| INSOLVENCY— Voluntary arrangement — Company — Claims by trustees of pension scheme in relation to deficit in scheme fund — Quantification of claims — Application of hindsight principle — Whether supervisors required to accept scheme actuary’s quantification — Pensions Act 1995, s 75
In re Federal-Mogul Aftermarket UK Ltd and others [2008] EWHC 1099 (Ch); [2008] WLR (D) 166
Ch D: David Richards J: 21 May 2008
There was nothing in the rationale underlying the general application of the hindsight principle to contingent debts which should restrict its application to whether there had been an initial triggering event.
David Richards J, sitting in the Chancery Division, so held on an application for directions by James John Gleave, Anne O’Keefe and Stuart Mackellar, the joint supervisors of the company voluntary arrangements (“CVAs”) of 51 companies in the Federal-Mogul Group, including the 14 companies (“the companies”) the subject of the application in relation to claims by the trustees of the T & N Retirement Benefit Scheme (1989) (“the scheme”) in respect of the liabilities of the companies under s 75 of the Pensions Act 1995. The trustees’ powers in relation to the claims were exercisable by the respondent, the Board of the Pension Protection Fund. A dispute arose between the supervisor and the respondent as to how the s 75 claims were to be quantified for the purpose of the CVAs.
DAVID RICHARDS J said that the s 75 claims arose as a result of the withdrawal of the 14 companies from the scheme in July 2004 ands were quantified in March 2006, before the CVAs were approved or had become effective in October 2006. However, as at the relevant date for determining the claims, 1 October 2001, they were contingent claims only. In valuing contingent claims, account was taken of those subsequent events which could bring greater certainty to the process of estimation. That was referred to as the hindsight principle. The operation of the hindsight principle was explained by Lord Hoffmann giving the advice of the Privy Council in Wight v Eckhardt Marine GmbH [2004] 1 AC 147. Counsel for the supervisors accepted that the hindsight principle was applicable to the allowance and estimation process under the CVAs, but only to the extent of taking into account the withdrawal of the 14 companies from the scheme in 2004, thereby triggering a claim under s 75 of the 1995 Act. He accepted therefore that there should be no discount for the possibility that no liability might arise under s 75. However, he submitted that while the certificates and apportionment provided by the scheme actuary in March 2006 were relevant to the estimation process under the CVAs, it was nevertheless for the supervisors to estimate the amount of the claims and they were not bound to accept the certified amounts. In particular, the supervisors would be free to use different mortality assumptions from those used by the scheme actuary. Counsel for the respondent submitted that as at 1 October 2001 there was a contingent liability under s 75 to pay the amount certified by the scheme actuary and that by reason of the hindsight principle the supervisors were required to accept the scheme actuary’s quantification. A debt under s 75 could arise only in an amount quantified by the scheme actuary. In estimating the trustees’ claim as at 1 October 2001, the supervisors were as much estimating the amount which would be quantified by the scheme actuary in accordance with the statutory provisions as they were estimating the chances that a claim under s 75 would be triggered by withdrawal from the scheme or by liquidation. The respondent’s counsel was correct in his submissions on that issue. There was nothing in the rationale underlying the hindsight principle which should restrict its application to whether there had occurred an initial triggering event, in this case the withdrawal of the 14 companies from the scheme. The subsequent quantification of the liability was equally a matter which rendered certain what was previously uncertain, particularly in a case such as the present where a debt did not arise as a matter of law except through a certified mechanism, in this case the certificate and apportionment of the scheme actuary. The respondent’s position was fully supported by Lord Hoffmann’s statement in Stein v Blake [1996] 1 AC 243, 252. The supervisors should allow the s 75 claims in the amounts fixed by the scheme actuary, subject only to the provision for caps contained in the CVAs. His Lordship said that he had reached that conclusion as a matter of the general application of the hindsight principle to contingent debts. There were also specific features of s 75 of the 1995 Act and the CVAs which supported that conclusion.
|
