Gleave & Ors v The Board of the Pension Protection Fund

When a contingent claim is valued for insolvency distribution, the hindsight principle permits account to be taken of subsequent events that clarify both whether liability arose and its amount. This applies where statutory quantification is required before a debt exists as a matter of law. A scheme actuary’s certified and apportioned amount under section 75 of the Pensions Act 1995 therefore forms the amount to be admitted, subject to any contractual cap, provided the statutory methodology has been followed.

Company voluntary arrangements were approved for companies in the Federal Mogul group following their administrations. The trustees of the T&N pension scheme had section 75 claims against fourteen former participating employers. Those employers withdrew from the scheme in 2004, and the scheme actuary certified and apportioned the resulting liabilities in 2006.

The supervisors accepted that the claims were contingent at the CVA filing date of 1 October 2001, but argued that they should estimate the claims independently, including by using different mortality assumptions. The Pension Protection Fund contended that the supervisors had to use the amounts certified and apportioned by the scheme actuary, subject to the CVA caps. The issue was how the hindsight principle applied to valuation of the contingent claims.

1. The Section 75 Claims were to be allowed in the amounts fixed by the scheme actuary, subject to the caps in the CVAs.
2. The hindsight principle applies to the whole process of valuing a contingent claim. It is not confined to deciding whether a triggering event occurred. Subsequent events may establish both that liability arose and the amount of the liability.
3. Under section 75 of the Pensions Act 1995, as modified by the Occupational Pensions Schemes (Deficiency on Winding-up etc) Regulations 1996, the debt arises through the scheme actuary’s prescribed certification and apportionment. Once that process has been carried out in accordance with the prescribed methodology, the certified amount is binding for estimating the earlier contingent claim, subject to the ordinary rights of challenge available to an employer.
4. The relevant date does not create a rigid freeze. The requirement to value claims at that date serves pari passu distribution and does not require later events revealing the true value of a claim to be ignored.
5. The supervisors were directed to allow the claims in the certified and apportioned amounts. The court would hear counsel on the precise form of the direction.

First-instance application for directions under section 7(4) of the Insolvency Act 1986. No appellate history is stated in the judgment.