly intended to satisfy the requirements for approval under section 226 ICTA 1970; so, in the case of ambiguity (if any) it would be appropriate to construe the policy in a sense which gave effect to that intention. But the answer to the question "did the restriction on alienation prevent the rights under the policy vesting in the trustee in bankruptcy" lay in the terms of the policy itself. In In re Landau, the relevant term was in paragraph 11 of the schedule: "This policy cannot be surrendered and no annuity can be assigned or commuted except as provided in provisions 8 and 9 of this schedule." The judge held that, as a matter of construction, the prohibition against assignment in paragraph 11 did not extend to transmission by operation of law; in particular the prohibition did not seek to prevent the vesting of the rights under the policy in a trustee in bankruptcy pursuant to section 306 IA 1986 - see [1998] Ch 223, 237B-C.
39. The third of the issues for decision in In re Landau was whether, if the policy vested in the trustee as part of the bankrupt's estate, was it nevertheless within the scope of section 310 IA 1986 so as to be available to meet the claims of creditors only if and insofar as an income payments order were made; an order which, on the facts in In re Landau, the court could not make. Mr Justice Ferris decided that issue in favour of the trustee. He was satisfied that "on the ordinary meaning of the language used in section 310" that section had no application to property or income which has vested in the trustee in bankruptcy under section 306 IA 1986. I have already indicated, earlier in this judgment, why I share that view. But, after referring to a number of authorities on the effect of section 51(2) of the Bankruptcy Act 1914 - which he described as the statutory predecessor of section 310 IA 1986 - and its predecessors, Mr Justice Ferris posed the question: "whether the decisions on section 51(2) of the Act of 1914 and its predecessors oblige me to give a similar effect to section 310, notwithstanding the view I take as to the ordinary meaning of the words used in section 310." He answered that question in the negative. He held that the right to payment of the annuity payable under the policy with which he was concerned vested in the trustee as part of the bankrupt's estate on his appointment and that section 310 IA 1986 had no application to it when it became payable.
The issues on these appeals.
40. I have referred to the judgment in In re Landau [1998] Ch 223 at some length because - as I have already indicated - it is in that judgment that the reasons for the orders which are the subject of the present appeals are to be found. The issues raised in the present appeals, as identified in the notices of appeal lodged on behalf of Mr Dennison and Mr Lesser and summarised in the skeleton arguments submitted by their respective counsel, are these:
(1) Do the statutory restrictions which restrict assignment of pensions policies prevent such policies from constituting `property belonging to or vested in the bankrupt at the commencement of the bankruptcy' so as to form part of the bankrupt's estate by virtue of section 283(1) IA 1986?
(2) If the policies do vest in the trustee as part of the bankrupt's estate, are they or the annuities payable under them caught by section 310 IA 1986, so that (notwithstanding that they have vested in the trustee) the income under them belongs to the bankrupt and becomes available to the creditors only if an income payments order is made under that section?
3(i) If the effect of IA 1986 is that pension policies vest in a trustee in bankruptcy, without the Court having jurisdiction as to whether some or all of the pension should be paid to the bankrupt, would that constitute a breach of Schedule 1, Part II of Article 1 of the European Convention of Human Rights (sic)?
(3)(ii) If the effect of IA 1986 is that the policies in existence as at the date of the coming into force of that Act vest in the trustee in bankruptcy without the Court having jurisdiction as to whether some or all of the pension should be paid to the bankrupt, would that constitute a breach of the said Article 1?
(3)(iii) In either case (3)(i) or (3)(ii) does IA 1986 admit of any construction which does not produce this result?
41. The reference in Mr Dennison's skeleton argument to "Schedule 1, Part II of Article 1 of the European Convention of Human Rights" is to be understood as a reference to Article 1 of the First Protocol to the European Convention on Human Rights. The First Protocol to the Convention is incorporated as Part II of Schedule 1 to the Human Rights Act 1998. The Act does not come into force in England and Wales until 2 October 2000.

Do the statutory restrictions which restrict assignment of pensions policies prevent such policies from vesting in the trustee in bankruptcy as part of the bankrupt's estate?
