A UK court has ruled that the country’s pensions regulator was right to use its power to get broadcaster ITV to support its Box Clever pension scheme. Published today, the judgement follows a two-week hearing in January.
The scheme has 2,800 members and a deficit of about £115m, the Pensions Regulator (TPR) said in a statement about the ruling today.
ITV will be seeking to appeal the decision, according to a spokesman for the company.
“ITV continues to believe that the case brought against it is unfair,” he said.
Mike Birch, TPR’s director of case management, said the regulator was pleased with the ruling.
It sent “a clear message to companies with defined benefit schemes that we will not hesitate to use our anti-avoidance powers where we believe it is reasonable for them to provide financial support,” he added.
Alan Herbert, chairman of the Box Clever scheme trustees, said: “This is another step forward towards securing the pension benefits of nearly 3,000 former Box Clever employees and their dependants.
“It’s been a long and incredibly complex journey”.
The dispute between TPR and ITV goes back to 2011, when the regulator made what has been described as a landmark decision to issue “Financial Support Directions” to ITV to require it to financially support the scheme.
The broadcaster referred the decision to the Upper Tribunal with considerable back-and-forth since then. January’s hearing was the “substantive hearing” of the case, according to law firm Eversheds Sutherland, which has been advising the trustees of the Box Clever scheme for more than nine years.
It said the long-running case was the first challenge to TPR’s anti-avoidance powers to be heard in full by the Upper Tribunal.
Box Clever was formed in 2000 as a joint venture between the TV rental businesses of Granada, now ITV, and Thorn, now Carmelite. In 2003 it collapsed. Before that, employees of the joint venture were transferred into a new Box Clever scheme with the intention they would receive the same benefits as they would have gained from their previous pension arrangements.
TPR has argued that ITV “extracted significant value” from the joint venture before the collapse.
According to the regulator, the Upper Tribunal ruled that it was reasonable for ITV to provide financial support for the Box Clever scheme in the circumstances of the case.
It today said the judges held that: “By their choice of structure for the Joint Venture, the Shareholders extracted considerable cash from the business with no risk of recourse to their assets.
“They retained an ongoing interest in the merged business with the possibility of further value being generated if the business was successful, but without having to bear any responsibility if the business, whose strategy they continued to determine, subsequently failed.”
The ITV spokesman said: “The Tribunal repeatedly stressed in its judgment that no blame or criticism should be attributed to ITV concerning the transaction, 18 years ago, that formed the Box Clever joint venture.
“There were sound reasons for implementing that transaction, which was, in good faith, regarded as being in the best interests of Granada’s shareholders, employees and consumers.”
Emma King, partner at Eversheds Sutherland, said that “in spite of its best efforts to avoid its moral responsibility to pension scheme members almost all of ITV’s arguments have been rejected”.