Malcolm vMackenzie & Ors

This is an appeal from an order made on 26 February 2004 by Mr Justice Lloyd, sitting as Vice-Chancellor of the County Palatine of Lancaster, in proceedings brought by Mr William Malcolm against his trustee in bankruptcy, Mr Graham Petersen, an insolvency practitioner and a partner in the firm of Benedict Mackenzie. The appeal raises the question whether the treatment of benefits accrued under a self-employed retirement annuity contract as an asset available to meet the claims of creditors in a bankruptcy - in accordance with domestic law as, hitherto, it has been understood to be prior to the coming into operation of section 11(1) of the Welfare Reform and Pensions Act 1999 – gives proper effect to the rights conferred by article 14 of the European Convention on Human Rights and Fundamental Freedoms.

The underlying facts are not in dispute. It is convenient to take them from the judgment below, [2004] EWHC 339 (Ch):

“2.

Mr Malcolm was a graphic designer. He went into partnership with two other men. Being self-employed rather than an employee, there was no employer’s occupational pension scheme through which pension benefits could be provided for him. Instead he entered into a contract on 1 June 1986 with the Second Respondent [Allied Dunbar plc] under the regime then in existence for tax-approved pension provision by the self-employed. This was a retirement annuity contract, under section 226 of the Income and Corporation Taxes Act 1970. He continued to make contributions under this contract until 1993.

3.

Differences arose between the partners, and the partnership came to an end. One of the three died, and the other two were faced with liabilities which they could not pay. Insolvency proceedings followed in relation to both of them and the estate of the third was also administered as an insolvent estate. In Mr Malcolm’s case, the Inland Revenue presented a bankruptcy petition and on 11 December 1996 he was made bankrupt. At first no trustee in bankruptcy was appointed. In 1998, with effect from 19 October, Mr Graham Petersen was appointed as his trustee in bankruptcy. He is a partner in the firm named as the First Respondent [Benedict Mackenzie]. He ought to be so named himself, as trustee in bankruptcy, but no point is taken on that.

4.

The effect of this appointment was that his assets vested in his trustee in bankruptcy, under the Insolvency Act 1986, section 306. On 11 December 1999 Mr Malcolm was discharged from bankruptcy automatically under the 1986 Act. However, his debts have not all been paid, and those assets that had vested in the trustee in bankruptcy remain vested in him for the purpose of paying those debts. The trustee in bankruptcy’s position is that the benefit of the pension contract is one such assets, and probably the only one worth anything.

5.

On September 2000 Mr Malcolm attained the age of 60, at which, under the terms of the retirement annuity contract, it would be possible for benefits to be drawn. The main benefit is an annuity. Under clause 9(2), however, there is an option to commute part of the pension and take it as a lump sum. This option is almost invariably taken, since the lump sum is taken free of tax. Clause 9(1) allows the transfer value of the contract to be applied towards another contract (the so-called open market option).

6.

In July 2002 the trustee in bankruptcy sought to obtain the benefit of the retirement annuity contract from the insurer, by the application of the transfer value towards a personal pension scheme, part of which he would then have commuted for a lump sum and the rest would have been paid by way of an annuity. Mr Malcolm asserted that the trustee in bankruptcy was not entitled to it. Allied Dunbar issued a cheque but then stopped it. After some correspondence, Allied Dunbar told Mr Malcolm that they would pay the transfer value to another pension provider at the direction of the trustee in bankruptcy unless he started court proceedings to prevent them. On 5 February 2003 he issued the application notice which is before me.”

Mr Malcolm acted in person in the proceedings before Mr Justice Lloyd. The application, by notice dated 5 February 2003 issued in the Crewe County Court, sought injunctions against both Benedict Mackenzie and Allied Dunbar plc restraining the transfer “of my pension fund to others”. As the judge recorded (at paragraph 8 of his judgment) Allied Dunbar plc indicated that it was content to be bound by whatever order the court should think fit to make and took no part in the proceedings. At a directions hearing in October 2003, the judge ordered that notice of the proceedings be given to the Department of Trade and Industry and the Department of Work and Pensions – on the grounds that Mr Malcolm seemed to him to be contending that the relevant provisions of domestic legislation were incompatible with his Convention Rights. The two Government Departments took the opportunity to intervene. They appeared by counsel at the hearing before the judge, as they have on this appeal. The judge also had the benefit of assistance from an advocate to the court, appointed by the Attorney-General at his request.

