Judgment enforced against the pension fund of a bankrupt fraudster (Bacci and ors v Green)

14 Mar 2022

Dispute Resolution analysis: The Claimant victims of a fraud have been granted relief similar to that awarded in the case of Blight v Brewster to enforce a judgment against a pension fund held by a judgment debtor pursuant to section 37 of the Senior Courts Act 1981.

Bacci and ors v Green [2022] EWHC 486 (Ch)

What are the practical implications of this case?

This is a rare example of a Court applying the jurisdiction set out in Blight v Brewster. It emphasises that the Courts can and should look to assist judgment debtors who are the victims of frauds perpetrated by the judgment debtor where possible. The cases deal with the particular problem presented by pension funds held by judgment debtors. Substantial sums can be saved into such funds, but because they do not constitute debts due and payable to the judgment debtor, unlike sums held in bank accounts, they fall outside the scope of Third Party Debt Orders. The solution adopted in both Blight v Brewster and the present case was to use section 37 of the Senior Courts Act 1981 to forcibly delegate powers held by the judgment debtor in respect of the pension fund to the Claimants’ solicitors, enabling those solicitors then to draw down from the fund. The threshold for the making of such an order seems to equate to cases in which a receiver would be appointed under section 37. Accordingly, orders of this kind are likely to remain confined to fairly exceptional circumstances.

What was the background?

The Defendant, Mr Green sought and obtained finance from a FundingSecure Ltd (“FSL”), a peer-to-peer lender. The finance was obtained as a result of security offered by Mr Green by way of mortgages over various works of art that he either did not own or had pledged or sold to third parties. The security was not effective and this was held to be a result of the dishonesty of Mr Green. FSL obtained judgment and a worldwide freezing order against Mr Green. FSL entered administration and the Claimants took an assignment of FSL’s judgment debt. Also after judgment was obtained, Mr Green was made bankrupt. Because the judgment against him was based on a fraud, the judgment debt survived his bankruptcy pursuant to section 281 of the Insolvency Act 1986. Due to section 11 of the Welfare Reform and Pensions Act 1999, Mr Green’s rights under the Richard Green (Fine Paintings) Executive Pension Scheme (the “Pension Scheme”) did not fall into his bankruptcy estate. The Claimants accordingly had the benefit of a substantial judgment debt in the sum of more than £3.2 million but the only asset against which it could be enforced was the Pension Scheme. The Claimants applied under section 37 of the Senior Courts Act 1981 for directions (of a broadly injunctive nature) that Mr Green delegate to the Claimants’ solicitors his power to notify HMRC that he is revoking his Enhanced Protection concerning his lifetime allowance, his right to call for a lump sum and his right to call for a pension under the Pension Scheme.  The Claimant seek authority to exercise those delegated powers and then to seek to recover the judgment debt from the drawn down funds by means of a third party debt order if not volunteered by Mr Green. The Pension Fund was worth about £8.5 million, but around 56% of this sum belonged to Mr Green’s wife as a result of a Pension Sharing Order.

What did the court decide?

The Claimants relied upon the decision of Gabriel Moss QC in Blight v Brewster [2012] EWHC 165 (Ch). This was a case in which the Court had been prepared to adopt a novel use of section 37 of the Senior Courts Act 1981 in order to overcome the inability to obtain a third party debt order in respect of funds held in a pension fund. The Court noted a number of similarities between the facts of that case and the facts of the present case. Both involved judgment creditors who were victims of the fraud of the judgment debtor. The delegation of powers order in Blight v Brewster represented a shortcut to the appointment of a receiver, a power found in section 37. Mr Green argued that the Claimants sought impermissibly to extent the scope of the Blight v Brewster jurisdiction because the power to terminate Enhanced Protection is not properly categorised as property. He argued that the powers of execution are not available where what is being done is not actually execution. Mr Green argued that the order sought by the Claimants changed the nature of the exercise of the power from execution against an asset to changing a debtor’s position (at a cost to him) so as to create an asset against which execution could be levied. Mr Green argued further that even if there was a jurisdiction under section 37, the Court should not exercise its discretion in favour of the Claimants. Both arguments were rejected. The Court concluded that the revocation of the Enhanced Protection should not be viewed in isolation. It was simply an integral part of the process of getting access to Mr Green’s property. There was an overriding public policy consideration against fraudsters being able to profit from their frauds and in avoiding enforcement by the use of pension funds. An order in the terms sought by the Claimants was granted.

Case details

  • Court: High Court, Business and Property Courts
  • Judge: Andrew Hochhauser QC (sitting as a Deputy High Court Judge)
  • Date of judgment: 7 March 2022

Article by Phillip Patterson – first published by LexisNexis


Phillip Patterson

Call: 2008


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