Enforcing Judgment Debts Against Pensions (Bacci & Ors v Green [2022] EWCA Civ 1393)

02 Apr 2023

The Court of Appeal in Bacci & Ors v Green [2022] EWCA Civ 1393 considered the rarely used Blight v Brewster order ([2012] EWHC 165 (Ch)). This is an order which allows a judgment debt to be enforced against a pension fund. It has so far only been granted in cases of fraud. It works by ordering an injunction pursuant to Section 37 of the Senior Courts Act 1981 (‘Section 37’) that the Defendant delegate its right to elect a pension draw down to the Claimant, and a third-party debt order over the debt which arises from that drawdown.

Blight v Brewster orders, and the Court of Appeal’s consideration of them in Bacci v Green, therefore have important ramifications for both fraud litigation, and asset recovery.

1. Blight v Brewster [2012] EWHC 165 (Ch)

In this case, the Defendant persuaded the Claimants to part with their money in order to make investments on their behalf. It was found at a summary judgment hearing that this was done on the basis of fraud. The question then arose as to how to enforce that judgment. The Defendant had a Canada Life pension, of which he could draw down 25% as a tax-free sum. The Claimants sought a third party debt order over this portion of the Defendant’s pension. This was discharged at first instance on the basis that the right to elect a drawdown was not a debt. The debt would only arise once the election was made. On appeal, the Court ordered an injunction pursuant to Section 37 that the Defendant delegate its power to elect the draw down his pension. Moss KC (sitting as a Deputy High Court Judge) stated at [70] that:

“there appears to me to be a strong principle and policy of justice to the effect 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.”

Section 37 also allows the appointment of an equitable receiver. Moss QC preferred an injunction to the appointment of an equitable receiver as it was simpler. However, he went on to state that if it were not possible to have ordered an injunction, he would also have ordered the appointment of an equitable receiver.

2. Bacci v Green [2022] EWCA Civ 1393

In this case, the Defendant obtained finance from a company (‘FSL’) by offering security over assets which he either did not own, or had contracted to sell. On the basis of this fraud, FSL obtained summary judgment of £3,233,625.76 against the Defendant.

Shortly after judgment, the Defendant was made bankrupt. Although the Defendant was discharged from the bankruptcy, the judgment debt survived by operation of Section 281(3) of the Insolvency Act 1986.

Again, the Defendant’s principal asset was a pension. However, in order to draw down the pension, he needed to revoke a voluntary ‘enhanced protection’ option under the Finance Act 2004.

FSL assigned its rights to the Claimants, who brought the instant proceedings.

At first instance, the Judge made an order requiring the Defendant to delegate his power to revoke the enhanced voluntary protection to the Claimants’ solicitors, and confer upon them authority to elect that the Defendant draw down his pension.

The Defendant appealed on three grounds, of which two are relevant to this article.

First, on the basis that the Defendant’s power to revoke his enhanced voluntary protection was not ‘property’ nor ‘tantamount to ownership’. The Defendant acknowledged that Blight v Brewster had been correctly decided; but argued that in that case, the right to election had been property. In this case, the power to revoke enhanced voluntary protection was not – exercising it would, argued the Defendant, effectively create new property. It was not open to the Court to appoint a receiver by way of equitable execution over a contingent right.

However, the Court found that the right did not have to be property, nor tantamount to it, in order for a receivership to be granted over it (at [19]), and so the Court had the power to make the order that it did.

In addition to the receivership, the Court also had the power to grant an injunction. Any doubt about its jurisdiction to do so was resolved by Broad Idea v Convoy Collateral [2021] UKPC 4. That case established that an injunction under Section 37 required: (i) an interest of the claimant which merits protection and (ii) a legal or equitable principle which justifies exercising the power to order the defendant to do or not do something. In addition, the category of cases in which injunctions could be deployed could be developed incrementally.

Second, the Defendant argued that the order was against public policy. On this ground, the Court endorsed Blight v Brewster. In particular, Newey LJ stated at [32] that when it came to enforcing a judgment against a pension, there was no analogy to be drawn with bankruptcy, for which parliament had specifically legislated to protect pensions.

The overriding consideration was that judgments must be enforced.

3. Practical impact

Blight v Brewster orders, now endorsed by the Court of Appeal, are clearly useful in extending the range of assets which judgments can be enforced against. However, a number of questions remain unanswered about this rare form of order.

  1. Will it only be granted in cases of fraud? The Court has not explicitly said so, but in both Blight v Brewster and Bacci v Green, the fraud of the Defendant was a strong policy consideration in the Court’s exercise of its discretion under Section 37.
  2. Will it only be ordered in cases where the Court would otherwise appoint an equitable receiver? The Court made clear in both Blight v Brewster and Bacci v Green that an injunction was effectively a shortcut, and that the Court in both cases would have appointed a receiver in any event. The Court will normally require satisfaction to a higher degree of injustice against the Claimant before appointing a receiver than granting an injunction.
  3. Will they only be granted in cases where the Defendant’s pension is registered within the jurisdiction? Third party debt orders only take effect against assets within the jurisdiction, but surely this applies only to the lump sum once it has been drawn down.
  4. Will they only be granted in cases where the Defendant’s pension is the only means of satisfying the judgment debt? It is conceivable that there might be a case in which a Defendant has a number of other assets which are difficult to enforce against, meaning that a Blight v Brewster order is sought for tactical reasons. However, there are also strong policy reasons why a pension should be a ‘last resort’ when it comes to enforcing a judgment.

If the answer to all of those questions is yes, then Blight v Brewster orders, ostensibly a useful tool, may remain rare.

Article by Thomas Mitty – first published by TL4 FIRE Magazine


Thomas Mitty

Call: 2021


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