The judge dismissed Mr Malcolm’s application and refused permission to appeal. An application for permission was made to this Court (Lord Justice Neuberger) on 18 May 2004 at an oral hearing. In giving judgment on that application ([2004] EWCA Civ 584) Lord Justice Neuberger pointed out that Mr Justice Lloyd had identified three points raised by Mr Malcolm:

“The first was that his pension fund should not form part of his estate under the insolvency legislation as it stood at 1996 (the date of his bankruptcy). The second argument was that, even if the first argument was wrong, Mr Malcolm was entitled to the benefit of s11 of the Welfare Reform and pensions Act 1999 (“s11”). Mr Malcolm’s third argument was that, if his first and second arguments were wrong, then he was entitled to rely on Article 14 of ECHR.”

Lord Justice Neuberger took the view that there was no real prospect of persuading the Court of Appeal that Mr Justice Lloyd had been wrong to decide the first two of those points against Mr Malcolm; but he was persuaded that permission should be granted in relation to the third point – namely the reliance on article 14 of the Convention. So it is that the appeal to this Court was limited to that ground. Mr Malcolm has been represented before us by counsel instructed by the Bar Pro-Bono Unit. The Court is grateful for the assistance he has been able to give.

It was accepted in this Court that - as the judge had held - Mr Malcolm could not rely on the provisions enacted in the Human Rights Act 1998; in particular, he could not rely on section 6 of that Act to complain of any act done by a public authority (which, in this context, would have included his trustee in bankruptcy) before 2 October 2000 when the 1998 Act came into force. This was not a case in which section 22(4) of that Act had any application. On the basis of that concession – which, as it seems to me, was rightly made in the light of the decision of the House of Lords in Wilson v First County Trust (No 2) [2003] UKHL 40, [2004] 1 AC 816 – it must follow that section 3(1) of that Act has no application; and that it would not be open to the Court (even if it would otherwise have been minded to do so) to make a declaration of incompatibility under section 4 of the 1998 Act. In the event, therefore, although we heard submissions from counsel for the two Government Departments, the basis upon which they had been invited to intervene has fallen away.

Mr Malcolm, through his counsel, did not seek to pursue arguments based on the provisions of the 1998 Act. His case was that, even where the Act does not apply, the provisions of the European Convention on Human Rights were to be used as an interpretative tool. He relied on observations of mine, in Krasner v Dennison and others, Lawrence v Lesser [2001] Ch 76, 107A-B, paragraph 69,that:

“. . . in construing the relevant provisions of the [Insolvency Act 1986] the court should follow the approach indicated by Lord Diplock in Garland v British Rail Engineering Ltd [1983] 2 AC 751 at 755, 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.”

It is in that context that we were referred to article 14 of the Convention and to article 1 of the First Protocol.

Article 14 of the Convention is in these terms:

“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

Article 14 confers no independent or ‘freestanding’ right not to be subjected to discriminatory treatment. Its object and effect is to secure the enjoyment, without discrimination, of the other rights conferred by the Convention. The right in relation to which Mr Malcolm claims that he suffers discriminatory treatment is that conferred by article 1 of the First Protocol:

“Every natural and 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.”

The judge accepted that Mr Malcolm’s rights under the retirement annuity contract into which he entered on 1 June 1986 were “possessions” in that context. So he was entitled not to be deprived of those rights, save in the public interest and subject to the conditions provided for by law. And, if he were to be deprived of those rights in circumstances which subjected him to discriminatory treatment, he was entitled to invoke article 14.

The judge identified as the real point in the case “the contrast between the position of the self-employed and that of employed persons as regards the impact of bankruptcy on their pension provision”.

At paragraphs 12 to 14 of his judgment the judge described, in general terms, the difference in structure between an occupational pension scheme – which, in order to comply with the conditions for tax approval under current legislation, “must be set up by way of a trust, with a trust deed and rules” – and retirement annuity contracts and personal pension schemes – which “take effect in contract”. He explained that the real distinction was not between employees and the self-employed. The real distinction was between the treatment, on bankruptcy, of the rights of a person entitled to benefits out of a trust fund, under an occupational pension scheme, and the treatment of the contractual rights under a bilateral arrangement such as a retirement annuity contract or a personal pension scheme. But, of course, the self-employed were unable to arrange for their retirement benefits to be provided out of a trust fund under the rules of an occupational pension scheme.

The judge explained the distinction at paragraphs 16 and 17 of his judgment, in terms which I gratefully adopt:

“16.

