Mr White Gets The Same Treatment As Mr Green: Director Ordered To Draw Pension Sums To Pay Creditors

• Published date: 19 October 2023
• Subject Matter: Finance and Banking, Employment and HR, Retirement, Superannuation & Pensions, Fund Finance
• Law Firm: Burges Salmon
• Author: Mr Justin Briggs

Summary

The recent judgment handed down by the High Court in Manolete v White [2023] EWHC 567 (Ch) reinforces the Court's power to order a judgment debtor to exercise a right to draw down on their pension for the benefit of creditors as recently seen in Bacci v Green.

The Facts

For over a decade, Ian White served as a of Lloyds British Testing Limited before it became insolvent, and Liquidators were appointed. The Liquidators, PwC, estimated creditors were owed over '3,306,000. After investigating the company's affairs, the Liquidators sued Mr White for breach of fiduciary duty to the Company by causing it to make payments towards luxury cars and holidays before it collapsed. The Liquidators' claims were successful, and judgment was awarded against Mr White for just under '1 million. Mr White failed to satisfy the judgment or make any contribution toward it. Knowing that Mr White had benefitted handsomely from the Company pension scheme, the Liquidators pursued him in relation to his substantial pension entitlement.

The property, valued at '800,000, was the only substantial asset of the Scheme and, via a lease, it generated an income of '60,000 per annum. As sole beneficiary of the Scheme, Mr White was entitled to a residual pension after a pension commencement lump sum, funded from the '60,000 annual income from the property.

To avoid the injustice of the Company's creditors not being paid whilst Mr White enjoyed a generous pension, the Liquidators sought an order under Section 37(1) of the Senior Courts Act 1981 requiring Mr White to delegate authority to the Liquidator's solicitor to draw down the remaining funds to which he was entitled under the Scheme, draw his pension and pay it into a bank account nominated by the solicitor. The Liquidators argued that Mr White plainly had the power to draw funds from the Scheme given he had already taken his tax-free cash sum, commenced drawing pension from it and was sole beneficiary of the Scheme. The Liquidators maintained that such an order (or injunction) would not conflict with Section 91 of the Pensions Act 1995 (which prohibits the assignment, commutation or surrender of a person's rights under an occupational pension scheme) as Mr White's right to receive his pension funds remained, albeit he would be compelled to apply those funds in discharge of the judgment debt. The Liquidators stressed that the statutory objective of Section 91 was not to enable debtors to escape their obligations to creditors by...