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Bonas Concluded

June 15, 2011

In what might be regarded as a climb down, the Pensions Regulator issued a Report under Section 89 Pensions Act 2004 on 9th June 2011 that it had settled proceedings with Michel Van de Wiele NV (VDW) by agreeing that a Contribution Notice be issued to VDW in the sum of £60,000.

This has of course denied us the benefit of a hearing by the Upper Tribunal of the substantive issues of disagreement between the Pensions Regulator and VDW, the former seeking to issue a Contribution Notice to VDW of circa £20 million.

The important question of what it is reasonable to seek by way of a Contribution Notice is therefore still unresolved leaving a gaping hole in the understanding of what the purpose of the legislation was, to protect or to punish?

The S89 Report is in the writer’s view extremely bullish as the Regulator seeks to protect and justify its view of the intention of the legislation and the extent of the detriment caused to the pension scheme justifying the size of the Contribution Notice the Regulator seeks to issue in a particular case.

Clearly it intends to seek to issue significant Contribution Notices in size irrespective of the detriment caused to the Scheme by the action complained of and whilst Warren J’s observations are undeniably ‘obiter dicta’ and accordingly not binding on future decisions, it was clear his observations were not restricted to the specific circumstances of this case.

Admittedly he did leave the door open for the issue of Contribution Notices greater than the detriment caused to the pension scheme although he did say he couldn’t immediately think of any such circumstances. This would have been something addressed at a full hearing of the Bonas case by the Upper Tribunal. A hearing we will now sadly be denied.

The S89 Report also refers to the changes to the moral hazard powers introduced by Pensions Act 2008 which introduced the concept of ‘material detriment’.

These changes were however to make the use by the Regulator of its moral hazard power easier and not in the writer’s view to address the question of the quantum of any Contribution Notice.

What is reasonable is still the test and whilst there is no guidance on this other than the ‘obiter dicta’ of Warren J in the Bonas case, it must be obvious that the Courts will have a significant say on this to avoid the Regulator being Judge , Jury and Executioner.

Len Fawke

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