UK fund for Icelandic bank recovers £2m from administrators
UK – Trustees of the pension fund for the UK subsidiary of Icelandic bank Kaupthing have successfully reclaimed £2m (€2.3m) deposited with the sponsor days before its collapse in 2008.
The High Court ruling passed down by the chancellor of the High Court Terence Etherton found that scheme trustees were entitled to the entirety of the money deposited with the bank, and that it should not count towards a £75m funding shortfall in place when the sponsor declared insolvency.
In the judgment, Etherton dismissed suggestions by Kaupthing, Singer & Friedlander's (KSF) administrator that trying to reclaim the £2m – placed in trust and ring-fenced by the Bank of England as it expressed concern with the bank's situation prior to its insolvency – would be "unjust enrichment" on behalf of the trustee, saying the argument "[failed] on many counts".
Addressing specifically Section 75 debt – the pension shortfall that crystallises when a company becomes insolvent – the judgment continued that there had not been an over-recovery and that there would not be.
"Taking the best estimate of the likely final dividend for unsecured creditors of KSF as 86.5p in the pound, the trustees' ultimate recovery from the administration of KSF in respect of the section 75 debt certified by the actuary at £74,652,000 will be £65,574,000."
The judgment went on to note that, even if the £2m were taken towards the shortfall, the deficit would still be "substantial".
Commenting on the ruling, Charlotte Scholes, associate at Pinsent Masons, said: "What the verdict shows is that the scheme actuary Section 75 certificate is pretty absolute, and it is hard to go behind it, and if you want to challenge a Section 75 debt, you need to have a specific challenge to the certificate."
She also echoed the judgment's wording that the Section 75 debt should be considered "indivisible", noting that it could not be "picked apart".
Alastair Meeks, pensions partner at the firm acing on behalf of BESTTrustees, added: "One of the benefits of the employer debt regime governing the treatment of pension schemes in insolvency proceedings is that it gives maximum clarity at the earliest possible point.
"The judge has firmly endorsed the importance of the actuarial certificate in determining the size of the debt owed to the scheme by the sponsoring employer under statute."