BT Pension Scheme Trustees Ltd v (1) British Telecommunications Plc (2) Secretary of State for Business, Innovation and Skills

JurisdictionEngland & Wales
JudgeMr Justice Mann
Judgment Date28 July 2011
Neutral Citation[2011] EWHC 2071 (Ch)
CourtChancery Division
Docket NumberCase No: HC09C02433
Date28 July 2011
Between:
BT Pension Scheme Trustees Limited
Claimant
and
(1) British Telecommunications PLC
Defendants
(2) Secretary of State for Business, Innovation and Skills

[2011] EWHC 2071 (Ch)

Before:

Mr Justice Mann

Case No: HC09C02433

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

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

Jonathan Evans (instructed by the Treasury Solicitor) for the Second Defendant

Hearing date: 13 th & 15 th July 2011

Mr Justice Mann

Introduction

1

On 21 st October 2010 I delivered judgment on four issues which were said to arise between the parties to this litigation. The neutral citation of that judgment is [2010] EWHC 2642 (Ch). Reference should be made to that judgment for the background to the case and for the actual issues that I decided.

2

The issues which I decided were the first four of a list of agreed issues which were before me when the trial started. I determined that I would in fact consider the first four on that list and then in due course hear such other of the remaining issues as needed separate decision and as might be appropriate to decide. When the matter was restored to me for further directions as to the disposal of those other matters it became apparent that the Secretary of State wished to raise another issue which was not on that list. The other parties contended that it was not open to the Secretary of State to raise that issue because it had been the subject of a concession by the Secretary of State which he was not entitled to resile from. Alternatively they claimed that the matter was res judicata or was something that it would be an abuse to raise under the rule in Henderson v Henderson (1843) 3 Hare 100. The issue is potentially a very significant one in money terms and I determined that it needed to be dealt with at a separate hearing when it was properly articulated via statements of case. I gave appropriate directions and it is that matter which has now been restored before me and which I address in this judgment. As well as having the benefit of statements of case, I also have witness statements from deponents for BT and the Scheme Trustee, though not from the Secretary of State.

The concession and its significance

3

My previous judgment sets out the background to the issues which I have to decide. For present purposes the important background is the 1983 deed and its accompanying rules and the merger of the BTNPS referred to in paragraph 17. In 1993 the Trustees decided that the BTSSS and the BTNPS should be merged. The BTNPS had benefits which were less favourable to employees than those under the BTSSS (they were more akin to private schemes than Civil Service schemes), so the two schemes could not simply be merged without more if that distinction was to be maintained. In order to reflect the separate entitlement of the BTNPS members a new section (Section C) was formed and the BTNPS members were put into that. As paragraph 17 reflects, the funds of the two schemes are not segregated; the various sections merely reflected different measures of entitlement.

4

Thus the BTNPS members became members of the BTSSS. In the jargon of this case they became "post-transfer date joiners".

5

This litigation, and the issues which it raises, were the subject of extended dealings between the parties in order to sort out what questions arose and what questions needed answering. Drafts of various documents containing potential issues were prepared and passed between the parties, and in the course of negotiation the formulation of the issues was refined. The final formulation of issues was that which was placed before me. One of the issues was Issue 3 that I decided in paragraphs 50–102 of my earlier judgment. It concerned the liability of the Secretary of State to make contributions under the statutory guarantee in respect of liabilities relating to post-transfer date joiners. The terms of my judgment in paragraph 102 indicate that I decided that the guarantee was capable of covering such liabilities, and was not limited merely to liabilities relating to pre-transfer date joiners. It is the case of BT and the trustee that my decision amounts to a binding determination that, save for any exceptions determined as a result of determining the answers to 8 more formulated questions, I had decided that post-transfer date joiners' liabilities were all covered by the Crown guarantee. That included those joining through the 1993 merger. The Secretary of State disputes that and says that all I decided was that post-transfer date joiners liabilities were not automatically excluded by virtue of the date at which they joined, and all sorts of other arguments were still open to it in relation the coverage of the guarantee in respect of liabilities to that class. This turned into a debate about res judicata at the present hearing in front of me.

