Foster Wheeler Ltd v Hanley and Others

JurisdictionEngland & Wales
JudgeThe Hon Mr Justice Patten
Judgment Date28 November 2008
Neutral Citation[2008] EWHC 2926 (Ch)
CourtChancery Division
Date28 November 2008
Docket NumberCase No: HC07C03485

[2008] EWHC 2926 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Honourable Mr Justice Patten

Case No: HC07C03485

Between:
Foster Wheeler Limited
Claimant
and
(1) Andrew John Hanley
(2) David Wardlaw
(3) George Midgley
(4) Norman Frederick Harley
(5) Trevor Bryan Staples
(6) Richard George Larkin
(7) Richard Bruce Chacksfield
(8) Russell Thomas Forrester Evans (The Trustees for The Time Being of The Foster Wheeler Pension Plan (“the Scheme”))
(9) Richard Williams
(10) Damon Hill
(11) Duncan White
(12) Veronica Gee
Defendants

Richard Hitchcock and Farhaz Khan (instructed by Blake Lapthorn) appeared on behalf of the Claimants

Andrew Simmonds QC (instructed by Clifford Chance LLP) appeared on behalf of Defendants (1) to (8)

Keith Bryant (instructed by Bond Pearce LLP) appeared on behalf of Defendant (9)

David E. Grant (instructed by Burges Salmon LLP) appeared on behalf of Defendant (10)

Andrew Short (instructed by CMS Cameron McKenna LLP) appeared on behalf of Defendant (11)

Nicolas Stallworthy (instructed by Wragge & Co LLP) appeared on behalf of Defendant (12)

Approved Judgment

Hearing dates: 7 th, 8 th, 9 th, 10 th, 13 th, 14 th, 15 th and 16 th October 2008

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 PATTEN The Hon Mr Justice Patten

Introduction

1

This is a Part 8 claim brought by Foster Wheeler Limited (“the Company”) which is the Principal Employer (as defined) under the Foster Wheeler Pension Plan (“the Scheme”). The Scheme is a registered (formerly exempt approved) occupational pension scheme established in 1956 which provides benefits both on a defined benefit and defined contribution basis to different sections of members. The Scheme is currently governed by the provisions of a Definitive Trust Deed and Rules dated 9 th April 2002 as subsequently amended.

2

According to the evidence, the Scheme, as at the last triennial actuarial valuation in April 2005, had a total of 5,548 members, of whom all but 83 were members of the defined benefits section. The issues raised by the Part 8 claim relate solely to this section of the Scheme.

3

The Scheme is now in deficit. As at 1 st April 2005 it was estimated to have a funding deficiency of £68 million. Since then the Company has made additional monthly contributions of about £1 million in order to amortise the deficit but, despite this increased funding, the position has deteriorated further and the Scheme's actuary has indicated that the deficit may now exceed £100 million. This figure could be increased by between £18 million and £30 million, depending upon the answers to some of the issues raised in the claim.

4

The purpose of these proceedings is to resolve a number of questions which have arisen out of the attempts made by the Trustees of the Scheme and the Company to give effect to the decision of the European Court of Justice in Barber v Guardian Royal Exchange Assurance Group [1991] QB 344 (“ Barber”). The ECJ held that pension payable under a private occupational scheme constituted “pay” for the purposes of Article 119 (now Article 141) of the EEC Treaty and that it was, therefore, unlawful for such a scheme to discriminate between men and women in similar employment by providing for their respective pension benefits to be payable at different ages.

5

Article 119 provides, inter alia, that:

“Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.”

6

Most schemes (and this one is no exception) had stipulated 60 as the normal retirement age for women and 65 for men thereby mirroring their entitlement to the state pension. On 30 th January 1990 the Advocate General delivered his opinion in Barber indicating that Article 119 did apply to pension benefits. The judgment of the Court was delivered on 17 th May 1990. In paragraphs 28–29 the ECJ stated that pension paid under a contracted-out scheme constitutes consideration paid by the employer to the worker in respect of his employment and, as a consequence, fell within the scope of Article 119. It made no difference, they said, that the scheme was set up as a trust administered by trustees independent of the employer because Article 119 also applied to consideration received indirectly from the employing company.

7

In Barber the issue was whether it was contrary to Article 119 for a male employee who was made compulsorily redundant at the age of 52 to be entitled only to a deferred pension at his normal pensionable age (62) when a woman in the same position would have received an immediate pension.

8

The Court confirmed that the principle of equal pay enshrined in Article 119 must be guaranteed and applied in respect of each element of the remuneration paid to workers rather than on a global basis and that it, therefore, precluded making payment of pension dependent on an age condition which varied according to the sex of the employee.

