BT Pension Scheme Trustees Ltd v British Telecommunications Plc and Another

JurisdictionEngland & Wales
JudgeMr Justice Mann
Judgment Date21 October 2010
Neutral Citation[2010] EWHC 2642 (Ch)
Docket NumberCase No: HC09C02433
CourtChancery Division
Date21 October 2010

[2010] EWHC 2642 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before: Mr Justice Mann

Case No: HC09C02433

Between
BT Pension Scheme Trustees Limited
Claimant
(1) British Telecommunications plc
(2) Secretary of State for Business, Innovation and Skills
Defendants

Alan Steinfeld QC and Jonathan Hilliard (instructed by Hogan Lovells International LLP) for the Claimant

Andrew Simmonds QC and Henry Legge (instructed by BT Legal) for the First Defendant

Ian Glick QC, Sarah Asplin QC and Geoffrey Topham (instructed by the Treasury Solicitors) for the Second Defendant

Hearing dates: 13 th, 14 th, 15 th and 16 th July 2010

Mr Justice Mann

Mr Justice Mann:

Introduction

1

This is a trial in which the court is invited to determine various questions all of which revolve around the extent of a statutory “guarantee” given by the Secretary of State (now the Secretary of State for Business, Innovation and Skills) in 1984 for the liabilities of the then newly formed and about to be floated British Telecommunications plc (“BT”), so far as it extended to the liabilities of BT under its pension scheme. The claimant is the current trustee of that scheme and it maintains that the guarantee is extremely wide. The Secretary of State contends that it is narrow in various respects to which I will come. They are both parties to these proceedings. The other party is BT itself. It is neutral on the extent of the guarantee, but takes a point in relation to the extent of its own liabilities and advances a point relating to how any guarantee payments should be appropriated.

2

The parties have prepared various issues to be placed before the court, but it seemed to me that it was not necessary to deal with all of them at one hearing. Indeed, I questioned whether it was appropriate to deal with some of them at all, since on one footing the questions raised were academic and not sufficiently real. In the circumstances, the parties were confined to just some of the issues. If and in so far as any issues remain live and worthy of litigation after this judgment, then directions can be given for their determination.

The relevant pension schemes and the legislation

3

Before 1969, those engaged in the telecommunications business now conducted by BT were employed by the Post Office, and were effectively civil servants. However, in 1969 the Post Office was separated out from the rest of the Civil Service and became a statutory corporation. It was given power to establish a pension scheme and its 400,000 employees became members of a new Post Office Staff Superannuation Scheme (“POSSS”). Hitherto the employees had enjoyed unfunded civil service pensions. In order that the employees of the Post Office should not lose the benefits of having a civil service pension it was announced that they would have the option of having equivalent benefits within the new scheme. The new scheme was established by a deed dated 24 th September 1969, and it did indeed provide for equivalent benefits to those that they had previously enjoyed. Their pensions were funded by the Post Office. In 1971 the scheme was amended so as to create three sections. The first comprised the then existing non-contributory section. This was closed to new entrants. The second was a new contributory Section A, which attracted civil service benefits and which was also closed to new entrants, and the third was a contributory Section B, which although having civil service benefits on establishment could be amended to provide different benefits. New employees could only join Section B.

4

In 1981 the telecommunications business at the Post Office was hived off to a new statutory corporation, the British Telecommunications Corporation (the “Corporation”), pursuant to the Telecommunications Act 1981. In 1983 the telecommunications element of the pensions was de-merged from POSSS, and the relevant part of its assets was transferred to a new scheme, the British Telecommunications Staff Superannuation Scheme (“BTSSS”), established by a definitive deed and rules dated 2 nd March 1983. This mirrored the provisions of POSSS. The BTSSS had sections equivalent to those within POSSS, but like POSSS it was not sectionalised in terms of any segregation of funds. The sections merely (for these purposes) reflected the nature of the benefits. The fund was administered as one overall fund.