42. This is, in effect, a re-formulation of the second of the three issues determined by Mr Justice Ferris in In re Landau [1998] Ch 223. As Mr Justice Ferris pointed out, the answer lies not in the statutory provisions, contained in section 226 ICTA 1970 and, now, in Chapter IV, Part XIV ICTA 1988, but in the terms of the policies themselves and (I would add) in the general law. The statutory provisions do not restrict the alienation of rights or benefits under retirement annuity contracts or under personal pension schemes. Those provisions do not, and do not purport to, do anything other than prescribe the conditions which must be satisfied before a retirement annuity contract or a personal pension scheme can be approved by the Board of Inland Revenue and so qualify for favourable tax treatment. It is appropriate to have those provisions in mind when construing the terms of the policies; but, unless the policies themselves have the effect, on their true construction and having regard to the general law, that, on the bankruptcy of the policyholder, the rights and benefits thereunder do not vest in his trustee, the question posed must be answered in the negative. There is nothing in the provisions in section 226 ICTA 1970 and in Chapter IV, Part XIV ICTA 1988 which leads to a different conclusion.
43. Section 226 ICTA 1970 was first enacted as section 43 of the Finance Act 1956. That section was enacted in order to give effect to recommendations in the Report of the Committee on the Taxation Treatment of Provisions for Retirement (1954, Cmnd. 9063, "the Millard Tucker Report"). The problem to which section 43(2) of the Finance Act 1956 (re-enacted as section 226(2) ICTA 1970) was addressed is identified at paragraph 201 of the report:
"The object of the requirement suggested in paragraphs 160 and 164 above that, with certain exceptions, benefits should take the form of non-commutable pensions is to ensure that they are taxable. That object might be wholly or partly defeated if the pensioner could assign his pension for a lump sum, either to somebody liable to a lower rate of tax, or, by way of surrender, to the person by whom it is paid, or otherwise. We therefore recommend that pensions should be non-assignable, as well as non-commutable, and that this should be made a condition of automatic approval. It may not always be possible, however, to prevent the assignment of a pension when it is required by operation of law. This might happen, for example, where the Court is making provision for the maintenance of a divorced wife or the children, or, with some types of pension, in bankruptcy proceedings. The position depends on the terms of the particular contract under which the pension is paid. The mere fact that the pension may be assigned or charged by operation of law, without the consent of the pensioner, should not disqualify the scheme from automatic approval." [emphasis as in original text]
44. It is clear, therefore, that the Committee accepted that the requirement that pensions should be non-assignable - which, as they recommended, should be a condition of approval for favourable tax treatment - would not prevent the transfer of rights by operation of law; in particular, by operation of the bankruptcy legislation. As the Committee recognised "The position depends on the terms of the particular contract under which the pension is paid."
45. What, then, is the position under the retirement annuity contracts and personal pension schemes in the present case? The relevant restriction is limited to a contractual prohibition against assignment. There is no provision which seeks to make void a purported assignment. There is no provision which seeks to forfeit a pension in the event of bankruptcy.
46. The starting point, as it seems to me is the long established principle that it is contrary to the public interest to allow a party to contract out of the operation of the bankruptcy code - see Ex parte Mackay, In re Jeavons (1873) 8 Ch App 643, applied in British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 1WLR 758 (HL). It was this principle which led Mr Justice Joyce to hold, in In re Fitzgerald [1903] 1 Ch 933, that a contract by a wife to settle property on an inalienable trust for her husband (if he survived her) was void and inoperative. As he put it, at page 940:
"But according to the law of England an inalienable trust cannot be created in favour of a man even for his maintenance. A mere prohibition of alienation cannot effectually be imposed except in the case of a married woman's separate property: Brandon v Robinson (18) Ves. 429; Graves v Dolphin 1 Sim.66; Younghusband v Gisborne (1844) 1 Coll. 400. It is contrary to the policy of the law in this country that property should be settled so as to continue in the enjoyment of a bankrupt notwithstanding bankruptcy."
47. It is, to my mind, unarguable that a mere restriction against alienation in an annuity contract, or in a pensions scheme, can prevent the benefits under that contract, or under that scheme, from vesting in a trustee in bankruptcy.
48. The need to protect certain classes of pension benefits from the claims of creditors has been recognised by Parliament for at least 130 years. Where it has thought it right to provide such protection, Parliament has enacted that an assignment of the pension rights shall be void. Examples are found in the Naval and Marine Pay and Pensions Act 1865, in the Army Act 1955 and, now, in the Superannuation Act 1972. Section 5(1) of the last named Act provides an illustration of the statutory formula that has traditionally been employed:
"5(1) Any assignment (or, in Scotland, assignation) of or charge on, and any agreement to assign or charge, any benefit payable under a scheme made under section 1 of this Act shall be void."
