Employee Issues
Cases
EBS Building Society -v- Hefferon & Anor [2012] IEHC 399
McGovern J.
2. Both funds have been approved by the Revenue Commissioners as exempt approved pension schemes under s. 774 of the Taxes Consolidation Act 1997. The defendants seek to set aside the appointment of the receiver on two grounds, namely:-
(i) material non-disclosure on the part of the plaintiff in the ex parte application to the High Court on 13th March, 2012, for the appointment of a receiver by way of equitable execution; and
(ii) that neither the capital funds held in the Pension Scheme nor any payments made therefrom in the future to the defendants are amenable to attachment by way of appointment of a receiver by way of equitable execution over the said Pension Schemes.
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5. The ex parte application for the appointment of a receiver by way of equitable execution was made on foot of an affidavit sworn by Mr. Philip Butler on 9th March, 2012. In para. 9 of his affidavit he states that in relation to the defendants’ pensionfunds “… there had been serious non disclosure on the part of each of the defendants in the original statement of affairs”. In para. 13 of his affidavit he states:-
“The said pension funds, which were both assets of very substantial value, were not referred to at any point in the estimated statements of affairs provided to the plaintiff under oath in June 2011. … The existence of the defendants pensions was excluded from statements of affairs prepared in June 2011, notwithstanding the fact that the plaintiff’s solicitors (by letter dated the 20th May, 2011, to Eversheds, the defendants’ solicitors) called upon each of the defendants to provide inter alia:-
‘… a detailed Schedule of all assets held by him wherever such assets may be situate in the world (including but not limited to all real and personal property) in which he has any legal or beneficial interest (whether held in his own name, in partnership with others or in a joint venture with others through companies or through any form of trust) over which he has any form of control or to which he has any form of contractual or other entitlement wherever such assets may be in the world … “‘
6. At the conclusion of para. 13 he states, “It seems highly unlikely to me that the defendants could not have advertently (sic) excluded their pensions from their statement of affairs. No explanation whatsoever has been offered by the defendants for why their pensions were excluded from their original statement of affairs”.
7. The defendants complain that in his affidavit granting the ex parte application, Mr. Butler omitted to exhibit or refer to a letter written by the solicitors for the defendants to the solicitors for the plaintiff on 8tth July, 2011, which stated inter alia:-
“Our clients are both members of an Occupational Pension Scheme sponsored by their employer. Following receipt of this letter, the solicitors for the plaintiff wrote to the solicitors for the defendants in relation to variousmatters, but did not pursue the issue of the pensions until the plaintiff’s application for discovery in aid of execution. In the course of his affidavit sworn on 6th December, 2011, grounding that application, Mr. Butler acknowledged receipt of the letter of 8th July, 2011, but complained that the information had been presented in a ‘vague and uninformative manner’.”
8. The affidavit of discovery in aid of execution sworn by each of the defendants referred to the relevant pensions. The defendants’ affidavits were sworn on 17th February, 2012. The defendants complained that Mr. Butler’s affidavit on the ex parte application to appoint a receiver by way of equitable execution suggests that in omitting to refer to the pension funds in the estimated statements of affairs exhibited in the affidavits of ih June, 2011, the existence of the pension funds was being kept hidden from the plaintiff who was unaware of the existence of same until receipt of the affidavits of discovery in aid of execution sworn on 17th February, 2012.
9. It is clear that on 8th July, 2011, the defendants’ solicitors wrote to the plaintiffs solicitors informing them “our clients are both members of an Occupational Pension Scheme sponsored by their employer”. It also appears to be the case that before Mr. Butler swore his affidavit on 9th March, 2012, the plaintiff was fully aware of the existence of the pensions. The defendants argue that the plaintiff ought to have informed the High Court on the making of the ex parte application of the letter of 8th July, 2011. Not only did the plaintiff fail to do so, but accused the defendants of having sought to conceal this information. In the circumstances the defendants state that this is a material non-disclosure and one which would significantly influence any court in the course of hearing an application for ex parte relief. Accordingly, the court should exercise its discretion in discharging the order of 13th March, 2012, whereby the receiver by way of equitable execution was appointed.
