Grace Bay II Holdings Sarl and Others v The Pensions Regulator ABF Ltd ((in Liquidation)) and Others (Interested Parties)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Whipple |
| Judgment Date | 10 January 2017 |
| Neutral Citation | [2017] EWHC 7 (Admin) |
| Docket Number | Case No: CO/4532/2016 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 10 January 2017 |
[2017] EWHC 7 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Whipple
Case No: CO/4532/2016
R-on the application of—
and
Michael Fordham QC, Iain SteeleandAjay Ratan (instructed by Pinsent Masons LLP) for the Claimants
Fenella Morris QC and Thomas Robinson, (instructed by The Pensions Regulator) for the Defendant
Monica Carss-Frisk QC, Jonathan HilliardQC andJamie Holmes (instructed by Burges Salmon LLP) for the Third to Seventh Interested Parties
Hearing dates: 14 December 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION
This claim for judicial review is brought by a number of Claimants against a warning notice dated 22 June 2016, issued by the Pensions Regulator (the "Regulator"). This was the second warning notice issued in the course of the Regulator's investigation and I shall refer to it as WN2. The first warning notice was issued on 11 December 2014 and I shall refer to it as WN1. Both warning notices named the Claimants in this action as the "targets", namely those persons and entities against whom the Regulator was considering taking regulatory action.
The Claimants challenge WN2 on the ground that it was unlawful, either because it was issued at a time when WN1 was still extant so that WN2 was beyond the Regulator's powers, or because the process leading up to issue of WN2 was so conspicuously unfair and lacking in even-handedness as to render WN2 unlawful.
The Claimants seek an order that WN2 be declared unlawful or quashed.
HEARING IN PRIVATE
An application to sit in private was made by the Regulator, by its Counsel (led by Miss Morris) in her skeleton argument. It was not resisted in the skeleton arguments filed by the Claimants (led by Mr Fordham) and by the third to seventh interested parties to this application (to whom I shall refer as the "Trustees") (led by Miss Carss-Frisk). At the outset of the hearing, I invited submissions from anyone present in Court who was not formally represented about whether I should hold the hearing in private. No one wished to address me. I ruled that the hearing should be in private, and said I would give my reasons later. These are my reasons.
The general principle is, of course, that hearings should be in open court. However, CPR 39.2(3) permits a hearing to be in private if that is necessary in the interests of justice. CPR 39.2(3)(c) deals with hearings involving "confidential information" defined to include information relating to personal financial matters, where publicity would damage that confidentiality. Rule 39.2(3)(g) is a catch-all which gives the Court power to hold the hearing in private where it is in the interests of justice to do so. The rules are supplemented by Practice Direction 39A.
In this case, the issues to be determined involved analysis and discussion of "Restricted Information" as that term is defined at section 82(4) of the Pensions Act 2004 (the "2004 Act"), being information obtained by the Regulator in the exercise of its functions which relates to the business or other affairs of any person, except information which is already in the public domain. Restricted Information is protected by the 2004 Act and must not be disclosed, s 82(1), (2) and (5). An exception to the bar on disclosure exists if the person to whom it relates consents, s 82(3).
The extent of interference with the principle of open justice occasioned by a private hearing was, in this case, relatively modest given that all parties agreed that my judgment should be public. I indicated at the beginning of the hearing, in public, that I intended to reserve judgment to enable the parties to make submissions on any passages to be rephrased or removed before the judgment was released. The Claimants and Trustees would also at that stage be able to consider granting consent to disclosure, to the extent that my judgment disclosed Restricted Information relating to their affairs.
I am satisfied that some if not all of the Restricted Information in the case papers is "confidential information" within the meaning of CPR 39.2. I am further satisfied that the balance was correctly drawn by holding the hearing in private in order to protect that confidential information, and to serve the wider interests of justice in upholding the statutory protections for Restricted Information contained in the 2004 Act.
FACTS
The background to WN2 is, in summary, as follows. On 7 May 2011, the HIG Group ("HIG"), a US private equity group including offshore funds, individuals and limited liability partnerships, acquired the business of Silentnight, the bed manufacturing company (the "company") for £19.2 million. The first to sixth Claimants are members of the HIG Group. The seventh, eighth and ninth Claimants were personnel within the HIG Group at the material time. They were involved in the sale of the business to HIG.
The company operated an occupational pension scheme for past and present employees, called the Silentnight Group DB Scheme (the "Pension Scheme"). At the time of the sale of the business to HIG, the Pension Scheme was facing a large deficit. The consequence of the sale to HIG was to divorce the business from the Pension Scheme. The Pension Scheme now remains in deficit, and is unable to meet its liabilities in full. Subject to action by the Regulator, the Pension Scheme is likely to enter the Pension Protection Fund ("PPF").
By exercise of its powers under the 2004 Act, the Regulator commenced an investigation into the sale of the group's business and assets to HIG. The Regulator interviewed a number of witnesses and obtained expert evidence from a Mr Murdoch McKillop, a chartered accountant and licensed insolvency practitioner with specialist expertise in financial restructuring of distressed companies. Mr McKillop was instructed to advise on the market value of the group's business and assets at the date of sale in May 2011, whether that value (if higher than the actual sale price) could have been achieved on sale in 2011, the difference if any between the net recovery received by the Pension Scheme and what it would have received if the market value had been achieved, and whether the 2011 sale had achieved the maximum sum reasonably obtainable. His report was dated 5 December 2014. He concluded that there had been a sale at an undervalue, because the market value of the group's business and assets had been £31.5 to £38.5 million at the relevant time, and that in consequence the Pension Scheme had lost out on additional returns.
The Regulator served a warning notice on 11 December 2014, warning the Claimants of an intention to seek a contribution notice against them in the amount of £17.16 million. The predicate for that contribution notice was that the group's business and assets had been sold at an undervalue with a resulting loss to the Pension Scheme of £17.16m. This is "WN1". WN1 was largely based on the expert evidence of Mr McKillop.
WN1 was sent, amongst others, to the Claimants and to the Trustees. The Claimants and the Trustees are "directly affected" persons for the purposes of the statute.
On 16 October 2015, the Trustees filed their representations on WN1. They adduced (amongst other things) an expert report from Mr David Griffiths, an expert with experience of banking and lending, specifically in relation to property development and investment lending. His conclusion was that the group could have refinanced its debt up to January 2011 without having recourse to HIG at all. The likely terms of refinance would have been based on an asset-backed structure against invoices, stock, and plant and machinery, provided by an asset-based lender.
The Claimants filed their representations in answer to WN1 on 16 December 2015, accompanied by extensive evidence, including four expert reports, seven witness statements, and numerous individual documents. Although the outline of the Trustees' case had been intimated in correspondence shared with the Claimants prior to this, before serving their representations the Claimants were not provided with the Trustees' representations or any of the expert or factual evidence underlying it. The Claimants' representations did not deal in detail with the Trustees' case, although one witness statement did refer to unsuccessful attempts made to refinance the business before and during HIG's involvement.
The Regulator considered the Trustees' representations and the Claimants' representations on WN1. The Regulator requested further information from the Claimants.
The Claimants responded to Mr Griffiths' report by a letter dated 3 March 2016. They challenged Mr Griffiths' conclusion that the group could have been refinanced without the group's business being sold.
On 22 June 2016, the Regulator served WN2 on the Claimants and Trustees. WN2 was accompanied by new evidence and documents. Specifically, WN2 was supported by a report from Mr Robert...
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