Between IBM United Kingdom Pensions Trust Ltd v Ibm United Kingdom Holdings Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 12 October 2012 |
| Neutral Citation | [2012] EWHC 2766 (Ch) |
| Docket Number | Case No: HC11C02799 |
| Court | Chancery Division |
| Date | 12 October 2012 |
[2012] EWHC 2766 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: HC11C02799
In the Matter of the IBM Pension Plan
Jonathan Gaisman QC, Jonathan EvansandEdward Sawyer (instructed by Nabarro LLP) for the Claimant
Andrew Simmonds QC, Paul NewmanQC andJoseph Goldsmith (instructed by Dickinson Dees LLP) for the First and Second Defendants
Nicolas Stallworthy QC (instructed by DLA Piper LLP) for the Third Defendant
Hearing dates: 9th, 10th, 11th, May 2012, 14th, 15th, 16th, 17th, 18th, May 2012, 21st, and 22nd May 2012 and, 30th, 31st May 2012 and 1st June 2012
Introduction
This case concerns a pension scheme known as the IBM Pension Plan ("the Main Plan") which was originally established in 1957. The Main Plan is a large occupational pension scheme with both defined benefit and defined contribution sections. These proceedings relate to part of the defined benefit section, know as "the C Plan". The claimant ("the Trust Company") is the present trustee of the Main Plan. The first defendant is the Principal Employer as defined in the Main Plan. The second defendant is the largest participating employer of the Main Plan. I will refer to them as " Holdings" and " IBM UK" respectively. I will refer to them together as " IBM" although on occasions I will use "IBM" to refer to the IBM group in the UK generally. The third defendant, Mr Metcalfe, has been joined as a member of the C Plan. He supports the Trust Company's case.
The Trust Company seeks an order rectifying the deed of amendment dated 14 December 1983 (" the 1983 Trust Deed and Rules") which created the C Plan and subsequent deeds of amendment. Unusually for a claim of this sort, it is brought by the Trust Company as trustee and not by a member or members of the C Plan. There are perfectly sensible reasons for this, but I do not need to rehearse them in this judgment. Nor do I need to rehearse why Mr Metcalfe is a party to the proceedings given that the Trust Company is prosecuting the rectification claim. His role is, however, restricted as a result of directions which I gave at an earlier interim hearing to protecting the interests of the class to which he belongs by monitoring the conduct of the case by the Trust Company and by lending such assistance as he can.
Representation by Counsel is as follows: the Trust Company is represented by Jonathan Gaisman QC, Jonathan Evans and Edward Sawyer; IBM is represented by Andrew Simmonds QC, Paul Newman QC and Joseph Goldsmith; and Mr Metcalfe is represented by Nicolas Stallworthy QC. Mr Stallworthy responsibly restricted his cross-examination and both his written and oral submissions in the light of the essentially supervisory function of Mr Metcalfe, his main input, I am sure, being by way of discussion with the Trust Company's legal team.
I received (i) on behalf of the Trust Company a long written opening and a very long written closing (I shall refer to them as "the Trust Company's opening" and "the Trust Company's closing") (ii) on behalf of Mr Metcalfe short written opening submissions and (iii) on behalf of Holdings and IBM UK a skeleton argument and a substantial written closing, the latter of which I will refer to as "IBM's closing".
The principal question at issue is whether, when the Trust Company and Holdings created the C Plan as a new section of the Main Plan in 1983, it was intended to be on terms that members of the C Plan would have a right to retire on an unreduced pension at any age between 60 and 63 without any employer consent. That is the sense in which I will use the phrase " flexible retirement" although it is right to point out that one of the principal witnesses, Mr Cawley, has from time to time used it in a different sense as will be seen.
A related question raises a similar question in relation to early leavers, that is to say persons leaving service with a participating employer without becoming entitled to an immediate pension: it is whether it was intended that early leavers should be entitled to draw an unreduced pension at any time after attaining the age of 60.
