Capita (Banstead 2011) Ltd and Another v RFIB Group Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 04 July 2014 |
| Neutral Citation | [2014] EWHC 2197 (Comm) |
| Docket Number | 2012 Folio 1124 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 04 July 2014 |
[2014] EWHC 2197 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2012 Folio 1124
Adam Tolley QC (instructed by Plexus Law) for the Claimants
Neil Kitchener QC & Laurence Emmett (instructed by Nabarro LLP) for the Defendant
Hearing dates: 24–25 June 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
1. The First Claimant ("Capita Banstead") is a private company previously named FPS Group Limited. The Second Claimant ("CHBC") is a private company previously named Robert Fleming Benefit Consultants Limited. They bring a claim against the Defendant ("RFIB") under an indemnity in a share purchase agreement dated 28 April 2004 ("the SPA") by which RFIB sold the entire issued share capital in CHBC to Capita Banstead. At the relevant times CHBC carried on business as a specialist benefits consultancy, whose services included in particular providing pension scheme advice, and pension scheme management and administration services. One of its clients was the Queen Elizabeth's Foundation for Disabled People ("QEF"). CHBC gave advice and provided services to the trustees of QEF's occupational pension scheme, a defined benefits scheme known as the Queen Elizabeth's Foundation for Disabled People Pension and Assurance Scheme ("the Scheme"). QEF and the trustees of the Scheme brought a claim against CHBC for negligence and other wrongdoing in relation to the Scheme between 2000 and 2008. The QEF Claim was settled at a mediation and the settlement embodied in a written agreement dated 11 October 2011 by which CHBC agreed to pay QEF and the Scheme trustees the total sum of £3,850,000 in settlement of their claim against CHBC. Capita Banstead paid the sum due from CHBC under the settlement agreement. The Claimants also claim to have incurred £66,831.46 in legal costs in dealing with QEF's claim. Capita Banstead and CHBC seek to recover those sums from RFIB under clause 5.8.5 of the SPA which provides:
5.8 The Seller [RFIB] undertakes to indemnify and keep indemnified the Buyer [Capita Banstead] on behalf of itself and the Company [CHBC] and the Subsidiaries from any liabilities costs claims demands or expenses which any of them may suffer or incur arising directly or indirectly from …
5.8.5 any services or products supplied by the Company [CHBC] or any of its Subsidiaries or any advice provided by the Company [CHBC] or any of its Subsidiaries (or any of their employees or agents) prior to the Transfer Date [close of business on 30 April 2004."
2. RFIB resists the claim on two grounds. First, it contends that the indemnity only bites on losses caused by wrongdoing prior to the Transfer Date, 30 April 2004, and that no more than 45% of the settlement sum is attributable to wrongdoing by CHBC prior to that date. Secondly, neither Claimant has a valid claim for that amount because CHBC's liability to QEF for the settlement sum was discharged by a payment by Capita Banstead. CHBC has no claim because it therefore suffered no loss; Capita Banstead has no claim because it was under no liability which falls within the scope of the indemnity. RFIB also disputes that either Claimant was liable for, or paid, any part of the £66,831.46 in legal costs being claimed.
3. The Claimants say that as a matter of the construction of the indemnity no apportionment falls to be made to account for events after the Transfer Date. The entirety of the QEF claim comprised a claim which arose directly or indirectly from services supplied or advice provided by CHBC prior to 30 April 2004, and the settlement concerned that claim. Those services and that advice were the effective cause of the QEF claim as a whole, and the fact that some of the events relied upon by QEF occurred after 30 April 2004 is not material. Alternatively if an apportionment falls to be made, 75% should be attributed to the period prior to the transfer as falling within the indemnity. The validity of RFIB's title to sue points is disputed.
THE QEF CLAIM
4. The claim by QEF was set out in a Protocol letter from its solicitors of 16 April 2010. The gist of the QEF Claim was as follows. QEF and the trustees were advised on all aspects of the day-to-day management of the Scheme by CHBC. CHBC's employee, Anthony Le Cras, was the consultant dealing with QEF between 2000 and 2006. The trustees, in consultation with CHBC, acting through Mr Le Cras, decided to make various amendments to the Scheme with the objective of reducing liabilities to members and therefore the cost of funding those liabilities. Those amendments were announced to members and ought to have taken effect on various dates between 6 April 2000 and 1 April 2004. The amendments and the dates on which they ought to have taken effect were:
(1) The introduction of a cap of RPI (with a maximum of 5%) for increases in pension benefits, with effect from 6 April 2000 (announced March 2000).
