For members of certain pension schemes used for "Pension Reciprocation"

Details of Claim
Order dated 1 December 2016
Table of Issues
First Witness Statement of Ben Fairhead
Court Order – June 2017
High Court – Open Transcript – June 2017

On 31 May 2011 Dalriada Trustees Limited (“Dalriada”) was appointed as an Independent Trustee of the schemes listed above.

The schemes have been used for what the promoters refer to as “pension reciprocation.”  As a result a significant proportion of the assets of the schemes are represented by what the promoters call “Maximising Pension Value Arrangements” or MPVAs under which a member of one of the schemes receives a payment from another of the schemes subject to terms set out in the MPVA.

Since Dalriada’s appointment it has been reviewing the underlying scheme documentation, and it has taken legal advice on various issues including, in particular, the legal status of the MPVAs that have been entered into.

Dalriada has been advised by a leading barrister (a Queen’s Counsel or “QC” who specialises in pensions and trust law matters) that there is a strong possibility that the MPVA arrangements are “void”.

In this context “void” is a technical legal term and if it is decided that the MPVAs are void they would not be recognised in law as ever having taken effect.

As a trustee Dalriada must understand how these arrangements should be operated going forward and Dalriada has been strongly advised that it must clarify the legal status of the MPVAs by applying to the High Court for direction.  This would mean that a High Court Judge would decide the legal status of the MPVAs.

Dalriada Trustees Limited (“Dalriada”) has issued proceedings in the High Court to clarify the status of the MPVAs that many members of the Schemes have entered into. Mr David Faulds has kindly agreed to represent the interests of members in the Court proceedings. He is referred to as a Representative Beneficiary. Mr Faulds has obtained legal representation through solicitors, Gateley, who in turn have instructed a barrister. All Mr Faulds’ reasonable costs (which will include the cost of the solicitors and barrister) will have to be met from the assets of the Schemes.

Dalriada is also engaged in clarifying the nature of certain other investments made by the schemes.

At this time it is appreciated that members and prospective members of the schemes will be concerned about the security of their pension and any implications that may affect them personally if they have entered into an MPVA with trustees of another scheme.

Dalriada’s lawyers have successfully applied for the Court proceedings that will determine the legal status of the MPVAs to be expedited. This means that the trial, at which the initial key questions will be considered by the Court, will take place significantly earlier, perhaps a full year earlier, than it would do if it were simply scheduled by the Court in the same way as any normal case. The hearing will take place at the end of November or in early December 2011. The Court has made it clear that, despite Dalriada’s efforts, November 2011 really is the earliest point at which a hearing could take place.

On Friday 25th November we received confirmation that  Court proceedings would commence on Tuesday 29 November 2011. The proceedings were heard by The Hon. Mr Justice Bean and took place in the Royal Courts of Justice, Strand, London WC2A 2LL.

The court proceedings concluded on Friday 2nd December.

On Friday 16th December 2011 the judgment was handed down. A full copy of the judgment transcript can be downloaded by clicking on the link below:

16th December – Final form judgment

An Announcement to members has also been issued on 16th December 2011. This, too, can be downloaded from the Announcements links.

In summary, Mr Justice Bean found the MPVA loans to be ‘unauthorised payments’ under the Finance Act 2004, outside of the scope of the trustees’ powers of investment and a ‘fraud on the power’ of investment. As such, MPVA loans were not validly made.

There are further questions to consider and it is hoped that these will be put to the Court early in 2012.

On 11th January 2012, Dalriada received copies of Notices of Appeal, lodged by Athena and Minerva. The Court has indicated to our legal advisers that it will aim to make its first decision in the window 1st to 22nd March 2012. At that point, the Court could allow Athena and Minerva permission to appeal, or it could refuse permission or, alternatively, require a hearing to determine whether or not to allow permission.

If permission to appeal is allowed, a hearing of the appeal will follow.

Dalriada will now consider its options in light of this decision by Athena and Minerva.

Update 6th April 2012

In our Announcement dated 13th January we advised that we had received copies of Notices of Appeal, lodged by Athena and Minerva and that the Court has indicated to our legal advisers that it would aim to make its first decision in the window 1st to 22nd March 2012.

