UT-2024-000019 - [2025] UKUT 00257 (TCC)

Mr Uberoi says that, so far as the sale of shares in DFHL and its associated financing are concerned, the Regulator has not established that there was a relevant act to which AP was a party.

He says that the Regulator has struggled to conceptualise exactly what this act is. It now describes the act as “The “draw down” of £800,000 from [DFL] to an associated company called Pink on 18 September 2015 and subsequent transfer of £360,437 of that money to [AP] in or about 1 April 2016 as part of a purchase of her shares in [DFHL]”. Despite what he describes as a “consistent reformulation” he says that the Regulator remains vague as to how this act caused material detriment.

Money was drawn down by DFL, using its facility with RBS, and then loaned to Pink. AP was told in emails (by CW and Ashgates) that this was a loan. Loans are to be repaid. The loan was shown in the Pink management accounts sent to AP by Ashgates as a current liability of £800k owed to DFL. Loans are to be repaid and at the point that she is bought out, this is still a loan. A loan does not cause any material detriment to the Scheme, and there would be no reason for AP to think that it would. It remained a loan for years until apparently something changed and it was written off after the Panel meeting last autumn.

The loan to Pink was in fact treated as repaid and then re-loaned to DFG. Little is known about the circumstances of those arrangements (and CW could not be asked about it, the Regulator having settled its case against him). It is not alleged that AP was responsible for the debt being moved over to DFG.

In any event, there is no material detriment established by the evidence. The employer (DFL) increased its indebtedness (by adding to its borrowings beforehand) but it also increased its receivables. At that point, that is not materially detrimental, even to the employer, let alone to the once removed Scheme for which this money was never going to be utilised. It is impossible to dispute that there isn't material detriment if Pink's obligation to repay is broadly comparable to the value of the loan and it is plausible that Pink will be repaying the loan.

There is no evidence that Pink has lots of competing creditors or money going out of its account in lots of different directions or was about to become insolvent. On the face of it, it is an active company that has suddenly got £800,000 in its bank account and £800,000 in borrowing. It is no different to how it was before this loan was sent across to it and things are neutral. When one focuses on the fact that AP was expecting the loan to be repaid before she departed the scene in March 2016, there isn't an act of material detriment on those facts.

There is no forensic accounting evidence before this Tribunal (nor was there before the Panel) to explain why an intercompany loan was a materially detrimental act, at the time that it was made.

Putting the point more broadly, Mr Uberoi is not clear why any use of employer funds in order to purchase its own shares is automatically a materially detrimental act. He submits that required expert evidence in order to explain why material detriment is automatically invoked by that act.

In any event, if there was an act which caused material detriment, AP was not a party to it. A more structured approach than just looking at dictionary definitions is necessary if the word is to have any real meaning. Referring to someone being “involved” in something opens the door (as has happened here) to an individual being held to be a “party” simply because they were an ultimate beneficiary of a transaction, but being an ultimate beneficiary should not be enough.

There should be a hierarchy of factual scenarios: being a decision-maker or procuring an act would be likely to make one a party. Being the ultimate beneficiary of an act (as AP arguably was, in the sense that she sold her shareholding, for value) should not be enough to make one a party.

Apart from being an ultimate beneficiary, there is nothing else upon which to base a finding that AP was a “party”, save for a single strand of analysis which suggests that (i) being copied into emails (which emails did not make AP feel for a moment anything was awry, and which included professional advisers) and (ii) it not crossing one’s mind that (as the Regulator would have it now) legal advice should be obtained, is enough to make one a “party”. She was not a decision-maker. The offer to buy her shares came -- this is a quote from her first statement -- "out of the blue". AP in no sense procured the act in question here either. She didn't say to CW, "I want to be bought out, you find a way to do it." Not only did the offer come out of the blue, she considered it very carefully for some time. She ultimately agreed to sell her shares for what she felt was a fair value.

Assistance with the proper construction of “party” can be found with paragraph (b) of subsection 38(3). AP was “connected” with DFL because she was a director. The fact that one must be connected to the employer (as in, by being a director) in order for a contribution notice to be issued (as well as being a party to the act) supports the construction that one should be playing a decision making role in matters in order for a contribution notice to be issued (the first category, decision-maker, above, or involved in procuring the act).

AP played no role in the relevant decisions, which were taken by CW, and there is therefore nothing surprising at all about the approach recommended here. Being copied into emails and not objecting to what appeared to her to be a transparent and “above board” way of proceeding cannot make her a “party” on the true meaning of that term. At no stage did it occur to her that Ashgates weren't proper professional advisers and she should do something differently.

AP’s directorship does not assist in pointing to her being a party. She was a paper-only director, to use her phrase. She has explained in convincing evidence how that came to be the case and that this was really for CW’s convenience and she had little or no involvement in the companies with the exception of Tressanda. As to Mr Robinson’s company law cases he says that Re Park simply tells us that, if you are a director who is asleep at the wheel, you can be disqualified pursuant to the Directors' Disqualification Act 1986 (“DDA 1986”), but DDA 1986 does not help with the construction of “party to” in section 38. The language is completely different; it asks whether the target was a party to an act. Similarly with Re Barings, thinking about directors’ duties does not help you decide whether someone was party to an act.

