Court held discretionary pension gratuities under Cap. 311 are not estate assets and cannot be executed for debts.

[*143] 1977 April 15

(STYLIANIDES, P.D.G. & DEMEERIOU, S.D.J.)

IN THE DISTRICT COURT OP LIMASSOL

The Limassol Civil Service Co-operative

Savings Bank Ltd. ,

Plaintiffs,

v.

Stelios Stylianou, in his capacity

as the administrator of the estate of Michalakis Chr. Iacovides,

Defendant.

(General Application No. 48/71).

Pensions or gratuities - Granted under the Pensions Law, Cap. 311 - Whether they can be taken in execution for the payment of any debt.

Administration of estates - Public officers - Pensions or gratuities granted under the Pensions Law, Cap. 311 - Whether they form part of the estate - And whether they can be taken in execution for the payment of any debt.

Pensions or gratuities - Paid under section 15(1) (a) of the Pensions Law, Cap. 311 - They are discretionary and are not granted as of right - They do not form part of the estate of a deceased public officer.

Words and phrases - "It shall be lawful" in section 15(1) of the Pensions Law, Cap. 311.

Pensions Law, Cap. 311 - Construction of section 15 of the Law.

E. Theodoulou, for the Applicant.

A. Myrianthis, for the Respondent.

P.L. Cacoyiannis, for the Interested Parties.

JUDGMENT

The judgment of the court was delivered by: -

STYLIANIDES. P.D.C.: Michalakis Iacovides, [*144] a civil servant, holding a pensionable post, died on 10.3.74, leaving as his lawful heirs, his wife Maroulla Iacovidou and his daughter Androulla Stylianou.

He passed away at the age of 58, before attaining the retiring age.

Stelios Stylianou,his son-in-law, was granted letters of administration of his estate in probate application 71/74. The deceased was heavily indebted. Amongst his creditors was the Limassol Civil Service Co-operative Savings Bank Ltd. He was indebted to this co-operative by virtue of two bonds: He was indebted by bond 4379 dated 30.4.71 in the sum of £2,125.230 mils plus interest at 8% as from 1.1.74, till final payment; and by virtue of bond number 4669 dated 9.3.72 in the sum of £210.300 mils plus interest at 4% per month as from 1.1.74, until final payment.

By letter dated 23.4.74, the Commissioner for Co-operative Development appointed Mr. Thrasos Thrasyvoulides arbitrator. Upon arbitration duly made on 13.11.74 the arbitrator awarded the aforesaid amounts and issued judgments in favour of the Limassol Civil Service Co-operative Savings Bank Ltd. against the estate of the late Michalakis Chr. Iacovides.

Under section 15 of the Pensions Laws, Cap. 311, as amended by Laws 9/67 - 73 the Council of Ministers granted to the deceased’s legal personal representative a gratuity amounting to £3,808.330 mils. This amount was paid to the personal representative Stelios M. Stylianou, by virtue of cheque number G.G.A. 526168. [*145]

A dispute arose as to whether this amount is liable for the payment of the just debts of the deceased, and the creditor took out this summons against the administrator, under section 53 of the Administration of Estates Law,Cap. 189.

By this application the applicant creditor posed two questions:

(a) Whether the amount of £3,808.330 mils sent by the Government of Cyprus directly to the administrator of the estate of Mr. Stelios Stylianou, is liable for the payment of the just debts of the deceased.

(b) Whether any other order is deemed necessary by the Court for the proper administration and distribution of the estate of the said deceased.

In the course of the hearing the second prayer was withdrawn and therefore we need not deal with it.

There was no controversy over the facts. The advocates of both sides addressed the Court. In the meantime the heirs of the deceased applied to be heard in relation to the above application, and the Court acceded to their request.

It was contended by the applicant that the amount of £3,808.330 in the hands of the administrator from the time of the payment to him by the Government, became part of the estate of the deceased, lost its characteristic of gratuity and is liable to the payment of the debts of the deceased.

