Judgment creditor can access judgment debtor’s pension fund
19 April 2012
In Blight & ors v Brewster  EWHC 165 (Ch), 9 February 2012 the High Court made an order requiring a judgment debtor to exercise his right to withdraw a lump sum from the pension fund, to be used to repay the creditor. This contrasts with the statutory protection afforded to pension funds on bankruptcy. The decision sheds further doubt on the controversial decision in Field v Field  1 FLR 376 in which the court refused to make such an order.
The claimants were the victims of fraud and forgery by the defendant. They obtained judgment in 2008 and took steps to enforce the judgment debt. Among the defendant’s assets was his fund in a Canada Life pension scheme which provided that he could elect to draw down 25% of his pension fund as a tax-free lump sum. The claimants obtained a third party debt order in relation to this right.
On 24 March 2011, a District Judge discharged the third party debt order. The claimants appealed this and other parts of the order that related to certain shares owned by the defendant. The defendant sought to rely on Field v Field  1 FLR 376, in which an applicant unsuccessfully sought to enforce an order for payment by requiring the debtor to elect to take a lump sum entitlement under a personal pension scheme. The court refused to appoint a receiver or grant an injunction under s37(1) of the Senior Courts Act 1981 (SCA 1981).
Moss QC, sitting as Deputy High Court Judge, allowed the appeal and restored the third party debt order with certain amendments. He considered that the current case was analogous to Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank & Trust Company (Cayman) Ltd  UKPC 17, noting that:
- the court’s jurisdiction under s37 of the SCA 1981 extends to granting an injunction or appointing a receiver to help the enforcement of a judgment;
- the jurisdiction can be developed incrementally to apply old principles to new situations;
- when considering the scope of the court’s jurisdiction under s37, the overriding consideration is the demands of justice;
- the equitable remedy of appointing a receiver by way of execution was available in respect of "rights tantamount to ownership" (in Tasarruf Mevduati, this was a power of revocation of a trust). The appointment of an equitable receiver was not limited, as the defendant had argued, to assets that are amenable to execution at law.
Moss QC also rejected the defendant’s submission that, because of the statutory protection extended to pensions in bankruptcy law, public policy requires pensions to be treated as exceptional when it comes to execution of judgments too. He commented that a bankrupt individual surrenders all of his assets to a trustee in bankruptcy (save for certain limited exceptions) and becomes subject to certain disadvantages and restrictions (eg he cannot be a director of a company, it is more difficult to obtain credit). A judgment debtor cannot have the benefits of bankruptcy (eg protection of his pension) without its burdens. Where a debtor fails to pay his debts and does not go into bankruptcy, his assets, including his rights in his pension fund, will be amenable to the enforcement of judgments by individual creditors.
Like the Privy Council in Tasarruf, Moss QC considered the reasoning in Field to be flawed and should not be followed. There is a strong principle and policy of justice that debtors should not be allowed to hide their assets in pension funds when they had a right to withdraw monies needed to pay their creditors. Accordingly, he ordered that:
- the defendant delegate to the claimants’ solicitor the power of election and that the court authorise the solicitor to make the election in the defendant’s name; and
- immediately following the election, the sum payable from the pension fund be subject to a third party debt order.
The judge was prepared to exercise his jurisdiction under s37 of the SCA 1981 to release certain funds held in a pension scheme for the benefit of the judgment creditor. Up until now, there has been some uncertainty about whether this is possible. The decision will certainly be welcomed by claimants. Successful claimants should now consider the terms of any pension, in particular terms enabling an early lump sum payment to be made, when determining the defendant’s assets against which a judgment may be enforced.
This case summary is part of the Allen & Overy Litigation Review, a monthly update on interesting new cases and legislation in commercial dispute resolution. For more information please contact Sarah Garvey email@example.com, or tel +44 (0)20 3088 3710.