England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE UPPER TRIBUNAL TAX & CHANCERY CHAMBER
(FINANCIAL SERVICES)
UPPER TRIBUNAL JUDGES
COLIN BISHOPP & TIMOTHY HERRINGTON

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/06/2013

Lady Justice Arden:

1. This is the judgment of the Court, to which we have all contributed.
2. The issue on this appeal is whether the trustees of a pension scheme for employees of the Lehman group ("the Trustees") can exercise the statutory right of persons "directly affected" by a determination of the Determinations Panel of the Pensions Regulator appointed pursuant to the Pensions Act 2004 ("PA 2004") to make a reference to the Upper Tribunal. Sections 96 and 103 of the PA 2004 establish a reference procedure to allow the Upper Tribunal's directions to be sought.
3. On 13 September 2010, nearly two years after the well-known collapse of the Lehman group, the Determinations Panel of the Pensions Regulator decided to exercise its statutory power under sections 10 and 43 of the PA 2004 and schedule 2 to that Act to issue a financial support direction ("FSD") to six Lehman group companies. An FSD may be issued in specified circumstances to companies ("targets") to make them responsible for securing financial support for a pension scheme for employees in defined circumstances where those employees are employed by an associated service company. The Trustees wish the number of targets to be increased by the addition of a further thirty-eight Lehman group companies (together "the Targets"), which the Regulator also sought (unsuccessfully) to do before the Determinations Panel.
4. Under section 43(9) of the PA 2004, an FSD must be issued within a period of two years after a past date, when various conditions were fulfilled, selected by the Regulator. The FSD in this case was in time but only by a whisker, since the date of the determination to issue the FSD was the day before the second anniversary of that selected date. Now the two-year period has elapsed, the Appellants say that the Regulator cannot issue an FSD against other Lehman group companies based on the same issue date.
5. The Targets which the Trustees sought to have added applied to the Upper Tribunal to strike out this application for a reference by the Trustees. This application was made on a number of grounds, all of which failed and only two of which are now pursued. All but one of the thirty eight Targets appeal from that dismissal in three groups: the Denton Targets, the Linklaters Targets and the Weil Targets (we are not concerned with any differences between the three groups). The six Targets identified in the Panel's determination also made their own reference from the determination but we are not concerned with that reference.
6. The two extant grounds for dismissal of the Trustees' application for a reference are that:

i) the Trustees lack standing to make a reference to the Upper Tribunal, it being common ground that for this purpose they have to be persons ("DAPs") who appear to the Tribunal to be"directly affected" by the determination for the purposes of section 96(3) ("the DAPs issue"); and that

ii) any determination by the Upper Tribunal would itself be caught by the two-year time limit ("the Time Limit issue").

7. For the reasons given in this judgment, we agree with the Upper Tribunal on both issues, and accordingly we dismiss this appeal.
8. Both issues are issues of statutory interpretation. The relevant parts of the principal statutory provisions to which we refer are included in the appendix to this judgment. Those provisions are shown in the appendix in the form in which they are currently in force, save for section 43(9) which is shown in the form in which it stood prior to amendment by the Pensions Act 2011.
9. For the purpose of determining those issues of interpretation, little more needs to be said about the facts, which are more fully set out in the decision of the Upper Tribunal.
10. As regards the statutory scheme, an FSD does not stipulate how much each target must contribute to the pension scheme. It merely directs the targets to produce a plan ("a financial support arrangement") that will ensure financial support for the pension scheme's liabilities to the satisfaction of the Regulator (see sections 43 and 45). If the targets fail to do this, the Regulator may issue a contribution notice to each target requiring payment of a specified sum to the scheme's trustees (section 47). Again the question whether a contribution notice should be issued may be referred to the Upper Tribunal for it to decide the appropriate action (section 96).
11. A determination to issue an FSD may be referred to the Upper Tribunal under section 96 by either the persons to whom the determination to issue the FSD was addressed or any persons directly affected by the determination (section 96(3)). The Upper Tribunal has wide powers on a reference to it under section 96(3): see section 103(5). Those powers are sufficiently wide to include a direction to substitute a new FSD which is addressed to new targets.
12. A salient feature of the statutory scheme for the issue of FSDs is the balance struck between the interests of the members of the pension scheme and the interests of potential targets (and their stakeholders). In particular, the interests of targets are protected by:

• the requirements already mentioned for the decisions to be made by the Determinations Panel and not the Regulator;

• the requirement for FSDs only to be given in the circumstances specified on the face of the PA 2004 (see section 43(2));

• the imposition of the time limit in section 43(9);

• aspects of the process applicable in this case. Most relevantly:

the Regulator can only issue an FSD if satisfied that (among other matters) it is reasonable to do so and the Act prescribes a number of matters to be taken into account in reaching this conclusion (see section 43(5) and (7));

potential targets must receive a warning notice so that they can make representations (section 96(2)(a)).

13. Warning notices must also be given to all persons "directly affected" by the regulatory action under consideration (section 96(2)(a)). In fact the warning notices in this case did not treat the Trustees as directly affected persons for that purpose, but that cannot affect the question whether, as a matter of law, they are persons directly affected by the determination for the purposes of section 96(3)(b). By contrast, the Determinations Panel did treat them as directly affected by its determination, but this is equally irrelevant.

