David Bacci & Ors v Matthew Green

Under section 37(1) of the Senior Courts Act 1981, the court may require a judgment debtor to exercise or delegate pension-related powers so that pension benefits can satisfy a judgment debt. A contingent right to receive a pension lump sum may be placed in receivership, with directions concerning any necessary preliminary election. Alternatively, equivalent relief may be granted by injunction where the creditor has an interest meriting protection and equitable principle justifies the order.

Statutory protection of pension rights in bankruptcy is ordinarily of very limited significance where the judgment debt arose from fraud and survived discharge. A tax charge caused by realisation is relevant to discretion, but does not itself bar enforcement.

The creditors held an assigned judgment debt arising from the debtor’s deceit and dishonest contractual breaches. Although the debtor had been discharged from bankruptcy, the fraud debt survived under section 281(3) of the Insolvency Act 1986. His principal asset was an interest in an occupational pension scheme.

The Deputy High Court Judge, in [2022] EWHC 486 (Ch), ordered the debtor to delegate powers enabling the creditors’ solicitors to revoke his enhanced tax protection and elect for pension lump sums. The debtor appealed on the grounds that the revocation power was not property, bankruptcy policy protected his pension, and revocation would generate a substantial tax charge.

The central question was whether section 37(1) of the Senior Courts Act 1981 permitted and justified the orders.

1. Appeal dismissed. The court could require the debtor to delegate his power to revoke enhanced protection. The order was available either as an adjunct to receivership or as part of free-standing injunctive relief under section 37(1) of the Senior Courts Act 1981.

2. The debtor’s contingent right to claim a Lifetime Allowance Excess Lump Sum could be placed in receivership. A contingent right is capable of being property, or tantamount to ownership, for this purpose. The court could also appoint a receiver over the debtor’s broader right to instruct the pension trustees. It could then direct him to exercise or delegate the preliminary power of revocation needed to make the receivership effective.

3. An injunction did not depend upon the revocation power itself being property or tantamount to ownership. The creditors had an interest meriting protection: enforcement of an unsatisfied judgment founded on fraud. The general equitable principle permitting ancillary orders to make judgments effective supplied a principled basis for relief. The absence of an exact precedent was not decisive because equitable practice can develop incrementally. Arnold LJ emphasised that the court’s in personam equitable power is unlimited, subject to statutory restriction, although its exercise must have a principled basis and satisfy justice and convenience. Males LJ considered that this difference in formulation did not affect the appeal.

4. The legislative policy protecting approved pension rights from trustees in bankruptcy did not prevent post-discharge enforcement of a fraud debt. Parliament had expressly provided that debts incurred through fraud survive discharge, without preventing creditors from resorting to pension rights afterwards. In this context, bankruptcy pension policy would ordinarily carry no more than very limited weight.

5. The substantial tax liability arising from revocation and withdrawal was a relevant discretionary consideration, but not a bar to relief. Realising assets to pay debts commonly generates tax or other costs. The judge had considered the liability and was entitled to conclude that the recovery available to the creditors justified the order.

1. Court of Appeal (Civil Division): In [2022] EWCA Civ 1393, the court unanimously dismissed the debtor’s appeal and upheld the relief granted below.
2. High Court, Business List (Chancery Division): In [2022] EWHC 486 (Ch), Andrew Hochhauser KC, sitting as a Deputy High Court Judge, ordered the debtor to delegate pension-related election powers to the creditors’ solicitors, including powers to revoke enhanced protection and elect for pension lump sums.