Airways Pension Scheme Trustee Ltd v Mark Owen Fielder
| Jurisdiction | England & Wales |
| Judge | Mr Justice Arnold |
| Judgment Date | 15 January 2019 |
| Neutral Citation | [2019] EWHC 29 (Ch) |
| Docket Number | Case No: PE-2018-000015 |
| Court | Chancery Division |
| Date | 15 January 2019 |
[2019] EWHC 29 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (CHANCERY DIVISION)
Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Arnold
Case No: PE-2018-000015
Jonathan Hilliard QC and Henry Day (instructed by Eversheds Sutherland (International) LLP) for the Claimant
Michael Furness QC and Elizabeth Ovey (instructed by Hogan Lovells International LLP) for the First Defendant
Michael Tennet QC and Sebastian Allen (instructed by Linklaters LLP) for the Second Defendant
Hearing dates: 18–19 December 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application for Beddoe relief (see Re Beddoe [1893] 1 Ch 547) which is made in unprecedented circumstances. The Claimant (“the Trustee”) is the trustee of the Airways Pension Scheme (“the Scheme”). The First Defendant (“Mr Fielder”) is a member of the Scheme, who has acted as a representative member for the purposes of this application. The Second Defendant (“BA”) is the principal employer under the Scheme, which has been joined to the application at its own request. In 2013 BA brought proceedings (“the Main Proceedings”) against the then trustees of the Scheme (“the Trustees”) challenging two decisions of the Trustees (“the Decisions”): (i) a decision in 2011 to exercise the unilateral power of amendment conferred by clause 18 of the Scheme trust deed to amend the Scheme rules to empower the Trustees to augment members' benefits by the award of discretionary increases (“the DI Power”) and (ii) a decision in 2013 to exercise the DI Power to confer a 0.2% increase. In 2017 Morgan J rejected BA's challenges to the Decisions. On 5 July 2018 the Court of Appeal held by a majority (Lewison and Peter Jackson LJJ, Patten LJ dissenting) in British Airways plc v Airways Pension Scheme Trustee Ltd [2018] EWCA Civ 1533, [2018] Pens LR 19 that the first Decision was invalid because it was a use of the power of amendment for an improper purpose. It followed that the second Decision was also invalid. Very unusually, the Court of Appeal granted the Trustee permission to appeal to the Supreme Court. The Trustee has filed a Notice of Appeal at the Supreme Court. The Trustee now seeks the approval of this Court for it to pursue the Appeal and for the Trustee to be indemnified in respect of its costs of the Appeal, and any adverse costs order, from the Scheme funds. Mr Fielder supports the application. BA vigorously opposes it.
Given that BA is a party to the proceedings, the application was heard almost entirely in open court, and I shall deliver this judgment in open court. I received written evidence from all the parties which was exchanged upon an open basis save for two aspects which are covered by privilege. First, both the Trustee and Mr Fielder put before the Court opinions of counsel as to the merits of the Appeal. Those opinions are subject to legal professional privilege, and therefore were not disclosed to BA (see Re Moritz [1960] Ch 251). Secondly, BA has recently made a settlement proposal to the Trustee covering not just the Main Proceedings, but also other matters. That proposal is subject to without prejudice privilege which is common to BA and the Trustee, but by consent it was disclosed to Mr Fielder in confidence. I received brief submissions from counsel for BA with respect to the settlement proposal in the presence of the Trustee's and Mr Fielder's representatives and brief submissions from counsel for the Trustee in the presence of Mr Fielder's representatives but in the absence of BA's representatives.
Factual background to the Main Proceedings
For present purposes the factual background to the Main Proceedings may be summarised as follows.
The Scheme is a balance of cost, defined-benefit occupational pension scheme for BA employees. The Scheme was established by a deed and rules dated 8 October 1948 against the backdrop of the Civil Aviation Act 1946, section 1(1) of which established two of the Scheme's initial employers. The trust deed required the Trustees to comprise an equal number of employer and member representatives. It gave the Trustees a unilateral power to amend the deed and a unilateral power to amend the benefit structure, in each case subject to the provisions of the 1946 Act.
The deed and rules were confirmed, and hence brought into effect, by the Airways Corporations (General Staff Pensions) Regulations 1948 made by the then Minister of Civil Aviation under the 1946 Act. Regulation 7 of the 1948 Regulations provided that no amendment to the deed and rules would have effect unless confirmed by regulations made by the Minister. Thus the power of amendment was then a unilateral trustee power to amend with Ministerial consent.
