what's in the news

Before the “Green Deal” is implemented, energy efficient improvements to properties are an expense incurred by the occupier effecting the improvements but benefit all future occupiers. The new proposals for the Green Deal under the Energy Act 2011 (“the Act”) will allow property owners to adopt energy efficient improvements at no upfront cost to the occupier. The improvements will be financed by accredited providers, and the cost will be recouped in instalments through energy bills.  The aim of the Energy Act is to reduce carbon emissions cost effectively.

There will only be an incentive for the current occupier to adopt energy efficient improvements if any supplementary charge attached to the energy bills is smaller than the resultant saving on the bill with the improvements. The Act introduces the Green Deal which is based on the principle that energy efficient improvements to properties are paid for by the resulting savings on gas and electricity costs; this principle is known as “the Golden Rule”. It will mean that energy bills for all occupiers, present and future, will be reduced and the owner of the property will benefit from the increased value of the property. (Note that for certain expensive measures for residential property, an extra subsidy could be available via the Energy Company Obligation.)

The government is obliged to devise framework regulations to establish a scheme for the authorising of Green Deal assessors, Green Deal providers or installers and to regulate their conduct in a Code of Practice. On 23 November 2011, DECC launched a consultation on the details of the Green Deal and the Energy Company Obligation (ECO), with a view to drafting these regulations. A Memorandum of Understanding has very recently been signed between the government and 22 organisations to become the first Green Deal providers.

It is likely that the Green Deal will come into force in Autumn 2012 and initially will apply to England only. Some of the fundamental principles that the Act will lead to are:

1. Payments are recoverable as a debt against the bill payer. There will not be a charge against the property nor will future bill payers be liable for any arrears. Bill payers are liable only in respect of the period during which they are the bill payer.

2. From April 2016, private residential landlords will be unable to refuse a tenant’s reasonable request for consent to energy efficiency improvements, where a finance package, such as the Green Deal and/or the Energy Company Obligation (ECO), is available.

3. From April 2018, it will be unlawful to rent out residential or business premises that do not reach a minimum energy efficiency standard (the intention is for this to be set at EPC rating ‘E’). This might mean that Landlords will be forced to enter into or consent to the deal.

For further information please contact Pitmans’ Real Estate, Planning and Environment Teams.

Sally Sharp
Partner
T: 0118 957 0362
E: ssharp@pitmans.com

Raithatha v Williamson [2012] EWHC 909 (Ch) (4 April 2012)

The High Court has held that a bankrupt’s right to draw a pension may be subject to an income payments order (“IPO”) even if the individual has yet to draw his pension. This judgement represents a significant departure from previous practice under the Welfare Reform and Pensions Act 1999 (WRPA 1999) which protected future pension rights from IPOs and distinguished them from pensions in payment. It also effectively allows a trustee in bankruptcy to compel a bankrupt to draw pension against his wishes.

Facts

The applicant, a bankrupt, opposed an IPO application from the respondent, his trustee in bankruptcy on the grounds that his undrawn personal pension scheme benefits were not income for the purposes of section 310(7) of the Insolvency Act 1986 (“IA 1986”) and therefore could not be subject to an IPO. While the applicant was entitled to draw his pension under the scheme rules, he had not yet elected to do so. He argued that until he elected to draw his pension, he is not ‘entitled’ to the payments and he is not receiving any pension income which may be subject to an IPO.

The applicant also argued that any potential lump sum payment could never be subject to an IPO, as the legislation only applied to periodical payments.

Judgement

The court ruled that both undrawn pension and any lump sum payment would both constitute income for the purposes of s310(7) IA 1986 and were subject an IPO.

Implications of the judgement

The decision in Raithatha v Williamson expands the scope for a trustee in bankruptcy to use section 310(7) to gain access to an individual’s pension rights. It means a bankrupt may be compelled to draw a pension which the bankrupt has become “entitled” to draw, in order to comply with an IPO.

The decision seems to contradict WRPA 1999, which aimed to distinguish future pension rights from pensions in payment. Before WRPA 1999, pension schemes were able to include provisions in their rules to prevent pension assets from being swallowed up in bankruptcy proceedings. The result is that personal pension schemes no longer have either form of protection. Many may criticise this approach and the applicant has been granted leave to appeal the decision.

