COUNSEL: Sandra Bristoll (instructed by Pothecary & Barratt) for the trustee.
Guy Newey (instructed by the Treasury Solicitor) as amicus curiae.
Philip Jones (instructed by Druces & Attlee) for NPI.
Mr Landau did not appear.

JUDGE: Ferris J

DATES: 20, 21, 22 NOVEMBER, 16 DECEMBER 1996

HEADNOYE: Bankruptcy – Bankrupt’s estate – Vesting in trustee – Retirement annuity policy effected by bankrupt prior to bankruptcy – Policy providing that annuity could not be assigned and that annuitant could commute part of annuity for a lump sum – Annuity becoming payable after bankrupt’s discharge from bankruptcy – Trustee in bankruptcy claiming to be entitled to payments and to commute part of annuity for a lump sum – Whether trustee so entitled – Whether policy had vested in trustee on his appointment – Whether payments after-acquired property – Whether payments income of bankrupt ÐInsolvency Act 1986, ss 306, 307, 310(7).

In 1982 L effected a retirement annuity policy with a company, NPI. Paragraph 11 of the policy terms provided that the annuity could not be assigned, and by para 9 the annuitant was given the right to receive a lump sum by way of commutation of a limited part of the annuity. On 3 May 1990 a bankruptcy order was made in respect of L and in December the applicant trustee in bankruptcy was appointed. On 3 May 1993 L was discharged from bankruptcy. In February 1994 L attained the age of 65 and sought payment from the company of the benefits payable under the policy. The trustee, however, took the view that by virtue of the Insolvency Act 1986 he was entitled to receive the annuity and to exercise the rights of ‘the annuitant’ under para 9 of the policy terms. He accordingly elected to receive a lump sum by way of commutation of part of the annuity. The company accepted that election and paid a lump sum of £11,549 to the trustee. Following objections from L, the trustee issued proceedings in the court in order to determine the validity of his claim.

Held – For the purposes of s 283(1)(a)a of the 1986 Act a retirement annuity policy effected by a bankrupt prior to his bankruptcy constituted ‘property belonging to or vested in the bankrupt at the commencement of the bankruptcy’, since his contractual rights thereunder constituted a chose in action and so fell within the definition of ‘property’ in s 436b of the Act. Accordingly, in the instant case, the policy formed part of L’s estate and therefore vested automatically in the trustee on his appointment by virtue of s 306c of the Act; it was not precluded from doing so by para 11 of the policy terms, since s 306 described the transmission of the bankrupt’s estate in terms of vesting, which was not to be equated with assignment, and as the policy itself envisaged that an annuity might become payable to someone other than the original annuitant by operation of law on death, para 11 could not be regarded as treating transmission by operation of law322 as an assignment. Moreover, since L had, in relation to the policy, the same chose in action at the date of the bankruptcy order as he had when he attained the age of 65 and the latter event did not result in anything being acquired or devolving on him, the benefits payable under the policy were not after-acquired property within s 307d of the Act. Nor were they income of L within s 310(7)e of the Act, since s 310 had no application to property or income which vested in the trustee under s 306. It followed that the annuity was payable to the trustee and the trustee had been entitled to exercise the option conferred by the policy as ‘the annuitant’ to commute part of the annuity for a lump sum (see p 328 d to f, p 330 f to p 331 b f to j, p 332 d e j to p 333 a and p 334 j to p 335 d f g, post).

a Section 283(1), so far as material, provides:

‘… a bankrupt’s estate for the purposes of any of this Group of Parts comprises—

(a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy …’

b Section 436, so far as material, is set out at p 327 h j, post
c Section 306, so far as material, is set out at p 330 g, post
d Section 307, so far as material, provides: ‘(1) … 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 …’
e Section 310, so far as material, is set out at p 332 f to h, post

Application

Michael Albert Pointer applied to the court for directions pursuant to s 303(2) of the Insolvency Act 1986, seeking a declaration that he was entitled in his capacity as trustee in bankruptcy of the estate of the first respondent, Ivan Aubrey Landau, to the lump sum paid to him and further payments to be made under the retirement annuity policy effected by Mr Landau on 26 April 1982 with the second respondent, National Provident Institution (NPI), and to exercise the full rights of the annuitant under that policy. The facts are set out in the judgment. Cur adv vult

16 December 1996. The following judgment was delivered.

FERRIS J. The issue in this case is whether the benefits under a pension policy effected by a bankrupt before his bankruptcy but which became payable after his discharge from bankruptcy are payable to the trustee in bankruptcy or to the discharged bankrupt himself.