The DAP issue

14. We proceed on the basis that the reference procedure complies with the right of access to a court guaranteed by Article 6 of the European Convention on Human Rights in fulfilment of the UK's international obligations. It is therefore reasonable to assume that by empowering DAPs to apply to the Upper Tribunal under section 96(3), Parliament intended to cover all persons who would be entitled to bring proceedings under the similar wording in CPR 54.1(2)(f) or under Article 6.
15. In its careful and comprehensive decision, the Upper Tribunal took the view that Trustees were clearly directly affected by the determination since it concerned "the creation of a potential benefit that is conferred on them": decision, paragraph 57. The benefit to the Trustees was "the mirror image" of the detriment to the Targets. In addition, in the Upper Tribunal's view, the Trustees were rightly treated by the Determinations Panel as persons affected by its decision and it would be odd if their rights were narrower on a reference than they were before the Determinations Panel. The Upper Tribunal considered that it was unnecessary to decide whether the Determinations Panel was an "independent and impartial tribunal" for the purposes of Article 6.
16. Section 96(3) gives the Upper Tribunal power to determine whether a person has standing within that provision, but it is common ground that the Upper Tribunal's decision is subject to review. As the Upper Tribunal pointed out, the fact that this power was given to it suggests that the determination of whether a person was "directly affected" by a determination is likely to be case-sensitive. Had the question of who is directly affected been a pure matter of law, the question whether a person was directly affected by a determination would not have been left to an exercise of judgment by the Upper Tribunal.
17. The argument advanced by the appellants on this issue was advanced orally by Mr Andrew Spink QC, instructed by the Weil targets. His argument is in effect a Morton's Fork: if the provision is to be interpreted in accordance with the domestic procedure rules, the Trustees were not persons directly affected since the House of Lords held in R(o/a Muldoon) v Liverpool CC [1996] 1 WLR 1103 that the same expression dealing with the standing of an applicant for judicial review in the then Rules of the Supreme Court meant that the conclusion "that a person is directly affected connotes that he is affected without the intervention of any intermediate agency" (per Lord Keith at 1105E, with whom the other members of the House agreed). Likewise, on Mr Spink's submission, if the expression has to be interpreted to be Convention-compliant, Convention jurisprudence adopted essentially the same rule and so there had to be a direct effect: see Procola v Luxembourg (1995) EHLR 193 at [38]. Here the determination would have no effect on the Trustees since the form of the financial support would only be worked out in the financial support arrangement approved under section 45. He contrasted the case of a reference to the Upper Tribunal following the issue of a contribution notice, when the Trustees would be DAPs since there would then be a sum which the notice required to be paid into the pension scheme, as Warren J held in Michel Van De Wiele NV v The Pensions Regulator ("the Bonas Group Pension Scheme case") [2011] Pensions Law Reports 109 at [66].
18. We will assume, without deciding the point, that Mr Spink is correct in assuming that the Trustees obtain no right recognised by law as a result of any directions which the Upper Tribunal gives on a reference even if the Upper Tribunal confirms the determination of the Regulator to issue an FSD. The Regulator would under public law principles have to take steps to see that there was a satisfactory financial support arrangement or, if not, to issue contribution notices. The possibility of there being a satisfactory arrangement which makes no provision that in some way enhances the assets of the pension scheme for at least some of the members must be remote.
19. Be that as it may, there can be no dispute that the Trustees would be DAPs if the determination resulted in some change in the rights or property of the Trustees. Mr Spink submitted that there might be no change in the rights or property of the Trustees if the financial support given were to consist of a guarantee, but the idea of a guarantee being given which the Trustees could not enforce is, we consider, not one we need take into account.
20. It follows that on analysis the appellants' argument amounts to saying that the Trustees are not DAPs because it takes two, or possibly three, steps after a determination that an FSD should be issued before any change to the trustees' rights occurs. The argument of Mr Spink is essentially that the Court should adopt a narrow interpretation of the expression "directly affected".
21. We reject this argument for two fundamental reasons.
22. First, the appellants' argument overlooks the fact that the determination and any financial support arrangement are connected steps for the enhancement of the scheme's assets. There can be no financial support arrangement unless there is an FSD. Therefore the Trustees cannot obtain the benefit of a financial support arrangement or, in default, any contribution notice unless an FSD is first issued. They are, therefore, interested in a very real sense in the initial stage involving the determination to issue an FSD. In an exceptional case, they may also be interested in saying that an FSD should not be issued because it would jeopardise some other plan that they have for securing the liabilities of the scheme.
23. Mr Spink argues that, if the Trustees have something to say about the issue of an FSD, their case can always be met by judicious use by the Upper Tribunal of its powers to receive representations from non-parties under rule 5(3) of the Tribunal Procedure (Upper Tribunal) Rules 2008. This power could be used to receive representations from the members of a pension scheme if the trustees of the scheme were for some reason unable or unwilling to represent members' interests on a reference to the Upper Tribunal.
24. The answer to that point is that the existence of that power cannot affect the true interpretation of "directly affected person". There are very good reasons why the Upper Tribunal might need the power in rule 5(3). It might for instance consider it appropriate to receive submissions from a non-governmental organisation which was clearly not a DAP.
25. The second fundamental reason for rejecting the appellants' arguments on this issue is that the expression "directly affected" must be given a contextual and purposive meaning.
26. We take first the context. Section 96(3) gives a right to bring proceedings that will (at least temporarily) suspend the process through which financial support is otherwise to be put in place. Clearly the right to make a reference has to be subject to some restriction. Because it is impossible to foresee all the situations that might arise, it is easier to say whom it is reasonable to suppose Parliament intended should not be able to bring these proceedings than to try to define comprehensively who might be DAPs, a task which we do not undertake.
27. As to those persons who should be excluded, it is reasonable to assume that Parliament did not intend that the right to make a reference should be given to persons who have no recognisable interest in law at stake, often persons who are, sometimes perhaps unfairly, termed by the law as "mere busybodies", and persons who do not need to have the right, such as persons with derivative interests which are already adequately represented by the holder of some other more direct interest.
28. The exclusion of these persons is, as we see it, the purpose of the adverb "directly" when it is used to qualify "affected". The adverb "directly" most obviously serves to exclude the mere busybody. The decision of the House of Lords in Muldoon shows that it also excludes the second group of mere derivative interest-holders as well. There the Secretary of State had an obligation to increase its support to a local authority if the authority was liable to pay housing benefit, and the issue before the court was whether a claimant was entitled to that benefit. Clearly the Secretary of State had only an indirect interest since the determination of the issue before the court would not directly affect the scope of any obligation of the Secretary of State. Muldoon is thus clearly dealing with a duplicating interest. It is also the type of case where the court might want to exercise a discretion as to whether to hear any submissions from the Secretary of State if, for example, the local authority chose not to defend proceedings.
29. Briggs J, as he then was, made a similar point in relation to the interests of creditors of an insolvent company in Re Nortel Gmbh [2011] Bus LR 818 at [184] – [185]. He did not consider that the creditors would be persons "directly affected" by the proposed exercise of the power to issue an FSD for the purposes of section 100 of the PA 2004 as their interests were adequately represented by the office-holder. This Court agreed: see [2012] 1 BCLC 248 at [115], [129] and [130].
30. Muldoon is therefore precisely consistent with section 100 of the PA 2004, which by implication treats the members of a pension scheme as persons who are not DAPs. Section 100 raises no similar implication that trustees are not DAPs. We, therefore, reject the appellants' submission to contrary effect.
31. On this basis, we do not need to decide whether Article 6 would be violated if the Trustees are not DAPs. We are, moreover, not prepared to hold on the limited authority adduced that Article 6 is determinative of the meaning of the expression "directly affected". It may well be that the true principle is not that the proceedings have an immediate effect, but rather a decisive effect, on the person or property of the complainant as the former view does not deal with the situation where two sets of connected proceedings might be involved, as here. It would not, as we see it, be an insuperable objection under the Convention that the domestic procedure involves two or more connected steps rather than just one. Be that as it may, we are not satisfied on what we have been shown that there is clear jurisprudence in Procola that Article 6 is engaged only if the Trustees can point to a change in their rights as a result of the order in the instant proceedings. In those circumstances, the jurisprudence is of little help when it comes to the interpretation of s.96(3).
32. The appellants protest that the Trustees should be able as of right to make arguments that were made and lost by the Regulator before the Determinations Panel when it decided to direct the issue of an FSD addressed to six only of the Targets. The appellants view as serious the possibility that the Trustees might also be permitted to file new evidence (see the Bonas Group Pension Scheme case, above, at [39] to [42] and [67] to [68]). The Regulator does not himself have the right to make a reference but, Mr Spink submitted, he gets a "second bite of the cherry" by this route without such a right. In our judgment, however, the question whether the Trustees can refer a determination to the Tribunal cannot depend on the nature of the arguments which the Trustees propose to make. Furthermore, the PA 2004 does not give the Upper Tribunal any power to remove the right of a person to make a reference under section 96(3).
33. For these reasons we dismiss the appeal on the first issue.

