Malcolm v MacKenzie & Anor

This judgment is given on an application by Mr William Andrew Malcolm concerning the benefit of a pension contract that he effected in 1986. The application raises issues as to the interaction between on the one hand the effect of English bankruptcy law on such a contract and on the other the provisions of the European Convention on Human Rights, incorporated into English law under the Human Rights Act 1998.

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 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.

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 that they could not pay. Insolvency procedures 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. He ought to be so named himself, as trustee in bankruptcy, but no point is taken on that.

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 had 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 asset, and probably the only one worth anything.

On 1 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).

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.

It was issued in the Crewe County Court under a claim number although, so far as I am aware, no Claim Form was ever issued. It should have been issued as an application in the bankruptcy proceedings. Those proceedings had been issued in the Royal Courts of Justice, but upon the making of the bankruptcy order they were then transferred to the Brighton County Court, where Mr Malcolm then lived. Since then he has moved to Cheshire. The bankruptcy proceedings were then transferred to the Manchester District Registry, and this application is treated as having been made in those proceedings.

Mr Malcolm has acted in person throughout this application. His trustee in bankruptcy has had Counsel, now Mr Cooper. The Second Respondent is content to be bound by whatever order the court makes, and has taken no part in the proceedings. At a directions hearing in October 2003, I ordered that notice of the proceedings be given to the appropriate Government Department, because Mr Malcolm seemed to contend that the relevant legislation was incompatible with the European Convention on Human Rights. I also asked the Attorney-General to appoint an advocate to the court. He agreed to do so, as a result of which I have had the valuable assistance of Mr Lavender’s submissions. The Departments of Trade and Industry and Work and Pensions took up the opportunity to intervene in the proceedings, so that I have also had the assistance of Miss Moore of Counsel. The participation of the Departments and of the advocate to the court came somewhat later than was provided for under my order, and Mr Malcolm was faced with a great deal of written material of a somewhat technical nature at a late stage. At one point he said that he would seek an adjournment, but in fact he did not press that, and the hearing took place over two days in Liverpool. I am grateful to Mr Malcolm for his sensible attitude in this respect and for his courteous submissions on a matter on which, entirely understandably, he has strong feelings. I am also grateful to Counsel for their respective submissions on the interaction between insolvency law, pension law and human rights law.

In 1999, Mr Malcolm’s mother came to an agreement with the trustee in bankruptcy under which she would buy from the trustee in bankruptcy his interest in a property, Rosevine Cottage, Truslers Hill Lane, Albourne, Sussex, which was then over-mortgaged and had no equity value. She was to pay the trustee in bankruptcy £211, of which £1 was the price for the interest in the property and £210 a contribution towards the costs of the transaction. I understand that the money was paid but that the documentation never proceeded because the property was repossessed by one of the mortgagees. The trustee in bankruptcy’s solicitors had written to Mrs Malcolm to say that the trustee would "transfer all his estate and interest in Rosevine Cottage". The reference to "all his estate" led Mr Malcolm to contend that the agreement related not only to his own interest in the cottage but also to the whole of his bankrupt estate. He therefore argues that, even if the trustee in bankruptcy would otherwise be right, he has no further interest in the estate. Plainly that is not correct. The correspondence makes it clear that all that is under discussion is Mr Malcolm’s interest in the cottage. The use of the technical phrase "all his estate and interest in" the cottage does not extend the transaction to anything else. There is therefore no substance in Mr Malcolm’s first ground for claiming that the trustee in bankruptcy has no interest in the pension contract.

In the course of the hearing before me Mr Malcolm contended that the few outstanding debts could easily be paid off without recourse to the pension. The largest creditor appears to be the Inland Revenue. He said that, at any rate as regards one of two debts to the Inland Revenue, for National Insurance Contributions, he had secured their agreement to accept a dividend of 9.2 pence in the pound. He therefore suggested that it was unnecessary and wrong for the trustee in bankruptcy to seek to secure the benefit of the pension, since the debts could be paid off otherwise. That was not covered in his evidence, and I cannot therefore make a finding on it. Mr Cooper, however, having had some notice of the point, showed me a letter from the trustee in bankruptcy’s office to Mr Malcolm written in January, in which he was told that, even if this debt was paid off, there were some £37,000 of other debts, quite apart from the costs of the bankruptcy proceedings. In those circumstances it seems unlikely, to say the least, that the bankruptcy can be dealt with without recourse to the pension.

