Bradbury v British Broadcasting Corporation
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lord Justice Henderson,Lord Justice Lewison |
| Judgment Date | 28 July 2017 |
| Neutral Citation | [2017] EWCA Civ 1144 |
| Docket Number | Case No: A3/2014/0340 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 July 2017 |
[2017] EWCA Civ 1144
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Warren J)
CH/2011/0648
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Gloster
Vice President of the Court of Appeal, Civil Division
Lord Justice Lewison
and
Lord Justice Henderson
Case No: A3/2014/0340
A3/2015/3326
Andrew Stafford QC and Nicholas Randall QC (instructed by Walkers Solicitors) for the Appellant
Michael Furness QC, David CraigQC andEmily McKechnie (instructed by DLA Piper UK LLP) for the Respondent
Hearing dates: 28 February – 1 March 2017
Approved Judgment
Introduction
This is an appeal by Mr John Bradbury ("the appellant" or "Mr Bradbury") against two orders of Warren J ("the judge"), dated 2 July 2012 and 6 October 2015, which dismissed appeals by the appellant against two determinations of the Pensions Ombudsman ("the PO") dated 24 October 2011 and 23 December 2013 respectively. By those determinations, the PO dismissed the appellant's complaint arising out of the conduct of the British Broadcasting Corporation ("the respondent" or "the BBC") in relation to the appellant's pension.
This appeal concerns the decision by the BBC to cap at 1% the part of a pay rise that would be used to calculate pensionable pay ("the Cap") in the final salary sections of the BBC Pension Scheme ("the Scheme") in circumstances where the BBC was faced with a multi-billion pound deficit in the Scheme.
The judge's reasons for upholding the PO's determinations are set out in two judgments: [2012] EWHC 1369 (Ch) ("the first judgment") and [2015] EWHC 1368 (Ch) ("the second judgment").
Mr Andrew Stafford QC and Mr Nicholas Randall QC appeared on behalf of Mr Bradbury. Mr Michael Furness QC, Mr David Craig QC and Miss Emily McKechnie appeared on behalf of the BBC.
Factual Background
Mr. Bradbury is a member of the BBC Philharmonic Orchestra, and has been employed by the BBC since 3 January 1997.
Mr Bradbury is a member of the Scheme. BBC Pension Trust Ltd ("the trustee") is the trustee of the Scheme. The respondent covenanted with the trustee to observe and perform the provisions of the trust deed and rules of the scheme.
Until 2011, the Scheme had three Sections with different benefit structures, known as the "Old Benefits Section", the "New Benefits Section" and "CAB 2006". The Old Benefits Section and the New Benefits Section provide a pension calculated as a proportion of the member's pensionable salary earned in the last year of active membership. CAB 2006 is a career average scheme, meaning that the member's pension is calculated as a percentage of the member's pensionable salary earned in each year of active membership. Mr Bradbury was a member of the New Benefits Section until 2011.
The BBC concluded that the deficit and future burdens of the Scheme were and would remain unsustainable. Accordingly, in 2010 it established a new career average Section of the Scheme called "CAB 2011" and a new defined contribution Scheme called "LifePlan", both of which would yield lower benefits to members.
In December 2011, the appellant elected to join CAB 2011, for his future service, in the circumstances set out below. However, the conduct of the respondent of which the appellant complained took place whilst the appellant was still a member of the New Benefits Section.
The terms of the New Benefits Section
The rules of the Scheme are set out in the 45th Deed of Variation dated 30 March 2011 ("the 2011 Rules"). Whilst it is necessary to refer to previous versions of the Scheme rules in relation to specific points, unless otherwise stated, I address the 2011 Rules.
In the New Benefits Section, the appellant's pension was based on final salary. Specifically, under rule 6A.1 the appellant would receive:
"[A] pension for life at an initial amount of 1/60th of the Member's Final Pensionable Salary for each Year (not exceeding 40) of his or her Pensionable Service."
The calculation of the pension by reference only to final salary in the New Benefits Section contrasts with the position in CAB 2006 and CAB 2011, where the pension calculation took into account earnings in each year of employment.