9

The Court of Appeal in its reference also sought guidance as to whether Article 119 had direct effect in the circumstances of the case. In answer to this question, the ECJ said in paragraph 39 of its judgment that Article 119 may be relied upon before the national courts and that it was for those courts to safeguard the rights which that provision conferred. The guidance was no more detailed than that. The Court did, however, go on to state (see paragraphs 40 to 45) that, in view of the financial consequences its ruling would have for pension schemes if applied retrospectively, the direct effect of Article 119 could not be relied upon in order to claim entitlement to a pension with effect prior to the date of the judgment except in cases where employees had already commenced legal proceedings.

10

The importance of this last point is that it set 17 th May 1990 as the date beyond which it became unlawful for pension schemes to discriminate between men and women in similar work in terms of their normal retirement age and the rights contingent on them. But the decision offers no further guidance as to how the principle of equal pay should be implemented and, in particular, whether the direct application of Article 119 imposed on existing schemes an automatic re-formulation of the relevant rules or merely delegated to the trustees and the employer a margin of discretion as to how and in what form the changes required should be made.

11

Further guidance on these points was given by the ECJ in Coloroll Pension Trustees Ltd v Russell [1995] ICR 179 (“ Coloroll”) where, in relation to a defined benefit scheme, the trustees had sought rulings from the High Court as to the effect of the decision in Barber. The reference to the ECJ included questions as to whether members and their dependents could rely upon the direct effect of Article 119 in relation to claims made not against the employer but against the trustees; whether the effect of Article 119 was to require the trustees to administer the scheme as if the rules had been altered to reflect the principle of equal pay laid down by Article 119 or merely required the employer and the trustees to use such powers as they had (whether by way of amendment of the rules or otherwise) to secure that the benefits payable reflected the principle of equal pay; and whether the principle of equalisation required the benefits of the disadvantaged sex to be increased or those of the advantaged sex to be reduced. Clarification was also sought about the effect of the ruling in Barber that Article 119 should have no direct application prior to the date of the decision on 17 th May 1990.

12

On the first issue, the Court ruled that the obligations imposed on an employer by Article 119 could not be avoided by setting up an occupational pension scheme in the form of a trust and, as a corollary to this, that the trustees, although not parties to the contract of employment, are required to pay benefits which retain their character of pay within the meaning of Article 119. It followed that employees did have the right to enforce their rights under Article 119 directly against the trustees of a pension scheme “who are bound, in the exercise of their powers and performance of their obligations as laid down in the trust deed, to observe the principle of equal treatment”.

13

This leads directly to the question of how the requirements imposed by Article 119 are, as a matter of law, to be implemented. Are the rules and the provisions of the trust deed to be treated as revised and read in a way which conforms to the principle of equal pay or are the trustees and the employer to be given the opportunity of revising the rules of the scheme in a way which gives effect to the requirements of Article 119? This issue has particular relevance to the Company's arguments addressed on question 3 in the Part 8 claim form which rely, in part, on what might be described as the automatic imposition of an Article 119 regime as from 17 th May 1990 as overriding the subsequent attempts of the parties themselves to reform the rules of the scheme so as to make them compliant.

14

The ECJ addressed the question of implementation in paragraphs 25 to 36 of its judgment as follows:

“25. By the second part of its first question the High Court asks whether, where certain rules of the scheme are incompatible with the principle of equal pay, the trustees must administer the scheme without regard to those rules, or whether the employer and the trustees must amend them so as to make them compatible with article 119. The High Court also asks whether the only way of bringing about equal treatment is in any event to increase the benefits of the disadvantaged class, or whether such equality may also be achieved...

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2 cases
  • Foster Wheeler Ltd v Hanley and Others
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 8 July 2009
    ...EWCA Civ 651 [2008] EWHC 2926 (Ch)" class="content__heading content__heading--depth1"> [2009] EWCA Civ 651 [2008] EWHC 2926 (Ch) IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE (CHANCERY DIVISION) Patten J Before: Lady Justice Lor......
  • William Grant And Sons Limited And Others V. Mercer Limited
    • United Kingdom
    • Court of Session
    • 9 April 2010
    ...funder of the scheme and the second pursuers being obliged to apply the terms of Article 119 (Foster Wheeler Limited v Hanley, [2008] EWHC 2926 (Ch) [2009] Pens LR 39, particularly at paragraph 22). If the "Barber window" was not closed until 2001, instead of 1993/4, this would result in mu......

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