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

An employee may have the opportunity of becoming a member of a pension scheme set up by his or her employer. Such a scheme is almost always set up so as to comply with the then current legislation as regards tax approval of such schemes. One condition for that is that it must be set up by way of a trust, with a trust deed and rules. It will provide a range of benefits for members and their dependants, the nature and amount of those benefits being limited by the rules for tax approval. It will be funded by contributions by the employer and often, though not always, by contributions from the employee members. The fund will be vested in trustees, whose duty is to administer it in accordance with the trust deed and rules.

The rules as regards tax treatment of such schemes change from time to time, and they are currently the subject of a major review. The regulatory system relating to such schemes has also evolved significantly over past decades, and continues to evolve. The issues arising are of major social and economic importance because of the vast amount of money invested in such schemes and of the importance for individuals of their pension benefits, especially with demographic changes over recent decades.

Not all employers provide such a scheme. Not all employees are eligible to join such a scheme if it exists, and employees cannot be compelled to join one. For those who are employed but are not members of an occupational pension scheme in respect of their current employment, the opportunity available for fiscally favoured pension investment is the same as is open to the self-employed. Before 1988 the vehicle available was the retirement annuity contract, such as Mr Malcolm took out. Since 1 July 1988 it has not been possible to enter into a new retirement annuity contract, but contracts already in existence can be maintained and further contributions can be made out of relevant income. In 1988 they were replaced by the personal pension scheme. Both retirement annuity contracts and personal pension schemes take effect in contract. They are bilateral arrangements between the person who wants to make provision for his or her pension and an insurance company authorised to carry on long-term business and willing to undertake the obligations in question. The benefits to be provided will include third party benefits in some circumstances, such as an annuity for a surviving spouse or dependent children, but the transaction remains based in contract, not in trust.

One condition of the favourable tax treatment of both an occupational pension scheme and a retirement annuity contract or personal pension scheme is that benefits may not be assigned. That is a matter of general policy, the point being that the favourable tax treatment which is offered as an incentive for provision for retirement should operate for the benefit of the individual in question, not some third party (other than spouses or other dependants).

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 her 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 bankruptcy of 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.

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.

The decisions in Landau and Krasner v. Dennison established that the position under bankruptcy law had changed with the introduction of the Insolvency Act 1986. Previously, income payments under a pension annuity did not vest in the trustee in bankruptcy, and were only payable to the trustee and to the extent that an income payments order was obtained by the trustee. Such an order came to an end upon discharge from bankruptcy. The new provisions which came into effect in the Insolvency Act 1986 altered that, as the courts held, so that the right to the annuity, as well as to the lump sum, was an asset of the bankrupt which vested in the trustee in bankruptcy. Before the 1986 Act came into force, therefore, while the lump sum under a retirement annuity contract was vulnerable on bankruptcy, the annuity was only vulnerable to a limited extent, and for a limited time. It was a matter of discretion for the court whether an income payments order was made, there were limits on that discretion, and once the bankrupt was discharged the full amount of the annuity was payable to the former bankrupt. Thus, the position of the holder of a retirement annuity contract or of a personal pension scheme on bankruptcy became even more disadvantageous under the Insolvency Act 1986 as compared with that of a member of an occupational pension scheme which includes a forfeiture clause.

It is striking that it took so long after the 1986 Act had come into force for this to be established. It did not take so long after the decision in Re Landau for the position to be changed. The case was decided on December 16 1996. In December 1998 the Secretary of State for Social Security presented a Green Paper to Parliament called "A new contract for welfare: Partnership in Pensions", Cm. 4179. Paragraph 48 of that Green Paper says this:

This proposal was given effect by section 11 of the Welfare Reform and Pensions Act 1999. Section 11(1) is as follows:

The definition of "approved pension arrangement" includes occupational pension schemes, retirement annuity contracts and personal pension schemes. The section came into force on 29 May 2000. According to evidence from the Department of Work and Pensions, the policy behind the limitation to bankruptcy orders made on petitions presented after the section had come into force was, first, the concern that to apply the new rule to bankruptcies which had commenced previously would lead to a need to unravel old bankruptcies, either taking away assets from creditors or, if this could not be done, making it necessary to provide public funds to compensate bankrupts. A second policy reason was the desire not to interfere with the legitimate expectations of creditors in respect of bankruptcy petitions already presented, given that a bankruptcy order has retrospective effect back to the date when the petition was presented.