Duty of uberrima fides in making ex parte Applications
10. An application made ex parte must be made uberrima fides that is to say with the utmost good faith. In Tate Access Floors Inc. v. Boswell [1991] 2 W.L.R. 304, Browne-Wilkinson V.C. stated at 319:-
“No rule is better established, and few more important, than the rule, ‘the golden rule’ that a plaintiff applying for ex parte relief must disclose to the court all matters relevant to the exercise of the court’s discretion whether or not to grant relief before giving the defendant an opportunity to be heard. If that duty is not observed by the plaintiffs, the court will discharge the ex parte order and may, to mark his displeasure, refuse the plaintiff further inter partes relief even though the circumstances would otherwise justify the grant of such relief”
11. Full disclosure of all facts relevant to the application must be made even where such facts may militate against the granting of an interim order. In F.McK. v. D.C. [2006] IEHC 185, Clarke J. stated at para. 2.2 that the obligation to make full disclosure was “… a quid pro quo for the entitlement of the applicant to obtain what are, frequently, very onerous orders, without affording the person affected by those orders an opportunity to be heard.”
12. In Brink’s Mat Ltd v. Elcombe [1988] 1 W.L.R. 1350, Ralph Gibson L.J. at 1356 listed seven principles relevant to the duty of full disclosure on an ex parte application:-
“In considering whether there has been relevant non-disclosure and what consequence the court should attach to any failure to comply with the duty to make full and frank disclosure, the principles relevant to the issue in these appeals appear to me to include the following:-
(1) The duty of the applicant is to make ‘a full and fair disclosure of all the material facts: ‘ …
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers …
(3) The applicant must make proper inquiries before making the application … the duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including:
(a) the nature of the case which the applicant is making when he makes the application; and
(b) the order for which application is made and the probable effect of the order on the defendant; … and,
(c) the degree of legitimate urgency and the time available for the making of inquiries …
(5) If material non-disclosure is established, the court will be ‘astute to ensure that a plaintiff who obtains [an ex parte injunction} without full disclosure … is deprived of any advantage he may have derived by that breach of duty: …
(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration, but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.
(7) Finally, it ‘is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded: ‘ … the court has a discretion notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms.”
13. In Brennan v. Lockyer [1932] I.R. 100, Kennedy C.J. stated at 108 that an affidavit which does not fully recite the relevant facts but avers as a fact what is really a conclusion of fact “is not such an honest disclosure of facts as the court should act upon”. In Atkin v. Moran [1871] I.R.6 E.Q. 79 Lord O’Hagan L.C. stated that the party making the application is not to make himself the judge of whether a particular fact is material or not. If it is a fact that might in any way affect the mind of the court, it is the duty of the applicant to bring it before the court’s attention having effective non-disclosure.
14. In Bambrick v. Cobley [2005] IEHC 43, [2006] I.L.R.M. 81, Clarke J. stated that the court had discretion to refuse to grant interlocutory injunction sought and to discharge the already granted interim injunction if there was material non-disclosure. He said at 89 that the court should have regard to all the circumstances of the case and he then set out a number of factors which appeared to him to be the ones most likely to weigh heavily with the court in exercising its discretion namely:-
“1. The materiality of the facts not disclosed
2. The extent to which it may said the plaintiff is culpable in respect of a failure to disclose. A deliberate misleading of the court is likely to weigh more heavily in favour of the discretion being exercised against the continuance of an injunction than an innocent omission. There are obviously intermediate cases where the court may not be satisfied that there was a deliberate attempt to mislead but that the plaintiff was nonetheless, significantly culpable in failing to disclose.
3. The overall circumstances of the case which lead to the application in the first place.”
15. In Kanwell Developments Ltd v. Salthill Properties (In receivership) [2008] IEHC 3, Clarke J. identified at para. 5.4 a further consideration in the exercise of the court’s discretion:-
“It is important to emphasise that the obligation of candour lies on any party making an ex parte application to the court, irrespective of the nature of the order which might be made in the event that the ex parte application was successful. However, it does seem to me that amongst the factors which the court should properly take into account in deciding what to do about any non disclosure, is the extent to which the order sought on the ex parte application might be regarded, on the one hand, as largely procedural or, on the other hand, as affecting rights and obligations. Where a third party (not before the court) has their rights and obligations altered on an application made ex parte, then the court should be even more anxious to ensure that the party who obtains the benefit of the order has made proper disclosure.”
16. For the reasons I have already outlined, the defendants claim that there was a material non-disclosure by the plaintiff in making the ex parte application in that the deponent sought to convey the impression that the defendants were concealing the existence of a pension fund when this was not the case and at a time when the plaintiff already had detailed particulars of the nature of the pension fund of which each of the defendants were members.
