In 2017, the Law Commission released its report Enforcement of Family Financial Orders in which it made a number of proposals for reform. A headline proposal was the suggestion that pension sharing should be available as an enforcement method. The report noted that there was, in any event, already a method in existence by which a judgment creditor could enforce against a debtor’s pension. This was the method which was approved in the Chancery case of Blight v Brewster [2012] EWHC 165 (Ch). This article will attempt to answer the following questions: (1) what is Blight v Brewster pension enforcement? (2) how has the judgment in that case been subsequently applied? (3) which cases would it be suitable for? (4) how is it done in practice? and (5) what are the potential pitfalls of the method?

1. What is Blight v Brewster pension enforcement?

The case of Blight v Brewster is a judgment of Mr Gabriel Moss QC (sitting as a deputy High Court Judge), and concerned a claimant applying to enforce a judgment debt against a defendant, who had the right to draw down 25% of his pension as a tax-free lump sum. The claimant targeted the tax-free lump sum, and the court used the following method to enable the creditor to obtain the sum from the non-consenting debtor:

1. The defendant was ordered to delegate his power of election for drawdown to the claimant’s solicitor (by way of mandatory injunction);
2. The claimant’s solicitor was then authorised to make the election for drawdown of the tax free lump sum directly to the pension provider;
3. A third-party debt order was also made, which took effect when the election was made and attached to the debt now due from the pension fund to the defendant. The third-party debt order had the effect of channelling the tax-free lump sum directly to the claimant.

Throughout this article, this method will be referred to as “the Blight v Brewster method”. The method actually involves a trio of orders: a mandatory injunction, a direction authorising a third party to make an election and a third-party debt order.

There was discussion in the Blight v Brewster judgment as to whether the court had jurisdiction to make an order mandating the defendant to delegate the power of election to the claimant’s solicitor, or whether it would be necessary to appoint a receiver by way of equitable execution and then force the defendant to delegate his power of withdrawal to the receiver. The Judge found that the court did have the jurisdiction to make an order compelling the defendant directly, and that in the circumstances of the case it “should plainly be exercised”.

2. How has the Blight v Brewster judgment been applied subsequently?

Shortly after the Law Commission report, Mostyn J handed down judgment in Goyal v Goyal (No. 3) [2017] EWFC 1. Mostyn J made a ‘bolstering injunction… pursuant to the principle expounded in Blight v Brewster. This injunction shored up the periodical payments order which required the husband to pay the wife two thirds of the quarterly income deriving from the husband’s annuity policy as it arose. The terms of the injunction were not included in the judgment, but the @EGlance commentary (co-authored by Mostyn J) reveals that the injunction ‘compelled the husband to procure that payments due to him… should go to the wife’: it would appear that the injunction mandated the husband to make an election to the annuity provider for two thirds of the income to be paid directly to the wife. The Blight v Brewster method was featured in the 2017 edition of The Financial Remedies Practice1 and the @EGlance commentary. The authors highlight that the Blight v Brewster case ‘should be of considerable interest to family practitioners’. However, surprisingly, in practice this does not appear to have been the case. There have been no reported family cases since Goyal where the Blight v Brewster method has been used or, so far as the author is aware, even referenced. The closest we have seen in the Law Reports has been Mostyn J’s appointment of a receiver in the case of Maughan v Wilmot [2014] EWHC 1288 (Fam). The case has recently come before the Court of Appeal (to determine the husband’s blanket appeal of a slew of orders on the basis of defective service), and in its judgment, the court noted that Mostyn J had dealt with an application by the receiver to draw monies from the husband’s pension fund in late 2014. Aside from these examples of Mostyn J’s judgments, the only record of a successful deployment of the Blight v Brewster method seems to be an unreported case in which Philip Cayford QC and Beverley Morris acted for the enforcing party. They wrote an article on the same, which appeared in Family Law Journal in February 2017.

3. Which family cases would this method be suitable for?

This method is best suited for cases where:

1. the creditor seeks enforcement of a lump sum (judgment debt or maintenance arrears);
2. the debtor has a private pension scheme, or an occupational scheme with an available tax-free lump sum;
3. the debtor is over the age of 55 (or such other qualifying age as is dictated by the scheme), and is thus able to draw down cash sums from the pension;
4. possibly even cases where the debtor has a private pension scheme and has already drawn down his tax-free lump sum.