Further that, at that point, the Court could allow Athena and Minerva permission to appeal, or it could refuse permission or, alternatively, require a hearing to determine whether or not to allow permission. If permission to appeal was allowed, a hearing of the appeal would follow.

At that point we had not seen the legal arguments put forward by Athena and Minerva in support of their decision to appeal.

To date, we have still not had sight of any supporting documents lodged with the Court by Athena and Minerva. The latest information we have from our legal advisers is that Athena and Minerva have sought, and been granted, several extensions to supply these documents.

As such, unfortunately, we are unable to say any more at this stage than was said in the 13th January Announcement.

Update 10th November 2012

Towards the end of August, our legal advisers received notice from the Court of Appeal that Lady Justice Arden has ordered an oral hearing to determine the application for permission to appeal. The hearing would take place on 24th October 2012.

David Faulds’ representatives had also been invited to attend.

In advance of the hearing, Dalriada’s legal advisers submitted its own arguments regarding the application for permission to appeal, a key issue being that Athena and Minerva had no legal standing to make the application for permission to appeal. Mr Faulds’ legal advisers also submitted arguments.

Subsequent to that and, indeed, only very shortly before the hearing on 24th October, Athena and Minerva’s legal advisers submitted an application to Court to be granted permission to represent the members for the purposes of the appeal or, otherwise, for a further Representative Beneficiary to be added to the proceedings.

At the oral hearing on 24th October, it was established that Athena and Minerva did not have the necessary standing to make the application for permission to appeal. As such, it was ordered that the application for permission to appeal be adjourned, subject to an application being made by Athena and Minerva to Court to have a further Representative Beneficiary added to the proceedings, this application to be made within 14 days. Athena and Minerva were ordered to pay the costs incurred by both Dalriada and Mr Faulds’ representatives as a result of what proved to be an unnecessary hearing.

In the event that this application is not successful, or the appeal is not going to proceed for any reason, Athena and Minerva have provided an undertaking that they will take reasonable steps to have the appeal dismissed.

Dalriada will look to update members in due course. However, it is unlikely that, even with the application to have a new Representative Beneficiary added being made within 14 days, this will be heard by the Court before the New Year.

Update 28th January 2013

The application was lodged with the Court within the required 14 days (on 6th November 2012) with a hearing originally listed for 30th November 2012.

However it was not served on Dalriada’s legal advisers until the 22nd November 2012 which was inadequate notice of the hearing. Further, the estimated time for the hearing was considered too short. As such, the judge, Mr Justice Bean, adjourned the hearing to be re-listed on a date when the parties would have proper notice and an appropriate amount of time to consider the issues. The hearing will now take place on 1st February 2013, in front of Mr Justice Bean.

In Dalriada’s announcement of October 2011, it gave members information regarding an investment made by the original trustees to purchase a company and investment plot in Cyprus, following which £4m was paid to a Cypriot company with a view to securing an option to buy the shares in the company that owns the plot of land near Larnaca. At the time of Dalriada’s appointment, the company concerned was seeking a further £2.6m in order to complete the purchase. Dalriada, as members may recall, expressed reservations about the project, given the state of the property market in Cyprus.

Dalriada is pleased to report that it has reached an agreement with the Cypriot company that will result very shortly in the sum of £4m, together with interest of £325,000, being returned to the accounts of the Schemes.

Update 17th February 2013

The hearing to hear Ms Deborah Oades’ application to be joined to the proceedings as a further representative beneficiary, effectively in place of Mr Faulds, and, additionally, to have her costs met from the Schemes, took place on 1st February 2013.

Ms Oades was not successful in her application to obtain an order entitling her to act as a representative beneficiary and her request for payment of costs from the Schemes was also declined.

Athena and Minerva were ordered to pay the costs incurred by Dalriada and Mr Faulds in relation to the application.

We are currently awaiting a decision from Ms Oades as to whether she intends to appeal this decision (from Friday 1st February) and, more generally, to clarify whether this means that the application for permission to appeal the decision reached in December 2011 will now be dismissed or potentially still pursued.