The Time Limit Issue


 


34. The second ground upon which the Targets sought to strike out the Trustees' reference to the Tribunal was that, even assuming that the Trustees were DAPs, their reference could not achieve its purpose in bringing about the issue of FSDs to the Targets, because the time limit for the Regulator's determination to do so had already expired. The Targets say that this time limit expired on 14 September 2010, one day after the Panel's determination notice, which is the subject of the Trustee's reference to the Tribunal.
35. The Targets' case, both before the Tribunal and in this Court, may be summarised as follows:

a) The sole statutory source of the Regulator's power to issue an FSD lies in section 43. No one other than the Regulator can do so, and certainly not the Tribunal.

b) The Regulator can only issue an FSD after a determination to exercise that power.

c) For that purpose the Regulator must select a date (the "look back date") at which it must be of the opinion that certain conditions about the employer and any chosen target must be satisfied.

d) Having chosen its look back date, the Regulator can only issue an FSD to any particular target or targets pursuant to a determination to do so made (by the Panel) within two years of the look back date.

e) Having in its Warning Notice identified 14 September 2008 as the look back date for any FSD determination against a target identified in the warning notice, the Regulator thereby imposed upon itself a two year time limit, expiring on 14 September 2010, after which no potential target identified in the warning notice could be the subject of a determination to issue an FSD.

f) The wide powers given to the Tribunal on a reference, by section 103, could not extend to directing the Regulator to do something which it had no power to do. All that the Tribunal could do was to direct the Regulator to determine to issue an FSD against one or more of the Targets, but that would be a fresh determination, and the self-imposed time limit for such a determination had expired, before the reference to the Tribunal was even made.

36. The Tribunal did not accept this analysis. Its view may be summarised as follows:

a) Section 43(9) did impose a time limit for the completion by the Regulator (including for this purpose the Panel) of its processes up to and including a determination whether or not to issue an FSD, and if so against which targets.

b) The section 43(9) time limit had no application to the Tribunal's powers on a reference, or to the power of the Regulator to issue an FSD (in this case) to further targets pursuant to the Tribunal's direction, in any case in which the reference to the Tribunal arose from a determination whether or not to issue an FSD which was itself made within the two year time limit.

c) Thus, if satisfied that the original (timely) determination ought to have been that an FSD be issued to more targets than those identified in the determination, then the Tribunal could simply direct the Regulator to issue an FSD which included those additional targets, without the Regulator (by the Panel) having to make any further determination of its own.

