The Trustee of the Singer & Friedlander Ltd Pension and Assurance Scheme v Richard Panton Corbett
| Jurisdiction | England & Wales |
| Judge | Mr Justice Birss |
| Judgment Date | 16 October 2014 |
| Neutral Citation | [2014] EWHC 3038 (Ch) |
| Court | Chancery Division |
| Date | 16 October 2014 |
| Docket Number | Case No: HC 14 D 02947 |
[2014] EWHC 3038 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Birss
Case No: HC 14 D 02947
Raquel Agnello QC (instructed by Pinsent Masons) for the Claimant
The defendant did not appear and was not represented
The Pension Regulator did not appear and was not represented
Hearing dates: 18th September 2014
This matter raises a short point on the interpretation of s75 of the Pensions Act 1995. The question is whether the trustee of a pension scheme is able to assign the debt owed to the pension scheme which is created by s75. In this case the trustee wishes to assign the s75 debt and seeks a declaration from the court that the debt created by the section is assignable. If it is assignable the trustee would seek to sell the debt by way of assignment at the best possible price in order to obtain the maximum benefit for the pension scheme. The trustee also asks the court to direct that the proposed assignment is one which in the circumstances a reasonable and properly advised trustee could enter into in the exercise of its powers.
The application is supported by witness statements from Bruce John McNess an associate of BESTrustees Plc, the sole trustee of the scheme.
Kaupthing, Singer & Friedlander (KSF) was a bank. The scheme's members were certain employees of KSF. KSF is the sponsoring employer of the scheme. The scheme is a defined benefit scheme established to provide benefits to or in respect of members in circumstances such as retirement, serious ill health and death. KSF entered into administration on 8 October 2008.
In accordance with section 75, once an insolvency event occurred (s75(6A)) and the relevant insolvency practitioner has served a notice pursuant to s75(4C) in compliance with s122 of the Pensions Act 2004 declaring that the scheme has failed, then an amount equal to the difference between the assets and liabilities of the scheme as calculated and certified by the scheme actuary shall be treated as a debt due from the employer to the trustee or managers of the scheme.
The scheme failure notice in this case was served and, on 8 January 2009, the Pension Protection Fund (PPF) confirmed it had received the notice. On 28 th May 2009 the scheme submitted a claim in the KSF administration for the s75 debt. At that stage the sum claimed was an estimate. By a report and certificate dated 3 April 2012 the Scheme Actuary certified the s75 debt at £74,652,000. The administrators accepted the s75 debt subject to two potential set offs. One was in relation to sums (£713,079) paid out for the purposes of pension payments made during the period prior to the administration. In effect the scheme had been using KSF as its bank in order to pay benefits to members. This set off was agreed between the trustee and the administrators. The second set off was disputed, with that dispute being resolved in the trustee's favour by the High Court in BESTrustees v Kaupthing Singer & Friedlander [2013] 081 PBLR (010).
Thus today the s75 debt is admitted by the administrators for the purpose of payments of dividends from the administration (subject to the agreed set off). To date the trustees have received £60.26m in dividend payments. That is 81.5p in the £ on the reduced sum of £73.94m.
The trustee wishes to be able to wind up the scheme. The only reason why the scheme cannot commence winding up is because there remains the possibility of further distributions by way of dividends from the KSF estate. The scheme is forced to incur expense whilst waiting for the administration of KSF to come to an end and enable further dividends to be paid. The administrators have stated that the end date for the administration will not be before 2017. The administrators have also indicated what their estimate of the final dividend would be. The figure is set out in Annex A to this judgment. The trustee has spoken to brokers interested in acquiring the debt owed by KSF to the scheme. Brokers have told Mr McNess that they could find buyers for the debt at the rate also set out in Annex A to this judgment.