Because of the limitation on the effect of the new legislation, section 11 does not apply to Mr Malcolm’s bankruptcy. He contended forcefully that it did or should, because the trustee in bankruptcy had taken no steps until long after it came into force. However, it is clear that it does not, according to its terms, and the law which, expressly, applies only to bankruptcies commencing after 29 May 2000 cannot be treated as applying also to previous bankruptcies. Mr Malcolm’s second reason for contending that the trustee in bankruptcy has no right to the proceeds of his retirement annuity contract fails for this reason. He also protested that the trustee in bankruptcy should not have waited for so long before seeking to claim the pension, and that he should not be allowed still to be seeking to enforce rights more than 7 years after the bankruptcy order, which would be too late for an ordinary creditor. Neither of these points would be a reason for denying the trustee in bankruptcy his right to claim the benefits of the retirement annuity contract, but it is fair to note that, on the trustee in bankruptcy’s behalf, Mr Cooper said that he had delayed his claim on the contract pending the process of appeals against the Landau ruling. Permission to appeal to the House of Lords was given in the Krasner cases, and it was only when it became clear that these appeals would not be pursued that the trustee in bankruptcy thought it appropriate to seek payment of the benefits. There is no analogy with limitation periods applying to ordinary creditors, since the trustee in bankruptcy is doing no more than seeking to realise an asset which he claims is vested in him already.

There is a long history of legislative provisions dealing with the treatment on bankruptcy of pension rights, which have given rise in turn to a series of judicial decisions. Chadwick LJ reviewed these in his judgment in Krasner at paragraphs 48 to 52, and as regards the case law at 59 to 66, and I do not need to go over that again. I should, however, refer to one point that was drawn to my attention. At paragraph 51 of his judgment he quoted section 91(3) of the Pensions Act 1995. This provided for the exclusion from the assets vesting in a trustee in bankruptcy of any entitlement under an approved occupational pension scheme. Unlike other parts of that section and related provisions, this sub-section was not brought into force in 1997, and it never did come into force. It was superseded, and repealed, by the 1999 Act when that came into force in 2000. It may be that the delay in bringing it into force had something to do with the fact that, by the time it would otherwise have come into force in April 1997, the Landau case had been decided, thereby drawing attention to the different position as regards retirement annuity contracts and personal pension schemes, and that its coming into effect was delayed pending a consideration of the implications of that decision and of the contrast in treatment between pension rights under the different regimes. Whether or not that was the reason, the fact is that that sub-section would have increased the difference of treatment as between retirement annuity contracts or personal pension schemes on the one hand and occupational pension schemes on the other, by excluding from bankruptcy even rights under an occupational pension scheme not protected by a forfeiture clause, and the decision not to bring it into effect meant that this greater divergence did not occur. Instead, eventually, the two systems were brought into line in this respect by the 1999 Act.

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 pension 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.

It is clear that the trustee in bankruptcy has no relevant discretion in the matter. According to the law as it has been laid down, the retirement annuity contract does vest in him, it is of substantial value and he must take steps to realise it for the benefit of creditors. (I do not mean to say that a trustee in bankruptcy never has a practical discretion as regards the realisation of assets, for example if the cost would be disproportionate to the benefit, or to the remaining deficiency, but no such factors apply here.) So although Mr Malcolm complains of the actions of the trustee in bankruptcy, he is really complaining of the law under which the trustee in bankruptcy can and must take steps to realise his pension benefits and distribute them to creditors.

Mr Malcolm’s complaint is based on article 14 of the European Convention on Human Rights, as follows:

As appears from this text the article is not freestanding. It applies to the enjoyment of rights or freedoms under other provisions of the Convention. The right invoked by Mr Malcolm is that under article 1 of the First Protocol. This is in these terms:

Rights under a contract such as Mr Malcolm’s retirement annuity contract are certainly possessions. In that respect, Mr Malcolm’s entitlement to the peaceful enjoyment of those rights is a right guaranteed by the Convention, and this is therefore something to which the rights under article 14 can apply.

A consideration of whether Mr Malcolm’s rights under the Convention have been infringed, and if so what are the consequences of that, must take account of the fact that the main relevant events occurred before 2 October 2000, the date on which the Human Rights Act 1998 came into force, making Convention rights directly enforceable in national courts in England and Wales for the first time. The retrospective operation of the Act is strictly limited. If the Act does not afford Mr Malcolm a remedy because the acts of which he wishes to complain occurred before the 1998 Act came into force, his only remedy (if any) would be to invoke the jurisdiction of the European Court of Human Rights. That, however, would lead, if he were successful, to a remedy against the Government, not against the trustee in bankruptcy or the fund which the retirement annuity contract represents. The question of retrospectivity cannot be fully answered without considering what it is that Mr Malcolm complains of, but I will deal first with the state of the law as regards retrospective effect.