49. The courts have given effect to that formula by holding that it precludes vesting in a statutory assignee or trustee in the event of bankruptcy. In the light of that legislative history, I would not, myself, adopt the reasoning of Mr Justice Ferris in In re Landau [1998] Ch 223, at page 237B-C, in so far as he accepted the argument of counsel for the trustee that the relevant restriction against assignment in the policy which he had to consider did not purport to extend to vesting in a trustee in bankruptcy by operation of law. I would prefer to base my conclusion on the principle - which Mr Justice Ferris treated as an additional ground for his decision on this issue - that an attempt to provide, by contract, that benefits will be inalienable on a bankruptcy must fail on grounds of public policy.
50. An early example of a more explicit prohibition against vesting in the trustee on bankruptcy can be found in section 14(1) of the Police Pensions Act 1921, which was before the court in In re Garrett [1930] 2 Ch 137. That section provided not only that any assignment of the pension payable under the Act should be void, but (in express terms) that, on the pensioner's bankruptcy, the pension should not pass to "any trustee or other person". It is that formula which has been adopted in more recent legislation. Examples are to be found in sections 48(1) and (2) of the Social Security Pensions Act 1975 (in respect of a guaranteed minimum pension) and in sections 2(7) and (8) of the Social Security Act 1986 (in respect of payments to give effect to protected rights). The latter provisions are in these terms :
"2(7) Every assignment of or charge on and every agreement to assign protected rights or payments giving effect to protected rights shall be void.
2(8) On the bankruptcy of a person who is entitled to protected rights or a payment giving effect to protected rights, any protected rights or payment the assignment of which is or would be made void by subsection (7) above shall not pass to any trustee or person acting on behalf of his creditors."
51. The provisions in sections 48(1) and (2) of the Social Security Pensions Act 1975 and in sections 2(7) and (8) of the Social Security Act 1986 were re-enacted as sections 159(4) and (5) of the Pension Schemes Act 1993; and the same protection from creditors was extended to other rights under an occupational pension scheme by section 91 of the Pensions Act 1995 - see, in particular, section 91(5):
"91(5) Where a bankruptcy order is made against a person, any entitlement or right of his which by virtue of this section cannot . . . be assigned is excluded from his estate for the purposes of Parts VIII to XI of the Insolvency Act 1986 . . ."
52. The position, therefore, is that Parliament knows well how to provide, when it thinks fit, that the general public interest that a restriction on alienation shall not be enforceable against creditors in a bankruptcy should yield to some more specific element of public policy requiring the protection of pension rights. It has done so, over many years, in relation to what may be described, generically, as public service pensions. It did so, in 1975, in relation to guaranteed minimum pensions provided by an occupational pension scheme. It extended that protection in 1986 to protected rights under an occupational pension scheme; and, in 1995, to rights generally under an occupational pensions scheme. It did not think fit to do so, in relation to retirement annuity contracts or personal pension schemes, until the enactment of section 11 of the Welfare Reform and Pensions Act 1999. In particular, it did not think fit to do so when it enacted (or re-enacted) the provisions which first appeared in section 43 of the Finance Act 1956. That must, I think, be taken to have been a deliberate legislative choice. It is not, in my view, to be circumvented by giving a strained construction to the definition of property in section 436 IA 1986; or in refusing to give effect to the clear words of sections 283(1) and 306 of that Act.
53. For those reasons I would decide the first issue of the issues raised on these appeals in the negative.
If the policies do vest in the trustee as part of the bankrupt's estate, are they or the annuities payable under them caught by section 310 IA 1986, so that (notwithstanding that they have vested in the trustee) the income under them belongs to the bankrupt and becomes available to the creditors only if an income payments order is made under that section?

54. For the purposes of section 310 IA 1986 "the income of the bankrupt" comprises "every payment in the nature of income which is from time to time made to him or to which he from time to time becomes entitled, including any payment in respect of the carrying on of any business or in respect of any office or employment and any payment under a pension scheme . . ." - see section 310(7). The words which I have emphasised were added by section 122 of, and paragraph 15 in schedule 3 to, the Pensions Act 1995. Strictly, perhaps, they do not assist in the interpretation of section 310 IA 1986 as it was at the date of the bankruptcy orders made in respect of Mr Dennison and Mr Lesser. But it would, I think, be artificial to ignore them.
