UK – The group of 22 pension funds suing Henderson over the management of the Henderson PFI Secondary Fund II were dealt a blow today when a High Court judge ruled that they could not pursue a derivative claim against the General Partner of the fund.

The pension funds claim that Henderson Equity Partners (General Partner) Limited and Henderson Equity Partners Limited (the Manager) breached its mandate when it acquired the PFI/PPP firm John Laing in 2006, and that the allocation of assets and liabilities to the fund had been unauthorised. 
The ruling handed down by Judge Robin Cooke, following a three-day preliminary hearing last week, states that the claimants can, however, pursue a derivative action against the Manager of the fund.

But to do this, the judge said the pension funds would have to forfeit their limited liability and "render themselves liable to creditors of the Partnership generally, as if they were the General Partner, for the period during which such claims are pursued". 

He added: "If they choose to do this, issues of costs in the pursuit of those claims will be decided as the litigation proceeds, in the ordinary way."

This means the claimant would have to become involved in the running of the fund and assume the full liabilities associated with being a General Partner, in this case, as owners of John Laing and its liabilities.

The judge also ruled that the claimants should pay the costs of the preliminary hearing.

The judgement also revealed that, although 22 investors – mainly UK pension funds – are suing for breach of mandate, only eight are suing for misrepresentation.

A spokesman for the pension funds said: "The investors are considering whether to seek permission to appeal against the judgement."

The 22 pension funds include some of the largest pension schemes in the UK, such as  Railpen and British Steel.

Other pension funds party to the litigation include BBC, BAE, Bupa, B&CE, Tesco, Smurfit Kappa, Nestle, NM Rothschild, Fenner, Magnox, Southern Electric, Kent County Council and South Tyneside, as well as Oxford Investment Partners and Trinity College Cambridge endowment funds.

They represent nearly 90% by value of the fund's investors.
In 2005, the Henderson PFI Secondary Fund II raised £575m from investors, most of which was used to acquire John Laing.

The aim was to gain access to John Laing's private finance initiative projects, building and maintaining schools and hospitals to provide the type of steady, inflation-proofed income defined benefit pension funds crave.

By June 2009, the value of the fund had fallen 60% to £225m, due to higher borrowing costs following the financial crisis and John Laing's spiralling pension scheme deficit.