ADJUDICATION OFFICER DECISION
Adjudication Reference: ADJ-00043822
Parties:
| Complainant | Respondent |
Parties | Kieran Wallace (Liquidator) for Protim Abrasives Limited (In Liquidation) | The Minister for Enterprise Trade and Employment |
Representatives | Alison Kierse BL, Michael Murphy Solr., McCann Fitzgerald LLP | Frances Meenan, SC, Elizabeth O’Donovan BL, Joseph Dolan Solr., Emmet Hayes Solr., The Chief State Solicitor's Office |
Complaints:
Act | Complaint/Dispute Reference No. | Date of Receipt |
Complaint seeking adjudication by the Workplace Relations Commission under Section 9 of the Protection of Employees (Employers’ Insolvency) Act, 1984. | CA-00054033-001 Online version | 07/12/2022 |
Complaint seeking adjudication by the Workplace Relations Commission under Section 9 of the Protection of Employees (Employers’ Insolvency) Act, 1984. | CA-00054061-001 Manual Version | 08/12/2022 |
Dates of Adjudication Hearing: 01/11/2023, 02/11/2023, 03/11/2023, 12/03/2024, 13/03/2024, 14/03/2024
Workplace Relations Commission Adjudication Officer: Penelope McGrath
Procedure:
In accordance with Section 9 of the Protection of Employees (Employers Insolvency) Act 1984 a person who has been refused a payment (by the relevant Minister), in whole or in part, which has been applied for under Section 7 of this said Act may present a complaint to the Director General of the Workplace Relations Commission who in turn refers said complaint to an Adjudication Officer.
The complaint shall not be entertained if it has been presented after the expiration of the period of six months from the date on which the Minister made the decision.
The Adjudicator will conduct a hearing into a complaint presented. The Adjudication Officer may require a person giving evidence in proceedings in relation to a complaint under this section to give such evidence on oath or affirmation. Proceedings in relation to a complaint under this section shall be conducted in public unless the Adjudication Officer, of his or her own motion or upon the application by or on behalf of a party to the proceedings, determines that, due to the existence of special circumstances, the proceedings (or part thereof) should be conducted otherwise than in public.
On hearing any such complaint, it is within the power of the Adjudicator to find that the Minister is liable to make a payment under Section 7 and in declaring same, the Adjudicator will specify the amount of any such payment.
In this jurisdiction, most employers and employees pay social insurance (pay related social Insurance) into the National Social Insurance Fund. The payments are usually deducted from wages.
The Insolvency Payments Scheme (IPS) is a scheme to protect pay-related entitlements of employees whose employer has become legally insolvent as defined by the scheme. Payments made under the Insolvency Payments Scheme are made from the said National Social Insurance Fund. Payments such as Statutory Redundancy and Minimum Notice are regularly sought to be paid under the scheme.
Section 7 of the Protection of Employees (Employers Insolvency) Act 1984 concerns unpaid contributions which the employer and/or the employee were liable to pay into an occupational pension scheme in the course of the employment relationship.
An “occupational pension scheme” in this context means “any scheme or arrangement which, forming part of a contract of employment, provides or is capable of providing, in relation to employees in any description of employment, benefits (in the form of pensions or otherwise) payable to or in respect of any such employees on the termination of their employment or on their death or retirement“ (per Section 1 of the Act)
In general terms, Section 7 of the 1984 Act allows the Liquidator (appointed on insolvency) to make an application (post insolvency) in respect of an occupational pension scheme. Where the Liquidator can establish that on the date of insolvency there remained unpaid relevant contributions remaining to be paid by the employer to the scheme, the Minister shall, subject to this section, pay into the assets of the occupational pension scheme, the sum which in the Minister’s opinion is payable in respect of the unpaid relevant contributions. The payment is then paid out of the National Social Insurance Fund.
The “relevant contributions” means contributions falling to be paid by an employer in accordance with an occupational pension scheme. These can be employer and/or employee contributions.
There is a proviso outlined in Section 7(3)of the 1984 Act which essentially stipulates that the sum payable under this section in respect of the unpaid relevant contributions of an employer on his own account to an occupational pension scheme shall be the lesser of the following two amounts (where both are calculable) —
- The balance of relevant contributions remaining unpaid on the date on which the employer became insolvent and payable by the employer on his own account to the occupational pension scheme in respect of the period of twelve months ending on the day immediately preceding the date on which the employer became insolvent.
or
- The amount certified by an Actuary to be necessary for the purpose of meeting the liability of the scheme on dissolution to pay the benefits provided by the occupational pension scheme to or in respect of the employees of the employer.
Background:
This in-person hearing was conducted over the course of six days in the Workplace Relations Commission building situate in Lansdowne Road, Dublin. A case management meeting was also held between the assigned Adjudicator and the legal representatives preceded the hearing. This was considered to be an expedient way of shaping a pathway through the hearing. In line with the Supreme Court decision in the constitutional case of Zalewski -v- An Adjudication Officer and the Workplace Relations Commission and Ireland and the Attorney General [2021] IESC 24 (delivered on the 6th of April 2021) the hearing was conducted in recognition of the fact that the proceedings constitute the administration of Justice. It was therefore open to members of the public to attend this hearing. In line with the Workplace Relations (Miscellaneous Provisions) Act, 2021 which came into effecton the 29th of July 2021 and where there was the potential for a serious and direct conflict in the evidence between the parties to the complaint, it was open to me as Adjudicator to direct that all parties giving oral evidence before me would swear an oath or make an affirmation as may be appropriate. In the interests of progressing this matter, I confirm that I have in the circumstances administered the said affirmation as appropriate. It is noted that the giving of false statements or evidence is an offence. The workplace relations complaint form herein issued on the 7th of December 2022. It therefore issued within six months of the Minister’s decision (in response to an application made under Section 7 of the Protection of Employees (Employers Insolvency) Act 1984), which decision was made known to the Complainant/Liquidator by a letter dated the 3rd of August 2022. The Decision was made by a Ms. Erica Farrelly (acting for and on behalf of the Minister) from the Redundancy and Insolvency Payments Section in the Department of Social Protection. The decision herein amounted to a refusal by the Minister to make any payment in respect of the unpaid relevant contributions. The workplace relations complaint form was prepared and submitted by a Mr. Kieran Wallace of KPMG who had been appointed Liquidator to the company known as Protim Abrasives Limited, and his appointment was made by order of Mr. Justice MacMenamin in the High Court as of the 12th of November 2009. It was agreed with the Respondent that the name of the Respondent be changed from the Minister for Employment Affairs and Social Protection to the Minister for Enterprise, Trade and Employment. This is on foot of S.I. No. 438 of 2020 – Employment Affairs and Employment Law (Transfer of Departmental Administration and Ministerial Functions) Order 2020 and S.I. No. 519 of 2020 – Business, Enterprise and Innovation (Alteration of Name of Department and Title of Minister) Order 2020. To understand how this matter has come before the Adjudication Services it is necessary to consider the chronology of events: The company known as Protim Abrasives Limited had been in existence in the state since 1957. The company was in the business of hardware supplies and had a specialised function in timber and wood maintenance and preservation. The company operated out of the Tolka Valley Industrial Park. Of significance to these proceedings is the fact that the company operated an occupational pension scheme of the type envisaged in the Protection of Employees (Employers Insolvency) Act 1984 per the definition outlined in Section 1 of the Act. The occupational pension scheme was established by way of a Deed of Trust dated 18 December 1991 and which was made between Protim Abrasives Limited, as principal employer, and three named Trustees - Edmund Paschal Brennan, Patrick Joseph Coyle and Anthony Peter Lynch. This was later updated and amended by a Definitive Trust Deed and Rules dated 1st December 1992. The occupational pension scheme has been opened extensively to me and its legitimacy and efficacy has not been challenged. This is a 200-page Deed of Trust which comprehensively sets out the terms and conditions of the pension scheme. The Deed is dated the 1st of December 1992 and as stated, is made between Protim Abrasives Limited on the one part and three named Trustees on the other part. For the purposes of this decision, the proper title of the Trust Deed or Definitive Deed is the FAC 1990 Occupational Pension Scheme. The Scheme is correctly signed, executed and dated. The FAC 1990 Occupational Pension Scheme is a defined benefit pension scheme. Counsel for the Complainant emphasised the significance of the type of pension scheme under consideration in this case. A defined benefit scheme is a pension scheme that provides a promised benefit to employees based on (and with reference to) their years of service with an employer and, in most cases, based on their salary at date of retirement. The defined benefit pension scheme is intended to provide an anticipated level of pension for each retiring employee at a future date. A defined benefit pension scheme provides for a guaranteed income on retirement. The pension payments payable to employees (on retirement) will depend on their years of service with the employer, the cost of living, as well as on their earnings at retirement (or in the years immediately preceding retirement). Crucially, the payments are also highly dependent upon the ongoing funding of the scheme by the employer and the ability and willingness of the trustees to enforce such funding. A defined benefit pension scheme operates by periodically assessing the value of potential benefits for all past and currently employed members in aggregate. The process of assessment is set out in the pension scheme. The value of all potential benefits must then be compared with the value of the assets held by the pension scheme. Ideally, the assets will be sufficient to cover the benefits which are currently being paid, and which are anticipated will have to be paid. With a defined benefit scheme, the employer holds all of the risk associated with the employees’ retirement benefits. A clear distinction is being drawn between the defined benefit scheme and a defined contribution scheme where the retirement benefits under the defined contribution scheme for each member will depend on how much money has been built up by the member’s retirement date. With a defined contribution scheme, it is not possible to know in advance what pension benefits a member will receive. Employee pension entitlements under the FAC 1990 Occupational Pension Scheme are governed by the underlying governing documents (the pension scheme itself) rather than investments made or the level of employee and employer contributions – which are features of the more common defined contribution benefit scheme. In the matter before me, the benefit entitlements under the FAC 1990 Occupational Pension Scheme are based on a standard defined benefit structure with members earning approximately 1/60th of their “Pensionable Salary” for each year of pensionable service. This has been described to me by the Complainant as a fixed entitlement. The mechanism by which the assets of the FAC 1990 Occupational Pension Scheme were to be periodically assessed (referenced above) is set out in clause 27 of the Trust Deed. Clause 27 provides that: - “The Trustees shall instruct the Actuary to prepare a valuation report on the actuarial position of the Scheme at intervals not exceeding three and one-half years and to advise what contributions ought thereafter to be made to the fund”. Clause 28(a) of the Trust Deed goes on to provide that the company (Protim Abrasives) as the employer: - “shall pay contributions to the Fund at the rate recommended by the Actuary under Clause 27 of this Deed or at such other rate or of such amount and at such dates as may be agreed between the Trustees the Principal Employer and the Actuary being such contributions as are necessary (together with the contributions paid by the Members to the Fund and any assets transferred pursuant to Clause 21 of this Deed) to secure the benefits under the Scheme.” The employer atClause 28(b): - “Shall pay all necessary expenses incurred in connection with the Scheme provided that in default of payment by the Employers as aforesaid such expenses may be paid by the Trustees out of the Fund …” Clause 29 of the Trust Deed speaks to the proposed termination, by an employer, of its liability to pay contributions: - “Each of the Employers may at anytime by not less than one month’s notice in writing to the Trustees terminate its liability under Clause 28 of this Deed to pay contributions to the Fund and expenses incurred in connection with the Scheme but without prejudice to its liability to pay any contributions or expenses which have become payable prior to the expiry of such notice or to pay any expenses which will arise in connection with the winding-up of the Fund PROVIDED THAT the said liability to pay contributions shall not apply to any period of employment with the Employer after the expiry of such notice or to any remuneration paid thereafter to Members.” What this appears to mean is that the employer (in this case Protim Abrasives or a Liquidator acting on behalf of Protim Abrasives), can write to the Trustees telling the Trustees that Protim Abrasives will, in one months’ time, be terminating its liability to pay contributions to the pension fund. This is without prejudice to the employer company - Protim Abrasives – having an ongoing liability to pay any contributions which have become payable prior to the expiry of the one-month notice period. In its lifetime, Protim Abrasives Limited had been a relatively successful company. I have been told that the workforce worked there on average for 17 years and had diligently made contributions to the defined benefit pension scheme of which they were the ultimate beneficiaries. I note that a number of the beneficiaries attended the hearing before this Adjudication process in the WRC and I thank them for their attendance and their keen interest in the proceedings and in the outcome thereof. When Protim Abrasives went into liquidation the average salary of the employees was, I have been told, about €50,000.00. There were 23 employees still employed on site. Another 18 had already retired, and up to 27 workers had left this workplace and were working elsewhere though were not yet of pensionable age. I am further advised that the average value of the pension for each of the relevant employees is €7,000.00 or €8,000.00 per annum payable from their normal retirement date (65th birthday). On 12th of November 2009 the High Court ordered Protim Abrasives Limited to be wound up and KPMG (and in particular Mr. Kieran Wallace) was appointed as Liquidator. This is the date of liquidation, and all parties are agreed on this fact. On the 13th of November 2009 the Liquidator triggered Clause 29of the FAC 1990 Occupational Pension Scheme and thereby informed the Trustees that he was (on behalf of the company) terminating the company’s liability to the scheme. Per Clause 29the actual date of cessation of liability occurs one month later. It is accepted then, per the terms of the FAC 1990 Occupational Pension Scheme that the Liquidator/employer would be free from incurring any further liability (in respect of the pension scheme) from the 12th of December 2009. All parties to the definitive deed are agreed that any liability to pay contributions and expenses, that the Liquidator (acting as employer and signatory to the Deed) has in respect of the FAC 1990 Occupational Pension Scheme continued to be payable for that one clear month after the notice of termination. On the 8th of December 2009, the Trustees made a contribution demand of the employer (in the person of the Liquidator) in the sum of €8,635,000.00 to secure, in full, the benefits accruing to the members or beneficiaries of the FAC 1990 Occupational Pension Scheme now and into the future. This figure was arrived at and reported on by the scheme Actuary Mr. Paul O’Brien on foot of a Clause 27 instruction from the Trustees. It is to be noted that this demand for €8.63M was made of the Liquidator after the date of Liquidation but is stated by Counsel to have been based on an actuarial valuation report commissioned by the Trustees and assessed by the Actuary on the 11th of November 2009 - one day before the Company went into Liquidation. By the 10th of December 2009 the Trustees (through their Solicitor) make a further demand of the Liquidator that the Trustees of FAC 1990 Occupational Pension Scheme be given preferential creditor status in respect of the claim for unpaid pension contributions in the sum of €8,635,000.00. There then followed a protracted period of seeming inaction. The Liquidator needed the time to wind up the company. I understand that issues did arise in that process, but none that have any significant bearing on the case before this WRC Adjudication. It is noted that work was also being carried out by the Trustees. In December of 2012 the Actuary Paul O’Brien sought to have this scheme included in the newly created Pensions Insolvency Payments scheme (the PIPS) created by the Social Welfare and Pensions Act of 2009. This FAC 1990 Occupational Pension Scheme would have qualified had it been able to make an up-front payment of €3,200,000.00 - this figure having been assessed by the National Treasury Management Agency and communicated by letter back to the Actuary on the 31st of May 2013. This process ultimately went nowhere. By June of 2015, the High Court had certified the Examiner’s Preferential Certificate of Debts in the Liquidation of Protim Abrasives Limited. This included the Trustees of the FAC 1990 Occupational Pension Scheme. It is noted that at this juncture the figure sought from the employer (in Liquidation) in respect of the pension funding had been reduced to €7,000,000.00. The Actuary and Trustees on the one hand and the Liquidator on the other hand had mutually agreed to the reduction. Evidence was adduced on this and there were many factors which were considered. These included the movement of members/beneficiaries, consideration of the scheme expenses, the updated cost of purchasing the necessary annuity contracts (due to updated economic conditions) and the rate of inflation. The figure was agreed between the parties and was certified by the High Court Examiner’s Office. The Respondent was not involved in this process. Another considerable period of time passed by. Then, in February of 2018 the Liquidator (Mr. Kieran Wallace) made an online application for a payment under the Insolvency Payments Scheme (IPS) in relation to unpaid contributions to an occupational pension scheme as provided for under Section 7 of theProtection of Employees (Employers’ Insolvency) Act 1984. The parties accept that the Liquidator is a person competent to act on behalf of the pension scheme. I accept that the Liquidator performs this function for and on behalf of the FAC 1990 Occupational Pension Scheme as part of the duties he carries in the Liquidation process which was ongoing. This is the start of the Respondent’s involvement in the process. The amount sought was €7,000,000.00. Unfortunately, this application did not have the requisite Actuarial input. The IP Scheme requires an Actuarial Declaration certifying the amount necessary. Whilst the Actuary - Mr O’Brien - is named in the application, it seems he did not sign off. A second application was made in 2019 and this time the sum of money being sought was €6,124,000.00. This time the Actuarial Declaration certifying the amount was made. I understand that the reduction (in the amount of €876,000.00) arises by reason of the fact that the Trustees had been paid a dividend in 2015 as a result of the sale of stock and the collection of debts. I also accept that the Department officials were not necessarily aware of this fact, and I understand that this unexplained movement between figures definitely raised a red flag. A third application was made in March of 2020 and the sum of money being sought was €6,124,000.00. There is a great deal of correspondence passing between the parties during this period of time. Officers from the Redundancy and Insolvency Section of the Department of Social Protection engage pro-actively with the Liquidator and members of his staff. What comes particularly into focus is the State’s assumption that the lump sum being sought does not amount to unpaid relevant contributions remaining to be paid by the employer to the scheme in respect of the period of twelve months immediately preceding the date of insolvency. The Minister/ Respondent instead asserts that this is some sort of aggregate and accrued loss built up over many years. On the 3rd of August 2022, the Deciding Officer in the Redundancy and Insolvency Department, (acting for and on behalf of the Respondent), communicated the Minister’s decision to the Liquidator. The decision amounted to a refusal by the Minister to make any payment in respect of unpaid relevant contributions. This was the outcome of the application made under Section 7 of the Protection of Employees (Employers’ Insolvency) Act 1984. The Complainant herein is now challenging this refusal pursuant to Section 9 of the Protection of Employees (Employers’ Insolvency) Act 1984. The Workplace Relations Complaint Form herein issued on the 7th of December 2022. |
Summary of Complainant’s Case:
The Complainant Mr. Kieran Wallace was fully and legally represented. The Complainant had status by reason of his having been appointed Liquidator to the insolvent company known as Protim Abrasives Limited, by order of Mr. Justice MacMenamin in the High Court as of the 12th of November 2009. Liquidation is the process by which a company (the company known as Protim Abrasives Limited in this instance) is brought to a legal end and the assets of the company are directed to be redistributed. The liquidation of a company involves the cessation of the company’s activities, the conduct of an investigation into the company’s affairs, the realisation of the company’s assets, the payment of the company’s creditors to the extent possible (i.e., if there are sufficient funds) and, if having discharged the company’s debts there are any surplus funds, distribution of same to the members. The company is then dissolved, terminating its legal existence. A liquidator (Mr. Wallace herein) is the person appointed to conduct the winding-up of a company. The main legislative provisions concerning Liquidators are set out in Section 11 Chapter 8 of the Companies Act 2014. For the purposes of these proceedings, it is noted that for the duration of the liquidation the Liquidator operates as the employer insofar as he acts in the best interests of the employees. To my mind, the Liquidator herein has exercised his Duty of Care with diligence throughout. The Complainant, Mr Kieran Wallace gave comprehensive evidence on affirmation. Several other witnesses provided further evidence on affirmation in support of the Complainant’s case. These included one of the Trustees to the FAC 1990 Occupational Pension Scheme - a Mr. Adrian McLoughlin. The third witness was a Mr. Paul O’Brien (working with Watson Wyatt Worldwide) who was the Actuary to the FAC 1990 Occupational Pension Scheme. Mr. O’Brien’s evidence was extremely helpful as his association with this scheme pre-dates the period being focused on herein (. I was also provided with a comprehensive submission from the Complainant dated the 27th of February 2023 together with a supplemental submission dated the 19th of October 2023. The submissions outlined the facts and detailed the legal argument being made for and on behalf of the Complainant. I was provided with considerable supplemental documentary evidence in support of the Complainant’s case. No objection was raised to any of the materials relied upon by the Complainant in making his case. Indeed, my understanding is that the parties herein agreed books of documents to be submitted in advance of the hearing. These comprised a Core Booklet, a Book of Authorities and a Book of further correspondence. The Evidence adduced by the Complainant (Liquidator) and his witnesses was challenged as appropriate by the Respondent’s representative. The Complainant is challenging the refusal by the Minister for Enterprise Trade and Employment to make a payment which has been applied for (by the Complainant) under Section 7 of the Protection of Employees (Employers Insolvency) Act 1984 and as per Section 9 of the Act, the Complainant is seeking a declaration that the Minister is liable to make a payment under Section 7 aforesaid.