There are two separate aspects to the 1998 Act. Section 3 affects the interpretation of primary and secondary legislation, so as to require it to be read, if at all possible, in a manner which is compatible with Convention rights. The operation of this section is purely prospective. It does not affect how any legislation is to be read in respect of things done or happening before 2 October 2000: see Wilson v. First County Trust Ltd (No. 2) [2003] UKHL 40, [2003] 2 WLR 568. Section 6, on the other hand, deals with acts of public authorities. It makes it unlawful for a public authority to act in a way which is incompatible with a Convention right: sub-section (1). By sub-section (2)(a) this does not apply to an act if, as a result of one or more provisions of primary legislation, the authority could not have acted differently. The section also defines what is a public authority. Relevantly to the present case, the Inland Revenue is a public authority, as is the court. By virtue of subsections (3)(b) and (5) Mr Malcolm’s trustee in bankruptcy is also a public authority in respect of his acts as such, because he has functions of a public nature. An act includes a failure to act, but not a failure to introduce or make primary legislation: sub-section (6).

The enforcement of the rights conferred by section 6 is governed by section 7. Relevantly, under sub-section (1), a person who claims that a public authority has acted in a way which is made unlawful by section 6(1) may (a) bring proceedings against the authority under the Act, or (b) rely on the Convention right or rights concerned in any legal proceedings, provided, in each case, that he is a victim of the unlawful act. "Legal proceedings", for this purpose, includes proceedings brought by or at the instigation of a public authority, and an appeal against the decision of a court or tribunal: sub-section (6). In this respect, retrospectivity is governed by section 22(4), which is as follows:

It follows that, unless the special provision under section 22(4) applies, Mr Malcolm cannot use section 6 to complain of an act of any public authority done before 2 October 2000. So the question is whether these proceedings, in which Mr Malcolm does seek to assert and rely on an unlawful act on the part of a public authority, were brought by or at the instigation of a public authority?

In order to answer that question, it is necessary to determine what are the proceedings in which Mr Malcolm seeks to rely on the Convention rights. This is not a question which would normally arise. One answer is that they are the bankruptcy proceedings, commenced by the petition of the Inland Revenue in 1996. Another is that they are the application by Mr Malcolm himself within the bankruptcy proceedings.

A question of fact could arise as to whether this application, though brought by Mr Malcolm, was brought at the instigation of the trustee in bankruptcy, a public authority. If it had not been for the trustee in bankruptcy’s approach to Allied Dunbar, the proceedings would not have been issued. But it does not seem to me that, on any reasonable use of language, one could say that the trustee in bankruptcy instigated the proceedings or, to use the passive form as in the sub-section, that Mr Malcolm brought the proceedings at the instigation of the trustee in bankruptcy. Accordingly, it seems to me that section 22(4) can only provide Mr Malcolm with a way to complain of acts done before October 2000 if the relevant proceedings are the bankruptcy proceedings as a whole, not the present application.

The correct application of section 22(4) has been the subject of divided views in the English courts already, in particular, as regards criminal appeals, in R. v. Lambert [2001] UKHL 37, [2002] 2 AC 545 and R. v. Kansal (No 2) [2001] UKHL 62, [2002] 2 AC 69. As a result of those decisions it is established that appeals in criminal cases must be treated as distinct from the proceedings at first instance, so that an appeal by an accused person is separate, for these purposes, from the prosecution by a public authority which led to the conviction, although this may well not be the correct interpretation of the relevant provisions. In relation to civil appeals the position has been held to be otherwise in MacDonald v. Advocate General for Scotland [2003] UKHL 34, [2004] 1 All ER 339: see Lord Nicholls at paragraph 23.

The reason for the special provision in section 22(4) was expressed in Wilson v. First County Trust Ltd (No. 2) [2001] EWCA Civ 633, [2002] QB 74 in the Court of Appeal by Sir Andrew Morritt V-C as follows (paragraph 21):

In due course when that case was heard in the House of Lords, [2003] UKHL 40, [2003] 3 WLR 568, Lord Hope said this on the same subject, at paragraph 90:

The distinction that might be drawn in the present case is different from that between proceedings at first instance and appeals, whether in criminal or in civil proceedings. Insolvency proceedings are different in nature from ordinary civil proceedings by one party against another to enforce civil rights or obligations. They are brought to secure the realisation and distribution of the assets of a debtor on a collective basis for the benefit of all creditors. They are initiated by a particular party, but once a bankruptcy order has been made, or a winding-up order in the case of a company, the proceedings are not an adversarial contest between two parties. (Even before that they are not just a contest between the two parties, in that, for example, other creditors have a right to be heard, but I need not consider in more detail the position at that stage.) After such an order, the proceedings provide a forum in which issues can and should be resolved that may arise in relation to the insolvent estate, the rights and obligations of the insolvent person and his or its creditors and debtors, and the functions of the person entrusted with the administration of the process, the trustee in bankruptcy or liquidator. It is exceptional for a claim against the bankrupt or the company in liquidation to be allowed to proceed outside the insolvency proceedings: see section 285 of the Insolvency Act 1986 as regards bankruptcy. A similar situation may arise, though nowadays it rarely does, as regards the solvent administration of the estate of a deceased person, or sometimes the execution of the trusts of a settlement, if the court makes an order for the administration of the estate or of the trusts. In such a case all issues arising in relation to the estate or the trusts have to be brought before the court by an application in the administration proceedings. In an insolvent administration, whether of a deceased’s estate, a bankrupt’s estate or the liquidation of a company, there may be many applications, of which all will involve the office-holder on one side or the other, and most will involve the bankrupt, or officers of the company in liquidation, as the only other party or parties. It is rare for the petitioning creditor to be a party to such an application, but this is not unknown.

Although it must be very common for one or more public authorities to feature among the creditors of a bankrupt or a company in liquidation, if only because there will almost always be liabilities for income or corporation tax, sometimes National Insurance Contributions, and often Value Added Tax, on the part of a person or company who becomes insolvent, it may be a matter of chance whether the petition is presented by any public authority. It seems therefore that it would be somewhat arbitrary if the relevance of acts done by a public authority before 2 October 2000 were to depend on whether a public authority happened to have been the petitioning creditor.

Moreover, even if the petitioning creditor was a public authority, it will by no means necessarily be the one whose acts are complained of. Whether section 22(4) only applies if the author of the relevant acts was also the bringer of the proceedings is a point touched on but not decided in R. v. Lambert by Lord Hope at paragraph 107 and Lord Clyde at paragraph 139, and in R v. Kansal (No. 2) by Lord Lloyd at paragraph 15. In Wilson v. First County Trust Ltd (No. 2) Sir Andrew Morritt VC assumed, in the passage cited at paragraph 36 above, that the public authority would be the same. Here the petitioning creditor was the Inland Revenue, but the only act of the Inland Revenue that might be said to be relevant, other than bringing the bankruptcy proceedings, is the exercise of its votes in relation to the appointment of a trustee in bankruptcy in 1998.

Although it is not easy to imagine circumstances in which, in practice, the question would arise, it would be absurd if section 22(4) were to apply (as it could) to proceedings brought by a public authority against a debtor which were allowed to be brought or to continue outside the bankruptcy proceedings, but not to an application within the bankruptcy proceedings made by the same public authority, unless the petitioning creditor had been a public authority. That suggests that the proceedings, for the purposes of section 22(4), are not the bankruptcy proceedings as a whole but the particular application within those proceedings. Moreover, because most, if not all, applications against a bankrupt would be made by the trustee in bankruptcy, who is a public authority, the bankrupt would usually be able to rely on section 22(4), unless it only applies where the public authority responsible for the proceedings is also that responsible for the act complained of – a point which I do not propose to decide.

For those reasons, it seems to me that the better view is that, while a bankruptcy petition is brought by the petitioning creditor, so that proceedings on such a petition are within section 7(1)(b) if the petitioning creditor is a public authority, after a bankruptcy order has been made the continuing proceedings are no longer brought by the public authority. After the bankruptcy order, the application of section 7(1)(b) requires attention to the particular application within the bankruptcy proceedings. If that application is made by the trustee in bankruptcy, it will be within section 7(1)(b), and it will also be so if the applicant is a separate entity which is a public authority. If, however, the applicant is the bankrupt, then the relevant proceedings are not within section 7(1)(b) and so section 22(4) does not apply, unless they were brought at the instigation of a public authority.

I should record that I am indebted to Mr Lavender for further assistance on this point by way of supplemental written submissions put in, pursuant to a direction I gave at the hearing, in order to amplify the coverage of this point, which had not been developed fully at the hearing itself.

For this reason, it follows that Mr Malcolm is not able to rely on an act of a public authority done before 2 October 2000 as a breach of his Convention rights, because he seeks to do so in proceedings brought by himself, and not at the instigation of a public authority. He therefore cannot bring himself within the limited retrospective operation of the 1998 Act in section 22(4).

