Cemex UK Marine Ltd v MNOPF Trustees Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 10 December 2009 |
| Neutral Citation | [2009] EWHC 3258 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC09C00708 |
| Date | 10 December 2009 |
[2009] EWHC 3258 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: MR Justice Peter Smith
Case No: HC09C00708
Mr Brian Green QC and Mr Andrew Mold (instructed by Wragge & Co) for the Claimant
Mr Michael Furness QC and Ms Emily Campbell (instructed by Baker & McKenzie) for the Defendant
Hearing dates: 19 and 20 November 2009
Peter Smith J:
INTRODUCTION
These proceedings have been brought to determine whether an “ Employment Cessation Event” (“ECE”) has occurred in respect of the Claimant, Cemex UK Marine Ltd (“Cemex”) which is a participating employer in the Merchant Navy Officers Pension Fund (“MNOPF”). It is a multi employer defined benefit occupational pension scheme.
It is common ground that if an ECE occurred at all in relation to Cemex it occurred on 28th November 2005. The Defendant (“the Trustee”) for the MNOPF claims that the ECE did occur on that date. Cemex denies it.
If an ECE has occurred then Cemex will have become liable for a debt under section 75 Pensions Act 1995 (“Section 75”- “Section 75 Debt”). As at 28th November 2005 the definition of an ECE was contained in the then current version of the Occupational Pension Schemes (Employer Debt) Regulations 2005 (2005/678) (“Regulations”). Those regulations had been brought into force on 6th April 2005.
The definition of ECE in the Regulations uses the same wording as had been included in all sets of regulations made for the purpose of Section 75 since that Section had come into substantive force on 6th April 1997. The first set of such regulations was the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1996 (1996/3128) (“the 1996 Regulations”).
Section 75 imposes a debt on an “Employer” in the case of a defined benefit Occupational Pension Scheme in cases where:—
1) The Scheme in which the Employer participates goes into Winding Up (Section 75 (2) PA 1995); or
2) The Employer which participates in the Scheme suffers an “Insolvency Event” (even though the Scheme might not then automatically go into Winding Up) (Section 75 (4) and 6 (a) PA 1995).
3) ECEs are specific to multi employer schemes and constitute the only other circumstances in which a Section 75 Debt arises under the relevant legislation.
4) ECE was defined by Regulation 6 (4) of the Regulations as follows:—
“ For the purposes of these Regulations an [ECE] occurs in relation to an employer if he ceases to be an employer employing persons in the description of employment to which the scheme relates at a time when at least one other person continues to employ such persons”.
SUBSEQUENT LEGISLATION
From and after 6th April 2008 the definition of ECE has been changed. The definition is now found in Regulation 2 (1) of the current amended edition of the Occupational Pension Schemes (Employer Debt) Regulations 2005 (2005/678) (“New Regulations”) which provides in material part that an ECE:—
“ occurs on the date on which (a) an employer has ceased to employ at least one person who is an active member of the scheme, and (b) at least one other employer ….. continues to employ at least one active member of the scheme”.
The New Regulations (Regulation 6A) however mitigated the effects of this by providing for a 12 month period of grace in which an employer who ceases to employ any active members of the scheme can commence to employ another active member and so avoid the occurrence of an ECE in relation to it.
BACKGROUND
The MNOPF is a defined benefit occupational scheme providing pension benefits for “ Officers” of the Merchant Navy employed by participating employers of which Cemex has at all material times been one and remains one. As at 31st March 2008 the total membership of MNOPF was 53,167 comprising 1,635 active members, 27,380 deferred members and 24,150 pensioner members.
The MNOPF was originally established by a Trust Deed and Rules dated 29th October 1937. However it is currently governed by a Trust Deed and Rules dated 25th June 1999 (as amended from time to time) (“the Trust Deed and Rules”).
The MNOPF enables qualifying employers to participate and so provide retirement benefits for officers in their employment who satisfy the conditions for membership of the MNOPF. It is common practice for officers to change employers in their careers yet remain in the industry. Thus the MNOPF provides officers with the opportunity for continuity in their pension provision despite a change in their employment from one participating employer to another. Assets of the MNOPF are pooled there are no individual sections for each participating employer.
