The Trustee of the Singer & Friedlander Ltd Pension and Assurance Scheme v Corbett

A debt created by Pensions Act 1995, section 75 is assignable by pension scheme trustees or managers. The statutory language creates an ordinary debt, and the legislation contains no express prohibition on assignment. The moral hazard provisions introduced by the Pensions Act 2004 do not alter that conclusion. They create distinct liabilities and may produce anomalies whether or not the section 75 debt is assigned. An assignment may properly be undertaken where the trustees reasonably and honestly consider that it will secure the best available result for scheme members. The court may direct that such an assignment is within the powers of a reasonable and properly advised trustee, without approving any particular sale price or transaction.

The claimant trustee sought declarations concerning a section 75 debt owed by the sponsoring employer of a defined benefit pension scheme. The employer was in administration, the debt had been certified and admitted for dividend purposes, and the trustee wished to assign it so that the scheme could wind up without waiting for further distributions.

The defendant, appointed to represent scheme members, supported the declaration on assignability but did not attend. The Pensions Regulator also declined to participate. The central issues were whether the debt was assignable after the amendments made by the Pensions Act 2004, and whether the court should direct that assignment was an act which a reasonable and properly advised trustee could undertake.

1. Assignability. The court held that the debt created by section 75 of the Pensions Act 1995 may be assigned by the trustees or managers of the scheme. Before the Pensions Act 2004, that conclusion followed from the ordinary language of section 75 and the reasoning in Bradstock Group Pensions Scheme Trustee Ltd v Bradstock Group Plc. A compromise of the debt had been held permissible where it secured the best result reasonably available for members; assignment was a lesser interference because the employer remained liable for the debt.
2. The 2004 Act introduced a distinct moral hazard scheme under which liabilities could be imposed on persons other than the employer. The reasoning in Storm Funding Limited (in administration) showed that contribution notice liabilities and section 75 liabilities are separate. The existence of powers under sections 41(4) and 50(4) to direct trustees not to recover the section 75 debt did not demonstrate an intention to change the debt’s nature. The statutory arrangements could produce anomalies whether or not assignment was permitted.
3. Applying the principles governing statutory amendments stated in Inco Europe Ltd v First Choice Distribution (a firm) and others, the court found no indication that Parliament intended to alter the operative words creating the debt. The absence of an express prohibition and the purposes of the pension legislation supported assignability.
4. The court gave the further direction sought. Assignment was something which a reasonable and properly advised trustee could enter into in the exercise of its powers. The court did not ratify a sale at any particular price or in any particular circumstances. It declined to decide whether the regulatory directions would operate as an equity binding an assignee, although that submission, if correct, would support the trustee’s position.

Declarations were made. Annex A remained confidential until further order.