Liability to cover pension costs deemed to include section 75 debt in a secondment agreement

In a recent High Court decision1, the court held that MF Global UK Limited (MF Limited), an employer to which a number of employees had been seconded from a service company (MF Global UK Services Limited) (MF Services), within the same group, was liable for the section 75 debt arising in relation to those employees on the insolvency of MF Services. The contract relating to the secondment stated that MF Limited should cover the employment costs due from MF Services, which had historically included pension contributions.

Although this case is specific on its facts, it confirms the idea that a company making itself liable for employment costs is, in the absence of explicit wording, liable for a section 75 debt, which may arise unexpectedly and is a significant figure. This is an issue for consideration in secondment and outsourcing agreements and should be considered in any drafting where a defined benefit pension scheme is in operation.

The Pensions Regulator's wings are clipped in the latest Court of Appeal decision in the Boxclever case2

The latest development in the Boxclever case (see also our previous pensions publications on this) has produced a welcome decision for potential targets of financial support directions ('FSD's) imposed by the determinations panel ('the Panel') of the Pensions Regulator.

This stage of the Boxclever case essentially discussed whether the Pensions Regulator was entitled to amend its case for imposing a FSD where a decision of the Panel to do so was appealed to the Upper Tribunal. The targets of such an FSD in the Boxclever case brought an application to the Upper Tribunal to strike out parts of the Pensions Regulator's case in the referral. The Upper Tribunal rejected this application and so the Targets appealed on this point to the Court of Appeal.  

In finding in favour of the Targets, the Court of Appeal said that when issuing a warning notice (which it must do before the FSD is issued), the Regulator must make it clear to the Target what the case against it is and when doing so it should be 'frank and transparent' and 'not hold anything back'. However, it also held that just because a ground for imposing the FSD was not included in the warning notice that did not restrict what conclusions the Determinations Panel or the Upper Tribunal could reach, but that all of the relevant factors of the case had to be considered when deciding whether or not new matters could be raised. In this case, the Court held that the test which the Upper Tribunal had applied in the Targets' strike out application had been 'unclear' and 'unsatisfactory' and the case was therefore remitted back to the Upper Tribunal to re-consider that application. 

This decision is a welcome one in highlighting that in such proceedings the Pensions Regulator is not open to amend its case at any time and however it wishes. A business or individual who is targeted by the Regulator in this way now has more guidance as to how the Regulator may conduct its case as matters develop.