Brass Trustees Ltd v Hayley Goldstone
| Jurisdiction | England & Wales |
| Judge | Mr Justice Richard Smith |
| Judgment Date | 31 July 2023 |
| Neutral Citation | [2023] EWHC 1978 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PE-2023-000002 |
[2023] EWHC 1978 (Ch)
THE HONOURABLE Mr Justice Richard Smith
Case No: PE-2023-000002
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
PENSIONS
7 Rolls Building
Fetter Lane, London,
EC4A 1NL
Fenner Moeran KC (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimant
Nicolas Stallworthy KC and Nicholas Hill (instructed by Pinsent Masons LLP) for the First Defendant
Michael Tennet KC (instructed by Hogan Lovells International LLP) for the Second Defendant
Hearing date: 4 July 2023
Draft judgment circulated: 12 July 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 31 July 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
On 4 July 2023, I heard a Part 8 claim brought by the Claimant, BRASS Trustees Ltd ( Trustee). The Trustee is the sole corporate trustee of an occupational pension scheme, the Biwater Retirement and Security Scheme ( Scheme). The Trustee sought the Court's approval for its decision to issue petitions to wind up the Scheme's sponsoring employers, Biwater Holdings Ltd ( BHL) and Biwater International Ltd ( BIL) (together Biwater), as requested in paragraph 1 of the amended Claim Form dated 15 March 2023 ( Decision).
The Trustee had also proposed the appointment of the first Defendant, Ms Hayley Goldstone, a pensions solicitor and partner in Pinsent Masons LLP, to represent all members and beneficiaries of the Scheme in whose interests it is that the Decision not be approved ( Rep Ben). At the hearing, I appointed her in that capacity pursuant to CPR, Part 19.9(2) for the reasons given then.
The second Defendant is the Board of the Pension Protection Fund ( PPF).
Biwater was also invited to participate in these proceedings (but declined to do so), as was (and did) the Pensions Regulator.
The claim was supported by two witness statements from Mr Nicholas Chadha, a designated member of the LLP corporate director of the Trustee, dated 28 February and 19 May 2023 respectively. In addition, Ms Goldstone submitted a witness statement dated 21 April 2023. Mr Malcolm Weir, Director of Restructuring and Insolvency at the PPF, also filed a witness statement dated 20 April 2023, accompanied by an expert's report dated 21 April 2023 prepared by Mr Bob Scott, a Fellow of the Institute and Faculty of Actuaries, on behalf of the PPF.
The hearing was held in private. Although the general position is that hearings should take place in public ( CPR, Part 39.2(1)), for the reasons I gave then, I was satisfied that publicity would defeat the object of the hearing and that it was necessary to sit in private to secure the proper administration of justice ( CPR, Part 39.3(a)).
The Trustee sought at paragraph 2 of the amended Claim Form (in the alternative to a declaration approving the Decision) guidance as to the basis on which the Trustee should determine whether to make the Decision. Given the facts of this case, said to provide overwhelming support for the primary relief sought, and the Rep Ben's conclusion, reached after close and extensive examination of the underlying position, that there is no credible basis to challenge the Decision, that alternative relief was not pursued.
At the conclusion of the hearing, I granted the primary relief sought in paragraph 1 of the amended Claim Form, with my reasons to follow. These are those reasons.
The Scheme — overview
The Scheme is a final salary occupational pension scheme, albeit also including a money purchase section. It is currently governed by a sixth definitive deed and rules dated 27 October 2016 ( Trust Deed and Rules). BHL is the Principal Employer of the Scheme. BIL is a participating employer.
Under clause 10.2.1 of the Trust Deed, the Scheme can only be “ terminated” upon:-
(a) the Principal Employer giving notice under clause 10.1;
(b) the Trustees determining to terminate it “ at any time during the Insolvency of the Principal Employer”; or
(c) by reason of statute or an order of the Pensions Regulator.
Upon termination, the Trustee has the power to defer winding up or wind up the Scheme (clause 10.2.3).
“ Insolvency” is defined in Schedule 1 to the Trust Deed as “ in relation to an Employer or the Principal Employer, its liquidation, provisional liquidation, administration, receivership, administrative receivership or its entering into a voluntary arrangement”.
The Trustee can, therefore, only wind up the Scheme, without the Principal Employer's agreement, on the Principal Employer's insolvency.
