Bestrustees Plc v Kaupthing Singer & Friedlander Ltd
[2013] EWHC 2407 (Ch)
Case details
Case summary
The Chancellor granted the Trustee's application under Rule 2.78 of the Insolvency Rules 1986 to reverse the administrators' decision to reduce the Trustee's proof by 2 million. The court held that the 2 million had at all times been the Trustee's property, held on trust in the trust account established under the Financial Services and Markets Act 2000 notice, and therefore was not part of the statutory s.75 debt under the Pensions Act 1995.
The judge emphasised that the s.75 debt certified by the actuary under the Employer Debt Regulations is a single statutory debt determined by reference to the audited accounts immediately before the insolvency trigger. The administrators did not challenge the actuary's certificate or the nil value attributed in the audited accounts to the 2 million deposit, and so could not recharacterise that deposit as forming part of the s.75 debt.
Consequently arguments based on the rule against "double dipping", unjust enrichment and subrogation failed: the Trustee never had the same claim both against KSF in administration and against KSF as trustee of the trust account, and there was no over-recovery in the administration to be disgorged.
Case abstract
Background and parties. The applicant was BESTrustees plc, trustee of the Singer & Friedlander Limited Pension & Assurance Scheme. The respondent was Kaupthing Singer & Friedlander Limited (in administration) (KSF), a former bank. KSF, at the direction of the Financial Services Authority, had placed customer deposits including a 2 million deposit from the scheme into a segregated trust account at the Bank of England. KSF entered administration on 8 October 2008.
Nature of the application. The Trustee applied under Rule 2.78 of the Insolvency Rules 1986 to challenge the administrators' reduction of its proof of debt in the administration of KSF by 2 million, that being the amount paid to the Trustee from the trust account. The Trustee's proof, certified by the scheme actuary under s.75 of the Pensions Act 1995 and the Occupational Pension Schemes (Employer Debt) Regulations 2005, was 4,652,000.
Issues framed by the court.
- Whether the 2 million paid from the trust account discharged or otherwise reduced the Trustee's s.75 statutory debt;
- Whether the administrators were entitled to reduce the Trustee's proof on the basis of the rule against "double dipping" or by invoking unjust enrichment and subrogation principles to prevent over-recovery;
- Whether any part of the s.75 debt could be reopened or varied by reference to subsequent clarification of the trust account beneficiaries or later valuation events.
Court reasoning and decision. The court accepted that the s.75 debt was a statutory, single indivisible debt certified by the actuary under the Employer Debt Regulations and calculated by reference to the audited accounts immediately before administration. The administrators had not challenged the actuary's certification nor adduced evidence to rebut the nil value recorded for the 2 million in the audited accounts. The court held as a matter of legal substance that the 2 million was always the Trustee's beneficial property and therefore not part of the s.75 debt provable in KSF's administration. For that reason the double-dipping and unjust enrichment/subrogation arguments failed. The judge granted the Trustee's application and ordered that the administrators' reduction of the proof by 2 million be reversed.
Subsidiary findings and context. The court explained that relief to adjust a certified s.75 debt might be available in exceptional circumstances (for example fraud) but no such basis was put before the court. The judgment also notes earlier first instance and appellate decisions on the trust account issues and explains why subsequent clarification of beneficiaries or post-trigger valuation changes do not alter the certified statutory debt in the absence of challenge to the actuary's certificate.
Held
Cited cases
- Brazzill v Willoughby (Court of Appeal), [2010] EWCA Civ 561 neutral
- Brazzill v Willoughby, [2009] EWHC 1633 (Ch) positive
- Barclays Bank v TOSG Trust Fund, [1984] AC 626 negative
- Re Polly Peck International plc, [1996] 2 All ER 433 positive
- Howkins & Harrison v Tyler, [2001] PNLR 27 unclear
- In re Kaupthing Singer & Friedlander Ltd (in administration) (No 2), [2012] 1 AC 804 neutral
- Best Trustees plc v Kaupthing Singer and Friedlander Ltd, [2012] EWHC 629 (Ch) positive
Legislation cited
- Insolvency Act 1986: Schedule B1
- Insolvency Rules 1986: Rule 2.77(2)
- Insolvency Rules 1986: Rule 2.78
- Pensions Act 1995: Section 75