Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2022/000100 and UT/2022/000107 - [2024] UKUT 00156 (TCC)

Fecha: 22-Mar-2024

The cases on the Pensions Act 2004

The cases on the Pensions Act 2004

58.

Under the PA04 The Pensions Regulator (“TPR”) can take regulatory action to protect the benefits of members of occupational pension funds, including requiring additional funding from employers and associates, if there are grounds for doing so. The procedure for doing this is similar to the Authority’s regulatory procedure with which we are concerned, as (perhaps unsurprisingly) is the language of the relevant statutory provisions. Section 96 of PA04 sets out the “standard procedure” to be adopted, as follows:

“(2)

The "standard procedure" is a procedure which provides for—

(a)

the giving of notice to such persons as it appears to the Regulator would be directly affected by the regulatory action under consideration (a "warning notice"),

(b)

those persons to have an opportunity to make representations,

(c)

the consideration of any such representations and the determination whether to take the regulatory action under consideration,

(d)

the giving of notice of the determination to such persons as appear to the Regulator to be directly affected by it (a "determination notice"),

(e)

the determination notice to contain details of the right of referral to the Tribunal under subsection (3),

(f)

the form and further content of warning notices and determination notices and the manner in which they are to be given, and

(g)

the time limits to be applied at any stage of the procedure.

(3)

Where the standard procedure applies, the determination which is the subject-matter of the determination notice may be referred to the Tribunal . . . by—

(a)

any person to whom the determination notice is given as required under subsection (2)(d), and

(b)

any other person who appears to the Tribunal to be directly affected by the determination.”

59.

Section 103 of PA04 applies to references to a tribunal and provides:

“(3)

On a reference, the tribunal concerned]may consider any evidence relating to the subject-matter of the reference, whether or not it was available to the Regulator at the material time.

(4)

On a reference, the tribunal concerned must determine what (if any) is the appropriate action for the Regulator to take in relation to the matter referred to it.

(5)

On determining a reference, the tribunal concerned must remit the matter to the Regulator with such directions (if any) as it considers appropriate for giving effect to its determination.

(6)

Those directions may include directions to the Regulator—

(a)

confirming the Regulator's determination and any order, notice or direction made, issued or given as a result of it;

(b)

to vary or revoke the Regulator's determination, and any order, notice or direction made, issued or given as a result of it;

(c)

to substitute a different determination, order, notice or direction;

(d)

to make such savings and transitional provision as the [tribunal concerned] considers appropriate.”

60.

Re Bonas Group Pension Scheme, (UT reference FS/2010/0007), is a decision of this Tribunal on a reference under PA04. In relation to the scope of “the matter referred” in section 103(4), the Tribunal observed:

“On a reference, the Tribunal must, under section 103(4), determine what (if any) is the appropriate action for the Regulator (which would include the Panel where relevant) to take “in relation to the matter referred to the Tribunal”. The matter referred to the Tribunal is, so far as relevant to the present case, the determination which may be referred pursuant to section 96(3). … I should emphasise that what is referred is the determination and not the reasons given for it. The Tribunal will, of course, pay due respect to the reasoning of the Panel and will agree or disagree as the case may be. But what gives the Tribunal jurisdiction is the referral of the determination.”

61.

Mr Temple drew my attention to paragraph [70] of the decision where Warren J observed:

“In my view, the Regulator is entitled to argue that the Tribunal should depart from the determination of the Panel so as to exercise the relevant regulatory function in the way which it, the Regulator, considers appropriate at the time when the matter is dealt with by the Tribunal. The Panel, as we have seen, exercises powers on behalf of the Regulator; it is no doubt for that reason that the Regulator itself cannot refer the determination of the Panel to the Tribunal. But once the decision of the Panel has been challenged, there is no reason, in my view. why the Regulator should be bound by that determination. By referring the matter to the Tribunal, the target must accept that he becomes subject to the power of the Tribunal to determine the appropriate action. The Regulator must be allowed, in my judgment, to present to the Tribunal what it sees as the appropriate regulatory action at that time. It may be that it cannot go beyond the relief sought in the warning notice, but that issue does not arise in the present case.”

62.

Mr Temple sees Bonas as authority for the proposition that the Authority can raise new arguments before the Tribunal and that Bluecrest is wrong to suggest that consideration of the regulatory process leads to the conclusion that the Authority is limited in the points it can raise in the Tribunal by the arguments raised earlier in the process.

63.

I am not sure that paragraph [70] is very helpful to Mr Temple. At this point in his decision, Warren J was considering whether the regulator could argue that a larger contribution should be made by one person than the Panel (broadly equivalent to the RDC) determined. In particular, he was considering how to deal with a situation where a pension shortfall is £2X and the regulator had issued two people (Mr A and Mr B) with a contribution notice of £X each. Mr A refers his determination to the Tribunal and facts come to light which show that Mr A should not be liable. Assuming that the determination against Mr B is before the Tribunal, could the regulator argue for a different outcome to that decided by the Panel, in particular (at [69]) Warren J asked whether it could “argue in favour of a larger sum, at least up to the amount specified in the warning notice?”. That is the context of his comments at [70]. Against that background, where the facts and allegations against a person appear to be settled, he considered the regulator could re-open the appropriate action to be taken. Once a determination is referred to the Tribunal, it has full power to determine the appropriate action, so a conclusion that the regulator must be allowed to argue for what it sees as the appropriate regulatory action at the time does not seem to me to be at all surprising. The point did not arise in Bonas, but at [69] and [70] Warren J was careful to suggest that the warning notice might limit what the regulator could argue for. That, of course, was exactly the point in Jabre.

