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A director of an insolvent company, who had previously been found to be in breach of his fiduciary duties, has been ordered by the High Court to drawdown his pension benefits to pay a judgment debt.

In an insolvency application made against White, a director of a company which had gone into liquidation in 2016, the Court found that White had breached his fiduciary duties owed to the company by making various payments, including payments towards expensive cars, foreign holidays, and White's personal home, in the period leading up to the company entering into administration. The Court ordered that White pay £996,014.22 as a result of his breach, which White failed to pay.

A further application was then brought against White in Manolete Partner v White [2023] EWHC 567 (Ch), in which the Court had to consider whether it could compel White to draw down benefits from his occupational pension scheme to settle the unpaid judgment debt. White attempted to defend the application by relying on Section 91 (2) of the Pensions Act 1995, which prohibits the assignment, commutation or surrender of an occupational pension scheme to another.

The Court upheld the application, ruling that it was "…just, equitable and convenient" to order White to draw down on his pension pot to satisfy his liability under the judgment debt. The Court placed particular emphasis on the fact that the principal asset of the pension fund derived entirely from funds provided by the company. In making its judgment, the Court relied on the case of Bacci v Green [2022] EWHC 486 (Ch), in which it was held that a drawdown of a pension pot to satisfy a judgment debt will not contravene the prohibition in Section 91 of the Pensions Act 1995. This is because, once the pension has been paid out to the pension scheme member, it is no longer in the "scheme wrapper" and so the funds become merely the pension saver's income and do not enjoy any greater protection from creditors than any other income of the pension saver.

The judgment in Manolete Partner v White is one of a string of cases over recent years (see our previous article here) which deals with the drawdown of pension pots to settle judgment debts. Whilst previous cases have concerned cases of fraud and the judgment debts arising out of them, Manolete Partner v White expands this area of law to confirm that, where there are unpaid judgment debts as a result of a breach of a director's fiduciary duties, a court may be willing to order that available pension funds be drawn down to settle the debt.

This may not yet have general application given the Court's statement that a "highly important consideration" in Manolete Partner v White was the fact that the pension fund derived entirely from funds provided by the company. However, office holders with the benefit of judgments for a breach of fiduciary duties claim will be encouraged that pension assets may be available to meet the judgment debt.

Case details:

  • Court: High Court, Business & Property Court in Manchester
  • Judge: Deputy Judge of the High Court Hodge KC
  • Date: 16 March 2023