The individual whose bankruptcy has given rise to this question is Mr Ivan Aubrey Landau. He was born on 9 February 1929 and was formerly a practising solicitor. On 26 April 1982 he effected with National Provident Institution (NPI) 324a policy in terms which had been approved by the Inland Revenue pursuant to s 226 of the Income and Corporation Taxes Act 1970 (the Taxes Act). The policy was issued in consideration of monthly premiums of £175 payable until 28 January 1999. It provided for the payment to Mr Landau, on his survival to his seventieth birthday on 9 February 1999, of an annuity of £4,424 with profits during the rest of his life. In the event of Mr Landau’s death before his seventieth birthday NPI was to pay a sum equal to all the premiums paid under the policy with compound interest at 4% pa.

The policy was expressed to be issued subject to the ‘laws and rules’ for the time being of NPI. The main terms of it were set out in the first schedule and were those which I have already mentioned. Further terms were set out in the second schedule of which the following are material.

(a) In para 1 it was recorded that the policy was an annuity contract approved by the Inland Revenue under s 226 and certain consequential provisions were set out.

(b) By para 7 the annuitant was given the right to alter the date when the annuity would become payable to any date not earlier than the sixtieth birthday of the annuitant and not later than his seventy-fifth birthday. Not surprisingly any such alteration would bring in its train an adjustment in the amount of the annuity.

(c) By para 8 the annuitant was given the right to require NPI, instead of paying the annuity itself, to pay a capital sum, ascertained as mentioned in the paragraph, by way of premium under an approved annuity contract to be issued by another institution.

(d) By para 9 the annuitant was given the right to receive a lump sum by way of commutation of a limited part of the annuity otherwise payable under the policy. He was also given other rights to amend the terms of payment of the annuity, including the right to insert a provision for its payment during a term certain not exceeding ten years, or to relinquish part of the annuity in exchange for an annuity payable to his widow.

(e) Paragraph 11 provided as follows: ‘This policy cannot be surrendered and no annuity can be assigned or commuted except as provided in provisions 8 and 9 of this schedule.’

On 28 July 1989 Mr Landau converted the policy into a fully paid policy under which no further premiums were payable. He also exercised his right to alter the date from which the annuity would become payable by stipulating that this would be his sixty-fifth birthday (ie 9 February 1994) instead of his seventieth birthday.

On 3 May 1990 a bankruptcy order was made in respect of Mr Landau in the High Court. Mr M A Pointer was appointed his trustee in bankruptcy with effect from 11 December 1990. The liabilities in the bankruptcy appear to have exceeded £250,000, a substantial part of which remains unsatisfied. On 3 May 1993 Mr Landau was discharged from bankruptcy pursuant to s 279 of the Insolvency Act 1986. This discharge did not, of course, have any effect on the functions of the trustee in bankruptcy or the operation of the provisions of the bankruptcy legislation in relation to Mr Landau’s estate (see s 281).

After he attained the age of 65 in February 1994 Mr Landau communicated with NPI and sought to obtain the benefits payable under the policy. NPI communicated with Mr Pointer seeking his confirmation that he had no objection to this. Mr Pointer initially replied on 22 March 1994 to the effect that he had no objection to the annual pension being paid to Mr Landau but required [*328] ‘property’. Moreover, the fact that, at the commencement of the bankruptcy, nothing was immediately payable under the policy does not alter this in any way. As Lord Oliver of Aylmerton said, in giving the opinion of the Privy Council in Kwok Chi Leung Karl (Exor of Lamson Kwok) v Comr of Estate Duty [1988] STC 728 at 732, [1988] 1 WLR 1035 at 1040: ‘A chose in action is no less a chose in action because it is not immediately recoverable by action …’

If it were right to regard the benefits payable under the policy not as property belonging to Mr Landau at the commencement of his bankruptcy but as ‘property which has been acquired by … the bankrupt since the commencement of the bankruptcy’ then it would not have vested in Mr Pointer under s 306 but would be after-acquired property which could only be obtained for Mr Landau’s estate by means of a claim under s 307. On this view of the nature of the policy, it would only have been acquired by Mr Landau when he attained the age of 65 in February 1994 and by that time he had been discharged from bankruptcy and it was no longer possible for Mr Pointer to claim under s 307 (see s 307(2)(c)).

