ITV has announced its intention to appeal last week’s decision by the Upper Tribunal, which imposed financial support payments to its former pension scheme by the broadcaster.
The Tribunal’s decision backs The Pensions Regulator (TPR) which initially used its powers to seek financial support from ITV for members of the Box Clever Pension Scheme.
Box Clever was a joint venture launched in 2000 between former TV rental firms Granada (now ITV) and Thorn (now Carmelite) with employees of both firms being transferred into the Box Clever Pension Scheme.
TPR opened an anti-avoidance investigation in 2011 following the collapse of Box Clever in 2003, arguing that prior to the collapse, ITV extracted significant value from the joint venture.
Following a nine year court battle, this view was now backed by the Upper Tribunal, which found that ITV should provide financial support to the 3,000 members of the Box Clever Pension Scheme, which has a deficit of £115m.
“By their choice of structure for the joint venture, the shareholders extracted considerable cash from the business with no risk of recourse to their assets. They retained an ongoing interest in the merged business with the possibility of further value being generated if the business was successful, but without having to bear any responsibility if the business, whose strategy they continued to determine, subsequently failed,” the Tribunal stated.
Speaking on behalf of law firm Eversheds Sutherland, which represented the Box Clever Pension Scheme, Emma King, partner, comments: “ITV threw its whole weight behind this dispute, culminating in years of appeals by ITV at every stage of this process. Yet, in spite of its best efforts to avoid its moral responsibility to pension scheme members, almost all of its [ITV’s] arguments have been roundly rejected, amounting to a clear victory for TPR and the trustee.”
Mike Birch, TPR’s director of case management, adds: “We are very pleased with this ruling which sends a clear message to companies linked with defined benefit (DB) pension schemes that we will not hesitate to use our anti-avoidance powers where we believe it is reasonable for them to provide financial support. We will pursue these cases for as long as necessary to protect pension savers and the Pension Protection Fund. ”
An ITV spokesman responded: “ITV is naturally disappointed by the Tribunal’s decision. ITV continues to believe that the case brought against it is unfair and will be seeking to appeal the decision.
“The Tribunal repeatedly stressed in its judgement that no blame or criticism should be attributed to ITV concerning the transaction, 18 years ago, that formed the Box Clever joint venture. There were sound reasons for implementing that transaction, which was, in good faith, regarded as being in the best interests of Granada’s shareholders, employees and consumers.”