55. I have already explained why I take the view that section 310 IA 1986 can have no application to income which the bankrupt would have been entitled to receive by virtue of some right to which he was entitled at the date of the bankruptcy order. In such case the right, and the income received by virtue of that right, forms part of the bankrupt's estate under the provisions of section 283(1)(a) IA 1986. The property to which section 310 applies ("income of the bankrupt") is not property within section 283(1)(a) IA 1986 ("property belonging to or vested in the bankrupt at the commencement of the bankruptcy"). The words "including . . . any payment under a pension scheme" have to be read in the context of the bankruptcy legislation as a whole. In that context it is clear that those words refer to pension payments the right to receive which do not vest in the trustee on the making of the bankruptcy order - for example, payments made under a public service pension scheme to which section 5(1) of the Superannuation Act 1972 applies.
56. I find support for that view in the circumstances in which the words "including . . . any payment under a pension scheme . . ." were introduced by the Pensions Act 1995. That Act, as I have already pointed out, extended the protection against the claims of creditors in a bankruptcy, previously afforded by section 159(5) of the Pension Schemes Act 1993 to "protected rights" and "guaranteed minimum pension" payable under an occupational pension scheme, to all accrued rights under such a scheme. But, at the same time, the Act provided for the court to have power, on the application of the trustee in bankruptcy, to redress the position if satisfied that those rights had been obtained by the making of excessive contributions to the scheme - see section 95 of the Pensions Act 1995. Further, the Act gave additional protection to "protected rights" and "guaranteed minimum pension" - see paragraph 41 in schedule 3, which introduces a new subsection, subsection (4A), into section 159 of the Pension Schemes Act 1993. The new subsection 159(4A) of the 1993 Act required that no order should be made by any court the effect of which would be that a person entitled to receive payments in respect of protected rights or guaranteed minimum pension would be restrained from receiving "anything the assignment of which would be made void" by sections 159(1) or (4). In effect, therefore, the power of the court to make an income payments order under section 310(1) IA 1986 in respect of payments of that description - payments which, plainly, could not form part of the bankrupt's estate but which would, prima facie, comprise "income of the bankrupt" within sections 310(1) and (7) IA 1986 - was curtailed. The legislative intention was reinforced by the amendment made to section 310(7) IA 1986 by paragraph 15 in schedule 3 to the Pensions Act 1995. That amendment introduced the additional words "and any payment under a pension scheme" into section 310(7) IA 1986; but qualified those words by excluding any payment to which subsection (8) applies. Section 310(8) - introduced by the same amending provision - applied to payments in respect of protected rights and guaranteed minimum pension under an occupational pension scheme. It is clear, therefore, that when Parliament amended section 310(7) IA 1986 so as to include an express reference to payments under a pension scheme it did so in the context of the changes it was making to the protection from the claims of creditors in a bankruptcy of rights under occupational pension schemes - rights which it had decided should not form part of the bankrupt's estate. There is no reason to think that the introduction of the additional words "any payment under a pension scheme" into section 310(7) IA 1986 reflected any legislative concern to reverse what would otherwise be the plain meaning of the section as originally enacted; namely that payments the right to receive which did form part of the bankrupt's estate were outside the scope of section 310 IA 1986 altogether.
57. The 1995 pension law reforms followed the Report of the Pension Law Review Committee (Cm 2342-1), under the chairmanship of Professor Roy Goode (as he then was). It is, I think, interesting to note the views expressed by the Goode Committee at paragraphs 4.14.33 to 4.14.35 under the general heading "Attachment of Pension Rights". It must be kept in mind that, in expressing those views, the Committee was directing its observations to occupational pension schemes. The Committee was not concerned, in those paragraphs, with personal pension schemes - see paragraph 2.5.8 of the Report. [Note: The distinction between occupational pension schemes and personal pension schemes is made in section 1 of the Pension Schemes Act 1993.] The relevant paragraphs in the Report are these:
"4.14.33 As noted above, future pension rights are in principle an asset of the scheme member and as such are available to be taken in execution to satisfy a judgment debt and to be distributable among creditors in the scheme member's bankruptcy. But since scheme rules nearly always provide for rights of pensions not in payment to cease on levy of execution, attachment of earnings or bankruptcy there is in practice no asset or pension income capable of being attached or otherwise being made available to creditors. Accordingly the same factor that precludes assignment renders the asset represented by future pension entitlements immune from the claims of a member's creditors. The position is otherwise, of course, where the scheme has come into payment, as regards sums that have been paid over by the trustees to the beneficiary or have become due for payment. These are income in the hands of the scheme member and do not enjoy any greater protection from creditors than any other income of the scheme member.
