Guest Post: Stephen Hunt on Raithatha v. Williamson  EWHC 909 Ch - Forcing a bankrupt to take an exlcuded pension
"I think this is a wrong decision. Leave has been given to appeal.
I think the judge got confused and ran the argument backwards. He said that a pension could be income and then said nothing in the Welfare Reform Act prevents him requiring the bankrupt to elect to take his pension. I think he should first have looked at whether a Trustee or an insolvency court can interfere in an excluded asset (no caselaw cited on that as far as I can see) and only if he found a method by which the court can interfere should he then have turned his mind as to whether he should and whether s.310 would bite as a result.
Funnily enough, my thought on reading this came up with a more entertaining solution. The court should have ordered the IPO at an amount based on the income to which the bankrupt was 'entitled', regardless of whether he elected to draw it. It would then have been the bankrupt's problem as to how to pay it!
That said, I hope I am wrong. It would be a handy power for a Trustee to have.
I would suggest that Malcolm v Official Receiver  B.P.I.R. 97, which was mentioned in this judgment, gives support for an order along the lines I set out above. In that case there was no question of the court being able to use s.310(3)(b) as that was not applicable to dealing with notional expenditure. The only difficulty the court had in that case was the practical difficulty the bankrupt had in obtaining rented accommodation at the level expected by the OR. In the pension case the bankrupt would be unable to run that point.
If the bankrupt chose to not elect and default on the IPO then I am not convinced that even then the court could order the pension company to pay up under s.310(3)(b). You can't get round the fact that the bankrupt merely has a contractual right to exercise an entitlement, which is not yet income.
I suppose what is most difficult to understand about this judgment is that Landau was won on the basis that a pension was not an income but an asset of the bankrupt, and this case relies on it being income!"
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