Day seven: Watchdog's FSD 'does not interfere with human rights'
The Pensions Regulator (TPR) has rebutted an assertion by ITV that its anti-avoidance action in relation to the Box Clever Group Pension Scheme is a breach of the human right to property.
The watchdog is seeking to impose a financial support direction (FSD) on five ITV group companies after concluding they were "connected or associated" with the scheme after the TV rental business - a 50:50 joint venture with Thorn - was formed in 2000 when ITV was known as Granada.
The broadcaster had claimed forcing it to support the scheme now would be a breach of its right to peaceful enjoyment of property under the European Convention of Human Rights (ECHR) and therefore that the FSD could not be applied.
However, in closing statements on 7 February, TPR's barrister Nicolas Stallworthy QC agreed the FSD did engage the EHRC, but said that no special justification was needed in this particular case.
"The aim pursued was a social remedial one," he said. "It was no part of the aim of the legislation [Pensions Act 2004] to shield the state from liability to transfer public debt to private entities, but to protect individual members of pension schemes."
He added that safeguards, such as the ability of targets to seek judicial moderation of the decision, as this case is an example of, meant there was not "any automatic imposition of liability". Instead, an FSD does not set a specific liability, but asks the targets to propose how they will support a scheme, with the regulator approving or not.
Stallworthy said this showed sufficient proportionality and reasonableness in the legislation, and said additional facts, such as the value extracted from the joint venture by Granada, gave greater weight to the FSD.
"Granada received cash of significantly greater value than the relevant assets were worth before the transaction," he said. "It was a favourable price. The benefit received [was] more than would have been received in a joint sale to a third party."
He pointed to the contemporaneous valuations quoted by Lincoln Pensions chief executive Darren Redmayne in his expert corporate finance and accounting evidence, which ranged from £359m to £463m on various methods. Redmayne also said the true value was between £240m and £353m when an assumption of the willingness of third-party buyers to pay for potential future synergies was omitted.
Not discrimination
Stallworthy also rebutted claims by ITV that it was discriminatory in its approach by not pursuing Carmelite - the current owners of Thorn - for an FSD, and "must treat like cases alike".
Yet, TPR's barrister said the circumstances of Thorn were different, as by the time the Pensions Act 2004 came into force, the Thorn side of the business had changed hands. Therefore, Nomura, the former owners who had "derived benefit", had ceased to have any connection or association before the regulator came into being.
However, the watchdog did admit it had made a mistake when providing Carmelite with a comfort letter in 2009 stating it would not seek any financial support from the company. Stallworthy said: "The decision in relation to Carmelite was an error. "It cannot be fair [on PPF levy-payers] for the regulator to replicate that error. If the regulator was wrong not to go after Carmelite, it should not compound that error."
Concluding his part of TPR's closing statements, Stallworthy reiterated the watchdog was not claiming any wrongdoing on the part of ITV, but simply seeking remedies for the pension scheme members.
"This isn't about fault or wrongdoing," he said. "This isn't about penalising people for past acts or omissions. This is about a legislative regime providing a remedial structure for pension schemes… reasonable to the risks that people have created. The responsibility they have for those risks, and whether it is reasonable for them to provide financial support to remedy those problems.
"[Granada] did receive, indirectly, huge benefit from what they did and, in these circumstances, it would be reasonable - balancing their interests with those of the employees and the PPF and its levy-payers - that they should be required to provide some financial support."
The regulator also sought to discredit evidence given by FTI Consulting senior managing director David Ashton, who had taken the stand on behalf of ITV to give expert corporate finance and accounting evidence.
Stallworthy said this should be given less credence, stating "he may have been subconsciously providing a less independent view than that of [Darren] Redmayne in circumstances where Redmayne's views were in any event more relevant".
He cited, in his "gentle submission", elements of the cross-examination where Ashton somewhat backtracked on parts of his witness statement, for example accepting there was no evidence to support a £600m valuation of Granada's TV rental business.
The case continues…
ITV & others v The Pensions Regulator: How the case has progressed
- Why Box Clever case spells big test for TPR's powers
- Day 1: Pensions watchdog claims FSD against ITV is a 'barn door case'
- Day 2: Box Clever trustees 'held out' for 100% benefits while company was in receivership
- Day 3: Box Clever subject to 'autocratic control' of Granada and Thorn
- Day 4: Box Clever launch was 'focused on getting as much cash as possible'
- Day 5: Granada and Thorn 'sold businesses to Box Clever for too high a price'
- Day 6: Trustees 'reasonable' to run Box Clever scheme on once company insolvent
- Day 7: Watchdog's FSD 'does not interfere with human rights'
- Day 8: Box Clever trustees needed 'intellectual gymnastics' to ignore the PPF
- Day 9: Box Clever trustees fall foul of ‘reverse moral hazard'
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