4.14.34 It may be thought unfair to creditors that the asset represented by future pension rights should not be attachable. But it has to be remembered that employers do not establish schemes in order to benefit creditors of scheme members, nor is substantial tax relief given for that purpose. To allow future pension payments to be attached by execution creditors or made a bankruptcy asset would be to frustrate that fundamental purpose. The evidence submitted to us shows a broad consensus in favour of exempting future pension entitlements from the claims of creditors.
4.14.35 We therefore consider that the immunity currently granted by the Social Security Pensions Act 1975 to [guaranteed minimum payments] and entitlements to protected rights payments should be extended to cover all pension entitlements. This would not preclude execution creditors from attaching money in the hand paid to the scheme member, nor would it prevent trustees in bankruptcy from exercising their normal statutory right to apply for an income payments order requiring the bankrupt to pay over income in excess of what is necessary for meeting the reasonable domestic needs of his family. Except as provided by statute there is no reason why pension payments made or due to a scheme member should be treated differently from other income in the scheme member's hands or enjoy any special immunity. But exemption of the asset represented by the future pension rights would give statutory effect to the protective trust provisions so widely adopted in scheme documents, enabling trustees to pay future benefits to a spouse or other dependant instead of to the scheme member."
58. Those paragraphs bring out the points: (i) that, in principle, future pension rights are an asset which will pass to the trustee in bankruptcy; (ii) that, in the case of an occupational pension scheme, that result can be avoided by provisions in the scheme rules analogous to protective trusts; (iii) that the immunity granted to guaranteed minimum pensions and protected rights payments - that is to say, exclusion from the bankrupt's estate - should be extended to all pension entitlements under occupational pension schemes; and (iv) that it is to income from pension entitlements which enjoy that immunity that the provisions of section 310 IA 1986 - enabling the court to make income payments orders - are intended to apply.
59. The foundation of the appellants' argument on this second issue is the decision of the Court of Appeal in Ex parte Huggins, In re Huggins (1882) 21 ChD 85. The bankrupt had been Chief Justice of Sierra Leone. On his retirement in 1879 he was granted a pension. He returned to England and, as Sir George Jessel, Master of the Rolls, put it, at page 89 . . . "was induced to enter into a bottle washing speculation, and the result was, what might have been expected, it has brought him to ruin and bankruptcy". The Master of the Rolls identified as "the only question" . . . "whether his creditors in the bottle washing-business are entitled to take the pension which he has so hardly earned to pay the debts which he has contracted with them". The trustee applied for, and obtained, an order that the pension had vested in him as part of the property of the bankrupt, and for a direction what proportion of that pension should be set aside for payment of the creditors and what proportion for the bankrupt's maintenance. The importance which the appellants attach to the decision lies in the fact that the Court of Appeal was willing to treat as "income" for the purposes of section 90 of the Bankruptcy Act 1869 income derived from property (the pension rights) which, as the court held, had vested in the trustee under section 17 of that Act.
60. Sections 89 and 90 of the Bankruptcy Act 1869 were in these terms:
"89. Where a bankrupt is or has been an officer of the army or navy, or an officer or clerk or otherwise employed or engaged in the civil service of the Crown, or is in the enjoyment of any pension or compensation granted by the Treasury, the trustee during the bankruptcy, and the registrar after the close of the bankruptcy, shall receive for distribution amongst the creditors so much of the bankrupt's pay, half-pay, salary, emolument or pension as the court, upon the application of the trustee, thinks just and reasonable, to be paid in such manner and at such times as the court, with the consent in writing of the chief officer of the department under which the pay, half-pay, salary, emolument, pension, or compensation is enjoyed, directs.
90. Where a bankrupt is in the receipt of a salary or income other than as aforesaid, the court upon the application of the trustee shall from time to time make such order as it thinks just for the payment of such salary or income, or of any part thereof, to the trustee during the bankruptcy, and to the registrar if necessary after the close of the bankruptcy, to be applied by him in such manner as the court may direct."