The Workplace Relations Complaint Form is dated the 7th of December 2022 and for the sake of completeness I am noting that the complaint herein falls under the Insolvency heading. In particular, the Liquidator claims that the Minister failed to make a payment due to the Liquidator under the Insolvency Payments scheme. The workplace relations complaint form further indicates that the debt owed to the Complainant/Liquidator, under the Insolvency Payments Scheme, are pension contributions. The complaint form articulates the complaint as follows: “An appeal of the decision of the Department of Social Protection refusing to pay into the assets of the F.A.C. 1990 Pension Scheme the sum payable in respect of unpaid relevant pension contributions, as provided for under section 7 of the Protection of Employees (Employers’ Insolvency) Act 1984 (as amended). The liquidator submits that the Department's explanation for refusing the claim, being that it 'does not meet the criteria set out in section 7(3) of the Act’ where the accompanying valuation report post-dates the date of the company's insolvency’’ is incorrect. The Department has failed to consider that whilst the date on the face of the report postdates the date of the company's insolvency, the valuation was prepared to date pre-dating the insolvency. In addition, separate demands for payment were made on 17 September 2009 and 21 September 2009, within the 12 months prior to the insolvency.’’ It should be noted that this last point (concerning September 2009 dates) is important, and more light will be thrown on this issue in due course. The total amount being sought is not specifically identified in the workplace relations complaint form but can be readily found in the submission attached thereto as a figure of €7,000,000.00 (though this figure did ultimately come down). Also, it is noted that the Complainant appears to have submitted two identical complaints. One arrived on the 7th of December 2022 in the electronic format - CA-00054061-001. The second was manually prepared a couple of days later - CA-00054061-001. The exact same complaint is articulated in both complaint forms.
Legal basis for bringing Complainant’s Case:
Before considering the oral evidence of the witnesses, Complainant’s Counsel outlined the relevant Statute and EU law. By way of opening the Complainant’s case I was invited to look atthe: DIRECTIVE 2008/94/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22nd October 2008 on the protection of employees in the event of the insolvency of their employer. This is a Directive which is a codified version of an earlier 1980 Directive, and which has an objective set out at Recitals (2) and (3) which state: - (2) The Community Charter of Fundamental Social Rights for Workers adopted on 9 December 1989 states, in point 7, that the completion of the internal market must lead to an improvement in the living and working conditions of workers in the Community and that this improvement must cover, where necessary, the development of certain aspects of employment regulations such as procedures for collective redundancies and those regarding bankruptcies. (3) It is necessary to provide for the protection of employees in the event of the insolvency of their employer and to ensure a minimum degree of protection, in particular in order to guarantee payment of their outstanding claims, while taking account of the need for balanced economic and social development in the Community. To this end, the Member States should establish a body which guarantees payment of the outstanding claims of the employees concerned. The objective behind Directive 2008/94/EC is to establish a minimum degree of protection to employees in the event of the employer becoming insolvent. Member States are obliged to set up abody to guarantee payments – a guarantee institution. In this jurisdiction, the guarantee institution is embodied in the Insolvency Payments Scheme process overseen by the Department of Social protection. The Complainant asserts that the policies, aims and objectives of the Directive are transposed into Irish law through the Protection of Employees (Employers Insolvency) Act 1984. Transposition is the process of incorporating EU directives into the national laws of EU Member States. EU countries are obliged to adopt measures to incorporate EU Directives into national law (transpose them) in order to achieve those objectives which are set out in the Directive. Counsel for the Complainant suggested that I must, at all times view the Protection of Employees (Employers’ Insolvency) Act 1984 through the prism of the obligations set out in the Directive. In effect, I am told that the various Statutory procedures which seek monies to be paid from the Social Insurance Fund are the Irish response to the requirements placed on Member States under DIRECTIVE 2008/94/EC to have a body which guarantees the payment of outstanding claims of employees where the employer has become insolvent. This is clear from the stated objective of the Protection of Employees (Employers Insolvency) Act 1984 which is described as: “AN ACT TO CONFER, ON THE INSOLVENCY OF EMPLOYERS, CERTAIN RIGHTS ON EMPLOYEES, TO AMEND CERTAIN ENACTMENTS RELATING TO THE RIGHTS OF EMPLOYEES.” Recital 7 of DIRECTIVE 2008/94/EC allows the Member State to set limitations: - (7) Member States may set limitations on the responsibility of the guarantee institutions. Those limitations must be compatible with the social objective of the Directive and may take into account the different levels of claims. The suggestion, says Counsel, is that it is open to a Member State to set temporal limitations and/or quantum limitations. It was pointed out to me time and again by the Complainant’s legal representative that all Member States are given many opportunities to curtail the liabilities of the guarantee body that have been set up. This has been expressly provided for. In the context of the matter before me which concerns retiring employees, I must give special attention to Article 8 of Directive 2008/94/EC which reads: “Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes.” As previously noted, the Liquidator was obliged at the start of the process of the liquidation (as of the 12th of November 2009) to consider the insolvent company’s liabilities under the FAC 1990 Occupational Pension Scheme. Also as previously noted, this is a defined benefit pension scheme and therefore different to the defined contribution scheme more commonly operated in the state. The Complainant Counsel placed emphasis on the fact that the notion of a fixed regular contribution or contributions does not necessarily apply when it comes to a defined benefit pension scheme. In fact, Counsel described the process as one of doing whatever had to be done to ensure the promised outcome. When funds were doing well there would be sufficient assets to fund liabilities but when the funds were performing badly, employers have to chase their liability. Generally, this is done by topping up the fund - “chasing the promise” was how Counsel for the Complainant put it to me. To further explain this idea, Counsel for the Complainant opened up different paragraphs of the Irish textbook Irish Pension Law and Practice (second Ed) by Finucane, Buggy and Tighe at page 38: “..a defined benefit scheme provides a pension at retirement which is defined in advance, such as a percentage or a fraction of the employee’s final salary… In a defined benefit scheme, the employer usually assumes this investment risk as the employer must fund to meet the defined benefit and will usually have to meet the shortfall. The fact that the employer bears the investment risk in a defined benefit scheme and that there is potentially a high degree of volatility between assets and liabilities are both major contributors to the current trend whereby employers are moving away from defined benefit schemes to defined contribution schemes.” At page 192 of the same book employer contributions are referenced: “The employer must make what the Revenue Commissioners term a “meaningful contribution” to an approved… scheme. For defined contribution schemes the employer must contribute any employer contributions at least monthly. With defined benefit schemes, the timing of contributions is largely a matter for the employer.” (emphasis added by Adjudicator) It is noted that the FAC 1990 Occupational Pension Scheme recognises the fact that the employer shall pay contributions at the rate recommended by the Actuary to the scheme. The Actuary (Mr. O’Brien) must be asked to analyse what contributions are required at least every 3.5 years and in practise he performed this task every year. As per Clause 27 which provides that: - “The Trustees shall instruct the Actuary to prepare a valuation report on the actuarial position of the Scheme at intervals not exceeding three and one-half years and to advise what contributions ought thereafter to be made to the fund”. Counsel for the Complainant went on to explain the position that the Liquidator found himself in when the company/employer was deemed to be insolvent. In general terms, there is a recognised obligation on the Liquidator to process or facilitate claims under the different avenues that might be open to employees in the event of the insolvency of the employer. It is well established in the WRC that Liquidators appointed to Insolvent companies will get actively involved in Statutory Redundancy claims to confirm their appropriateness and thereby provide facility to the Adjudicator and the employee. As per the Directive 2008/94/EC as transposed into Irish Law in the Protection of Employees (Employers Insolvency) Act 1984 the Liquidator, it is being asserted, knew that it was necessary to provide for the protection of the employees herein in consequence of the insolvency of their employer. The Liquidator is obliged to ensure a minimum degree of protection, in particular to guarantee payment of outstanding claims of employees including arrears of remuneration, notice and holiday entitlements etc. The Liquidator will also consider the measures put in place to protect the interests of employees (and of those persons having already left the employer’s business) at the date of the onset of the employer’s insolvency in respect of their rights under occupational pension schemes (as outlined in Article 8 of the Directive). On the insolvency of Protim Abrasives Limited, the Liquidator herein – Mr. Wallace) was obliged to consider the defined benefit pension scheme then in operation for the benefit of the employees. In this jurisdiction legislative measures have, of course, been put in place to protect employees (in compliance with Article 8 of the Directive) in respect of their rights under occupational pension schemes and this includes the making payments of unpaid contributions to an occupational pension scheme. This is provided for in Section 7 of theProtection of Employees (Employers Insolvency) Act 1984 the text of which reads: - 7.—(1) If, on an application made to him in the prescribed form by an employee or by the persons competent to act in respect of an occupational pension scheme .. the Minister is satisfied that— (a) an employer (being in case the application is made by a person otherwise than in his capacity as the person competent so to act the employer of the applicant) has become insolvent, (b) the date on which for the purposes of this Act the employer became insolvent is a day not earlier than the 22nd day of October 1983, and (c) on that day there remained unpaid relevant contributions remaining to be paid by the employer to the scheme .., on the date on which the employer became insolvent, being a date not earlier than the said 22nd day of October the Minister shall, subject to this section, pay into the assets of the scheme out of the Social Insurance Fund the sum which in his opinion is payable in respect of the unpaid relevant contributions. (2) In this section “relevant contributions” means contributions falling to be paid by an employer in accordance with an occupational pension scheme .., either on his own account or on behalf of an employee; provided that for the purposes of this section a contribution of any amount shall not be treated as falling to be paid on behalf of an employee unless a sum equal to that amount has been deducted from the pay of the employee by way of a contribution from him. (3) The sum payable under this section in respect of unpaid contributions of an employer on his own account to an occupational pension scheme .. shall be the lesser of the following amounts— (a) the balance of relevant contributions remaining unpaid on the date on which he became insolvent and payable by the employer on his own account to the scheme .. in respect of the period of twelve months ending on the day immediately preceding that date, (b) the amount certified by — (i) an actuary, (ii) where the employees concerned are employed or habitually employed in the State and the employer is an undertaking which is insolvent under the laws, regulations and administrative procedures of another Member State in accordance with Article 2(1) of the Directive, an actuary or person performing a similar task, or (iii) where the employees concerned are employed or habitually employed in the State and the employer is an undertaking which is insolvent under the laws, regulations and administrative procedures of the United Kingdom, an actuary or person performing a similar task, to be necessary for the purpose of meeting the liability of the scheme on dissolution to pay the benefits provided by the scheme or Personal Retirement Savings Account (within the meaning of the Pensions Act 1990) to or in respect of the employees of the employer. Counsel for the Complainant makes the case that the Liquidator/Complainant herein is a person competent to act (per section 7) in respect of an occupational pension scheme (FAC 1990 Occupational Pension Scheme) and in that capacity he has been able to demonstrate that the company - Protim Abrasives Limited - has become insolvent on a date after the 22nd day of October, 1983 and that on the date of insolvency (which we know to be the 12th of November 2009- by High Court Order) there remained unpaid relevant contributions remaining to be paid by the employer - Protim Abrasives Limited - to the scheme (FAC 1990 Occupational Pension Scheme). In consequence of the foregoing, and having satisfied the criteria, Counsel for the Complainant says that there is an unassailable obligation on the Minister to pay into the assets of the scheme out of the social insurance fund the sum which in the Minister’s opinion is payable in respect of the unpaid relevant contributions. The “relevant contributions” means contributions falling to be paid by an employer in accordance with the occupational pension scheme either on the employer’s own account or on behalf of the employees. Counsel notes that the Protection of Employees (Employers Insolvency) Act 1984 has been drafted so as to allow the rules and regulations making up an occupational pension scheme (such as the FAC 1990 Occupational Pension Scheme) govern how “relevant contributions” come into existence and come to be payable. It is in these circumstances that Counsel has invited me to read Section 7 of the Protection of Employees (Employers Insolvency) Act 1984 in conjunction with Clause 28(a) of the Occupational pension scheme which provides that the Company (Protim Abrasives) as the Employer: - “shall pay contributions to the Fund at the rate recommended by the Actuary under Clause 27 of this Deed or at such other rate or of such amount and at such dates as may be agreed between the Trustees the Principal Employer and the Actuary being such contributions as are necessary (together with the contributions paid by the Members to the Fund and any assets transferred pursuant to Clause 21 of this Deed) to secure the benefits under the Scheme.” In effect, it has been put to me that (as per the Trust) the employer herein (as a signatory to the Trust) is obliged to make contributions at the direction of the scheme Actuary and that if these are unpaid then they are deemed unpaid relevant contributions as envisaged under Section 7 of the 1984 Act. Of course, section 7 of theProtection of Employees (Employers Insolvency) Act 1984 does go on to impose a statutory limit in respect of the unpaid contributions of an employer on his own account to an occupational pension scheme declaring it shall be the lesser of two amounts (set out in 7(3)(a) and 7(3)(b) above). The first is the balance of relevant contributions remaining unpaid on the date of insolvency and payable by the employer in respect of the period of twelve months ending on the day immediately preceding the date of insolvency. The second is the amount certified by an actuary. Counsel for the Complainant has urged me to note that there is no maximum amount at play here. The lesser of two amounts can be considered, but there is no statutory ceiling imposed on either one of those two amounts. This cannot, it has been asserted, be an oversight. It has been pointed out to me that other payments out of the social insurance fund do have statutory ceilings attaching to them. These include Statutory Redundancy payments and Unfair Dismissals claims. I am therefore being asked to look specifically at that twelve-month period from the 12th of November 2008 to the 11th of November 2009 (date of Liquidation) to consider if there was a balance of relevant contributions which remained unpaid and which were payable by the employer in accordance with the occupational pension scheme. The Complainant makes the case that (in that twelve-month period) the relevant Actuary (on instruction from the Trustees) made up to two legitimate recommendations as to the necessary contributions which had to be paid by the Employer (emphasis added by Adjudicator). I acknowledge that this proposition is in line with the Act. Facts basis for bringing Complainant’s Case:
It has been put to me that Protim Abrasives Limited was a company in financial difficulty in 2009. I accept that this difficulty has to be seen against the backdrop of the well-documented trajectory of the Irish economy which entered severe recession in 2008, and then entered into an economic depression in 2009. Protim Abrasives Limited was particularly vulnerable as it relied heavily on the collapsed construction industry. Of equal significance was the worldwide stock market crash which started in September of 2008 and spiralled downwards through 2009. This would have had a devastating effect on value of the FAC 1990 Occupational Pension Scheme. I understand that the company filed a petition for the appointment of an examiner in or around September 9th, 2009. Examinership is a mechanism providing for the rescue and return to health of ailing, but potentially viable companies. I acknowledge the fact that the High Court must be persuaded that when putting a company into examinership the company must be seen to have a reasonable prospect of survival. I am bound to accept that this case was made at that time and accepted by the High Court. An Examiner was appointed on the 17th of September 2009. The Examiner was Mr. Kieran Wallace who would ultimately become the Liquidator. Separately, on the 15th of September 2009 the Scheme Actuary Paul O’Brien (working with Watson Wyatt, Actuarial advisors) communicated by letter with the Chief Financial Officer of the Employer Company (Protim) who was also a named Trustee - concerning the pension scheme. This communication was sent on foot of an Actuarial Report dated the 14th of September. Mr. Paul O’Brien is the Actuary independently engaged by the Trustees. In this letter of the 15th of September 2009, Mr O’Brien outlines a helpful history concerning the funding of the scheme which appears to have had some underfunding issues off and on and starting from as far back as 2003. Mr O’Brien notes that under the Pensions Acts, the Trustees are required to enter an agreement with the company for a revised funding proposal to be submitted to the Pensions Board by December 31st of 2009. This, I understand is not particularly unusual. Mr O’Brien notes that Clause 27 of the Deed of Trust actually directs that contributions shall be paid to the fund at the rate recommended by the Actuary (or as might be agreed between the Trustees, the Principal Employer and the Actuary) to secure the benefits under the scheme. The Actuary identifies the sum of €3.7 million as being the deficit in the pension scheme. I understand this figure was calculated by the Actuary as being the shortfall as of the 1st of July 2009. The Actuary performed this analysis of the pension on instruction from the Trustees which was given to him on the 1st of July 2009 - a date which, it is noted preceded both the Examinership and the Liquidation. I as Adjudicator am satisfied that this figure was prepared when the company was not under threat of failure and the valuation report was primarily prepared to appease the Pension Board. The Scheme Actuary in this same letter of 15th September 2009, has calculated that over an extended timeframe of ten years, the deficit could be addressed by an annual contribution of €775,000.00 for each of the next ten years (this annual figure is inclusive of the €360,00.00 which was a rate of contribution – by employer and employees – already being paid on an annual basis). The suggestion being the employer needed to fund an extra €415,000.00 per annum for each of the next ten years. I have been asked to accept a number of facts can be extracted from this letter. Firstly, that the figure of €3.7 million articulated by the Actuary is a relevant contribution falling to be paid as of the 15th of September 2009 (this is the capital payment figure referenced in the Actuarial Report). Secondly, that the overall tone of the letter signals a belief that the company will survive. Thirdly, that the ten-year plan articulated demonstrates good faith and a willingness to do what is proper and correct. I find I agree with this proposition. Counsel for the Complainant has identified this point in time as being the point from which the employer can be considered to be on notice of the relevant contributions as recommended by the Actuary having taken instruction for the Trustees. In this regard, it is noted that the recipient of the letter is both employer and Trustee. It is also worth noting that these communications between Trustees, Actuary and Employer have nothing to do with the Complainant and pre-date his appointment as Liquidator. On balance I accept that the company, at this point in time, is assumed to be viable. It has been suggested to me that the company Protim Abrasives, which had survived for so long, likely failed because of the level of debt associated with the pension fund. The company was quite simply chasing its own debt arising out of the inbuilt promises made to the pension beneficiaries. Had the financial climate been different the company may well have survived but this was 2009 and the Irish economy was, I acknowledge, in a perilous state. As noted, on the 12th day of November 2009 the High Court directed the winding up of the Company with the Complainant to be appointed as the Liquidator to that winding up process. The Complainant therefore steps into the shoes of the company - Protim Abrasives - and moving forward, he also operates as the employer. The Complainant’s appointment to the role of Liquidator in this winding up process is what ultimately brings him before the WRC. On the 13th of November 2009 one of the newly appointed Liquidator’s first tasks is to notify by letter to the Trustees of the pension scheme that the company terminates its liability under Clause 28 (..to pay contributions to the Fund at the rate recommended by the Actuary..) of the governing Scheme. Citing Clause 29 of the Trust Deed which speaks to the termination, by the employer, of its liability to pay contributions: - “Each of the Employers may at any time by not less than one month’s notice in writing to the Trustees terminate its liability under Clause 28 of this Deed to pay contributions to the Fund and expenses incurred in connection with the Scheme but without prejudice to its liability to pay any contributions or expenses which have become payable prior to the expiry of such notice or to pay any expenses which will arise in connection with the winding-up of the Fund PROVIDED THAT the said liability to pay contributions shall not apply to any period of employment with the Employer after the expiry of such notice or to any remuneration paid thereafter to Members.” The Complainant’s legal representative argues that this letter of notification dated the 13th of November 2009 recognises an ongoing obligation to pay contributions which have become payable by the Company/Employer/Liquidator for one month after the presentation of the notification. Any liability arising beyond the 12th of December 2009 cannot be included. The Trustees of the pension scheme are under an obligation to administer the scheme responsibly. As previously noted, there is an ongoing power set out in Clause 27 of the scheme which provides that: - “The Trustees shall instruct the Actuary to prepare a valuation report on the actuarial position of the Scheme… “ In the circumstances, the Trustees had already engaged Mr. Paul O’Brien the Scheme Actuary to prepare a report calculating the contributions which were required (to secure the full benefit entitlements of all the scheme members) and which were payable as of 11th of November 2009. This instruction was given one day before the Court ordered the complaint into the liquidation process. Mr. O’Brien prepares this report and same is sent to the pension Trustees dated the 8th of December 2009. Mr. O’Brien notes that the landscape has changed somewhat in that ongoing funding through accumulated contributions will now cease. The company is no longer viable. The Trustees must now (on instruction form the Actuary) identify the funding required to enable the scheme to have sufficient assets to secure the promised benefit payments. Mr. O’Brien identifies that his function and authority comes from Clause 28 (a) of the Occupational pension scheme. The Actuary recommends that the company make an immediate one-off contribution under Clause 28 in the sum of €8,635,000.00. This, he states in his letter, will allow the Trustees to secure the benefits under the scheme. Counsel for the Complainant says that this is in line with the terms of the Trust Deed. The Liquidator, Mr. Kieran Wallace, is notified of the contents of the actuarial valuation report as prepared by Mr. Paul O’Brien at the behest of the Trustees. It is noted that the demand made on the 8th of December 2009 for €8.635M postdates the date of the liquidation ( which was12th of November 2009) and the date on which the Liquidator had already notified the Trustees of an intention to terminate the company’s liability to the scheme (13th of November 2009). Counsel for the Complainant asserts that the actuarial report is based on the actuarial position of the scheme as at 11th of November 2009 (the date on which the Trustees did, in fact, instruct the Actuary to prepare an updated valuation). Around this time, the Trustees through their Solicitors McCann Fitzgerald also call upon the Liquidator to recognise the Trustees as preferential creditors in the liquidation and call upon the Liquidator Mr. Kieran Wallace to pay the sum of €8,635,000.00 in full discharge of the company/employer liability to pay the contributions which have become payable prior to the expiry of the Clause 29 notice. This demand was made by a Solicitor’s letter dated the 10th of December 2009. The Clause 29 notice was to expire on the 12th of December 2009. There is a frustrating lull in activity in connection with these matters until early 2015. By that time the Liquidator Mr. Kieran Wallace acting on behalf of the employer/company has engaged his own Solicitors in the firm of A and L Goodbody who wrote on behalf of the Liquidator to the Trustees’ Solicitor on the 8th of January 2015. By now the parties, through their Solicitors, have agreed that the Trustees’ claim on behalf of the pension will be given the requested preferential creditor status in the amount of €7,000,000.00. There are a number of factors which were considered when allowing this reduction. The correspondence tends to demonstrate a need for pragmatism and expediency. The last stages of the Liquidation in the Examiner’s List see a certification from the Examiner’s Office dated the 19th day of June 2015, wherein the list of declared preferential creditors includes the Trustees of the FAC 1990 Occupational Pension scheme seeking pension contributions in the sum of €7,000,000.00. It is only from this point forward that the Respondent, in the person of the Minister for Enterprise Trade and Employment (having oversight of the Insolvency Payments Scheme) becomes involved in the narrative. The Liquidator or Complainant as he might more properly be referred to from this point on, made no less than three online applications for payment of unpaid contributions to the occupational pension scheme pursuant to the Protection of Employees (Employer’s Insolvency) Acts 1984 to 2006. As previously noted, where an employer is legally insolvent (as is the case here) and the Liquidator who has been appointed to wind up the business is satisfied that a claim should be made out of the insolvency Payments Scheme then that claim will be processed through the Insolvency payments Section of the Department of Enterprise, Trade and Employment. A claim was made in February 2018– in the amount of €7m. There was no signed declaration by the Actuary in this first application. A claim was made on the 10th of January 2019 – this claim had been reduced as by this time a dividend from preferential creditors and from the sale of stock has come in and had been off set against the €7million figure. I understand that this money was realised by 2015. The claim was now for a figure of €6,126,642.00 I understand that the Liquidation process is considered to be ongoing in circumstances where the Liquidator is actively behind the application for payment out of the social insurance fund. I understand that the company cannot be fully wound-up until this process is complete. The Actuary had signed off on this second application in the sum of €6,126,642.00. A further claim was made in March 2020 – the Actuarial declaration was made by Paul O’Brien certifying the amount now needed to meet the liability to pay the benefits provided by the scheme on dissolution is in the amount of €6,124974.65. This application also included a considerable amount of information relating to each and every one of the beneficiaries of the Scheme. For example, the PPS numbers of each individual was included and this was information which had been sought by the Redundancy and Insolvency Payments Unit. A reply in the form of a letter comes from a Ms. Erica Farrelly of the Redundancy and Insolvency Payments Section on the 3rd of August 2022. The letter sets out the relevant legislation and in particular the entirety of Section 7 of the Protection of Employees (employers’ Insolvency) Act 1984 (set out above). Having transcribed Section 7 over three pages of the letter, Ms. Farrelly goes on to write: - “Protim Adhesives Limited went into liquidation on 12 November 2009. Therefore, the date of insolvency was 12 November 2009. The application was supported by means of a purported valuation report dated 8 December 2009. The application does not meet the criteria set out in section 7(3). Accordingly, a decision has been made to disallow the application.” (emphasis added by Adjudicator) This is the final decision under appeal herein. Counsel for the Complainant makes the case that it is clear that the parties are now at cross purposes. Counsel for the Complainant took profound exception to the use of the word “purported” in this letter of reply as she said it tended to suggest that the Complainant - in his role of Liquidator - was somehow chancing his luck. Oral evidence presented in support of the Complainant’s case:
Adrian McLoughlin (Trustee) – This witness explained that he is a Principal in the Independent Trustee Company which allows qualified persons step in as acting Trustees for larger occupational schemes. He gave further evidence on the difference between the types of pension schemes – defined benefit and defined contribution. This Trustee gave evidence that he was a Trustee who instructed the Actuary to prepare a Report in November of 2009 and just before the company went into liquidation. He said that this was needed to update the position set out in the previous report concerning the actuarial position in July of 2009. That earlier report he said assumed the survival of the entity. He said he had had a number of conversations with the Actuary during this time. The witness accepts the accuracy of the Actuarial figures presented. In cross examination the witness was asked about the PIP scheme application which he said there was no agreement on. Regarding the Double Insolvency option, he noted that the Trustees have to secure the benefits to the members and the first obligation is to make an application under Section 7 of the Protection of Employees (Employers’ Insolvency) Act 1984. The Double Insolvency option is not, he said, the first port of call. Kieran Wallace (The Complainant and the Liquidator) – The Liquidator outlined the steps he had taken in accordance with his professional duties. He noted that liquidations are always protracted. The Liquidator is parachuted into a company by order of the High Court but has no pre-knowledge of the business. The Liquidator can take no decisions until everything has been satisfactorily understood and authenticated by him. This witness described the initial conversation around reducing form €8.6million to €7million. He said he took advice from his own lawyers regarding the sums of money. A figure had to be submitted as the Trustees were certainly preferential creditors. He recalled then that the dividend from preferential creditors brought the figure down to €6.124million from the €7m that had initially been submitted. The witness was cross examined on the changing figures, but he confirmed he would only ever submit a claim if he believed it was appropriate. Mr. Wallace confirmed he had no real experience of the Double Insolvency Process when he was questioned about it. Mr. Wallace further confirmed that the Liquidation of Protim Abrasives is ongoing in circumstances where the issues around the FAC 1990 Occupational Pension Scheme needed to be resolved. The Liquidator was robustly challenged on the delays in getting this matter before the Redundancy and Insolvency unit. He defended his actions. Paul O’Brien (The scheme Actuary) – Mr. O’Brien noted that it is his job to ensure that the correct money is in the fund to pay the recipients. It is for him to identify any gap that arises. The witness noted that the Pension Authority had been keeping an eye on this scheme as new regulations regarding minimum levels were an issue. The Pension Authority wanted an update by the end of 2009. It was in these circumstances that the Trustees had sought an assessment in July of 2009.
Prior to that, there had been the publication of the Trustees annual report for the period January 2008 and December 2008. This report had been finalised in June of 2009. The witness led me through the Actuary funding certificate prepared by himself (prepared in December of 2008) which confirms that there was some slippage and that the resources of the scheme would not have been sufficient had the scheme been wound up in December of 2008 (a Pension Board required standard). However, the deficit wasn’t seen as fatal. The Scheme did not therefore satisfy the funding standard required under Section 44 of the Pensions Act 1990. The Investment commentary prepared by Friends First in this same report signalled the start of what we now know to be the economic crash. The over reliance on the property bubble is addressed therein:
‘In the Irish Property Commercial market activity is virtually at a standstill as values have fallen by some 25% over their 2007 highs. An overheating market has combined with the credit crunch to bring to an abrupt end the long run of out performance from the property sector. 2009 is likely to be another difficult year with any slight recovery not occurring before 2010 at the earliest.’
