Fisher & Ors v Harrison & Ors

The Court of Appeal dismissed the appellants' appeal. The court held that clause 19(b) of the pension scheme, construed in its contractual and statutory context, operates to forfeit only future pension rights and not rights to sums that had already become absolutely payable. Section 91 of the Pensions Act 1995 protects future pension rights from assignment or orders restraining receipt, and so the consent order of 30 May 2000 and the freezing (Mareva) order of 7 April 1998 could not validly operate to assign or restrain future payments. Because the consent order was framed to embrace both past and future benefits and could not be severed, it was unenforceable and had to be set aside in its entirety together with the freezing order; the trustees retain discretion to consider hardship in relation to any forfeited benefits.

This is an appeal from the Queen's Bench Division (Liverpool) where judgment had been given for the appellants against Mr and Mrs Harrison in December 1999 for a money sum arising from breach of share sale warranties. The dispute involved pension benefits under an occupational pension scheme established by B. J. Harrison Ltd and a policy with NPI. The company was trustee until its liquidation in 1996 and the scheme's rules included clause 19(b) providing for forfeiture of benefits in certain circumstances.

The procedural history included a freezing (Mareva) order made on 7 April 1998 at the appellants' instance and a consent order made on 30 May 2000 by which the Harrisons had purportedly consented to the scheme "benefits and proceeds" being paid to the appellants' solicitors and, on receipt, the Harrisons to be discharged from liability on the earlier judgment. The Pensions Act 1995 (notably s.91) had not been brought to the court's attention when those orders were made.

The principal issues before the Court of Appeal were:

• the construction of clause 19(b) (whether it forfeited pension rights already absolutely due as distinct from future rights);
• the scope of s.91 of the Pensions Act 1995 (whether it protects only future accrued rights or also payments already due); and
• whether the consent order could be read down or severed so as to give effect to assignment or payment of sums that had already become payable while avoiding conflict with s.91.

The court analysed the scheme wording, the policy considerations and relevant authorities (including Caboche v Ramsay, In re Scientific Instrument Pension Plan Trusts and Krasner v Dennison) and the background material that had led to the 1995 Act. It concluded that clause 19(b) should be construed as applying to future pension payments and not to sums which had already matured into an absolute entitlement to payment. Section 91 was read consistently with that distinction and thus does not invalidate dispositions of sums that had already become payable. The consent order, however, was expressed so as to embrace both past and future benefits and therefore purported to effect assignments/restraints contrary to s.91 in respect of future payments. Because the consent order was unitary and could not be severed without rewriting the parties' agreement, it was unenforceable and had to be set aside together with the freezing order. The trustees retain the discretion to consider hardship payments in respect of any forfeited benefits, and the appellants were left to pursue other remedies to enforce their judgment.

Appeal dismissed. The court held that (1) clause 19(b) of the scheme operates to forfeit only future pension rights and does not invalidate absolute rights to sums that had become payable before forfeiture; (2) the Pensions Act 1995 (notably s.91) protects future pension rights from assignment or court orders restraining receipt but does not extend to sums that had already become payable; and (3) the consent order of 30 May 2000 and the freezing order of 7 April 1998, having been made without regard to s.91 and covering future benefits, were unenforceable and could not be severed, and therefore were set aside, subject to a limited substituted freezing order protecting any sums already absolutely due as at 30 May 2000.

Appeal from the Queen's Bench Division (Liverpool District Registry) (HHJ Kershaw QC sitting as a judge of the High Court). Judgment below given 31 January 2002 and order dated 8 March 2002. The appeal first came before a two-judge court on 19 March 2003 and was then reheard by a three-judge court (Aldous LJ, Mance LJ, Latham LJ) on 26 June 2003, with this judgment handed down 29 July 2003 ([2003] EWCA Civ 1047).