As yet, rights under occupational schemes should be unaffected by this decision as they are protected under section 91 of the Pensions Act 1995.  However, this decision may encourage trustees in bankruptcy to test the limits of section 310(7) in relation to occupational schemes. In particular, a trustee in bankruptcy may be tempted to apply this decision to rights under an occupational scheme where the member has already reached Normal Retirement Date and therefore entitled to, but has not yet opted to, draw their pension.

For further information, please contact Pitmans Pensions Team.

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com

Parminder Latimer
Director
T: 0118 957 0324
E: platimer@pitmans.com

Richard Jakubowski
Solicitor
T: 0207 634 4640
E: rjakubowski@pitmans.com

The Article 29 (A29) Working Party has recently published their opinion paper on the rise of facial recognition technology and the concerns that this brings for the protection of personal data online. This note looks at the issues of online privacy and the concerns for data privacy as facial recognition software becomes more widely available.

The A29 Working Party is the European body which comprises leading representatives from each data protection supervisory authority in the EU (in the UK, this is the Information Commissioner’s Office); its opinions are therefore particularly influential, if not binding.

Last year Pitmans published a briefing explaining the issues of privacy at the time Facebook changed their ‘tagging’ service for photographs to incorporate facial recognition technology. For further information, click here.

Since then, the availability and application of the technology has grown exponentially; as its accuracy and deployment expands, this technology could be used for the most routine events in every day life – but also by advertising companies, collecting market information based on attendance monitoring and profiling to tailor targeted advertising messages.

The A29 Working Party has identified facial recognition technology as being used for authentication or verification for devices or online services. However, the application of this technology may be naturally extended from the online to the offline world. From a defence and security perspective, retinal scans and other biometric data access are already in use at a number of airports and conditional access facilities; in addition, full facial recognition systems are reportedly already used by security agencies to identify known criminals at sporting and live events by using the technology to identify particular faces amongst the crowd (e.g. known hooligans at a football match or members of the public at the London Olympics).

Similarly, access to live events, venues and concerts has become more sophisticated than merely paper tickets – organisers continue to explore ways in which they may combat the growing grey market in second hand ticket sales which diverts income, and brand value, away from events and the artists. Methods include tickets containing photographs, bar codes or employing near field communication (NFC) technology. Fully automated facial recognition technology is a natural technological progression for those industries where secure access is an essential requirement.

But such applications raise data privacy concerns and consequently companies controlling or processing the data may be in breach of data privacy laws, unless such measures and new technologies are balanced against an individual’s right to privacy. While the A29 Working Party’s opinion on facial recognition focuses on online and mobile, the principles apply equally to anyone collecting and using data for facial recognition services.

The A29 Working Party consider that where a digital image contains an individual’s face, which is clearly visible and allows identification of the individual then such an image would be considered personal data. Therefore, where a reference template is created from an individual’s image, this template will also be personal data if it contains a set of distinctive features of an individual’s face which can be linked to the specific individual and stored for later use. The only instance where a template is likely not to be considered personal data, would be where it was not associated with an individual’s record, profile or original image – but clearly this would limit the application of the technology. Importantly, the template and corresponding profile (or personal details) of the data subject in question do not need to be held by the same entity – it may still constitute personal data where a data controller has the means to access the corresponding information needed to identify that individual (even where held by a third party supplier).

Directive 95/46/EC states the conditions by which the processing of personal data must comply. Article 6 states that images and templates must be relevant, and not excessive, for the purposes of facial recognition processing. As the images constitute biometric data, the processing of the personal data may only be performed if the informed consent of the individual is obtained prior to commencing processing or if another exception is satisfied under the Directive (e.g. for legitimate purposes pursued by the data controller – such as security for the venue in the light of perceived terrorist threats – provided it does not prejudice the rights of the individual concerned). The A29 Working Party note that some elements of processing may be necessary before consent is obtained, i.e. to verify existing records, but this should only be for the strictly limited purpose, and the information deleted immediately.

