Manolete Partners v White

When the court could consider allowing a creditor to enforce a judgment debt against the debtor's pension.

Summary

In Manolete Partners PLC v White the court granted an injunction forcing the respondent to draw down on his pension for a debt incurred through a breach of director’s duties. The court followed the principles laid down in established case law. 

Background  

Mr White was a director of Lloyds British Testing Limited until the company went into liquidation in 2017. Over the 20 months prior to the company’s liquidation, Mr White had accessed company assets to make various purchases. These included luxury cars, luxury holidays, the acquisition of a helicopter, and payments towards his own and his son’s properties.  

Application to access the pension funds 

Manolete Partners applied to the High Court for an injunction under section 37 Senior Courts Act 1981 to force Mr White to draw down his pension (within the pension scheme rules) and to satisfy some of the judgment debt. Manolete was aware that Mr White had pension funds totalling £237,000.  

Mr White’s main defence relied upon section 91 Pensions Act 1995 (Inalienability of occupational pension), stating that he would be restrained from receiving his pensions if an injunction were made forcing him to draw down his pensions.  

The High Court had to consider whether Mr White was required to draw down his pension to partially satisfy the judgment.

The court's decision  

The court held that the payments were made for Mr White's financial benefit. The payments were made in breach of Mr White’s duties as director. Mr White was ordered to pay a total of £996,014.22. Mr White’s pension fund also came to the attention of the claimant.

The court followed the established approach taken in Blight v Brewster and held that it could, and should, compel Mr White to draw down on his pension fund to satisfy a judgment debt for breach of director's duties. It was appropriate for the court to exercise its jurisdiction under section 37 Senior Courts Act 1981 to make the order sought.

Pensions Act 1995 considerations   

The court confirmed that section 91(2) Pensions Act 1995 is no bar to the making of this order. An order would not stop a debtor from receiving the pension, in fact, an order would require a payment to be made to Manolete rather than remaining tied up in the pension scheme.  

The court followed the approach of the court in Lindsay v O’Loughnane by ordering the respondent to give written notice to the scheme trustees asking for the remaining pension fund to be changed to a Drawdown Pension Fund. The pension fund is then to be directed to the respondent’s bank.

Misfeasance a highly important consideration  

Mr White’s pension consisted of funds provided by the liquidated company and the court noted that this was a ‘highly important consideration’ in coming to its decision This, coupled with Mr White’s misfeasance and breaches of fiduciary duties as director, convinced the court that it was "neither just, nor convenient, nor equitable" that he should be allowed to keep his pension (paragraph 77).

Comments  

The Manolete case is the most recent example of courts making orders to force debtors to draw down on their pensions even in non-fraud cases. Debtors should be warned of the possibility that creditors might try to enforce judgments against undrawn pensions in this way.  

In any case, it is worth noting that a court's decision can differ from case to case depending on its facts. The above cases involved debtors involved in some kind of misconduct, such as fraud or a breach of duties.