CMG Pension Trustees Ltd v CGI IT UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Leech |
| Judgment Date | 11 August 2022 |
| Neutral Citation | [2022] EWHC 2130 (Ch) |
| Docket Number | Case No: PE-2021-000010 |
| Court | Chancery Division |
[2022] EWHC 2130 (Ch)
Mr Justice Leech
Case No: PE-2021-000010
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST: PENSIONS (ChD)
IN THE MATTER OF THE CMG UK PENSION SCHEME
7 Rolls Buildings
Fetter Lane, London
EC4A 1NL
Mr Andrew Short QC and Ms Elizabeth Grace (instructed by Addleshaw Goddard LLP) appeared on behalf of the Claimant.
Mr Keith Rowley QC and Mr Henry Day (instructed by Gowling WLG (UK) LLP) appeared on behalf of the Defendant.
Hearing dates: 29 April 2022, 1 and 2 May 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
I. Preliminary Matters
By Amended Claim Form dated 1 April 2022 the Claimant, CMG Pension Trustees Ltd (the “ Trustee” or the “ Trustees”), seeks the determination of certain issues relating to the construction and effect of Rule 5.11 (“ Rule 5.11”) of the current rules of the CMG UK Pension Scheme (the “ Scheme”) under CPR Part 8. On 28 September 1973 the Scheme was established and since that date the Trustee, which is a company limited by guarantee and was formerly known as CMG Computer Management Group (Pension Trustees) Ltd, has been the corporate and sole trustee of the Scheme.
The Defendant, CGI IT UK Ltd (the “ Employer”), is the Scheme's Principal Employer and has been since 30 April 2010. The Claim Form was originally issued on 20 May 2021 and also named CMG Ltd (“ CMG”), which was the Scheme's Principal Employer from 1 October 1973 until 29 April 2010, as the Second Defendant. CMG is no longer a party to the action (although nothing turns on this).
The Scheme is both a defined benefit pension scheme and a defined contribution pension scheme. This claim is concerned only with the defined benefit scheme which closed to future accrual on 30 April 2010 (when the change of Principal Employer took place). From 2009 onwards the Trustee and its advisers had begun to identify issues relating to the way in which benefit changes had been implemented and the Scheme had then been administered and which resulted in benefits being underpaid to members. The Trustee took steps to address these issues and then to pay off the arrears to members.
In September 2019 the question arose whether the Trustee should pay arrears to members which fell due for payment more than six years earlier. This issue turns on the construction and effect of Rule 5.11 and provoked a difference of view. The Employer contended that Rule 5.11 is a forfeiture provision and that its effect is (and was) to forfeit all sums which fell due for payment more than six years before. The Trustee argued that Rule 5.11 is not a forfeiture provision and did not have that effect in the present case.
I am now asked to determine nine issues which have arisen or may arise out of the construction and effect of Rule 5.11. The effect of Rule 5.11 turns (at least in part) on whether members entitled to benefits under the Scheme have made “claims” for those benefits within the six year period prescribed by the rule. For the purpose of deciding those nine issues I am asked to assume that claims were made on 1 October 2019 and that no further claims were needed after that date (however I interpret the rule and determine the issues). It follows, therefore, that the six year claims “period” with which I am concerned runs from 1 October 2013 to 30 September 2019. It is common ground between the parties that arrears accruing on or after 1 October 2013 are not forfeit.
In section II (below), I set out the statutory history of forfeiture clauses in pension schemes which informs the provisions of the Scheme. In section III, I set out the development of the Scheme itself. In section IV, I deal with the administration of the Scheme and how the issues which I have to determine have arisen. In section V, I set out the legal principles applicable to the construction of pension schemes and in section VI, I set out the issues which I have been asked to determine. In section VII, I deal with the construction of Rule 5.11 and whether it is a forfeiture provision and in section VIII, I set out my decision and reasons in relation to each of the nine issues. Finally in section IX, I summarise my conclusions and the way in which I dispose of the claim.
Mr Andrew Short QC and Ms Elizabeth Grace appeared for the Trustee and Mr Keith Rowley QC and Mr Henry Day appeared for the Employer. Mr Short invited me to make representation orders in the form set out in paragraphs 2 and 3 of the Amended Claim Form which provides as follows:
“2. An order pursuant to CPR 19, r 7 appointing the Claimant to represent all those persons actually or potentially entitled under the Scheme interested to argue that questions 26 to 32 above are to be answered in the manner that results in larger payments being made to members; that question 33.1 and 33.2.1 are to be answered in the affirmative and question 33.2.2 and 33.3 are to be answered in the negative;
3. An order pursuant to CPR 19, r 7 appointing the First Defendant to represent all current and former employers of the Scheme and all those persons actually or potentially entitled under the Scheme interested to argue that questions 26 to 32 above are to be answered in the manner that results in smaller or no payments being made to members; that question 33.1 and 33.2.1 are to be answered in the negative and questions 33.2.2 and 33.3 are to be answered in the affirmative.”
