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‘Coach and four’ cannot be driven through insolvency law, tribunal told

Liquidator of Protim Abrasives Ltd is challenging Department of Social Protection refusal to pay sum from Employers’ Insolvency Fund into a defined-benefit pension fund for former staff

Final legal submissions in the case relating to Protim Abrasives Ltd were heard on Thursday following six days of hearings at the Workplace Relations Commission

Stephen Bourke
Fri Mar 15 2024 - 16:56

Lawyers for top liquidator Kieran Wallace cannot “drive a coach and four” through insolvency legislation with a novel claim for more than €6 million on behalf of an insolvent pension fund, a State barrister has said.

The remark was made on the final day of hearing into a complaint under the Protection of Employees (Employers’ Insolvency) Act 1984, taken by Mr Wallace against the Minister for Enterprise.

Mr Wallace, acting in his capacity as the liquidator of Protim Abrasives Ltd, is challenging a decision by the Department of Social Protection to refuse to pay the sum out of the Employers’ Insolvency Fund into a defined-benefit pension fund for former staff of the firm, which is also insolvent.

A tribunal has heard the liquidation process for the Dublin-based firm, which dealt in chemicals and wood preservatives, is now into its 15th year because of the complexity of the winding-up process, including the unresolved question of its pension scheme deficit.

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The tribunal heard today that pensioners who ought to be getting about €8,000 a year from the scheme have “not been paid for some time now”.

One of the pensioners came to hear final legal submissions in the case on Thursday following six days of hearings at the Workplace Relations Commission (WRC) on the claim, while another was represented in the public gallery by a family member.

The State maintains that the record sum being sought from the Employers’ Insolvency Fund for the pension fund amounts to the entirety of the deficit in the company’s pension scheme and that the liquidator has “zero” entitlement to recover money for the fund through the statutory complaint.

Last year one expert witness said the fund had taken “investment risks” and that the scale of the deficit in the fund was clear over a year before its parent company went into examinership in 2009.

The State maintains that the exchequer is liable only for the lesser of two sums: either the contributions due to be paid into the scheme in the 12 months before an employer became insolvent, or a sum certified by an actuary to meet the liability of the scheme.

Frances Meenan SC, appearing for the State in the matter, said: “You cannot drive a coach and four through the legislation. It’s either contributions or the amount certified by an actuary, the lesser of the two.”

She said “sadly and regrettably” the tribunal had been told that members of the scheme had “relatively low earnings”. She said that once the statutory complaint was concluded, the liquidator had a “further port of call” by applying to the Minister for Finance, as the pension scheme fell into a category where it was eligible to receive a different payment under the Pensions Act.

Remarking on the length of time the matter had taken to reach this point, she said: “It’s regrettable. All of our officials, we really did try to help.”

Alison Keirse, appearing instructed by Mason Hayes and Curran for the respondent, said the suggestion of relief under the Pensions Act was “absolutely groundless” and gave “no comfort whatsoever”.

She said the State was entitled under European law behind the 1984 act to “strike a balance” between protecting workers’ pensions and national finances but that any limits set could not “undermine the efficacy of the scheme put in place by the directives”.

Ms Keirse argued that in examining the application against the social insurance fund, officials at the Department of Social Protection had treated the scheme at the centre of the dispute as if it had been a defined contribution pension scheme rather than a defined-benefit scheme.

The adjudicator, Penelope McGrath, previously told the parties that it was a novel case and had “no sense” of how long it would take her to come to a decision.

“There’s a lot of work in this, a lot of interesting points ... I know it’s generated some interest upstairs, which is good,” she added.

Giving evidence last year the pension scheme’s actuary, Paul O’Brien of Willis Towers Watson, explained he had initially calculated the sum required to fund the defined benefits at €8.65 million if the trustees were to go to the insurance market to buy annuities for the members.

The liquidator, Mr Wallace, explained that a figure of €7 million “arrived at through discussions and correspondence between the parties” was ultimately admitted to the High Court liquidation process for Protim Abrasives.

The State took the position that the €7 million figure was “not scientifically reached.”

“I would not have admitted – I don’t admit a number into any liquidation that I haven’t taken advice on. Having taken advice, I felt €7 million was the right number to admit,” Mr Wallace told the WRC.

The liquidation of the firm yielded a dividend of €875,000 for the pension scheme, he said, leaving a funding gap of €6.125 million, the tribunal was told.

Giving evidence last November, Daire Breathnach, principal officer in the redundancy and insolvency section of the Department of Enterprise, said: “There have most emphatically been contributions made from the social insurance fund for defined-benefit schemes, but not for the scale of deficit we’re talking about.”

“I do understand the fund was in deficit prior to 2009, so therefore what was being sought was the entirety of the deficit,” Ms Breathnach said.

An independent actuary consulted on the matter by the State, Joe O’Connell, said that prior to the 2008 crash it was clear the fund had been taking “investment risks”.

He said it would have been clear within days of the collapse of Lehman Brothers on September 15th, 2008, that the Protim pension scheme “had a very large deficit on any measurement”.

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