The digital images or templates stored must be used only for the specified purpose for which the have been provided – and for which consent has been sought or where another relevant exemption applies (as, for instance, in the case of the legitimate use exemption described above). The greater the sensitivity of the personal data concerned the more likely explicit consent will be required.

The A29 Working Party considers that technical controls should be implemented to ensure that third parties do not gain access to the data and use it in an unauthorised manner. As trials of cashless technology grow for events, it may be that this technology is used by individuals to purchase items using credit stored against their profile, for instance drinks or merchandise. Controllers should be aware of the parameters of consent and that data stored against a user’s profile, including data used for, or available from, facial recognition data, can be valuable information for advertising or marketing agencies profiling consumers.

Similarly, controllers and processors will need to guard against security breaches which may result in unauthorised access to the data. The A29 Working Party advises that technical measures such as encryption will need to be used for data storage and data transit. One method suggested by the A29 Working Party is for biometric encryption techniques themselves to be used so that the cryptographic key is directly bound to biometric data and is only re-created where correct live biometric sample is presented on verification.

To reduce such concerns the Working Party recommends minimising the data so that the images or templates stored do not contain more data than necessary to perform the specified purpose. Similarly, templates should not be transferable between facial recognition systems. Organisations developing or deploying such technology should also carry out Privacy Impact Assessments (PIA) and follow development methodologies based on Privacy by Design (PbD).

The everyday use of facial recognition software in society to improve security checks for employees, visitors or customers may soon become common place when using even the simplest of access control systems.

Data controllers and data processors should be aware of the law in this area as the technology becomes more prevalent. But consequently it appears the law may also need to keep abreast of various ways in which the software can be exploited to monitor and profile individuals using a range of services and ensure adequate protection for data subjects as the technology advances.

For further information please contact Philip James or a member of Pitmans’ Data Privacy & Information Law team.

Philip James
Partner, Digital Media, Technology and Data
T: 0207 634 4655
E: pjames@pitmans.com

HSBC has become the first large corporate organisation in the United Kingdom to guarantee part time work when it is requested by parents working for the organisation.

HSBC have announced plans to offer the option of a part-time role at the same level and salary grade to all employees returning from maternity or paternity leave. This is aimed at helping their employees balance the demands of family life with their own career progression. The bank will offer jobs equivalent to at least two and a half days per week on a pro-rata salary and at the same level as their original role to these returning parents.

The bank’s head of employee relations, Sue Jex, said:

“As a business we see about 1,100 staff each year taking parental leave following childbirth and of this number, 87% want to return to work. By guaranteeing our returning parents part time roles, we are supporting our staff by offering more flexible working patterns in order to help balance the need for child care while maintaining household income.”

The current law regarding flexible working states that all employees are entitled to request flexible working providing they have been employed for a period of at least 26 consecutive weeks with the same employer, are not agency workers or members of the armed forces, have not made a flexible working request in the previous 12 months and their reason for making the request is to care for children or other adults. Whilst employees who satisfy these criteria have the right to request flexible working, there is no obligation on the employer to provide it.

The bank also has a scheme which supports staff that are looking for extended leave by allowing year-long unpaid sabbaticals as well as a priority returner scheme for staff rejoining the bank within five years.

Indeed the HSBC’s approach is summarised well by Joe Garner, who is the head of HSBC in the United Kingdom. He recently stated that:

“We want our employees to know we value their talent and experience. By guaranteeing part-time work at a pro-rata salary we hope we can help them balance the demands of family life with their ongoing careers at HSBC.”

HSBC’s approach appears revolutionary and this latest flexible working scheme fits well in to the family friendly approach which they have adopted. This outlook is quickly making this multi-national bank seem like a much-sought-after employer as the scheme has become a way in which HSBC can clearly demonstrate that they recognise that their employees have a life outside of the office and that they care enough to enable a successful work/life balance to be reached. Only time will tell as to how many other large corporate organisations follow HSBC’s lead.

For further information on this article or any of the issues involved, please contact Pitmans’ Employment team.

1. All Change in April

By way of a reminder a number of important changes come about this month. For the first complete pay week on or after 1 April 2012, statutory maternity, paternity and adoption pay increases apply (increasing the amount payable by employers to £135.45 per week, up from £128.73 per week). On 6 April 2012 statutory sick pay increases (from £81.60 to £85.85 per week) and changes to the rates and allowances for NICS come into force. At the same time the personal allowance, for income tax, rises and the threshold at which employees pay the higher income tax rate of 40% reduces.

From 6 April 2012 HMRC will have the power to ask an employer to pay a security where there is a serious risk that it will not pay income tax or Class 1 NICs that it has deducted from an employee’s pay and employees in defined contribution pension schemes will lose the opportunity to contract out of the state additional pension.

The qualifying service period for employees to bring a claim for unfair dismissal will increase from one to two years on 6 April 2012 but only applies to employees starting with a new employer on or after that date.

2. Suitable Alternative Employment

As part of a fair redundancy process there is an obligation on employers to consider whether there are any suitable alternative vacancies for those at risk of redundancy.  The Employment Appeal Tribunal has held that an employer is not obliged to use an objective selection criteria in the context of an interview for such alternative employment.

What does this mean?
It will be difficult for employees to successfully argue that they were unfairly treated where an employer uses ‘subjective’ criteria to assess an employee’s suitability for an alternative post.

What should employers do?
However, employers should bear in mind that whilst ‘subjective’ criteria may be used when selecting staff for a new or alternative position the decision (not to select the candidate for the alternative job) should not be so unreasonable that no reasonable employer could have come to that conclusion in the circumstances.

Even when an employer thinks that affected employees may not prove suitable for an available alternative post; it is good practice not to consider external candidates until the affected employees have been ruled out following a fair process.

3. Foreign workers

The Biometric Residence Permit system has been expanded.

What does this mean?
From 29 February 2012 all non-European Economic Area nationals applying to remain in the UK for more than 6 months, including refugees and those given the right to live in the UK permanently, will have to obtain a Biometric Residence Permit.

What should employers do?
Employers should always check that their staff are allowed to work in the UK as those who employ illegal foreign workers may be imprisoned and/or fined.  From June 2012 employers will be able to check online whether a person holds a Biometric Residence Permit, though only individuals who have had to make an application will have one.

4. TUPE

The Employment Appeal Tribunal has held that a change to a work base on a TUPE transfer can give rise to a claim for constructive, automatically unfair, dismissal.

What does this mean?
Employees who transfer under TUPE transfer on their existing terms and conditions of employment. Where a transfer involves a substantial change in working conditions to an employee’s material detriment the employee is entitled to claim unfair dismissal.  Significantly changing an employee’s place of work can, as in this case, amount to a substantial change in working conditions.

What should employers do?
Businesses who are considering purchasing another business should take specific legal advice as to their liabilities under TUPE.

5. The Diamond Jubilee

Acas has published guidance for employers to help them plan for the extra bank holiday on Tuesday 5 June to mark the Queen’s Diamond Jubilee.  Acas recommends that employers plan ahead to avoid last minute leave request clashes or short-term absences and handle requests for time off as fairly and consistently as possible.

What should employers do?
There is no statutory right to bank / public holidays so employees are only entitled to take such days off if their contract of employment entitles them to do so. Employers have the right to refuse a request for statutory minimum leave under the Working Time Regulations, as long as they give notice which is at least as long as the holiday requested. Employees should handle holiday requests fairly, consistently and avoid discriminating against staff when prioritising requests for time off.

When planning for the Jubilee, employers should bear in mind that the last bank holiday in May has been moved to Monday 4 June 2012 and that most schools have moved their half-term holiday to that week. Employees who are obliged to work on a bank / public holiday will only have the right to be paid extra if their employment contract entitles them to extra pay.

6. Marriage discrimination

What does this mean?
Less favourable treatment on the basis that an employee is married to a particular person is only unlawful if the ground for the treatment is specifically that the person is married, rather than only that they are in a close relationship which happens to take the form of marriage.

What should employers do?
Employers who wish to avoid perceived conflicts of interest and nepotism can legitimately implement policies prohibiting persons who are in a close relationship from working with each other as long as the policy is not restricted to people who are married or in civil partnerships.

7. TUPE

The Employment Appeal Tribunal has held that corporate franchisees do not fall within the definition of ‘workforce’ for the purposes of TUPE Regulations.

What does this mean?
Provided the use of corporate franchisees is not a sham, the dismissal of employees who do not wish to become franchisees after the transfer may be for an economic, technical or organisational reason.

What should employers do?
Businesses who are considering purchasing another business should take specific legal advice as to their liabilities under TUPE.

8. Redundancy

The Employment Appeal Tribunal has held that a redundancy pool could consist only of one where the individual concerned was the company’s only employee in China and the company decided for business reasons to stop having an employee there. The Employment Appeal Tribunal said that selection only operates, when assessing fairness, where there is a number of similarly qualified possible targets for redundancy.

What does this mean?
It will be difficult for an employee to challenge selection for a redundancy pool even in the case of a pool of one if the employer has adopted a fair procedure to decide who goes into the pool.

What should employers do?
Employers must “genuinely apply their minds” to the pooling issue and be able to provide evidence of their reasoning and their decisions. This will make it more difficult for an employee to challenge the pool although inevitably there is likely to be a higher risk if the number of roles is the same as the number of people in the pool. Employers should always take specific legal advice before selecting employees for a redundancy pool.

9. Fixed-term contracts

The European Court of Justice has held that the conversion of a fixed-term contract into one of indefinite duration need not require the new contract to reproduce in identical terms the main clauses of the previous contract.

What does this mean?
If the employee’s tasks and functions remain the same, however, then the conversion of contracts must not involve material changes in their terms which are unfavourable to the employee.  In the UK, the Regulations concerning Fixed Term Employees generally automatically convert the contract to a permanent one after 4 years with no limit on duration. So there should not usually be a problem with terms becoming less favourable, however, if the original fixed term contract did not contain a notice period to carry over, there could be a risk of the notice provisions in the permanent terms being less favourable.

What should employers do?
Employers should always take specific legal advice before issuing or ending a fixed-term contract.

10. Apprenticeships

The Apprenticeships (Form of Apprenticeship Agreement) Regulations 2012 come into force on 6 April.

What does this mean?
The Apprenticeships, Skills, Children & Learning Act 2009 provides that completing an apprenticeship requires a person to enter into an ‘apprenticeship agreement’. If this agreement is to take effect as a contract of service it must be in the ‘prescribed form’. However, until now no form has actually been prescribed. These Regulations prescribe the form. They generally require the agreement to contain a written statement of the particulars of employment. The agreement must also include a statement of the skill, trade or occupation for which the apprentice is being trained under the apprenticeship framework.

What should employers do?
Employers who employ apprentices will need to issue an apprenticeship agreement in the prescribed form to those apprentices who are employed under a contract of service.

For further information on this article, please contact Pitmans Employment team.

Mark Symons
Partner, Head of Employment
T: 0118 957 0340
E: msymons@pitmans.com

The Pensions Regulator has issued a report on its involvement in the Uniq deficit-for-equity swap which took place last year. The report provides insight into the Regulator’s approach to situations when a sponsoring employer cannot satisfy its Pension Scheme deficit.

Background

The Uniq plc Pension Scheme (the Scheme) is an occupational pension scheme with approximately 20,000 defined benefit (DB) members. The Scheme’s employers at the time of the transaction were Uniq plc, Uniq (Holdings) Limited and Uniq Prepared Foods Limited (the Group). The Group had significantly reduced in size since the year 2000 which resulted in the Scheme having a large deficit relative to the Group’s size. The Group showed a loss of £21M on £287M turnover in the year 2009 and the Scheme’s buyout deficit was approximately £431M against its assets of £619M.
The Group was clearly not in a position to address the Scheme’s deficit even if it returned to profitability. Uniq plc was listed on the London Stock Exchange, but its market capitalisation was less than £10M as a result of the perception that it had an insurmountable pension problem posed by the Scheme. This negatively impacted on potential investors, customers, suppliers and creditors. 

A recovery plan was not viable

It was clear that conventional funding solutions were not realistic and more radical options were considered. These included a recovery plan with a period of recovery stretching over 40 years but the issue was that its success was contingent on the Group’s ability to raise fresh capital. It was clear that due to the size of the debt owed by the Group, it was in effect owned by the Scheme and the only reasonable chance the Group had of future growth was if it did not have to support the Scheme. The Trustees concluded that there were no viable scheme funding solutions and unless the Group underwent restructuring with an injection of fresh capital, insolvency would be the inevitable outcome.

Alternative was a deficit– for– equity proposal

The Regulator worked with the Pension Protection Fund (PPF) and all other parties to reach a deficit-for-equity proposal. Under the arrangement the Scheme received 90.2% of equity in Uniq plc through an SPV. The Group’s shareholders backed the proposal and retained the remaining 9.8% equity which would enable them to yield a better return than if the inevitable insolvency event occurred.

Following the Group’s restructuring, the Scheme received confirmation that the S143 valuation, showing that the Scheme is funded higher than the PPF compensation levels, is binding. In July 2011 Greencore Foods Limited made a cash offer of £113M for the entire issued share capital of Uniq plc which resulted on £100.8M going to the Scheme. The Trustees of the Scheme entered into a buy-in contract in December 2011 which ensured that members would receive benefits equal to PPF compensation levels as a minimum. The Trustees will now try to secure benefits above these compensation levels for the Scheme’s members.

Principles established for application to future cases

The Regulator assessed the following criteria when considering the merits of the potential restructuring options:

1) The scheme members and the PPF are significantly better off than if insolvency takes place.

2) The scheme members and the PPF get a sufficient stake in the surviving business to ensure no exploitation of them post-restructuring. Where gain is available, the scheme members and the PPF get no less than a proportionate amount of this gain.

3) The risks to the PPF are acceptable in the context of the Regulator’s broader duties to members as well as the PPF.

4) Proper account has been taken of the members’ interests, especially where the risks have increased, and appropriate ongoing arrangements are in place to manage those risks.

5) Costs are proportionate and fairly shared.

The Regulator has said that each case will be considered on its own facts but the principles reflect how it believes the legislation should operate.

For further information about Pitmans’ Pensions team, please contact:

David Hosford                                                       
Partner                       
T: 0118 957 0363                  
E: dhosford@pitmans.com                             

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com

The EU insolvency law has resulted in insolvent debtors shopping for a better jurisdiction in which to become bankrupt.  This article examines why and how.

Why?

The EC Regulation on Insolvency Proceedings 2000 (the ECIR), came into effect in May 2002, providing a framework for the national jurisdictions to work together by recognition of each states insolvency mechanisms.  However the EC Regulation does not harmonise substantive differences in insolvency law between the subscribing nations.

England and Wales aim to encourage entrepreneurialism and the comparatively friendly insolvency legislation has caused bankrupts to establish their centre of main interest (COMI) in England or Wales.  Automatic discharge of a bankrupt after 12 months and wiping of all pre bankruptcy debts so that the bankrupt can effectively start afresh (subject to certain exceptions) has caused England and Wales to become known as a ‘debtor friendly’ state.

Our ‘debtor friendly’ state is more marked when compared with Germany where the discharge from bankruptcy can take up to 9 years and Irish law where currently there is no automatic discharge and bankruptcy lasts 12 years.

How?

Recital 4 of the ECIR states that the regulation should not be used for forum shopping.  However, there is no clear definition of COMI and the ECIR therefore enables some insolvent debtors to establish a COMI in a more favourable jurisdiction.  The court will usually regard the country where the debtor carries on a business or earns their living as their COMI.  Recital 13 of the ECIR states that an individual’s COMI will be ‘the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties’.  The court will also have regard to the place where the debtor normally lives, how long they have lived their and how often they travel abroad.  The location of a debtor’s COMI will be a question of fact to be decided on the specific circumstances of each case.

Change?

Concerns have been raised that there is not sufficient policing of the line between genuine and fictional relocations.  Chadwick LJ in Shierson v Vlieland-Boddy [2005] BPIR 1170 said ‘that there is nothing… which prevents a debtor’s centre of main interests from being changed from time to time’.  There have however been a number of recent “cross border” bankruptcies which have been annulled in the courts of England and Wales following findings that the debtor’s COMI was not correct at the commencement of proceedings.  In Official Receiver –v- Huck [2011] BPIR 702, and Sparkasse Hannover –v- Korffer [2011] B.P.I.R the courts held that the debtors COMI was not England.  Both cases emphasise that in establishing a COMI there must be a necessary element of permanence.     In practice, for a debtor to establish their COMI, the debtor will have to have had their arrangement for a minimum of 6 months for the court to consider such arrangement to be credible.

In 2010 there were 59,173 bankruptcies in England and Wales compared with only 9 bankruptcies in the Republic of Ireland.  In quarter 3 of 2011, there were 9,567 bankruptcies in England and Wales compared with 301 bankruptcies in Northern Ireland.  Ireland’s financial difficulties have been well noted since 2008 and it seems at odds to see so few bankruptcies compared with England and Wales.  Arguably these statistics demonstrate the ability to shop for bankruptcy.

The creditor perspective is that reform of the ECIR is needed to limit the scope for insolvent debtors to switch their COMI in anticipation of filing for bankruptcy.   The European Commission has committed to reviewing the position by 1 June 2012 and its recommendation for any change to the EU law will be awaited with interest.

For further information on this article please contact Pitmans Insolvency & Restructuring Team.

Hannah Wright
Solicitor, Insolvency & Restructuring
T: 0118 957 0354
E: hwright@pitmans.com

The Court of Appeal has unanimously dismissed a challenge on the part of various public service unions to the Government’s decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI).

Background

Many public sector pension schemes are increased in accordance with the Pensions Increase Act 1971 and related legislation.  This means that the Government is obliged to review the “general level of prices” for a given period and, where there has been an increase in prices, it is ordered to increase pension benefits by not less than the percentage increase in prices.

The Government announced in its June 2010 budget that it would switch from RPI to CPI saying it believed that CPI would provide a more appropriate measure of pension recipients’ inflation experiences.  CPI is calculated differently to RPI and generally results in a lower price level.  From the Government’s perspective, a switch from CPI to RPI would mean a significant reduction in the cost of pensions.

The unions’ challenge

The unions challenged the Government’s decision on two key grounds:

1) The adoption of CPI was inconsistent with the Government’s statutory obligations

The unions argued that, instead of measuring the “general level of prices”, CPI actually measures consumer responses to changes in prices and is, therefore, contrary to the legislation. The Court unanimously rejected this argument and stressed that, so long as the Secretary of State “acts rationally and takes all (and no inappropriate) measures into account, it is a matter for him which such index he chooses.”

2) The Government’s decision was motivated by irrelevant considerations and/or an improper purpose

The unions contended that the Government had put the interests of the economy ahead of its obligations to adhere to the law. The Court, however, considered that subject to proportionality, it was not unreasonable for the Government to take into account the effect of adopting different measures of inflation on the national economy and, even if it was incorrect that the economy be a consideration in the decision, the use of CPI as the relevant index would nonetheless be lawful.

Comment

The Court of Appeal rejected the unions’ challenge unanimously and found that the Government had not acted unlawfully in making the move from RPI to CPI.  Although the unions have indicated that they may appeal this decision to the Supreme Court, based on this judgment, the scope to do so would appear limited.

For further information, please contact Pitmans’ Pension Team:

Symon Rowley
Director, Pensions
T: 0118 957 0301
E: srowley@pitmans.com

Megan Cole
Solicitor, Pensions
T: 0207 634 4592
E: mcole@pitmans.com

The High Court has granted an order to assist the enforcement of a judgment debt against part of a debtor’s pension fund. The order has the effect of requiring the debtor to exercise his right to withdraw a lump sum from his pension fund. The court also granted a third party debt order to take effect when the right has been exercised.

Facts

The claimants were the victims of fraud and forgery by the defendant. They obtained judgment in 2008 and took steps to enforce the judgment debt. Among the defendant’s assets was his fund in a pension scheme which provided that he could elect to draw down 25% of his pension fund as a tax-free lump sum.

Decision

The court may grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so (section 37(1), Senior Courts Act 1981 (SCA 1981)).

The judge was prepared to exercise his jurisdiction under section 37 of the SCA 1981 to, in effect, release certain funds held in a pension scheme for the benefit of the judgment creditor.

Accordingly, he ordered that:

- the defendant delegate to the claimants’ solicitor the power to elect to take the lump sum from the pension fund and for the court to authorise the solicitor to make the election in the defendant’s name; and

- immediately following the election, the sum payable from the pension fund would be subject to a third party debt order.

The judge did not consider it proportionate in this case to require the appointment of a receiver to whom the election could be delegated. However, he added that he would have done so had it not been possible to make the order in the terms set out.

Implications of the judgment

The decision will be welcomed by claimants. Successful claimants should now consider the terms of any pensions when considering the defendant’s assets against which a judgment may be enforced.

This outcome contrasts with the position in bankruptcy where HMRC approved pensions are afforded special statutory protection. In this case, the judge rejected the defendant’s submission that, because of this protection in bankruptcy, public policy requires pensions to be treated as exceptional when it comes to execution of judgments. The judge commented that a bankrupt individual:

-    surrenders all of his assets to a trustee in bankruptcy (save for certain limited exceptions); and

-    becomes subject to certain disadvantages and restrictions.

A judgment debtor cannot have the benefits of bankruptcy without its burdens. Where a debtor fails to pay his debts and does not go into bankruptcy, his assets will be available for enforcement of judgments by his creditors.

For further information about Pitmans’ Pensions team, please contact the following:

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com

In a recent ruling in Premier Food Group Services Limited v RHM Pension Trust Limited, the High Court held that a “Deed of Intention” was effective in equalising retirement ages for male and female members. The decision represents a more pragmatic approach to an issue which has been the subject of numerous legal questions in the recent past.

Premier Food Group Services Limited v RHM Pension Trust Limited (2 March 2012)

Following the European Court of Justice ruling in Barber v Guardian Royal Exchange in 1990, the trustee of the RHM Pension Scheme (the “Scheme”) took the decision to equalise retirement ages for male and female members at age 65. At the time of the decision, the Scheme had retirement ages of 65 for men and 60 for women.

The trustee passed a resolution to change the Scheme’s normal retirement age for female members and subsequently, on 15 November 1990, the trustee and the principal employer executed a Deed of Intention to provide that:

1) the Scheme rules would be amended as soon as possible to document the change in the normal retirement age, to be effective from 25 August 1990; and
2) pending the amendment of the Scheme rules, the Scheme would be administered on the basis that the change had occurred on 25 August 1990.

On 18 February 1993, a Deed of Amendment was executed to provide for a common retirement age of 65 for both male and female members. The question before the Court was whether the Deed of Intention was effective in equalising the Scheme’s normal retirement ages from 25 August 1990, or whether equalisation only took effect from the date of execution of the Deed of Amendment on 18 February 1993.

The Scheme’s employers argued that the Deed of Intention satisfied the formal requirements of the Scheme’s amendment rule so that the change was valid with effect from 25 August 1990 pending a subsequent deed of amendment. The trustee, on behalf of a Scheme beneficiary, argued that the Deed of Intention recorded only a future intention and could not be held to have amended the Scheme rules in 1990.

Decision

The Court accepted the employers’ argument and held that the trustee’s interpretation of the Deed of Intention “is at odds with the more natural meaning of the language used and is unsatisfactory in its legal and practical consequences.” The Court held that the Deed of Intention was effective in amending the Scheme as an exercise of the power of amendment contained in the rules.

The decision represents a practical approach to determination of how a Scheme may be amended to give effect to the equalisation of retirement ages. Whilst the trustee’s resolution, subsequent announcement to members and Deed of Intention, did not formally comply with the Scheme’s amendment power, the Court took a purposive approach to the construction of the Scheme’s governing documents and the manner in which the power of amendment may be satisfied.

For further information about Pitmans’ Pension team, please contact the following:

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com

Julian Richards
Solicitor
T: 0207 634 4649
E: jrichards@pitmans.com