Mr. Myrianthis on behalf of the administrator, contended that in view of the provisions of section 12 of [*146] the Pensions Law,Cap. 311 , this amount is not liable to be attached sequestered or levied in respect of any debt except a debt due to the Government.

Learned counsel for the heirs, P.L. Cacoyiannis, submitted that the aforesaid amount does not form part of the estate as this term is defined in the Administration of Estates Law, Cap. 189, and the Wills and Successions Law, Cap. 195, in that the deceased did not die possessed of this amount or of a right of receiving this amount. This amount was granted to the legal personal representative after a decision of the Council of Ministers which was discretionary and the words "shall be lawful for the Council, of Ministers to grant" did not confer any right to the

administrator or the heirs. He further, relying on section 12 of the Pensions Law,Cap.311, submitted that this pension is

neither attachable nor leviable.

This application raised rather important and curious questions.

Is this amount liable for the payment of the debts of the deceased?

An administrator, having obtained letters of administration shall proceed to collect and get in the estatewith all reasonable speed, pay the funeral and testamentary expenses and pay all the just debts of the deceased in the order of priority set out in section

42 of Cap. 189, (section 41 (2) of the Administration of Estates Law Cap. 189).

The relevant part of section 12 of the Pensions Law,Cap. 311, reads: [*147]

"12. A pension, gratuity or other allowance granted under this Law shall not be assignable or transferable except for the purpose of satisfying - (a) (b) and shall not be liable to be attached, sequestered or levied upon for or in respect of any debt or claim whatever, except a debt due to the Government".

So long as an amount bears a characteristic of pension, gratuity or other allowance granted under the Pension Law it cannot be taken in execution for the payment of any debt except a debt due to the Government. But when such amount ceases to be pension or gratuity, when it loses its characteristic of pension or gratuity, then it is liable to execution. When it is reduced into possession of the payee after payment by the Accountant-General, it is no longer pension, gratuity or allowance.

In Jones and Company v. Coventry

(1909) 2 K.B. 1029, it was held that an amount which was received by the debtor as pension in respect of past services and which was standing to his credit at the bank, this sum being the balance of the retire pay previously received by him from the Pay - Master - General had lost its characteristic of retire pay, as it had been received from the Pay - Master - General at the time when the garnishee order was served and was therefore liable to attachment. The defendant contended that this amount was protected from execution by section

141 of the Army Act, 1881 which prohibited an assignment of or charge on the pension payable to any officer or soldier. [*148] Darling J. said at p. 1037:

"With regard to the sum of £6.13s 8d., it is argued on behalf of the defendant that this sum cannot he attached under the garnishee order because it is pension money, and that pension money, so long as it can he identified as such, cannot be taken in execution, even though it be in the possession of the pensioner or his agent. If that is correct, it can only be because section 141 of the Army Act 1881, applies to such a case. That section says that 'Every assignment of, and every charge, on, and every agreement to assign or charge, any deferred pay or military reward payable 'to any officer or soldier of any of Her Majesty's forces, or any pension, allowance, or relief payable to any such officer or soldier, or his widow, child, or other relative, or to any person in respect of any military service, shall, except so far as the same is made in pursuance of a Royal Warrant for the benefit of the family of the person entitled thereto, or as may be authorized by any Act for the time being in 'force be void’. In my opinion that section does not apply to this sum of £6.13s.8d. I cannot accept the contention that a sum of money which is the result of payment of pension cannot be taken in execution by reason of the provisions of the above-mentioned section, even that it [*149] has come into the possession of the pensioner. I do not think that the section hears that construction, nor do the cases, when they are looked at, give any support to it. In Crowe v. Price, 22 Q.B.D. 429, a case which was relied upon in support of this contention, Lord Esher said; 'I adhere to the opinion expressed by this Court in Lucas v. Harris, 18 Q.B.D. 127 that section 141 of the Army Act, 1881, was passed in favour of officers and soldiers on grounds of public policy, and that it must be construed so as to protect pensions granted to them for their services.

