In the July Pensions update we reported on the decision of the Determinations Panel of the Pensions Regulator to issue the first ever Contribution Notice (CN). One of the proposed recipients of the CN, Michel Van De Wiele N.V. (VDW) has referred the matter to the Upper Tribunal. The CN cannot be issued until the procedure before the Tribunal is completed.  

We do not yet have the final decision of the Tribunal but it has issued an interim decision, dealing with some preliminary matters raised. This gives useful insight into the workings of the CN process and how the Tribunal thinks the Regulator should approach the exercise of its powers. Of particular interest are the Tribunal’s comments on the size of the proposed CN, and an explanation of how the statutory process for issuing CNs fits together.

The Tribunal’s decision can be found here  

Some key points in the Tribunal ruling on the CN appeal process

  • The Tribunal undertakes its own assessment of the evidence (including new evidence) before making its own decision. It is not sitting as an appellate body i.e. it does not need to decide whether the Determinations Panel had acted reasonably or was in error.  
  • If only one target refers the matter to the Tribunal, when the CN was to be imposed on more than one, the Tribunal can only look at the matter referred, not the case as a whole. This could mean that a CN is removed from one target without the Tribunal being able to impose additional liability on anyone else.  
  • Trustees would be able to refer a decision of the Panel to the Tribunal (as “persons directly affected” by the CN). So if only one of a number of targets appealed, trustees should consider referring the other targets to the Tribunal themselves in order to ensure that the appeal is dealt with as a whole.

The Tribunal also considered in some detail the requirements of the legislation for imposing a CN. One of the grounds is that there has been a “deliberate failure to act” the purpose or main purpose of which is to “prevent the recovery...of a debt” and it is reasonable for the Regulator to impose the CN. The Tribunal commented that this should require a conscious choice by a person and that in making that choice, the person intended that the practical effect of his inaction would be to prevent the recovery of a debt. When looking at the “reasonableness” of a CN, the Tribunal suggested that the extent to which the act or failure to act has resulted or will result in a reduction in the amount available needs to be identified (whether from the employer or from any other person liable for the debt such as guarantor, or by way of reduction in the value of a security for the debt), rather than just looking at the entire section 75 debt.

As part of the reference to the Tribunal, the Regulator has applied to increase the CN against VDW from just over £5m to £20m. Although it has made no formal ruling on this point, the Tribunal stated that “I have serious reservations about whether the Regulator has a sustainable case that the amount to be specified in any contribution notice should be anything like the figure of £5.089m which the Panel determined”. In view of this it seems unlikely the Regulator will achieve the increase it seeks.