37. The competing arguments which we have briefly summarised were pursued mainly between Mr Simmonds QC for the targets and Mr Stallworthy QC for the Trustees, with assistance from Miss Agnello QC for the Regulator, with great tenacity, skill and detail but, in the event, economy. We intend no disrespect to counsel by setting out, first, the clear view which we have reached as to the proper interpretation of the relevant statutory provisions, read together, without a minute analysis of the competing arguments, although we shall address some of the Targets' main submissions in due course, to explain why we have not been persuaded by them. Further, we think it unnecessary to explore the interpretation or application of these provisions in relation to every possible permutation of Panel determination in relation to an FSD, whether positive, wholly negative, or, as in the present case, a hybrid between the two. It is sufficient to confine our analysis to matters arising from this determination, in which the Panel resolved that there should be an FSD issued to some but not all potential targets, which has been made the subject of a reference designed to lead to the issue of an FSD to additional targets.
38. We are able to take this slightly abbreviated course because it is common ground that there will never be another case in which the time limit imposed by section 43(9) in its original form will fall to be applied. For the future, the current (amended) version of section 43(9) is all that will have to be considered.
39. We acknowledge at the outset that a purely textual analysis of the relevant provisions, mainly in sections 43 and 103, reveals indications which may fairly be said to support either of the competing interpretations. Although there are, we think, some textual indications powerfully supportive of the Trustees' and Tribunal's analysis, to which we will refer in due course, we accept that, taken as a whole, the relevant provisions could without doing undue violence to the language, be read either way. It is for that reason that we think it useful to begin with some identification of the purposes of these provisions, and an analysis of the differing extent to which the rival interpretations give effect to those purposes. It is also we think sensible to begin the analysis by reference to the legislation in its original form, in which Parliament's purposes might be thought most clearly to be discerned. So wide is the gulf between the two rival conclusions on the time limit issue that we think it wholly unlikely (and the contrary is not suggested) that the amendments to which we will refer can have been intended to shift the interpretation of the time limit and related provisions from one rival version to the other.
40. The power of the Regulator to issue an FSD was, when enacted, a novel form of regulatory intervention capable of giving rise, for the first time, to very large financial obligations and financial benefits between DAPs (targets and scheme trustees) and stakeholders (targets' creditors and contributories and scheme members) with no prior legal relationship between each other. That novel power is given, in the first instance, to a specially constituted Panel of the Regulator. It is to be exercised having regard to the interests both of the beneficiaries and the targets of the process (see section 100), but the Regulator is required therefore to strike some sort of discretionary balance between those competing interests, the nature of which may become clearer when judgment is given by the Supreme Court at the end of the Nortel/Lehman litigation about the effect of FSDs on insolvent companies.
41. It is common ground that the financial uncertainties to which the existence of that power gives rise in relation to the affairs of potential targets and other DAPs, while it remains available but un-exercised, are such that the time limit imposed by section 43(9) may properly be regarded as designed to impose an element of discipline and expedition on the Regulator, so that the sword of Damocles which the power represents is either wielded or sheathed within a reasonable time.
42. Equally, the potentially drastic consequences of the issue, or non-issue, of an FSD, coupled with the broad discretionary power of the Regulator whether or not to issue it, and if so to which targets, are of such importance to DAPs that Parliament thought it fit to impose very detailed safeguards designed to enable such persons both to be informed about and participate in the process leading to a determination by the Panel, and to challenge that determination by legal proceedings before an independent Tribunal, and on appeal from it. The provisions for notification and participation are contained in the standard procedure called for by sections 93 and 96, and sufficiently summarised for present purposes in paragraphs 39 and 41 of the first instance decision in the Nortel/Lehman case [2011] Bus LR 766 at 780-801. The provisions for challenge by reference to the Tribunal appear in sections 96(6) and 103. Originally, when the reference was to the Pensions Regulator Tribunal, section 104 made express provision for any party to a reference to that tribunal to have a qualified right of appeal both to the Court of Appeal and to the House of Lords. Those rights have now been replaced by equivalent provisions applicable generally to appeals from the Upper Tribunal, but they lose none of their relevance for present purposes by being located elsewhere in the statutory labyrinth. It is plain therefore that Parliament specifically contemplated and intended that persons directly affected by the exercise of this novel regulatory power should have the fullest rights of reference and appeal through legal proceedings where aggrieved by the alleged severity or leniency of its exercise.
43. Originally, the "prescribed period" referred to in section 43(9) was set at one year, i.e. from the look back date chosen by the Regulator and specified in the warning notice. On the Targets' construction, a person aggrieved by the non –exercise of the section 43 power to issue an FSD would need to be able both to complete a reference and exhaust any permitted avenues of appeal within that fragment of the year left after, using its best endeavours, the Regulator had conducted the whole of the standard procedure required to enable the Panel to reach a determination. Persons aggrieved could, for the reasons already given, include both the Trustees of the relevant scheme and targets included within a determination who contended that the FSD should include other targets which had been excluded.
44. Nor is it to be supposed that the extension of the prescribed period in section 43(9) from one to two years was the consequence of any perception that more time needed to be allowed for the pursuit of available avenues of reference and appeal. In the four cases where FSDs have thus far been considered by the Regulator (Sea Containers, Lehman, Nortel and Box Clever) it took the Regulator until two weeks, one day, five days and ten days respectively before the expiry of the de facto time limit to proceed as far as a Panel determination. Furthermore, we were told that the impetus to amend section 43(9) so as to require a warning notice rather than a determination to be issued within the two year period came not from those seeking further time to pursue a reference or appeal, but from prospective targets complaining at being rushed into the process leading to the Panel's determination.
45. If the Targets' interpretation is correct, then in all the FSD cases thus far, the rights of persons aggrieved by the leniency of a Panel determination to pursue their grievance by reference or appeal have been illusory. By contrast, if the Trustees' interpretation is correct, the prescribed period has indeed acted as a spur on the Regulator to conduct its own approach to a determination with diligence, but to leave the speed of advance of the process of reference and appeal to those responsible for case management in the tribunals and courts concerned, having appropriate regard to the desire for speed and certainty, not only of those involved in the proceedings arising from the FSD process, but also of other tribunal and court users.
46. Assuming, but without deciding, that the de facto time limit imposed by section 43(9) is properly to be regarded as a limitation period at all, it would on the Targets' construction operate in a wholly unprecedented manner since the running of time under limitation periods properly so called is almost invariably stopped by the issue, rather than the conclusion, of the relevant proceedings. Counsel could think of no comparable example in any other sphere of litigation controlled by limitation periods.
