Anantkumar Meghji Pethraj Shah v The Pensions Regulator

A contribution notice may be issued where a person is party to a series of acts which materially reduces the likelihood of accrued pension benefits being received, and it is reasonable to impose liability on that person. A reference to the Upper Tribunal under the Pensions Act 2004 is determined de novo. The Tribunal stands in the shoes of the Determinations Panel and makes the appropriate regulatory determination itself.

Reasonableness is a multifactorial value judgment. The target’s financial circumstances are relevant but are not automatically decisive and require full, frank and cogent evidence. Where material detriment is established, the amount of a contribution notice is not confined by a compensatory-loss analysis. It is subject to the statutory shortfall-sum cap and the overall requirement of reasonableness.

The reference concerned a determination by the Pensions Regulator’s Determinations Panel to issue a contribution notice against Mr Anant Shah in connection with the Meghraj Group Pension Scheme. The proposed liability arose from a 2012 agreement which removed MFSL’s entitlement to future proceeds from an Indian joint venture and a 2014 payment of £3,688,108 to an offshore nominee of Mr Rohin Shah.

The Tribunal had to determine whether Mr Shah was a party to the relevant acts or series of acts, whether the material detriment test was satisfied, and whether it was reasonable to impose liability and in what amount. It also considered the legal effect of earlier arrangements made in 2004 and the proper approach to the Tribunal’s jurisdiction on a reference.

1. Jurisdiction. The reference was determined afresh. Under sections 96 and 103 of the Pensions Act 2004, the Tribunal considered all relevant evidence, stood in the shoes of the Determinations Panel and determined the appropriate action for the Regulator.
2. Party Test. The 2012 agreement and the 2014 payment were sufficiently connected to constitute a series for section 38 purposes. Mr Shah was a party to the series because he executed the 2012 agreement on behalf of MFSL and, at the least, knowingly assisted the subsequent payment.
3. Material detriment. The 2004 arrangements were not legally binding on MFSL or MPL. They were an arrangement between Mr Shah and Mr Rohin Shah, binding in honour but not intended to create legal relations. The 2012 agreement therefore removed MFSL’s entitlement to the remaining Indian joint-venture proceeds. The subsequent payment placed those proceeds offshore and materially reduced the likelihood of the Scheme receiving accrued benefits. The material detriment test was satisfied.
4. Reasonableness. The assessment required a multifactorial value judgment. Mr Shah’s involvement, his relationship with the employer, his connection with the Scheme, the failure to notify the relevant events, the purpose of the acts and the failure of creditors to recover all pointed strongly towards issuing a contribution notice. His financial circumstances did not outweigh those factors. A contribution notice is not a financial penalty, and enforcement considerations should be distinguished from the decision whether to issue it.
5. Quantum and order. The current legislation does not impose an additional compensatory-loss cap beyond the statutory shortfall-sum limit and reasonableness requirement. A sum of £1,844,054, representing half of the 2014 payment, plus a 1.7% uplift for the passage of time, was reasonable. The reference was dismissed unanimously. The determination was varied and the Regulator was directed to issue a contribution notice for £1,875,403.

The reference was made under section 103 of the Pensions Act 2004 against a determination of the Pensions Regulator’s Determinations Panel dated 10 June 2020. The Tribunal determined the matter de novo and varied that determination.