England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		28 October 2002

SECTION A: INTRODUCTION

1. The husband (as I will describe him notwithstanding that the marriage was long ago >dissolved) is in breach of an order for payment to the wife of a lump sum. The wife (as I will describe her) wishes to enforce the order; and to do so against the husband's entitlements under a personal pension scheme, in particular his right to elect for part of the payment to him to be made in the form of a lump sum but also his right to an annuity. To that end she asks the court to make any one or more of three orders which, so Mr Sternberg suggests on her behalf, are all within its powers. They are:

(a) a charging order in her favour on his entitlements under the scheme pursuant to s. 1 Charging Orders Act 1979; and

(b) an injunction , issued pursuant to s.37 of the Supreme Court Act 1971 (or to s.37(2)(a) of the Matrimonial Causes Act 1973, which he says could achieve the same effect), requiring the husband forthwith and irrevocably to elect to receive a lump sum to the maximum permissible extent on his fiftieth birthday (11 March 2003) and to claim his annuity from that date and directing their payment to the wife; and

(c) an order for the appointment of a receiver, by way of equitable execution, over the husband's entitlements under the scheme, pursuant to s.37 of the Supreme Court Act 1981, so that with effect from that date the receiver can make the election, claim the annuity and remit the proceeds to the wife.

2. Mr Thorpe, on behalf of the husband, contends firmly but stylishly that the court lacks jurisdiction to make any of the three orders. Accordingly at this stage I have confined counsel's argument to the issues as to jurisdiction. If I hold that jurisdiction exists in one or more of the three cases, I will invite submissions on whether in all the circumstances the resultant discretion should be exercised in favour of making the order.

SECTION B: THE LUMP SUM ORDER

3. The lump sum order was part of an elaborate order for ancillary relief, by way of clean break, which I made by consent on 21 May 1997 within divorce proceedings issued in 1995. Both parties then had the benefit of representation by leading as well as junior counsel. The lump sum order was to the effect that the husband should pay £900,000 to the wife by instalments of £400,000 by 20 August 1997 and of £500,000 by 1 July 2000. He paid the first instalment but has paid no part of the second.
4. It is a reasonable inference from the preamble to that order and to its prefatory agreements and undertakings that the parties, through their lawyers, were at that time concerned that the second instalment of the lump sum might not be paid on time. First, the wife was given security for its payment by means of a charge over land in Sussex, owned by the husband through a U.S. company, which it was hoped would attract planning permission and then be sold to a building company which had and has an option to purchase it. Planning permission has not yet been granted and so the land has not yet been sold. Thus to date that security has proved valueless to the wife. Second, the husband undertook to pay £32,000 p.a. to the wife until payment in full of the second instalment of the lump sum, such to be on account of any liability for statutory interest accruing from 1 July 2000. In that, from that date onward, and in the light of his default, the rate of statutory interest (8% p.a.) made him liable to pay £40,000 p.a., the husband then agreed to increase the annual payments from £32,000 to £40,000 and, subject to arrears of about £9,000 which he offers to clear, he has paid at that rate. Mr Thorpe argues that the wife's receipt of interest at 8% p.a., which, in that it has been cast in a form akin to periodical payments, is said to be tax-free in her hands, is almost certainly better than any yield which the wife could generate upon a capital sum of £500,000. But these two points do not touch the jurisdictional issues which I now address. They might, although provisionally I doubt it, affect the exercise of any resultant discretion. The plain fact is that the husband bound himself to pay £500,000 not upon sale of the land in Sussex but upon 1 July 2000; and now, over two years later, it remains entirely unpaid. Receipt of interest even at a high level is no substitute for the freedom that attends the possession of capital.

SECTION C: THE PENSION SCHEME

5. The husband's scheme is a Personal Pension Scheme within the meaning of Chapter IV of Part XIV of the Income and Corporation Taxes Act 1988. Indeed it is a Self- Invested Personal Pension Scheme (a "SIPPS"). It is administered by trustees in accordance with a Deed of Trust to which the Rules of the scheme are scheduled. There are two trustees of the scheme; a UK-registered company called MC Trustees Ltd and the husband himself. It is important to note that, perhaps confusingly, MC Trustees Ltd is defined for the purposes of the Deed of Trust as "the Trustee". In that there are two trustees, I prefer to describe it as the corporate trustee.
6. Clause 5 of the Deed provides:

"The entire beneficial ownership of the assets of the Scheme or beneficial interest in the investments held for the purpose of the Scheme shall lie with the Trustee of the Scheme."

So it is clear to me that the two trustees hold the legal interest in the assets of the scheme on trust for the corporate trustee beneficially.