Cemex is a subsidiary of Cemex Investments Ltd which is part of the Cemex Group. Its business consists of dredging sand and gravel from the sea and it is in that connection that it has for at least 28 years employed officers of the British Merchant Marine. It commenced participating in the MNOPF as a condition of being a member of the British Chamber of Shipping.
MEMBERSHIP OF THE MNOPF
Eligibility of the MNOPF is primarily limited to “Officers”. By rule 3.0 of the Trust Deed and Rules it is provided that “ [it] means and includes Masters, Navigating Officers, Engineer Officers, Radio Officers (excluding trainees), Refrigerator Engineers, Electrical Engineers, Boilermakers, Pursers and Catering Officers and such other persons as the Trustees may from time to time regard as holding any position of authority on board ship and shall include such officers engaged on the shore staff of the Participating Employers”. The MNOPF was generally closed to new members by deed of amendment dated 1st November 1996. However the Trustees retain a discretion to admit members to the membership of the MNOPF under rule 4 subject to their consent. Thus even after 1st November 1996 Officers could become members of the MNOPF so long as the Trustees' consent was obtained.
ELIGIBILITY OF CEMEX EMPLOYEES
Cemex has always allowed those of its employees who were eligible for the MNOPF the opportunity to join. It does provide a separate pension scheme (the Cemex UK Pension Fund) and as will be seen some of the relevant potential members of MNOPF actually elected to join that scheme instead of the MNOPF.
FINANCIAL CONSEQUENCES
Like many pension funds the MNOPF is in deficit. Its deficit calculated on a discontinuance basis was £950,000,000 as at 31st March 2006, £784,000,000 as at 31st March 2007 and £961,000,000 as at 31st March 2008. On an ongoing basis the deficit for the respective years are £151,000,000, £103,000,000, and £83,000,000.
The discontinuance deficit as at 28th November 2005 calculated for Section 75 purposes was £1,210,000,000. The amount Cemex will be liable to pay if the ECE has occurred is alleged to be £20,282,426.
As a participating employer it is still liable to make up the deficits and is currently making annual deficit contributions of £177,099 (commenced 30th September 2005 and continuing through to March 2014). Cemex will still be liable under the MNOPF Rules to continue to fund the MNOPF deficit even if an ECE has occurred. Further, it is possible that if an ECE event has occurred in the circumstances of this case Cemex will be liable to have a further ECE when its present active members cease to be such. The possibility is far from academic as will appear.
There is no suggestion that Cemex will not fund the ECE if established.
CATEGORIES OF MEMBERS
There are a number of potential categories of members. First there is “ an active member” which in relation to an occupational pension scheme means a person who is in pensionable service under the scheme (PA 1995 Section 124 (1)). A “ deferred member” means a person other than active or pensioner member who has accrued rights under the scheme (ibid). Finally a “ pensioner member” means a person who in respect of his pensionable service under the scheme or by reason of transfer credits is entitled to the present payment of pension or other benefits and who is not an active member of the scheme (ibid).
Expressions in the Regulations have the same meaning and effect as in Part 1 of the 1995 Act (section 124).
Significantly Regulation 6 (4) does not activate an ECE by reference to any of the above defined categories of members. It activates it by reference to a category of employee of Cemex. This is to be contrasted with other parts of the Regulations. See for example Regulation 9 (1) which differentiates between active members and the lack of active members. This is important because the Trustees contention is that the words in Regulation 6 (4) “ employing persons in the description of employment to which the scheme relates at a time when at least one other person continues to employ such persons” relates to active members.
CEMEX'S EMPLOYEES
On 27th November 2005 Cemex employed one “ active member” of the MNOPF namely Mr Blair.
On 28th November 2005 Mr Blair attained his normal pension age but continued to be employed by Cemex as “ an Officer”. In consequence from that date he became a “ deferred member” of MNOPF (i.e. a member of MNOPF whose pension in due course would be paid from the MNOPF if and when he called for it; see the definition above).
On 1st January 2006 Mr Blair elected to start drawing his pension from the MNOPF but continued to be employed by Cemex as an “ Officer”. In consequence Mr Blair became a “ pensioner member” of the MNOPF in accordance with the definitions set out above.
On 31st March 2006/1st April 2006 Mr Blair's job at Cemex was taken over by another “ Officer” Mr Hunter who was at all material times (i.e. before and after that date and continuing today) an “ ...
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