Rule 1.3 defined the relevant terms:
'Final Pensionable Salary' was defined as:
"[A New Benefits Section] Member's Pensionable Salary in respect of the last Year (calculated at a daily rate) of his or her Pensionable Service (which in this definition includes as an Active member after Normal Pension Age). 1
Provided that
(a) if a Member's Pensionable Salary is reduced during the last 10 Years of Pensionable Service, Final Pensionable Salary will be determined by the BBC. It will not be less than the Member's Pensionable Salary paid in the last Year of Pensionable Service, nor more than the greater of —
(i) the annual equivalent of his or her highest Pensionable Salary during the last 10 Years of Pensionable Service; and
(ii) the highest average annual equivalent of Pensionable Salary paid in any 3 consecutive Years ending in the last 10 Years of Pensionable Service;
(b) if a Member's Pensionable Service includes Part-Time Employment, (a) above will not apply and this definition is modified as set out in rule 9.3; and
(c) in calculating the Final Pensionable Salary of a Class A Member (as defined in Schedule 3), his or her Pensionable Salary in respect of each day during a Year must not exceed the Scheme Earnings Cap on that day."
'Pensionable Salary' was defined as:
"[A] Member's Basic Salary from the Employer. It includes London weighting and such other regular additions to Basic Salary as the BBC may determine from time to time. It does not include any other allowance, bonus, overtime earnings or temporary or fluctuating emoluments not specifically recognised by the BBC as being included in Pensionable Salary."
'Basic Salary' was defined, so far as the New Benefits Section was concerned, as:
" [T]he amount determined by the BBC as being an Employee's basic salary or wages payable under the terms of his or her Continuing or Fixed Term Contract, but also including from time to time any salary or wages given up by the Employee in return for –
(a) the BBC's Scheme known as Smart Pensions (as modified from time to time) under which his or her salary or wages is reduced in exchange for the Member ceasing to make contributions to the Scheme under Rule 3.1; or
(b) such other flexible benefit arrangements as the BBC from time to time designates."
In order to distinguish between the total sums actually paid to an employee under their employment contract and the defined concept of "Basic Salary", I will refer to the former as simply "pay".
There was a dispute between the parties in relation to the effect of the words "determined by the BBC" in the definition of Basic Salary. The respondent contended that the effect of these words was that it could decide whether an increase in pay (or how much of the increase) counted as Basic Salary; since Final Pensionable Salary was calculated by reference to Basic Salary, this would allow the respondent to determine whether a pay rise would count towards the calculation of an employee's pension – that is to say, whether it was "Pensionable Salary". The appellant did not accept this construction, and argued that these words merely reflected the fact that the respondent could, of course, decide what level of pay to offer to employees; the respondent could therefore determine what pay to offer, but it could not determine that pay would not count as Basic Salary.
To the extent that a determination of Basic Salary by the respondent would involve the exercise of a discretion or power, it is relevant to recite the terms of rules 13.3(1)–(2), read alongside rule 13.3(3), which provided that:
"(1) Every discretion or power conferred by the Rules on the [BBC] will be absolute and uncontrolled, except that it must, if necessary, be exercised in such a manner as, in the [BBC's] opinion, is necessary for the retention of the Scheme's status as a Registered Scheme.
(2) The [BBC] may vary or revoke any regulation or decision by [it] under the Rules, unless —
(a) doing so would infringe (1) above; or
(b) the original regulation or decision was expressed to be irrevocable; or
(c) the consent of another party was required to the original regulation or decision and the other party does not consent to it being varied or revoked."
Finally, clause 5 of the 2011 Rules provided that the rules "may be altered under Rule 19.2". Rule 19.2 in turn provided:
" The Trustees may from time to time, with the consent of the BBC, by deed executed by the Trustees and the BBC, alter or modify any of the trusts, powers or provisions of the Trust Deed or the Rules.
Provided that no such alteration or modification shall —……
(3) take effect as regards the Active Members whose interests are certified by the Actuary to be affected thereby unless –
(a) the Actuary certifies that the alteration or modification does not substantially prejudice the interest of such Members; or
(b) the Actuary certifies that to the extent to which the interests of such Members are so prejudiced, substantially equivalent benefits are provided or paid for by the BBC or the Trustees or provided under any legislation; or
(c) the alteration or modification is approved by resolution adopted at a meeting of such Members convened by the Trustees".
The conduct of the respondent complained of by the appellant
By 2008–2009 the respondent was facing a growing need to reduce its pension liabilities. The respondent considered various options, sought external advice and engaged in consultations with the trustee, Scheme members and employee unions.
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British Broadcasting Corporation v BBC Pension Trust Ltd
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