The question in the present case is whether this sum of £109 has ceased to be pension, for if it has not, it is money

which could not be taken in equitable 'execution'. Fry L.J. said; The money remained pension, of which one may use the expression 'that it had not been reduced into possession'. It might be different if the officer had received it, and had paid it into his bankers, or had bought furniture with it. But this did not happen; …………………………………..”

“That is the true test, namely, whether the money had lost its character of pension or whether it still remained pension. In my opinion, pension, when it has been paid to the person entitled to receive it ceases any longer to be pension; it had lost its character of pension, just like [*150] dividends, which, after payment, lose their character of dividends. It becomes part of the pensioner's ordinary money. I think, therefore, that this sun of £6.13s.8d which was the balance of pension moneys paid to the bank and credited by the bank to the defendant's account, had lost its character of pension, and accordingly it does not come within the provisions of section 141 of the Army Act 1881. It became an ordinary debt due from the bank to the defendant and can be attached under the garnishee order".

Jelf J. said at p. 1042:

"I am of the same opinion. It seems to me that the learned Master who tried this issue correctly stated the Law applicable to this case. He said this: ‘I hold that when once the money reaches the officer's banking account it ceases to be impressed with the character of pension: the only concern of Parliament being to see that the money reaches the officer, and is not intercepted on its way to his hands or account’. That is a perfectly correct statement of the law, and I entirely agree with it".

In the present case, the money reached the legal personal representative of the deceased, and we were left to understand that they were deposited in the banking account of the legal personal representative. The applicant does not seek to intercept the money. The amount which was [*151] paid by cheque as gratuity lost its characteristic as such at the moment that the cheque was either cashed or deposited at a bank which credited the account of the administrator with an equal amount. Therefore, if this amount is part of the estate it should be used by the administrator as provided by section 41 of the Administration of Estates Law, Cap. 189. One of the duties cast on the administrator is to pay all the just debts of the deceased.

Is the amount paid under s. 15 of the Pensions Law part of the estate?

"Estate” means the movable property, and immovable property of which a person dies possessed. Movables are corporeal or incorporeal. Any rights even if they mature on the death or after the death of a person form part of an estate.

Pensions in this country were introduced from the early days of the English Administration. In all the laws and Orders in Council relating to pensions there was a specific provisions that no officer had an absolute right to pension, gratuity or other allowance under the said laws. All the benefits under the Pensions Laws were discretionary, though there was a well founded expectation that they would be paid. The Pensions Law, 1949, No. 10 of 1949, as amended is Cap. 311 of the 1959 edition of the Laws of Cyprus. Section 5(1) provided that "no officer shall have an absolute right to compensation for past services or to pension, gratuity or other allowance". The discretionary nature of the benefits is further clear from the words "may" and [*152] may be granted" found in sections 3(1) and the proviso to section 6.

In. Nixon v. A.G., (1931)A.C. 184, it was held that an established civil servant of the Crown had on the true construction of the superannuation Acts 1834-1909 no legal right enforceable in a Court of Law to superannuation allowance.

Viscount Dunedin said at p. 191:

"The learned counsel had to admit that in quite the early days there obviously was no actual right in a servant of the King to have a pension, and he really pinned his faith to the Act of 1859, and the second section of it. It is impossible, of course, in that section to find positive words which direct that a pension must be granted, the phrase is: Subject to the exceptions, the Superannuation Allowance to be granted after the commencement of this Act to persons who shall 'have served shall be', so-an-so. All through the Acts that follow there is a frequent use of the word 'entitled', but 'entitled', I take it, shows no more than 'entitled' to such as the Acts give him. And I cannot do better there than quote the phrase which Lord Buckmaster used for Considine v. McInerney (1916) 2 A.C. 162, 170 where summing up the position he says: he was entitled to 'expect an annual allowance', and then he goes on, with the well known words that have been so often [*153] quoted, to say. This expectation though it might he relied on with full certainty, was none the less not a legal right, and no claim 'for it could he enforced by any legal proceedings'".