64.

Against that background, I do not consider that paragraph [70] of Bonas provides much (if any) support for the proposition that, once a matter has been referred to the Tribunal, the Tribunal can consider any allegations which could be made against an applicant if they are based on the facts and circumstances canvasses in the warning notice.

65.

However, later in his decision (at [79]) Warren J considered whether the regulator can seek to rely on different arguments, or different elements of the evidence before the Panel, to support the determination which it seeks, and in relation to that he commented:

“It is not, I think, possible to answer this question in the abstract; a different argument might, on the one hand, raise a completely new case which is entirely outside the scope of the warning notice properly understood or it might, on the other hand, simply be a new way of putting something the essence of which is already included in the warning notice.

80.

However, it is possible to give an answer in relation to reliance on difference elements of the evidence in some respects. Returning to the example, suppose that a warning notice relies on an act or failure within section 38(5) to justify a contribution notice. Suppose that the evidence within the scope of the warning notice reveals another act which might fall within section 38(5) but is not identified as such in the warning notice. Can the Panel take account of that act in making its determination? In my view it can do so as a matter of jurisdiction but it must act fairly, in particular in relation to the procedure to be adopted, in doing so.”

66.

He considered the position to be broadly the same in the Tribunal, commenting:

“84.

The position is the same, in my view, on a reference to the Tribunal. Once the relevant determination has been identified (for instance a determination to issue a contribution notice to a person in a specified sum) it is open as a matter of jurisdiction for the Tribunal to rely on any act identified in the evidence before the Tribunal to support the regulatory action originally sought in the warning notice But it is not open to the Tribunal to decide that regulatory action not identified in the warning notice should be taken.”

67.

ITV plc and others v The Pensions Regulator, [2015] EWCA Civ 228, is mentioned in Seiler, but was not included in the Authorities Bundle and was only briefly referred to by Mr Temple. Having read that case for myself, I consider that it is an important authority. The case concerned a reference to the Upper Tribunal of a decision by TPR that five companies should contribute to the Box Clever pension scheme, the point at issue being the extent to which, following a warning notice, TPR can rely on grounds that it did not mention in the warning notice if its action is challenged.

68.

The Court of Appeal held that it could. Arden LJ (with whom Floyd and Christopher Clarke LJJ agreed) noted (at [57]-[58]) the importance of warning notices as a protection for targets in the statutory scheme, but there were other protections too (discussed at [61]-[62]). Despite the role of warning notices, she said this at [60]:

“60.

But it is significant that [PA04] does not go on to say that either the Determinations Panel or the Upper Tribunal are constrained in the conclusions they can reach by the absence of a relevant ground in the [warning notice]. In my judgment, the absence of a provision to that effect firmly indicates that Parliament left the question whether the Determinations Panel or the Upper Tribunal could do so to their discretion.

63.

I therefore conclude that Mr Stallworthy and Mr. Hilliard are correct in their submissions that the Upper Tribunal's discretion to allow TPR to rely on additional grounds is not fettered by a threshold test of "good reason". I accept Mr Stallworthy's submission that, as Warren J held in paragraphs 72, 79 and 80 of Re Bonas Group Pension Scheme, the Upper Tribunal can on a reference permit further evidence to be filed and receive fresh arguments, and that this supports the conclusion that it must be open to TPR, in an appropriate case, to adduce additional grounds for its proposed regulatory action on a reference to the Upper Tribunal.”

69.

She made some comments on the Upper Tribunal’s decision in that case, as follows:

“65.

Moving from my conclusion that there is no threshold test of good reason, I turn to consider how the Upper Tribunal should approach the introduction by TPR of allegations which go outside the [warning notice]. The test applied by the Upper Tribunal in this case is unclear and unsatisfactory. It is either

•

a test of relevancy (paragraph 114), or

•

a test whether the new allegation has been "aired" before the Determinations Panel (paragraph 118) or

•

a test whether the new allegation affected the core allegations against the targets or

•

whether the issue was aired in the WN or before the Determinations Panel or

•

whether the issues formed part of the facts and circumstances before the Determinations Panel (paragraph 171).

66.

In my judgment, each of these tests is in its own way too narrow and too prescriptive.

67.

In my judgment, the exercise of the Upper Tribunal's discretion to allow TPR to raise a new case not contained in the [warning notice] should depend on a consideration of all the relevant factors in the case, and not just the narrow question whether TPR had good reason for seeking to enlarge its case. The Upper Tribunal has to weigh up all the facts and circumstances in deciding whether to permit TPR to adopt a new case. It would be impossible to provide a comprehensive list of those facts and circumstances, though I can give a few examples.

68.

The Upper Tribunal has to consider the nature of the new allegations, and their impact on the case. If the new case involves fraud or bad faith, it may be less willing for a new case to be brought forward unless the case is clearly pleaded and appropriate detail given. It has to consider the reasons why the case was not previously put forward.

…

70.

Accordingly, I do not consider that it is sufficient for the Upper Tribunal to conclude that the matters were in some way "aired" at some earlier stage or to limit its inquiry to asking whether the new case arises from facts and matters which were before the Determinations Panel.”

There are clearly echoes here of the language used in the analyses adopted by the Upper Tribunal in relation to similar issues in the context of FSMA references.