Storm Funding Ltd, Re

The court was asked for directions on the construction of the Pensions Act 2004 provisions concerning financial support directions (FSDs) and contribution notices, in particular whether multiple contribution notices issued in respect of the same non-compliance may, in aggregate, specify or give rise to recovery of an amount greater than the "shortfall sum" (the actual or notional section 75 debt). The judge held that the statutory scheme does not implicitly cap aggregate contribution-notice amounts at the shortfall sum and that contribution notices may be issued to more than one target which in aggregate specify or give rise to recovery in excess of the shortfall sum. The decision rests on construction of sections 43-51 of the 2004 Act together with section 75 of the Pensions Act 1995: section 48(1) limits the amount which may be specified in any single contribution notice to the shortfall sum but contains no express aggregate cap; sections 49(8)-(9) expressly provide for the limited and discretionary possibility of joint and several liability; and section 50(6) (payments under contribution notices reducing the section 75 debt) does not imply an aggregate cap. The application by the administrators to imply an overall limit was rejected.

The applicants were the administrators of 14 Lehman group companies who sought directions on the construction of the Pensions Act 2004 regime for financial support directions and contribution notices. The trustees of the Lehman Brothers Pension Scheme and the Pensions Regulator opposed the administrators' main submissions.

The background was that Lehman Brothers Limited (LBL) had a certified section 75 debt of £119 million on its insolvency; FSDs and contribution notices were in play and the trustees estimated a much larger buy-out deficit. The administrators sought directions primarily on (i) whether the aggregate maximum recoverable by contribution notices issued in respect of the same non-compliance is limited to the shortfall sum (the certified section 75 debt in this case), (ii) whether the shortfall sum is measured only by the certified s.75 debt (which the parties agreed was the answer here), and (iii) (later withdrawn) whether the Regulator could lawfully refuse particular financial support arrangements under s.45.

The court framed the legal issue as one of statutory construction. It analysed the purpose and structure of the 2004 Act (sections 43-51) and the definition and operation of section 75 of the 1995 Act. The judge emphasised (a) that FSDs are wide in scope and need not be co-extensive with a section 75 debt, (b) that section 48(1) prescribes only the maximum for any single contribution notice, and (c) that the Act expressly contemplates multiple notices and (optionally) joint and several liability under section 49(8)-(9). The court rejected the administrators' submission that an aggregate limit should be implied to protect insolvency distributions, and rejected LBHI's alternative submission that recovery in aggregate must be limited to the shortfall sum by application of the principle against double recovery. The judge concluded that the statutory scheme, the role of the Determinations Panel and the Upper Tribunal, and the express textual provisions point against implying any further limit.

The judge therefore refused the primary declaratory relief sought by the applicants and concluded that contribution notices may be issued to more than one qualifying target and may in aggregate specify or give rise to recovery of sums in excess of the shortfall sum.

The application for directions was dismissed. The court held that, on the true construction of the Pensions Act 2004 (sections 43-51) read with section 75 of the Pensions Act 1995, contribution notices may be issued to multiple qualifying targets in respect of the same non-compliance and the aggregate sums specified in or recoverable under those notices are not limited by implication to the shortfall sum; the shortfall sum limits only the amount which may be specified in any single contribution notice and the statutory scheme (including s.49(8)-(9) and s.50) demonstrates that no overall cap is to be implied.