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Trustee of Heavily Insolvent Pension Scheme Receives High Court Aid

An absence of assets to satisfy a judgment debt is not, by itself, a good reason for refusing to grant judgment in the first place. The High Court made that point in coming to the aid of the trustee of an insolvent employer’s pension scheme.

The employer, an English company, was obliged to make payments into a registered occupational pension scheme. After it went into liquidation, its assets were assigned to the trustee in part settlement of its debts to the scheme. A very substantial deficit remained, however, and the Pension Protection Fund was considering whether or not to step in and accept transfer of the scheme.

In those circumstances, the trustee launched proceedings against a Swiss sister company of the employer that had guaranteed the latter’s obligations under the scheme. The trustee sought payment of over £4.3 million, that being the unpaid amount due from the employer to the scheme as at 30 November 2016.

In resisting the claim, the Swiss company argued that, on a true construction of the guarantee, its obligations were limited to the extent of its freely disposable equity reserves. It was submitted that there were no such reserves as it was in negative equity to the tune of over 8.8 million Swiss francs. In ruling that that argument stood no real prospect of success, however, the Court found that the primary obligation created by the guarantee was unambiguous and entirely unqualified.

The Swiss company also argued that the trustee’s claim was an abuse of process in that, given its parlous financial position, there would be no hope of enforcing any judgment obtained against it. It was submitted that the true purpose of the trustee’s claim was to bring pressure to bear on the Swiss company’s parent company to bail out its subsidiary and discharge its liability.

In rejecting those arguments, the Court accepted that the claim was being pursued for the simple and appropriate purpose of securing payment of sums due under the guarantee, an objective that the trustee considered achievable, at least in part. Even if the company had insufficient assets to satisfy the judgment, that was not a reason for refusing to grant the same.

Any pressure placed on the parent company did not derive from the claim itself but from the Swiss company’s inability to discharge the guarantee from its own resources. It would in any event remain open to the parent company to leave the judgment debt unsatisfied. In the circumstances, summary judgment was entered against the Swiss company for the full amount claimed.

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