Dalriada remains unable to progress matters materially until the position with regard to the appeal is known. However, we have set out in our 10th Announcement a flowchart as to how things might progress.

This Announcement also gives an update on costs incurred since the date of the last Accounts.

Update 17th April 2014

Dalriada has now finally had confirmation, ultimately, from the Court that the application for permission to appeal has been dismissed.

Dalriada now requires directions from the Court, the first (a Beddoe application) will seek directions as to what approach to take with regard to seeking recovery of the MPVA loans. The second will seek directions as to the extent to which there is any basis for segregation of individual member funds and, thereafter, regarding the division of costs and investment losses between schemes and between different categories of members.

Dalriada will endeavour to ensure that both elements are addressed by the Court at the same time. Whilst we will look to have the Court hearing as soon as possible, it may still be some months away.

HMRC – Dalriada has been in discussion with HMRC and communication is ongoing. HMRC has set out its position that it does intend to levy unauthorised payment charges on members. Further, HMRC intend to determine the unauthorised payment charges payable with reference to the loans made by the scheme of which an individual was a member. Whilst we are not clear at this stage how individual tax assessments will be calculated, it does mean that those members who did not receive an MPVA payment might face a tax charge.

This approach taken by HMRC may impact on other tax charges that might be levied against the Schemes (Scheme Sanction Charges) and, as such, Dalriada is keen to maintain dialogue with HMRC.

In light of possible tax charges, Dalriada wishes to protect the Schemes from further investment losses and, as such, continues to adopt a very conservative investment strategy in relation to the funds it has been able to recover.

Dalriada is aware that certain comments have been made by or on behalf of members lately that it is important are corrected.

First, the judgment of Mr Justice Bean in December 2011 stands as a binding decision of the Court. His decision was that the MPVA payments were unauthorised payments and were void.

Secondly, as a result, they are arguably repayable. What approach is taken as regards repayment is entirely distinct from what stance HMRC might take regarding tax charges.

Dalriada will take action in this regard only as directed by the Court and, then, only after a representative beneficiary has had the opportunity of putting forward arguments on behalf of the members.

Investments – Dalriada has recovered the full £1m invested in Entrepreneurs Capital Holdings Limited (“ECH”) along with interest.

More detailed information is set out in our 11th Announcement which can be downloaded from the link above.

Update 13th November 2014

Dalriada has issued further Announcements on 23rd July and 28th August. The 23rd July Announcement was a brief update. The 28th August Announcement set out the background to Dalriada’s appointment to the Ark Schemes and summarised the actions it has taken since and what actions it intends to take in the future. It is a more user friendly summary of all the previous Announcements issued so far.

On 10th November Dalriada issued its latest (14th) Announcement. Dalriada is aware that many members are now being contacted by HMRC and this Announcement provides information on the current approach being taken by HMRC and sets out how members can respond to HMRC by way of a Frequently Asked Questions document attached the Announcement.

Copies of all Announcements can be downloaded from the links above. Copies of HMRC’s Frequently Asked Questions document can also be downloaded from the following link:

HMRC FAQs

Our 14th Announcement also confirmed that Dalriada’s applications to Court to seek directions on the management of the Schemes going forward are now largely prepared. The usual approach in such applications is to have a Representative Beneficiary (or Beneficiaries) who represent the interests of the members generally. Dalriada is looking to see if there are any members who are interested in acting as a Representative Beneficiary. More information is set in the Announcement.

The Announcement also provides contact details for Ark Class Action. Ark Class Action is a group established to help and support victims of pension liberation.

Dalriada has been in communication with Ark Class Action and will work with them where appropriate, particularly with regard to ensuring a coordinated response to HMRC.
Dalriada cannot recommend, or advise, members to join Ark
Class Action but has provided contact details in the Announcement such that members can contact the group and decide for themselves if they wish to join.

Dalriada has included here some Frequently Asked Questions (FAQs) and answers. It is hoped that these will provide answers to common questions from members.