Capital Cranfield Trustees Ltd v Walsh and Another

JurisdictionEngland & Wales
JudgeMR JUSTICE LINDSAY,Mr Justice Lindsay
Judgment Date09 December 2004
Neutral Citation[2004] EWHC 2874 (Ch)
Date09 December 2004
CourtChancery Division
Docket NumberCase No: 2105 of 2004

[2004] EWHC 2874 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

COMPANIES COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

In The High Court Of Justice

Chancery Division

Before:

The Honourable Mr Justice Lindsay

Case No: 2105 of 2004

Claim No. Hc04c00486

In The Matter Of K & J Holdings Limited

And In The Matter Of The Insolvency Act 1986

Capital Cranfield Trustees Limited
Applicant
and
(1) Timothy Gerard Walsh
(2) Richard Victor Yerburgh Setchim
respondents
Between:
Capital Cranfield Trustees Limited
Claimant
and
(1) Pinsent Curtis (a Firm)
(2) Pinsent Curtis Biddle (a Firm)
(3) Pinsents
Defendants

Mr N. Inglis-Jones Q.C. and Mr M Collings (instructed by Sacker & Partners) for Capital Cranfield Trustees Ltd

Mr A. Steinfeld Q.C. (instructed by Lovells) for Pinsents

Mr A. Simmonds Q.C. (instructed by Martineau Johnson) for Messrs T.G. Walsh and R.V.Y. Setchim

Hearing dates: 24 th, 25 th and 26 th November 2004

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.

MR JUSTICE LINDSAY Mr Justice Lindsay

Mr Justice Lindsay

A. Introduction

1

This judgment concerns the same or similar questions of construction arising in two quite different proceedings.

2

The first proceedings ("the Proof of Debt proceedings") relate to a Proof of Debt submitted by Capital Cranfield Trustees Limited ("the Trustee") as sole trustee of the Kenrick & Jefferson Group Pension Plan ("the Scheme") in the Members' Voluntary winding up of K & J Holdings Limited ("the Company"), formerly Kenrick & Jefferson Limited. The Scheme, now in winding up, was a defined benefit "balance of cost" Occupational Pension Scheme to some of the terms of which I will need to refer at length. The Respondents, Messrs T.G. Walsh and R.V.Y. Setchim, both of PricewaterhouseCoopers LLP, appear by Mr Simmonds Q.C. and are Joint Liquidators of the Company ("the Liquidators"). The Trustee, on the footing that the Scheme had insufficient assets to meet all its liabilities, lodged a Proof in the Company's winding up. It was calculated by reference to the cost of purchasing from one or more insurance companies provision to the members of the Scheme of the benefits to which they had become entitled; that can be called the "buy-out" basis of calculation. However, the Liquidators rejected that Proof, which was then "estimated to be in the region of £12.2m" and the Trustee, which appears by Mr Inglis-Jones Q.C. leading Mr Collings, now appeals against that rejection. Mr Inglis-Jones tells me that the £12.2m has grown to some £18.23m.

3

The question of construction in the Proof of Debt proceedings is whether, under the provisions of the Scheme, the Trustee was entitled to demand a contribution from the Company on the buy-out basis after the Company had by notice purported to terminate the Scheme. That question arises as it was only after the Company had served a notice purporting to terminate the Scheme (and after, also, the notice had, according to its terms, taken effect) that any requirement for payment of such a lump-sum contribution was made.

4

The second proceedings ("the Negligence Action") are also brought by the Trustee but against Pinsent Curtis, Solicitors (and related firms, successors of Pinsent Curtis) who appear by Mr Steinfeld Q.C.. The Negligence Action alleges professional negligence on the part of the Solicitors ("Pinsents") as former advisers of the Trustee in their advice to, or failure to advise, the Trustee, in particular as to there being (as the Trustee asserts) at material times an ability in the trustee for the time being of the Scheme under its terms to demand any buy-out shortfall as a contribution from the Company. I must emphasise that there has been as yet no investigation into the facts in the Negligence Action, in which Pinsents deny negligence. I have not needed to go into questions such as whether Pinsents were instructed by the Trustee to advise, whether they did or did not advise and, if they did advise, whether their advice was negligent or not. However, in the Defence in the Negligence Action, Pinsents assert that the relevant provisions of the Scheme did not entitle the Trustee to demand a buy-out shortfall from the Company either before or after the Company purported by notice to terminate the Scheme. Accordingly, the Proof of Debt proceedings and the Negligence Action raise, as to the effect of the provisions of the Scheme after such notice, the very same principal question of construction. Moreover, some of Pinsents' arguments on construction seek to contrast and compare the effect of the Scheme after such a notice with that obtaining before. Hence there were plainly compelling reasons why the questions of construction that had arisen should be decided at one hearing fixed to deal with both proceedings. Accordingly on the 11 th October 2004 Master Price ordered that the questions of construction in the Negligence Action should come on with the Proof of Debt proceedings. In that way I have come to be required to deal with two quite different proceedings at one and the same time.