Does it work with defined benefit schemes?

It has been suggested that the Blight v Brewster method would not work with occupational schemes where the consent of a third party is required. The author respectfully suggests that as general proposition this is not correct: it depends on the scheme. In Philip Cayford QC and Beverley Morris’s unreported case, the respondent was a member of the NHS occupational pension scheme. The lower court made a Blight v Brewster order authorising the applicant’s solicitor to make the election to draw down the lump sum early, but the pension trustees refused to comply. The NHS pension scheme is a debt owed by the Crown: the trustees raised the issue of whether it was possible for an order to be made assigning/charging a debt owed by the Crown (the NHS pension scheme being such a debt in favour of a third party). The trustees initially submitted that the prohibition on such an assignment prevented the Blight v Brewster order from being implemented.

In light of the trustees’ objections, the matter was transferred to the High Court, and questions of law were posed. The pension trustees relented and consented to implement the Blight v Brewster order before the matter was determined, but the High Court answered the questions anyway, and said:

1) The election of a respondent to take his lump sum early was not an ‘assignment’ for the purposes of NHS Pension Scheme Regulations, and was thus not a prohibited assignment;

2) There was nothing in the statutes/statutory instruments that prevented the lump sum being paid to the applicant’s solicitor pursuant to the order, and;

3) Once the election has been made, there is no statutory or any other bar on a third party debt order being made against that sum in the hands of either the trustees or the applicant’s solicitors.

The High Court’s determination illustrates that there is no general rule against the efficacy of the Blight v Brewster method with defined benefit/occupational schemes.

Is its use confined to a tax-free lump sum?

There is no obvious reason why this should be the case. What would prevent an applicant from targeting the entire CEV of a money purchase scheme? Practitioners will be familiar with the well publicised changes to the pension regulations that led Nicholas Francis QC in his oft cited judgment in SJ v RA & RF [2014] EWHC 4054 (Fam) to comment that ‘pension investments are virtually to be treated as bank accounts to people over 55’. Whilst this characterisation has divided opinion amongst some practitioners, it is not unfair to describe the majority of money purchase pension schemes as tax-laden bank accounts. Cash can be drawn out at one’s income tax rate: the question is often how such cash should be drawn down tax efficiently.

So what of a scenario where Blight v Brewster enforcement is being sought in relation to a money purchase pension scheme, but the tax-free lump sum has already been commuted? In this hypothetical scenario:

• the respondent is age 57
• the pension is a money purchase pension scheme with a CEV of £50,000
• the applicant is seeking to enforce maintenance arrears of £25,000, all of which has accrued within 12 months and thus does not require leave to enforce

There appears to be no reason why the applicant could not seek a Blight v Brewster order compelling a respondent to elect the drawdown of such a gross sum from the pension that would meet the full balance of the maintenance arrears. In this scenario, that would be the bulk of the pension CEV. Actuarial/accountancy expert evidence would need to be sought on the correct gross CEV sum that would ‘net down’ to equal the maintenance arrears: it would be unfair to force the respondent to bear the tax consequences of drawing down a sum greater than that required to meet the debt.

Of course, the respondent in that scenario would argue that this was unfair, and would expose them to an additional detriment: they are being forced to incur punitive tax rates in order to draw down their pension in one go. The most tax efficient way of transferring the pension capital would be by way of a pension sharing order, but despite the Law Commission’s December 2016 recommendations, such orders are still not available on enforcement. The respondent could also argue that an order that has the effect of greatly reducing their pension provision (with much of the sum drawn down being paid in tax) would amount to a variation of a first instance order: especially in a case where a pension offset had been applied.

None of these arguments have yet been ventilated in a reported judgment. It remains to be seen how the court responds to an application to effectively empty a tax-laden bank account intended for a respondent’s retirement with the additional consequence of much of the balance of said money purchase pension scheme being paid in tax. However, it is worth noting that in Philip Cayford QC and Beverley Morris’ case, the lower court was not dissuaded from making the order by the fact that the respondent’s pension lump sum would be discounted for being drawn down early (his normal retirement date being his 60th birthday).