Mr Lavender drew to my attention a number of possible arguments on the basis of which it might be argued for Mr Malcolm that things done or happening since 2 October 2000 had infringed his Convention rights. I will refer to these, but the essence of Mr Malcolm’s complaint is really about the state of the law as it was before 29 May 2000, and the government’s failure to change it sooner, or with retrospective effect.

First Mr Lavender suggested that the position of the trustee in bankruptcy in relation to Mr Malcolm’s assets might be regarded as one of continuing control, rather than of divestment once and for all, so that the trustee in bankruptcy’s continuing acts after 2 October 2000 would be subject to the Human Rights Act 1998 without the need to invoke section 22(4). In his submission decisions of the European Court of Human Rights have drawn a distinction between these two concepts. Cases of expropriation are in the second category, but a case where a person’s assets are taken for the purpose of being used to pay his debts, whether to the State or to all creditors, are or may be different. In support of this argument he showed me the decision of the Court in Gasus Dosier- und Fördertechnik GmbH v. Netherlands (1995) 20 EHRR 403.

In that case the complainant, Gasus, had supplied goods to a Dutch company (Atlas) on terms under which it retained title to the goods until payment, and it had not been paid. Atlas owed debts for taxes to the Dutch Government, which it did not pay. The Government invoked remedies for the payment of taxes which included the right of recourse to goods on the debtor’s premises, even though not owned by the debtor. Under these provisions the goods supplied by Gasus were seized and sold. Later Atlas became bankrupt. Gasus did not receive notice of the seizure of its goods at the time. When they took steps to challenge the seizure, they were told that this was out of time. They brought proceedings in the national courts in the Netherlands, invoking article 6 of the European Convention on Human Rights and complaining of the provisions of the legislation by which they were not allowed access to the court to enforce their rights of property. These proceedings failed, at all levels.

Gasus then applied to the European Court of Human Rights, relying both on article 6 and on article 1 of the First Protocol. As regards article 1, the court considered (at paragraph 59) that the case fell most naturally within the third sentence of the article, as an example of the State’s power to "control the use of property in accordance with the general interest or to secure the payment of taxes", rather than as an example of deprivation of possessions, within the second sentence, though they said (at paragraph 55) that the article is to be read as a whole, the second and third rules both being concerned with particular instances of interference with the right to the peaceful enjoyment of property. The relevance of the third, rather than the second, rule may have been all the clearer because there was no change of ownership in that case upon the seizure of the goods by or on behalf of the tax authorities, any more than there would be in this jurisdiction if a judgment creditor sought to execute on the debtor’s goods. In the present case, there was a change of ownership, albeit that the trustee in bankruptcy became owner not in his own right but as trustee for the creditors and, if and insofar as the assets were sufficient to discharge the debts and the costs, for the bankrupt. It does not seem to me, having read the judgment as a whole, that anything in the decision turned on the distinction between the second and the third rule. The complaint was dismissed.

I recognise that a difference may be drawn between different types of interference with the peaceful enjoyment of possessions, for the purposes of article 1. I can see that there might be interferences which can fairly be regarded as occurring on a continuing basis, or renewed from time to time, with the result that a situation which began before 2 October 2000 and continues thereafter can be complained of as regards the latter period even though not of the former period, though I do not propose to postulate any examples. However, it does not seem to me that a case such as the present, where the rights of Mr Malcolm as regards his assets were altered fundamentally on the making of the bankruptcy order in 1996, and in due course his assets became vested in the trustee in bankruptcy in 1998, who then came under an immediate duty to apply those assets towards discharge of Mr Malcolm’s debts, is to be treated as anything other than a divestment occurring once and for all in either 1996 or 1998 (I do not need to decide which). The consequences, of course, continued, and still continue today, but that is the result of what happened before 2000, not of things occurring on a repeated or continuing basis after that. I therefore do not accept that this is an argument by which Mr Malcolm can avoid the limits on retrospective effect under the Human Rights Act 1998.

Mr Lavender’s other suggestion was that Mr Malcolm has a continuing residual interest in his own estate, which is to be regarded as among his possessions, and therefore within article 1. The difficulty with that point is that, even accepting that he does have such an interest, nothing that the trustee in bankruptcy has done or proposes to do is inconsistent with that residual interest. Mr Malcolm’s interest in that respect is inherently subject to the rights of his creditors and the duty of the trustee in bankruptcy to realise assets for the benefit of the creditors. This right, therefore, is not infringed by the trustee in bankruptcy carrying out his normal functions.

