The Pensions Regulator v (1) Payae Ltd
| Jurisdiction | England & Wales |
| Judge | Pelling |
| Judgment Date | 23 January 2018 |
| Neutral Citation | [2018] EWHC 36 (Ch) |
| Docket Number | Case No: HC-2015-002605 |
| Court | Chancery Division |
| Date | 23 January 2018 |
[2018] EWHC 36 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (Ch.D)
Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
HIS HONOUR JUDGE Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: HC-2015-002605
Mr Jonathan Hilliard QC, Mr James Walmsley, Ms Elizabeth Houghton, Mr Nicholas MacklamandMr Sam Chandler (instructed by The Pensions Regulator) for the Claimant;
The 1 st to 6 th Defendants did not appear and were not represented;
The 7 th Defendant appeared in person on 6 December 2017 but otherwise did not appear and was not represented; and
The 8 th Defendant did not appear and was not represented at trial but was represented in the proceedings by Pinsent Masons LLP
Hearing dates: 5–6 and 8 December 2017
Judgment Approved
HH Judge Pelling QC:
Introduction
This is the trial of a claim by the Claimant (“TPR”) brought under s.16 of the PensionsAct 2004 (“PA04”) by which TPR seeks to recover the whole of the sums lost as the result of what TPR characterises as an “ … improper and dishonest …” pension “ liberation” scheme by which approximately 245 members of occupational schemes with pension pots worth about £55,000 on average (“Members”) were induced to transfer their respective pots from mainly occupational pension schemes operated by their employers (“Ceding Schemes”) to schemes established, controlled or operated by the third to seventh defendants (“Receiving Schemes”) by the promise that they would receive some money as a result of the transfer.
Although the Members generally received some cash as an inducement to transfer their pension pots to the Receiving Schemes (referred to by the fourth to seventh defendants as “ rebates”), the rest of the money was transferred out of the bank accounts operated in the name of the Receiving Schemes and was lost or has been expended by the eighth defendant in attempting to protect the interests of Members following its appointment as a trustee of the Receiving Schemes in the circumstances that I refer to below. In the result the Members have lost their pension pots (other than the cash sums paid to them) and have been exposed to the possibility of having to pay significant tax penalties because the sums received by them were at least arguably “ unauthorised payments” within the meaning of the relevant tax legislation.
The eighth defendant is an independent professional trustee appointed by TPR as independent trustee of the Receiving Schemes once it became aware of the matters with which this claim is concerned. Although the eighth defendant might have been expected to bring the claims against the first to seventh defendants, it does not have sufficient assets available to it to bring them. It is for that reason that TPR brings this claim and seeks by way of remedy the payment by the fourth to seventh defendants to the Receiving Schemes acting by the eighth defendant of the sums removed from the Receiving Schemes' bank accounts. The total sums claimed by TPR in these proceedings exceed £13m. The eighth defendant was joined to the proceedings by TPR but it did not appear and was not represented at the trial.
The claims against the first to third defendants have been settled. In consequence, none of them appeared or were represented at the trial. The trial proceeded only against the fourth to seventh defendants. None of the fourth to sixth defendants appeared or were represented at the trial. Mr Hilliard QC made it clear that TPR did not seek to rely on the non-appearance of the fourth to sixth defendants as supporting any element of TPR's case. Accordingly, I leave it out of account. The seventh defendant appeared only for the second day of the trial in the circumstances I set out in more detail below. The result of the non-appearances of the first to sixth defendants and the limited participation of the seventh defendant was that the trial was completed in 3 days although originally scheduled to take 8 days.
As I explain below, dishonesty is not a necessary ingredient of the cause of action created by PA04, s.16 but TPR's case has been advanced on the basis that the fourth to seventh defendants have acted dishonestly and it asks that I determine this case on the basis of those allegations. TPR has adopted this course because they wish any judgment they obtain against the individual defendants to come within the scope of s.281(3) of the Insolvency Act 1986 (“ IA86”).
As already mentioned, the seventh defendant appeared on the second day of the trial, when he elected to give oral evidence and was cross examined. He informed me at the end of his evidence that he did not intend to further attend the trial or to make any closing submissions – see T3/129/12 – 130/12, where he indicated that in relation to the scheme he was concerned with he “ … didn't know what was happening” by which I understand him to deny dishonesty as alleged against him whilst accepting that he was involved in the misappropriation that I describe and make findings about later in this judgment.