B. Scheme provisions

5

The Scheme, then regulated by different instruments, began life in 1959. It was re-structured as a Group Pension Plan in 1984. The terms of the Scheme, as it was immediately before the final form with which I am concerned, consisted of a Definitive Deed, as amended from time to time, which is now found in a so-called "working edition" of December 198All parties made reference to such earlier provisions ("the Earlier Provisions") as aids to the construction of the successor provisions as to which the questions of construction before me arise, namely the comprehensively re-drafted and still current form of the Definitive Trust Deed of the 16 th June 1997 ("the Current Provisions").

6

The Current Provisions begin with declarations, one of which states that the Earlier Provisions "… shall be replaced by the provisions set out in the Schedule to this Deed …". That Schedule and its appendices then set out the rest of the Current Provisions. I shall need to refer to only a few of the many defined terms; "the Actuary" is defined as "the Fellow of the Institute of Actuaries or of the Faculty of Actuaries appointed for the purpose of the Scheme by the Trustees" (A.1.1). The "Principal Employer" is defined (A.1.1) as the Company "or its replacement for the time being in accordance with the Trust Deed". The term "Employers" is defined (A.1.1) to include the Principal Employer and other employers admitted to participation in the Scheme but there never was, in fact, at any material time any Employer but the Principal Employer. "The Fund" (A.1.1) is defined as "All the cash and other assets from time to time held by or on behalf of the Trustees for the purposes of the Scheme". The singular was to include the plural (A.1.4). The discretions and powers conferred on the Trustees were described as "absolute and unfettered" (A.2); a power to amend was included (B.4.1). Clause B.6, headed "Perpetuities", after a reference to the Pension Schemes Act 1993 provided as follows:-

"If the relevant provisions of section 163 of the 1993 Act and the Personal and Occupational Pension Schemes (Perpetuities) Regulations 1990 cease to apply to the Scheme, the Scheme shall be wound up and the trusts dissolved on the later of the date which falls on the 20 th anniversary of the death of the last survivor of the descendants living on 3 rd April 1959 of His late Majesty King George V and the latest date which may then be permitted by law."

That period of twenty years has, of course, not yet even started.

7

Clause C of the Current Provisions, headed "Use of the Fund" began, at C.1.1, as follows:-

"The Trustees shall continue to pay out of the Fund held by them on irrevocable trusts the benefits for which the Scheme provides and the expenses properly incurred by the Trustees. Any such expenses and benefits may be paid in full as and when they become payable without regard to the sufficiency of the Fund to meet any other expenses or benefits whether payable presently, prospectively or contingently. The Trustees need not distinguish between capital and income of the Fund for any purpose."

8

Section E.6, headed "Actuarial Valuations", provided, so far as material, as follows:_

"E.6.1 The Trustees shall appoint an Actuary ….

E.6.2 The Trustees shall obtain actuarial valuations of the Scheme from time to time but in any event the effective date of each such valuation shall not be later than 3 years and 6 months after the date of the previous valuation. Each such valuation shall be obtained as soon as reasonably practicable after its effective date and shall comply with and be accompanied by an actuarial statement pursuant to the Disclosure Regulations."

9

That was a reference to the Occupational Pension Schemes (Disclosure of Information) Regulations 1996. The Current Provisions include the ability of the Scheme to receive transfers from other schemes and to make transfers to other schemes (Section H). At Section I, headed "Re-organisations of the Scheme" provision was made at I.2 for a new Principal Employer replacing the Company. At I.3, marked "Closure to new Members", the Scheme provided that:-

"The Principal Employer may close membership of the Scheme to new entrants and may direct that the Scheme be reopened, in either case by giving written notice to the Trustees."

10

At I.4 the Current Provisions include a provision which is of some importance because of the reference to it found in Clause L.1.3, one of the clauses, which I shall come onto, which are most central to the questions of construction before me. I.4, so far as relevant, provides as follows:—

"Cessation of participation

If an Employer...

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