Bacci v Green (Court of Appeal)

The Court of Appeal dismissed the appellant's challenge to a High Court order that enabled judgment creditors to obtain pension proceeds from a debtor who had been subject to bankruptcy but whose debt (incurred by fraud) survived discharge under section 281(3) of the Insolvency Act 1986. The court held that relief under section 37(1) of the Senior Courts Act 1981 could be used to require the debtor either to delegate or to exercise rights necessary to draw pension lump sums (including steps to revoke enhanced protection) as ancillary to a receivership or as standalone injunctive relief. The court rejected public policy and tax arguments advanced by the debtor: Parliament protected pensions in bankruptcy but expressly preserved debts for fraud, and the tax consequences of revocation did not make the exercise of the discretion unjust. The decision relied on established equitable authorities (including Blight v Brewster and TMSF) and on modern developments in the scope of the section 37(1) jurisdiction (notably Broad Idea and Re G).

This appeal arose from a High Court order (Andrew Hochhauser KC, [2022] EWHC 486 (Ch)) by which four former investors (the respondents) obtained judgment enforcement relief against Mr Green. The respondents hold an assignment of claims previously pursued by FundingSecure Limited and sought to realise some of the judgment debt by obtaining pension lump sums from Mr Green's interest in the Richard Green (Fine Paintings) Executive Pension Scheme.

Facts and procedural posture:

• Mr Green had been found at summary judgment liable to FSL (and costs on the indemnity basis) for sums exceeding £3.2m; a bankruptcy order was made and he was later discharged, but the debt survives discharge because it arose from fraud (section 281(3) Insolvency Act 1986).
• Mr Green's primary asset is an accumulated pension credit of substantial value but subject to a Pension Sharing Order in favour of his wife and to "enhanced protection" for lifetime allowance purposes; revocation of that protection would permit certain lump-sum extractions (PCLS and LAELS) but would trigger substantial tax charges.
• The respondents applied for an order requiring Mr Green to delegate to their solicitors powers to notify HMRC revoking enhanced protection and to elect pension drawdown so their solicitors could secure lump sums which could then be the subject of third party debt orders or attachment of earnings.

Issues framed by the court:

1. Whether the power to revoke enhanced protection (and related election rights) constitutes property or rights "tantamount to ownership" such that relief under section 37(1) (injunctions/receivers) could be granted.
2. Whether public policy (including statutory protection of pension rights from bankruptcy) precluded such relief where the debtor had been bankrupt.
3. Whether the tax consequences of revoking enhanced protection made it unjust or inappropriate to grant the relief.

Court's reasoning and conclusions:

• The Court of Appeal accepted that, even if the revocation power taken alone might be contested as to its character, the rights to call for pension lump sums and to instruct trustees under Rule 5 of the scheme could properly be the subject of receivership or injunctive relief. A contingent right (e.g. to a LAELS) can be treated as property or as a receiver's target and a court may make ancillary mandatory directions (Masri, TMSF).
• The court held it would be open to make an order either by appointing a receiver over the member's instruction rights or by granting a standalone injunction requiring the debtor to exercise or delegate the revocation/election rights, and that Blight v Brewster provided a permissible and practical procedure short of appointing an equitable receiver in every case.
• Public policy did not bar relief: Parliament had excluded pension rights from a bankrupt's estate but had expressly preserved debts incurred by fraud; the court may therefore, in appropriate cases, permit creditors who hold enforceable judgments for fraud to recover from pension rights.
• The judge had considered the tax consequences and was entitled to treat them as a factor of limited weight: tax charges arising from execution of an order do not automatically prevent enforcement where there is a real benefit to creditors.

Outcome: the Court of Appeal dismissed the appeal and upheld the High Court's order enabling the creditors' solicitors to take the steps necessary to obtain pension lump sums for enforcement.

The appeal was dismissed. The Court of Appeal held that it was open to the High Court under section 37(1) of the Senior Courts Act 1981 to make orders requiring the debtor either to delegate or to exercise rights necessary to draw pension lump sums (including revocation of enhanced protection) as ancillary to a receivership or as standalone injunctive relief. Public policy protecting pensions in bankruptcy did not prevent enforcement of a debt arising from fraud, and the tax consequences did not make the order unjust.

Appeal from the High Court (Business and Property Courts (Chancery Division), Deputy High Court Judge Andrew Hochhauser KC), [2022] EWHC 486 (Ch); appeal heard in the Court of Appeal and decided [2022] EWCA Civ 1393.