In my judgment, however, it is impossible to take this view of Mr Landau’s interest in the policy. At the commencement of his bankruptcy he had a present right to compel NPI to make payments under the policy in the future. This was an immediate chose in action, as Lord Oliver’s statement shows. Other illustrations of this principle are, I think, provided by the decisions on liability for estate duty in D’Avigdor-Goldsmid v IRC [1953] 1 All ER 403, [1953] AC 347 and Westminster Bank Ltd v IRC, Wrightson v IRC [1957] 2 All ER 745, [1958] AC 210. In each of these cases a settlor settled a policy of assurance on his life on trust for certain beneficiaries. When the settlor died the sum assured by the policy became payable. The Revenue claimed estate duty on the ground that the beneficiaries then became entitled to an interest purchased or provided by the deceased settler. This claim was rejected on the ground that the beneficiaries had the same interest in the policy before the settlor’s death as they had after it, so that no interest ‘arose’ on the death. In my judgment, the same reasoning leads to the conclusion that Mr Landau had, in relation to the policy, the same chose in action on the date of the bankruptcy order as he had when he attained the age of 65 and that the latter event did not result in anything being acquired by or devolving upon him.

I therefore determine the first issue by answering it in the affirmative.

(2) If the policy would, on the assumption made for the purpose of issue (1), have vested in Mr Pointer as part of Mr Landau’s estate, would there be a different result if the restrictions on assignment affecting the policy are taken into account?

The first step in determining this issue must be to examine the restrictions which are said to affect the policy. There are three possible sources of these, namely s 226 of the Taxes Act; the ‘laws and rules’ of NPI; and the policy terms.

Section 226 of the Taxes Act

This provides for relief from income tax to be given in respect of any premium paid by an individual under certain pension policies. Relief is only available in respect of premiums payable under policies which have been approved by the Board of Inland Revenue and most of s 226 is taken up with the requirements which must be satisfied in order to obtain board approval. The requirement which is relevant for present purposes is that the policy must ‘include provision securing that no annuity payable under it shall be capable in whole or in part of surrender commutation or assignment’. This requirement is, by subsequent328 provisions, diluted so as to permit the approval of policies which give limited rights of commutation of the kind contained in the policy effected by Mr Landau.

While this provision is, no doubt, the reason for the inclusion in the policy with which I am concerned of a number of the provisions which I have already mentioned, it is not, in my judgment, of direct relevance to the issue which I have to decide. Failure to satisfy the requirements would, it appears to me, mean only that the Revenue ought not to have approved the policy in question or ought to withdraw any approval already given or, possibly, that the policy holder ought not to be given tax relief on his premiums. The provision may, however, have some indirect relevance. As I have said when dealing with the terms of Mr Landau’s policy, that policy was stated to have been approved by the Board of Inland Revenue under s 226 of the Taxes Act. If, therefore, an ambiguity is discovered when the terms of the policy are examined, it would, in my view, be appropriate to resolve that ambiguity by adopting a meaning which would result in the requirements for approval being satisfied in preference to a meaning which would result in the requirements not being satisfied.

The laws and rules of NPI

NPI is incorporated and regulated by private Act of Parliament, the latest version of which is the National Provident Institution Act 1987. The rules of NPI on 30 December 1987, when the Act came into force, were set out in the Schedule to the Act. The Act and these rules are clearly what is referred to in the policy as ‘the laws and rules’ of NPI. Nothing in the Act itself relates to the assignment of policies. In the rules, r 8 is headed ‘Assignees etc’. Rule 8(1) provides that assignments or transfers of policies confer on the assignee membership of NPI or any right to attend or vote at meetings of NPI. This is not material to the situation which I have to consider. Rule 8(2), which constitutes the remaining part of r 8, provides as follows:

‘If any insurance is declared to be non-assignable NPI shall not be bound by any assignment or purported assignment thereof or any notice or intimation of any such assignment and the receipt of the person who would otherwise have been entitled to the insurance shall be NPI’s full and sufficient discharge.’

