BT Pension Scheme Trustees Ltd v British Telecommunications Plc and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 16 December 2011 |
| Neutral Citation | [2011] EWHC 3388 (Ch) |
| Docket Number | Case No: HC09/C02433 |
| Court | Chancery Division |
| Date | 16 December 2011 |
[2011] EWHC 3388 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Mann
Case No: HC09/C02433
Alan Steinfeld QC and Jonathan Hilliard (instructed by Hogan Lovells International LLP) for the Claimant
Andrew Simmonds QC and Henry Legge (instructed by British Telecommunications PLC Legal & Business Services) for the First Defendant
Ian Glick QC and Jonathan Evans (instructed by the Treasury Solicitors) for the Second Defendant
Hearing dates: 22 nd and 23 rd November 2011
Judgment Approved by the court for handing down
Introduction
This is the latest round in this litigation whose purpose is to determine the answers to various questions which are said to arise in relation to the true construction of a statutory guarantee given in relation to liabilities of the old publicly-owned British Telecommunications so far as those liabilities arise out of its pension fund. On 21 st October 2010 I delivered a judgment [2010] EWHC 2642 (Ch)) in relation to some, but not all, of the questions which were said to arise as to the extent of the liability. In this judgment I shall use the same abbreviations and terminology as in the 2010 judgment. That earlier judgment should be read for the background, which I do not intend to set out again here.
The intention was that those questions having been determined, that determination would enable the parties to consider the extent to which other questions (already formulated) were in effect answered by the first judgment, and which of those other questions still required determination by the court. The next phase in the operation ought to have been the determination of such other of those questions as still required determination. Unfortunately there was a diversion from that course, because the Secretary of State wished to raise a further question on which it was said by the other parties that binding concessions had been made by him. That required a further hearing in which I determined that in the circumstances which had arisen the Secretary of State could not take the point that he had wished to take—see [2011] EWHC 2071 (Ch).
With that point out of the way the determination of formulated issues could resume; hence this hearing. On the way the Secretary of State responsible for this matter had shifted to the Secretary of State for Culture, Olympics, Media and Sport; I gave permission for joinder and amendment accordingly (so the title to this action has changed). Furthermore, the parties have agreed that various of the questions originally asked no longer need to be answered by me—the original plan worked in that my first decision has provided an answer to some of the other questions, though not all of them. This judgment deals with the remaining questions which the parties say are still outstanding.
Question 4A—Does the Crown Guarantee include the Company's liabilities in respect of benefits attributable to service with Other Participating Employers, where the member was in the service of the Company when he started accruing pension?
The Scheme as at the Transfer Date did not contain a power to admit other participating employers. In 1986 this position was changed. By a deed dated 13 th January 1986 the trust deed and rules were amended to allow companies which were associated with or a subsidiary of BT to enter into a deed of adherence and thus become a "participating company". The amendments allowed employees of participating companies to become members of the schemes and required the participating companies to contribute accordingly. However, the obligations of BT to contribute under the original provisions were not amended, with the effect that its obligations covered liabilities to contribute in respect of these employees even though they were not BT's employees. Thus a liability exists, and the question arises as to whether this is a liability covered by the Crown guarantee.
Examples were posed in order to put this problem into context, and Mr Steinfeld QC, who again appeared for the trustee, relied on some of these examples as demonstrating what he said would be anomalies were the liabilities arising to be held to be outside the scope of the guarantee.
(a) BT wishes to sell off part of its business. It creates a subsidiary to hold the transferred business, transfers the business into it and then after a short time sells the subsidiary. In the course of this the subsidiary is made a participating employer and the employees are transferred in under the TUPE regulations. There might be a period of some months before the transfer in and the sale of the subsidiary. In some cases the status of participating company survives the sale for a short period of time to allow a new scheme to be set up, at which point the participation ceases. Question 4A arises in relation to liabilities accruing in respect of the period of participation. Some employees may have left service before they became members of the new scheme, and some may have left their entitlements in the BT scheme when they joined any new scheme set up after the purchase. Question 4A applies to that sort of situation.
(b) BT wishes to place parts of its business into a new subsidiary and leave them there. It does so, and the employees who are transferred into it remain members of the Scheme via the participating employer regime.
(c) BT's holding company became a participating employer to allow its employees (actually very limited in number) to participate.
It is really (a) and (b) that are of most practical significance. Question 4A is said to arise in two further refinements of the above circumstances—where the employees in question are not employed again by BT, and where they come back into BT's employment (Permanent Swappers and Returners respectively, in the jargon of the case).
In my first judgment I decided that members who joined the Scheme via the participating employer route, and who had never hitherto been employed by BT, were not members whose liabilities were covered by the Crown guarantee—see the answer to Question 4 at paragraph 110. However, I left open the question of the position in relation to those who were employees of BT (and therefore members of the Scheme) prior to moving to a participating employer—see paragraph 108. Thus question 4A was formulated and I am now asked to address the point.
The arguments on question 4A in outline
I shall have to elaborate some of the arguments in a later section of this judgment, but in outline the arguments on the parties in relation to Question 4A were as follows.
The Secretary of State's argument seeks to apply the logic of my earlier judgment. In that judgment I had held that the guarantee covered liabilities transferred by section 60. Liabilities imposed by the participating company regime were introduced only by an amendment introduced after the statutory transfer of liabilities took effect, albeit under a power to amend which was in the original deed. Those liabilities were therefore not in existence when section 60 operated, and were therefore not transferred by it. The situation is no different from that which applied to question 4. In the case of persons who came into the Scheme when their employers became participating employers, liabilities in respect of their pensions were not covered by the guarantee because that liability did not exist at the time of the transfer. Those who move to a participating employer from BT, and remain members, are members only because of the participating company regime, and so their liabilities are excluded for the same reason.
Mr Steinfeld for the trustee did not accept this argument. He pointed to various provisions of the trust deed which, it was said, demonstrated that under the pre-transfer regime a BT employee could remain a member of the Scheme even if he became an employee of a different company, and that the liability that was imposed on BT as a result of the new participating employer regime was not so very different, and was not so different as to lead to the conclusion that a new liability was being assumed for the purposes of section 60 (and therefore section 68). In this context he pointed to various provisions of the pre-transfer deed and rules, to which I will myself refer later. These rules were also said to demonstrate that the same commercial effect could have been achieved in at least some cases (cases of TUPE transfers in anticipation of a sale) by retaining the employees in BT until immediately before the sale, with the result that liabilities in respect of their pensions would continue to be covered by the Crown guarantee; so it is "unnatural" to treat the contributions of employees of a participating employer differently. Mr Steinfeld particularly relied on anomalies arising in relation to a Returner. He contrasted the case of a member who was transferred into a participating employer and then came back to BT, with a member who went to an external employer and then returned to BT. The latter could (under the provisions of the pre-amendment rules) bring a transfer from his second employer back to BT, and find his total period of service including the period covered by the transfer in covered by the guarantee. The Returner who had merely been in the subsidiary, and who thus remained a member, would not have the value of his liabilities in that period covered by the guarantee, because he did not bring a fund back with him and the liability to him was new and not covered by the guarantee if the Secretary of State was correct. Mr Steinfeld sought to say that this demonstrates that one should treat a transfer back as not a sufficient departure from...
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