The Scheme's benefit structure at that stage operated on a “building block” basis: for each year of service a member earned a specified amount of benefit, determined by reference to the employer and member contributions paid in respect of that member during that year. Those building block pensions did not increase, whether in payment or deferment.
By the Air Corporations (General Staff, Pilots and Officers Pensions) (Amendment) (No 2) Regulations 1971, it was provided that Regulation 7 of the 1948 Regulations should cease to have effect and that accordingly the Scheme could be further amended without Ministerial confirmation (save in one case which is not material for present purposes). Since 1971 the Trustees have therefore had a unilateral power of amendment without the need for Ministerial consent.
In 1973 Part VI of the Scheme's rules was added by amendment, and it is this part of the rules to which the Main Proceedings relate. Part VI provided benefits calculated on a final salary basis, including a rule for pension increases, rule 15, that linked them to the annual review orders made for public servants and provided for a review of such increases where necessary. Rule 15 was entitled “Adjustment of Pensions and Allowances” and provided as follows:
“The annual rate of all pensions and allowances payable or prospectively payable under Rules 8, 9, 10, 11, 12, 13 and 16 hereof shall be adjusted as if the rates of increase as specified in the Annual Review Orders issued in accordance with section 2 of the Pensions (Increase) Act 1971 were applicable thereto ….”
After the introduction of rule 15, increases in benefits were consistently awarded in accordance with the Pensions Increase (Review) Orders initially made under the Pensions (Increase) Act 1971 and later under the Social Security Pensions Act 1975, which provided for indexation in accordance with the Retail Price Index (“RPI”).
The Scheme was closed to new members on 31 March 1984 in connection with the privatisation of BA. It remains open to benefit accrual for active members. Employees who joined BA between 1 April 1984 and 2003 are members of a successor scheme, the New Airways Pension Scheme (“NAPS”). NAPS closed to new entrants in 2003 and to future accrual in March 2018. As at 31 March 2015, NAPS had a deficit of £2,785 million on the technical provisions basis.
On 1 April 2008 the Trustees adopted a Consolidated Trust Deed and Rules incorporating all the amendments to the 1948 deed and rules which had been made prior to that. The key provisions of the 2008 Deed for present purposes are clauses 2, 4(a), 11(d) and 18. Clause 2 sets out the main object of the Scheme:
“The main object of the Scheme is to provide pension benefits on retirement and a subsidiary object is to provide benefits in cases of injury or death for the staff of the Employers in accordance with the Rules. The Scheme is not in any sense a benevolent scheme and no benevolent or compassionate payments can be made therefrom.”
Clause 4(a) provides:
“The Management Trustees shall manage and administer the Scheme and shall have power to perform all acts incidental or conducive to such management and administration and the Custodian Trustees shall concur in and perform all acts necessary or expedient to enable the Management Trustees to exercise their powers of management or any other power or discretion vested in them accordingly for which purpose the Custodian Trustees shall have vested in them the power for and on behalf of and (if necessary) in the name of the Management Trustees to execute any deed or other instrument giving effect to the exercise by the Management Trustees of any power vested in them and the Custodian Trustees shall deal with the Fund and the income thereof as the Management Trustees shall from time to time direct and the Custodian Trustees shall be under no liability otherwise than by recourse to the trust property vested in them for making any sale or investment of or otherwise dealing with the trust property and/or the income thereof as directed by the Management Trustees.”
Clause 11(d) provides:
“If the Actuary certifies that there is a disposable surplus attributable to an Employer the scheme referred to in paragraph (b) above shall provide that:
(i) the amount or outstanding term of any existing annual deficiency contribution shall be reduced to such extent as the disposable surplus will permit
(ii) if after having extinguished as aforesaid all outstanding annual deficiency contributions of an Employer a balance of disposable surplus still remains the contributions of the Employer shall be reduced to an extent required to dispose of such balance by annual amounts over such a period not exceeding 30 years from the date of the valuation as the Actuary shall advise.”
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Airways Pension Scheme Trustee Ltd v Mark Owen Fielder
...that the Trustee's costs of the appeal be paid out of the assets of the Scheme (subject to a limit of £1,034,000): Spencer v Fielder [2019] EWHC 29 (Ch). 14 The settlement agreement was entered into (subject to conditions including the approval of the court) in April 2019. It includes the ......