Some attention was given in argument to the court’s powers to give directions to trustees in bankruptcy, under sections 303 and 363 of the Insolvency Act 1986, and its inherent jurisdiction sometimes exercised in relation to a trustee in bankruptcy as an officer of the court, as in Ex parte James, in re Condon (1874) LR 9 Ch App 609. The court is itself a public authority, and therefore subject to the duties under section 6 of the Human Rights Act 1998. However, it does not seem to me that the powers, statutory and otherwise, to give directions in a bankruptcy can legitimately be used to produce a result which the Human Rights Act 1998 itself does not produce, because of the limitations on its effect, both as regards time and as regards subject-matter, even if that result appeared to ensure greater respect for a given person’s Convention rights. I am not at all satisfied that there was any interference with Mr Malcolm’s Convention rights, but even if there had been, this is not a way round the limitations of the Human Rights Act 1998 in giving effect to those rights.

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.

However, having had argument on the substantive points, I propose to say something about them, even though this is not necessary to my decision.

Recent decisions of the Court of Appeal have provided guidance as to the approach to be followed when considering a complaint under article 14. In Wandsworth Borough Council v. Michalak [2002] EWCA Civ 271, [2003] 1 WLR 617, four questions, to be posed successively, were formulated as follows. (1) Do the facts fall within the ambit of one or more of the substantive Convention provisions? (2) If so, was there different treatment as respects that right between the complainant on the one hand and other persons put forward for comparison ("the chosen comparators") on the other? (3) Were the chosen comparators in an analogous situation to that of the complainant? (4) If so, did the difference in treatment have an objective and reasonable justification, or in other words, did it pursue a legitimate aim and did the differential treatment bear a reasonable relationship of proportionality to the aim sought to be achieved? In R. (Carson) v. Secretary of State for Work and Pensions [2003] EWCA Civ 797, [2003] 3 All ER 577, Laws LJ commented that distinguishing between the third and fourth questions is not always easy. He proposed (at paragraph 61) a compendious question in place of the third question, namely: are the circumstances of the complainant 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?

Taking the questions in order, reformulated in that way, it seems to me that, at any rate in general terms, the facts do fall within the ambit of the substantive provisions of article 1 of the First Protocol. Pension entitlement is one of the possessions of the person entitled. Although not enjoyable in possession until a given age, the economic importance of pension rights, and the fact that they represent either (for those using a retirement annuity contract or personal pension scheme) one of a number of different possible ways of making and investing savings out of a person’s own funds, or (in the case of members of an occupational pension scheme) deferred pay, seems to me to make it clear that the rights whose loss Mr Malcolm complains of were possessions of his within the meaning of article 1 of the First Protocol.

Was there different treatment as regards those rights as between Mr Malcolm and a chosen comparator? On the face of it, the answer is yes, because Mr Malcolm’s rights vested in his trustee in bankruptcy, whereas the rights of a member of an occupational pension scheme whose provisions included a forfeiture clause would not have done. The comparison, therefore, is not, as Mr Malcolm originally proposed, between the self-employed and employees, because by no means all employees are members of an occupational pension scheme, and not all occupational pension schemes have forfeiture clauses. According to the evidence from the Department of Work and Pensions, the Family Resources Survey for 2002/3 shows that 48% of employed persons are members of an occupational pension scheme, and 12% have a personal pension scheme. 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.

Miss Moore submitted that this is only part of the necessary enquiry, and that the difference of treatment has to be on the part of a public authority for it to be relevant. It seems to me that she is right about this, but that it may nevertheless be useful, at any rate in the present case, to follow the four questions through before coming back to the issue whether any public authority is responsible for the difference in treatment.

So I come to the reformulated third question: are the circumstances of the complainant 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? Mr Malcolm’s most powerful argument on this point is to be found in the words of the Green Paper which I quoted at paragraph 19 above. The Government itself there characterises the difference in treatment as unfair. There, he says, is an express recognition that the circumstances of the two classes of persons are similar, that they ought to be treated similarly, and that it is unfair that they are not. He goes on to say that this shows, not merely that the similarity calls for a positive justification for the less favourable treatment of the complainant in comparison with the chosen comparator, but also, moving on to the fourth question, that no such objective or reasonable justification exists. That is a powerful argument, and one which suggests that the third question is to be answered in Mr Malcolm’s favour.

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.

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.

