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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> ITV Plc & Ors v The Pensions Regulator & Anor [2015] EWCA Civ 228 (24 March 2015) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2015/228.html Cite as: [2015] EWCA Civ 228, [2015] WLR(D) 139, [2015] Pens LR 389, [2016] ICR 206, [2015] 4 All ER 919 |
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ON APPEAL FROM THE UPPER TRIBUNAL
(Tax and Chancery Chamber)
Judge Herrington
FS/2012/0001-5
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE FLOYD
and
LORD JUSTICE CHRISTOPHER CLARKE
____________________
ITV Plc & Ors | ||
Appellants | ||
- and - | ||
(1) The Pensions Regulator | ||
(2) Box Clever Trustees Limited | ||
Respondents |
____________________
(Transcript of the Handed Down Judgment of
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Mr Nicolas Stallworthy QC, Mr Ben Hooper and Mr James Walmsley (instructed by The Pensions Regulator) for the 1st Respondent
Mr Jonathan Hilliard and Mr Benjamin Faulkner (instructed by Eversheds LLP) for the 2nd Respondent
Hearing dates: 16-17 December 2014
____________________
Crown Copyright ©
LADY JUSTICE ARDEN:
FACTUAL BACKGROUND
Formation of Box Clever and the Joint Venture transaction
Investigation by TPR and decision to take regulatory action
168…it is our view that it would be reasonable to issue FSDs to the Targets and to require them to secure that financial support is put in place for the Scheme, within six months of the issue of the FSDs. The factors that have weighed most heavily with us are the value of benefits received by the Targets from the Employers and the Targets' relationship with those Employers. Overall it seems to us that this is a case where the Scheme's principal employer, BCT, was set up by the Granada and Thorn groups as part of a transaction that aimed to extract value from the consumer rentals businesses of those groups, but leave them able to share in any future profit. A requirement of that transaction was that a pension scheme be set up for transferring employees; no value could have been extracted without this. Valuable financial benefits were received by the Targets, while the structure used to obtain them required BCT to borrow £860m from West LB, left all of BCT's assets charged to secure that borrowing, and left the Scheme with a weak employer as a result. It is also relevant that this borrowing was not secured on any assets of Granada or Thorn group companies, insulating them from financial difficulties of BCT. We do not find misconduct on the part of the Targets, but consider the issue of FSDs to be an appropriate and reasonable response to the events of 1999 to 2003 in relation to BCT and the Scheme.
Reference to the Upper Tribunal: TPR pleads new case in reply
… the consideration paid to [Granada] reflected a market valuation exercise that had been [the] subject of due diligence…[TPR] does not contend that the price paid for the businesses on their hive down to the Joint Venture was improperly or negligently derived. Yet that does not prevent it being entirely clear that [Granada] received significant benefits. In the event, it is plain that the valuation was based on a business plan that proved overly optimistic and that more value was extracted from the businesses than the Joint Venture could ultimately bear.
reduced to the status of a mere preliminary hurdle, after which [TPR] and the trustee can advance their "real" case or a newly thought-up case before the UT. To permit such a wholescale modification would be to deprive the targets of one of the important protections built into the FSD legislation, namely that after a certain period a target may not be faced with a claim for the imposition of an FSD based on a given set of facts.
The true nature of the oppression inherent in what the Regulator and Trustee now seek to do is thrown into sharp relief by the extraordinary and, in the Targets' view, disgraceful, procedural history of this case. Not only did the Regulator fail to bring the FSD claims until 2011 (even though the relevant facts occurred in 1999-2003), it then subjected the Targets to an expedited process before the Panel (under 2½ months from Warning Notice to hearing); it subsquently, in the two weeks before the Panel hearing, substantially changed its case (see the Panel's Reasons at paragraphs 15-16 and 20); and it now proposes to change its claims again, by expanding its case some 18 months into the Upper Tribunal proceedings, with no end realistically in sight (as to which see Reason 4 below). Furthermore, the Regulator has refused to be drawn on the quantum of its claims and it appears to envisage that another, subsequent regulatory process would deal with the amount of any FSDs. Left unchecked, the Regulator will turn this case into the regulatory equivalent of Jarndyce v Jarndyce.
DECISION OF THE UPPER TRIBUNAL
…when as in a case such as this the Trustee is essentially taking a role of support to the regulatory action proposed then it should work within the same boundaries as TPR. So if the boundary in this case is held to be the scope of the matters within the scope of the Warning Notice then the Trustee's pleadings should be limited to matters falling within that boundary. Sight should not be lost of the fact that the subject matter of the reference is whether it is appropriate to issue an FSD and the powers to do so fall upon TPR. The prime responsibility for making that case falls upon TPR. It may be supported in that quest by the Trustee, who may be able to bring its own perspective and deal with matters that are more properly within its own knowledge than TPR, but ultimately it is TPR who has to justify the proposal and it should do so within clearly defined boundaries. The Interested Party is just that, someone who is interested in the structure of the proceedings and should be able to make representations accordingly, but does not have prime responsibility for making the case for an FSD. That role falls to TPR. It is a recipe for chaos if the Trustee is free to advance entirely different arguments of its own that fall outside these boundaries at the tribunal stage. That is not to say that it should not be permitted to advance arguments that do fall within the scope of the matters referred, even if they are not advanced by TPR. (paragraph 111)
It follows that the starting position is that TPR, and by analogy the Trustee, should be free to present its case in reliance on any facts and circumstances that were within the scope of the allegations made in the Warning Notice and which were canvassed before the Determinations Panel and in doing so may rely on any evidence relevant to these facts and circumstances, whether or not that evidence was available to the Determinations Panel. This follows from the de novo nature of the Tribunal's jurisdiction and the specific provisions of s 103(2) of the Act which allow the Tribunal to consider any evidence relating to the subject matter of the reference whether or not it was available to TPR at the relevant time. Although s 103(2) suggests that the Tribunal has a discretion whether to admit such evidence (provided of course it is relevant to the issues in dispute), in my view it should not normally refuse to do so in circumstances where it relates to the facts and circumstances within the scope of the matter referred.
If it were proper that they should be aired before the Determinations Panel then in my view it is equally proper that they are capable of being aired again before the Tribunal. (para 118)
171. My overall conclusion on The Targets' Strike Out Application is therefore that the effect of the Responses is not to alter the core of the case against the Targets as originally set out in the Warning Notice and considered before the Determinations Panel. During the course of the process before the Determinations Panel the Targets sought to defend the action on the basis of the positive assertions they made regarding the Propriety Matters and these issues therefore formed part of the facts and circumstances before the decision-maker and therefore within the subject matter of the determination notice that may be referred to the Tribunal. In those circumstances, bearing in mind the Tribunal's de novo jurisdiction and the undesirability of narrowing its enquiry it should be able to consider the Propriety Matters and their significance in the context of a request for an FSD. The Responses should therefore stand and the application is dismissed.
PARTIES' ARGUMENTS ON WHETHER TPR CAN RELY ON ADDITIONAL GROUNDS
Targets' submissions
133. On this point, for the same reasons that we consider that our discretion to allow the Director to submit further evidence should be exercised only sparingly, we accept Napp's basic submission that, in principle, the Director should not be permitted to advance a wholly new case at the judicial stage, nor rely on new reasons. To decide otherwise would make the administrative procedure, and the safeguards it provides, largely devoid of purpose; the function of this Tribunal is not to try a wholly new case. If the Director wishes to make a new case, the proper course is for the Director to withdraw the decision and adopt a new decision, or for this Tribunal to remit.
i) Financial Conduct Authority v Hobbs [2013] Bus L R 1290, CA: Lord Pannick submits that the context was very different. It concerned the question of whether a person was fit and proper, which involved looking at the future. It was distinguishable because the new grounds, on which this court held the regulator could properly rely, were lies uttered only after the WN.
ii) R (o/a Willford) v Financial Services Authority [2013] EWCA Civ 677, Lord Pannick submits that this case does not help for a number of reasons. I need mention only three. First, this court did not consider the question of widening the WN. Second, it was common ground in that case that additional charges could be laid in the Tribunal. Third, this court did not go into detail about the limits placed on TPR on receiving material additional to the WN.
Submissions for TPR
A narrowing of the inquiry by the [Upper] Tribunal that excludes relevant material from its assessment of an applicant is to be avoided provided, of course, that the applicant is given a fair opportunity to address the [FCA's] case.
Submissions for the trustee
MY CONCLUSION -TPR CAN RELY ON MATTERS NOT RAISED IN THE WN
9. Contents of the Warning Notice will ordinarily include:
(i) The circumstances of the case, the action or decision under consideration and the grounds and evidence on which the Warning Notice is based, including where appropriate the details of any alleged breach of the law;
(ii) Material received or obtained by the regulator that might reasonably be considered to support or undermine the case for the use of the power(s) (Excluding any material that is legally privileged)…
(iii) Details of the specific powers that are under consideration…
[12] 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 s 43(2));
– the imposition of the time limit in s 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 s 43(5) and (7));
– potential targets must receive a warning notice so that they can make representations (section 96(2)(a)).
- a test of relevancy (paragraph 114), or
- a test whether the new allegation has been "aired" before the Determinations Panel (paragraph 118) or
- a test whether the new allegation affected the core allegations against the targets or
- whether the issue was aired in the WN or before the Determinations Panel or
- whether the issues formed part of the facts and circumstances before the Determinations Panel (paragraph 171).
RESULT OF APPEAL
Lord Justice Floyd:
Lord Justice Christopher Clarke.
Financial Support Directions
43. (1) This section applies in relation to an occupational pension scheme other than—
(a) a money purchase scheme, or
(b) a prescribed scheme or a scheme of a prescribed description.
(2) The Regulator may issue a financial support direction under this section in relation to such a scheme if the Regulator is of the opinion that the employer in relation to the scheme—
(a) is a service company, or
(b) is insufficiently resourced,
at a time determined by the Regulator which falls within subsection (9) ("the relevant time").
(3) A financial support direction in relation to a scheme is a direction which requires the person or persons to whom it is issued to secure—
(a) that financial support for the scheme is put in place within the period specified in the direction,
(b) that thereafter that financial support or other financial support remains in place while the scheme is in existence, and
(c) that the Regulator is notified in writing of prescribed events in respect of the financial support as soon as reasonably practicable after the event occurs.
(4) A financial support direction in relation to a scheme may be issued to one or more persons.
(5) But the Regulator may issue such a direction to a person only if—
(a) the person is at the relevant time a person falling within subsection (6), and
(b) the Regulator is of the opinion that it is reasonable to impose the requirements of the direction on that person.
(6) A person falls within this subsection if the person is—
(a) the employer in relation to the scheme,
(b) an individual who—
(i) is an associate of an individual who is the employer, but
(ii) is not an associate of that individual by reason only of being employed by him, or
(c) a person, other than an individual, who is connected with or an associate of the employer.
(7) The Regulator, when deciding for the purposes of subsection (5)(b) whether it is reasonable to impose the requirements of a financial support direction on a particular person, must have regard to such matters as the Regulator considers relevant including, where relevant, the following matters—
(a) the relationship which the person has or has had with the employer (including, where the employer is a company within the meaning of subsection (11) of section 435 of the Insolvency Act 1986 (c 45), whether the person has or has had control of the employer within the meaning of subsection (10) of that section),
(b) in the case of a person falling within subsection (6)(b) or (c), the value of any benefits received directly or indirectly by that person from the employer,
(c) any connection or involvement which the person has or has had with the scheme,
(d) the financial circumstances of the person, and
(e) such other matters as may be prescribed.
(8) A financial support direction must identify all the persons to whom the direction is issued.
(9) A time falls within this subsection if it is a time which falls within a prescribed period which ends with the [as at 30 September 2011: determination by the Regulator to exercise the power to issue] [as at the date of this judgment: giving of a warning notice in respect of] the financial support direction in question….
The Regulator's procedure in respect of its regulatory functions
93 (1) The Regulator must determine the procedure that it proposes to follow in relation to the exercise of its regulatory functions.
(2) For the purposes of this Part the "regulatory functions" of the Regulator are—
…
(c) the reserved regulatory functions (see Schedule 2),
(3) The Determinations Panel must determine the procedure to be followed by it in relation to any exercise by it on behalf of the Regulator of—
(a) the power to determine whether to exercise a regulatory function, and
(b) where the Panel so determines to exercise a regulatory function, the power to exercise the function in question.
(4) The procedure determined under this section—
(a) must provide for the procedure required under—
(i) section 96 (standard procedure), and
(ii) section 98 (special procedure), and
(b) may include such other procedural requirements as the Regulator or, as the case may be, the Panel considers appropriate.
(5) This section is subject to—
(a) sections 99 to 104 (the remaining provisions concerning the procedure in relation to the regulatory functions), and
(b) any regulations made by the Secretary of State under paragraph 19 of Schedule 1.
Standard Procedure
96 (1) The procedure determined under section 93 must make provision for the standard procedure.
(1A) In any case where—
(a) a warning notice is given to any person in respect of a contribution notice under section 38, and
(b) the contribution notice under consideration would be issued wholly or partly by reference to the Regulator's opinion that the material detriment test is met in relation to an act or failure,
the standard procedure must provide for the following matters.
(1B) The matters are—
(a) a requirement for the warning notice to explain the general effect of section 38B, and
(b) a requirement for the person to be given an opportunity before the contribution notice is issued to show the matters mentioned in subsection (2) of that section.
(2) The "standard procedure" is a procedure which provides for—
a) the giving of notice to such persons as it appears to the Regulator would be directly affected by the regulatory action under consideration (a "warning notice"),
(b) those persons to have an opportunity to make representations,
(c) the consideration of any such representations and the determination whether to take the regulatory action under consideration,
(d) the giving of notice of the determination to such persons as appear to the Regulator to be directly affected by it (a "determination notice"),
(e) the determination notice to contain details of the right of referral to the Tribunal under subsection (3),
(f) the form and further content of warning notices and determination notices and the manner in which they are to be given, and
(g) the time limits to be applied at any stage of the procedure.
(3) Where the standard procedure applies, the determination which is the subject-matter of the determination notice may be referred to the Tribunal . . . by—
(a) any person to whom the determination notice is given as required under subsection (2)(d), and
(b) any other person who appears to the Tribunal to be directly affected by the determination.
(4) Subsection (3) does not apply where the determination which is the subject-matter of the determination notice is a determination to issue a clearance statement under section 42 or 46.
(5) Where the determination which is the subject-matter of the determination notice is a determination to exercise a regulatory function and subsection (3) applies, the Regulator must not exercise the function—
(a) during the period within which the determination may be referred to the Tribunal . . ., and
(b) if the determination is so referred, until the reference, and any appeal against the Tribunal's determination, has been finally disposed of….
(7) In this section "the Tribunal", in relation to any reference under subsection (3), means—
(a) the First-tier Tribunal, in any case where it is determined by or under Tribunal Procedure Rules that the First-tier Tribunal is to hear the reference;
(b) the Upper Tribunal, in any other case.
97 Special procedure: applicable cases
(1) The special procedure in section 98 (and not the standard procedure) applies to—
(a) a case falling within subsection (2),
(b) a case falling within subsection (3), and
(c) a case falling within subsection (4).
(2) A case falls within this subsection if—
(a) the Regulator considers that it may be necessary to exercise a regulatory function listed in subsection (5) immediately because there is, or the Regulator considers it likely that if a warning notice were to be given there would be, an immediate risk to—
(i) the interests of members under an occupational or personal pension scheme, or
(ii) the assets of such a scheme,
References in relation to decisions of Regulator
103 (1) . . .
[(1A) . . .]
(2) . . .
[(2A) This section applies to references to a tribunal in relation to a decision of the Regulator.]
(3) On a reference, [the tribunal concerned] may consider any evidence relating to the subject-matter of the reference, whether or not it was available to the Regulator at the material time.
(4) On a reference, the [the tribunal concerned] must determine what (if any) is the appropriate action for the Regulator to take in relation to the matter referred to [it].
(5) On determining a reference, [the tribunal concerned] must remit the matter to the Regulator with such directions (if any) as [it] considers appropriate for giving effect to its determination.
(6) Those directions may include directions to the Regulator—
(a) confirming the Regulator's determination and any order, notice or direction made, issued or given as a result of it;
(b) to vary or revoke the Regulator's determination, and any order, notice or direction made, issued or given as a result of it;
(c) to substitute a different determination, order, notice or direction;
(d) to make such savings and transitional provision as the [tribunal concerned] considers appropriate.
(7) The Regulator must act in accordance with the determination of, and any direction given by, the [tribunal concerned] (and accordingly sections 96 to 99 (standard and special procedure) do not apply).
(8) The [tribunal concerned] may, on determining a reference, make recommendations as to the procedure followed by the Regulator or the Determinations Panel.
(9) An order of the [tribunal concerned] may be enforced—
(a) as if it were an order of [the county court], or
(b) in Scotland, as if it were an order of the Court of Session.