Two observations on this rule seem to be appropriate. First, it does not itself provide any restriction on assignment. Any such restriction must therefore be found, if it exists at all, in the policy. Secondly, it does not purport to state the effect of an assignment or purported assignment of a non-assignable policy beyond saying that NPI is bound and entitled to deal only with the original policy holder. In my view, nothing in r 8 prevents a policy effected by a person who becomes bankrupt from being comprised in the bankrupt’s estate by virtue of s 283 and thus vesting in his trustee in bankruptcy under s 306 of the 1986 Act.

The policy terms

The only term of the policy which relates to assignment is para 11 which, as I have already stated, provides: ‘This policy cannot be surrendered and no annuity can be assigned or commuted except as provided in provisions 8 and 9 of this schedule.’

There can, I think, be no doubt that this term was included in order to satisfy the requirement for Revenue approval under s 226 of the Taxes Act which I have already mentioned. What is now s 226 was originally enacted to give effect to a329 recommendation made in 1954 by the Report of the Committee on the Taxation Treatment of Provision for Retirement (Millard Tucker Report) (Cmd 9063) that tax relief should, subject to certain conditions, be given on premiums paid under personal pension policies by self-employed persons. Paragraph 201 of the Millard Tucker Report was in the following terms:

‘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 will be 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.’ (Committee’s emphasis.)

This constitutes an indication of the ‘mischief’ at which the requirement of non-assignability which was imposed by s 226 was aimed.

On behalf of Mr Pointer, Miss Bristoll argued that the word ‘assigned’ in para 11 of the policy terms should not be construed as extending to a vesting of the policy as part of the bankrupt’s estate under s 306. Clearly this vesting does not amount to a surrender of the policy. Accordingly, the vesting which would occur if para 11 of the policy terms were absent is not in any way prevented by the presence of para 11.

In support of this argument Miss Bristoll made the following points.

(i) Section 306 describes the transmission of the bankrupt’s estate in terms of vesting, not assignment, and s 306(2) provides expressly: ‘Where any property which is … comprised in the bankrupt’s estate vests in the trustee … it shall so vest without any conveyance, assignment or transfer.’

(ii) The policy itself envisaged that an annuity might become payable to someone other than the original annuitant by operation of law, so that para 11 cannot be regarded as treating transmission by operation of law as an assignment. This is illustrated in two ways. First, if an instalment of the annuity had become payable to the annuitant before his death but had not actually been paid at that time, it must have been the intention that the outstanding instalment would be paid to the annuitant’s personal representatives and form part of his estate for the purpose of administration. Secondly, the form of the policy document shows that the terms were to be the same whether or not the annuity was payable for a term certain. In the case of an annuity for a term certain (eg for the life of the annuitant or for five years, whichever should be the longer) if the annuitant died during the fixed term, the annuity payable during the balance of the term would clearly be payable to the annuitant’s personal representatives.

(iii) There are authorities which show that the vesting of the property of a bankrupt in his trustee under the bankruptcy legislation is not to be equated with an assignment of that property. Thus in Re Riggs, ex p Lovell [1901] 2 KB 16 at 21, 330in which it was alleged that a lessee who had been made bankrupt on his own petition was in breach of a covenant not to assign or underlet the demised premises, Wright J said:

‘On the construction of this lease, and apart from authority, I should be of opinion that in this covenant the words “assign or underlet” are used in their ordinary or popular sense, and refer only to such assignments as are directly made by the lessee as distinguished from such assignments by law as result by the statute from a petition in bankruptcy followed by adjudication.’

He went on to find that authority did not prevent him from giving effect to this view and that it made no difference that the bankruptcy had been initiated by the lessee himself. Re Griffiths, Jones v Jenkins [1926] Ch 1007, [1926] All ER Rep 639 was to the same effect. The main issue was whether a person had alienated a right to income by being adjudicated bankrupt on his own petition. Romer J said ([1926] Ch 1007 at 1014,[1926] All ER Rep 639 at 642):

‘The adjudication was the act of the Court, which had a discretion in the matter, and, though the presentation of the petition by the debtor was an act by him setting the Court in motion, I cannot for myself understand how the adjudication and the consequent divesting of his property can be said to be an alienation by him. If the adjudication had been made on the petition of a creditor, could it truthfully be said that the creditor had alienated the debtor’s property? Indeed if the alienation is to be regarded as the act of a person who is instrumental in bringing about an adjudication by the Court, it will be difficult to know where to stop.’