47. It is perhaps fair comment that section 43(9) does, however construed, have the effect of leaving time running until the Panel's determination, if the process thus far is regarded as a form of legal proceedings initiated by a warning notice. Nonetheless, to construe it in such a way as to leave time running throughout the process of reference and subsequent appeals, so as one-sidedly to constrain the powers of the Tribunal and any appellate court in a way which would prevent an over-lenient Panel determination being remedied by the addition of further targets would extend a novel form of time limit into regions never previously affected.
48. To do so would seem to us to involve a whole series of plainly undesirable consequences. The first, as already noted, is that in many cases it would render the rights of reference and appeal wholly illusory. The second is that, even if it did not, it would turn the reference and appeal proceedings into a filibusterer's paradise. The third is, as also noted, that it would impose upon the Tribunal and appellate courts time constraints which would be likely to be the enemy of justice, both as between the parties to those proceedings and in terms of the proper distribution of limited court resources between competing court users.
49. Mr Simmonds' attempted answer to those apparently undesirable consequences of his submissions was only that, with a two year time limit, there was reason to suppose that the Regulator could ordinarily act much quicker than revealed by the FSD cases to date, once appraised of the alleged true effect of section 43(9), and that Article 6 required no more than the availability of one independent tribunal to a person aggrieved, rather than to any higher levels of appeal. In our view this response came nowhere near to meeting the point. The originally prescribed period was only one year. Further, regardless of the precise extent of the ambit of the Article 6 entitlement, Parliament expressly contemplated and conferred two higher levels of appeal upon directly affected persons aggrieved by the decision of the Tribunal, originally to be found in the self-same statute in which the section 43(9) time limit is set out.
50. We therefore approach the interpretation of the relevant provisions with a lively disinclination to think that Parliament can have intended to legislate for the consequences which would flow from the Targets' case, but aware nonetheless that a conclusion which avoids those consequences must be arrived at by a legitimate process of interpretation, rather than by re-writing the provisions in question.
51. The provisions falling primarily to be interpreted are sections 43 and 103. They need to be looked at both separately and together. Section 43 is designed to confer power on the Regulator to issue an FSD, if its own opinion forming process satisfies a series of conditions. Under section 43(2), the Regulator may issue an FSD if "of the opinion" that the employer in relation to the scheme satisfies what is generally referred to as the employer condition. Similarly, section 43(5)(b) requires the Regulator to be "of the opinion" that it is reasonable to impose the requirements of the FSD on each chosen target. The reasonableness condition, as amplified by section 43(7), requires the Regulator to form opinions about a non-exhaustive list of potentially relevant matters to the extent that it "considers" them relevant. Although certain other conditions, such as those related to the target in section 43(5)(a) and (6) are expressed in purely objective terms, the conditions for the issue of an FSD are nonetheless, taken as a whole, referable only to a process of opinion forming, and the exercise of discretion, which the Regulator must perform. Furthermore it is, pursuant to section 43(2)(b), for the Regulator to determine the look back date, described as "the relevant time" within the period prescribed pursuant to section 43(9).
52. In sharp contrast, the process whereby, on a reference to the Tribunal, section 103 contemplates that an FSD might come to be issued by the Regulator involves no process of opinion forming, choice, or the exercise of discretion by the Regulator at all. If the Tribunal's view is that an FSD ought to be issued in a particular form (so as, for example, to include more targets than those selected in the Panel's determination), then it will simply give directions to the Regulator designed to produce that result. Thus, section 103(4) requires the Tribunal to "determine" what (if any) is the appropriate action for the Regulator to take in relation to the matter referred to the Tribunal. Section 103(5) requires "the matter" (i.e. the matter which has been referred) to be remitted to the Regulator with such directions as the Tribunal considers appropriate for giving effect to its determination. The phrase "its determination" means the determination by the Tribunal of the matter referred to it. Section 103(6) provides a broad but non-exhaustive range of potentially suitable directions to be given by the Tribunal to the Regulator, including the variation of the Regulator's determination, and the making of any appropriate savings and transitional provisions. Section 103(7) then simply requires the Regulator to act in accordance with the Tribunal's determination of the reference.
53. In the role contemplated by section 103(7) the Regulator is acting purely mechanically, as directed by the Tribunal. It is neither required nor entitled to form any further opinions of its own, to make any choices or to exercise any discretion, unless of course in a particular case the Tribunal thinks it appropriate to direct it to do so. It is certainly not required, again unless directed to do so, to repeat the process of opinion forming, choice and discretionary decision-making set out in section 43. Still less is it required to do so within the time limit which its original selection of the look back date de facto imposes for the making of its original (Panel) determination.
54. Mr Simmonds submitted that the only way in which the Tribunal could, pursuant to its powers under section 103, direct the Regulator to take steps leading to the issue of an FSD (if different from that contemplated by the Panel determination being referred) would be to require it to travel again through the processes contemplated by section 43, and therefore within the section 43(9) time limit. Otherwise, he said, the Regulator would have no power to issue the FSD at all.
55. In our view this analysis is wrong, for two reasons. First, the notion that the Tribunal can only direct the Regulator to repeat the opinion forming discretionary process in section 43 is flatly inconsistent with the express powers conferred by section 103(4)(5) and (6)(b) and (c). Secondly, it ignores the settled principle that the express imposition of a statutory duty, in this case in section 103(7), itself carries with it the requisite power to perform that duty: see for example Jones v Cleanthi [2007] 1WLR 1604, per Jonathan Parker LJ at paragraph 75, and National Grid Co plc v Mayes [2001] 1WLR 864, per Lord Hoffmann at paragraph 35.
56. This does not, of course, mean that the section 43 conditions will be of no relevance to the Tribunal in determining a reference from a Panel determination made within time under section 43. The Tribunal is an independent judicial body given power to reconsider what should be done in the light of any criticisms of the original determination which is the subject matter of the reference, which it considers to be well-founded. It is by no means merely conducting a review and is by section 103(3) entitled to consider evidence not previously available to the Regulator "at the material time" (i.e. at the time of the Panel determination). Furthermore, the use of the present tense in section 103(4) in the phrase "must determine what (if any) is the appropriate action for the Regulator to take" contemplates that the Tribunal may have regard to events subsequent to the Panel determination. Nonetheless the primary focus of its scrutiny will be upon the rightness or otherwise of the determination made by the Panel at the time when it was made, applying the whole of section 43 for that purpose, and considering the applicability or otherwise of the conditions in section 43(2) and (5)(a) by reference to the look back date already chosen by the Regulator and specified in the warning notice.
