In the case of Manolete Partners PLC v White, the Court of Appeal has overturned a High Court judgment which would have required a member to draw down his entire pension fund from his SSAS in order to enable his creditor to enforce a judgment debt against him. Here we take a look at the Court of Appeal's decision and its wider implications for creditors seeking to enforce debts against an individual's pension fund.
Court of Appeal overturns court order that allowed enforcement of debt against pension fund
In the case of Manolete Partners PLC v White, the Court of Appeal has overturned a High Court judgment which would have required a member to draw down his entire pension fund from his SSAS in order to enable the member's creditor to enforce a judgment debt. The Court of Appeal held that the High Court order breached section 91 of the Pensions Act 1995 which provides that no order can be made by a court if the effect would be that a member would be restrained from receiving a pension under an occupational pension scheme.
Background facts and High Court judgment
Mr White was the owner of a company and the only member of a SSAS established by the company for his benefit. The company went into insolvent liquidation. Manolete took an assignment of the liquidators' claims against Mr White for breach of fiduciary duty and obtained a judgment against Mr White for about £1 million. After the judgment remained unsatisfied, Manolete obtained a High Court order which required Mr White to exercise such rights as he might have to draw down his entire pension fund and direct payment to a UK bank account in his own name. To enable Manolete to enforce its debt, the judge also ordered Mr White to give Manolete details of the nominated bank account. The judge considered that his order did not breach section 91 of the Pensions Act 1995 because the order required the pension fund to be paid into a bank account in Mr White's own name and therefore could not be said to have the effect of restraining Mr White from receiving his pension. The judge considered that it made no difference that the order was motivated by the objective of enabling Mr White's pension pot to be used to satisfy a judgment debt against him.
The Court of Appeal decision
The Court of Appeal allowed Mr White's appeal, holding that the order made by the High Court judge was prohibited by section 91 of the Pensions Act 1995. It said that the legislative purpose behind section 91 was that a member's entitlement or future right to benefits under an occupational pension scheme should be immune from attachment to pay the claims of creditors (subject to limited exceptions not relevant to Mr White's case).
The Court considered it notable that section 91 was drafted in terms that prohibited the making of an order "the effect of which" would be that a member would be restrained from receiving a pension. The Court said that this wording reinforced the view that the court should look at the substantive real world result of any order which it is being asked to make. It should not simply focus on the form of the order in isolation. The Court considered that the reference to a member receiving their pension should be read as a member receiving their pension for their own benefit.
Our thoughts
Section 91 of the Pensions Act 1995 applies only to occupational pension schemes, not personal pension schemes. This produces a somewhat arbitrary distinction between SSASs and SIPPs. Where a member's pension fund is held within a SIPP, there is nothing to stop a court making an order of the type made by the High Court judge in the Manolete case and the courts have indeed shown themselves willing to make such orders.
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