Written evidence from BDO (NPS0014)

Inquiry into the Norton[1] Pension Schemes[2] and the Fraud Compensation Fund (“the Inquiry”)

I refer to your email of 17 January 2024 via our online contact form, in which you invited BDO to make a written submission on the questions contained in the Inquiry’s terms of reference (and anything else, within the Committee’s remit, that BDO thinks is relevant).

My BDO partner, Danny Dartnaill, and I were originally appointed as joint administrators of the Norton (as defined below) on 29 January 2020.  We were subsequently appointed as joint liquidators of those companies in January 2021.  This letter is written on behalf of both myself and Danny Dartnaill in those capacities and contains our responses to your questions.

Your email of 17 January 2024 acknowledges that some of the questions in the Inquiry’s terms of reference may not be relevant for BDO. We agree with that assessment.  We also wish to note at the outset that our experience is in acting as insolvency practitioners and that, although we have some experience of the Pensions Regulator (“tPR”), the Fraud Compensation Fund (“FCF”) and the Pensions Ombudsman (“PO”), we are by no means experts in the regulatory and statutory frameworks which govern such bodies and hence under which they themselves must act.

Background

The Committee is already well aware of the full background to the insolvencies of each of NMUL and NMHL (as defined below) and the events relating to the Pension Schemes. We therefore do not rehearse that history here but instead provide a brief summary of my and Mr Dartnaill’s involvement as insolvency office-holders.

In December 2019, BDO was engaged by NMUL and other interested parties to undertake a high-level review of the short-term cash flow forecasts of NMUL and a connected company in order to assess the viability of those entities. This review was concluded on 19 December 2019 and found that NMUL would be unable to continue to trade and pay its creditors as they fell due without significant additional funding. Funding options were explored by NMUL but, during early January 2020, a winding-up petition was served by a creditor upon NMUL which resulted in its bank accounts being frozen. Ultimately, a secured creditor of NMUL decided that, in view of these ongoing cash pressures and a lack of progress in sourcing any additional investment or funding into the business, there was no alternative but to appoint administrators.

On 29 January 2020, Danny Dartnaill, Ryan Grant and I (all BDO partners at that time[3]) were appointed Joint Administrators of Norton Motorcycles (UK) Limited (now NMUL Realisations Limited (in liquidation) (“NMUL”)) and Norton Motorcycle Holdings Limited (now NMHL Realisations Limited (in liquidation) (“NMHL”)).

The Joint Administrators were also appointed as office holders in respect of companies connected to NMUL and NMHL, being Donington Hall Estates Limited and Priest House Hotel Limited.

In this letter, we refer to NMUL, NMHL and such connected companies collectively as “Norton”.

As the Committee will know, the Joint Administrators have subsequently been appointed as Joint Liquidators of NMUL and NMHL when those companies entered into Creditors’ Voluntary Liquidation in January 2021[4].

By the time the Joint Administrators were appointed in January 2020, issues relating to the Norton pension schemes had been disclosed to tPR and were already in the public domain. Regulatory action had already been taken by tPR, which had issued a Determination Notice in May 2019 (“the May 2019 Determination”) appointing an independent trustee (“Dalriada”) to the schemes.

This was a result of concerns in relation to: Mr Garner’s conflicts of interest; inappropriate investment decisions, unlawful employer-related investments, poor governance; and lack of knowledge and understanding of the law relating to pensions and investments.

Further regulatory action at or around the same time was taken by the PO, which held a public hearing in February 2020, subsequently issuing its own determination about Mr Garner’s running of the Norton pensions schemes in June 2020.

We do appreciate that these events will already be well known to the Committee. We repeat them here only to provide some context as to why we are unable to comment on some of the questions included in the Inquiry’s terms of reference.

The Joint Administrators/Joint Liquidators were not in a position to observe tPR’s investigations resulting in the May 2019 Determination. Subsequent tPR actions (including the prosecution of Mr Garner and prohibition from acting as a trustee) occurred after Dalriada had been appointed to the Norton Pension Schemes. Our direct involvement with tPR in relation to the Norton Pension Schemes has been limited to what is necessary in order property to discharge our duties as Joint Administrators/Liquidators.

We reproduce below the six Inquiry questions in bold text with our responses in normal text.

1. Does TPR have the powers it needs to prevent trustees acting dishonestly and in breach of their trustee duties, leading to the loss of pension scheme assets, as happened in the Norton case according to the Pensions Ombudsman;

     a) Are the right regulatory arrangements to prevent a similar case happening again;

For the reasons noted above, we are not in a position to provide a response to this question.  We respectfully suggest that this question may be better directed to tPR or other bodies representing the Pension Schemes and/or their trustees.

2. Could different regulatory arrangements have delivered a faster resolution of the Norton case, or a similar case;

We are not in a position to provide a response to this question.  We respectfully suggest that this question may be better directed to tPR or other bodies representing the Pension Schemes and/or their trustees.

3. How could co-ordination with other (non-pension) bodies be improved;

We are not in a position to provide a response to this question.  We respectfully suggest that this question may be better directed to tPR or other bodies representing the Pension Schemes and/or their trustees.

4. How could communications with scheme members of collapsed pension schemes be improved while at the same time protecting scheme assets;

As Joint Administrators/Joint Liquidators, our role is to conduct the Administration/Liquidation in accordance with our legal and regulatory obligations.

This includes being subject to reporting requirements which see us periodically publishing reports for creditors and on Companies House. It is the Pension Scheme which is the creditor of the relevant employer estate, rather than individual members of that scheme. 

The trustee of the Pension Scheme is responsible, in turn, for communicating with Norton Pension Scheme members.

We have had regular communications with Dalriada as independent trustee since our appointment. We have additionally communicated directly from time-to time with the Pension Scheme members, albeit it is preferable in our view for there to be a single channel of communication between scheme members and those professionals/bodies involved in the Norton case.

We very much respect that the Pension Scheme members understandably expect to see their pensions preserved/protected for their retirement, and hence will be most concerned by what happened to the Norton schemes. We also very much respect the human side of the collapse of Norton. 

We have noted the Inquiry’s response from the FCF and, in particular, the resolve of that body to work collaboratively with Dalriada to help progress to payments to scheme members as quickly as possible. This has included reaching an in-principle decision accepting there has been dishonesty in the case, prior to the conditions for an eligible claim being met. We hope that this step will provide comfort to scheme members that their case is under active consideration by the relevant bodies.

In the meantime, we will continue to discharge our duties as Joint Liquidators diligently and bearing the above very much in mind.

5. How could the process for applying to the Fraud Compensation Fund (FCF) be simplified and sped-up; and

We are not in a position to provide a response to this question.  We respectfully suggest that this question may be better directed to tPR or other bodies representing pension schemes and/or their trustees.

6. What claims might the FCF expect in future and are there schemes which might be eligible but do not have the support to make a claim.

We are not in a position to provide a response to this question.  We respectfully suggest that this question may be better directed to the FCF.

February 2024