57. Mr Simmonds submitted that, unless the re-run of the section 43 process by the Regulator was an inevitable consequence of any determination of a reference by the Tribunal, then the Tribunal would be set free of section 43 altogether, and could direct that FSDs be imposed on fresh targets regardless of the section 43 conditions. For the reasons given, we reject that submission. If the Tribunal determines a reference on the basis that an FSD ought to be issued to further targets, then the power of the Regulator to do so derives from section 103(7) not from section 43, but section 43 will nonetheless remain a central aspect of the Tribunal's deliberations. Thus the Tribunal could not properly direct the regulator to issue an FSD to a target which the Panel could not have included in (and therefore at the time of) the determination being referred.
58. It is to be noted in that context that section 103(7) expressly dis-applies the standard procedure, which would otherwise apply to any determination by the Regulator to issue an FSD under section 43. This is plainly because, after a reference under section 103, the Regulator is acting purely in accordance with directions from the Tribunal, rather than performing any opinion forming or discretionary process to which the safeguards of the standard procedure must be applied.
59. Even the de facto time limit in section 43(9) has, on this interpretation, an appropriate effect on a reference to the Tribunal. For example, a reference may be based upon an assertion that the Regulator in its determination chose a look back date outside the prescribed two year period, or purported to determine to issue an FSD more than two years after its chosen look back date. Nonetheless, to treat section 43(9) as imposing a continuing two year period (from the look back date) within which in every case the Regulator must determine again, in accordance with the Tribunal's direction, to issue an FSD would be to treat the time limit as an inappropriate master, rather than as a good servant.
60. That textual analysis of the two sections and their inter-relationship leads easily and, we think, naturally to the interpretation arrived at by the Tribunal. It involves no straining, still less re-writing of the statutory language. It produces an outcome which still preserves the perceived purpose of section 43(9), namely of imposing some degree of speed and discipline on the Regulator, but without the unsatisfactory and unfair consequences to DAPs (including disgruntled targets) which would flow from the need to cram both the original determination, a reference and any subsequent appeals into a two year time limit beginning with the look back date.
61. Out of respect for Mr Simmonds' excellent submissions, we must briefly deal with some of his arguments which, although we have considered them, have yet to be mentioned in this judgment. The first is his reliance on the principle against doubtful penalisation. It is "a principle of legal policy that a person should not be penalised except under clear law": per Simon Brown LJ in R v Bristol Justices ex parte E [1999] 1WLR 390, at 397. Where it applies, it operates as a principle which may require ambiguities to be construed in favour of the person who would otherwise be penalised. We accept that it applies whether the relevant penalty is imposed under criminal or civil law: see ESS Production Limited v Sully [2005] EWCA Civ 554. We also accept that, by the same token, a provision which gives relief from another penal provision should itself be liberally construed.
62. Nonetheless, the principle is, again, a good servant which should not be unthinkingly allowed to dominate the process of interpretation, wherever it applies. We consider that the Tribunal was right to take it into account, but to treat it as overborne by other considerations relevant to the interpretation issue before it.
63. We would add that it is not at all easy to see how the Targets' interpretation will invariably lead to less, rather than more "penalisation", even if that is, which we doubt, an appropriate description of the consequences of the FSD process. The Targets' interpretation is that any decision by the Tribunal which requires the issue of a different FSD than that determined upon by the Panel must be subjected to a fresh determination which is subject to the section 43(9) de facto time limit. If correct, that would apply not merely to a Tribunal decision that further targets should be added, but to a decision that some targets should be removed. Furthermore, the question whether the addition of targets has a penalising effect may depend upon the perspective of the viewer. A target proposed to be included in an FSD by a Panel determination may refer that determination to a Tribunal on the basis that the Panel should have included further targets. From the perspective of the disgruntled target, the effect of the time limit would be to increase, rather than reduce, the so-called penalty beyond that which, if its reference were well-founded, would properly be imposed upon it. This is because, subject to the details of arrangements made between them, the greater the number of targets, the lesser may be the burden of the FSD upon any single one of them.
64. Mr Simmonds submitted that the whole of the case against the Targets was based upon a misconception that, where more than one target is identified as the intended recipient of an FSD, there is a single FSD covering all of them, rather than a series of separate FSDs against each. This submission was used as the stepping stone for the argument that, at any rate, any decision to issue an FSD to a new target, or targets, necessarily involved a separate determination.
65. We have not been persuaded that the 'single FSD theory' is a misconception. The effect of the issue of an FSD to a number of targets is that it requires them collectively to propose and if possible agree with the Regulator a framework of arrangements for the ongoing financial support of the relevant pension scheme: see s.45(1). In sharp contrast with contribution notices (whether under s.38 or s.47) an FSD imposes no specific, still less quantifiable, financial liability on any single target, or even group of targets.
66. We do not in any event consider that the approach to the interpretation of sections 43 and 103 at which we have arrived depends upon any particular answer to the single or multiple FSD issue. This is because, in our view, the power of the Regulator to issue one (or more than one) FSD pursuant to the Tribunal's direction that it should do so flows directly from section 103(7), and requires no further determination by the Regulator at all. Similarly, it matters not, in our view, whether the reference to the Tribunal is analysed as a challenge to a single determination to issue an FSD to (say) four targets, on the basis that it should have been issued to six, or a challenge to the Panel's failure to issue separate FSDs to targets 5 and 6. Either way, our interpretation of the two sections gives rise to no continuing time limit in relation to the issue, for the first time, of an FSD to, or including, targets 5 and 6.
67. Mr Simmonds submitted that the Tribunal's conclusion, and any decision to the same effect by this Court, would involve over-ruling the decision of the Tribunal (Sir Stephen Oliver QC) in Desmond v The Pensions Regulator FS/2010/0010-11, an appeal from which has been heard by the Northern Ireland Court of Appeal, although judgment is still awaited. That was a case about a s.38 contribution notice, and may well be distinguishable from a case about an FSD for that reason alone, as the Tribunal concluded in the present case, in paragraph 140 of the decision. More generally we would prefer to express no opinion on whether Sir Stephen's reasoning in the Desmond case is either wrong or inconsistent with our view of the relationship between ss.43 and 103. In particular the very different language of s.38(5)(c) is much more akin to a traditional limitation period than the flexible look-back period created by s.43(9).
68. In the circumstances, we need not decide the following arguments. The Trustees argued (unsuccessfully) before the Tribunal that, in relation to any FSD yet to be issued, section 43(9) should be applied in its amended form, which came into force in January 2012, the effect of which is to prescribe a time limit of two years from the chosen look back date not for the determination to issue an FSD, but for the issue of a warning notice in respect of it. The Trustees have pursued that argument by respondent's notice in this Court. In addition, the Trustees have also argued that the Targets' construction would be contrary to Article 6 since it would impair the very essence of their rights as DAPs to refer an adverse determination by the Panel to an independent tribunal or to appeal from the decision of any such tribunal. However, in the light of our conclusion in paragraphs 45 to 48 above that the right of access to a judicial body, whether on a reference or on appeal from a reference, is in many circumstances illusory, it is likely to be difficult to conclude that the appellants' interpretation entailed no violation of Article 6.

