A creditor might be able to enforce a judgment debt against a debtor's personal pension, and a court could order payment of the entirety of the pension(s) to be paid to the creditor, not just the tax-free lump sum.
Summary
The High Court, in part, found in favour of the claimant to enforce a judgment against multiple personal pension funds held in the defendant's name.
Background
The defendant, O'Loughnane, was the managing director and majority shareholder of a company engaged in currency conversion. The claimant, Lindsay, engaged in several foreign exchange transactions with the company for the purpose of transferring euros abroad.
Under the company's standard terms and conditions, money paid to it by clients was held on trust pending the purchase of foreign currency. The company experienced financial difficulties and was unable to pay its debts. O'Loughnane accepted instructions from Lindsay to conduct three transactions in June and August 2008 and two transactions in September 2008 to convert sterling to euros.
In the June and August transactions Lindsay received the euros into his foreign bank account late. Lindsay was told that the delay had been due to the inefficiency of the bankers. In fact, by mid-2008 the company was insolvent and unable to pay its debts. The money was not kept in the trading account on trust for Lindsay but was being used to illegitimately pay other creditors of the company and O'Loughnane.
In September 2008, Lindsay paid a further sum of £565,000 which was not converted to euros or transferred to his bank account. On 18 September 2008, the company went into administration and in due course into liquidation.
In 2010 the court granted damages to Lindsay. The judge held that the defendant was liable in deceit and ordered O'Loughlane to pay the claimant over £1 million. Of this only around £310,000 was recovered by way of enforcement.
Lindsay made an application to enforce the debt via a third party debt order in respect of the debtor’s pensions. O’Loughnane had four personal pension plans with various providers, totalling around £58,500.
An interim third party debt order was made, and in 2020 the court allowed the claim to be amended and re-served as one for an order under s37 of the Senior Courts Act 1981 (SCA 1981).
The court’s decision
The court ordered O’Loughnane to give written notice to his pension providers requesting draw down on the date specified as the normal retirement date, or aged 55 if later, and directing the pension providers to make the payment to Lindsay.
The court declined to make an order under s39 SCA 1981 which would require the liquidator of the company to send the relevant notifications if O’Loughnane failed to do so.
The court recognised that a third party debt order could not be made on pensions. At the time the application was made, there was no debt currently owed by the pension providers to O'Loughnane in respect of which such an order could be made.
The court still had powers to make an order, as held in two cases dealing with pension plans.
The case of Blight v Brewster [2012] All ER (D) 190 (Feb) identified that, in such a circumstance, the court could use its powers under s37(1) SCA 1981 in relation to the granting of injunctions and receivership.
The Blight case was applied in Bacci v Green [2022] EWHC 486 (Ch). The judgment debtor had had an interest in an occupational pension scheme. The claimants sought injunctions under s37 SCA 1981 that the judgment debtor delegate to the claimants’ multiple rights, including the right to call for a lump sum under the pension scheme.
Comments
This case shows circumstances where a creditor might be able to enforce a judgment debt against a debtor's personal pension.
It also shows that a court could order payment of the entirety of the pension(s) to be paid to the creditor and not just the tax-free lump sum.
Read more about how a creditor can enforce a judgement on Shelter Legal.