The assets of the Scheme are significantly less than its liabilities. The Scheme's actuary, of XPS, has provided a best estimate of the Scheme's assets and liabilities as at 31 December 2022. This shows:-
(a) an asset value of £41.6m;
(b) total liabilities of £69.9m; and
(c) therefore, a Scheme deficit of some £28.3m.
Biwater's debts to the Scheme
As at 19 May 2023, Biwater owed the Scheme over £39.74m, £8,516,231 of which was due by way of outstanding contributions for deficit recovery, expenses, insurance and exceptional contributions.
There are three primary sources of payment obligations from Biwater to the Scheme, namely under:-
(a) the Trust Deed and a Schedule of Contributions ( SoC) dated 4 August 2020;
(b) an agreement dated 14 January 2020 ( 2020 Pensions Agreement); and
(c) a series of agreements creating the Cascal Share Payment Obligation ( CSPO).
SoC & 2020 Pensions Agreement obligations
Under clause 8 of the Trust Deed and section 227 of the Pensions Act 2004, there is an obligation to put in place a schedule of contributions, identifying the amount to be contributed by the employers to the Scheme and when. In addition to the obligation to pay under the Trust Deed (clause 8.2), section 228 of the Pensions Act 2004 makes any unpaid sum due under the SoC a debt due from the relevant employer.
Mr Chadha explains, including by reference to a helpful spreadsheet, these elements of the amounts due to the Scheme and for how long they have been outstanding. This shows that Biwater has failed to meet its obligations to the Scheme from March 2020 onwards. Although the earliest obligations (deficit recovery contributions from March to May 2020) were deferred until 2021, and contributions were paid in June to November 2020, the outstanding debt has steadily increased from then onwards.
Mr Chadha also explains how Biwater agreed to make ‘exceptional contributions’ of £40,000 per month from June 2020 onwards under the 2020 Pensions Agreement.
Biwater has outstanding sums due under the current SoC and the 2020 Pensions Agreement of £8,516,231 as at 19 May 2023 (not including interest), comprising:-
(a) £6,389,121 in unpaid deficit recovery contributions from March 2020;
(b) £919,153 in expense allowance contributions from August 2021, including £479,153 of PPF levy contributions, from December 2020;
(c) Approximately £87,649 in death in service insurance contributions, from August 2021; and
(d) £1.12m exceptional contributions, from February 2021.
I should add that, based on the most recent updating information provided by the Trustee to the court, the Scheme did receive £170,000 towards deficit recovery reductions on 29 June 2023, albeit this was less than the amount due for June 2023.
The CSPO
Under agreements entered into between 2006 and 2009, Biwater was granted a reduction in ongoing funding contributions to enable it to buy out the Cascal B.V. joint venture. In return, Biwater agreed to pay the Scheme additional funds, originally intended to come from the proceeds of sale of Cascal. That sale did not generate the proceeds expected and the debt is still owed. There were various agreements to postpone the debt but the last moratorium under the 2020 Pensions Agreement ended on 27 January 2023. Taking into account the £7.4m paid down since 2010, this debt currently stands at £31.23m.
Biwater's financial problems and Scheme treatment
The Trustee has set out in its evidence Biwater's financial position as it understands it to be based on its communications and discussions with Biwater management and other available information. This presents a bleak picture, not least for the Scheme's ability to recover the debt due from Biwater. Although this information is necessarily ‘second hand’, I am satisfied that the Trustee has been assiduous in its efforts to understand Biwater's financial position and prospects and ability to pay the debts due to the Scheme. Moreover, given Biwater's generally unforthcoming approach, its ‘drip-feeding’ of information to the Trustee and its efforts to project positively its prospects, albeit ultimately not borne out, I am also satisfied that, if anything, the Trustee's evidence likely understates the full extent of Biwater's financial problems.
Biwater's statutory accounts for the year ended 30 September 2021 have not been filed and are now overdue by almost nine months. The last available statutory accounts are therefore long out of date. Despite this, it is clear that Biwater has no prospect of meeting its financial obligations to the Scheme. Indeed, in recent months, the directors of Biwater have apparently been worried about their position given Biwater's situation. Other creditors are becoming more aggressive. As Mr Chadha records:-
“On 12 April 2023, I had a call with Justin Jones and Paul Stevens [directors of BHL] who told me that the directors were worried about their position from a director duties perspective, as it was becoming harder to justify continuing to operate. They noted that in recent...
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