5

It is now necessary to turn to the provisions of the deed of the BTSSS. It recites:

“Whereas:

(1) British Telecommunications acting in pursuance of the provisions of the British Telecommunications Act 1981 has determined that there shall be established under irrevocable trusts a scheme to be known as British Telecommunications Staff Superannuation Scheme … to be interpreted by English Law and having as its primary purpose the securing of pensions and other benefits for or in respect of some or all of the present and future employees of British Telecommunications and the present and future Members of the Corporation in accordance with the Rules set out in the Schedules … hereto.”

6

The first nine provisions are background and administration. The first important provision is clause 10 dealing with the employer's contributions.

“Contributions by the Corporation

10. The Corporation shall contribute to the Fund by monthly instalments:

“(a) such contributions as are certified by the Actuary as needed to meet the cost of benefits under the Schedule 1 Rules, excluding a member's contributions towards the cost of family and dependants’ benefits;

(b) such sums as may be due under Rule 12 of the General Rules;

(c) such further contributions as may from time to time be required to repair any deficiency reported by the Actuary.”

7

Clause 12 provides for periodic actuarial valuations and for the making up of deficiencies.

“Actuarial valuations

12(1) on or before the 31 st day of March 1988 and thereafter at the end of such periods not exceeding 5 years as the Trustees shall from time to time determine the Actuary shall make an actuarial valuation of the assets and liabilities of the Fund and shall make a report upon the financial position thereof making therein any recommendations he thinks fit to the Trustees who shall forthwith transmit to the Corporation and to such organisation or organisations as are mentioned in Clause 3(2) a copy of such report and any recommendations they may wish to make in regard thereto.

(2) Where on any such valuation the Actuary certifies that a deficiency or a disposable surplus in the fund is disclosed the Corporation shall within 3 months after receiving the valuation and report and the Trustees’ recommendations (if any) make arrangements which in the opinion of the Corporation are expedient for making good the deficiency or as the case may require for dealing with the surplus.

(3) Subject to the provisions of sub-clause (4) if a deficiency is certified in the Fund any arrangements made shall provide for an annual deficiency contribution of such amount as may be certified by the Actuary to be required to make good the deficiency over such period not exceeding 40 years from the date of the valuation as the Corporation may determine.”

8

For the purposes of this case the contributions to be made under this Clause can be called the “deficiency contributions”.

9

Clause 17 provides for amendment of the scheme and rules (the latter being technically part of the former for these purposes). Both the Corporation and the Trustees have to participate in such an amendment. No amendment was permitted which would alter the primary purpose of the Scheme or which would reduce the benefits of any person who was at the time entitled to receipt of a pension. I do not need to set out the detailed provisions of that clause.

10

Clause 20 contains the provision which lies at the heart of this case. It is headed “Termination” and reads as follows:

“20(1) If the Scheme terminates an actuarial investigation shall be made and the Fund shall be realised and subject to the payment of all costs charges and expenses and the Trustees’ liabilities to creditors properly payable thereout the monies then in hand together with such sums as may be due from the Corporation to restore the solvency of the Fund shall be applied under the advice of the Actuary, where appropriate, so far as they permit to the purposes and with the priorities indicated in the following sub-clauses.

(3) On a winding-up of the Scheme, any liabilities of the Scheme in respect of [various obligations including pensions in payment] shall be accorded priority over other liabilities under the Scheme.

(4) If the assets of the Scheme are not sufficient to meet in full the liabilities specified in sub-clause (3) above, the assets shall be applied to meet those liabilities in the order of priority in which those liabilities are specified in sub-clause (3).

(5) If after the liabilities specified in sub-clause (3) have been met there are assets in hand then such assets together with any sum due from the Corporation to restore the solvency of the Fund shall be applied under the advice of the Actuary to the following purposes (if and to the extent that those purposes have not been satisfied under sub-clause (3) above), and with the priorities indicated, namely:

First in the purchase from the Government or from any insurance company to which the Insurance Companies Acts 1974 and 1981 apply of non-commutable non-assignable annuities payable under the same conditions as payments receivable under the Rules for those persons who immediately before the winding-up were entitled whether immediately or in reversion to pensions out of the Fund such annuities to be of amounts equal to the pensions to which those persons are then entitled;

Secondly in the purchase in like manner of non-assignable (and in so far as the Trustees may with the...

To continue reading

Request your trial
3 cases

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT