|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> The Pensions Regulator v A Admin Ltd & Ors  EWHC 1378 (Ch) (08 May 2014)
Cite as:  EWHC 1378 (Ch)
[New search] [Context] [View without highlighting] [Printable RTF version] [Help]
Strand, London, WC2A 2LL
B e f o r e :
| In the Matter of : LPA Umbrella Trust LPA Umbrella Trust 2 LPA Umbrella Trust 3 LPA Umbrella Trust 4 Palace Pension Fund Trust
THE PENSIONS REGULATOR
|- and -
|(1) A ADMIN LIMITED
(2) WARWICK PENSIONS ADMINISTRATION LIMITED
(3) LINCOLN PENSIONS ADMINISTRATION LIMITED
(4) BAXENDALE-WALKER LLP
(5) PAUL MICHAEL BAXENDALE-WALKER
Stephen Hackett (instructed by Johnsons) for the First to Fourth Defendants
The Fifth Defendant appeared in person on 26 March 2014 but did not appear and was not represented on 27 March 2014
Hearing dates: 26th and 27th March 2014
Crown Copyright ©
Mrs Justice Rose:
"1. On the true construction of the trust deeds governing the Schemes (as defined in the Amended Particulars of Claim), are the beneficial interests of the Members (as there defined) void for uncertainty?
2. On the assumption that the Schemes constitute occupational pension schemes within the meaning of the Pension Schemes Act and the Pensions Act 1995 and if the answer to question 1 is no, on the true construction of the trust deeds governing the Schemes, do the beneficial interests of Members declared by the trust deeds constitute an entitlement to a pension or a right to a future pension within the meaning of s.91(1) of the Pensions Act 1995 (as amended)?
3. Does s. 91(5) of the Pensions Act 1995 (as amended) limit the exclusion from the general prohibition of s. 91(1) of surrenders for the purpose of providing benefits for the relevant person's widow, widower, surviving civil partner or dependants to surrenders where the new benefits are to be provided under the same scheme as the scheme providing the surrendered benefits?"
i) He enters into a contract set out in the Engagement Letter. This contract is between the individual and a Jersey based company called Minerva Services Limited ('Minerva'). By this contract he applies to become a member of the Lincoln Umbrella Pension Trust ('the UPT') which is established and administered by the Third Defendant ('Lincoln PAL').
ii) The individual then forms a company which is wholly owned and controlled by him. This is referred to as his personal management company or 'PMC'. He becomes a director of that PMC.
iii) He signs and dates a form (the Scheme Membership Letter) by which he agrees to be a member of a specified Lincoln PAL Umbrella Trust registered scheme.
iv) He signs a letter, in his capacity as director of the PMC, by which the PMC agrees to be a principal employer for the purposes of the specified Lincoln PAL Scheme.
v) He signs and dates a transfer value request to his existing pension scheme or provider asking to transfer the value of all his benefits to the Lincoln PAL Scheme with immediate effect.
vi) He signs but does not date a Membership Interest Surrender form by which he surrenders the whole of his interest and entitlement under the Lincoln PAL Scheme for the purpose of providing benefits to his widow and dependants.
1. The Certainty Issue
(1) The First Principal Employer wishes to establish a pension scheme which is a registered pension scheme for the purposes of English law.
(2) The First Principal Employer wishes there to be provided under the trusts of the Scheme exclusively Prescribed Benefits.
(3) The First Principal Employer has contributed the sum of £100 to be held subject to the trusts of this Deed"
i) 'the Beneficiaries' are defined as every Scheme Member;
ii) 'The Fund' is defined as including the £100 and any further property that becomes subject to the trusts, including any 'cash equivalent' received by A. Admin by reason of a direction given by a Scheme Member in respect of property of any other registered pension scheme;
iii) The 'Prescribed Benefits' is defined as 'the benefits prescribed by Schedule 1 to this Deed';
iv) A 'Scheme Member' is defined as any employee from time to time of, amongst others, the First Principal Employer who elects to join the scheme by giving notice;
v) The 'Primary Pension' in respect of any Beneficiary is defined as the Prescribed Benefit payable to such Beneficiary under the trusts of the deed 'which Prescribed Benefit shall be computed in accordance with the provisions of Schedule 1 to this Deed'.
"1. The benefits under the Scheme for any Member shall be exclusively the benefits of such kinds as are prescribed by Part 4 FA 2004 and shall be computed in accordance with the limits prescribed by Part 4 FA 2004.
2. The amount of such prescribed benefits shall be 90% (ninety per cent) from time to time of the maximum amount permissible under Part 4 FA 2004."
"There is no doubt that the first task is to try to ascertain the settlor's intention, so to speak, without regard to the consequences and then, having construed the document, apply the test. The court, whose task it is to discover that intention, starts by applying the usual canons of construction; words must be given their usual meaning, the clause should be read literally and in accordance with the ordinary rules of grammar. But very frequently, whether it be in wills, settlements or commercial agreements, the application of such fundamental canons leads nowhere, the draftsman has used words wrongly, his sentences border on the illiterate and his grammar may be appalling. It is then the duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate common sense and desire to make sense of the settlor's or parties' expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language if it can do so without doing complete violence to it."
i) it is a necessary implication, having regard to the background and surrounding circumstances, that the transfer value received in respect of a particular member was to be applied in and towards the provision of the member's Primary Pension at the discretion of the Trustee and that the deed of trust must be construed accordingly;
ii) that the deed of trust 'on its true construction requires a Member's Primary Pension (as defined) to be calculated by reference to the Transfer Value(s) received by the Scheme at the direction of such Member';
iii) that each Scheme created by the applicable deed of trust is an occupational pension scheme;
iv) and, specifically in response to the assertion of uncertainty, that under the trust deed 'the Member's entitlement is to a Primary Pension consisting of the Prescribed Benefit(s) as defined'. It then says 'The Trustee has a discretion, subject to the limit prescribed as 90% of the maximum amount permissible under Part 4 FA 2004, as to the form and method of provision of the Prescribed Benefit(s)."
What is said therefore is that the computation of the Primary Pension is at the discretion of the Trustee.
"By contrast, the test for legal validity of a Deed [or] other written instrument evidencing such an agreement is whether the contracting parties know what their agreement was. Since the contracting parties had (on the Claimant's own pleaded case) common directorship minds, the common law contractual test of certainty is met by definition."
"no reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language that they have used interpreted in the light of the relevant factual situation in which the contract was made. But the poorer the quality of the drafting, the less willing the court should be to be driven by semantic niceties to attribute to the parties an improbable and unbusinesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis."
2. The Future Pension Issue
"91 Inalienability of occupational pension
(1) Subject to subsection (5), where a person is entitled to a pension under an occupational pension scheme or has a right to a future pension under such a scheme —
(a) the entitlement or right cannot be assigned, commuted or surrendered,
(b) the entitlement or right cannot be charged or a lien exercised in respect of it, and
(c) no set-off can be exercised in respect of it,
and an agreement to effect any of those things is unenforceable.
(2) Where by virtue of this section a person's entitlement to a pension under an occupational pension scheme or right to a future pension under such a scheme, cannot, apart from subsection (5), be assigned, no order can be made by any court the effect of which would be that he would be restrained from receiving that pension.
(4) Subsection (2) does not prevent the making of—
(a) an attachment of earnings order under the Attachment of Earnings Act 1971, or
(b) an income payments order under the Insolvency Act 1986.
(5) In the case of a person ("the person in question") who is entitled to a pension under an occupational pension scheme or has a right to a future pension under such a scheme, subsection (1) does not apply to any of the following, or any agreement to effect any of the following—
(a) an assignment in favour of the person in question's widow, widower or dependant,
(b) a surrender, at the option of the person in question, for the purpose of—
(i) providing benefits for that person's widow, widower, surviving civil partner or dependant, or
(ii) acquiring for the person in question entitlement to further benefits under the scheme,
(c) a commutation—
(i) of the person in question's benefit on or after retirement or in exceptional circumstances of serious ill health,
(ii) in prescribed circumstances, of any benefit for that person's widow, widower, surviving civil partner or dependant, or
(iii) in other prescribed circumstances, …"
3. The Same Scheme Issue
"(b) a surrender, at the option of the person in question, for the purpose of—
(i) providing benefits for that person's widow, widower, surviving civil partner or dependant, or
(ii) acquiring for the person in question entitlement to further benefits under the scheme, …"
"77(4) A scheme may, at the option of the member, enable surrender—
(a) to provide benefit for the member's widow, widower or dependant;
(b) to acquire for the member transfer credits under the rules of another occupational pension scheme or rights under the rules of a personal pension scheme or a self-employed pension arrangement;
(c) to acquire for the member entitlement to further benefits under the same scheme, relating both to a period of pensionable service previously terminated and also to a subsequent period of service in relevant employment."
"4.14.3 The prohibition against dealings with pension entitlements during a scheme member's lifetime is designed to fulfil two objectives. First, it is intended to avoid additional administrative burdens which would arise if the scheme administrator had to recognise the title of assignees and chargees. Secondly, and more fundamentally, the purpose of a pension scheme is not to build up an assignable asset but to provide income to support members upon their retirement and to their dependants on the member's death. The State has an interest in such provision, for in its absence the State itself may have to provide the requisite retirement support. Accordingly approval of a scheme for tax purposes is dependant on the inclusion of a provision in the trust deed or rules precluding assignment or surrender of a pension except within the permissible limits of commutation or by way of surrender or allocation of pension to provide a pension for a surviving spouse or dependant, or exchange of a non-indexed for an indexed or a lower indexed or a higher non-indexed pension of equal actuarial value."
"Where an individual surrenders rights under a registered pension scheme, the value of what is surrendered is treated as an unauthorised payment. This is intended to prevent individuals avoiding tax or liberating funds. There are two key exceptions: rights can be given up in favour of higher pensions for dependants; or rights can be given up to fund the making of an authorised surplus payment to the scheme's sponsoring employer (section 172A of FA 2004) … "
"A surrender of rights in favour of dependants will be prevented from being treated as an unauthorised payment only when the dependants' newly acquired rights are provided under the same pension scheme."
"And the canons of statutory construction, as we all know, are that when the Government says, "Oh, oops, the legislation does not work so we are amending it", you do not get to say that the legislation did work originally. That is the canon of statutory construction that we all work by otherwise we are in anarchy."
"Anyway, we do know that the Government's policy is, "It's their money." As Pensions Minister, Steve Webb, said, "It is people's choice whether to buy Italian Lamborghini sports cars with their pensions' cash." That is where it all comes from. People are free to spend money in their own way. This is not Pensions Minister, Steve Webb, making it up. This is the policy of Her Majesty's Government. Mr. Cameron said that the changes will benefit 400,000 people who work hard, save and do the right thing. This is about our values, the Government's values. It is about saying that the best people to look after Mr. Kane's money are those who earned it in the first place. We are dealing in this case with an utterly artificial state of affairs created, like an ice sculpture, by the Regulator. While there was an unpublished etheric public policy of State control of pensions then there was a foundation, an etheric foundation granted, for the Regulator's case. What the Regulator's case amounts to at paragraph 3 is that it is not their money and that has been expressly stated in the skeleton argument. It is not their money. I am afraid Her Majesty's Government disagrees with the Regulator. … The policy of this Government is to treat the persons in this country who earn the money and save the money as the person who are sovereign with respect to that money. Any interpretation of any pensions legislation must pay homage and respect to that policy."
i) The application by Mr Baxendale-Walker dated 18 March 2014 in the Part 8 claim seeking final judgment in that claim;
ii) The application by Mr Baxendale-Walker dated 14 March 2014 in the main proceedings, seeking to consolidate the Part 8 claim with the main proceedings;
iii) The application in the Part 8 claim dated 17 March 2014 by which the entities which are the First to Fourth Defendants in the main proceedings seek to be joined as applicants in the Part 8 claim;
iv) The application issued by Mr Baxendale-Walker on 13 March 2014 seeking to strike out paragraphs 28.5 and 37.2 of the Amended Particulars of Claim in the main proceedings. Paragraph 28.5 alleges that transfers of pension funds to the scheme would not comply with sections 164 and 196 of the Finance Act 2004 and paragraph 37.2 alleges that an authorised surplus payment charge would arise in respect of the payment of the net transfer value because section 6 of the Corporation Tax Act 2009 does not apply.