In the present case Mr Landau was made bankrupt on the petition of a creditor, not on his own petition.

(iv) Paragraph 11 does not say what is to happen if there is in fact a purported assignment of an annuity payable under the policy. In the case of an attempt to dispose of the annuity made by the annuitant himself, the very presence of para 11 is likely to deter an assignee from accepting the assignment. Where the disposition is involuntary, as in the case of bankruptcy, there is no scope for any such deterrent effect. If the argument which underlies Mr Landau’s claim were correct it would mean that a person could place a part of his assets beyond the reach of his creditors in a bankruptcy and reserve it for himself by the simple expedient of applying those assets in payment of the premiums due under a policy which contains a provision equivalent to para 11. This would be contrary to the principle of bankruptcy law which prevents a person relying on protective trusts created by his own disposition as a means of defeating the claims of his creditors (see eg Re Brewer’s Settlement, Morton Blackmore [1896] 2 Ch 503). The construction of the word ‘assigned’ in para 11 which prevents it extending to a statutory vesting under s 306 is therefore to be preferred to one which would produce this anomalous result.

(v) This construction of the word ‘assigned’ is not inconsistent with the requirement of s 226 of the Taxes Act in respect of non-assignability because a statutory vesting is not within the mischief at which those requirements are directed. In other words ‘assignment’ in s 226 is to be construed as having the same limited meaning as was attributed to ‘assign’ in Re Riggs.

Miss Bristoll also drew attention to a number of modern statutory provisions relating to the non-assignability of pension entitlements. Generally these use the term ‘assignment’ only in relation to dispositions made by the person entitled to331 the pension or other benefit and apply different language to the vesting of the pension or other benefit in a trustee in bankruptcy. I do not think any assistance is to be derived from these provisions.

Mr Newey, in accordance with his duty as amicus curiae, put before me such arguments as might seem to assist Mr Landau’s claim. In particular, although he felt bound to accept that the policy itself envisages some circumstances in which some part of the annuity will or may become payable to a bankrupt’s personal representatives by reason of the operation of law on the bankrupt’s death (cf what I have summarised above as Miss Bristoll’s point (ii)), he suggested that there might be a difference between transmission by operation of law in the event of death and transmission by operation of law in the event of bankruptcy. In the case of bankruptcy there is, in substance, a deemed assignment and all that s 306 does is to dispense with the need for an actual assignment. Mr Newey also suggested that it would be odd if compliance with the requirements of statute, in the form of s 226 of the Taxes Act, were to be regarded as a fraud on the bankruptcy law, which he said was the burden of the submission which I have summarised as Miss Bristoll’s point (iv).

I did not find these or the other submissions advanced by Mr Newey in support of Mr Landau’s claim to be convincing. As to the second specific point, Miss Bristoll’s argument would avoid the conclusion that compliance with the requirements of s 226 of the Taxes Act conflicted with the bankruptcy law. I accept that and the other arguments advanced by Miss Bristoll which I have summarised. I find that the only relevant restriction on the assignment of the policy is that imposed by para 11 of the policy terms but that on its true construction this does not prohibit vesting under s 306. Moreover, this construction does not in my view result in any failure to comply with the requirements of s 226 because the word ‘assignment’ in s 226(2) is to be construed in the same sense as the word ‘assigned’ in para 11.

(3) Is the policy, or the annuity payable under it, caught by s 310?

Section 310(1), (6) and(7) provides, so far as material:

‘(1) The court may, on the application of the trustee, make an order (Òan income payments orderÓ) 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 … (6) An income payments order shall not be made after the discharge of the bankrupt …

(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.’

If the benefit of any policy, or the annuity payable under it, is ‘the income of the bankrupt’ for the purposes of s 310(7) then it could only be claimed by Mr Pointer from Mr Landau’s estate by means of an income payments order under s 310(1); but s 310(6) prevents such an order being made now.

On the ordinary meaning of the language used in s 310, I would have no doubt that the section has no application to property or income which vests in the trustee under s 306. Property or income which so vests cannot, on the face of it, be a ‘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’, because it ought332 to be paid to the trustee and only the trustee is entitled to it. Correspondingly, the trustee has no need to obtain any order for the purpose of getting such income into the bankrupt’s estate, for it will be payable to the trustee automatically by virtue of the vesting.