It was only shortly before the trial started that it became clear that the fourth defendant (described by Mr Hilliard as the “ ring leader”) would not appear at the trial. Although he had previously provided an admission but indicated he intended to appear at the trial, the fourth defendant subsequently indicated he wished to withdraw his admission but would not attend the trial. Although there was no formal application made by the fourth defendant to withdraw his admission, it was not opposed by TPR and I acceded to it for reasons I set out in a ruling I delivered on the first day of the trial.
The seventh defendant did not appear on the first day of the trial. That being so, I invited Mr Hilliard to summarise early in his oral opening submissions those parts of the evidence tendered by TPR in relation to the claim against the seventh defendant. I then summarised the steps that the seventh defendant would have to take if he wished to challenge that evidence. This was all set out on the live transcript that was being taken. I directed that a copy of the relevant part of the transcript should be sent to the seventh defendant by email by TPR's solicitors as soon as possible that day. In the result, the seventh defendant attended the second day of the trial, the witnesses relevant to the claim against the seventh defendant (Ms Edwards and Mr Tyrrell) were tendered for cross examination and the seventh defendant cross examined those witnesses on a limited basis. The seventh defendant then gave evidence and was cross examined. Save for the evidence relevant to the claim against the seventh defendant all the other evidence relied on by TPR was admitted unchallenged.
I accept the evidence of TPR's witnesses in so far as that evidence was not challenged and I accept the evidence of Ms Edwards and Mr Tyrrell in relation to the claim against the seventh defendant. I return to the evidence of the seventh defendant as necessary in more detail below.
The Relevant Legal Principles
The Substantive Law
PA04, s.16 provides that:
“If, on the application of the Regulator, the court is satisfied that there has been a misuse or misappropriation of any of the assets of an occupational or personal pension scheme, it may order any person involved to take such steps as the court may direct for restoring the parties to the position in which they were before the misuse or misappropriation occurred.”
By PA04, s.16(2), a person is “ involved” if he appears to the court to have been “ … knowingly concerned in the misuse or misappropriation of the assets”. PA04, s.16 confers on TPR standing to commence proceedings in relation to the misuse or misappropriation of the assets of a relevant pension scheme which it would not otherwise have because it is not the trustee of any such schemes. In this case it enables TPR to pursue those knowingly concerned with such misuse or misappropriation where the trustee of the scheme or schemes concerned is unable to do so.
The Need To Prove Dishonesty
Although in this case TPR has chosen to present its case on the basis that the first to seventh defendant have been dishonestly involved in the misuse or misappropriation relied on, Mr Hilliard submits that dishonesty is not a necessary ingredient of a claim under PA04, s.16.
I accept that submission. Although the concept of being “ knowingly concerned…” might suggest such a requirement, just as it does in the context of accessory liability for breach of trust, in my judgment construing PA04, s.16(2) as imposing such a requirement would defeat in part the purposes for which it was enacted. The purpose of PA04, s.16 is to enable TPR to pursue all persons involved in either the misuse or misappropriation of scheme assets. That necessarily includes former trustees or others who have misused assets without dishonesty. If PA04, s.16(2) is construed as importing a requirement for dishonesty by use of the word “ knowingly” that would preclude claims being made against former trustees who have misused assets without dishonesty. That cannot have been intended to be the outcome. A scheme trustee would be entitled to bring such a claim. There is no obvious reason why TPR should be more fettered in the claims that it can bring under PA04, s.16 than a scheme trustee would be when making a claim for breach of trust, particularly when TPR is likely to bring PA04, s.16 proceedings only where the scheme trustee is unable or unwilling to do so through a lack of funds. In my judgment the effect of the word “ knowingly” is merely to...
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...hold subject to the terms of the transferring scheme. In support of this submission Mr Sawyer cited The Pensions Regulator v Payae [2018] EWHC 36 (Ch) at [40]: … the Ceding Schemes were without doubt occupational or personal pension schemes, the pension pots were intended to be transferred......