The 2008 Trustees report demonstrates no irregularities or outstanding amounts for that year. There were in fact enhanced payments agreed a number of years before that. These were being paid. The witness said that the thinking at that time was, all things being equal, that the deficit would be extinguished. All decisions were made without any knowledge of the impending crash. No alarm bells were ringing for 2008 as reflected in the Report published in June 2009. The witness was challenged on the fact that the Report produced in December 2009 post-dated the commencement of the Liquidation. He affirms the calculations are an assessment of the financial situation before the Liquidation – the 11th of November 2009. This witness noted that a capital contribution and a capital payment are one and the same thing. In the course of his cross examination, the Actuary noted that the State (through the officers in the Redundancy and Insolvency Section) never provided alternative figures or alternative methodologies for calculating figures to those provided through the process of making this claim under the Insolvency Payments Scheme. I accept that the parties never had any meaningful engagement during that period. The Actuary confirmed that Clauses 27 and 28 appear to put the power into the scheme Actuary’s hands, but that this is not unusual. The Actuary confirmed that when he made his final report on foot of the assessment which he had been asked to prepare on the 11th of November 2009 he was looking to go to market and purchase Annuity Contracts for each of the members. This witness was asked about efforts to use alternative schemes which were potentially available. A letter dated the 9th of August 2021 was opened in the course of the Actuary’s evidence. This is a letter addressed to this witness from the Pensions Policy Unit concerning a potential Section 48B application in the case where a double insolvency exists. He said that the understanding is that applying for relief under the Protection of Employees (Employers’ Insolvency) Act 1984 does not preclude a subsequent application under Section 48B. The letter clearly states this: “As the application in respect of the insolvency Payments Scheme has not concluded the extent of the potential liability under Section 48B of the Pensions Act cannot yet be established” This witness was also instrumental in trying to bring this matter into the Pensions Insolvency Payments scheme (the PIPS) created by the Social Welfare and Pensions Act of 2009. The so-called PIP Scheme. Seemingly, progress was effectively blocked by the National Treasury Management Agency requesting €3.1 million to join this process. The witness confirmed that as of the 15th of September 2009 he had formally notified the Trustees that a figure of money in the sum of €3.7million was needed to secure the fund at that point in time. The witness agreed he had suggested two potential ways of paying the money. He suggested €620,000.00 per month for six months July through December of 2009 (set out in the Actuarial report) or an annual contribution of €775,000.00 over a period of ten years (set out in the letter of the 15th of September 2009). The witness confirmed that no three-way discussion ever took place to agree how the €3.7M might be paid. The Actuary confirmed that the Trustee Mr. Keane was also the Managing Director of the company and therefore all relevant parties were on notice of the €3.7 request in September 2009. He further noted that the employer is bound to breach the gap once it arises even though the collapse in the construction market is nobody’s fault. He made the point that the asset value of the pension fund in January of 2008 was €8.4million and this had slipped to €6.7million by the July 2009 valuation. This was the attrition over the eighteen-month period and in response to the prevailing economic climate.. He pointed out the fact that Clause 28 requires him to prepare a valuation report that recommends such contributions as are necessary to secure the benefits under the scheme. That’s his minimum obligation he said. |
Summary of Respondent’s Case:
It was agreed with the Respondent that the name of the Respondent be changed from the Minister for Employment Affairs and Social Protection to the Minister for Enterprise, Trade and Employment. This is on foot of S.I. No. 438 of 2020 – Employment Affairs and Employment Law (Transfer of Departmental Administration and Ministerial Functions) Order 2020 and S.I. No. 519 of 2020 – Business, Enterprise and Innovation (Alteration of Name of Department and Title of Minister) Order 2020. The Minister (as the Respondent herein) had full representation at the hearing. The Respondent provided me with a written submissions dated June 2023. I have additionally heard from a number of witnesses for and on behalf of the Respondent. No objection was raised in connection with any of the documentary evidence relied upon by the Respondent in the course of making the Respondent’s case. All evidence was heard following an affirmation. The Respondent witnesses were cross examined as appropriate by the Complainant. Where I deemed it necessary, I made my own inquiries so as to better understand the facts of the case and in fulfilment of my duties as prescribed by Statute. Respondent’s legal argument for resisting the Complainant’s claim:
The Respondent made a brief reply to the Complainant’s opening statement before presenting the oral evidence adduced to rebut the Complainant’s case. The Respondent agrees that the Insolvency Payments Scheme provides a mechanism whereby a relevant officer of an insolvent company, such as a liquidator, may apply to the Minister for the payment from the social insurance fund of relevant contributions which the former employer had failed to pay to the former employees’ pension scheme. The Respondent asserted that “Relevant contributions” are limited to contributions remaining unpaid by the employer on the date of insolvency in respect of the period of 12-months immediately preceding the date of insolvency or the amount certified by an actuary to be necessary for the purpose of meeting the liability of the scheme to pay the benefits provided for under the pension scheme. i.e. the total deficit. Whichever is the lesser of these two amounts. The Respondent Counsel urged that there must be limitations, and in particular the Insolvency Payments Scheme does not necessarily provide for the payment of the entire deficit of a pension scheme from the social insurance fund – that sum may only be claimed if it is less than the sum of the unpaid employer contributions which fell due in the 12 months immediately preceding the date of the insolvency. The Respondent rejects the Complainant’s assertion that in this instance they are one and the same figure. It rejects that the entire deficit is the same as the unpaid contributions payable in the previous twelve months. The Respondent referred me to the single case heard before the Employment Appeals Tribunal Meehan v The Minister for Enterprise and Employment in the case of Mueller Ireland Limited (In Voluntary Liquidation) wherein Section 7 of the 1984 Act was under consideration. With respect to employer contributions the EAT stated: “The literal interpretation of subsection (3) means that the statutory scheme only provides for payment from the Social Insurance Fund in respect of unpaid contributions falling due within and only attributable to the period of the 12 months ending on the day immediately preceding the date of insolvency. The statutory scheme does not provide for payments of unpaid contributions that fell due in an earlier period even if there is a private agreement between the parties that payment in respect of these earlier unpaid contributions will be made within the twelve-month period ending on the day immediately preceding the date of insolvency. To allow otherwise would be to expose the Social Insurance Fund to a greater liability than is provided for in the Act.” The case precludes arrangements outside the twelve-month time period from being included. This seems sensible to me. The Respondent Counsel went on to ask me to consider the viable alternative routes which the Complainant might also take on behalf of the beneficiaries herein. It is noted that Counsel for the Respondent had raised these issues with each of the Complainant witnesses in turn and that this had also formed a central plank in the Respondent submission provided in advance of the hearing. In particular Counsel pointed me in the direction of the Pensions Insolvency Payments scheme (the PIPS) created by the Social Welfare and Pensions Act of 2009 and thereafter to the process known as the “Double Insolvency application”and minimum details of this are set out in the Pensions Authority Guide as follows: 1.Section 48A of the Pensions Acts 1990, as amended (the “Act”) provides for the payment of certain amounts by the Minister for Finance to the trustees of a scheme, in circumstances where the resources of the scheme are not sufficient to discharge liabilities in relation to certain benefits. In order to be eligible to apply for a payment under section 48A, the scheme must have wound up after 25 December 2013 and at this date the employer is also insolvent (usually referred to as double insolvency). 2. Guidance on process Section 48A envisages both the Minister for Social Protection (the “Minister”) and the Pensions Authority issuing guidance on the section 48A process. i. Ministerial Guidelines. The Act requires the Minister to make guidelines regarding (1) the statement prepared by the scheme actuary (the “Statement”); (2) the application by the trustees to the Pensions Authority (the “Application”); and (3) the certification of the amount claimed by the trustees (the “Certification”) (collectively, the “Ministerial Guidelines”). The Ministerial Guidelines issued on 24 March 2016. The Ministerial Guidelines on the Statement and the Application contain the broad requirements in relation to the preparation of the Statement by the Actuary and the Application process. Applications must be made by trustees no later than 9 months after the date of winding up the scheme. Etc. Oral evidence presented in support of the Respondent’s case:
Erica Farrelly the Deciding Officer in the Redundancy and Insolvency Payments Section of the Department of Social Protection. This witness penned the letter on the 3rd of August 2022 refusing the claim brought by the Liquidator/Complainant. Her response was: “Protim Adhesives Limited went into liquidation on 12 November 2009. Therefore, the date of insolvency was 12 November 2009. The application was supported by means of a purported valuation report dated 8 December 2009. The application does not meet the criteria set out in section 7(3). Accordingly, a decision has been made to disallow the application.” This witness had been in this role since 2018, and had never come across such a high figure. She said she understood how a defined benefit scheme operated and understood that the benefit is guaranteed. She described herself as the contact point in the section. When asked why she had taken that view (outlined in her letter) she stated that she had run everything past her Higher Executive Officer and Assistant Principal. She repeated this fact several times. It was, she said, a conclusion reached between “me and my colleagues”. It was put to her that her interpretation of the Section was reductive and that she had simply applied an in-house practise without seeking legal advice. She accepted that this was a matter that could possibly have merited legal advice had the interpretation now being pushed been made known at the time. It was put to this witness that the letters and correspondence from her Department section appear to reject everything set out in the Trustees’ 2008 reports. She accepted that a tremendous amount of work had been done by the Liquidator collecting the information relating to each of the employees named in the pension scheme. The witness denied that she would have used the word purported and it was put to her that the word implies a criticism of Complainant and the Actuary. Dara Breathnach – the Principal Officer. This witness said that she gives policy guidance. She gets called in primarily if matters are complex. She took on the management role in October 2021 about halfway through the inter parte correspondence between the Section and the Liquidator’s team. She pointed to the confusion of the three different Insolvency Payments Scheme applications, coming in at three different times, and each providing for different amounts. This witness made the point that the Minister and his Department are not a party to the Liquidation which is run through the High Court. The Department is not therefore bound by the figures emanating from the Examiner’s Office. Much of the correspondence between the parties dwelt on the issue of where and how the sum of €7million came into being. They felt in the Department there was no satisfactory explanation given for the reduction from €8.635M to €7M. It seemed random. They had to question whether the final figure was correctly calculated or calculated at all. This witness had reviewed the Trustee Reports and in particular the actuarial Funding Certificates provided to the Pension Board/Authority concerning the funding standard requirements. It was explained that The Pension Authority monitors the financial strength of a funded defined benefit pension scheme. At least every three years the Actuary must prepare an actuarial funding certificate (AFC) and submit this to the Authority. An AFC indicates whether or not a pension scheme can meet all liabilities that have been accrued by members to the effective date of the certificate, were it to wind up at that date. The FAC 1990 Occupational Pension Scheme was in deficit in 2007 and 2008 though the deficit was in fact greater in 2007 than in 2008. This, I agree, perhaps suggests that the overall picture would have improved had the financial crash not happened. This witness noted that there had been unsatisfactory attempts at filling out the relevant IPS forms. Then there was the fact that the amount of money was alarmingly high. She firmly believed that the valuation date was outside the time allowed and that the figure claimed did not admit or explain the inclusion of a pre-existing funding deficit. This witness does accept that the Complainant never got a full explanation of these factors in her communication on August 3rd of 2022. She does now accept that not providing a reason meant that the Complainant inevitably had to move to the next level – appealing this matter to the WRC. The witness accepts that the date of the report might have been better left to legal advice, but she states that she is also entitled to form a view. The actuarial report, she said, is dated after the liquidation and therefore a question mark was raised over its admissibility. Of importance is the fact that this witness took the view that the actuarial report dated the December 2009 was out of time. That was a key part of the decision to refuse. This witness agreed that the use of the word purported may have been her language. It was not intended to imply it had been cooked up, just that it wasn’t valid for the purpose of the Act. The witness agreed that they commissioned their own actuarial report though did they not say this to the Liquidator at the time. Their own actuarial report said nothing was due. She agreed that she did consult with the Chief State Solicitor’s but that there was certainly never any suggestion that the two actuaries should be put together to try and see if there could be any understanding reached. The witness agreed that she always understood that the relevant contribution referenced in the Act had to have some sort of ‘routine’ element to it. She did, however, acknowledged that that word is not there in the definition. She conceded therefore that there is no absolute requirement that there has to be some sort of periodic payment scheme. Shortfalls do arise, she agreed, and other companies find the need to plug gaps as asset the values rise and fall. She understood that the employer must make up the difference when a fund crashes and the fund cannot make the agreed payments. The witness further agreed that the Act does not distinguish between the types of occupational pensions being considered/protected/funded. There is an assumption it seems, that the scheme will pay up to twelve times what a regular expected monthly payment might be. This is not anywhere stated in the Act. It was put to the witness that even though the scheme might have been on the Pension Authority radar from time to time the Company had always stepped up to plug the gap so to speak. It was put to the witness that this could reasonably have been expected to continue to be done by the company, had the crash not happened. John O’ Connell – Actuary and fellow of the Society of Actuaries in Ireland. This witness prepared an Actuarial report on behalf of the State and the report is dated the 14th of July 2023. It therefore just narrowly pre-dates the Deciding Officers decision The report was drafted with a view to assisting the Redundancy and Insolvency Payments Section of the Department of Social Protection. The witness described it is an independent report. The witness noted that relevant contributions falling due in the 12-month period can mean anything. It can include an amount which includes making up a deficit and paying what the cost of constantly accruing benefits might be. Each employee each month and each year has an accruing benefit. He noted that the tTrust Deed clauses operated in a satisfactory way (27 and 28). The powers in Clause 28 were used a number of times to right the ship over the years. He stated, however, that it was not normal to look for everything in one go under a Section 7 application. The witness had prepared an analysis of the financial performance of the FAC 1990 Occupational Pension Scheme going back as far as 2000. The fund was performing satisfactorily up to the end of 2007, and it was only in 2008 that the funding proposal was going off track. The witness said that in the previous years the asset vs liability figures were not the exact same. However, moving forward this was not too much of a concern as the company was essentially viable and trading robustly. The point was that the Pension Authority was satisfied that the Minimum Funding Standards was covered. The 2007 actuarial report for FAC 1990 Occupational Pension Scheme confirmed that whilst there had been a drop in the Minimum Funding the Actuary was satisfied that the plan in place was still fit for purpose and the funding proposal was on track. The witness agreed that this was his assessment. The Respondent Actuary had prepared a table which tended to demonstrate what the relevant contributions looked like taking past payments and applying the average into the future up to 2011. The State argue this is a more realistic expectation of what should constitute relevant contributions. However, the analysis does not take into account the fact of the Actuary being asked to prepare a further report. Which was seeking a proposal for minimal funding as had worked in 2003. This witness also believed that the scheme Actuary (Mr. O’Brien) was reacting to his understanding of the outward influences and the economic crash. He had opted to move things up a gear in anticipation. The witness could not say whether his opposite number (Mr. O’Brien) was precluded from doing this. The witness confirmed that 70% of the scheme’s assets was invested in properties stock market equities. He was asked whether, if the Investment strategy can be seen to be going awry, is the Actuary precluded (under the terms of the Trust Deed) from going to the Employer to sub vent? The witness agreed that there was nothing there to say that he was so precluded. By July of 2009 the witness confirms that the funds were in freefall. It was therefore not surprising that the Trustees got on to the Actuary. Lehman Brothers happened in September 2008, and everything thereafter became exposed he noted. A request is made of the Actuary in July and signed off on in September. There was a €3.7million deficit in the fund required. This witness has invited me to consider a letter dated the 21st of September 2009 from the Trustees to a parent company who were never in fact on the hook for this expenditure. However, what’s important here is the fact that the letter suggests that in addition to the ongoing collection of employer and employee contributions that a further sum of €415,000.00 be added creating a payment of €775,000.00 for each year for the next 10 years. This was one of two proposals set out by the scheme Actuary. This witness says there was never any reality to this suggestion. He said that the €8.6m figure assessed by the Scheme Actuary was the Rolls Royce of outcomes. The scheme Actuary was recommending going to the market and purchasing appropriate (but very costly) insurance contracts. He said that he was not familiar with assessments being done like this and that it was completely out of step with the norm. He stated that the assessment should have been for the minimum of funding plans. The witness did, however, accept that the €8.6m figure is probably a correct figure if purchasing notoriously expensive annuity contracts. The scheme Actuary, he stated, set himself the task of calculating the most expensive way out to ensure everyone would get what they are entitled to. Going back to the second Actuary report dated 8th December 2009. The purpose of the calculation therein he said was markedly different. At this point the scheme Actuary was looking to secure the full benefit that accrues on the 11th of November 2009. The earlier €3.7m figure targets the minimum funding standard in an ongoing situation. This witness does note that there’s a change in the objective of this report and that the Actuary Mr. O’Brien has confirmed his terms of reference have changed. This witness does look at Clauses 27 and 28 of the Trust Deed. His sense is that Clause 27 really relates to future/prospective planning with the word thereafter presumably lending itself to this interpretation. However, he agrees it’s not clear. This witness talked about the question mark over the business (Protim Abrasives) and the splitting away of a viable part of the business prior to liquidation. However, nothing was ever done about these issues (when the Liquidation was before the High Court) and therefore they do not form a part of the equation for the process before the WRC. When asked, this witness did concede that the figures noted in the report on the valuation of the FAC 1990 Occupational Pension Scheme dated the 14th of September 2009 (albeit based on an assessment made in July of 2009) was in line with the sharp decline in fund and asset value as a result of the collapse. This could, he said, have conceivably led to a €3.7 million deficit. As the Adjudicator I am bound to note this concession. This witness asserted that the Actuary’s recommendations can only be notified by way of the valuation report he is asked to prepare. The report can advise on the contributions which ought thereafter to be made. Counsel for the Respondent put it to him that the Report was only published and known in September of 2009 and therefore the payments could only start to be made in September of 2009. This implies that at the very most a contribution of €620,000.00 was liable to be paid for three months of September, October, and November. This gives a figure of €1,860.000.00 which it is noted is somewhat down from the €8,635,000.00 originally sought. However, the staged payments would have had to have been agreed upon in line with Clause 28. It is thereby confirmed that there was no agreement and I have noted this fact as Adjudicator. This witness suggested that the fund had taken “investment risks” and that the scale of the deficit in the fund would have been clear for over a year before its parent company went into examinership in 2009. The witness accepted that the Pension Authority gave some latitude around funding under the Pension Act. He agreed that a lot of defined benefit schemes were in trouble. He agreed that there was no suggestion of delinquency in the funding as the Pension Board had given two years of latitude in 2007. The witness was questioned about his instructions and the curious feature that he had had lawyers instructing him and that this fact was confirmed in the Report. The Witness was challenged in the imprecise use of wording including his use of the phrase falling due. The insertion of the word due is misleading and inappropriate it was suggested to this witness. The Act speaks of “contributions falling to be paid”. |
Complainant’s submissions