61. Those sections were subsequently re-enacted as sections 53(1) and (2) of the Bankruptcy Act 1883; and as sections 51(1) and (2) of the Bankruptcy Act 1914. They may properly be regarded as the fore-runner of what is now section 310 IA 1986. The appellants submit that, in the circumstances that the Court of Appeal was prepared to hold, in 1882, that pension payments could be income within section 90 of the Bankruptcy Act 1869 notwithstanding that the rights to those payments had vested in the trustee in bankruptcy under section 17 of that Act, so, now, it should be held that pension payments are "income" within section 310 IA 1986, notwithstanding that the rights to those payments have vested in the trustee under section 306 IA 1986.
62. Ex parte Huggins was followed - albeit, latterly, with some reluctance - over the period of one hundred years or more prior to the enactment of the new bankruptcy code now found in IA 1986. In In re Garrett [1930] 2 Ch 137 - a case in which the pension payable under the Police Pensions Act 1921 did not vest in the trustee - Mr Justice Farwell held that section 51(2) of the Bankruptcy Act 1914 applied "both to property that vests in the trustee under s. 18, sub-s. 1, and also to property not so vesting". That decision was approved by the Court of Appeal in In re Landau [1934] Ch 549. In In re Tennant's Application [1956] 1 WLR 874 the Court of Appeal did not find it necessary to decide whether the right to payments made by a husband to a former wife under covenant did or did not vest in the wife's trustee in bankruptcy because, as Lord Evershed, Master of the Rolls, put it at page 882:
". . . the monthly sums with which we are here concerned constitute income within section 51(2) [of the Bankruptcy Act 1914], and if the property in those sums did vest in the trustee (as I do not decide) then the effect of the vesting is controlled and qualified by section 51(2), so that the trustee's rights and powers in regard to them are limited to those stated in that subsection."
63. Both Lord Evershed, Master of the Rolls, (at page 878) and Lord Justice Jenkins (at page 884) expressed the view, in In re Tennant's Application, that, but for the earlier decisions which were binding upon them, they would have held that section 51(2) of the Bankruptcy Act 1914 applied only to cases where the right to receive the salary or income did not vest in the trustee under the general vesting provisions of that Act. Lord Evershed, Master of the Rolls, reiterated that view in In re Cohen [1961] Ch 246, at page 260. He indicated, at page 266, that the position in relation to income the right to receive which had vested in the trustee merited reconsideration by Parliament - or by the House of Lords in its judicial capacity. Lord Justice Upjohn, who had himself doubted Ex parte Huggins when sitting at first instance in In re Tennant's Application, agreed with the views expressed by the Master of the Rolls in In re Cohen - see page 267.
64. It may be said, therefore, that the position under the bankruptcy law in this country, as it stood up to the enactment of the new code in 1985, was that the "income" of a bankrupt fell to be dealt with under section 51(2) of the Bankruptcy Act 1914 notwithstanding that it was income the right to receive which had vested in the trustee in bankruptcy under section 53 of that Act. The reason, as explained by Lord Justice Jenkins in In re Tennant's Application, at page 883, was that it had been held in Ex parte Huggins (1882) 21 ChD 85 that the section "controlled and qualified the operation of the vesting provisions of the Act with respect to any income to which the section applied". But it must also be said that the Court of Appeal had expressed a strong view, in 1956 and in 1961, that the matter required reconsideration.
65. The question, therefore, is whether this court is obliged to follow Ex parte Huggins, notwithstanding the changes which have been made in the new bankruptcy legislation; or whether it may properly take the view that those changes reflect an intention, upon the reconsideration by Parliament of the position, that the law as expressed in Ex parte Huggins should be altered. I have no doubt that the changes reflect an intention to alter the law. It is important to have in mind that the treatment of after-acquired property - that is to say, property which did not belong to or was not vested in the bankrupt at the commencement of the bankruptcy - has been altered by the new legislation. The position under the 1914 Act and its predecessors was that property which was acquired by or devolved on the bankrupt after the commencement of his bankruptcy but before his discharge was part of the "property of the bankrupt divisible amongst his creditors" for the purposes of section 38 of the Bankruptcy Act 1914; and so vested automatically in the trustee - see section 38(a) and section 53(1) of the Act, and their statutory predecessors, sections 15(3) and 17 of the Bankruptcy Act 1869. The effect, therefore, was that any payment, whether by way of salary or income or otherwise, would, when received by the bankrupt and in the absence of some other provision, become part of the property of the bankrupt divisible amongst his creditors. It would, plainly, be oppressive and unworkable if every payment of salary received by the bankrupt in the course of his bankruptcy were immediately to become property divisible amongst his creditors and had to be treated as if it had vested in the trustee. In those circumstances it is easy to see why, as Lord Justice Jenkins pointed out in In re Tennant's Application [1956] 1 WLR 874, at page 883, section 51(2) of the 1914 Act was thought to have the role of controlling and qualifying the vesting provisions of that Act. The section was needed for that purpose.