17. The plaintiff argues that the authorities relied on by the defendants are primarily concerned with the interlocutory applications where the court is making an onerous order before a final determination has been made and not to processes of execution which are intended to allow enforcement. The plaintiff points out that in F.McK. v. D.C. [2006] IEHC 185, Clarke J. at para. 3.4 of his judgment indicated that he had considered “… decisions such as Brinks-Matt Limited v. Elcomb [1988] 3 All E.R. 188, which without discounting the heavy duty of candour which falls upon persons making ex parte applications, cautions against the principle of disclosure being carried to extreme lengths”.
18. The plaintiff argues that the letter of 8th July, 2011, from the defendants informing the plaintiff that the defendants were both members of an Occupational Pension Scheme sponsored by their employer had not significant information content other than to admit the existence of assets of some unstated worth and without some degree of explanation as to whether it meant that it was within the materiality levels and that it was left to the plaintiff to make of it what it could. However, it appears that the plaintiff did not seek further information from the defendants once this information had been disclosed. The plaintiff points out that the affidavit of the first defendant stated that documents in relation to the defendants’ pensions were “prima facie relevant to the issue of whether the defendants have any and what other property or means to satisfy the plaintiff’s judgment”.
19. Before stating my conclusions on this issue I will deal with the second point raised by the defendants.
Are the capital funds held in the Pensions Schemes or any payments made therefrom in the future to the defendants amenable to attachment by way of the appointment of a receiver by way of equitable execution over the said Pension Schemes?
20. Section 772 of the Taxes Consolidation Act 1997 (“the Act of 1997”) provides, inter alia, as follows:-
“(1) Subject to this section, the Revenue Commissioners shall approve any retirement benefits scheme for the purposes of this Chapter if it satisfies all of the prescribed conditions, namely-
(a) the conditions set out in subsection (2), and
(b) the conditions as respects benefits set out in subsection (3).
(2) The conditions referred to in subsection (1) (a) are-
(a) that the scheme is bonafide established for the sole purpose of providing relevant benefits in respect of service as an employee, being benefits payable to, or to the widow or widower, children or dependants or personal representatives of, the employee;
(3) The conditions as respects benefits referred to in subsection (1) (b) are –
(a) that any benefit for an employee is a pension on retirement at a specified age not earlier than 60 years and not later than 70 years, or on earlier retirement through incapacity, which does not exceed one-sixtieth of the employee ‘s final remuneration for each year of service up to a maximum of 40 years;
(f) that no pension is capable in whole or in part of surrender, commutation or assignment, except in so far as the scheme allows an employee on retirement to obtain by commutation of the employee ‘s pensiona lump sum or sums not exceeding in all three-eightieths of the employee ‘s final remuneration for each year of service up to a maximum of 40 years;
…”
21. Section 774 of the Taxes Consolidation Act 1997 provides, inter alia, as follows:-
“(1) This section shall apply as respects-
(a) any approved scheme shown to the satisfaction of the Revenue Commissioners to be established under irrevocable trusts, or
(b) any other approved scheme as respects which the Revenue Commissioners, having regard to any special circumstances, direct that this section shall apply,
and any scheme which is for the time being within paragraph (a) or (b) is in this Chapter referred to as an ‘exempt approved scheme’.”
22. This section goes on to make provision for tax relief on the income of and contributions made to an approved scheme.
The Pension Deeds
23. The terms of the two Pension Deeds are similar. In each case the Deed is between the principal employer, one of the defendants and his spouse as “the Company Trustees” and Alan Flynn as “the Pensioner Trustee”. Each of the PensionFunds was established by Deed on the dates already referred to at para. 3 of this judgment.
24. The Deeds recite that the principal employer has determined to establish under irrevocable trusts, a Retirement Benefit Scheme which is capable of being approved by the Revenue Commissioners pursuant to s. 772 of the Act of 1997 and capable of being treated by the Revenue as an exempt approved scheme pursuant to s. 774 of the Act.
25. In order to determine whether the capital funds held in the Pension Schemes or any payments to be made thereunder in the future are amenable to attachment by way of appointment of a receiver by way of equitable execution over the PensionSchemes, it is necessary to look at some relevant clauses of the Deeds.