Counsel for the Complainant/Liquidator broke down her final legal Submissions under 6 headings as follows: - 1.Beneficaries Counsel stated that the point is not to preserve the fund at all costs but to make the fund available. The Complainant here represents very real people. This is a company that has provided employment and essential work since 1947. All the beneficiaries are very real people, and the names have been provided to me. Some of the beneficiaries sat in the hearing room for the duration.. One individual is still working at the age of 72 with no pension. These are people working from 26 years to 14 years who have lost their modest pension entitlements. EU law says these workers are entitled to their pension entitlements in the same way as anyone is. EU law demands that they have a right of protection and that the state has a commensurate obligation to give protection. S7 of theProtection of Employees (Employers’ Insolvency) Act 1984 is the statutory provision which gives minimum protection in the event of the insolvency of the company. Counsel asked that I, as Adjudicator, look at this case through the lens of the EU mandated protections. Counsel stated that here is no entitlement to add, subtract or freeze words in the Section 7 process. It certainly cannot be interpreted so as that it fails to give effect to the EU obligations. Counsel addressed the suggestion of delay by simply stating that the application is not now and never was out of time. As long as the Liquidation process was in being, this application was capable of being made by the Liquidator. On the day of the appointment of the Liquidator there were 23 active employees, 27 former employees (working elsewhere) and 18 retired employees. Their average age was 46 and they worked on average 17 years with an average salary of €53,000.00. These are the beneficiaries. The average amount payable as a pension would be in and around €7,000.00 to €8,000.00. There is no suggestion that this is a windfall amount, she said, even though this appears to have been treated as such within the Department. The Respondent has argued, she noted, that the figures had been prepared in response to or on the basis of being in liquidation. But this is the point argued the Complainant’s Counsel. There will be no more contributions made by the Employer and /or the Employees. The Actuary must therefore calculate on the basis of the insolvency of the company. In his evidence the State Actuary conceded that he would probably have done the same thing had he been tasked. Once it has been identified that the Company is insolvent, and this is a fact beyond doubt there is an onus then on the state to protect the enforceable rights of the employees. It is clear that there is a deficit in the pension arising out of the insolvency. It was noted that the actual calculations are not in dispute as the Respondent Actuary has agreed that the figures are at the high end in term of the type of cover being sought. It is conceded that this can be argued downwards but what has happened is that there has been no discussion and no pay out at all. The state has instead directed the Complainant and the beneficiaries to alternative routes – the PIPs Scheme and the Section 48B option. The Respondent has also pushed the issue of inordinate delay. However, this has missed the point entirely says the Complainant’s Counsel. The State must protect the beneficiaries. 2. Acts, Provisions, Directive Counsel asked me again to consider the Looking first at the EU Directive - DIRECTIVE 2008/94/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22nd October 2008 on the protection of employees in the event of the insolvency of their employer. The clue, she says, is in the title - If there is no insolvency there is no entitlement. The Directive sets out the minimum level of protection required to be implemented at member state level. A Member state can do more but never less. The Directive has Direct Effect Several cases were opened to me: Sicherungs-Verein WaG -v- Bauer (Case C-168/18)[2020]1CR 985 concerning a German national experiencing financial hardship when his monthly pension payments took a drastic drop arising out of the insolvency of the Employer. A portion of his pension continued to be paid by a third-party guarantee institution. The Complainant brought proceedings contending that the guarantee institution (created in line with Chapter II of Directive 2008/94EC) was required to make good the shortfall created by the Insolvency of the Employer. The Court highlighted: Article 43 - That the objective pursued by the Directive was to offer protection in circumstances which present a threat to livelihood of an employee and his or her family. Article 45 - Article 8 of Directive 2008/94 requires an obligation to provide a minimum degree of protection that a member state guarantee to a former employee exposed to such a reduction in his or her old age benefits compensation in an amount which without necessarily covering all of the losses suffered is such as to prevent them from being manifestly disproportionate. Counsel for the Complainant states that at a minimum, the guarantee institution must address an employee’s ability to meet their needs. Counsel quoted extensively from the Judgement: 38. It must be recalled that, in transposing Article 8 of the directive, Member States have considerable latitude in determining both the means and the level of protection of employees’ accrued entitlement to old-age benefits under supplementary pension schemes. That provision cannot therefore be interpreted as requiring a full guarantee of the rights in question 39. Consequently, Article 8 does not preclude Member States, in the pursuit of legitimate social and economic objectives, from reducing the accrued entitlement of employees in the event of their employer’s insolvency, provided they have due regard for, inter alia, the principle of proportionality 40. It follows that the Member States are obliged, in accordance with the objective pursued by Directive 2008/94, to ensure for employees — in the absence of any abuse of rights by them for the purposes of Article 12 of the directive — the minimum degree of protection required by that provision 41. The Court has already held that correct transposition of Article 8 of the directive requires a former employee to receive, in the event of the insolvency of his or her employer, at least half of the old-age benefits arising out of the accrued pension rights under a supplementary occupational pension scheme 42. In addition, the Court has stated that, even if Article 8 of Directive 2008/94 requires at least half of the old-age benefits to be guaranteed, that does not mean that, in certain circumstances, the losses suffered by an employee or former employee may not also be regarded as being manifestly disproportionate in the light of the obligation referred to in that provision to protect the interests of employees And Finally: 46. In the light of the above considerations, the answer to the second question is that Article 8 of Directive 2008/94 must be interpreted as meaning that a reduction in the amount of occupational old-age pension benefits paid to a former employee, on account of the insolvency of his or her former employer, is regarded as being manifestly disproportionate, even though the former employee receives at least half of the amount of the benefits arising from his or her acquired rights, where, as a result of the reduction, the former employee is already living, or would have to live, below the at-risk-of-poverty threshold determined by Eurostat for the Member State concerned. Accordingly, the Court went on to hold that 50% of the value of the Pension is not always enough. This is the prism through which, Counsel for the Complainant says, Section 7 has to be viewed. Certainly, the beneficiaries have not yet received any fraction let alone half of their entitlements and no assessment has been made as to the proportionality of the outright refusal. The next case opened to me was: Hogan and Others (Applicants) -v- Minister for Social and Family Affairs (respondent) Case (C-398/11 of the Court of Justice of eh European Union) [2013] IRLR 668. This case involved the Waterford Glass Employees where Waterford Crystal became insolvent in 2009. Based on the assets to hand, it was calculated that the employees would receive less than 50% of their pension entitlements. There was a 100 million deficit in the pension fund. The Court said: ” It must be pointed out that the purpose of Directive 2008/94 is the protection of employees in the event of the insolvency of their employer. It does not deal in any way with the causes of that insolvency. There may be various causes for the underfunding of a supplementary occupational pension scheme, such as non-payment of contributions by employees or by the employer, unfavourable developments in the capital markets, poor management of the scheme’s funds or insufficiently stringent prudential rules.” Counsel says this means that the protection extends to employees no matter what the Employer has done. The Court it seems has signified that the beneficiaries will not be disadvantaged by the behaviours of others. Counsel drew my attention to paragraphs 7 to 10 of the Judgement: “In Ireland, in most defined-benefit supplementary occupational pension schemes, the assets of the schemes are held by trustees, fund administrators, for the exclusive benefit of the members of the scheme concerned and thus do not belong to the employer and are not available to satisfy the claims of the employer’s creditors in the event of the insolvency of the employer. In such a scheme, the employees are entitled to a pension only on condition that their scheme has sufficient assets. Those assets are protected by the use of a trust, which segregates them from the assets of the employer. Under the national rules, the supplementary pension schemes are funded by contributions from both employer and employees. In the case of the employees, a fixed percentage of their salary is paid to the pension fund, while the employers make an annual contribution in order to ensure that in the long term the supplementary pension scheme has sufficient assets to meet its liabilities. In order to determine the amount of the employer’s contribution, the Pensions Act 1990, as amended, requires an actuary to calculate the employer’s contribution in accordance with a specified standard known as the ‘Minimum Funding Standard’. It follows that the supplementary pension schemes are ‘balance of cost’ schemes, where the employer contributes annually the amount needed in addition to the employees’ contributions to balance the assets and liabilities in the long term.” Emphasis added as Counsel suggests that this language clearly tends to allow for the capital lump sum payments scenario. It allows for fluctuation from one assessment to the next. Read again: “…while the employers make an annual contribution in order to ensure that in the long term the supplementary pension scheme has sufficient assets to meet its liabilities” In the case before the WRC, Counsel argued, that the State appears to have resolutely abided by the notion that only regular known amounts can qualify and this concept of an ‘amount needed’ does not compute. This ignores the obvious commercial fact that funds fluctuate up and down all the time and not just in the middle of a financial crises. The Court in the Hogan case found that measures taken by the state in response to the outcome of the Robbins case were insufficient and it was as a result of this that Section 48(B) was introduced into the legislature. This legislation provides relief in the event of a Double Insolvency where both the Employer and the Pension are insolvent. The next case opened to me was: Robins -v- Secretary of State for Work and Pensions (case 278/05 of the Court of Justice of the European Union) [2007] IRLR 270 Where Employees in the UK whose employer had been placed in liquidation sought to have the Directive interpreted: “…as requiring member states to ensure, by whatever means necessary that employees accrued rights …under final salary pension schemes are fully funded by Member States in the event that the employee’s private employer becomes insolvent, and the assets of the scheme are insufficient to fund those benefits.” The Employees contended that that the UK had failed to implement Article 8. That the domestic legislation had failed to give effect to the concept of protection. The Court held: “Nor does Article 8 require a full guarantee of accrued pension rights. Insofar as it does no more than prescribe in general terms the adoption of measures necessary to ‘protect the interests’ of the persons concerned” This case also seemed to reject the limitation which capped the liability at 49% of the value of the pension. The Court held that provisions of domestic law that may lead to a guarantee of benefits under a supplementary occupational pension scheme limited to less than half of the benefits to which an employee was entitled do not fall within the definition of the word ‘protect’ used in Article 8 (now Directive 2008/94) Counsel emphasised that despite the clear indication in both of these European cases, the Respondent herein has determined that the beneficiaries, the employees, get nothing. Without reference to their circumstances or to their own clear obligations as the guarantee institution set up to protect the interests of the persons concerned. They have overlooked this obligation and instead gone down the path of resisting entirely any and all applications. Leaving it therefore to the Complainant Liquidator to step into the role of protector. Counsel asked me to look again at Section 7 of the Protection of Employees (Employers’ Insolvency) Act 1984. She advised that it can only be interpreted on the basis of the words that are written. Words cannot be inserted. This was something done by the Respondent Actuary. Shifting the emphasis concerning the “relevant contributions” falling ‘due’ instead of “falling to be paid” (the actual words of the Section). Counsel for the Complainant noted that it is not wise to speculate as to the intentions of a Government through a Department policy. This was the trap that Ms. Breathnach fell into when she so determinedly stood by the concept that only regular monthly instalments counted. Qualifying under the Act is mechanical says the Complainant. The Employer is insolvent, and the Insolvency occurred after October 1983. Additionally, there remained unpaid relevant contributions remaining to be paid by the Employer to the scheme Note “relevant contributions” means contributions falling to be paid by an employer in accordance with an occupational pension scheme. Ms. Breathanach seemingly had no interest in the Trust Deed governing this occupational pension scheme and believed this had no relevance to her considerations. Counsel suggested that this approach was flawed. The legislation as drafted has left itself open to being tied into the terms of this occupational pension scheme. Even though the legislature can have no idea how individual occupational pension schemes operate there seems to be an assumption that the Trust Deeds which govern these pension schemes will not allow for a divergence in interpretation. This has clearly what has arisen herein. Counsel invited me to look again at Directive 2008/94/EC recitals 1 to 11. Recital (3) - It is necessary to provide for the protection of employees in the event of the insolvency of their employer and to ensure a minimum degree of protection, in particular in order to guarantee payment of their outstanding claims, while taking account of the need for balanced economic and social development in the Community. To this end, the Member States shouldestablish a body which guarantees payment of the outstanding claims of the employees concerned. Section 7 of the 1984 Act, says Counsel, is the Member State’s response to the obligation created under the Directive herein. The State sought to draft to include a twelve-month time limit. This says Counsel is somehow now being incorrectly interpreted by some in the Department, to mean 12 monthly instalments. The State did not choose to have a quantitative limit. Also, I was invited to consider the fact that there is no suggestion that there’s a hierarchy of Pension Schemes that the guarantee institution is willing to protect. All occupations pension schemes qualify. Recital (7) Member States may set limitations on the responsibility of the guarantee institutions. Those limitations must be compatible with the social objective of the Directive and may take into account the different levels of claims. This says Counsel, allows member states to set limits such as the temporal ones included in Section 7. Any limitation cannot undermine the Directive so that in the Robbins case the limitation which only allowed recompense in the amount of 49% of the value was seen to undermine the Directive. Article 2 (1) - For the purposes of this Directive, an employer shall be deemed to be in a state of insolvency where a request has been made for the opening of collective proceedings based on insolvency of the employer, as provided for under the laws, regulations and administrative provisions of a Member State, and involving the partial or total divestment of the employer’s assets and the appointment of a liquidator or a person performing a similar task, and the authority which is competent pursuant to the said provisions has: (a) either decided to open the proceedings; or (b) established that the employer’s undertaking or business has been definitively closed down and that the available assets are insufficient to warrant the opening of the proceedings. The following case looked at this issue: Magdalena Glegola v The Minister for Social Protection Ireland and the Attorney Genera SCT. Mr. Justice O’Donnell [2018] IESC 65 The question that arose here was whether the Section 7 application can be made when a company/ employer is not formally insolvent but has simply ceased to trade? The Complainant had been awarded a sum of money on foot of an Unfair Dismissal/Payment of Wages complaint brought to a Rights Commissioner. The recommendation was not appealed and became binding, and a debt was now due by the Company to the Employee. The Complainant needed to wind up the company to gain access to the Social Insurance fund, but the High Court refused her application. There is therefore an implicit denial to her accessing the Social Insurance Fund. A direct application for payment out of the Social Insurance Fund was refused and the matter came before the Courts by way of Judicial review. The Supreme Court opened up with an analysis of Article 2 (1) of the Directive which reads For the purposes of this Directive, an employer shall be deemed to be in a state of insolvency where a request has been made for the opening of collective proceedings based on insolvency of the employer, as provided for under the laws, regulations and administrative provisions of a Member State, and involving the partial or total divestment of the employer’s assets and the appointment of a liquidator or a person performing a similar task, and the authority which is competent pursuant to the said provisions has: (a) either decided to open the proceedings; or (b) established that the employer’s undertaking or business has been definitively closed down and that the available assets are insufficient to warrant the opening of the proceedings The ultimate outcome allows us to understand that the Court recognises that the Social Insurance Fund is there to be accessed and the protection of the fund is not the only or primary consideration. The Complainant was successful. At p. 31 of the Judgement: ” Further it is obvious that the 2008 Directive is intended to secure important benefits for citizens. In this case, I do not think it appropriate or permissible to treat the limited implementation of the 2008 Directive as excusable or understandable because of the absence of complaint by the commission. That in my view would apply too low a standard. “ He goes on to confirm the Complainant’s success stating: ” There is in my view an obligation on any decision maker to satisfy themselves that an applicant’s case is well founded particularly where there is an obligation on the part of the State, or another party, not represented in the proceedings to satisfy the award. “ Looking at Article 3 - Member States shall take the measures necessary to ensure that guarantee institutions guarantee, subject to Article 4, payment of employees’ outstanding claims resulting from contracts of employment or employment relationships, including, where provided for by national law, severance pay on termination of employment relationships. The claims taken over by the guarantee institution shall be the outstanding pay claims relating to a period prior to and/or, as applicable, after a given date determined by the Member States. Article 4 of the Directive - Member States shall have the option to limit the liability of the guarantee institutions referred to in Article 3. And Article 8 - Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes Counsel for the complainant says that the Directive is Critically important per Complainant’s case. The State shall ensure the necessary measures are in place to protect the interests of the employees regarding pension rights. Section 7 of the 1984 Act underpins the implementation of Article 8. Counsel invited me to look again at the Protection of Employees (Employers’ Insolvency) Act 1984. She opened the definitions in the Act. No doubt we have employees, and we have an occupational pension scheme the FAC 1990 Occupational Pension Scheme, and a relevant officer which includes the Liquidator – our Complainant. Counsel suggests that it is very exacting language carefully crafted so as to allow the inclusion of both types of pensions. It is important to note the imperative contained herein – “Minister shall, subject to this section, pay into the assets of the scheme out of the Social Insurance Fund the sum which in his opinion is payable in respect of the unpaid relevant contributions.” Also, the reference to the Minister’s opinion does allow for an element of considered calculation. The Act protects payments which are referenced in the actual occupational pension scheme. The Act is blind to what the Act is signing up to in terms of the Trust Deed which is attached. The Act or the State allows the occupational pension scheme to dictate how and when payments fall to be paid. There is no time bar, and the section does not engage in a quantum cap but instead opts for the lesser of two figures. The date immediately preceding the date of insolvency in the case in front of me is the 11th of November 2009. Counsel opened the entire of the Section to me as follows: 7.—(1) If, on an application made to him in the prescribed form by an employee or by the persons competent to act in respect of an occupational pension scheme F70[or Personal Retirement Savings Account (within the meaning of the Pensions Act, 1990)], the Minister is satisfied that— (a) an employer (being in case the application is made by a person otherwise than in his capacity as the person competent so to act the employer of the applicant) has become insolvent, (b) the date on which for the purposes of this Act the employer became insolvent is a day not earlier than the 22nd day of October, 1983, and (c) on that day there remained unpaid relevant contributions remaining to be paid by the employer to the scheme F70[or Personal Retirement Savings Account (within the meaning of the Pensions Act, 1990)], on the date on which the employer became insolvent, being a date not earlier than the said 22nd day of October the Minister shall, subject to this section, pay into the assets of the scheme F70[or Personal Retirement Savings Account (within the meaning of the Pensions Act, 1990)] out of the F71[the Social Insurance Fund] the sum which in his opinion is payable in respect of the unpaid relevant contributions. (2) In this section “relevant contributions” means contributions falling to be paid by an employer in accordance with an occupational pension scheme F70[or Personal Retirement Savings Account (within the meaning of the Pensions Act, 1990)], either on his own account or on behalf of an employee; provided that for the purposes of this section a contribution of any amount shall not be treated as falling to be paid on behalf of an employee unless a sum equal to that amount has been deducted from the pay of the employee by way of a contribution from him. (3) The sum payable under this section in respect of unpaid contributions of an employer on his own account to an occupational pension scheme F70[or Personal Retirement Savings Account (within the meaning of the Pensions Act, 1990)] shall be the lesser of the following amounts— (a) the balance of relevant contributions remaining unpaid on the date on which he became insolvent and payable by the employer on his own account to the scheme F70[or Personal Retirement Savings Account (within the meaning of the Pensions Act, 1990)] in respect of the period of twelve months ending on the day immediately preceding that date, F72[(b) the amount certified by — (i) an actuary, (ii) where the employees concerned are employed or habitually employed in the State and the employer is an undertaking which is insolvent under the laws, regulations and administrative procedures of another Member State in accordance with Article 2(1) of the Directive, an actuary or person performing a similar task, or (iii) where the employees concerned are employed or habitually employed in the State and the employer is an undertaking which is insolvent under the laws, regulations and administrative procedures of the United Kingdom, an actuary or person performing a similar task, to be necessary for the purpose of meeting the liability of the scheme on dissolution to pay the benefits provided by the scheme or Personal Retirement Savings Account (within the meaning of the Pensions Act 1990) to or in respect of the employees of the employer.] Counsel for the Complainant makes the case that the State has incorrectly read into this section the notion that it only relates to a particular type of contribution. The Department has refused to see beyond this. I am invited to consider that, even though Mr. O’Connell does not necessarily agree with the maths, there was a tacit acceptance that there is a sum of money owing herein. It’s a protection. The level of surprise triggered in the Department does not change this fact. It’s a protective measure that has no quantum cap. The State ought to be aware from the case law that there is an obligation to pay 50% or more of the liability and at least should be looking more carefully at the figures before reducing the full liability to zero. In the end the Complainant is in fact making the case that the two sums are the same one is not less than the other. The Actuarial Report confirms what falls to be paid as of the 11th of November. The next case opened to me concerned interpretation: Heather Hill Management Company -v- An Bord Pleanala and Ors Supreme Court 2022 [IESC] 43 Which case concerned the scope of a provision where the state was liable to pay the costs of an individual. The Court found that: ” While the Court could surmise reasons why an Oireachtas might not have wished to allow cost protection for all challenges to decisions granting development consent, it was not hard to point to credible reasons why it might have sought to do so. It is not the function of the court in the teeth of statutory provision – the language of which is clear in its terms and effect- to interpret that legislation so as to give effect to one of a number of competing policy objectives without some objective basis for deciding between them. None was identified and thus substantiated by the Respondent to this Appeal “ (see page 320 paragraph 4) Addressing the issue of Statutory Interpretation at Para 113” First, ‘legislative intent’ as used to describe the object of this interpretive exercise is a misnomer: a court cannot peer into the minds of parliamentarians when they enacted legislation and as the decision of this Court in Crilly v Farrington [2001] 3 IR 251; [2002] ILRM 161 emphatically declares their subjective intent is not relevant to construction. Even if that subjective intent could be ascertained and admitted, the purpose of individual parliamentarians can never be reliably attributed to a collective assembly whose members may act with differing intentions and objects. 114. Second, and instead, what the Court is concerned to do when interpreting a Statute is to ascertain the legal effect attributed to the legislation by a set of rules and presumptions the common law (and latterly statute) has developed for that purpose (see DPP -v- Flannagan [1979] IR 265 at page 282 per Henchy J). This is why the proper application of the rules of Statutory interpretation may produce a result which, in hindsight, some parliamentarians might plausibly say they never intended to bring about. This is the price of an approach which prefers the application of transparent, coherent and objectively ascertainable principles to the interpretation of legislation to a situation in which judges construe an Act of the Oireachtas by reference to their individual assessments of what they might think parliament ought sensibly to have wished to achieve by the legislation (see comments of Finlay J in McGrath v McDermott [1988] IR 258 at 276.) 115 Third and to that end, the words of a statute are given primacy within this framework as they are the best guide to the result the Oireachtas wanted to bring about. The importance of this proposition and the reason for it, cannot be overstated. Those words are the sole identifiable and legally admissible outward expression of its members objectives: the text of the legislation is the only source of information a court can be confident all members of parliament have access to and have in their mind when a statute is passed. In deciding what legal effect is to be given to those words their plain meaning is a good point of departure. As it is assumed that it reflects what the legislators themselves understood when they decided to approve it. 116. Fourth and at the same time the Oireachtas usually enacts a composite Statute not a collection of disassociated provisions and it does so in pre-existing context and for a purpose. The best guide to the purpose, for this very reason, is the language of the statute read as a whole, but sometimes that necessarily fails to be understood and informed by reliable and identifiable background information…. Which identifiable background information the Complainant before me herein maintains must be the fact of and the need to implement the Directive. Section 5 of the Interpretation Act, 2005 was also opened to me: 5.— (1) In construing a provision of any Act (other than a provision that relates to the imposition of a penal or other sanction)— (a) that is obscure or ambiguous, or (b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of— (i) in the case of an Act to which paragraph (a) of the definition of “Act” in section 2 (1) relates, the Oireachtas, or (ii) in the case of an Act to which paragraph (b) of that definition relates, the parliament concerned, the provision shall be given a construction that reflects the plain intention of the Oireachtas or parliament concerned, as the case may be, where that intention can be ascertained from the Act as a whole. (2) In construing a provision of a statutory instrument (other than a provision that relates to the imposition of a penal or other sanction)— (a) that is obscure or ambiguous, or (b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of the instrument as a whole in the context of the enactment (including the Act) under which it was made, the provision shall be given a construction that reflects the plain intention of the maker of the instrument where that intention can be ascertained from the instrument as a whole in the context of that enactment. Counsel for the Complainant and the Beneficiaries invites me to apply a confirming interpretation when construing legislation which has been brought in to implement the Directive. 3.Trust Deed and chronology Counsel went through the chronology of events with reference to the oral evidence heard by me. I was invited to consider the helpful chronology of events set out in the actuarial report prepared by Mr. O’Brien. Counsel states that the Section 7 process recognizes that it adopts the occupational pension scheme and the Deed of Trust governing it. We are clearly dealing in this instance with a Defined Benefit Scheme. There is an implicit promise as to outcome not as to input. The defined benefit scheme is clearly a recognised scheme type. Revenue understands it. There has to be an enormous amount of money in the fund pot to ensure promises that are made can be kept. It does, she said, become very problematic if the funds drop as the Trustees have to chase and make up the loss. Look at Clause 28 of the Governing Trust Deed. The Employer: “shall pay contributions to the Fund at the rate recommended by the Actuary under Clause 27 of this Deed or at such other rate or of such amount and at such dates as may be agreed between the Trustees the Principal Employer and the Actuary being such contributions as are necessary (together with the contributions paid by the Members to the Fund and any assets transferred pursuant to Clause 21 of this Deed) to secure the benefits under the Scheme.” These contributions are the “relevant contributions” specified in Section 7 of the 1984 Act. The obligation is clear. Contributions have to be made to secure the benefits under the scheme. The contributions are to be calculated by the Actuary or otherwise agreed by the three parties - Actuary Trustees and Employer. Once again Counsel focused on the question of Employer Contributions as considered in Finucane and Buggy’s book on Irish Pension Law and Practise (second edition) 2006 Where at paragraph 6-43 it states: ”The Employer must make what the Revenue Commissioners term a ‘meaningful contribution’ to an approved or exempt approved scheme. For defined contribution schemes, the Employer must contribute any employer contributions at least monthly. With defined benefit schemes the timing of contributions is largely a matter for the employer. “ This, it is suggested, is confirmation that however popular and/or commonplace monthly payments might be they are not the only option. Sometimes Employers will make irregular though meaningful contributions. This, it is suggested by Counsel, might be in response to outside factors. That’s what is so extraordinary about how Section 7 was drafted. It is, she says, left itself exposed to the terms and condition of a Trust Deed to which it is not a party, and that very same trust deed operates so as to respond to market fluctuations. The Respondent’s mantra of refusing to pay lump sums/ capital sums and/or accrued liabilities (as they see them) misses the point of how the defined benefit scheme has to operate, if it is to keep ahead of the promises made. The Complainant and the beneficiaries that he represents, are only looking to secure the benefits promised under the scheme. The Complainant is therefore strongly making the case that up to and including the entire deficit can be construed as the relevant contribution. The Complainant rejects the Respondent’s reductive take on this section which incorporates features not actually present. The Complainant states that the raising of the date of the Report is an absolute non-issue. As the Report was commissioned on the 11th of November 2009 the figures contained therein relate to the situation on that day. The figures produced relate to the 11th day of November 2009. The fact that the company was put into liquidation the next day (12th of November 2009) is not relevant they say. The Report may have become available after the 11th of November, but the report relates to that day. The Trustees are entitled at any time to instruct the Actuary to prepare a valuation report on the actuarial position of the scheme. Clause 27 is opaque on timing. There is nothing preventing the Actuary from preparing, and or the Trustees from demanding that the report relate to a specific date (as happened here). In fact, it makes great sense that this would happen. It would also be possible (though perhaps unlikely given the variables) that the Trustees could demand a report projecting for an actuarial position into the future. The point is that Clause 27 is vague. There has to be some timelapse allowed between the instruction to prepare a report and the release of the said report. That, says Counsel, is in built into the instruction/compliance narrative. To suggest that an instruction to prepare a report would include an expectation that the Report would be concluded on the same day is simply not tenable. The Report is intended to give actuarial advice as to what contributions ought thereafter be made. The thereafter here could mean from the date of instruction which in these circumstances is November 11th, 2009, or from the date of released report which is December. Again, Counsel notes, the Clause 27 is vague. Counsel turned her attention to the previous report. The Actuarial Report released on the 14th of September on foot of a valuation instructed on the 1st of July 2009. Counsel says that there is no date issue with this report. The calculations she notes are made on the basis of an ongoing entity, whereas the later report is prepared on the basis, perhaps, of a defunct entity. The Liquidator/ Complainant has operated to the highest standard on behalf of these employees. He went on to instruct A and L Goodbody as well as Invesco (Investment Management) when dealing with the Examiner’s Office. The Complainant counsel asks if the Respondent is suggesting that this whole process – recognising the fact of a pension scheme and including the pension beneficiaries as preferential creditors was somehow all nonsensical and a waste of time? That the Liquidator ought to have known that the beneficiaries would never be entitled to anything under the Directive protections? Ms. Breathnach said that her section was not bound by the figures prepared and submitted over the years. Though of course, Counsel notes, this was not put into the letter of refusal. No warning was ever given that the refusal was based on the figures presented. Clause 29 of the Trust Deed speaks to the termination, by the Employer, of its liability to pay contributions: - “Each of the Employers may at anytime by not less than one month’s notice in writing to the Trustees terminate its liability under Clause 28 of this Deed to pay contributions to the Fund and expenses incurred in connection with the Scheme but without prejudice to it’s liability to pay any contributions or expenses which have become payable prior to the expiry of such notice or to pay any expenses which will arise in connection with the winding-up of the Fund PROVIDED THAT the said liability to pay contributions shall not apply to any period of employment with the Employer after the expiry of such notice or to any remuneration paid thereafter to Members.” The Trustees were therefore given a short period to determine the actuarial position once the Liquidator had given the notice. I am invited to understand that Clauses 27, 28 and 29 operate all the time. Not just at a time of insolvency. Section 7 deals with Insolvency and the terms of Section 7 are what I am primarily being asked to consider. However, where section 7of theProtection of Employees (Employers’ Insolvency) Act 1984 is silent, then the terms of the Trust Deed may be relevant. This is because Section 7 has expressly directed that the occupational pension scheme be referred to. Counsel for the Complainant agrees that there has been some confusion around the deficit amount which has moved from €3.7m to €8.6m back down to €7m and currently rests at €6.2m. However, each of these figures, Counsel argues, has been satisfactorily explained. A very helpful Chronology can be extrapolated from the Actuarial report prepared on the 17th of October 2023 by Mr. O’Brien. This sets out the chronology of events before any application was made to the Respondent. I have been asked to consider a selection of sections of this Report as follows: In my experience, contributions payable to defined benefit pension schemes can consist of once off lump sum contributions; capital contributions over a specified time period; and regular annual, monthly or weekly payments. The profile of contributions will generally be determined having regard to the circumstances of the Scheme, employer and economic conditions. I [The Complainant Actuary herein] was instructed by the Trustees to carry out an actuarial assessment to determine the contributions necessary to be paid by the sponsor which would be sufficient for them to secure the benefits which members had earned up to 11 November 2009 (“the valuation date”). As there was no remaining period of employment for Scheme members, I determined that the contribution should be paid by the sponsoring employer as a single payment instead of a sequence of payments spread forwards into future periods. In my view, this approach is consistent with the provisions of the Trust Deed which states that the sponsor “shall pay contributions to the Fund at the rate recommended by the Actuary”. The rate recommended in this instance was a single employer contribution Historical valuations had been finalised on the basis of the Scheme continuing as a going concern with a sponsoring employer remaining available to pay additional funding, if necessary, to cover any future shortfalls should they emerge. This included the actuarial valuation completed with an effective date of 1 July 2009 which was completed during the Examinership period. The going concern approach could no longer be adopted from November 2009 and the Trustees asked me to determine the contributions necessary in order to secure the benefit entitlements which members had accrued up to 11 November 2009. The contributions I recommended be paid by the sponsoring employer under the 1 July 2009 valuation amounted to €3.72 million (payable as €620,000 for each of the months July 2009 through to December 2009) together with 11.9% of salary roll per annum. The Trustee’s letter of 17 September 2009 sought the payment of €3.7 million from the sponsoring employer. In that letter, they also advised that they would be willing to agree to a pattern of contributions over a longer period of time should the company and Scheme remain as a going concern. This is consistent with the proviso within Clause 27 as referenced earlier. Based on the recommendation of my 11 November 2009 assessment, the Trustees issued a demand for a contribution of €8.635 million from the sponsor on 10 December 2009, before the expiry of the period of notice. In March 2010, the Liquidator appointed Invesco (represented by Frank Downey) as their independent actuarial advisor to review the Trustee’s claim for unpaid contributions. Various documents and information were shared with Invesco and they read into the case. Meetings to provide additional information took place between WTW and Invesco in August and October 2010 whilst Invesco continued to review the 11 November 2009 valuation and associated employer contribution calculation. As described in the Liquidator’s report to the High Court dated 30 June 2011, there were a number of complex matters requiring the attention of the Liquidator on which he was seeking legal advice. These included: the sale of the timber treatment business prior to examinership the validity of the security National Irish bank holds over the site in Glasnevin the preferential Status of the 8.6 million claim submitted by the Trustees of the Defined Benefit Scheme. The Trustees responded to the Liquidator on 1 August 2014 to advise that I, as Scheme Actuary, had reviewed changes in annuity interest rate and inflation expectations in the period post November 2009. The Trustees acknowledged that updating these assumptions to a current 2014 date could justify the use of a marginally lower assumption for inflation and the rate of statutory revaluation of benefits in the short-medium term. The letter advised that this could have to lead to a further reduction in the Scheme’s liabilities of perhaps €350,000 - €400,000. The Liquidator advised on 8 January 2015 that it was of the view that the claim for outstanding contributions could be adjusted and proposed to recommend to the Examiner that the claim be admitted for a reduced amount of €7 million. The Examiners Certificate of Preferential Creditors dated 19 June 2015 (copy attached) confirms the amount and preferential nature of the Trustee’s claim for the employer pension contributions unpaid at the date of Liquidation. I find this to be a very helpful synopsis of the work being done before ever the Respondent was a party to this matter. Concerning the issue of the capital Lump Sum, the Complainant opened another case set out hereunder: Holloway v Damianus BV [2015] IECA 19. In this case, I note: The Employer served notice on the plaintiffs of its intention to discontinue contributions to the Scheme, and nominated 31st December 2012 as the winding-up date. The trustees advised that the Scheme’s funds were insufficient. The trustees” actuaries duly assessed. The trustees demanded payment of a sum of €2,250,000.00. The Employer informed the plaintiffs that it did not intend to pay the amount. The Employer lost in the High Court where Judgement was granted in the amount of €2,439,193.56. On appeal the Employer maintaining that they are not liable for the amount claimed, or for any amount by way of contribution to the Pension Fund, and that a proper construction of the Trust Deed supports this position. They rejected the cut-off date as being the 31st December 2012 and also that any liability was capped at the statutory Minimum Funding Standard (MFS). The Court found against the Employer on both points. The Court held the words in the Trust must prevail and that the Employer’s obligations were not limited in the manner suggested. The shortfall required to fund the Scheme sufficiently to meet that liability was held to be €2,250,000.00, the amount claimed in the proceedings. I am invited to consider the importance of this decision as this was a Summary Judgement which was awarded as a capital sum payment. It had nothing to do with a scheme of periodic payments. Also, the case demonstrates that the Trust Deeds are expected to operate even when there is no insolvency. Also, the minimum funding standard argument was rejected by the Court. Lastly the Court found that the Respondent could not give three months’ notice and then assert that the winding up had happened on the first date. 4.Evidence I have heard the Expert evidence of two Actuarial witnesses. One has of course been involved in the entire process - Mr. Paul O’Brien. The second was commissioned by the State to provide a different perspective. Counsel for the Complainant notes that the case of Duffy v McGee [2022]IECA 254 has been referenced in the Respondent submission (at page 24) concerning the Actuarial Report furnished by the Respondent at page 452 of the core booklet. This case deals with the proper scope, and admissibility of expert evidence. The Claimant notes the content report of Mr. John O’Connell, Actuary of Trident Consulting wherein at the conclusion of his report, Mr. O’Connell states: “This report is not confined to actuarial content. Where I consider it helpful to the Commission, I express opinions based on my experience.” Counsel notes that the Workplace Relations Commission has before it an appeal which raises questions of law: the interpretation of the Deed, the Directive and the Act of 1984. It is not within the scope of Mr. O’Connell’s experience, qualifications or expertise, to offer an opinion on those matters, and expressions of opinion which traverse on such matters are inadmissible. See in this regard, McGrath on Evidence at 6-014, who pointed out that despite the eclipse of the “ultimate issue rule” as noted by Murphy J in Murnaghan Bros. v O’Maoldomhnaigh [1991] 1 IR 455: “…the court must not abdicate to experts the role of the court in determining matters of law and fact”. I am asked to understand the concept that the ultimate issue is the main question that needs to be answered in a legal case. It is the most important point that will determine the outcome of the case. See also Duffy v McGee [2022] IECA 254 on the proper scope, and admissibility, of expert evidence: “For present purposes, it is sufficient to set out what the authors of Hodgkinson & James, Expert Evidence: Law and Practice (5th ed; 2020) suggest is “clear law” in both civil and criminal cases, as follows: “(1) Expert evidence presented to the court should be and should be seen to be the independent product of the expert uninfluenced as to form or content by the exigencies of litigation. (2) An expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within their expertise. An expert witness should never assume the role of advocate.” (para 6-002, footnotes omitted)” In my opinion, these principles are “clear law” in this jurisdiction also. Their essence is reflected in Order 39, Rule 57(1) RSC, providing as it does that: “It is the duty of an expert to assist the Court as to matters within his or her field of expertise. This duty overrides any obligation to any party paying the fee of the expert. Experts are required to acknowledge that duty in any report prepared by them and are also obliged to disclose any financial or economic interest in any business or economic activity of the party retaining them: Order 39, Rule 57(2). Order 39, Rule 57 is of general application, as is Order 39, Rule 58. The legal practitioners acting for a party seeking to adduce expert evidence bear an important responsibility for ensuring that the evidence is relevant and likely to assist the court and that a witness has the necessary expertise to give it. They must also ensure that such evidence is confined to issues properly within the scope of the expert’s relevant expertise. They also have a duty to ensure - and this is critical - that the witness fully understands, and is in a position to comply with, the duties of an expert witness, as articulated in the jurisprudence and encapsulated now in Order 39, Rule 57(1). If not, the witness should not be proffered.” As earlier, said Counsel for the Complainant, noted, the real issues in controversy in this appeal are relatively net and focussed on issues of legal interpretation - of statute and of the Deed, and of facts which are either accepted, or incapable of serious dispute. Counsel for the Complainant has invited me to be wary of the lack of impartiality contained in the Respondent’s expert report. Under cross examination it should be noted that this witness conceded that the 3.7m claim did fall within the potential timeframe though did not allow for this in his Report. The Complainant’s Counsel opened up the Conclusion already set out in her submission by way of bringing her legal argument to its ultimate destination. There are, she says: 11.1Three matters require to be established under s. 7 for a claim to be allowed under the IPS. 11.2 First, under s. 7(1)(a) that an employer is insolvent. That is accepted. 11.3 Second, under s. 7(1)(b) the date on which, for the purposes of the Act, employer became insolvent after 22 October 1983. That is accepted. 11.4 Third, contributions in respect of which a claim is made are relevant contributions within the meaning of subsection (2). Relevant contributions are contributions falling to be paid by an employer in accordance with an occupational pension scheme. On a plain reading of the Deed the contributions in issue were fixed by an actuary precisely in accordance with the Deed, which governs the Scheme. Thus, subs. (2) is satisfied. The essence of the Respondent’s position is to call for a qualification of subs. (2) which does not exist. 11.5 Fourth, the sum payable in respect of relevant contributions shall be the lesser of the balance of relevant contributions remaining unpaid for the period of 12 months ending on the date immediately preceding the date of insolvency (subs. (7)(3)(a)) or the amount certified by an actuary to be necessary for the purpose of meeting the liability of the scheme on dissolution to pay the benefits provided (subs. (7)(3)(b)). An accurate interpretation of s. 7(3) must give effect to subs. 7(2). The employer contribution in this case were, according to the Deed, fixed by what was recommended by an actuary (clause 28). The sum was fixed, demanded, and unpaid for the period of 12 months prior to the date of insolvency. The members of the Scheme are therefore entitled, in respect of those payments, to the protections afforded by the Directive, and given effect to by the Act of 1984, in accordance with the terms of the Act as written. 11.6 As such, the Respondent’s objections are entirely misplaced, and the Claimants appeal ought to be allowed. Counsel highlighted a few points that had come to light in the course of the evidence of other witnesses. She noted that Kieran Wallace Liquidator/Complainant was criticised a number of times but he confirmed he would only ever submit a claim if he believed it was appropriate. His integrity is not in issue. There is nothing nefarious about reducing from €8.6m to €7m to €6.2m Mr O’Brien has indicated the current figure stands at €6.2 million. Whether it post-dates the insolvency is an issue for me as the Adjudicator. The other discounts were explained. Erica Farrelly agreed she had no pension expertise. She understood how the €875,000 had been deducted. She denied using the word purported and ultimately agreed that the reasons given such that they were not sufficient. Regarding Ms Breathnach’s evidence, Counsel said that the policy view taken in the section is neither here nor there. This is a question of law. The application of the policy is wrong in law. This witness was persuaded by the report dates and believed that the parties should have been looking elsewhere without realising that other avenues had already been factored in (PIPS and s48B.). In any event, Counsel asserted that it is legally improper to ask the Adjudicator not to make a decision because there are other options out there. Ms Breathanach was aware of the Waterford Crystal case and yet still was not minded to accept that there was such a thing as a relevant contribution that didn’t come in as the same figure month after month Mr O’Connell did not suggest that Mr. O’Brien’s approach was wrong or inappropriate. In fact, he accepts that faced with the same situation he would probably have prepared a similar report 5.What is legally relevant and what is not Counsel articulated her final points as follows: Put simply the Company is insolvent and the day before the insolvency there are unpaid relevant contributions remaining to be paid by the company. The Complainant says the amount payable is €6.2million. What is not relevant is any concern about the amount being too large. No concern over delay. Don’t concern about the form needing to be resubmitted twice after first time. Missing PPS numbers should not be presenting as a fatal difficulty. It is irrelevant that the calculations are not based on regular periodic sums The pre-History is irrelevant to the situation that transpire on the day of liquidation. |
Respondent’s submissions
On behalf of the Minister, Counsel for the Respondent has asserted that there is in fact a positive obligation on the state to protect the social insurance fund. Pay outs, she says, can only be made in respect of verified entitlements. Look at the words of O’Donnell J in Magdalena Glegola v The Minister for Social Protection Ireland and the Attorney General SCT. Mr. Justice O’Donnell [2018] IESC 65 At page 119: ‘There is, in my view, an obligation on any decision maker to satisfy themselves that an applicant’s case is well founded, particularly where there is an obligation on the State, or another party not represented in the proceedings to satisfy the award’ The Respondent returned to the issue of the double Insolvency option which is also open to the Complainant. This issue had arisen in the course of oral evidence, and continues to be an option open to the Complainant, she says. It operates where the employer is found to be insolvent and the employee’s pension fund has also become insolvent. The Respondent also asked me to consider the opening with Recital 3 of the EU Directive - Directive 2008/94/EC of the European Parliament: (3) It is necessary to provide for the protection of employees in the event of the insolvency of their employer and to ensure a minimum degree of protection, in particular in order to guarantee payment of their outstanding claims, while taking account of the need for balanced economic and social development in the Community. To this end, the Member States should establish a body which guarantees payment of the outstanding claims of the employees concerned. This is all accepted as is the need to have limitations – evidenced, said Counsel, by use of words such as“balanced ” and “minimum degree ”. (7) Member States may set limitations on the responsibility of the guarantee institutions. Those limitations must be compatible with the social objective of the Directive and may take into account the different levels of claims. Again, the Directive allows for limitation. Article 4 was opened to me and reads: 1. Member States shall have the option to limit the liability of the guarantee institutions referred to in Article 3. 2. If Member States exercise the option referred to in paragraph 1, they shall specify the length of the period for which outstanding claims are to be met by the guarantee institution. However, this may not be shorter than a period covering the remuneration of the last three months of the employment relationship prior to and/or after the date referred to in the second paragraph of Article 3. Member States may include this minimum period of three months in a reference period with a duration of not less than six months. Member States having a reference period of not less than 18 months may limit the period for which outstanding claims are met by the guarantee institution to eight weeks. In this case, those periods which are most favourable to the employee shall be used for the calculation of the minimum period. 3. Member States may set ceilings on the payments made by the guarantee institution. These ceilings must not fall below a level which is socially compatible with the social objective of this Directive. If Member States exercise this option, they shall inform the Commission of the methods used to set the ceiling. Article 8 was also opened to me: Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes.
