Bestrustees Plc v Kaupthing Singer & Friedlander Ltd

A statutory pension employer debt must be calculated by reference to the scheme’s assets and liabilities at the statutory trigger date. Later clarification or increases in the value of an asset do not alter the certified debt where the valuation and underlying accounts are not challenged.

Payment of trust property to its beneficial owner does not discharge a separate statutory debt owed by the same legal person. The rule against double dipping has no application where the beneficiary has only one claim, namely for the return of its own trust property, and that property was assigned no value in calculating the statutory debt.

BESTrustees plc, trustee of an occupational pension scheme sponsored by Kaupthing Singer & Friedlander Ltd, challenged the administrators’ reduction of its proof of debt by £2 million. The reduction represented £2 million paid to the scheme from a segregated trust account.

The administrators accepted the certified amount of the statutory debt under section 75 of the Pensions Act 1995, but argued that the trust-account payment discharged part of that debt or otherwise created an over-recovery requiring reduction of the proof. The central issues were whether the payment and the statutory debt were the same claim, and whether unjust enrichment or subrogation justified the reduction.

1. Application granted. The administrators’ decision to reduce the Trustee’s proof by £2 million was reversed.
2. The section 75 debt was a statutory debt arising immediately before KSF entered administration. Under section 75(5) of the Pensions Act 1995 and the Employer Debt Regulations, the scheme’s assets and liabilities had to be valued by reference to the statutory date and the relevant audited accounts. Later changes in value were irrelevant.
3. The administrators did not challenge the actuary’s certificate, the audited accounts, or the nil value attributed to the deposit at the relevant date. There was therefore no basis for reopening the certified debt. The statutory debt was a single indivisible debt, and it could not be reduced by attributing £2 million to a later recovery.
4. The £2 million in the trust account was always beneficially owned by the Trustee. KSF held it as trustee, not as debtor. Its payment to the Trustee therefore could not discharge any part of the section 75 debt.
5. The rule against double dipping was inapplicable. The Trustee did not have the same claim against two estates. Its claim to the trust money was a proprietary claim against KSF as trustee, whereas the section 75 claim was a distinct statutory debt provable in the administration. In applying the distinction between legal and economic substance, the court relied on Re Polly Peck International plc [1996] 2 All ER 433.
6. The unjust-enrichment argument also failed. The anticipated dividend on the certified section 75 debt, even together with the £2 million trust payment, would not produce recovery exceeding 100 pence in the pound. The administrators could not carve £2 million out of the indivisible statutory debt.

The judgment is a first-instance decision. It records earlier trust-account proceedings, including Brazzill v Willoughby [2009] EWHC 1633 (Ch) and the related Court of Appeal decision [2010] EWCA Civ 561, together with an earlier decision concerning the section 75 valuation.