Trustees of the Lehman Brothers Pension Scheme and another v LB Re Financing No Ltd and another
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden |
| Judgment Date | 21 June 2013 |
| Neutral Citation | [2013] EWCA Civ 751 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2012/1906, 1912 & 1915 |
| Date | 21 June 2013 |
[2013] EWCA Civ 751
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE UPPER TRIBUNAL TAX & CHANCERY CHAMBER
(FINANCIAL SERVICES)
UPPER TRIBUNAL JUDGES
COLIN BISHOPP & TIMOTHY HERRINGTON
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Kitchin
and
Lord Justice Briggs
Case No: A3/2012/1906, 1912 & 1915
Mr Andrew Simmonds QC and Mr. Joseph Goldsmith (instructed by Dentons UKMEA LLP and Linklaters LLP) for the Appellant (The Denton and Linklaters Targets)
Mr. Andrew Spink QC and Mr. Richard Hitchcock (instructed by Weil, Gotshal and Manges LLP) for the Appellant (The Weil Targets)
Mr Nicolas Stallworthy QC (instructed by Travers Smith LLP) for the First Respondent (The Trustees of the Lehman Brothers Pension Scheme)
Ms Raquel Agnello QC, Mr. Jonathan Hilliard and Mr. Thomas Robinson (instructed by The Pensions Regulator) for the Second Respondent
Approved Judgment
Hearing dates : 30 April - 3 May 2013
This is the judgment of the Court, to which we have all contributed.
The issue on this appeal is whether the trustees of a pension scheme for employees of the Lehman group ("the Trustees") can exercise the statutory right of persons "directly affected" by a determination of the Determinations Panel of the Pensions Regulator appointed pursuant to the Pensions Act 2004 ("PA 2004") to make a reference to the Upper Tribunal. Sections 96 and 103 of the PA 2004 establish a reference procedure to allow the Upper Tribunal's directions to be sought.
On 13 September 2010, nearly two years after the well-known collapse of the Lehman group, the Determinations Panel of the Pensions Regulator decided to exercise its statutory power under sections 10 and 43 of the PA 2004 and schedule 2 to that Act to issue a financial support direction ("FSD") to six Lehman group companies. An FSD may be issued in specified circumstances to companies ("targets") to make them responsible for securing financial support for a pension scheme for employees in defined circumstances where those employees are employed by an associated service company. The Trustees wish the number of targets to be increased by the addition of a further thirty-eight Lehman group companies (together "the Targets"), which the Regulator also sought (unsuccessfully) to do before the Determinations Panel.
Under section 43(9) of the PA 2004, an FSD must be issued within a period of two years after a past date, when various conditions were fulfilled, selected by the Regulator. The FSD in this case was in time but only by a whisker, since the date of the determination to issue the FSD was the day before the second anniversary of that selected date. Now the two-year period has elapsed, the Appellants say that the Regulator cannot issue an FSD against other Lehman group companies based on the same issue date.
The Targets which the Trustees sought to have added applied to the Upper Tribunal to strike out this application for a reference by the Trustees. This application was made on a number of grounds, all of which failed and only two of which are now pursued. All but one of the thirty eight Targets appeal from that dismissal in three groups: the Denton Targets, the Linklaters Targets and the Weil Targets (we are not concerned with any differences between the three groups). The six Targets identified in the Panel's determination also made their own reference from the determination but we are not concerned with that reference.
The two extant grounds for dismissal of the Trustees' application for a reference are that:
i) the Trustees lack standing to make a reference to the Upper Tribunal, it being common ground that for this purpose they have to be persons ("DAPs") who appear to the Tribunal to be"directly affected" by the determination for the purposes of section 96(3) ("the DAPs issue"); and that
ii) any determination by the Upper Tribunal would itself be caught by the two-year time limit ("the Time Limit issue").
For the reasons given in this judgment, we agree with the Upper Tribunal on both issues, and accordingly we dismiss this appeal.
