On December 21 2011, the Pensions Regulator determined to issue another financial support direction (FSD), this time against 5 companies in the ITV group.  It published its reasons for doing so earlier this week.  The companies are appealing to the Upper Tribunal. 

The FSD related to the Box Clever Group Pension Scheme.  Box Clever was a joint venture arrangement set up in 1999 by Granada and Thorn.  It was financed by £860m debt, none of which was secured on any assets of Granada or Thorn.  Granada received around £500 million as a result of the transaction.  The Box Clever Group became insolvent in 2003 and went into receivership.  In 2004, ITV was formed and Granada became part of it.   By the end of 2009, the Scheme had a deficit of approximately £62m on a 'buy-out' basis, approximately £41.2m of which related to former Granada employees.

The Determinations Panel of the Regulator had to consider whether it was reasonable to issue FSDs against companies in relation to events which happened between 1999 and 2003, particularly in light of the fact that the Regulator did not come into existence until 2005.  It concluded that there was no express temporal limitation in the legislation relating to FSDs (as there is for contribution notices) and therefore "Parliament intended the Regulator to have regard to all relevant matters when deciding upon reasonableness under s.43, no matter when they occurred." 

Although ITV did not come into existence until 2004 and was therefore not involved in any of the events being considered and received no direct benefit from Box Clever, the Regulator considered that it "stands in the shoes of Granada Limited as the ultimate parent company of the group which benefited from the formation of the JV" and therefore it was reasonable to issue an FSD against it.

Although Granada did not directly control Box Clever, it did have a representative on the Board and was clearly involved in the inception and development of the Scheme.  Therefore there was sufficient control over Box Clever and the Scheme by Granada to make it reasonable to issue an FSD against the 5 ITV group companies. 

There were also issues of procedural fairness.  The Regulator issued a warning notice saying that it was considering issuing an FSD on 30 September 2011.   The last date on which it could issue an FSD was 31 December 2011 and the determination was in fact made on 21 December.   The Panel concluded that the parties had been able to obtain all of the relevant evidence within the time frame and therefore, "albeit by a narrow margin", it was sufficient.  The Panel was also required to consider whether the Regulator could rely on evidence which was not set out in the warning notice.  It concluded that as long as all the parties could fairly take account of any additional evidence and had an opportunity to meaningfully respond, the Regulator could rely on such evidence. 

In summary, the case raises the spectre of acts and omissions before the "moral hazard" legislation came into force being reviewed in the context of FSDs. It will be interesting to see whether the Upper Tribunal feels able to agree with the approach taken on this, and the other matters raised by this latest FSD.

The reasoning of the Determinations Panel can be found here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 02/02/2012.