Further his Lordship touched section

30 of the Act of 1914 which said that there is to be no absolute right and continued. "My Lords, to get out of a provision that you "are not to have not an absolute right a positive provision that you are to have a right, is an argument which has only to be stated to be rejected".

In England formerly all benefits were discretionary although there was a well founded expectation that they would be paid. Now, however, the Minister for the Civil Service is empowered in making a scheme to specify benefits as mandatory or discretionary according to choice; (Superannuation Act (1972) Section l(l)(a)) are to be paid or may be paid. The principle of Civil Service Pension Scheme 1972 has provided that, with a few exceptions, benefits are to be or will be paid. Thus by implication there is a right to payment, subject of course to the provision of money by Parliament. (See the Civil Service Pension Scheme 1972 rules 3 and 8).

The material part of section 15(1) under which this gratuity was granted to the legal personal representative of the deceased, provides that where an officer holding a pensionable office dies while in the service of Cyprus "It shall be lawful for the Council of Ministers to grant to his legal personal representative a gratuity". [*154]

The words "it shall be lawful" in a statute are plainly and unambiguously merely permissive, empowering and conferring on the person named a right to do a specified thing, but where the object of the enactment is to effectuate a legal right, whether public or private, they are to be construed as compulsory.

In Julius v. Lord Bishop of Oxford and another All E. R. Rep. (1874-1880) p. 4-3 Earl Cairns, L.C., said:

"The words 'It shall be lawful' do not by themselves do more than confer a faculty or power. But there may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title, of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty and make it the duty of the person in whom the power is reposed to exercise that power when called on to do so. The words being, according to their natural meaning, only permissive or enabling, the burden is on those who contend that an obligation exists to exercise the power to show something in the "circumstances of the case which created the obligation".

In construing section 15 of the Pension's Law, we have to take into consideration the object of the Legislator to find out from the wording of the Law if the words "It shall be lawful" occurring in section 15(1) (a) are merely permissive [*155] or they create an obligation on the Council of Ministers to exercise such power.

By the Pensions (Amendment) Law, 1967, section 3(1), the proviso to section

6 and regulation 4 were amended by the substitution of the words "may be granted" with the words "are granted" and "is granted" respectively ### Section 5(1) was repealed. By these amendments the pension, gratuity, etc. to which the amended sections referred to are granted as of right.

Section 15, however, remained unaffected by the amending Law of 1967. A corresponding provision was enacted in section 13 of the Law providing for pensions to the teachers of Secondary Education, No. 56/67, whereby it is provided that "……………………………” To ### The same wording is found in the new section 16 of Cap. 311.

Does any beneficial interest accrue to the heirs on the death of an officer holding a pensionable post in the service of the Republic? The word "interest" is used in the sense of an interest in property as would be protected in a Court of Law. The grant of a gratuity under section 15 is discretionary. The provision is not compulsory or mandatory. The Council of Ministers has to consider the matter and in the exercise of their discretionary power they may grant or not gratuity. The service of the deceased Civil Servant is causa sine qua non of the granting of the gratuity, but not [*156] the causa causans. This is not enough to create a beneficial interest. There may be only an expectation of the gratuity but not a right enforceable (J. Bibby & Sons Ltd., Pensions Trust Deed Davies v. Inland Revenue Commissioners

(1952) 2 All E.R. p.. 483). The omission of the Legislature to change the empowering provision of sections 15 and 16 into mandatory or compulsory is intentional and the benefits under these sections are discretionary and they are not granted as of right. Though this gratuity is paid to the Legal personal representative for the benefit of the heirs according to their legal share, it is not part of the estate and it does not attract liability to estate duty, though it is not exempted by section 15 of the Estate Duty Law 67/1962. It is not part of the estate and it is not liable to the payment of the debts of the deceased.

In view of the novelty of the points raised, we make no order as to costs.

Application dismissed. No order

as to costs.