A common feature of an occupational pension scheme is a forfeiture provision, under which, if a member becomes bankrupt, his or her right to benefit is forfeited, and the equivalent benefits are then held by the trustees on discretionary trusts under which the benefits may be paid to him or applied for his or her benefit. In practice, I understand, it is very common for the discretion to be exercised in favour of the member so that, despite bankruptcy, he or she will in fact receive the pension benefits. Because this is a matter of discretion, however, there is no asset of the bankrupt that can vest in the trustee in bankruptcy. This is a development of a type of provision that used to be common in private trusts, reflected in section 33 of the Trustee Act 1925. Its validity in the context of an occupational pension scheme was upheld in Kemble v Hicks [1998] PLR 141. It was not the subject of any legislation until 6 April 1997 when section 92 of the Pensions Act 1995 came into force. This provided that entitlement to a pension from an occupational pension scheme may not be forfeited but, by way of exception, permitted forfeiture by reference to the bankruptcyof the person entitled to the pension. This did not impose such a provision on an occupational pension scheme, but it declared the validity of such provisions which were common. They were not universal, and Patel v Jones [2001] BPIR 919 is an example of a scheme from which such a provision was absent.

17.

By contrast, the position of an individual with a retirement annuity contract or a personal pension scheme was different. This is what Mr Malcolm complains of. Because the pension is provided under contract, not by way of trust, there are no trustees upon whom a discretion can be conferred to apply the relevant benefits according to any discretion. The benefit of the contract is undoubtedly an asset of the insured person. Accordingly in Re Landau [1998] Ch 223, Ferris J held that both the cash lump sum and the continuing annuity payable under a retirement annuity contract were property of the bankrupt which vested automatically in the trustee in bankruptcy under the Insolvency Act 1986. In consolidated appeals against later decisions following Re Landau, reported as Krasner v Dennison [2001] Ch 76, the Court of Appeal approved the decision and held that it applied to a personal pension scheme as well. In Patel v Jones, mentioned above, the same result was held to follow in relation to an occupational pension scheme without a forfeiture clause. In Rowe v Saunders [2002] EWCA Civ 242, [2002] 2 All ER 800, the Court of Appeal followed Krasner v Dennison and held that the provisions in question were not inconsistent with article 1 of the First Protocol to the European Convention on Human Rights.”

Judgment in In re Landau (a bankrupt), reported at[1998] Ch 223, was handed down in December 1996. The distinction between the treatment, on bankruptcy, of the rights of a person entitled to benefits under an occupational pension scheme, and the treatment of the rights under a personal pension scheme was recognised in a Green Paper (Cm.4179) presented to Parliament some two years later. The distinction was described as “unfair” (ibid, paragraph 48):

“The pension rights of a member of an occupational pension scheme who becomes bankrupt are usually protected from seizure to pay off creditors. Personal pension holders do not enjoy the same protection. We believe that this is unfair. It is only reasonable to expect that everyone who has made a genuine attempt to save for their retirement should have their rights protected, regardless of the type of pension arrangement they have. We therefore propose that all tax-approved private pension rights should be exempt from the bankruptcy process, thus falling outside the jurisdiction of the trustee in bankruptcy.”

Prospective effect was given to the proposal made in the Green Paper by section 11 of the Welfare Reform and Pensions Act 1999. Section 11(1) is in these terms:

“Where a bankruptcy order is made against a person on a petition presented after the coming into force of this section, any rights of his under an approved pension arrangement are excluded from his estate.”

In that context, “approved pension arrangement” has the meaning given by section 11(2). The expression includes an occupational pension scheme, a retirement annuity contract and a personal pension scheme in respect of which approval has been given under the relevant provisions in Part XIV of the Income and Corporation Taxes Act 1988 or their statutory predecessors.

Section 11 of the Welfare Reform and Pensions Act 1999 was brought into force on 29 May 2000, by statutory instrument (SI 2000/1382) made under section 89 of that Act. There were obvious policy reasons why the section should not have been given retrospective effect – as the judge explained at paragraph 21 of his judgment. The judge held that it could have no application to Mr Malcolm’s bankruptcy, which had commenced some three and a half years before that date. As I have said, Mr Malcolm has been refused permission to appeal from the judge’s conclusion on that point. So Mr Malcolm gains no assistance from the change in the law. The change can, of course, be taken as an indication that Parliament recognised that the distinction between the treatment, on bankruptcy, of the rights of a person entitled to benefits under an occupational pension scheme, and the treatment of the rights under a personal pension scheme was unsatisfactory; but it is as clear as can be that Parliament decided to leave the position as it was in respect of pre-existing bankruptcies.