Both issues are issues of statutory interpretation. The relevant parts of the principal statutory provisions to which we refer are included in the appendix to this judgment. Those provisions are shown in the appendix in the form in which they are currently in force, save for section 43(9) which is shown in the form in which it stood prior to amendment by the Pensions Act 2011.
For the purpose of determining those issues of interpretation, little more needs to be said about the facts, which are more fully set out in the decision of the Upper Tribunal.
As regards the statutory scheme, an FSD does not stipulate how much each target must contribute to the pension scheme. It merely directs the targets to produce a plan ("a financial support arrangement") that will ensure financial support for the pension scheme's liabilities to the satisfaction of the Regulator (see sections 43 and 45). If the targets fail to do this, the Regulator may issue a contribution notice to each target requiring payment of a specified sum to the scheme's trustees (section 47). Again the question whether a contribution notice should be issued may be referred to the Upper Tribunal for it to decide the appropriate action (section 96).
A determination to issue an FSD may be referred to the Upper Tribunal under section 96 by either the persons to whom the determination to issue the FSD was addressed or any persons directly affected by the determination (section 96(3)). The Upper Tribunal has wide powers on a reference to it under section 96(3): see section 103(5). Those powers are sufficiently wide to include a direction to substitute a new FSD which is addressed to new targets.
A salient feature of the statutory scheme for the issue of FSDs is the balance struck between the interests of the members of the pension scheme and the interests of potential targets (and their stakeholders). In particular, the interests of targets are protected by:
• the requirements already mentioned for the decisions to be made by the Determinations Panel and not the Regulator;
• the requirement for FSDs only to be given in the circumstances specified on the face of the PA 2004 (see section 43(2));
• the imposition of the time limit in section 43(9);
• aspects of the process applicable in this case. Most relevantly:
• the Regulator can only issue an FSD if satisfied that (among other matters) it is reasonable to do so and the Act prescribes a number of matters to be taken into account in reaching this conclusion (see section 43(5) and (7));
• potential targets must receive a warning notice so that they can make representations (section 96(2)(a)).
Warning notices must also be given to all persons "directly affected" by the regulatory action under consideration (section 96(2)(a)). In fact the warning notices in this case did not treat the Trustees as directly affected persons for that purpose, but that cannot affect the question whether, as a matter of law, they are persons directly affected by the determination for the purposes of section 96(3)(b). By contrast, the Determinations Panel did treat them as directly affected by its determination, but this is equally irrelevant.
The DAP issue
We proceed on the basis that the reference procedure complies with the right of access to a court guaranteed by Article 6 of the European Convention on Human Rights in fulfilment of the UK's international obligations. It is therefore reasonable to assume that by empowering DAPs to apply to the Upper Tribunal under section 96(3), Parliament intended to cover all persons who would be entitled to bring proceedings under the similar wording in CPR 54.1(2)(f) or under Article 6.
In its careful and comprehensive decision, the Upper Tribunal took the view that Trustees were clearly directly affected by the determination since it concerned "the creation of a potential benefit that is conferred on them": decision, paragraph 57. The benefit to the Trustees was "the mirror image" of the detriment to the Targets. In addition, in the Upper Tribunal's view, the Trustees were rightly treated by the Determinations Panel as persons affected by its decision and it would be odd if their rights were narrower on a reference than they were before the Determinations Panel. The Upper Tribunal considered that it was unnecessary to decide whether the Determinations Panel was an "independent and impartial tribunal" for the purposes of Article 6.
Section 96(3) gives the Upper Tribunal power to determine whether a person has standing within that provision, but it is common ground that the Upper Tribunal's decision is subject to review. As the Upper Tribunal pointed out, the fact that this power was given to it suggests that the determination of whether a person was "directly affected" by a determination is likely to be case-sensitive. Had the question of who is directly affected been a pure matter of law, the question whether a person was directly affected by a determination would not have been left to an exercise of judgment by the Upper Tribunal.
The argument advanced by the appellants on this issue was advanced orally by Mr Andrew Spink QC, instructed by the Weil targets. His argument is in effect a Morton's Fork: if the provision is to be interpreted in accordance with the domestic procedure rules, the Trustees...
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