Paul Morton is a partner in commercial litigation and corporate recovery
at Halliwell Landau.
The first contested prosecution under The Pensions Act 1995 has ended in
Last week in Hoban v Opra 1999, a former managing director of a pottery
company was acquitted in Stafford Crown Court on nine charges.
The act makes it a criminal offence for a company, without reasonable
excuse, to fail to pay over pension monies deducted from employees'
salaries by the 19th of the month following the deduction.
Officers of a company commit a criminal offence if they consent to the
failure to pay deductions, or if the failure is attributable to that
officer's neglect. If tried in the Crown Court, the officer can receive up
to two years jail and unlimited fines.
It is fair to say that the company concerned was not in the best financial
Pension deductions had not been paid at all for a five-month period and
had been paid late prior to that. What needed to be proved for a successful
conviction of the managing director was, first, the date of his actual
knowledge of the problem and second, to clearly and precisely outline what
neglect was believed to be attributable to him.
The managing director received regular financial documentation. None of
those documents showed a shortfall in payments and he only became aware of
the problem very late in the company's life.
Criticism of the managing director had to involve the failure to have in
place sensible procedures for the provision of financial information from
the financial director. Good procedures were in place.
The financial information had to be scrutinised carefully for any obvious
error within it, though in this instance there was none.
The jury concluded, having heard the facts, that the managing director was
not guilty of any offence.
If further specific levels of safeguard are required by any managing
director then they could arrange for the pension deductions to be subject
to a direct debit to the fund holder within the appropriate time limit.
Alternatively, the managing director could have a standing formal written
instruction to the finance director to report every month that pensions
deductions have been paid.