LB Re Financing No 1 Ltd & 36 Ors v Lehman Brothers Pension Scheme, Trustees of

Trustees of an occupational pension scheme are persons directly affected by a determination to issue a financial support direction. The expression is contextual and purposive. It excludes busybodies and persons whose derivative interests are adequately represented, but it does not require an immediate alteration of the trustees’ rights where connected statutory steps are directed to enhancing the scheme’s assets.

The former two-year limit in section 43(9) of the Pensions Act 2004 governed the Regulator’s original determination. It did not constrain directions made by the Upper Tribunal under section 103 following a timely reference, or the Regulator’s mechanical implementation of those directions.

The Pensions Regulator’s Determinations Panel decided, within the statutory period, to issue a financial support direction (“FSD”) to six companies in the Lehman group. The trustees of the group pension scheme sought a reference to the Upper Tribunal so that further group companies could be included as targets.

The proposed additional targets applied to strike out that reference. The Upper Tribunal dismissed their application. They appealed, contending that the trustees were not persons directly affected by the Panel’s determination for section 96(3) of the Pensions Act 2004, and that the former time limit in section 43(9) prevented the Tribunal from directing FSDs against further targets.

The central issues were the trustees’ standing and the effect of the section 43(9) time limit on the Tribunal’s powers under section 103.

1. Appeal dismissed. The trustees, by virtue of their office, were persons directly affected by the determination and had a statutory right to refer it to the Upper Tribunal under section 96(3) of the Pensions Act 2004.

2. “Directly affected” is to be construed contextually and purposively. The word “directly” excludes persons with no recognisable legal interest, including busybodies, and persons whose merely derivative interests are adequately represented by the holder of a more direct interest. It does not impose an inflexible requirement that the determination itself must immediately change the claimant’s legal rights or property.

3. An FSD determination and the ensuing financial-support arrangement are connected stages directed towards enhancing the scheme’s assets. The trustees therefore have a real interest in the determination to issue an FSD, because neither a financial-support arrangement nor, in default, a contribution notice can arise without it. Their standing cannot depend on the arguments or evidence they may later advance on the reference.

4. The court did not decide whether Article 6 of the European Convention required that result. The limited Convention material did not establish that Article 6 was determinative of the statutory expression.

5. The former section 43(9) time limit governed the Regulator’s and Determinations Panel’s process up to a timely original determination whether to issue an FSD. It did not apply to the Upper Tribunal’s determination and directions under section 103, or to the Regulator’s implementation of those directions. Under section 103(7), the Regulator acts mechanically in accordance with the Tribunal’s determination and need not undertake a fresh section 43 opinion-forming process unless directed to do so.

6. The Tribunal must nevertheless examine whether the original determination was correct by reference to the section 43 conditions and the selected look-back date. It may consider new evidence and later events as section 103 permits. It cannot properly direct an FSD against a target whom the Panel could not lawfully have included at the time of the determination referred.

• Court of Appeal (Civil Division): Dismissed the targets’ appeals and affirmed the Upper Tribunal’s refusal to strike out the trustees’ reference: [2013] EWCA Civ 751.
• Upper Tribunal (Tax and Chancery Chamber, Financial Services): Dismissed the proposed targets’ application to strike out the trustees’ reference from the Determinations Panel’s FSD determination.