Keywords: pensions regulator, TPR, Bonas, pensions liabilities, contribution notice

The Pensions Regulator (TPR) has confirmed that it has issued its first contribution notice (CN) in respect of the Bonas Machine Company Limited's group pension scheme (Bonas), after reaching a settlement with Bonas' parent, Michel Van de Weile NV (MVW).

Background

TPR's exercise of its power to issue a CN arose after MVW bought the Bonas business on a pre-pack sale, leaving behind the pensions liabilities. TPR issued a CN against MVW in the sum of £5.089 million (TPR had originally sought a payment of £23 million). MVW asked for the determination to be struck out.

The Appeal

The strike out appeal failed. However, Mr Justice Warren commented that there were questions about the amount of the CN. He noted that only in "the most exceptional circumstances" would it be reasonable for a CN to be for more than the amount by which the act or omission had prejudiced the recoverability of the debt due from the employer.

The maximum amount by which MVW could have prejudiced the recoverability of the debt was likely to be the potential difference between the consideration provided by MVW for the business under the pre-pack sale, and the amount for which the business could have been sold on an open market. The evidence suggested that this was likely to be a maximum of £100,000.

The Settlement

TPR and MVW settled their dispute and a CN has been issued against MVW in the sum of £60,000 (which is considerably less than the initial CN). This is in line with the Tribunal's observations that the amount of the proposed CN should reflect the amount by which the act or omission has affected the recoverability of the debt and in light of Tribunal's suggestions, it is perhaps not a surprise that a settlement has been reached, thereby saving the substantial costs of a full hearing.

Comment

It is difficult to see this as anything but a pyrrhic victory for TPR. TPR is maintaining, however, that it is "business as usual" and is keen to stress that the Tribunal's statements were not strictly part of the judgment and specific to the Bonas case. Despite this, it is likely that Mr Justice Warren's observations will be considered by the Tribunal in any future dispute and in light of the requirement for an CN to be reasonable, we cannot see how the comments could be rejected entirely. In the meantime, there remains a real threat of TPR action where asset values are uncertain and an insolvency sale takes place at the bottom of the value range: this is bound to be of continuing concern to the restructuring community

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