As to the reasonableness test, Mr Uberoi says that in reality AP is being exposed to a quasi-penal regime as a result of being an ultimate beneficiary (above). Even if she were found to have been a “party”, upon the same analysis it is not reasonable to impose a CN upon an ultimate beneficiary who is simply copied in on emails and does not suspect anything is amiss.

AP was a “paper only” director for reasons of family history, unintentionally caught up in the machinations of her brother. She was an individual earning approximately £48,000 per year for her separate role at Tressanda and played no role in the actions of DFL. She did not seek or propose the buying out of her shareholding, it was CW’s idea which was put to her. AP was in a situation where what she saw described a loan and it did not dawn on her at any point that there was a problem with it. She had no way of predicting the loan would not be repaid. This is not a case of any alleged corporate misfeasance by AP. No case has been advanced that she did in fact think something was amiss and didn't follow through with a suspicion. She is not a sophisticated businesswoman organising an extraction of value. Her sole motivation throughout was simply to sell her shareholding for what she was being told was a reasonable price, partly motivated by the chance to extricate herself from further distressing dealings with CW. If a CN is imposed upon her, she will be divested of her shareholding for no (or little) consideration and subjected to enormous financial consequences as she approaches retirement. All in circumstances where the money in question would at no stage have been used for the benefit of the Scheme in any event (CW would not have drawn down the money in order to pay it to the Scheme – that is clear). AP is an obvious (and just) candidate for the application of the “reasonableness” handbrake.

As a result of the Regulator’s settlement with CW, the Tribunal is in no position to assess reasonableness in the round, because no evidence has been heard from the main driver of events. The Tribunal cannot hear from him and AP is not able to cross-examine him (for example as to his intentions with regard to the loan, why it was not repaid, whether the money might have been used for the Scheme, or how the loan featured in the sale discussions with Pack34). The Regulator is also in a position where it may receive greater than 100% of what it was originally asking for. The Tribunal simply cannot know as the Regulator has not revealed the amount which it settled its case against CW for.

Overall, it is not reasonable for any CN to be imposed upon AP, at all. If any sum is to be imposed, then the starting point should be that the approach of the Panel at [126] of the Determination Notice is correct on this point. This (correct) analysis should only serve as the ceiling / starting point of the analysis, however. Thereafter, and considering the section 38(7) matters (and as stated by the Upper Tribunal in Shah, the first three criteria should receive the most weight):

It was pre-arranged that significant sums would be paid to AP’s children (which they were), and she has paid £36,048 in capital gains tax. AP accepts that there is no rule of law which states those two sums must be excluded. But where an assessment of reasonableness is called for, they should be.

Starting from a ceiling of £180,281.50, and applying the matters set out in section 38(7) and the deductions above, any CN should be in a range of £0 - £50,000, at its uppermost.

Turning to the other two alleged acts, until AP referred the Determination to this Tribunal, these formed a peripheral part of the Regulator’s case. Indeed, they were barely argued in front of the Panel at all. In its own words, the Panel considered these acts to have been “only very lightly referred to” (Determination Notice [142]) and that was, no doubt, why they and the Regulator’s “series” argument were not addressed in the Determination Notice.

Absent the “series” argument, the Regulator does not say how these acts are to be assessed as constituting a material detriment.

The Regulator can only issue AP with a CN if she was party to an Act which occurred during the six years ending with the issuing of the Warning Notice. On any view, that must require that the conduct which the Regulator relies on to say that AP is a “party” bears some proximity to the act. If not, the limitation provisions set out in in section 38(5) would be hollowed out entirely (as would the party test) because individuals could find themselves the subject of a CN on the basis of conduct which (i) vastly pre-dates the limitation period and which, (ii) the individual could not have known may lay the basis for a material detriment at the time the conduct was performed.

As far as the monthly extractions of cash for CW and his wife are concerned, Mr Uberoi says:

As to the final act (now formulated as using DFL’s assets since 2014 to support another group company of which AP was also a director, leading DFL to write-off £224,481 in 2018), Mr Uberoi says:

On the Regulator’s “series” argument, Mr Uberoi says that, for “series” to have any sensible meaning at all (and as a matter of ordinary English language), there must be a comprehensible and close interconnection between the acts said to make up the series. But no such interconnection exists here. All there is here is a chronological succession of acts/allegations with no link between them.

Turning to the time value of money, Mr Uberoi accepts that in many cases an increase for time value will be reasonable. However, this would more normally be the case where there is a far clearer link between monies no longer theoretically available to a scheme, and the act causing material detriment. In this case, there is simply no realistic counterfactual in which the monies drawn down and used at CW’s instigation would have been made available to the Scheme. He accepts that a time value increase may well be appropriate where there is a coherent case of in effect corporate misfeasance diverting money from the pension scheme, but that simply is not this case here. This is therefore a case where no time value increase is appropriate.