7. But, although the husband is not the beneficial owner of the assets, the rules confer certain entitlements upon him as against the trustees in respect of them. At any time between his 50^th and his 75^th birthdays he can require the trustees to apply the assets to the purchase for him and his dependants of an annuity. Indeed at any time between those birthdays he can elect to be paid a lump sum equal to one quarter of what is then the value of the assets. If he makes that election, he is not obliged to suffer the immediate application of the remaining three quarters to the purchase of an annuity. He can defer that purchase until some later date prior to his 75^th birthday but, in the event of deferment, he is obliged to accept income withdrawals from the fund of a specified minimum. Mr Thorpe says that at any rate for a few years the husband does not intend to elect to be paid a lump sum or to require purchase of the annuity.
8. Clause 28 of the Deed provides:

"No pension annuity or lump sum benefit on retirement payable under the Scheme shall be capable of being assigned or charged to someone else. If a trustee in bankruptcy is appointed in respect of a Member the Member's Fund and entitlements under the Scheme shall not vest in the trustee in bankruptcy. If through the operation of this Clause a benefit ceases to be payable, the Trustee with the consent of the Provider may in case of hardship apply all or any part of it for the support and maintenance of the person who would have been the recipient had the benefit not ceased to be payable or his spouse children or remoter issue (but in no case shall any payment be made to an assignee or purported assignee)."

Rule 10.2 of the Rules provides:

"The right to payment of a lump sum is not capable of surrender or assignment."

9. In 1998 the husband went to live in South Africa. He applied some of his personal assets to the purchase of real property there. The wife, however, assumed that the funds of the pension scheme remained invested in the U.K. In 1999 and 2001 correspondence took place between her solicitors and both the husband and the corporate trustee in which they both appeared to the wife to be assuring her that the pension fund remained invested in the U.K. Mr Thorpe says that, if carefully read, the assurances were only to the effect that the corporate trustee would remain based in the U.K. In February 2001 the corporate trustee offered the wife an estimate of the value of the fund in the sum of £1,178,741.
10. On 8 July 2002 I ordered the corporate trustee to provide the wife's solicitors with a breakdown of the assets of the pension fund. It then stated, to the astonishment of the wife, that there was virtually no cash or other investment remaining in the U.K. but that the fund had been invested in four identified real properties in South Africa said to be worth £622,919. It added that the four properties were held by a Jersey company on trust for the trustees of the pension scheme. More recently the corporate trustee has represented that those four properties were purchased between August 1999 and March 2001. But the situation is even more unsatisfactory. For the husband alleges that the purchase of the most expensive of the four properties identified by the corporate trustee, namely a hotel in South Africa which it said had been bought in March 2001 for over £200,000, was never completed and that accordingly the hotel has never been an asset of the scheme. When asked to explain the alternative deployment of the £200,000, the husband states that he wants as keenly as does the wife to be provided by the corporate trustee with an explanation of that as well as of other matters. Provisionally I approach his statement with considerable scepticism. It is enough to say that the pension fund seems now to have been largely, if not entirely, invested in South Africa; that I suspect that the husband was allowed free rein to effect such investments; that, for various reasons including the fall in the value of the rand against the pound, the fund may now have a value of only about £600,000; and that the destination of the income generated by the investments in South Africa is also shrouded in mystery. It is clear that, if that estimate of value is anywhere near accurate, the wife's principal assault, namely upon the maximum lump sum element, would satisfy only a minor part of her judgment debt.

SECTION P: A CHARGING ORDER?

11. The power to make a charging order in relation to a judgment debtor's property for the purpose of enforcing the debt is derived from s.l Charging Orders Act 1979. The property which can thus be charged is described by s.2 of the Act as follows:

"Property which may be charged-(l) ... [A] charge may be imposed by a charging order only on-

(a) any interest held by the debtor beneficially-

(i) in any asset of a kind mentioned in subsection (2) below, or

(ii) under any trust; or

(b) any interest held by a person as trustee of a trust ('the trust'), if the interest is in such an asset or is an interest under another trust and-

(i) ...or

(ii) the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit, or

(iii) ...

(2) The assets referred to in subsection (1) above are-

(a) land,

(b) securities of any of the following kinds-

...,or

(c) funds in court."

12. Mr Sternberg presents his application as one for an order charging an interest held by the husband beneficially under a trust within the meaning of s.2(l)(a)(ii). Alternatively he presents it as one for an order charging an interest in land (or perhaps more accurately under another trust, namely that of the Jersey company) held by him as trustee pursuant to s.2(l)(b). But that subsection gives Mr Sternberg no greater advantage than is given by s.2(l)(a) because under s.2(l)(b)(ii) he still has to show that the whole beneficial interest under the trust of the pension scheme is held by him for his own benefit.
13. Unfortunately it is clear to me that the husband has no beneficial interest under the trusts of the pension scheme. He has entitlements at certain times to require the trustees to deploy their assets for his benefit. But they do not give him a beneficial interest. Clause 5 of the Deed, set out at §6 above, makes that all too plain. And Mr Sterberg's invitation to me, cast as usual with such charm and emphasis as at first sight to make it seem irresistible, to look at realities is, as so often, an invitation to look away from them toward merits.
14. Furthermore there is Clause 28 of the Deed, set out at §8 above, which expressly provides that no annuity or lump sum benefit payable under the scheme is capable of being charged. Mr Sternberg has not explained to me how this provision, the effect of which is reinforced by s. 159(4) and (4a) of the Pension Schemes Act 1993, can be overriden. Section 166(4) of the Pensions Act 1995 would enable the court to override it for the purpose of making financial provision orders. But we are beyond that stage.