Doubt is introduced only by reason of the fact that the statutory predecessor of s 310, which was s 51(2) of the Bankruptcy Act 1914, and the equivalent provisions of earlier bankruptcy statutes were held to apply both to property which vested in the trustee and to property which did not so vest.

Section 51(1) of the 1914 Act related to the receipt by the trustee in bankruptcy of a proportion of the pay or salary of a bankrupt who held any of a number of offices or positions. Section 51(2) then provided:

‘Where a bankrupt is in receipt of a salary or income other than as aforesaid, or is entitled to any half-pay, or pension, or to any compensation granted by the Treasury, the court, on the application of the trustee, shall from time to time make such order as it thinks just for the payment of the salary, income, half-pay, pension, or compensation, or any part thereof, to the trustee, to be applied by him in such manner as the court may direct.’

Ex p Huggins, re Huggins (1882) 21 Ch D 85 concerned a pension payable to a former colonial judge who had become bankrupt through entering into trade during his retirement. It was held that the pension was property which vested in his trustee in bankruptcy under the equivalent of s 306 then in force and that it was also income of the bankrupt within s 90 of the Bankruptcy Act 1869, which was to substantially the same effect as s 51(2) of the 1914 Act. Re Garret [1930] 2 Ch 137, [1930] All ER Rep 139 concerned a pension payable under the Police Pensions Act 1921. By virtue of the terms of that Act the pension was not property of the bankrupt which vested in his trustee, but it was held that it was ‘salary or income’ within s 51(2) of the 1914 Act. Farwell J said ([1930] 2 Ch 137 at 141,[1930] All ER Rep 139 at 141): ‘The sub-section applies both to property that vests in the trustee … and also to property not so vesting.’ A similar view was taken in Re Landau, ex p trustee [1934] Ch 549, [1934] All ER Rep 130, where the Court of Appeal rejected an argument that s 51(2) applied only to property of the kind there described which vested in the trustee.

In Re Tennant’s Application [1956] 2 All ER 753, [1956] 1 WLR 874 an attempt was made to persuade the Court of Appeal that s 51(2) related only to salary or income which could not and did not vest in the trustee. Lord Evershed MR and Jenkins LJ, with both of whom Hodson LJ agreed, said that if the matter were free from authority there would be much to be said for the argument that this was so. But having regard to the earlier authorities, which included those I have already mentioned, they held that they were bound to reject this argument. A similar point arose in Re Cohen (a bankrupt), ex p the bankrupt v Trustee of the property of the bankrupt, ex p trustee of the property of the bankrupt v The bankrupt [1961] 1 All ER 646 at 652, 655, [1961] Ch 246 at 260, 266 where Lord Evershed MR expressed the same view as did Upjohn LJ, who had been the judge from whom the appeal in Re Tennant was brought (see [1961] 1 All ER 646 at 656, [1961] Ch 246 at 267). Both Lord Evershed MR and Upjohn LJ expressed the hope that the matter would be reviewed in a higher court.

The question which I have to consider is whether the reform of the law of insolvency by the Insolvency Acts 1985 and 1986 has changed this. As is well known, the 1985 Act followed upon, although it did not in all respects adopt, the recommendations of the Cork Committee in the Report of the Review Committee on333 Insolvency Law and Practice (Cmnd 8558). Despite the observations in Re Tennant and Re Cohen the interaction of s 51(2) and the vesting provisions in the 1914 Act were not commented upon by the committee. The committee did, however, recommend an important change in respect of the vesting of after-acquired property. The result is that, as has already been observed, the bankrupt’s estate is now defined in s 283 in a way which confines it to property belonging to or vested in the bankrupt at the commencement of the bankruptcy and certain other property which, by virtue of other provisions of the 1986 Act, is to be treated as comprised in the bankrupt’s estate.