66. There is no need for section 310 IA 1986 to fulfil that role in the new legislation. After-acquired property does not automatically form part of the bankrupt's estate - see section 283(1)(a) IA 1986. It does so only if a notice is served by the trustee in bankruptcy under section 307(1) IA 1986. But after-acquired property which, as part of the bankrupt's income, could be the subject of an income payments order under section 310 IA 1986, cannot be the subject of a notice under section 307(1) - see section 307(5) IA 1986. Section 310 provides a separate regime in relation to after- acquired property which is in the nature of income. Such property does not form part of the bankrupt's estate unless it is received by the trustee under an income payments order. Section 310 does not control and qualify the vesting provisions in sections 306 or 307 IA 1986; it supplements those provisions. It applies to property which would not otherwise fall within those provisions. There is no need, and no justification, for construing section 310 IA 1986 as having any application to property which has vested in the trustee on his appointment under section 306(1).
67. For those reasons I would answer the second issue raised by these appeals, also, in the negative.

Does the vesting of the pension policies (including those in force prior to 1986) in the trustee in bankruptcy, in circumstances in which the Court has no jurisdiction to direct that some or all of the pension should be paid to the bankrupt, constitute a breach of Article 1 of the First Protocol to the Convention?
68. Article 1 of the First Protocol to the European Convention on Human Rights is in these terms:
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
69. The appellants accept, of course, that the Article does not yet have the force of law in England and Wales. Nor is the court yet required, or entitled, to give effect to section 3(1) of the Human Rights Act 1998; which requires that, so far as it is possible to do so, primary and secondary legislation must be read and given effect in a way which is compatible with Convention rights. But the appellants submit, correctly, that, in construing the relevant provisions of IA 1986 the court should follow the approach indicated by Lord Diplock in Garland v British Rail Engineering Ltd [1983] 2 AC 751, at page 755A-B, and construe the words of the statute, if they are reasonably capable of bearing such a meaning, as intended to carry out an international obligation which the United Kingdom has assumed under a treaty or convention and not so as to be inconsistent with that obligation.
70. In order to achieve the result for which the appellants contend it would be necessary either (i) to construe the words in section 436 IA 1986 which define "property" in such a way as to exclude rights under retirement annuity contracts and personal pension schemes, or (ii) to construe the words in section 283(1)(a) IA 1986 (which define the bankrupt's estate for the purposes of Part IX of the Act) in such a way as to exclude such rights where the contract or scheme contains a restriction on alienation, or (iii) to construe the words in section 306 IA 1986 (which provide for the vesting of the bankrupt's estate in the trustee in bankruptcy immediately on his appointment) in such a way as to exclude such rights where the contract or scheme contains a restriction on alienation, or (iv) to construe section 310 IA 1986 so as to apply to income of, or derived from, property which has vested in the trustee in bankruptcy under section 306 IA 1986. We were not, I think, asked to attempt the tasks set under (i) or (ii) of that analysis. The appellants recognise, perhaps, that that would be to attempt the impossible. Nor do I think that it is possible to achieve the result for which the appellants contend - the exclusion from the vesting provisions in section 306 IA 1986 of rights under a contract or scheme which contains a restriction on alienation - by any process which can be described as the construction of section 306 itself. The submission, as I understand it (and it would not, I think, be unfair to take the view that it was not advanced with the same display of confidence or enthusiasm as the submissions under the first and second issues raised by these appeals), was that we were bound to construe section 310 IA 1986 in accordance with proposition (iv) in order to avoid an inconsistency between the legislation enacted in 1986 and the United Kingdom's obligations under the Convention.
71. For that submission to succeed it would be necessary to be persuaded of two matters: first, that what I have held to be the true construction of section 310 IA 1986 (without regard to the convention obligations imposed on the United Kingdom by Article 1 of the First Protocol) is inconsistent with those obligations; and second, that the words used in the statute are reasonably capable of bearing the meaning for which the appellants contend. I am not persuaded of either of those matters.