6

All the members of the BTNPS were, in chronological terms, post-transfer date joiners. The liabilities associated with that class were the subject of dealings between the parties before this action started and the subject of the concession made in this case. The actual concession is recorded in the document containing the issues in the form of an expression of the Secretary of State's position in relation to one of the issues in the agreed list of issues before me, namely issue 12. That issue, and the parties' express positions, were expressed as follows:

"12. Irrespective of the answer to the other issues (including Issue 3), to the extent, if any, that:

(i) bulk transfers into or out of the Scheme; or

(ii) apportionment of Section 75 debts away from the other Participating Companies to the Company; or

(iii) any Post-Transfer Date Event that does not fall within (i) or (ii)

increase the size of

(a) the Buy-Out Lump Sum (if any); and/or

(b) any Deficiency Contributions that fall due on or after the Company's entry into winding-up or fall due before that date but are unpaid at such date, and this extra quantum is not excluded from the scope of the Guarantee by the answers to the other issues, does this extra quantum of Company Contributions fall outside the scope of the guarantee?

[(1) HMG has put forward the argument that this quantum of the Company's Contributions falls outside the scope of the Guarantee.

(2) The Trustee's position is that this quantum of the Company's Contributions is covered by the Guarantee.

(3) HMG's position is as follows:

(a) HMG accepts that a bulk transfer out, on a share of fund basis, causes no extra quantum.

(b) HMG also accepts that a bulk transfer in on a past service reserve basis does not in itself cause any extra quantum, provided that the past service reserve is calculated in accordance with the actuarial assumptions used by the BTPS, as the receiving scheme. If, on the other hand, the reserve was calculated by reference to the actuarial assumptions used by the transferring scheme and the reserve would have been higher if calculated on the actuarial assumptions used by the BTPS, then the difference would be extra quantum.

(c) HMG emphasises the words "in itself". It is HMG's case that the Guarantee cannot extend to any BT liability for contributions other than in respect of pensionable service of BT employees. Hence, if on bulk transfer in, the transferring members are granted past service credits in respect of service with an employer other than BT, the Guarantee does not extend to any BT liability to contribute in respect of such past service credits. Equally, if, after transfer in, the transferring members are employed by a participating employer other than BT, any resulting liability to contribute in respect of such service is also outside the guarantee.] "

7

The relevant concession is in the italicised paragraphs (b) and (c). The italicised text is italicised in the original list agreed between the parties, no doubt to distinguish the parties' comments from the text of the issues.

8

The concession was supplemented by a further factual concession made by the Secretary of State in his skeleton argument at last year's trial. In Appendix B, headed "Post-Transfer Date Events", there is a paraphrase of the above concession in the following terms:

"However, if a transfer in is, at the time of the transfer, full-funded [sic] on the above basis, it is accepted that liabilities in respect of the members transferring in are not, under the ambit of this Appendix excluded from the guarantee.

NB It is accepted that the transfer on the merger by BTNPS was fully funded on the above basis [and there is a footnoted cross-reference to evidential material]"

9

There was no particular question addressed to the extent to which liabilities arising out of bulk transfers arising from an amendment would or might be covered by the Crown guarantee. Were it not for the dispute which has now arisen, the next step in the action would be to move on to Issues 5 to 12. However, having obtained my decision on Issues 1 to 4, the Secretary or State now wishes to raise the following issue in place of the old Issue 12:

"12. Does the Crown Guarantee exclude an increase in the Company's liability to pay contributions (whether Buy-Out Lump Sum or Deficiency Contributions) which results from:

(a) an amendment of the rules made after the Transfer Date (that does not fall within any of the other issues)?

Trustee's position: No

BT's position: No

HMG's position: Yes.

(b) (as a particular actual example of (a)), the merger of the BTNPS with the Scheme in 1993?

Trustee's position: Issue already determined, alternatively No

BT's position: Issue already determined under Issue 3 and/or HMG's concession on this point cannot now be withdrawn,...

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