ITV PLC and others v The Pensions Regulator with Box Clever Trustees Ltd as an Interested Party
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Rose,Judge Herrington,Member Abrams |
| Neutral Citation | [2018] UKUT 0164 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Financial Services,18 May 2018 |
| Date | 18 May 2018 |
| Published date | 18 May 2018 |
[2018] UKUT 0164 (TCC)
Reference:FS/2012/0001-5
PENSIONS REGULATOR – Financial support direction – pension scheme of joint
venture company insufficiently resourced – jurisdiction – whether Targets
connected with or an associate of the employer at the relevant time – yes – whether
the legislation can be applied to events all of which occurred before legislation
came into force – yes – whether different treatment by Regulator of Targets to co-
joint venturer lawful- yes- whether presence of moral hazard necessary – no –
whether reasonable to impose financial support direction on the Targets – yes –
Pensions Act 2004 ss 43, 100 & 103 – references dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
GRANADA UK RENTAL & RETAIL LIMITED
GRANADA MEDIA LIMITED
GRANADA GROUP LIMITED
GRANADA LIMITED
ITV plc
Applicants
- and -
THE PENSIONS REGULATOR Respondent
- and -
BOX CLEVER TRUSTEES LIMITED
Interested
Party
TRIBUNAL: MRS JUSTICE ROSE, CHAMBER PRESIDENT
JUDGE TIMOTHY HERRINGTON
MEMBER IAN ABRAMS
Sitting in public at The Rolls Building, Fetter Lane, London EC4A 1NL on 29, 30
and 31 January, and 1, 2, 5, 7, 8 & 9 February 2018
Lord Pannick QC, David Railton QC, Michael Furness QC, Edward Sawyer and
James McCreath, instructed by Hogan Lovells International LLP, Solicitors, for
the Applicants
Jonathan Hilliard QC, Benjamin Faulkner and Tim Matthewson, instructed by
Eversheds Sutherland (International) LLP, Solicitors, for the Interested Party
Nicolas Stallworthy QC, Gabriel Moss QC, Martin Chamberlain QC and James
Walmsley, instructed by The Pensions Regulator, for the Respondent
© CROWN COPYRIGHT 2018
2
DECISION
I. INTRODUCTION AND MATTERS REFERRED
1. This decision concerns references made under s 103 of the Pensions Act 2004 5
(“PA 2004”). The references relate to a determination made on 21 December 2011 by
the Determinations Panel (“DP”) of the Respondent. The Pensions Regulator (“the
Regulator”) contends that five companies from t he corporate group of the well-known
broadcasting company ITV should be t he subject of a Financial Support Direction
(“FSD”) issued pursuant to s 43 PA 2004 so as to require them to provide fi nancial 10
support to address an estimated deficit of £115 million in the Box Clever Group Pension
Scheme (“the Scheme”). The companies which are the subject of the DP’s
determination are the Applicants in the reference and are referred to in this decision as
the “Targets”. Box Clever Trustees Limited, the Trustee of the Scheme (“the Trustee”),
has been joined to the reference as an interested party. 15
2. The Regulator’s case for an FSD is based on the Targets’ involvement in a Joint
Venture known as Box Clever (the “Joint Venture” or “Bo x Clever”) which existed
between 1999 and 2003. The basic history of the Joint Venture, which is not in dispute,
can be summarised as follows:
(1) Box Clever was established in 1999-2000 when the Grana da group of 20
companies (now part of the ITV group) agreed to combine its TV rental
business with the TV rental business of its competitor, the Thorn group.
(2) Granada and Thorn each sold their respective rental businesses to the
newly-created Box Clever group of companies, which was owned 50-50 by
Granada and Thorn. 25
(3) The transaction was agreed in 1999 and completed in June 2000.
(4) The purchase price payable by Box Clever for the rental businesses it
acquired was £980 million, of which £600 million was payable to Granada
and £380 million was payable to Thorn.
(5) The purchase was funded by Box Clever borrowing £860 million from 30
Westdeutsche Landesbank (“WestLB”); the loan was secured on the Box
Clever group’s assets. Using the loan monies, (simplifying somewhat) Box
Clever paid approximately £530 million to Granada and the rest to Thorn
in respect of the purchase price. The balance of the purchase price was left
outstanding in the form of loan notes. Neither Granada nor Thorn was 35
liable for the monies lent by WestLB, the borrower being Box Clever.
(6) From June 2000, Box Clever operated the combined rental business.
(7) In October 2001, Box Clever established the Scheme to provide pension
benefits for its employees. The Box Clever companies (and not Granada or
Thorn) were the employers of the Scheme and were liable to fund it. 40
3
(8) Unfortunately, the Box Clever business did not prosper; it fell behind
with the repayments to WestLB and ended up deeply insolvent. During
September-November 2003, WestLB appointed administrative receivers
(“the Administrative Receivers”) over the princ ipal Box Clever operating
companies. 5
(9) Thereafter, the Administrative Receivers took over the Box Clever
business and sold it. All the proceeds of sale went to WestLB as secured
lender.
(10) Neither Granada nor Thorn had anything further to do with the Box
Clever business after the Administrative Receivers were appointed in 2003. 10
(11) According to figures provided by the Trustee, at the time of the
Administrative Receiverships, t he Sc heme had a funding deficit of some
£25 million on a gilts-matching basis, which Box Clever was unable to meet
due to its insolvency. The reported deficit has since grown to around £115
million. 15
3. Following the failure of the Joint Venture, the Scheme was closed to new accruals
in December 2003 (but not wound up) and discussions and negotiations took place from
2004 onwards between the Trustee and the ITV group as to whether ITV would be
prepared for ex-Granada group members of the Scheme to be transferred back into what
had been the Granada Pension Scheme (now the ITV Pension Scheme). Similar but 20
less protracted discussions took place with Thorn.
4. These proposals as regards Granada became conditional upon the Trustee
withdrawing any request to the Regulator for the issue of an FSD and the Trustee
supporting any application that ITV might make to the Regulator for a “clearance
statement” under s 42 and s 46 of PA 2004 in respect of the Joint Venture (explained 25
below).
5. Negotiations as to the terms of any such transfer c ontinued intermittently until
December 2008, when ITV replaced previous offers with successive, diminishing offers
instead to augment ex-Granada members’ be nefits that had been retained in the ITV
Scheme. This was not accepted, and ITV withdrew from negotiations entirely in 30
October 2009.
6. On 17 November 2009 ITV applied (on behalf of itself and many other companies
within the ITV group, including all the Targets) for cleara nce statements under ss 42
and 46 of PA 2004. If granted, such clearance statements would have bound the
Regulator to refrain from exe rcising its powers under ss 38 or 43 of PA 2004. This 35
clearance application by ITV was refused in March 2010. ITV’s application for
clearance was modelled on a n application for clearance that had been made by
Granada’s partner in the Joint Venture (by then called the Carmelite group) in 2008.
That application for c learance had also not resulted in the grant of any clearance
statement, but had resulted in a letter of comfort dated 25 February 2009 being issued 40
by the Regulator to Carmelite that it would not pursue an FSD against them. That letter
was issued to Carmelite on the basis of a view then held by the Regulator as to the legal
effect of the appointment of an administrative receiver on its jurisdiction to issue an
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