At William Fry offices this morning, a full-house of over 150 representatives from Ireland’s pensions and insolvency sectors heard from Liam Connellan, Partner in the Employment & Pensions Group at William Fry; Barry Cahir, Partner in Insolvency & Corporate Recovery at William Fry; and David Carson, Partner in Deloitte’s Restructuring Services Group on the challenges facing stakeholders involved in Ireland’s pensions schemes.
With the outcomes of future decisions such as those in the imminent Omega Pharma Ireland as well as Coillte Teroanta cases likely to further influence policy affecting the treatment of beneficiaries in insolvent schemes, attendees heard from experts in the fields of insolvency and restructuring on the current Irish pensions landscape.
Liam Connellan spoke of the implications arising from the decision in the Element Six case decided in February this year commenting, “The Element Six case, arguably the most highly anticipated and important case in the history of Irish pensions litigation has laid out six lessons for trustees when making discretionary decisions in winding up pension schemes in Ireland: trustees of pension schemes should seek expert advice, they must be aware of conflicts of interest; they must consider all relevant factors; while ignoring irrelevant factors; they must also consider the status of all funding proposals; and they are not obliged to apply to the courts for direction in their decision making.”
Barry Cahir highlighted the possibility that, in certain circumstances, the funding deficit might become a preferential claim in a liquidation of the employer, thereby dwarfing all other claims.
Liam Connellan went on to discuss the meaning of ‘wilful default’ in light of the Element Six case adding, “the members argued that the trustees should have made a contribution demand of €129.2m to make up the funding deficit and that their failure to do so was a wilful default. Mr Justice Peter Charleton rejected this argument holding that to prove a wilful default, the members had to show not only that the decision was made consciously, but also that it was a reckless breach of duty.”
Guests as this morning’s briefing also heard from David Carson on the implications surrounding the highly contentious Waterford Wedgewood plc case. “This case, referred to the European Court of Justice and still being looked at by the High Court in Ireland, has clarified what pensioners can expect to receive from an insolvent scheme and also introduces the potential to improve the conditions and considerations for those beneficiaries of insolvent or doubly insolvent pension schemes. Based on legislation introduced in response to this case, when a pension scheme is being wound up in deficit in Ireland, we can assume that pensioners will be entitled to a minimum of 50% protection by the company, and in the event that the company cannot provide this, it will be guaranteed by the state.”
David Carson went on to mention the possibility of conditions improving under this case, “While current legislation guarantees a minimum protection of 50% of expected payments out of the pension scheme, the High Court may advise that this is insufficient and beneficiaries could potentially be protected, under both the assets of the company as well as a state guarantee of the shortfall, up to a level above 50% that the courts determine reasonable.”
Liam Connellan, closed proceedings this morning looking ahead to the decisions of the Omega Pharma and Coillte Teroanta cases noting, “The pension landscape in Ireland has undergone significant legislative change and it appears it will continue to evolve. Irish courts will not interfere in situations where reasonable decisions have been made by trustees, they will, however, become involved in those situations where trustees decisions’ can be regarded as one which no reasonable body of trustees could have made. Therefore, it is imperative for those involved in pension schemes, as employers, employees, trustees or as advisors to familiarise themselves with and to understand the conditions imposed upon them by virtue of the decisions in both recent cases as well as those pending.”
For further information, please contact:
Sinead Hennebry, Head of Marketing, William Fry, 01-4896429 / 086 602 7930