Section 283 has to be read in conjunction with ss 306 to 310 of the 1986 Act. Section 306 is the principal section which governs vesting and I have already set it out. Section 307 deals with after-acquired property, which means property which has been acquired by or devolved upon the bankrupt after the commencement of the bankruptcy. This does not vest in the trustee automatically. It will only vest in him if, in accordance with s 307, the trustee serves notice claiming it for the bankrupt’s estate. Section 307(5) provides that references to property in s 307 do not include any property which, as part of the bankrupt’s income, may be the subject of an income payments order under s 310. While it is appropriate to mention this provision, I do not think it constitutes any kind of an indication that s 310 applies only to income which would be within s 307 but for the exclusion effected by s 307(5). Section 308 enables certain property which would ordinarily be excluded from the property of the bankrupt (tools of trade, household effects etc.) to be claimed for the estate of the bankrupt where certain conditions are satisfied. Section 308A, which was added by the Housing Act 1989, enables the trustee to claim certain tenancies which would otherwise be excluded from the bankrupt’s estate. Section 309 deals with the time limit for making claims under ss 307 and 308. Then there is s 310, whose scope I am now considering.

The question which I have to consider is whether the decisions on s 51(2) of the 1914 Act and its predecessors oblige me to give a similar effect to s 310, notwithstanding the view I take as to the ordinary meaning of the words used in s 310.

While there is authority to the effect that the new bankruptcy code is to be construed in accordance with the ordinary canons of construction, unfettered by previous authorities (see Re a debtor (No 1 of 1987, Lancaster), ex p the debtor v Royal Bank of Scotland plc [1989] 2 All ER 46 at 50, [1989] 1 WLR 271 at 276Ð277), it has also been said that this does not mean that—

‘the language of the new Act comes to one entirely free of any of the intellectual freight which was carried by words and phrases in earlier bankruptcy or other legislation’ (see Re a debtor (No 784 of 1991), ex p the debtor v IRC [1992] 3 All ER 376 at 378, [1992] Ch 554 at 558Ð559 per Hoffmann J.)

I have come to the conclusion that the ‘intellectual freight’ imported by the earlier decisions which I have mentioned is not such as to lead me to depart from the conclusion which I would otherwise reach as to the scope of s 310 on the basis of the language of that section. In reaching this conclusion I have attached importance to the following circumstances:

(1) Although they all deal with the same general subject matter, there is a considerable difference in language between s 51(2) of the 1914 Act and its predecessors on the one hand and s 310 on the other hand.

[*334] (2) There is an important difference in respect of after-acquired property between the vesting provisions of the 1914 Act and earlier Acts on the one hand and those of the 1986 Act on the other hand. Under the earlier legislation after-acquired property vested automatically in the trustee in bankruptcy. Under the 1986 Act such property does not vest in the trustee unless it can be and is claimed by the trustee for the benefit of the bankrupt’s estate. Thus under the 1914 Act there was only one scheme for the vesting of property, both that held at the commencement of the bankruptcy and that acquired afterwards, in the trustee. This vesting was governed principally by ss 18(1), 37 and 38 of the 1914 Act. Under the 1986 Act there are separate provisions for the vesting of property belonging to the bankrupt at the commencement of the bankruptcy (s 306); after acquired property (s 307); the certain otherwise excluded property (s 308); and certain tenancies (s 308A). It seems to me that there is much less reason to apply s 310 to property which vests under any of these diverse provisions than there was to apply it to property which vests by virtue of the single scheme of vesting adopted in the 1914 Act and its predecessors. Indeed in its content and context s 310 itself provides for something equivalent to vesting in respect of a particular kind of property (ie income received under an income payments order obtained in accordance with the section). I regard it as more natural to treat this as a provision governing only a type of property which would not otherwise vest in the trustee than to treat it as also qualifying the trustee’s title to property which vests under a separate provision, namely s 306.

(3) The force of the earlier authority is much diminished by the observations made in Re Tennant and Re Cohen [1961] 1 All ER 646, [1961] Ch 246 which clearly indicate that distinguished judges of the Court of Appeal thought that an erroneous view had been taken when it was decided that s 51(2) applied to income which was already vested in the trustee.

I therefore hold that the right to payment of the annuity payable under the policy with which I am concerned vested in Mr Pointer as part of Mr Landau’s estate on his appointment as trustee in bankruptcy and that s 310 had no application to it when it became payable. The annuity is therefore payable to Mr Pointer as part of Mr Landau’s estate, not to Mr Landau himself. After the right to receive the annuity became vested in him Mr Pointer was, in my judgment, the only person entitled to exercise the options conferred by the policy as ‘the annuitant’. It follows that in my view Mr Pointer was entitled to commute part of the annuity for a lump sum, as he has done, and that lump sum is part of Mr Landau’s estate, just as the commuted part of the annuity would have been if it had been payable as the annuity.

Declaration accordingly.