Section 7 – Protection on occurrence of insolvency
56.Section 7 of the Act inserts section 4B into the 1996 Act which concerns the treatment of periodical payments in the event of the recipient’s insolvency. (The recipient may be the person in respect of whose injuries the payments are being made, but may alternatively be another person if the right to the payments has been assigned. On the latter situation, see paragraph 59 below). It applies to rights to periodical payments under both periodical payment orders and some agreements (subsection (8), which is in similar terms to section 4A(6), on which see above).
57.Section 4B(2) and (3)(b) protects any part of the periodical payment for future pecuniary loss which relates wholly to expenditure likely to be incurred for the person as a result of the personal injury to which it relates (subsection (5)). That is the same portion of the periodical payments as is covered by section 4A (see above). That portion of a periodical payment cannot be required to be paid to a trustee under a protected trust deed granted by the recipient as a contribution from income (subsection (2)) or to a trustee in sequestration under a debtor contribution order under section 90 of the Bankruptcy (Scotland) Act 2016 (subsection (3)(b)).
58.Section 4B(1) excludes the right to periodical payments for any future pecuniary loss (not just the portion referred to above) from the assets transferred under a trust deed if that trust deed is to get protected status under the Bankruptcy (Scotland) Act 2016. Similarly, subsection (3)(a) excludes the right to such periodical payments (or assets or arrangement backing them) from the estate that vests in a trustee in sequestration.
59.The protections do not apply where the right to receive the periodical payments has been assigned after the order was made and the person to whom the right has been assigned is not using the periodical payments for the benefit of the person who suffered the injury to which the periodical payments relate (subsection (6)).
60.Subsection (7) prevents section 4B having an effect on rights which have vested in a person under an order or agreement made before section 7 of the Act comes into force.
