NIHAL MOHAMMED KAMAL BRAKE & Anor v GEOFFREY WILLIAM GUY & Ors

A third-party debt order attaches only to a debt which the judgment debtor could immediately and effectually recover. An accessible pension fund held as investments constitutes a beneficial interest, rather than a debt, until the investments are liquidated.

Under section 37 of the Senior Courts Act 1981, the court may compel a judgment debtor to exercise, or delegate, a right whose exercise will crystallise such a debt. Pension status, the source of the judgment liability and ordinary tax consequences do not prevent that relief. The controlling question is whether the injunction is just and convenient. Once a flexi-access drawdown fund has been crystallised and the member gives an effective instruction, a trustee lacking any relevant discretion must implement it.

Following the dismissal of the claimants’ appeal in [2022] EWCA Civ 235, the Court of Appeal ordered Andrew Brake to make an interim payment of £70,000 towards the defendants’ costs. The payment remained unpaid. The defendants obtained an interim third-party debt order against the trading name used by the trustee of Mr Brake’s self-invested personal pension.

The pension had been placed wholly into flexi-access drawdown. Mr Brake had withdrawn the tax-free portion, while the balance of approximately £89,000 remained invested. The court considered whether the invested fund was a debt capable of supporting a final third-party debt order and whether the trustee and scheme administrator were necessary parties.

Alternatively, the defendants sought injunctions under section 37 of the Senior Courts Act 1981 compelling Mr Brake to procure liquidation of the fund, or to delegate that power, so that an enforceable debt would arise.

1. The application was granted in part. The description of the third party was corrected under rule 19.2 of the Civil Procedure Rules 1998 by substituting James Hay Pension Trustees Ltd for “James Hay Partnership”. No person had been misled by use of the group’s trading name.

2. The interim third-party debt order could not immediately be made final. A debt is due or accruing due for rule 72.2 only where the judgment debtor could immediately and effectually sue for it and no unsatisfied contingency or condition precedent remains. A judgment creditor acquires no greater right than the judgment debtor possesses. Had the crystallised fund been held in cash, the need to request payment and calculate tax and charges would not have prevented it being a debt. The fund was instead invested, so Mr Brake held a beneficial interest in investments rather than a presently payable debt: [2018] AC 690, [2018] EWHC 1916 (Comm) and (1886) 32 Ch D 512 applied.

3. The absence of the scheme administrator did not prevent relief against the trustee. Mr Brake had already selected flexi-access drawdown and the administrator had implemented that choice. No relevant discretion remained capable of defeating his access to the fund, provided that he supplied effective instructions and the required documentation.

4. It was just and convenient to grant an injunction under section 37 of the Senior Courts Act 1981 compelling Mr Brake to exercise his right to draw down the balance. The jurisdiction recognised in [2012] 1 WLR 2841 and [2022] EWHC 486 (Ch) was not confined to liabilities arising from fraud. The relevant conduct was the use of a pension fund to prevent enforcement, not the conduct which created the judgment liability.

5. Neither tax consequences nor possible competing creditors made relief unjust. Tax and realisation costs commonly reduce the proceeds of enforced assets. They become decisive only if they eliminate any real benefit to the enforcing creditor. The expected net proceeds remained a significant proportion of the £70,000 costs liability. In the absence of bankruptcy, another creditor’s unexecuted claim did not prevent the defendants from pursuing individual enforcement.

6. The trustee had no general contractual or fiduciary discretion to withhold payment following a valid drawdown instruction. Fiscal considerations and regulatory requirements therefore had no operative discretionary role. In any event, compliance with an injunction would be compelled by law, and an order of the High Court must be obeyed unless and until set aside.

7. Mr Brake was ordered to provide the information required for drawdown and to execute the settled documentation forthwith. If he failed to do so, a partner in the defendants’ solicitors was authorised under section 39 of the Senior Courts Act 1981 to execute it for him. After deducting tax and fees, the trustee was to pay the defendants the lesser of £70,569 and all sums remaining in the pension fund.

• Court of Appeal: The claimants’ appeal was dismissed in [2022] EWCA Civ 235. The claimants were ordered to pay the defendants’ appeal costs, including £70,000 on account.
• High Court: The underlying claim was determined at trial in [2021] EWHC 671 (Ch).