Investment firm PanJam loses bid for share in $104m pension surplus

Property developer and investment firm Panjam Investment Limited is not entitled to a share of the $104.1 million in surplus money which remains in a pension plan that was closed over seven years ago, the Supreme Court has ruled.

The decision vindicates pensions regulator the Financial Services Commission (FSC). 

PanJam went to court after the FSC refused to approve the proposed scheme of distribution and directed that the  plan be revised to exclude PanJam from getting any of the surplus. 

The proposed scheme involved the allocation of approximately 42.5 per cent of the surplus to PanJam and the balance to the various categories of members of the plan.

The FSC argued that the employer was not entitled to a share of the surplus based on the documents that established the pension plan and the relevant legislation.

The surplus should be exhausted in increasing the benefits to the members of the plan, the FSC said. 

The regulator was represented by King's Counsel Patrick Foster and attorney-at-law Camille Wignall-Davis

A resolution was passed by the trustees of the pension plan to wind it up, effective April 30, 2015. The winding up was approved by the FSC in March 2016 but it disagreed with PanJam benefitting from the surplus.

PanJam sought several declarations from the Supreme Court in a suit it filed against the FSC in 2019. 

The company's lawyers Hadrian Christie and Sanya Goffe argued that PanJam was entitled to a share in the surplus as recommended by the actuary on winding up of the pension plan.

However, Justice Crescencia Brown-Beckford agreed with the FSC that the sponsor Panjam was not entitled to share in the surplus remaining on winding up of the plan.

The judge agreed with the FSC's lawyers that the sponsor distribution clause in the rules of the plan was invalid.

The clause was introduced by way of an amendment which varied the main objective of the plan which was the provision of pensions for members and their beneficiaries and vested an interest in the sponsor or employer.

In handing down the judgment in January this year, the judge directed that the sponsor distribution clause must be severed from the rest of the surplus distribution clause.

The judge considered the limits on pension payments under section 44(2) of the Income Tax Act and held that those limits apply only to ongoing pension plans and are not applicable to the allocations from the surplus of a pension plan on winding up.

Submissions were made by the parties as to whether the legal costs should be paid from the pension fund.

The judge ruled on March 24 that FSC's costs should be paid by PanJam as it would be burdensome to the pension plan to bear those costs.

Trustees of the pension plan for First Jamaica Investments Limited were named as interested parties and they sided with the FSC.

They were represented by Kerr-Ann Allen Morgan. The commissioner of General Tax Administration of Jamaica was also an interested party and was represented by attorney-at-law Cecelia Chapman Daley.

PanJam's claim concerned the distribution of the surplus under the pension plan for the employees of First Jamaica Investments Limited which was a defined plan established to provide an exclusive benefit to members, retired members, their widows, widowers and /or designated beneficiaries.

First Jamaica Investments Limited was amalgamated with Panjam by an order of the Supreme Court on July 27, 2011. 

Following on the dissolution and striking off of First Jamaica Investments Limited from the Register of Companies, Panjam was effectively substituted for First Jamaica Investments Limited as the employer/sponsor of the plan.

-Barbara Gayle and Jovan Johnson

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