Conclusion

69. In agreement with the Upper Tribunal, we therefore conclude on this appeal that on the true interpretation of the PA 2004:

i) when the Regulator, acting by the Determinations Panel, makes a determination about an FSD in relation to a pension scheme, the trustees of that scheme, by virtue of their office, are persons "directly affected" by that determination for the purposes of section 96(3) of the 2004 Act, and they accordingly have standing as of right to refer that determination to the Upper Tribunal under that provision; and

ii) if any person refers such a determination of the Regulator to the Upper Tribunal under section 96(3), the two-year time limit in section 43(9) of the PA 2004, which, prior to amendment by the Pensions Act 2011 in effect required the Regulator to issue an FSD within two years of the time which he selected for determining whether the pre-conditions in section 43(2) for the issue of an FSD had been fulfilled, does not apply to any directions which the Upper Tribunal may give regarding an FSD under section 103(5) and (6), or to any order made on an appeal from those directions.

APPENDIX Relevant Provisions of the Pensions Act 2004

9 The Determinations Panel

(1) The Regulator must establish and maintain a committee consisting of–

(a) a chairman, and

(b) at least six other persons,

(in this Part referred to as "the Determinations Panel")….

10 Functions exercisable by the Determinations Panel

(1) The Determinations Panel is to exercise on behalf of the Regulator–

(a) the power to determine, in the circumstances described in subsection (2), whether to exercise a reserved regulatory function, and

(b) where it so determines to exercise a reserved regulatory function, the power to exercise the function in question.

(2) Those circumstances are–

(a) where the Regulator considers that the exercise of the reserved regulatory function may be appropriate, or

(b) where an application is made under, or by virtue of, any of the provisions listed in subsection (6) for the Regulator to exercise the reserved regulatory function.

(3) Where subsection (1) applies, the powers mentioned in that subsection are not otherwise exercisable by or on behalf of the Regulator.

(4) For the purposes of this Part, a function of the Regulator is a "reserved regulatory function" if it is a function listed in Schedule 2….

38 Contribution notices where avoidance of employer debt

(1) This section applies in relation to an occupational pension scheme other than–

(a) a money purchase scheme, or

(b) a prescribed scheme or a scheme of a prescribed description.

(2) The Regulator may issue a notice to a person stating that the person is under a liability to pay the sum specified in the notice (a "contribution notice")–

(a) to the trustees or managers of the scheme, or

(b) where the Board of the Pension Protection Fund has assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 (pension protection), to the Board.

(3) The Regulator may issue a contribution notice to a person only if–

(a) the Regulator is of the opinion that the person was a party to an act or a deliberate failure to act .which falls within subsection (5),

(b) the person was at any time in the relevant period–

(i) the employer in relation to the scheme, or

(ii) a person connected with, or an associate of, the employer,

(c) the Regulator is of the opinion that the person, in being a party to the act or failure, was not acting in accordance with his functions as an insolvency practitioner in relation to another person, and

(d) the Regulator is of the opinion that it is reasonable to impose liability on the person to pay the sum specified in the notice….

43 Financial support directions

(1) This section applies in relation to an occupational pension scheme other than–

(a) a money purchase scheme, or

(b) a prescribed scheme or a scheme of a prescribed description.

(2) The Regulator may issue a financial support direction under this section in relation to such a scheme if the Regulator is of the opinion that the employer in relation to the scheme–

(a) is a service company, or

(b) is insufficiently resourced,

at a time determined by the Regulator which falls within subsection (9) ("the relevant time").

(3) A financial support direction in relation to a scheme is a direction which requires the person or persons to whom it is issued to secure–

(a) that financial support for the scheme is put in place within the period specified in the direction,

(b) that thereafter that financial support or other financial support remains in place while the scheme is in existence, and

(c) that the Regulator is notified in writing of prescribed events in respect of the financial support as soon as reasonably practicable after the event occurs.

(4) A financial support direction in relation to a scheme may be issued to one or more persons.

(5) But the Regulator may issue such a direction to a person only if–

(a) the person is at the relevant time a person falling within subsection (6), and

(b) the Regulator is of the opinion that it is reasonable to impose the requirements of the direction on that person.

(6) A person falls within this subsection if the person is–

(a) the employer in relation to the scheme,

(b) an individual who–

(i) is an associate of an individual who is the employer, but

(ii) is not an associate of that individual by reason only of being employed by him, or

(c) a person, other than an individual, who is connected with or an associate of the employer.

(7) The Regulator, when deciding for the purposes of subsection (5)(b) whether it is reasonable to impose the requirements of a financial support direction on a particular person, must have regard to such matters as the Regulator considers relevant including, where relevant, the following matters–

(a) the relationship which the person has or has had with the employer (including, where the employer is a company within the meaning of subsection (11) of section 435 of the Insolvency Act 1986 (c. 45), whether the person has or has had control of the employer within the meaning of subsection (10) of that section),

(b) in the case of a person falling within subsection (6)(b) or (c), the value of any benefits received directly or indirectly by that person from the employer,

(c) any connection or involvement which the person has or has had with the scheme,

(d) the financial circumstances of the person, and

(e) such other matters as may be prescribed.

(8) A financial support direction must identify all the persons to whom the direction is issued.

(9) A time falls within this subsection if it is a time which falls within a prescribed period which ends with the determination by the Regulator to exercise the power to issue the financial support direction in question….

45 Meaning of "financial support"

(1) For the purposes of section 43 (financial support directions), "financial support" for a scheme means one or more of the arrangements falling within subsection (2) the details of which are approved in a notice issued by the Regulator.

