Saving case

Raquel Agnello QC and Thomas Robinson report on the implications of a ruling that helps to clarify the relationship between the Upper Tribunal and the Pensions Regulator


The first case before the Upper Tribunal to consider the ­Pensions Regulator’s powers relating to moral hazard – Michel van de Wiele NV v The Pensions Regulator (2011) – was a crucial step towards clarifying the tribunal’s role in hearing a reference from a decision of the Determinations Panel (DP) of the regulator, as well as setting out the role of the regulator at any hearing before the tribunal.

The scope of a reference to the Upper ­Tribunal from any decision of the DP has been the subject of much debate. Is it restricted to being an appeal or is it a ­complete rehearing? Is the Upper Tribunal restricted to considering only those issues raised in the notice that institutes the reference or can the regulator ask it to consider other issues, whether raised before the DP and rejected or arising from fresh evidence?

Reference point

In van de Wiele, Mr Justice Warren, ­sitting as president of the Upper Tribunal, held that a reference to the tribunal was a rehearing and a fresh hearing rather than any form of appeal from a decision of the DP. In this respect, references from the DP are the same as references from the FSA’s Regulatory Decisions Committee.

However, Warren J did note that it was up to each Upper Tribunal panel to determine under its case management powers how the hearing before it should operate. For example, directions may be given restricting the cross-examination of ­witnesses where such examination has taken place before the DP.

The case also decided that although ­references cannot be made by the regulator itself, once a reference had been made by those the regulator seeks to take action against or by the trustees, it is able not only to ­participate but, more importantly, is not restricted to simply supporting the ­decision of the DP and its reasons.

Equally, the regulator is able to depart from the reasoning of the DP. So any target who seeks to make a reference should be warned that the regulator is entitled to argue for a result that goes further than the ­actual decision and findings of the DP. This is in line with the position in FSA cases.

There is, however, a fundamental restriction on the powers of the regulator and its role in relation to any reference. The regulator cannot make any ­reference itself or seek, once a reference is made by a ­target, to bring before the Upper Tribunal any other target against whom the DP determined that no regulatory action should be taken against.

In reaching this conclusion, Warren J ­considered the role of the DP and its position as part of the Pensions Regulator. The regulator’s scope for seeking a different outcome (on different grounds) to that before the DP is restricted to those who have actually made a reference to the Upper Tribunal.

At this stage the role of trustees of ­pension schemes becomes significant. The trustees, the Pension Protection Fund (PPF) or any directly affected party are ­entitled in any reference made by any of them to bring before the Upper Tribunal any target against whom the DP ­determined not to take action.

Although the regulator may not bring back such targets, the trustees or the PPF – or, indeed, any directly affected party – can ask in its reference that the Upper Tribunal considers what regulatory action should be taken against targets released by the DP.

Once such a reference has been made, in accordance with the judge’s ruling, it is open to the regulator to argue that regulatory action should be taken against those targets. The provision setting out the jurisdiction of the Upper Tribunal states that it must ­determine what, if any, is the “appropriate action” for the regulator to take.

The scope of proceedings before the Upper Tribunal will therefore depend on parties other than the regulator itself. It is important to recognise the restrictions placed upon the regulator at this stage and for both targets and trustees to understand the significance of their role in defining the scope of the reference and what might be “appropriate action”.

Three range

The tripartite relationship in cases before the DP, and subsequently before the Upper Tribunal, is unique to this area.

Although it is a decision for the regulator whether or not to issue a warning notice and who should be a target, once the DP has made its determination significant power is transferred from the regulator to the trustees. If the trustees, PPF or other ­directly affected parties do not make a reference, the regulator’s actions are limited to those who have made a reference.

The decision means that in cases ­involving complex corporate groups or where the proceedings before the DP were not as extensive as a full court hearing, trustees will need to take care before ­deciding whether to make a reference, and who to join as ­respondents.

Raquel Agnello QC and Thomas Robinson are barristers at 11 Stone Buildings