72. The relevant prohibition in Article 1 of the First Protocol is against deprivation of possessions "except in the public interest and subject to the conditions provided for by law". The reference to "the general principles of international law" in the latter part of the second sentence has no application to the taking by a State of the property of its own nationals - see paragraph 66 in the judgment of the European Court of Human Rights in James v United Kingdom (1986) 8 EHRR 123, at page 151. Further, it can hardly be said that a deprivation of property effected under the relevant provisions of the bankruptcy legislation - in the present case, by section 306 IA 1986, read in conjunction with sections 283(1)(a) and 436 IA 1986 - was not in accordance with "the conditions provided for by law". The relevant question, as it seems to me, is whether the vesting in the trustee in bankruptcy of the bankrupt's rights under retirement annuity contracts and personal pension schemes, in circumstances which exclude the power of the court to make an income payment order under section 310 IA 1986, is in the public interest. In that context it is relevant to have in mind that national authority is, in principle, better placed than the international judge to appreciate what is in the "public interest"; and so must be allowed a certain margin of appreciation - see the observations of the European Court of Human Rights in James v United Kingdom at paragraph 46 (8 EHRR 123 142):
". . . the decision to enact laws expropriating property will commonly involve considerations of political, economic and social issues on which opinions within a democratic society may differ widely. The Court, finding it natural that the margin of appreciation available to the legislature in implementing social and economic policies should be a wide one, will respect the legislature's judgment as to what is `in the public interest' unless that judgment be manifestly without reasonable foundation."
73. Examination of the historical treatment of pension rights under the law of England, to which I have referred earlier in this judgment, leads to the following conclusions. First, that Parliament has, for a long time, recognised a need to exclude certain pension rights (in particular, rights under public service pensions) from the full operation of the bankruptcy law - see, for example, the Naval and Marine Pay and Pensions Act 1865, the Police Pensions Act 1921, the Army Act 1955 and the Superannuation Act 1972 (and its statutory predecessors). Second, that, when this has been done, the courts have had power to make income payment orders in respect of the payments to be made in respect of those pension rights - see sections 89 and 90 of the Bankruptcy Act 1869, sections 51(1) and (2) of the Bankruptcy Act 1914 and, now section 310 IA 1986. Third, that, more recently, Parliament has thought it right to extend that regime, first, to protected rights and rights to minimum guaranteed pension under occupational pension schemes - see sections 48(1) and (2) of the Social Security Pensions Act 1975, sections 2(7) and (8) of the Social Security Act 1986 and sections 159(4) and (5) of the Pension Schemes Act 1993 - and, latterly, to rights generally under an occupational pension scheme - see section 91 of the Pensions Act 1995. Fourth, that, even more recently, Parliament has extended the regime to rights under retirement annuity contracts and personal pension schemes - see section 11 of the Welfare Reform and Pensions Act 1999. Fifth, that the extension to pension rights generally, whether under occupational pension schemes or under personal pension schemes, is to be made subject to the safeguards against abuse that were enacted, in the Pensions Act 1995, as sections 342A to 342C IA 1986 and re-enacted (in a revised form) in section 15 of the Welfare Reform and Pensions Act 1999.
74. This, then, cannot be said to be an area in which Parliament has been inactive over the past twenty five years. Clearly, Parliament has been responding to a perception of what the public interest requires in this field. It has done so against a background of judicial decisions, over very many years, that the public interest requires, generally, that a bankrupt's property should be available to answer the claims of his creditors. In my view it would be quite impossible to hold that Parliament did not take full account of what, in its view, the public interest required when, in 1986, it enacted section 310 IA 1986 in the form in which it did; or that, for Parliament to have failed to provide that the courts should have power to make income payments orders in respect of income derived from property which had vested in the trustee in bankruptcy would have been inconsistent with the United Kingdom's obligations under Article 1 of the First Protocol of the Convention.
75. That conclusion makes it unnecessary to consider, at any length, whether the words used in the statute are reasonably capable of bearing the meaning for which the appellants contend. But, for the reasons which I have already given, I am not persuaded that the words used are reasonably capable of bearing that meaning.
76. It follows that I would answer the third issue raised by these appeals in the negative; and that, accordingly, I would dismiss these appeals.
LORD JUSTICE MAY:
77. I agree that these appeals should be dismissed for the reasons given by Lord Justice Chadwick.
LORD JUSTICE KENNEDY:
78. I agree.

Order: Both appeals dismissed, with costs - Minute order to be lodged - Permission to appeal on both cases refused, with costs.
(Order does not form part of the approved judgment)

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