(2) The introduction of the same cap for revaluation of deferred pensions, with effect from 6 April 2000 (announced January 2001).
(3) A reduction of the annual accrual rate from 1/60 th to 1/80 th, with effect from 1 July 2001.
(4) A reduction of dependants' pensions on a member's death from 2/3 to 1/2 with effect from 1 April 2004 (announced March 2004).
(5) An increase in the active members' contribution rate from 5% to 7%, with effect from 1 April 2004 (announced March 2004).
Formal amendments to the rules of the Scheme, signed by the trustees, were required in order to implement the proposed changes, so that the announcements issued to the members of the Scheme were ineffective. CHBC was negligent and in breach of contract in failing to ensure that the amendments were made. In addition, from April 2004 CHBC, acting through Mr Le Cras, appreciated that amendments to the Scheme rules were required, such that in making subsequent representations that the amendments were in place he was guilty of deceit. The error was appreciated by QEF in October 2007 and amendments to the Scheme rules effected on 30 July 2008. Because of the effect of s. 67 of the Pensions Act 1995, these changes could only be made prospectively, save for the increase in contributions from 5% to 7%. Save in the latter respect, as a result of CHBC's wrongdoing the liabilities of the Scheme between 1 April 2000 and 30 July 2008 were substantially greater than would have been the case if the required amendments to the rules of the Scheme had been properly made in a timely fashion. This had in turn increased the cost of funding the Scheme. The amount was estimated at £4.2 million. In addition approximately £88,000 was claimed in respect of costs.
5. Shortly before this letter QEF and the Trustees had commenced proceedings against CHBC in the High Court by the issue of a claim form on 30 March 2010. The Particulars of Claim served on 26 July 2010 articulated the claim as follows:
" 2000/2001 Amendments
13. On 8 March 2000 Mr Le Cras of RFBC attended a Trustees' Meeting at Leatherhead Court at which:
a. An actuarial report in relation to MFR requirements was considered and it was noted that the Actuary had stated that it would now be possible for the Foundation to maintain the funding rate provided that the future pension increase rate was reduced from a fixed 5% per annum to RPI to a maximum of 5%;
b. Mr Le Cras was instructed to take all necessary steps so as to ensure that such an amendment to the Scheme was effected as from 1 April 2000 and to prepare a suitable announcement for issue for employees informing them of the Scheme change.
14. Thereafter an announcement prepared by Mr Le Cras dated March 2000 was issued to members. In this announcement Mr Le Cras represented that as from 6 April 2000 the Scheme had been changed so that all pension earned from 6 April 2000 would, when it was paid, increase annually by the lower of 5% or the change in the Retail Price Index each year.
15. In fact, although at the material time the Foundation and the Trustees were led to believe by Mr Le Cras that the above change in benefits had been effected by way of the announcement to members dated March 2000, this did not in fact occur. In particular Mr Le Cras:
a. Represented that the above change had been effected when this was in fact not the case;
b. Failed to take any or adequate steps to arrange for the above change to be effected, and in particular to ensure that it was incorporated into the Rules of the Scheme. Clause 16 of the Third Definitive Trust Deed dated July 1999 expressly specified the manner in which amendments to the rules were required to be made, namely in writing under the hands of the Trustees. However, negligently and in breach of duty Mr Le Cras and RFBC proceeded on the basis that amendments could be made simply by way of an announcement to members;
c. Failed to provide any advice to the Foundation and the Trustees that it was necessary to amend the rules of the Scheme in order to give effect to the above change but instead led them to believe that an announcement to members in respect of the proposed change was sufficient;
d. Failed to ensure that a change to the Scheme was effected which covered both pensions in payment and the revaluation of deferred pensions.
16. In January 2001 Mr Le Cras prepared a further announcement to members which represented that:
a. in March 2000 the intention of the Foundation and the Trustees had been that the previously fixed 5%...
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