Hearn and Others v Dobson and another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan,MR JUSTICE MORGAN |
| Judgment Date | 17 July 2008 |
| Neutral Citation | [2008] EWHC 1620 (Ch) |
| Date | 17 July 2008 |
| Court | Chancery Division |
| Docket Number | Case No: HC08C00819 |
[2008] EWHC 1620 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Morgan
Case No: HC08C00819
Christopher Tidmarsh QC (instructed by Travers Smith LLP) for the Claimants
Nicolas Stallworthy (instructed by Lovells LLP) for the First Defendant
Paul Newman (instructed by Sacker & Partners LLP) for the Second Defendant
Hearing dates: 27 th June, 30 th June & 1 st July 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of thisJudgment and that copies of this version as handed down may be treated as authentic.
This judgment concerns the Construction Confederation Staff Pension Scheme, which is a final salary scheme with some 503 members (“the Scheme”).
The issue which arises concerns the operation or potential operation, in relation to the Scheme, of Part 3 of the Pensions Act 2004 and the Occupational Pension Schemes (Scheme Funding) Regulations 2005.
The Scheme was originally called the BEC Staff Pension Scheme and was established with effect from 1 st July 1992 by an interim trust deed of 18 th June 1992. It was later governed by a definitive trust deed and rules dated 16 th December 1994.
By a trust deed dated 8 th May 2000, made between the Construction Confederation (“CC”), an unincorporated employer's association, and certain named trustees, the Scheme was directed to be known as the Construction Confederation Staff Pension Scheme and a new set of rules (“the Rules”) attached to the trust deed of 8 th May 2000 were given effect in place of the earlier rules.
The Scheme was a multi-employer scheme. Under the Rules of the Scheme CC is defined as the Principal Employer. There were three other employers who participated in the Scheme. They were Home Builders Federation Limited (“HBF”), Housebuilder Media Limited (“HBM”) and Civil Engineering Contractors Association (“CECA”).
The Rules which came into effect on 8 th May 2000 have since been amended in certain respects. I will first set out the Rules which came into effect in May 2000 and then refer to later amendments.
Rule A1 deals with the interpretation of the Rules. By Rule A1.6, it is provided that headings above or at the beginning of text are for convenience only and should not affect the interpretation of that text. Rule A2 contains a large number of terms which are defined for the purposes of the Rules. I will attempt to summarise these definitions rather than set out their text in full. An Employee is a permanent employee of an Employer. Employers are the Principal Employer and such other firms and companies as become Employers in accordance with Rule L1. The Fund is defined so as to refer to all contribution monies, property, rights and other matters held by the Trustees for the purposes of the Scheme. Identified Beneficiary has the meaning given in Rule M1.4. A Member is a person admitted to membership of the Scheme in accordance with Rule B2. A Member remains a Member of the Scheme for so long as any benefits are or may be payable for him. Normal Retirement Date is, in relation to a Member or Employee, the date on which he reaches age 65. Pensionable Service in relation to a Member is defined, principally, by reference to a period of Service as a Member. Service is any service as an Employee.
Part B of the Rules deals with membership. By Rule B1.1, an Employee is eligible to become a Member if he has reached 21, but is less than 64. By Rule B1.2, an employee or director of an Employer who does not satisfy the normal conditions of eligibility in Rule B1.1 may be eligible for membership if the Trustees and Employer agree, in which case such a person's membership is subject to such conditions as the Trustees think fit. Rule B2.1 deals with the procedure by which a person becomes a Member. By Rule B5.1, a Member still in Service may terminate his Pensionable Service by giving notice to that effect.
Part C of the Rules deals with contributions. Part C1 deals with Members' contributions. Part C2 deals with employers' contributions. Rule C2.1 confers on the Principal Employer power, in the circumstances therein described, to determine the amount of liability of an Employer to pay contributions to the Fund. Rule C2.2 describes the funding targets of the scheme. Rule C2.5 cross refers to the minimum funding requirements in sections 56 to 61 of the Pensions Act 1995.