Those questions might appear to be relatively straightforward to answer. However, they give rise to a number of issues of considerable complexity. Not the least of these is resolution of the factual issues given that the events in question took place in the early 1980s, some 30 years ago. Much of the documentary material no longer survives or, if it does, it has not been found and made available. The recollection of the many witnesses I have heard from is, hardly surprisingly, not in some respects complete; and some persons whose evidence would have been highly relevant are either no longer alive or are not able to give evidence because of health reasons. Given those evidential problems, the claim might be seen as ambitious. But high achievement often requires ambition and it is my task to decide whether that ambition is fulfilled.
I wish to record here, so that I do not need to repeat, that in preparing this judgment I have re-read all of the witness statements in the light of, and with a focus on, the cross-examination which took place. I refer expressly to only a limited amount of the evidence but have taken account of all of it in forming my assessment of the witnesses and in reaching the conclusions which I do.
In relation to the central claim for rectification of the provisions of the C Plan, it is alleged that a mistake was made in the drafting of the 1983 Trust Deed and Rules by which the C Plan was formally introduced into the documentation of the Main Plan. I say formally introduced, because, as we will see, the C Plan was actually in operation some months before the 1983 Trust Deed and Rules were executed. Since 1983, there have been a number of amendments to the Main Plan. It is the Trust Company's case that the error in the 1983 Deed and Rules was repeated in subsequent versions of the rules of the Main Plan and that these, too, should be rectified. The result would be that the current trust deed and rules dated 24 April 1997 ("the Current Trust Deed and Rules") should be amended to reflect what was originally intended in 1983.
The Current Trust Deed and Rules provide, in summary and insofar as relevant to the current proceedings that:
i) for active C Plan members, retirement between ages 60 and 63 is subject to consent, but any pension payable from 60 is unreduced: see rule 2(1)-(3) of the Rules in Schedule D;
ii) for deferred C Plan members, retirement between ages 60 and 63 is subject to consent for deferred members still in Service (but not other deferred members) and any pension payable will be "subject to actuarial reduction": see rules 2(1)-(3) of the Rules at Schedule F.
If rectification is granted in relation to active members but not deferred members, issues arise under certain statutory requirements known as the Preservation Requirements, originally contained in section 63 and Schedule 16 Social Security Act 1973 and continued by the Pension Schemes Act 1993. I will consider these provisions in some detail later.
The Trust Company also advances a contractual claim on behalf of members of the C Plan whose rights under other sections of the Main Plan were converted into C Plan benefits. And IBM asserts a contractual counterclaim so far as concerns new joiners (that is to say members of the C Plan other than those who transferred from other Plans within the Main Plan whom I will refer to as " New Joiners") restricting the benefits which the C Plan would otherwise provide assuming that the claim for rectification succeeds.
There is also a claim pleaded which relates to a different section of the Main Plan, namely the M Plan. In the light of the way in which the evidence developed at the hearing, there is no longer any dispute specific to the M Plan which I need to decide. IBM has made a concession in the light of which I say no more about this claim. I anticipate that the parties will be able to agree the relief which follows from the concession in the light of my other findings in this judgment. The concession is as follows:
If a C Plan member otherwise has a right to an unreduced pension at age 60, IBM does not contend that such a member who elected to transfer to the M Plan in 2006 thereby lost that right. The effect of the concession is that IBM will consent to the early payment of M Plan benefits in cases where C Plan benefits are payable as of right. Accordingly the issues which arose on the pleadings in relation to the M Plan are no longer live.
The Law
I consider it helpful to address the law concerning rectification at this early stage of my judgment in order to establish the focus of factual enquiry. I will also deal with the Preservation Requirements. I will postpone dealing with the extent to which contractual terms are capable of restricting benefits otherwise arising under a pension scheme to a later stage of this judgment.
Rectification generally
The most helpful starting point in considering the law of rectification is to be found in the opinion of Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101. Although his discussion of this topic was strictly obiter, it can be taken as an accurate statement of the law, especially given the concurrence of the other Law Lords hearing the appeal. This was the approach taken by the Court of Appeal in Daventry DC v Daventry District Housing Ltd [2012] 1 WLR 1333 (" Daventry") albeit with reservations being expressed by the Master of the Rolls and Toulson LJ. At [48], Lord Hoffmann said this:
"The requirements for...
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