ANTHONY PETER SUPPERSTONE (Applicant) v (1) LLOYDS NAMES ASSOCIATIONS' WORKING PARTY (2) CHRISTOPHER DEREK STOCKWELL (3) BRADGLADE LTD (Respondents) (1999)

Ch.D (Evans-Lombe J) 25/6/99

INSOLVENCY AND BANKRUPTCY

ESTATES OF BANKRUPTS : PROPERTY : AFTER-ACQUIRED PROPERTY : INCOME : PAYMENTS : DISCHARGE : SS.307 AND 310 INSOLVENCY ACT 1986 : NO CAUSE OF ACTION

Payments received by the second respondent after his bankruptcy constituted income and not after-acquired property. Accordingly, the applicant's claim under s.307 Insolvency Act 1986 fell to be struck out as disclosing no cause of action.

Application by the trustee in bankruptcy ('the trustee') of the second respondent ('S'), pursuant to s.307 Insolvency Act 1986, claiming that certain payments made after the bankruptcy constituted after-acquired property of S which vested in the trustee. By cross-application S contended that the payments were no part of his property, or that they were in the nature of income, and that the trustee's application fell to be struck out as disclosing no cause of action. S was a member of Lloyds. In 1992, following the collapse of a number of Lloyds syndicates, S joined various action groups. The first respondent ('L') was formed to co-ordinate the activities of those groups. On 31st March 1992 the third respondent ('B') was incorporated by a family trust connected with S. In May 1992, S became the chairman of L. By a service contract dated 14 July 1992 S agreed to provide his services to third parties only through B in exchange for a salary. B entered into an agreement with L for the provision of S's services for a fee. On 21 June 1994 S was made bankrupt. Following acceptance of the Lloyds Reconstruction and Renewal Settlement offer in 1996, L agreed with B that a total sum of £600,000 was payable as the fee for the services of S. From late 1996, substantial payments were made by L to B in discharge of that sum. On 20 June 1997 S was discharged from his bankruptcy with the consequence that no income payments order could be made against him under s.310 of the Act. By ordinary application issued on 29 April 1999 the trustee laid claim to all the monies paid to B by L, pursuant to s.307 of the Act, alleging the same to be after-acquired property of S. S applied to strike out the application. At the hearing, the trustee sought leave substantially to amend the application to add, inter alia, an allegation that the agreement between L and B was a sham, alternatively a colourable device. S's cross-application to strike out was taken first, and was dealt with on the footing that leave to amend had been given.

HELD: (1) The payments received or receivable by B did not constitute property of S within s.307(1) of the Act capable of vesting in the trustee, since: (i) there was no pleading of any relationship between S and L which would give S a present or future right to claim any part of the monies held by B; (ii) there was no trust of those monies in favour of S; (iii) no attack was made upon the bona fides of the service agreement between S and B; (iv) accordingly, S's only interest was in his salary. (2) In the alternative, even if the payments to B were to be regarded as payments to S or to his use, those payments were in the nature of income, since: (i) as the trustee's pleaded case itself alleged, they were made in respect of the services of S; (ii) payments did not have to be periodical to constitute income because, in the context of s.310(7), payments made "from time to time" meant payments made "at any time". (3) Leave to amend would not, in fact, have been given. The amendments amounted to an allegation of fraud against S and B. Notwithstanding that the trustee had been in possession of the materials necessary to advance that plea for a reasonable period, it had only been made at the last minute (after the conclusion of S's opening) when the continuance of the proceedings was hanging in the balance.

Trustee's application dismissed.

LTL 29/6/99 (Unreported elsewhere)

Judgment Approved subject to editorial corrections - 18 pages

Document No. AC7200053