SECTION E: INJUNCTION?

15. The width of the words of s.37(l) Supreme Court Act 1981 is well known:

"The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so."

16. But the carte blanche ostensibly conferred upon the court by the section is illusory. Injunctions can be granted thereunder only for the purpose of protecting legal or equitable rights: per Lord Brandon of Oakbrook in Richards v Richards [1984] AC 174 at 218G. Mr Sternberg would say that the wife has an obvious legal right, viz. to be paid £500,000. But it would follow from that argument that, once there is a judgment debt, any injunction can be made in aid of enforcement provided only that its making is just and convenient; and that the specific methods of enforcement provided by statute or otherwise established can thus in effect be bypassed or subsumed within the injunctive jurisdiction.
17. I drew Mr Sternberg's attention to B v B (Injunction : Jurisdiction') [1998] 1 WLR 329, coincidentally a decision of my own, to the effect that an injunction could not be granted under s.37(l) to restrain a judgment debtor from leaving England and Wales in other than the short term, indeed until he paid the debt. I held at 334F that s.37 could be used as an aid to the court's established procedures for enforcement of a judgment but not as a free-standing enforcement procedure in its own right. Mr Sternberg responded to the effect that a restraint on personal liberty fell into a different category. But in my view his point does not affect the principle which I there enunciated and to which I still adhere.
18. Section 37(2)(a) of the Matrimonial Causes Act 1973 in effect provides that, if satisfied that the husband is about to deal with property with the intention of frustrating enforcement of the order, the court can restrain him from so doing. Mr Sternberg suggests that the case is apt for an order thereunder which would restrain the husband from taking any step with regard to his pension fund other than to elect to take the maximum lump sum on his fiftieth birthday and to require the purchase on that date of an annuity, by which the judgment debt may partly be satisfied. With respect, Mr Sternberg's invocation of s.37(2)(a) is unsustainable. We cannot pretend that the husband is about to deal with his pension fund when the essential complaint is that he is not about to do so. Moreover the injunction which may issue under the subsection is prohibitory not mandatory. Even the words of Mr Sternberg's suggested order do not require the husband either to make the election or to require the purchase: each of them is no more than a step excepted from what the proposed order prohibits.

SECTION F: RECEIVER?

19. Following enlargement by the Charging Orders Act 1979 of the types of a debtor's property which can be the subject of a charging order, exercise of the equitable power to appoint a receiver in aid of execution, now exercisable under s. 37(1) of the Supreme Court Act 1981, has fallen into desuetude. But the present case, submits Mr Sternberg, is a proper vehicle for its revival.
20. Unfortunately I disagree. The function of a receiver is to receive: he receives property owned by the debtor and, subject to exceptions, he receives income owed to the debtor. Following the short argument appropriate to this case, I propose to leave open the question whether a receiver ever has power to make the elections on behalf of the debtor which are central to Mr Sternberg's aspirations. What in any event he has clearly to establish is that whatever is payable to the husband is of such a character as to make his interest in it assignable: see Kerr on Receivers and Administrators, 17^th ed., p. 100. So Clause 28 of the Deed is, again, fatal.

SECTION G: POSTSCRIPT

21. It is common ground that the court's jurisdiction to include within an order for financial provision for a wife a provision earmarking all or part of the husband's pension towards its satisfaction, inserted by s. 166 of the Pensions Act 1995 into the Matrimonial Causes Act 1973 as ss.25B-D, is not available in this case. First, the petition was issued prior to 1 July 1996. Second, a lump sum order has already been made and cannot be varied; and the wife's other claims have been dismissed. Nevertheless s.25B(7) of the Act of 1973, as thus inserted, is worth noting:

"Where the party with pension rights may require any benefits which he has or is likely to have under the scheme to be commuted, the order may require him to commute the whole or part of those benefits; ..."

Even this power appears to be lame. For it was held in T v T ('Financial Relief: Pensions) [1998] 1 FLR 1072 at 1086H (and seems to be generally accepted) that, while the order can require the husband to elect commutation, the section does not empower the court to require him to do so at any particular time. At all events, had Mr Sternberg been correct in asserting that, by any one of the three suggested orders, enforcement of a wife's lump sum order can proceed against the elective lump sum under the husband's pension scheme, s.25B(7) would have been redundant.

SECTION H: THE ORDER

22. The wife's applications are dismissed.

JF/Field v Field/D:Judgment