The judge identified the point, as it had been argued before him, at paragraph 24 of his judgment:

“The third ground on which Mr Malcolm contends that the trustee in bankruptcy is not entitled to take the benefit of the retirement annuity contract relies on the human rights dimension, and is expressed by reference to article 14 of the European Convention on Human Rights, prohibition of discrimination. He says that because he could only use a retirement annuity contract for his pension provision, under which the benefits vest on bankruptcy in his trustee in bankruptcy, whereas an employed person holding benefits under an occupational scheme does not lose his benefits on bankruptcy, the actions of the trustee in bankruptcy are discriminatory and against equality of human rights, and they put Mr Malcolm in an extremely disadvantaged position upon retirement as compared with a member of an occupational pension scheme.”

But, as the judge pointed out, it was not open to the trustee in bankruptcy to act otherwise. As the law stood before 29 May 2000 – or, at the least, as it was understood to be in the light of the decision in In re Landau (supra) - the retirement annuity contract did vest in the trustee under section 306 of the Insolvency Act 1986; it was an asset of substantial value and he was bound to take steps to realise that value for the benefit of creditors. The judge observed, correctly, that “although Mr Malcolm complains of the actions of the trustee in bankruptcy, he is really complaining about the law under which the trustee in bankruptcy can and must take steps to realise his pension benefits and distribute them to creditors”.

At paragraphs 26 to 44 of his judgment the judge addressed the question whether or not Convention rights were directly enforceable, in this case, under the provisions of the Human Rights Act 1998. He held that they were not. As I have said, the relevant events had occurred before the 1998 Act came into force on 2 October 2000; and this was not a case in which section 22(4) of that Act had any application. It was accepted, in this Court, that the judge was right to take that view. That was sufficient to dispose of the point – as the judge recognised at paragraph 52 of his judgment:

“For those various reasons, therefore, I hold that Mr Malcolm is unable to complain of what happened before 2 October 2000 because his claim is not brought in the limited circumstances in which the Human Rights Act 1998 has retrospective effect. I also hold that he cannot get round this difficulty by arguing that the complaint is of an act done since 2 October 2000. From that conclusion it follows that his application must fail.”

Nevertheless, the judge went on to consider the argument that the treatment of a self-employed person – in relation to pension rights in the event of his bankruptcy – was discriminatory when compared to the treatment of an employee in relation to rights under an occupational pension scheme. He directed himself by reference to the guidance given by this Court in Wandsworth Borough Council v Michalak [2002] EWCA Civ 271, [2003] 1 WLR 617, as explained by Lord Justice Laws in R (Carson) v Secretary of State for Work and Pensions [2003] EWCA Civ 787, [2003] 3 All ER 577, 604b-c, paragraph [61]. He posed the question: “are the circumstances of the claimant and the chosen comparator so similar as to call (in the mind of a rational and fair minded person) for a positive justification for the less favourable treatment of the complainant in comparison with the chosen comparator”.

As I have said, the judge explained that, on a true analysis, the true comparison was not between the self-employed and employees – as Mr Malcolm had originally sought to argue – because a substantial proportion of employees were not members of occupational pension schemes and not all occupational pension schemes contain forfeiture provisions. As the judge put it: “The chosen comparator, being the person who Mr Malcolm says is otherwise equivalent to him, but who does not (in practice) suffer the loss of pension rights on bankruptcy, is an employee who is a member of an occupational pension scheme, being one which includes a forfeiture provision in the event of bankruptcy among its terms”.

The judge recognised the force of the argument based on paragraph 48 of the Green Paper (Cm.4179), to which I have already referred. It can be said that the Government itself has characterised the difference in treatment as unfair. But he went on to say this, at paragraphs 59 and 60 of his judgment:

“59.

However, it is necessary to examine more closely the basis of the difference of treatment. As I have said, the difference does not arise from any legislative provision. It stems from the fact that occupational pension schemes are established by way of trust, with trustees, so that it is possible to include among the trusts and powers in the trust deed or rules a provision for forfeiture in the event of bankruptcy, whereas a retirement annuity contract, like a personal pension scheme, is a bilateral contract, with no possibility of such a provision which would be valid in law. Such a provision in an occupational pension scheme was recognised as valid by the Pensions Act 1995, as from 1997, but in 1996, at the time of Mr Malcolm’s bankruptcy, it was a matter of general trust law. Similarly, the impossibility of achieving the same effect in relation to benefits under a retirement annuity contract was the result of ordinary principles of contract law. It may perhaps be that, if the point had been thought about, a trust structure could have been devised under which the benefits of a retirement annuity contract or personal pension scheme could have been provided, and which could have included a forfeiture clause. I do not know whether this would have complied with the fiscal rules for approval of such contracts or with the law on forfeiture provisions. At all events, even if such an approach would have been possible, it was not adopted in this case nor, so far as I am aware, in any case.

