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The London office of Dundas & Wilson has won a High Court victory for the Pension Protection Fund (PPF) that will have wide-reaching implications for thousands of pensioners in insolvent companies.
Sitting in the Chancery Division, Mr Justice David Richards found in favour of the PPF in a long-running case relating to asbestos producer Turner & Newall (T&N), which went into administration in 2001.
The T&N Retirement Benefit Scheme became eligible for PPF protection following the insolvency.
In order for the PPF to take responsibility for a scheme, company voluntary arrangements (CVA), which are effectively deals between an insolvent company and its creditors, have to be agreed.
As employers have a duty to fund their pension schemes, pension funds count among an insolvent company’s creditors.
Dundas partner John Verrill said an argument arose in September 2006 after CVA supervisor Kroll, which was acting for T&N, said the sum the company was being asked to pay to the PPF was over inflated.
Verrill said: “Kroll didn’t think the T&N pensioners would live as long as expected because they had been exposed to asbestos. They thought the pension fund’s deficit would be lower than the independent scheme actuary calculated.
“The scheme actuary said the liability was £94m but the actuaries acting for Kroll said it should be £10m less.”
Action was taken after Kroll, advised by Denton Wilde Sapte (DWS) partner Mark Andrews, claimed it had a right to challenge the scheme actuary’s decision. The PPF refuted this claim and Richards J agreed.
Verrill said: “If the PPF hadn’t been right then every time a company with a defined benefit pension scheme went into insolvency, the amount of claim the PPF would have been able to make would have been negotiable.
“The insolvency practitioner’s actuary would have been able to say the claim was too much and should be reduced. This provides clarity for the future.”
Verrill instructed Mike Tennet QC and Jonathan Hilliard of Wilberforce Chambers, and Lucy Frazer of 3-4 South Square.
Andrews at DWS instructed Peter Arden QC of Enterprise Chambers and Jonathan Evans of Wilberforce.