(2) The arrangements falling within this subsection are–

(a) an arrangement whereby, at any time when the employer is a member of a group of companies, all the members of the group are jointly and severally liable for the whole or part of the employer's pension liabilities in relation to the scheme;

(b) an arrangement whereby, at any time when the employer is a member of a group of companies, a company (within the meaning of section 1159 of the Companies Act 2006 (c. 6)) which meets prescribed requirements and is the holding company of the group is liable for the whole or part of the employer's pension liabilities in relation to the scheme;

(c) an arrangement which meets prescribed requirements and whereby additional financial resources are provided to the scheme;

(d) such other arrangements as may be prescribed.

(3) The Regulator may not issue a notice under subsection (1) approving the details of one or more arrangements falling within subsection (2) unless it is satisfied that the arrangement is, or the arrangements are, reasonable in the circumstances….

47 Contribution notices where non-compliance with financial support direction

(1) This section applies where there is non-compliance with a financial support direction issued in relation to a scheme under section 43.

(2) The Regulator may issue a notice to any one or more of the persons to whom the direction was issued stating that the person is under a liability to pay to the trustees or managers of the scheme the sum specified in the notice (a "contribution notice").

(3) The Regulator may issue a contribution notice to a person only if the Regulator is of the opinion that it is reasonable to impose liability on the person to pay the sum specified in the notice.

93 The Regulator's procedure in relation to its regulatory functions

(1) The Regulator must determine the procedure that it proposes to follow in relation to the exercise of its regulatory functions.

(2) For the purposes of this Part the "regulatory functions" of the Regulator are–

…

(c) the reserved regulatory functions (see Schedule 2),…

(3) The Determinations Panel must determine the procedure to be followed by it in relation to any exercise by it on behalf of the Regulator of–

(a) the power to determine whether to exercise a regulatory function, and

(b) where the Panel so determines to exercise a regulatory function, the power to exercise the function in question.

(4) The procedure determined under this section–

(a) must provide for the procedure required under–

(i) section 96 (standard procedure), and

(ii) section 98 (special procedure), and

(b) may include such other procedural requirements as the Regulator or, as the case may be, the Panel considers appropriate.

(5) This section is subject to–

(a) sections 99 to 104 (the remaining provisions concerning the procedure in relation to the regulatory functions), and

(b) any regulations made by the Secretary of State under paragraph 19 of Schedule 1.

95 Application of standard and special procedure

(1) The Regulator must comply with the standard procedure (see section 96) or, where section 97 applies, the special procedure (see section 98) in a case where–

(a) the Regulator considers that the exercise of one or more of the regulatory functions may be appropriate, …

(2) For the purposes of section 96, references to the regulatory action under consideration in a particular case are–

(a) in a case falling within subsection (1)(a), references to the exercise of the one or more regulatory functions which the Regulator considers that it may be appropriate to exercise, …

96 Standard procedure

(1) The procedure determined under section 93 must make provision for the standard procedure….

(2) The "standard procedure" is a procedure which provides for–

(a) the giving of notice to such persons as it appears to the Regulator would be directly affected by the regulatory action under consideration (a "warning notice"),

(b) those persons to have an opportunity to make representations,

(c) the consideration of any such representations and the determination whether to take the regulatory action under consideration,

(d) the giving of notice of the determination to such persons as appear to the Regulator to be directly affected by it (a "determination notice"),

(e) the determination notice to contain details of the right of referral to the Tribunal under subsection (3),

(f) the form and further content of warning notices and determination notices and the manner in which they are to be given, and

(g) the time limits to be applied at any stage of the procedure.

(3) Where the standard procedure applies, the determination which is the subject-matter of the determination notice may be referred to the Tribunal by–

(a) any person to whom the determination notice is given as required under subsection (2)(d), and

(b) any other person who appears to the Tribunal to be directly affected by the determination.

(4) …

(5) Where the determination which is the subject-matter of the determination notice is a determination to exercise a regulatory function and subsection (3) applies, the Regulator must not exercise the function–

(a) during the period within which the determination may be referred to the Tribunal, and

(b) if the determination is so referred, until the reference, and any appeal against the Tribunal's determination, has been finally disposed of.

(6) …

(7) In this section "the Tribunal", in relation to any reference under subsection (3), means—

(a) the First-tier Tribunal, in any case where it is determined by or under Tribunal Procedure Rules that the First-tier Tribunal is to hear the reference;

(b) the Upper Tribunal, in any other case.

100 Duty to have regard to the interests of members etc

(1) The Regulator must have regard to the matters mentioned in subsection (2)–

(a) when determining whether to exercise a regulatory function–

(i) in a case where the requirements of the standard or special procedure apply, or

(ii) on a review under section 99, and

(b) when exercising the regulatory function in question.

(2) Those matters are–

(a) the interests of the generality of the members of the scheme to which the exercise of the function relates, and

(b) the interests of such persons as appear to the Regulator to be directly affected by the exercise.

103 References in relation to decisions of Regulator

(1),(2)…

(2A) This section applies to references to a tribunal in relation to a decision of the Regulator.

(3) On a reference, the tribunal concerned may consider any evidence relating to the subject-matter of the reference, whether or not it was available to the Regulator at the material time.

(4) On a reference, the tribunal concerned must determine what (if any) is the appropriate action for the Regulator to take in relation to the matter referred to it.

(5) On determining a reference, the tribunal concerned must remit the matter to the Regulator with such directions (if any) as it considers appropriate for giving effect to its determination.

(6) Those directions may include directions to the Regulator–

(a) confirming the Regulator's determination and any order, notice or direction made, issued or given as a result of it;

(b) to vary or revoke the Regulator's determination, and any order, notice or direction made, issued or given as a result of it;

(c) to substitute a different determination, order, notice or direction;

(d) to make such savings and transitional provision as the tribunal concerned considers appropriate.

(7) The Regulator must act in accordance with the determination of, and any direction given by, the [tribunal concerned] 7 (and accordingly sections 96 to 99 (standard and special procedure) do not apply).

(8) The tribunal concerned may, on determining a reference, make recommendations as to the procedure followed by the Regulator or the Determinations Panel.

(9) An order of the tribunal concerned may be enforced–

(a) as if it were an order of a county court…

Schedule 2, Part 4

…

30 The power to issue a contribution notice under section 38.

…

33 The power to issue a financial support direction under section 43.

…

34 The power to issue a contribution notice under section 47.