26. Clause 1:-
“The principal employer establishes the Scheme under irrevocable trust to commence on and operate from [1st January, 2007 in the case of Thomas Hefferon, and 4th July, 2006 in the case of Michael Kearns]”.
Clause 2:-
“The principal employer appoints the Trustees to be Trustees hereof and in respect of the Scheme and the Trustees consent to so act”.
Clause 3:-
“The Trustees undertake to carry out the obligations of the administrator under the Act and to comply with the requirements of the Pensions Act 1990 and all Regulations made thereunder”.
Clause 5:-
“The Trustee shall seek approval of the Scheme by the Revenue Commissioners as an exempt approved scheme under s. 774 of the Taxes Consolidation Act 1997 and shall do all acts and things necessary to ensure the continuation of such approval.
Clause 6:-
“The purpose of the Scheme is the provision of relevant benefits as defined in the Act for persons entitled to participate in accordance with the provisions hereof and for the dependents of such persons.
Clause 8:-
27. The following are some relevant rules of the Deeds:-
(a) “Normal Retirement Age” is defined in each Deed as meaning “the sixtieth birthday of a member”;
(b) “Member” is defined in each Deed as meaning “a person who is currently included in the Scheme in accordance with the eligibility conditions set out in Schedule 2 hereof;
(c) Rule 2.1 of each Deed provides “a permanent employee of any of the Employers shall be eligible for inclusion in the Scheme at the absolute discretion of the Principal Employer”.
(d) Rule 3.1 provides “the amount and form of benefits payable to a member and/or his dependents are always subject to the limits and regulations set out in Schedule 4 and may be varied if necessary to comply with the provisions of Schedule 4 or with any amendment thereto”.
(e) Rule 3.2 provides “a member’s interest in the Fund shall be determined by the Trustees having regard to the value at that time of investments held by the Trustees on his behalf referable to the employer’s contributions and employee contributions (if any) on its behalf any transfer payments received by the Trustees in the name of the member.”
(f) Rule 3.3. provides “on the retirement of a member at Normal Retirement Age (or such earlier or later date of retirement as the member and Trustees determine subject to the continued approval of the Scheme by the Revenue Commissioners under the Act), his interest in the Fund shall be applied to the provision of pension for the member and/or his dependents in a manner to be agreed between the member and Trustees and acceptable to the Revenue Commissioners”.
(g) Rule 5.5 provides “benefits from this scheme may not be assigned to or charged in favour of any person and any purported assignment or charge shall be invalid but shall divest the beneficiary of any interest in the benefits purported to be assigned or charged except insofar as the Trustees shall decide”.
28. On 11th July, 2006, the Revenue Commissioners approved the Michael Kearns Pension Fund as a Retirement Benefit Scheme for the purpose of Part 30, Ch. 1 of the Act of 1997. By letter dated 13th February, 2007, they approved the Tom Hefferon Pension Fund on a similar basis. On 28th February, 2012 and 6th June, 2012, Deeds of Amendment were executed in respect of the Thomas Hefferon Pension Scheme and Michael Keams Pension Scheme respectively and the Deeds of Amendment were dated 15th February, 2012, to reflect the decision to make the amendment on that date. “Normal retirement date” was thereby changed to mean “the 70th birthday of a member”. Mr. Thomas Hefferon will be 70 on 20th August, 2019, and Mr. Michael Kearns will be 70 on 14th June, 2018. Under the current terms of the Pension Fund Deeds, neither of the defendants have a legal or beneficial ownership in respect of the assets held within the Pension Fund until they reach the age of 70. This arises on account of the provisions of Rule 3.2 which provides that “a member’s interest in the Fund shall be determined by the trustees”. On their retirement, the defendants’ interest in the Fund shall be applied to the provision of pension for the defendants and/or their dependents in a manner to be agreed between the defendants and the trustees and acceptable to the Revenue Commissioners. So even after the defendants reach “normal retirement age”, their right to receive a pension is subject to the agreement of the trustees. Although the Pension Fund is clearly intended to benefit each of the defendants, the Deeds provide at Rule 2.1 that a permanent employee of any of the employers shall be eligible for inclusion in the scheme at the absolute discretion of the principal employer, and the defendants argue that, therefore, the composition of the Pension Funds as of the date of normal retirement age is not certain. Neither of the defendants have withdrawn any funds or otherwise received the benefit of any monies created in the Fund and Mr. Alan Flynn, the pensioner trustee for both pension funds confirms that no benefits of any kind, save for his own remuneration, have ever been paid out of either pension fund.