60.

So the difference of which Mr Malcolm complains results from the different legal structure used for two types of pension provision, and from the fact that it is open to those establishing an occupational pension scheme to include a forfeiture clause, under which, on the face of it, the member does lose his pension benefits on bankruptcy, but he does so in a way in which, on the one hand, they cannot be made available to his trustee in bankruptcy and thus to his creditors, and on the other the benefits are available to be applied for his benefit, and in practice they usually are so applied.”

The judge accepted that a difference in treatment in respect of pension rights under the insolvency code – which had the effect of treating the rights of employees in a different way to the rights of the self-employed - would infringe article 14 of the Convention. If the rights were otherwise the same, the differential treatment would properly be regarded as discriminatory on the grounds of status. But, as the judge pointed out, the difference in treatment stems not from any differential provision in the insolvency code, but from the fact that, under the general law, the rights of an employee under an occupational pension scheme which includes a provision for forfeiture on bankruptcy are not the same as the rights of a self-employed person under a retirement annuity contract or a personal pension scheme. The judge held that the need to identify the chosen comparator as one “who is not only employed but a member of an occupational pension scheme, and one which includes a forfeiture clause” required “the introduction of too many factors for the comparison to be appropriate or relevant under article 14”. Accordingly, as he said at paragraph 66 of his judgment, he would have dismissed the claim even if he had been persuaded that Mr Malcolm were able to rely on an unlawful act done before 2 October 2000 in these proceedings.

The appeal in this Court was advanced by counsel (who had not appeared below) on the basis of arguments which differed from those which had been put before the judge, either by Mr Malcolm in person or by the advocate to the court; and on the basis of arguments which differed from those which had persuaded Lord Justice Neuberger to grant permission to appeal. When this was pointed out to him, counsel sought permission to amend the appellant’s notice so as to include, as additional grounds of appeal, the points raised in his skeleton argument. After hearing full argument on those additional grounds we were not persuaded that there was any real prospect of success on an appeal (on those grounds alone) and so refused permission. We indicated that we would give our reasons in a written judgment.

It was recognised, before this Court, that the Insolvency Act 1986 treats pension rights in the same way, whether the bankrupt was an employee or self-employed. If those assets form part of the bankrupt’s estate – as defined by section 283(1) of the Act – they vest in the trustee in bankruptcy under section 306 immediately on appointment. An example of the vesting of employee’s rights under an occupational pension scheme under section 306 of the Act is found in Patel v Jones [2001] BPIR 919, to which the judge referred.

If assets do not form part of the bankrupt’s estate, then they do not vest in the trustee under section 306 of the Act. If the assets do not form part of the bankrupt’s estate, the trustee’s rights are confined to a claim for after-acquired property, under section 307 of the Act; or to making an application for an income payments order, under section 310. In the latter case, the application must be instituted before the discharge of the bankrupt. An example of rights under an occupational pension scheme which did not vest under section 306 of the Act is found in Kemble v Hicks [1998] PLR 141. Before section 11 of the Welfare Reform and Pensions Act 1999 came into force, the question turned in each case, as Mr Justice Rattee made clear in his judgment in Kemble v Hicks (ibid, page145, at paragraph 11),on the nature and effect of the particular forfeiture provision in the scheme.

Starting from that position, counsel sought to persuade the Court that section 283(1) of the Insolvency Act 1986, read in conjunction with section 436 of that Act, should be construed so as to exclude from the bankrupt’s estate any rights of his under a pension arrangement approved under section 226 of the Income and Corporation Taxes Act 1970 or under Part XIV of the Income and Corporation Taxes Act 1988 – so, in effect, anticipating or pre-empting section 11(1) of the Welfare Reform and Pensions Act 1999.

As I have said, section 283(1) of the Insolvency Act 1986 defines the phrase “bankrupt’s estate”:

“Subject as follows, a bankrupt’s estate for the purposes of any of this [second] Group of Parts [Insolvency of Individuals; Bankruptcy] 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] is comprised in that estate or is treated as falling within the preceding paragraph.”

