In the case of Re Lloyds British Testing Ltd (in liquidation): Manolete Partners plc v White, the High Court has held that section 91 of the Pensions Act 1995 did not prevent it from making an order allowing a judgment debt to be enforced against a debtor's pension fund. 

The debtor had been the director of a company which went into liquidation.  The debtor was found to had caused the company to make various payments in the run up to its insolvency which had been in breach of the director's fiduciary duty to the company.  These included payments towards two Bentleys, two Lamborghinis and a Porsche.  The debtor was ordered to pay a sum totalling just under £1 million in respect of his breaches.

The claimant sought to enforce the judgment debt against the assets of the debtor's SSAS, of which the debtor was the sole member, by obtaining a court order requiring the debtor to draw down sufficient funds to pay the debt.  (The debtor was over the age of 55.)  The debtor argued that this was prevented by section 91(2) of the Pensions Act 1995 which provides, “Where by virtue of this section a person's entitlement to a pension under an occupational pension scheme, or right to a future pension under such a scheme, cannot… be assigned, no order can be made by any court the effect of which would be that he would be restrained from receiving that pension.”  

The judge rejected the debtor's argument, saying that provided he directed that payment of the debtor's pension pot should be made to a UK bank account in the debtor's name, the order would not have the effect of restraining the debtor from receiving his pension pot, but rather the opposite.  It would ensure that the payment of the pension pot was made to the debtor rather than remaining within the pension scheme wrapper.

The judge said that he considered a highly important consideration in the case before him, which distinguished it from many other cases where enforcement of a judgment debt is sought against the debtor's pension pot, was the fact that the main asset within the SSAS was derived entirely from funds provided by the company in relation to which the debtor had breached his fiduciary duty.  The judge considered this to be the case despite the fact that there was no causal connection between the funds paid to the SSAS and the funds paid out of the company in breach of the debtor's fiduciary duty, and that there had been a gap of approximately 10 years between the two events.

Our thoughts

Addleshaw Goddard LLP's Restructuring team (Tim Cooper and Rebecca O'Callaghan) acted for the claimant in this case.  The court's decision about the meaning of section 91 of the Pensions Act 1995 is a significant one.  It remains to be seen whether courts will prove as willing to allow member debts to be enforced against pension scheme assets in cases where the member who has incurred the debt engenders greater sympathy.