Article 14 is drafted inclusively as regards the grounds of discrimination which are subject to it. It seems clear that a distinction made between the self-employed and employees could be an example of discrimination on grounds of status, so as to be within the article. As I have observed earlier, that is not the discrimination complained of in the present case. It is necessary for Mr Malcolm to propose a comparator who is not only employed, but a member of an occupational pension scheme, and one which includes a forfeiture clause. It seems to me that this requires the introduction of too many different factors for the comparison to be appropriate or relevant under article 14. Moreover, it seems to me that it could arguably be legitimate, in considering issues of public policy in this area, to treat benefits afforded by an employer under an occupational pension scheme, in effect by way of deferred pay, in one way, but to regard differently benefits under a retirement annuity contract or personal pension scheme, which are essentially one of several possible ways of making private savings. It might not be self-evident that benefits under such a contract should be immune from bankruptcy any more than benefits under any other form of savings, some of which have beneficial tax treatment. That is not the position that was in fact adopted by the government when it came to the 1998 Green Paper or the 1999 Act, but perhaps it underlay some of the previous differences, or at any rate the failure to legislate earlier in the way that was eventually done in 1999.

The difference between the position of a bankrupt under the two regimes was increased by the changes made by the Insolvency Act 1986, in that previously the income element of a pension was only at risk for a limited time (until discharge) and to a limited extent, whereas under the 1986 Act, until the changes made in 2000, it vested in the trustee in bankruptcy and the bankrupt can derive no benefit from it. That was a feature of the reforms of insolvency law generally made by the Insolvency Act 1986, as described by Chadwick LJ in Krasner v. Dennison [2001] Ch 76 at paragraphs 59 to 67, and was connected with other aspects of those reforms, in particular as to after-acquired property. This reform of bankruptcy law was considered in relation to article 1 of the First Protocol in Krasner itself at paragraphs 68 to 75. The argument that it was inconsistent with article 1 of the First Protocol was rejected, and that has been affirmed in Rowe v. Saunders. It seems to me that it is no more inconsistent with Convention rights by reference to article 14 than it is by reference to article 1 of the First Protocol by itself.

Moreover, it would not be sufficient for Mr Malcolm to show that the legislation is inconsistent with Convention rights, since what is at issue is things that happened before the Human Rights Act 1998 came into force. He could only succeed, even if he were able to get over the retrospectivity hurdle by means of section 22(4), by showing that a public authority has acted inconsistently with his Convention rights. To show that primary legislation produces a situation which itself is inconsistent is not enough, because section 6(2)(a) shows that if a public authority has to act as it did by virtue of primary legislation, that is not an unlawful act for this purpose. Nor is a failure to introduce or pass new primary legislation an act for this purpose: section 6(7).

The only public authorities relevant to the case, as regards things done before 2000, are the Inland Revenue and the trustee in bankruptcy. The Inland Revenue presented the bankruptcy petition. That in itself is not discriminatory. Nor could their act in voting for the appointment of a trustee in bankruptcy (assuming that they did so) amount to an unlawful act on grounds of discrimination. The trustee in bankruptcy could not have acted otherwise than he did because of his obligations under the Insolvency Act 1986. Accordingly, it seems to me that there was in fact no act on the part of a public authority that could be said to be unlawful, even if Mr Malcolm were able to overcome all other difficulties in the argument.

The essence of Mr Malcolm’s complaint is that the law, and the way it was used by the providers of, on the one hand, occupational pension schemes and, on the other, retirement annuity contracts or personal pension schemes, produced a different result on bankruptcy as between himself and his chosen comparator, an employed person who was a member of an occupational pension scheme with a forfeiture clause, which was unfair, and that although the Government recognised this unfairness in 1998, it did not change it retrospectively. The decision to make the change in the law that was effected by the 1999 Act only prospective is one which was rational, and itself may have been influenced by article 1 of the First Protocol, as regards rights of creditors under bankruptcies which commenced before 2000. Mr Malcolm criticised the then Government for not bringing the 1995 Act into force more quickly, and the present Government for not introducing the provision that was made by the 1999 Act sooner and bringing it into effect sooner. Failure to enact legislation is not a possible subject of complaint under the Human Rights Act 1998, because of section 6(6). In any event, the extensive effect of pensions legislation is such that it is normal, rather than the exception, for a significant period to elapse between it being enacted and it coming into force, so that those involved in the administration of pension schemes and contracts can have time in which to prepare for the effect of the legislation. It is also very common for subordinate legislation to be necessary before the Act can be brought into operation, for which significant time has to be allowed. Therefore it does not seem to me that his complaints of delay are fair or justified.

For those reasons, it seems to me that, even if I had been persuaded that Mr Malcolm was able to rely on an unlawful act done before 2 October 2000 in these proceedings because they were brought by a public authority, I would not have been able to find in his favour that there was any such unlawful act.

For the reasons given earlier in this judgment, I dismiss Mr Malcolm’s application.