4. How do you do it in practical terms?

Drawing the threads together, the best route would seem to be as follows:

• Apply for general enforcement in Form D50K, setting out particulars of your intended use of the Blight v Brewster enforcement method in a rider to the form.
• Write to the respondent requesting undertakings not to deal with/reduce the targeted pension, if such undertakings are not immediately proffered, apply for a freezing injunction on notice, pending determination of the issue at the first enforcement hearing.
• Set out the application and the nature of the order sought in full in a position statement prior to the first enforcement hearing in the D50K process.
• If seeking to draw down gross pension CEV outside a tax-free lump sum, seek actuarial/accountancy evidence on the gross quantum of pension CEV required to meet the judgment debt, and the tax due on drawdown. It is possible that this would need to be done by way of single joint expert evidence, which would need to be ordered at the first enforcement hearing. If this is anticipated, the D50K application should also contain a Part 25 application.

The greatest obstacle to the use of the Blight v Brewster method is that it is unfamiliar to most Family Court Judges. Many judges may take some persuading that they have the jurisdiction to make the orders sought. This is why it would assist to set out full particulars of the order sought at the very first opportunity (and a short explanation, referring to the relevant authorities, of the court’s jurisdiction to make such orders): i.e. in the D50K application notice itself.

An additional freezing injunction will often be prudent even if not strictly necessary in practical terms. Setting out particulars of the enforcement method sought in the D50K application notice has the additional effect of alerting a respondent at an early stage that their pension is in the crosshairs: a mischievous respondent could draw down a tax free lump sum immediately and attempt to spirit it outside of the court’s reach. A freezing order was made in Philip Cayford QC and Beverley Morris’ case.

5. Areas of uncertainty and potential pitfalls?

As discussed above, the biggest pitfall of the Blight v Brewster method may be its unfamiliarity but there is another possible procedural vulnerability. Form D50K contains on its face a notice section titled ‘To the Respondent’ which contains the following warning to respondents (emphasis added):

As a result of this application, the court has issued an order that you must attend court to provide information about your means or other information needed to enforce the order referred to above. At the hearing of this application, the court may make an order for enforcement by any of the following methods, as it considers appropriate:

• An attachment of earnings order
• A third party debt order
• A charging order, stop order or stop notice
• A writ or warrant of execution (seizure and sale of personal property)
• The appointment of a receiver

The wording of this warning notice suggests that the list of enforcement methods is exhaustive. Crucially, whilst it warns a respondent that an order may be made for the appointment of a receiver – it does not put them on notice that an order for a mandatory injunction could be made (i.e. step 1 of the Blight v Brewster method). Even a generous reading of CPR Part 25 and PD25A would not support the making of a mandatory injunction against a respondent without giving him notice. The question is then: is the form D50K setting out the fact that the applicant is seeking Blight v Brewster enforcement sufficient notice to the respondent, or should there be an additional application for an injunction to give a respondent unambiguous notice?

Logically, the former is more likely, especially as the form D50K gives notice of the possibility of an order for a receiver, which is a more wide-ranging and draconian order, that would in any event accomplish the same result as a mandatory injunction (but at greater cost). A respondent could not argue that he had not received proper notice of the possible outcome, because a receiver could be appointed and make an election for pension drawdown on his behalf.

Conclusion

On its face, the Blight v Brewster method appears to be a cost effective and efficient method of enforcement. Its attractiveness is marred by its unfamiliarity. Its relative obscurity adds a perceived additional layer of risk for practitioners and their clients., leading to a temptation to stick to the tried and true methods listed in the Form D50K. However, it is submitted that there is no reason why Blight v Brewster pension enforcement cannot be pursued alongside other methods (for example applying for a charging order in the alternative), so there is little risk for an applicant. The very nature of the D50K method permits an applicant to keep their enforcement options open until more information is obtained from the debtor. It is designed to enable an applicant to have several irons in the fire. For applicants, there is little to lose and much to gain.

1 Singer, Mostyn, Marks QC, Smith, Viney, 2017, Class Legal

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