Granada UK Rental & Retail Ltd v Pensions Regulator

The Court of Appeal dismissed the appellants' challenge to the Upper Tribunal's confirmation of the Pensions Regulator's decision to issue Financial Support Directions (FSDs) under section 43 of the Pensions Act 2004. The Court held that s.43 may lawfully be applied where relevant matters pre-date the coming into force of the Act, that the test in s.43(7) properly permits inquiry into past relationship, involvement and benefits, and that this retrospective element did not render the statute incompatible with Article 1 of the First Protocol (A1P1) to the European Convention on Human Rights. The Court also upheld the Upper Tribunal's factual and legal conclusions that the appellants were associates of the relevant employers within the meaning of s.435 Insolvency Act 1986 and that it was reasonable to impose the requirements of an FSD on them.

Key legal principles: (1) s.43 PA 2004 can take account of pre-commencement events when assessing reasonableness under s.43(7); (2) A1P1 does not bar the statutory scheme where a fair and proportionate balance is struck and judicial scrutiny exists; (3) association under s.435 IA 1986 may be established despite intervening receivership where legal entitlement to voting power remains; (4) the Upper Tribunal's de novo merits role and high threshold for inferring an error of law from a reasoned evaluative judgment were respected.

The Court of Appeal considered an appeal by Granada/ITV group companies against an Upper Tribunal decision ([2018] UKUT 0164 (TCC)) confirming the Pensions Regulator's Determination Panel decision to issue Financial Support Directions under s.43 Pensions Act 2004 in respect of the Box Clever Group Pension Scheme.

Background and parties:

• The Box Clever joint venture (Granada and Thorn) acquired rental businesses in 2000. A defined benefit pension scheme (the Scheme) was later established for transferring employees. The joint venture was highly leveraged and subsequently entered receivership. The Scheme became materially underfunded.
• The Regulator determined to issue FSDs to several ITV group companies (the Targets) relying on s.43 PA 2004 and a look-back date of 31 December 2009. The Targets referred the Determination to the Upper Tribunal, which confirmed the Regulator. The Targets appealed to the Court of Appeal.

Nature of application / relief sought: The appellants sought to quash the Upper Tribunal's decision confirming the Regulator's Determination to issue FSDs and contended (a) that s.43 could not lawfully or fairly be given retrospective effect; (b) that they were not "connected with or an associate of" the Employers at the relevant time under s.43(6)(c) read with s.435 IA 1986; and (c) that it was not reasonable to issue FSDs on the facts.

Issues framed:

1. Whether s.43 PA 2004 may lawfully and compatibly with A1P1 be applied taking account of events pre-dating the Act's commencement.
2. Whether the Targets were "connected with or an associate of" the Employers at the look-back date (31 December 2009) under s.435 IA 1986.
3. Whether, on the facts found by the Upper Tribunal, it was reasonable to issue FSDs to the Targets.

Court's reasoning (concise):

• Construction/retrospectivity: The Court accepted the Upper Tribunal's purposive reading of s.43. The statutory list in s.43(7) permits consideration of past relationships, involvement and benefits. The presumption against retrospectivity is engaged only lightly (and is a matter of degree). Parliament's objectives, the package of measures including the Pension Protection Fund, and the existence of the reasonableness safeguard and judicial review by the Tribunal supported the conclusion that s.43 can have regard to pre-2005 events.
• Convention rights: A1P1 was engaged but the interference was held to be justified and proportionate. The Court accepted the Upper Tribunal's analysis that a fair balance had been struck and that the availability of independent judicial scrutiny reduced the risk of arbitrariness.
• Association: Applying s.435 IA 1986 and the Debenture, the Court agreed with the Tribunal that (i) voting control in respect of the Trio remained attributable to BxC Holdings absent notice from the Security Agent, and (ii) THSP (though in receivership) remained entitled to exercise voting power and thus control TUK for the statutory purpose. The Court therefore upheld the finding of association.
• Reasonableness: The Court afforded weight to the Upper Tribunal's extensive factual findings and its de novo evaluative role. The Tribunal had correctly taken into account retrospectivity as a significant factor but concluded that the Targets' responsibility for structuring and extracting value from the Joint Venture and the benefits received by them clearly outweighed the retrospective disadvantage. That evaluative conclusion was not such that no reasonable tribunal could have reached it.

Procedural posture: Appeal from the Upper Tribunal (Tax and Chancery Chamber) [2018] UKUT 0164 (TCC); appeal dismissed by the Court of Appeal on 20 June 2019.

Appeal dismissed. The Court held that (1) s.43 Pensions Act 2004 can lawfully and compatibly with A1P1 be applied having regard to relevant events predating the Act; (2) the appellants were associates of the participating employers at the look-back date under s.435 Insolvency Act 1986; and (3) the Upper Tribunal was entitled to conclude that, on the facts, it was reasonable to issue Financial Support Directions to the appellants; the Tribunal's evaluative judgment involved no error of law.

Determination by the Pensions Regulator's Determination Panel to issue FSDs (decision dated 21 December 2011). Targets referred the Determination to the Upper Tribunal under s.96(3) PA 2004; the Upper Tribunal (Rose J, Judge Herrington and Ian Abrams) confirmed the Regulator's power and that it was reasonable to impose FSDs: [2018] UKUT 0164 (TCC). The Targets appealed to the Court of Appeal and the appeal was dismissed: [2019] EWCA Civ 1032.