Part D of the Rules deals with retirement benefits. Part E of the Rules deals with the options available at retirement. Parts F and G deal with death benefits and breaks and absence from service. Part H deals with leaving benefits. Under Rule H1.1, if a Member leaves Service before Normal Retirement Date, and various other provisions do not apply, then he shall be entitled to a deferred pension payable from Normal Retirement Date. By H4, if a Member leaves Pensionable Service, no pension is paid to him while still employed by an Employer until Normal Retirement Date.
Part J of the Rules lays down various detailed provisions as to benefits under the Rules. Part K of the Rules deals with the position of the Trustees of the Scheme.
Part L of the Rules deals with the general operation of the Scheme. By Rule L1.1, provision is made for a company or firm to participate in the Scheme and become an Employer in respect of it. By Rule L1.3, it is provided that the Trustees may release an Employer from its liabilities under the Scheme in certain circumstances.
Part M of the Rules deals with various modes of termination. Under Rule M1.1, an Employer may withdraw and terminate its liability under the Scheme in respect of all its employees by, amongst other things, giving notice to that effect, specifying a Termination Date. By Rule M1.4, on a termination of an Employer's liability, the Trustees must identify certain persons who are then called “Identified Beneficiaries”. The Identified Beneficiaries include, in particular, Members in Pensionable Service of the Employer on the Termination Date.
Rule M2.1 provides:
“On a termination of an Employer's liability, the Trustees shall set up a Separate Fund within the Fund in accordance with this Rule M2. Rule M5 shall apply to the Separate Fund, and Identified Beneficiaries shall not benefit from any other part of the Fund (except as mentioned in Rule M5.8) unless they have benefit entitlements which are not included in the Basic Entitlements to which the Separate Fund relates.”
Rule M2.2 deals with the value of the Separate Fund. In summary, the value of the Separate Fund is the value of the Basic Entitlements or the Share of Fund, if that is less than the value of the Basic Entitlements. Basic Entitlements are those set out in Rule M5.2 and their value is to be certified by the Actuary of the Scheme. By Rule M2.5, the Share of Fund is the value of that part of the Fund which relates to benefits for Identified Beneficiaries calculated by the Actuary to the Scheme on a basis which involves certain specified assumptions.
Rule M2.6 deals with the time at which the Separate Fund is to be set up and provides that the Trustees may set up a Separate Fund at any time after the event causing the termination but, if they have not set up the Separate Fund by the Termination Date, then they must do so as soon as reasonably practicable after that date.
Rule M2.7 provides:
“When setting up a Separate Fund as part of the Fund, it shall not be necessary to allocate particular assets to it. Instead, the Trustees may record the value of the Separate Fund and all payments, receipts and other transactions affecting that value. If particular assets are allocated to the Separate Fund, that shall also be recorded and all receipts from and expenditure relating to those assets shall be added to or paid from the Separate Fund which is not so represented by assets allocated to it as they think fit, which may be by addition of interest or by additions or deductions reflecting the total investment performance of all or any part of the Fund.”
Rule M3 deals in detail with the way in which the liability of all Employers in respect of all their Employees may terminate.
By Rule M4.1, any Identified Beneficiary who is a Member in Pensionable Service on the Termination Date is treated as leaving Service on that date, so that he shall not pay contributions for any period after that date.
The relevant part of Rule M4.2 provides:
“An Employers' liability to make payments under the Scheme (whether by way of contributions, payment of expenses, indemnity of the Trustees or otherwise) shall not terminate in respect of amounts due, expenses incurred or claims made on or before the Termination Date. Interest may continue to accrue under Rule C2.4 despite termination.”
By Rule M4.4, all duties, powers, discretions and options of the Trustees, Employers, Members and other persons are to continue after the Termination Date, except as expressly stated in Rules M1 to M5.
Rule M5 deals with certain matters in respect of the Separate Fund. Rule M5.1 provides for the Separate Fund to be used to repay borrowings and costs and expenses so far as they relate to the Separate Fund or Identified Beneficiaries. Rule M5.2 deals with what was earlier described as Basic Entitlements. Rule M5.2 is subject to Rule M5.1 and to section 73 of the Pensions Act 1995. By Rule M5.2, the Separate Fund is to be used to provide the benefits for Identified Beneficiaries as more particularly set out in Rule M5.2. The benefits included in the list in Rule M5.2 include pensions and other benefits...
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