The credit crunch is biting ... your scheme's sponsoring employer is facing insolvency ... what can the trustees and advisors do before the insolvency to lay the foundations for a smooth Pension Protection Fund (PPF) assessment period?

What is a PPF assessment period?

The court will not always set aside a property transfer order in matrimonial proceedings where the party transferring the property, as part of a clean break order, becomes bankrupt shortly afterwards, and there are allegations of lack of consideration or transfer at an undervalue.

The subject of gratuitous alienations is a problematic area for the property practitioner. Timing is all-important, and often it only becomes an issue for insolvency reasons retrospectively. Put simply of course, in lay terms a gratuitous alienation is no more than a gift, and there is nothing to prevent an owner of property gifting it to someone if he chooses.

Summary

The Pensions Regulator intends to issue its first financial support direction (FSD) against the Bermudan-based Sea Containers Limited (SCL), which is currently restructuring under the US Chapter 11 bankruptcy process.

MB had been the secured tenant of a property in which she lived with B, and which she had bought at a substantial discount. The property was conveyed into the joint names of MB and B as joint tenants. Although MB’s mortgage company had insisted the property be in joint names, she claimed that the intention had always been that B would only have a minimal interest in it. He had made no contribution to the purchase price, mortgage repayments or household expenses. When MB had ascertained the effect of the joint tenancy, she gave notice of severance to B.

A husband and wife jointly owned their property. In matrimonial proceedings, the husband was ordered to transfer his interest in the property to the wife. Following his bankruptcy, the husband’s trustee applied to set aside the property transfer on the basis that it had been made at an undervalue, and the wife had given no consideration in money or money’s worth within the meaning of s339 of the Insolvency Act 1986. The wife contended that the fact that she had foregone ancillary relief claims was capable of amounting to consideration.

The bankrupt’s trustee applied for a possession order of his home. The bankrupt unsuccessfully appealed his bankruptcy, the order in litigation that had led to his bankruptcy and the possession order, but he refused throughout to give up possession and applied for a committal order. The court found the bankrupt in contempt of court for failing to give possession and sentenced him to six months’ imprisonment.

A trustee in bankruptcy applied for an order for sale of a property owned jointly by the bankrupt and his wife, the claimant. The claimant, who suffered chronic ill health, resided in the property. She also jointly owned another property with her brother, and in order to suspend orders for possession and sale of the matrimonial property, offered charges over that other property. This was not accepted by the trustee on the basis that the husband’s creditors would be unlikely to receive payment in the near future.

A landmark ruling has paved the way for companies to restructure without necessarily making their pension scheme ineligible for the Pension Protection Fund (PPF). Trustees in the case of L v M sought the court’s support (and that of the Pensions Regulator) for a plan to prevent the insolvency of the sponsoring employer which would result in an apportionment of the debt due to the scheme from the employers, the winding up of the scheme and would take the scheme into the PPF.

The claimant appealed against a decision that her former husband’s one third interest in the matrimonial home vested in his trustee in bankruptcy (the first defendant) free from any rights asserted by her, so permitting an order for possession and sale of the property. The claimant argued that pursuant to a matrimonial consent order made prior to the bankruptcy, she had a right of exclusive occupation of the property until remarriage, cohabitation or death.