Section 283(2) excludes from the bankrupt’s estate (a) such tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation and (b) such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his family. Sections 283(3) and (3A) exclude property held by the bankrupt on trust for any other person, rights of nomination to vacant ecclesiastical benefices and certain tenancies. Section 283(4) is in these terms (so far as material):

“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 . . .”

“Property” is given a wide meaning by section 436 of the Act:

“‘property’ includes 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.”

If the “bankrupt’s estate” is to be read so as to exclude rights of the bankrupt under a pension arrangement approved under section 226 of the Income and Corporation Taxes Act 1970 or under Part XIV of the Income and Corporation Taxes Act 1988 - that is to say, is to be read so as to exclude rights under an “approved pension arrangement” as that phrase is now defined in section 11(1) of the Welfare Reform and Pensions Act 1999 - without the need to rely on section 11(1) of the 1999 Act, it is necessary either (i) to construe “property” in such a way as to exclude contractual pension rights (notwithstanding that those rights are, plainly, “things in action”) or (ii) to construe the expression “property belonging to or vested in the bankrupt” – in the context of section 283(1) of the Insolvency Act 1986 – in such a way as to exclude property which comprises contractual pension rights.

I accept, of course, that – independently of the requirement in section 3 of the Human Rights Act 1988 (which has no application in the present case) - words in a domestic statute should be construed in a manner which is consistent with Parliament’s assumed intention to give effect to the United Kingdom’s obligations under an international treaty or convention – and, in particular, obligations under the European Convention on Human Rights – rather than in a manner which is inconsistent with those obligations. But that is subject to the qualification that the words must be reasonably capable of bearing the meaning which it is sought to put upon them.

In the present case, I am not persuaded that, to construe the provisions in sections 283(1) and 436 of the Insolvency Act 1986 so as to include within the bankrupt’s estate contractual pension rights vested in the bankrupt at the commencement of the bankruptcy would be inconsistent with the obligations imposed on the United Kingdom by article 14 of the Convention. It seems to me that, upon a true analysis, the differential treatment in bankruptcy of the contractual pension rights of the self-employed and the pension rights of those employees who are members of an occupational pension scheme set up by way of trust which (under the trust provisions) provides for forfeiture of rights on bankruptcy is not a difference of treatment based on discrimination on the ground of status – or on any other ground which offends that article. For the reasons already set out, the differential treatment under the Insolvency Act 1986does not arise from a difference in the treatment of persons (of differing status) having the same or similar rights. The differential treatment arises because contractual pension rights fall within the description of property for the purposes of the Act and the rights of a beneficiary under an occupational pension scheme (after forfeiture on bankruptcy) do not fall within that description. In the latter case, the bankrupt had no relevant property within section 436 of the Act. His right to be considered as an object of the discretionary trust which arose on forfeiture was not a “thing in action” for the purposes of that section. Nor, as it seems to me, was it an “interest . . . arising out of, or incidental to, property” for the purposes of that section.

But, even if that analysis is wrong, the appellant faces a hurdle which he cannot surmount in this Court. The words in sections 283(1) and 436 of the Insolvency Act 1986 must be reasonably capable of bearing the meaning which it is sought to put upon them. That is to say the words must be reasonably capable of being construed in such a way as to exclude contractual pension rights from the definition of “property” in section 436 of the Act or (in some other way) to exclude contractual pension rights from the scope of the expression “property belonging to or vested in the bankrupt” in section 283(1) of the Act. This Court has held, in Krasner v Dennison (supra), that that is not a possible construction. At paragraph [70] of my judgment in that case (ibid, 107B-F), in addressing the related argument that the vesting of personal pension policies in the trustee in bankruptcy constituted a breach of article 1 of the First Protocol to the Convention, I said this:

“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), (ii) or (iii) of that analysis. The appellants recognise, perhaps, that that would be to attempt the impossible. . . .”

The other members of the Court (Lord Justice Kennedy and Lord Justice May) expressed agreement with that analysis. It was approved by this Court in Rowe v Sanders [2002] EWCA Civ 242, [48]–[50], [2002] BPIR 847, 858, and noted at [2002] 2 All ER 800.

As I have said, the matter has been argued before us on grounds which the judge was not asked to consider. In my view the judge was correct to reach the conclusion which he did on the arguments before him for the reasons which he gave. The appeal was not pursued on the single ground for which permission was given by Lord Justice Neuberger. It must be dismissed. The further grounds advanced in this Court do not lead to any other conclusion. Permission to appeal on those further grounds – and permission to amend the appellant’s notice so as to raise those grounds – is refused.

I agree.

I also agree.