Trustee wins important victory in battle to obtain contribution notice

The Trustees of the Desmond & Sons pension scheme have successfully overturned a decision by the Upper Tribunal to strike out a case against a shareholder.

05 December 2013

The Trustees of the Desmond & Sons pension scheme have successfully overturned a decision by the Upper Tribunal to strike out a case against a shareholder who benefited handsomely from the winding up of clothing manufacturer, Desmond & Sons in 2004.

Desmond & Sons was formerly one of Northern Ireland’s largest employers, operating as a manufacturer to M&S. When M&S announced it intended to source product from overseas manufacturing facilities the shareholders of the company placed it into Members’ Voluntary Liquidation (MVL) at short notice which resulted in many job losses and the Desmond & Sons Pension Scheme’s members receiving only 50 per cent of their pension benefits.

Soon after the MVL Garvin Trustees Ltd were appointed as independent trustees to the scheme in 2004, instructing a team of lawyers from leading UK law firm Burges Salmon, led by pensions litigator Justin Briggs.

In April 2010, the Determinations Panel of the Pensions Regulator found that Desmond & Sons directors and shareholders, Mr Dennis Desmond and Mr Donal Gordon, had been party to an act or acts a main purpose of which was to prevent the recovery of a £10.9 million debt due to the scheme. The Panel determined to issue contribution notices against Mr Desmond and Mr Gordon in the sum of £1 million, but determined not to issue a contribution notice against Mr Desmond's wife, Annick. Whilst Mrs Desmond had not been a director of the company, she had been a significant shareholder, was critical in securing the MVL at short notice and benefitted handsomely as a result.

In May 2010, Burges Salmon referred the Panel’s determinations to the Upper Tribunal (Tax and Chancery Chamber) in London. Clifford Chance, acting for Mr Desmond, Mrs Desmond and Mr Gordon sought to strike out parts of the case against their clients and the entirety of the case against Mrs Desmond on the grounds that it was now too late for the Upper Tribunal to make any order against her.

Although it rejected all other arguments, the Upper Tribunal accepted the argument that it was too late to pursue Mrs Desmond. Burges Salmon, on behalf of the Trustee, and the Pensions Regulator appealed this decision to the Court of Appeal in Northern Ireland.

On 8 November 2013 the Court of Appeal (Northern Ireland) held that the Upper Tribunal does have the power to make a Contribution Notice against Mrs Desmond if that is the direction it believes should be made at the conclusion of the proceedings.

The judgment from the Court of Appeal means that the Upper Tribunal proceedings against Mr Desmond, Mrs Desmond and Mr Gordon, which have been on hold for two years, will now proceed to trial. Within that process all three will now need to convince the Tribunal that avoiding paying the pension scheme debt was not a main purpose of the MVL as the Trustee alleges.

Burges Salmon’s Justin Briggs said: “The Court of Appeal’s judgment is a clear sign that the courts will not allow those who may have avoided meeting their obligations to pension schemes to avoid liability via technical timing points. To this extent the decision is consistent with the English Court of Appeal's decision in Lehman Brothers earlier this year. Given that the facts surrounding the placing of Desmond & Sons Ltd into MVL are so concerning, it is pleasing to know that the matter will now proceed to trial with Mrs Desmond as part of that process.'

This case demonstrates Burges Salmon’s expertise in regulatory matters and specifically Pensions litigation, as only a handful of cases have ever been appealed from the Determinations Panel to the Upper Tribunal.

Key contact

Justin Briggs

Justin Briggs Partner

  • Pensions Disputes
  • Trustees and Trust Companies
  • Professional Negligence

Subscribe to news and insight

Burges Salmon careers

We work hard to make sure Burges Salmon is a great place to work.
Find out more