Mr Rowley supported Mr Short's application and I will make the requested representation orders. I add that paragraphs 26 to 33 of the Amended Claim Form reflect the nine individual issues which I have been asked to determine and which I so determine in section VIII (below).
II. Statutory Background
Rule 5.11 (and the Scheme rules more generally) cannot be properly construed and understood without an awareness of the statutory background which goes back as far as 1973 (when the Scheme was itself established). For much of what follows I express my gratitude to Mr Rowley and Mr Day for their thorough and clear explanation of the statutory history.
(1) The Social Security Act 1973
In the Social Security Act 1973 Parliament first legislated to control forfeiture clauses in pension schemes. The purpose of the relevant statutory provisions was to protect against forfeiture the rights of members who left pensionable service before the “normal pension age” but remained entitled to “short service benefit” (both terms of art under the Act). Schedule 16, paragraph 17 provided as follows:
“(1) No rule must operate so as to deprive a person of short service benefit (whether a member himself, or a member's widow or widower or dependant) by reference to— (a) failure by him or any other person to make a claim for the benefit or for any payment due as benefit; or (b) failure by him or any other person, at any time after termination of pensionable service, to give any notice, or comply with any formality, required by the scheme as a condition of entitlement.
(2) Sub-paragraph (1)(a) above is not to prevent reliance on any enactment relating to the limitation of actions; and in cases of failure to claim, the scheme may provide for the right to receive any payment to be forfeited in the event of its not being claimed within 6 years of the date on which it became due.”
Paragraph 17(2) permitted the trustees of a pension scheme, therefore, to rely on a defence of limitation. It also permitted (but did not require) a scheme to include a provision for forfeiture where no claim had been made for six years. Paragraph 18(1) also provided that a scheme could in certain limited circumstances contain a rule enabling the trustee to exercise a charge or lien over a member's short service benefit:
“(1) A scheme must contain no rule enabling a member's employer to exercise any description of charge or lien on, or set-off against, short service benefit, to the extent that it includes transfer credits; but a charge or lien on, or set-off against, a member's short service benefit is permissible (insofar as it does not include transfer credits) for the purpose of enabling the employer to obtain the discharge by the member of some monetary obligation due to the employer and arising out of a criminal, negligent or fraudulent act or commission by the member.”
Parliament took a similar approach in relation to “contracted out” benefits in the Social Security Pensions Act 1975. It introduced the state earnings related pension scheme (generally known as “ SERPS”) with effect from 6 April 1978, which provided an additional state pension (above the basic state pension). SERPS was replaced by the state second pension (“ S2P”) with effect from 6 April 1997.
Employers and employees could contract out of SERPS with reductions in the amount of national insurance contributions which both had to pay. But the employee had to be entitled to a minimum level of pension under the employer's occupational pension scheme known as a “ Guaranteed Minimum Pension” or “ GMP”. More usually, however, the employee's benefits under the scheme would be significantly greater than their GMP.
Section 39 permitted the GMP of a member or widow to be suspended or forfeited in circumstances to be prescribed and Regulation 9(2) of the Occupational Pension Schemes (Contracting-out) Regulations 1975 ( SI 1975/2101) contained the prescribed provisions. In particular, it provided as follows:
“(2) For the purposes of the said section 39(4)(b) the circumstances in which schemes may provide for an earner's or widow's guaranteed minimum pension (whether current or prospective) to be forfeited are—
(a) where the person...
To continue reading
Request your trial
-
The Pensions Ombudsman v CMG Pension Trustees Ltd
...FROM THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES BUSINESS LIST: PENSIONS (ChD) Mr Justice Leech [2022] EWHC 2130 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Paul Newman KC and Michael Ashdown (instructed by Pensions Ombudsman) for the Andrew Short K......
-
British Broadcasting Corporation v BBC Pension Trust Ltd
...30 In this case, I agree with the utility of considering the 1949 Deed and Rules, although like Leech J in Re CMG UK Pension Scheme [2022] EWHC 2130 (Ch), I prefer to start with the current versions and then to use the 1949 documents by way of a cross-check, to see whether they suggest any......