In the case of the Trustee of the Singer & Friedlander Ltd Pension and Assurance Scheme v Corbett, the High Court has ruled that trustees may assign a section 75 debt to another party.
Background
The Singer & Friedlander Scheme was a defined benefit (DB) occupational pension scheme whose sponsoring employer, Kaupthing, Singer & Friedlander, entered administration in October 2008.
The section 75 debt was certified at £74.65 million; however, the trustee accepted a reduced debt of £73.94 million. The Trustee had received £60.26 million in dividend payments and the administrators had indicated that the administration would not end – and the final payment become available – before 2017. This delay was preventing the Trustee from winding up the Scheme.
The Trustee was approached by brokers interested in acquiring the debt still owed by the employer. The Trustee therefore applied to court for a direction that the section 75 debt due from the employer could be assigned and that such an assignment was one that a reasonable and properly advised trustee could enter into in the exercise of its powers.
The judgment
Mr Justice Birss ruled that the section 75 debt could be assigned by the Trustee and gave a direction that a reasonable and properly advised trustee could enter into such an assignment in the exercise of its powers.
The Court noted that debts in general are capable of assignment and that there was no explicit prohibition on the assignment of a section 75 debt. The judge further could identify no public policy reason against the assignment. He concluded also that, if the assignment “secures the largest amount which the trustees reasonably and honestly believe can be secured towards the shortfall, then such a transaction would be furthering the purposes of section 75 and the legislation as a whole”.
The judge then considered whether the introduction of TPR’s anti-avoidance powers affected this conclusion. He concluded that the relationship between the anti-avoidance powers and section 75 gives rise to “potential anomalies whichever way they are looked at. That is important because it undermines any attempt to construe the legislation in such a way as to avoid an anomalous result. It is unreal to find in … the 2004 Act any manifestation of an intention by Parliament to alter the debt created by section 75.”
Comment
This decision will enable trustees in a similar situation to reduce the delays – and hence the costs – involved in winding up their scheme, which should lead to a better outcome for all parties.