The trustee obtained a report from KPMG on the valuation of the claim in the KSF administration and calculations from Barnett Waddingham (the scheme actuary) on the costs of running the scheme for another 3–4 years to allow the KSF administration to come to an end as opposed to winding up the scheme once the trustee had assigned the s75 debt. Both the report and the calculations are exhibited by Mr McNess. The relevant figures are set out in Annex A to this judgment. The KPMG report highlights three potential benefits of selling the debt (1) saving scheme running costs, (2) an increased payment potentially achieving more than the administrators' current estimate and (3) certainty of being able to recover the sums now rather than the uncertainties and potential for lower recovery than the administrators' estimates.
Thus the trustee seeks the guidance of the court by bringing this Part 8 claim. The claim was issued on 30 th July 2014. The matter is urgent because the trustee wishes to take advantage of the current market position relating to KSF debt, if it is properly entitled to. The claim was served on the defendant Mr Richard Corbett as a representative defendant and was served on the Pensions Regulator. On 11 th September 2014 Deputy Master Nurse gave directions, including an order confirming that Mr Corbett be appointed to represent all members of the scheme and all those persons (including the unborn and the estates of deceased persons) claiming under and through them.
On 16 th September a short third witness statement of Mr McNess was served which dealt only with recent variations in the price on offer and underlined the urgency of the application. Annex A summarises the reasons for urgency.
Mr Corbett's position is explained in a witness statement of Claire Elizabeth Carroll dated 17 th September 2014. Ms Carroll is a partner in the solicitors firm Eversheds who act for him. Mr Corbett is a member of the scheme, was an employee of Singer & Friedlander for many years and became an executive and later a non-executive director of the bank. He was a trustee of the scheme for five years in the 1990s and has served on an ad hoc consultative committee set up after KSF failed.
Ms Carroll's witness statement addresses the defendant's stance on this application. It deals with the question of the assignability of the s75 debt, draws the court's attention to the key arguments on both sides. Ms Carroll explains that Eversheds have advised Mr Corbett that the arguments presented by the trustee are "comprehensive and coherent" and that the arguments against assignability are not so overwhelming that the application should not be made at all. Ms Carroll concludes on this point by explaining that Mr Corbett supports the trustee's application for a declaration that the debt is assignable.
On the second issue, of whether the court should direct that the proposed assignment is one which in the circumstances a reasonable and properly advised trustee could enter into in the exercise of its powers, Mr Corbett's position is that since neither he nor Eversheds know what the price would be, they cannot comment on a putative assignment. That will be a commercial matter for the trustee to decide upon if it obtains directions from the court. Mr Corbett takes comfort from the trustee's explanation that if the court gives the direction sought, the trustee would review the market carefully and obtain advice from KPMG, Pinsent Masons and leading counsel on whether any offers at that time were reasonable and take into account any change in the likely dividend from the administration in deciding whether accepting an offer to buy the debt was in the members' best interests. Mr Corbett makes no other comment on the second direction sought.
The claim form and the supporting evidence were served on the Pensions Regulator (save for the recent third statement of Mr McNess). It was asked to consider whether it would seek to be joined to the claim and make representations. In an email exchange the solicitors for the trustee drew the Pension Regulator's attention to the principal arguments both ways in relation to the interpretation of s75. In particular the solicitors drew the Pension Regulator's attention to the key issue about the moral hazard provisions in the Pension Act 2004 (see below) which appear to run counter to the trustee's position. The Pension Regulator reviewed the documents provided and decided it did not need to be joined on the application and did not intend to make representations to the court.
Neither Mr Corbett nor his representatives nor any representatives from the Pension Regulator attended the hearing. Ms Agnello invited me to consider whether to require representatives either of Mr Corbett's and/or the Pension Regulator to attend in any event and assist the court by arguing the case against the trustee. I have given this anxious consideration since a decision on any point of this nature is always improved by hearing adversarial argument from both sides of the matter. However in the end I decided not to require such representation from either party, for the following three reasons.
First, in a related case which I deal with below, Bradstock Group Pensions Scheme Trustee Ltd v Bradstock Group Plc and others [2002] ICR 1427 (Charles Aldous QC sitting as a deputy judge of the Chancery Division), none of the parties before the court in that case dissented from the argument about section 75 which was advanced by the trustee there but counsel for the representative...
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