The Upper Tribunal (Tax and Chancery Chamber) has rejected a strike-out application by the target of the first contribution notice issued by the Pensions Regulator (TPR).

In June 2010, TPR confirmed that it had issued its first CN against a Belgian company, Michel Van De Wiele N.V. (VDW), the parent company of Bonas UK Limited, the sponsoring employer of the Bonas Group Pension Scheme. Bonas had entered administration in 2006 and then had its business sold to another subsidiary of VDW under a pre-pack insolvency process, leaving the scheme to be taken over by the Pension Protection Fund (PPF). The CN would, if issued, order VDW to pay just over £5 million to the PPF.

The company appealed to the Upper Tribunal and made an interlocutory application to strike out TPR’s case. Whilst the application was refused, Warren J did however criticise the amount specified in the contribution notice, stating that some of the panel’s reasoning as to the requested amount was ‘unsustainable’.

Warren J reasoned that the purpose of a contribution notice should be compensation for the scheme for the detriment suffered rather than actively to penalise the target (a different approach would apply to a financial support direction). On the facts presented, Warren J felt that the appropriate amount would be the difference between the market value of the business and the price obtained under the pre-pack insolvency.

The appeal should now proceed to be heard by the Upper Tribunal.