Counsel for the Respondent agreed that Member States should be encouraging the use of pension schemes to ensure people can be financially secure in their old age when working is no longer possible. Respondent’s Counsel also referred me to the decision in Sicherungs-Verein WaG -v- Bauer(Case C-168/18)[2020]1CR 985 Page 68 was opened to me:
Counsel re-opened parts of the Judgement which to which I had previously been directed: 38. It must be recalled that, in transposing Article 8 of the directive, Member States have considerable latitude in determining both the means and the level of protection of employees’ accrued entitlement to old-age benefits under supplementary pension schemes. That provision cannot therefore be interpreted as requiring a full guarantee of the rights in question 39. Consequently, Article 8 does not preclude Member States, in the pursuit of legitimate social and economic objectives, from reducing the accrued entitlement of employees in the event of their employer’s insolvency, provided they have due regard for, inter alia, the principle of proportionality 40. It follows that the Member States are obliged, in accordance with the objective pursued by Directive 2008/94, to ensure for employees — in the absence of any abuse of rights by them for the purposes of Article 12 of the directive — the minimum degree of protection required by that provision 41. The Court has already held that correct transposition of Article 8 of the directive requires a former employee to receive, in the event of the insolvency of his or her employer, at least half of the old-age benefits arising out of the accrued pension rights under a supplementary occupational pension scheme 42. In addition, the Court has stated that, even if Article 8 of Directive 2008/94 requires at least half of the old-age benefits to be guaranteed, that does not mean that, in certain circumstances, the losses suffered by an employee or former employee may not also be regarded as being manifestly disproportionate in the light of the obligation referred to in that provision to protect the interests of employees In effect the Respondent is saying that there is no requirement to guarantee the full loss. The Respondent suggested that I, as Adjudicator, should not have to be concerned with proportionality or percentages. This is beyond my remit, she says. Counsel has invited me to accept that there is an alternative route open to the Beneficiaries through their Liquidator. It is to be found in the Consolidated version of the Pensions Act 1990 (No. 25) at Section 48(B) concerning the: “Payment of moneys by the Minister for Finance in respect of liabilities accruing under certain relevant schemes”. The Section reads as follows: (1) The Minister for Finance may, at the request of the Minister, following consultation with the Minister for Public Expenditure and Reform, pay moneys to an approved person for the purpose of the discharge by the approved person of the liabilities of an eligible pension scheme, referred to in paragraph (b) of the definition of eligible pension scheme. (2) The Minister for Finance may, after consultation with the Minister for Public Expenditure and Reform, authorise a person to be an approved person for the purposes of this section. (3) The moneys referred to in subsection (1) that are required by the Minister for Finance for the making of a payment under that subsection shall be paid out of the Central Fund or the growing produce thereof. (4) In this section - 'approved person' means a person authorised under subsection (2); 'eligible pension scheme' means a relevant scheme where the date of the winding up of the scheme is on or after 25 January 2007 and before 25 December 2013 and in respect of which – (a) the employer participating in the relevant scheme is, or where more than one employer participates in such scheme, all of the employers participating in the scheme are, at the date of the winding up insolvent for the purposes of the Protection of Employees (Employers’ Insolvency) Act 1984, and (b) the resources of the relevant scheme are not sufficient to discharge in whole or in part, the liabilities of the scheme in respect of – (i) 50 per cent of the benefits specified in paragraph 1 of the Third Schedule to or in respect of those persons who, at the date of the winding up of the scheme, were within the categories referred to in that paragraph, to the extent that those benefits have not already been discharged, and (ii) 50 per cent of the benefits specified in paragraphs 2, 3 and 4 of the Third Schedule to or in respect of those members of the scheme who, at the date of the winding up of the scheme, were within the categories referred to in those paragraphs, to the extent that those benefits have not already been discharged. (5) A reference to 'effective date of the certificate' in the Third Schedule shall, insofar as it relates to an eligible pension scheme, be construed as a reference to the date of the winding up of the eligible pension scheme concerned, with any necessary modifications. Counsel for the Respondent invites me to note that the Scheme therefore only operates in between those certain and notorious dates and the scheme was set up in response the findings of the Court of Justice of the European Union. The FAC 1990 Occupational Pension Scheme herein certainly appear to fall within those dates. The point, says Counsel, is that there are other avenues that the Complainant should be exploring on behalf of the beneficiaries. Once again I had Section 7 of the Protection of Employees (Employers’ Insolvency) Act 1984 opened to me. Concerning the workings of the Office for Redundancy and Insolvency Payments I note that Counsel for the Respondent defended the performance of the staff therein. There can be no doubt that the staff had to establish that the end beneficiaries had been paying their PRSI contributions. Their PPS numbers were therefore required. This gave rise to some of the State interaction with the Liquidator and his team. There were missing PPS numbers and it is not clear that that had been fully resolved even at the end of the six days of hearing this matter. The staff have been working on trying to establish the amount being sought in connection with each and every one of the beneficiaries. The officials in the Department, says Counsel, made every effort in assisting the Liquidator and his team when they were making claims on behalf of beneficiaries. The application simply has to comply with certain regulations, she says. Whether these are formal regulations or just custom and practise, is not clear to me. The Counsel brought me through the IPS application forms which had been filled out. Clarity when filling out the forms is sensible. The forms were not clear. The first claim was for €7,000,000.00 This form was unsigned and included a small sum for the employee contributions in the amount of €1,668.00. By the second form the figure had appeared to rise and by the last form the figure appeared to have settled at €6,124,000.00. There was a lot of correspondence passing between the parties. Erica is the Department employee who spent a lot of time trying to break down the enormity of the claim. She tried to understand and figure out what the deficit is, and how it relates to the individual employees/beneficiaries. The idea that there was some sort of arrears element in this claim was formally identified in a letter from Ms. Farrelly dated the 9th of July 2019: ‘’ 1. Please submit the schedule of employees on our online system, giving the breakdown for each employee of the outstanding employer contributions in respect of the 12-month period prior to insolvency. Please note that arrears accrued in earlier periods are not payable from the scheme and should not be included. The breakdown should reflect the outstanding employer contributions in respect of the 12-month period only ‘’. (The emphasis was added at source). This was the sticking point in the Department. It came down to the large amount of money being sought. This had all the hallmarks of a year-on-year deficit, and not the relevant contributions payable in the last twelve months. The Respondent Counsel agrees that the concept of an aggregate amount was introduced by the Department. The view was formed that the sum of money being sought was in fact made up of several years’ worth of losses. It was for that reason that the letter of the 3rd of August 2022 issued. Though it is conceded by Counsel that this reason is not given in the said letter. That particular allegation was not made. Ultimately the finding was made that the Complainant and the beneficiaries he was representing, were entitled to nothing. The Respondent does not believe that this was a bona fide situation. This was a ‘’ retrospective demand‘’ meaning presumably a demand made to deal with past matters. She says that at the time that it was sought, there was never any chance of that money being found or paid by the Employer. Counsel strenuously made the case that the Department officials did try to help. They did however become wedded to the idea that there needed to be a monthly payment pattern. As Adjudicator, I am bound to note that the Department officials were not presented with anything like the same level of detail and explanation that was presented before this hearing. It is impossible to know if they might not have concluded differently had the legal and factual arguments presented to me been presented to them. Counsel noted that at best there was a seemingly legitimate demand made in September of 2009 which sought six equal payments from July through December. Mr.O’Connell’s own report acknowledges the potential legitimacy perhaps of the September analysis. Counsel urges that should the WRC find that the mid-Sept 2009 actuarial valuation legitimately changes what falls due from the employer, there is an argument for following the below steps: - Establishing the % of the contribution in respect of Protim Osmose Ltd and determining that this amount is not the responsibility of the Social Insurance Fund. - Accepting the contribution of €620k per month from its date of publication (14/09/2009) to the date of liquidation (12/11/2009) – 59 days, adjusted for the % of the deficit funding that is attributable to Protim Osmore Ltd. This is the height of the complainant’s case, she says. I find, as Adjudicator the case herein to be compelling save insofar as there was never any agreement reached between the parties on how and when and in what amounts that September 2009 figure should be payable. There is only one EAT decision which Counsel went on once again to open to me: Meehan -v- Mueller Ireland Limited (in Vol Liquidation) case no 110/2005 Which is a decision of the Employment Appeals Tribunal that refused to payments of unpaid contributions that had been promised outside of the twelve month period. In fact, the Respondent makes the case that it owes zero monies by reason of the monies actually paid in 2009. This I might have found to be relevant in circumstances where there was no updating of the figures as requested from July of 2009 The Trust Deed was re-opened by the Respondent. The different Clauses were opened to me. The Employer, said Counsel, went into liquidation. Then the Employer (through the Liquidator) indicates no more payments are to be made. There is however a notice period. This time might be used by the Trustees to look around and see if anyone can take on the pension scheme. If that’s not going to happen, then they must wind up the pension scheme. A Statement of Affairs is produced, and the employees are preferential creditors. Counsel does make the point that the employer company was not technically written to. The English and American companies were. She does not accept that these are demands formally made of the Employer pursuant to the Deed and invites me to agree with that proposition. As I see it, there is no reference to a demand having to be made. In terms of the obligation to select the lesser of two figures – as set out in Section 7. Counsel for the Respondent rejected the proposition that they can be the exact same figure. The lesser of the two has a clear and unambiguous meaning per the Heather Hill Judgement of Denham J. This was a parliamentary interpretation intended to set a cap. She says it is abundantly clear that there was always intended to be a an either/or situation and only the lesser of the two could be presented. In conclusion the State maintains that the record sum being sought from the social insurance fund for the pension fund herein, amounts to the entirety of the deficit in the company’s pension scheme and that the liquidator has no entitlement to recover money for the fund through this statutory complaint. Counsel further remarked that the Complainant was purporting to “ drive a coach and four through the legislation” meaning the scale of the amount being sought was well out of the range of what was ever intended to be paid out by this fund. Counsel suggested that there are tax implications associated with paying capital lump sums into a scheme as against the regular lump sums paid periodically. This is one of the reasons that large lump sums like the one being sought here are never or at least rarely sought. |
Complainant’s final reply:
The Complainant did take the opportunity to reply to a number of points raised by her colleague. I was invited again to look at the Heather Hill -v- An Board Pleanala case where at Para 198: ‘As with most canons applied in the interpretation of legislation, the principle that legislation implementing an international treaty should be construed to give effect to that agreement attributes an intention to the Oireachtas. EU law imposes one’ There can be no speculation here, says the Complainant’s Counsel. The Directive tells us what the legislation must mean. It is the prism through which Section 7 needs to be interpreted. There is no need to modify or disapply. The repeated suggestions that the beneficiaries herein and the Liquidator acting for them can look elsewhere is not acceptable, she says. The Pension Insolvency Payments Scheme or PIPS scheme is, in fact, no longer available. This scheme when it operated was for people who had retired. Not for people not yet retired as is the case for many in this situation. The issue only came into focus because the Actuary Mr. O’Brien gave evidence of exploratory talks he had had under this heading. In the course of those talks the sum of money being sought moving forward as preferential creditors was reduced €8.6m down to €7m. People who had already retired were thereby taken out of the picture. That was a partial win which is generally known about in these proceedings. As for the Section 48(B) option; it should be noted that this Respondent makes no representation on behalf of the Minister for Finance. The Respondent cannot do so. The legislation (Pensions Act 1990) directs that up to three Ministers must have a conversation to agree an outcome. The Respondent herein can give no promise or guarantee or comfort. Not even a 50% commitment has been made because they have no authority to make it on behalf of another Minister or Department. We are in a Section 7 process, Counsel says, and it would not be right or appropriate to be fobbed off to another process. As it happens, the S 48B option may still be available after this process and after whatever Appeal may lie from the Adjudicator decision. That, she said, was not respectfully something that the Adjudicator can consider in the context of an application made against a refusal by this Minister to make a payment. Counsel returned to the Respondent’s argument by stating that she appreciated that the Complainant has to strike a balance between employee entitlements and limitations. But the Complainant says that a greater problem arises where the limitations imposed tend to limit the employee protection. The email correspondence from Erica on the 14th of May 2019 reads: “ …I will have to withdraw the Pension group from our system if no response is received. Please note the claims can be resubmitted at a later date as long as the company is still in Liquidation ‘’ This negates somewhat the delay argument being made. The payments were always going to have to be applied pro rate so the fact of missing PPS numbers was not fatal. Monies for unidentified persons would be set aside until the rightful recipient had been located. The constant reference to extraordinary amounts involved is designed to be off putting. But an insolvency has happened, and that fact is not extraordinary. Very often, Counsel argued, the sums of debt and liability arising thereafter do become very large as the fall out brings matters into focus. I am inclined to agree with this assertion and this has been borne out by the cases opened to me. The Department she says, is fundamentally misunderstanding the nature of the scheme in front of them. They tried to shoehorn this situation into the more recognisable defined contribution format. A format they, themselves, were more comfortable with. There simply were no monthly figures payable here. There was no assumed pattern of payment. Reviews had been undertaken before where sums of money were needed to bring the scheme in line with the known expectations. This is not an unusual practise. As Adjudicator I find the assertions herein to be persuasive. They have extrapolated a finding (articulated in their letter of refusal) that is neither reasoned nor considered. The well-known principle of giving a reasoned and considered decision has not been exercised here. At the time that the Company was in examinership there was a prospect of survival. The Trustees had asked the Actuary what is the liability here? That was the demand made. The Respondent appears to challenge the nature of the letters to the two parent companies but is not meaningfully challenging the fact that a demand has been made It is preposterous, she said, for the state to suggest that the Trustees do nothing as the fate of the company was hanging in the balance. In fact, it would have been in breach of their duties not to recognise that a full audit needed to be made to determine the liabilities outstanding. It is unsustainable to suggest that the beneficiaries’ entitlements should not have been looked after. Per Clause 28 the liability is assessed while the liability is still due to be paid. Insolvency by its very nature is when the assets are insufficient to meet the liabilities. The Act does not require the apportionment of blame for the collapse of the company and the Pension Scheme. The Act does not ask how the insolvency has occurred and does not seek to apportion blame the use of the word purported in the context of the rejection letter was a clear (and misguided) suggestion that this was some sort of ready up. Again, as Adjudicator, I am inclined to agree with what is being articulated here. It cannot, says Counsel, be right that these gentlemen get nothing. That would be tantamount to a suggestion that Article 8 applies to some but not to others. The delay is not relevant and does not fall to be adjudicated upon I am advised that the State will cooperate with the two missing individuals (and their PPS Numbers) and I think and I can note that that is a non-issue in the case. Lastly Counsel for the Complainant invited me to acknowledge the presence of the many Beneficiaries who have waited so long. On the last day of hearing, it included a father and daughter who had between them given more than forty years of service to the employer. |
Findings and Conclusions:
I have carefully considered the evidence adduced across the six days of hearing. I have heard and considered the evidence of six witnesses and listened to three days of legal argument capably presented by the representatives herein. I have taken the time to carefully review all the oral evidence together with the written submissions made by the parties. I have reviewed my own notes. I have noted the respective position of the parties. I am not required to provide a line-by-line assessment of the evidence and submissions that I have rejected or deemed superfluous to the main findings. I am guided by the reasoning in Faulkner v. The Minister for Industry and Commerce [1997] E.L.R. 107 where it was held that a “…minute analysis or reasons are not required to be given by administrative tribunals...the duty on administrative tribunals to give reasons in their decisions is not a particularly onerous one. Only broad reasons need be given…”. My jurisdiction is outlined in Section 9 of theProtection of Employees (Employers’ Insolvency) Act 1984. This is the Section which has allowed the Complainant/Liquidator (Mr Wallace) to present a complaint to the Director General of the WRC that the Minister has failed, on an application made by Mr. Wallace, to make a payment into the resources of a pension scheme. The complaint was lodged with the WRC on the 7th of December 2022 some four months after the decision was made by the Minister (through his Department officials) in August of 2022, not to make any payment. To bring me to a point where I can make a considered and reasoned decision, the parties have had to outline the fourteen-year history which precedes my involvement. The parties have additionally presented legal argument and rationale to assist in the final analysis of all that has gone before. This case concerns what has been described shorthand to me as a Section 7 application. That is the application made pursuant to Section 7 of the Protection of Employees (Employers’ Insolvency) Act 1984. The text of the Section has already been set out a number of times in the decision. The Section 7 application in the context of the matter before meisa request for the payment of unpaid contributions to an occupational pension scheme known as the FAC 1990 Occupational Pension Scheme. To succeed in an application the Minister must be satisfied that an employer is insolvent, and that the employer became insolvent after October 1983, and on the date of the insolvency (which in this instance is agreed to be the 12th of November 2009) there remained unpaid relevant contributions remaining to be paid by the employer (Protim Abrasives) into an occupational pension scheme. I find as a matter of fact that the appointment of the Liquidator is conclusive evidence of insolvency. The fact that the insolvency happened after October 1983, is self-evident. If these criteria are met, an application can be made to the Minister by a person competent to act in respect of the occupational pension scheme (which in this instance I accept is the Liquidator – Mr. Kieran Wallace) for a payment into the assets of the FAC 1990 Occupational Pension Scheme out of the social insurance fund. The sum payable is the sum which in his (the Minister’s) opinion is payable in respect of the unpaid relevant contributions. The unpaid “relevant contributions ‘’ means those contributions falling to be paid by the employer in accordance with an occupational pension scheme. However, the sum payable by the Minister will be the lesser of two potential amounts. The first, is the balance of relevant contributions remaining unpaid on the date of the insolvency and which were payable by the employer to the scheme in respect of the period of twelve months ending on the day immediately preceding the insolvency (which in this instance is the 11th of November 2009). The second is the amount certified by an Actuary to be necessary for the purpose of meeting the liability of the scheme on dissolution to pay the benefits. At this juncture, I am prepared to accept that there is, therefore, no upper limit in a Section 7 application on what amount might become payable in respect of unpaid relevant contributions. It is not clear to me if this is a legislative oversight or if it is by design. As previously noted, there are limits placed on other payments out of the social insurance fund so the absence here is noteworthy. There is, of course, a temporal twelve-month limit included in a Section 7 application, but there is no financial upper limit. To my mind, another curious feature of the Section 7 application is the fact that in the definition for “relevant contributions ‘’ the Act specifically means those contributions falling to be paid by the employer in accordance with an occupational pension scheme (in this case The FAC 1990 Occupational Pension Scheme). It seems strange to me that any part of a formal application looking for monies to be paid from the social insurance fund would be dictated by the terms of an unidentified occupational pension scheme. The State is not and never has been a party to this scheme and yet the State has signed up to be bound by the terms and conditions contained therein. It is in these circumstances that three Clauses in the FAC 1990 Occupational Pension Scheme have come under such scrutiny as they play a key role in this Section 7 application. The three clauses of the Definitive Deed for the FAC 1990 Occupational Pension Scheme which needed to be opened to me during this hearing were: Clause 27 Actuarial Reports: - “The Trustees shall instruct the Actuary to prepare a valuation report on the actuarial position of the Scheme at intervals not exceeding three and one-half years and to advise what contributions ought thereafter to be made to the fund. ‘’ Clause 28 Payment of Contributions and Expenses: - The Employers (a) “shall pay contributions to the Fund at the rate recommended by the Actuary under Clause 27 of this Deed or at such other rate or of such amount and at such dates as may be agreed between the Trustees the Principal Employer and the Actuary being such contributions as are necessary (together with the contributions paid by the Members to the Fund and any assets transferred pursuant to Clause 21 of this Deed) to secure the benefits under the Scheme.” (b): - “Shall pay all necessary expenses incurred in connection with the Scheme provided that in default of payment by the Employers as aforesaid such expenses may be paid by the Trustees out of the Fund …” Clause 29Termination of liability to Contribute: “Each of the Employers may at anytime by not less than one month’s notice in writing to the Trustees terminate its liability under Clause 28 of this Deed to pay contributions to the Fund and expenses incurred in connection with the Scheme but without prejudice to it’s liability to pay any contributions or expenses which have become payable prior to the expiry of such notice or to pay any expenses which will arise in connection with the winding-up of the Fund PROVIDED THAT the said liability to pay contributions shall not apply to any period of employment with the Employer after the expiry of such notice or to any remuneration paid thereafter to Members.” From the evidence presented I accept that the Trustees of this occupational Pension Scheme appointed an Actuary to the Scheme in the person of Mr. Paul O’Brien from Watson Wyatt. I further note that Mr. O’Brien has been the Actuary since as far back as 2003. Per the terms of the Scheme, the Trustees to the scheme can ask Mr. O’Brien to prepare a valuation report on the actuarial position of the pension scheme at any time but at least every three and a half years. The primary purpose is to prepare a valuation report to recommend what contributions ought thereafter to be made to the fund. Once the advice has been sought from the Actuary and the advice has been given by the Actuary to the Trustees or to the Employer, the Employer is bound to pay contributions to the Fund at the rate recommended by the Actuary unless some other agreement is reached. What became apparent in the course of this hearing, is the singular lack of detail contained in these three clauses. There is no detail on how the instruction is initially given to the Actuary. There is no obligation on the Trustees or the Actuary to consult with the Company on when instruction to prepare a valuation report will be made. There are no timeframes given. There is no detail on whether the actuarial valuation report should relate to the date of the giving of instruction or the date on which the report is concluded. We cannot be clear on what is meant by the term thereafter in this context. The Clauses are silent on how the valuation report once prepared is to be notified to the Trustees and when thereafter is the Employer to be notified of same? In the course of evidence there was much talk of a demands being made of the Employer and yet that language does not appear in these clauses. Lastly when and how and in what circumstances does an agreement have to be reached between the employer the Trustees and the Actuary on how to pay the rate recommended by the scheme actuary? I have been advised and I must accept that I cannot add, or presume to add, words or intentions that do not patently appear. The last relevant issue in the Clauses relates to the decision by an employer to terminate its liability to pay contributions to a pension fund. This can happen at any time, but a one month notice period must run before the employer can stop paying contributions, and therefore any liabilities or contributions which have become payable during that one-month period are still payable by the employer. I confirm that a Liquidator, when appointed by the High Court steps into the shoes of the employer for the purpose of completing the liquidation. The Liquidator (in this instance Mr. Wallace) is empowered to trigger Clause 29 terminating the employer’s liability to contribute. We know that the Liquidator did do this on the 13th of November 2009. In terms of the facts, I have no difficulty accepting that the company Protim Abrasives Limited was a viable and successful company for many decades. It was undoubtedly hit hard by the unprecedented economic downturn of 2008 and 2009. Clearly, I accept that this is a defined benefit occupational pension scheme and as such I confirm that I have no difficulty in accepting that capital sum payments will sometimes be required to bring the asset or fund value in line with the legitimate expectations of the beneficiaries. The Complainant representative spent some considerable time making this point and I agree that nothing in the Act or Deed of Trust precludes the making of a capital sum payment. I am therefore finding that a capital sum payment falling to be paid by an employer in accordance with an occupational pension scheme must be accorded the status of relevant contribution for the purpose of the Act. A distinction has to be made between the two types of pension schemes so that there is an expectation that from time to time the Trustees of a defined benefit scheme has to call on the employer to make a significant contribution to ensure the assets of the scheme are in line with the liabilities. I am satisfied that it is incorrect to assert that only routine monthly payments can be deemed relevant contributions. One-off payments must also be included. I further recognise that a once off sum might have to be substantial. This is evidenced in some of the case law. For example, in the case of Holloway v Damianus BV [2015] IECA 19 a summary Judgement in the amount of be €2,250,000.00 was made in accordance with the Actuary report. I understand that the Respondent is of the view that one off payments of the magnitude under consideration in this case, has the effect of driving a coach and four through the legislation. This may well be so, but the State was unable to provide me with a brake mechanism for not allowing this outcome. In accepting this fact, I am also finding that the witnesses who spoke to the decision-making process in the Redundancy and Insolvency Section, had seemingly limited their understanding of the width of what might fall to be paid by an employer. For reasons unknown to me, the witnesses held a very fixed view that any payment which might be made under the Insolvency Payments Scheme had to be in the form of routine, periodic payments which were known or knowable in the relevant twelve-month period. This was, to my mind, adding an interpretation to the Section 7 process which was not correct. I accept the Complainant’s argument that to impose this limitation operates to exclude defined benefit schemes from the Section 7 process. This would be wholly unfair. I also accept absolutely that I am obliged to read and consider the Protection of Employees (Employers’ Insolvency) Act 1984 through the proverbial lense of the DIRECTIVE 2008/94/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22nd October 2008 on the protection of employees in the event of their employer becoming insolvent. This is unavoidable. Member States are obliged to ensure that measures are taken to protect the interests of employees in situations of employer insolvency. I would go so far as to suggest that the process of hearing this complaint against the Minister’s decision is also a part of that guarantee institution set up in furtherance of the objectives set out in the Directive. The Section 7 process certainly cannot be interpreted so as that it fails to give effect to the EU obligations and the Directive clearly operates to protect and enhance the interests of the employees in insolvency situations. As against this, I understand that the Respondent has asked me to consider the need for limitations and the need for balance and I accept these are also concepts contained in the Directive. However, crucially, for me, is the fact that the 1984 Act does not set a financial ceiling despite the fact that the Directive specifically invites each Member State to set such limits in Article 4. This was a complicated case in terms of factual background. I have had to minutely consider each detail and try and extract the details which are relevant in terms of my jurisdiction and my assessment of the complaint before me. Some facts are beyond dispute. The company was put into a liquidation process on the 12th of November 2009. The company was a party to a lawful occupational pension scheme. This was a defined benefit scheme. The company had always had financial obligations to the pension scheme that fluctuated in line with market forces. Setting aside the inordinate delay, the Liquidator (appointed in 2009) was entitled to make an application to the Minister for a payment into the occupational pension scheme out of the social insurance fund. The Liquidator was only entitled to make an application in respect of unpaid relevant contributions remaining to be paid by the employer to the scheme on the date of the Liquidation. As previously noted, I am satisfied that relevant contributions can include a capital sum contribution which is needed to ensure the pension scheme can meet its obligations. In the case before me, the relevant contributions are those contributions falling to be paid in accordance with the occupational pension scheme. I am satisfied that in line with the terms set out in the FAC 1990 Occupational Pension Scheme the Trustees instructed the Actuary to prepare a valuation report on the actuarial position of the scheme on the 1st of July 2009. I am further satisfied that this request was made well before the employer went into examinership and/or Liquidation. I further accept that the primary purpose for requesting this report at that time was in anticipation of an end of year review with the Pension Authority. I am satisfied that on foot of a detailed analyses of the actuarial position of the scheme, the Actuary advised that a contribution of €3.7M ought to be made. This advice is contained in an Actuarial Report prepared by the Scheme Actuary and dated 15 September 2009. I note that the company had just been put into examinership six days previously, but that has no relevance as examinership does not equate to insolvency. No agreement was reached between the Trustees and the Actuary and the employer as to a methodology for payment of the amount. This fact is really important because in the absence of an agreement, I am finding that suggestions as to how €3.7M might have been broken down and paid for are without merit. In circumstances where no alternative agreement has been reached, and in accordance with the terms of the FAC 1990 Occupational Pension Scheme, the employer is legally required to make the contribution to the fund at the rate recommended by the Actuary. That legal requirement was fixed as of the 15th of September 2009. The requirement was in the sum of €3.7M. I note that the Respondent expert witness tentatively agreed with this proposition. It seems to me therefore that for the purposes of a Section 7 application the sum of €3.7M is the relevant contribution which remained unpaid on the date of insolvency, and which was payable by the employer in the twelve-month period preceding the date of liquidation – November 12th, 2009. On balance, I cannot accept that the significantly larger figure of €8.635M has that same status. Whilst I accept that the Trustees instructed the Actuary to prepare a second valuation report on the actuarial position of the scheme before the company went into Liquidation, it was only one day before (on November 11th). There can be no doubt that the Trustees were on notice of the fact of the impending liquidation. Crucially, I am bound to find that the advice which was thereafter given by the Actuary (recommending €8.65M) was based on an actuarial valuation report which was only made available after the date of Liquidation (December 8th 2009). The actuarial valuation was calculated on the basis of the company no longer being financially viable. The actuarial valuation was calculated to put the beneficiaries in the best possible position described as the Rolls Royce outcome. It also seems likely that the actuarial valuation was prepared with an eye to ensuring that the Trustees would be well placed for their preferential creditor status. One way or another, I cannot accept that this second recommendation of a contribution to be paid to the pension fund has the status of a relevant contribution falling to be paid by an employer and remaining unpaid by the employer in the twelve-month period immediately preceding the date of Liquidation. In making this finding, it accept that much of the case that was opened to me over the course of six days does not impact my final decision. For the avoidance of doubt, I understand that the figure of €8.635M did come to be reduced over the course of time, so that the figure in fact being sought in the complaint before me was €6,124,000.00. I acknowledge and accept how the calculations evolved. I am also confirming that the issue of delay is a non-issue for me in the exercise of my function. The complaint was brought within the six-month time period allowed under Statute. Beyond that, the tortuously slow Liquidation process was caused by a multiplicity of factors which were all touched on in the course of the hearing. It seems to me that the State might recognise that €3.7M in today’s terms is worth considerably less than it was in 2009. I have put a considerable amount of thought into the question of whether the capital sum contribution of €3.7M ought properly be reduced by the figure of €876,000.00 which was the amount realised in the liquidation process and made available to the Trustees. On balance, I believe that it is proper and correct that I do so. In reaching this conclusion, I am finding that the Minister should be the first person to have the benefit of this offset against any liability due to be paid out of the social insurance fund. This is in line with the Respondent’s proposition that the state has an obligation to protect the social insurance fund. This leaves a figure of €2,824,000.00.
|
Decision:
Section 9 of the Protection of Employees (Employers’ Insolvency) Acts, 1984 – 2012 requires that I make a decision in relation to the complaint in accordance with the relevant redress provisions under section 9 of that Act.
Complaint seeking adjudication by the Workplace Relations Commission under Section 9 of the Protection of Employees (Employers’ Insolvency) Act, 1984. CA-00054033-001 - Having heard the complaint presented under this section, I declare that the Minister is liable to make a payment under Section 7 and I specify that the amount payable is €2,824,000.00. Complaint seeking adjudication by the Workplace Relations Commission under Section 9 of the Protection of Employees (Employers’ Insolvency) Act, 1984. CA-00054061-001 – The Complaint herein is in the exact same terms as CA-00054033-001 and as a duplicate requires no further decision.
|
Dated: 06/12/2024
Workplace Relations Commission Adjudication Officer: Penelope McGrath
Key Words:
|