Compromising the pari passu principle

SHPL, a company selling pre-arranged funeral plans, entered administration on 23 March 2022. Although the funds from plan holders were placed into a trust, the administrators found that there was a significant shortfall between the available assets in the trust and the amounts required to pay the plan holders' respective funerals. Around 460,000 plan holders have been impacted by SHPL’s administration.

The administrators entered into a Deed of Delegation with the trustees of the trust. The trustees transferred the trust funds and assets to SHPL and delegated to SHPL (acting by the administrators) all of their trust powers, duties and discretions.

While the administrators tried to enable the existing policy holders to transfer to other pre-arranged funeral plan providers on terms as beneficial for them as possible, they needed to deal with plans that were being called on. The choice was to do nothing and leave bereaved individuals to fend for themselves, without access to the funds of the trust, or to try to provide interim assistance.

For an interim period (between 1 May and 31 October 2022), Dignity Funerals Limited (Dignity) stepped in, providing funeral services for 416 policy holders on a without profit basis. The agreement, which included payment of the cost of the funerals, between Dignity and the administrators was conditional upon it being approved or sanctioned by the court.

This resulted in a limited number of policy holders receiving the benefit of funerals paid for by funds held in the trust, whilst the majority would receive only the distribution of net realisations to which they are each entitled; that sum would be reduced by about £13.00 for each living plan holder if the administrators were permitted to pay the cost price agreed with Dignity.

The court was asked to consider:

  • Whether there was power under the terms of the trust to use the trust monies for payment of funerals rather than to distribute them pari passu; and, (if so) whether the court should approve or sanction the exercise of that power.
  • Whether there was power to approve or sanction payment to Dignity pursuant to the Berkeley Applegate principles; and (if so) whether that power should be exercised.

Considering the terms of the trust and the agreement, ICCJ Jones found that the administrators had exercised their powers properly and that the agreement with Dignity should be given the court’s blessing. ICCJ Jones did not address the Berkeley Applegate principles in detail but observed that these principles apply when the office holder is not a trustee and has no power to deal with the assets; this was not the case here.

Nedim Patrick Ailyan Ben Stanyon (In their capacity as Joint Administrators of Safe Hands Plans Limited) [2023] EWHC 2025 (Ch)

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