29. The appointment of a receiver by way of equitable execution is a discretionary remedy. Property which is intended to be the subject of the receivership may be either legal or equitable in nature, but it must be capable of assignment and not otherwise inalienable. See Lafferty and Jarvis in ‘Commercial Enforcement’ (2nd Ed. 2008) at para. 6.30. This principle is repeated in Glanville in ‘Enforcement of Judgments’ (1999 Round Hall Sweet & Maxwell) at para. 16-12. In Hanniball v. Cunningham [2006] IEHC 326, [2010] 2 I.R. 1, Laffoy J. stated at para. 30 that the remedy of appointment of receiver by way of equitable execution is a remedy only available where the judgment debtor has only an equitable interest in the property against which the judgment creditor seeks recourse. In so holding, she applied National Irish Bank Ltd. v. Graham [1994] 1 I.R. 215, in which the jurisdiction of appointment of a receiver by way of equitable execution was considered.
30. The court was referred to Picarda in ‘The Law Relating to Receivers, Managers and Administrators’ (4th Ed. 2006, Tottel Publishing) where, at p. 403, the author states, “the court must, in the first place and in any event, be satisfied that the property in question is capable of assignment”. The defendants argue that equity does not act in vain, and where it cannot be shown that the appointment of a receiver by way of equitable execution will be an effectual and useful method of enforcing the judgment, that it will not be made.
31. The defendants cited a number of texts and some case law in support of the proposition that a receiver can only be appointed over pension payments where the pension is awarded entirely for past and not all for future services and is assignable.
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51. On the question as to whether or not the benefits from the pension funds are amenable to attachment by way of appointment of a receiver by way of equitable execution, there is a conflict in the arguments raised by the plaintiff and the defendants (including their spouses). The defendants argue that in England and Wales, the jurisprudence has evolved in recent years to the point where it is possible for the court to appoint a receiver by way of equitable execution over future receipts since the decisions in Masri v. Consolidated Contractors International (UK) Ltd. (No. 2) and Tasarruf Mevduati Sigorta Fonu v. Merrill Lynch Bank and Trust Company (Cayman) Ltd. (the “TMSF’ case already referred to above). In the Masri case, the court held that the remedy of appointment of a receiver by way of equitable execution was discretionary and that a receiver can be appointed in respect of future debts or income from a defined asset. Of some significance, this was not a case involving a pension or a case involving an irrevocable trust. The defined asset in that case was future oil revenue. In the TMSF case, a receiver by way of equitable execution was sought to be appointed over the proceeds of two discretionary trusts in the Cayman Islands where the party executing the trusts had reserved the power to revoke, amend, vary or alter the trust. The Privy Council held that the powers of revocation were such that in equity in the circumstances of that case, the party entitled to exercise the power of revocation could be regarded as having rights tantamount to ownership. In the circumstances, the court directed that the holder of the power of revocation should delegate his powers to the receiver so they could exercise them. The only discretion that the holder of the power had was whether to exercise it in his own favour. In the course of his judgment, the Privy Council noted that no serious suggestion had been made on behalf of the holder of the power that there would be any prejudice to any third party. It seems to me that the facts of both these cases are quite different to the matter which I have to decide. Under the terms of the Pension Fund Deeds, neither of the defendants have a legal or beneficial ownership in respect of the assets held within the pension fund until they reach the age of 70 years. Even after they reach that age, their right to receive a pension is subject to the agreement of the trustees and the pension funds have established an irrevocable trust for the purpose of providing retirement benefits and were established in accordance with the provisions of sections 772 and 774 of the Act of 1997. This provides a statutory framework and conditions for the provision of exempt approved schemes. The Deeds provide for a prohibition on the assignment of benefits from each of the pension funds. They are approved schemes “shown to the satisfaction of the Revenue Commissioners to be established under irrevocable trust” (s. 774 of the Taxes Consolidation Act 1997). In my view the pension funds of the defendants are not amendable to attachment by way of appointment of a receiver by way of equitable execution.
52. The defendants are entitled to an order in the terms of para. 1 of the notice of motion dated 28th May, 2012. In the circumstances, it is not necessary to make any order in respect of the motion brought on behalf of the spouses of the respective defendants.