Hoover Ltd v Hetherington
| Jurisdiction | England & Wales |
| Judge | Mr Justice Pumfrey |
| Judgment Date | 27 May 2002 |
| Neutral Citation | [2002] EWHC 1052 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC 0103128 |
| Date | 27 May 2002 |
[2002] EWHC 1052 (Ch)
The Honourable Mr Justice Pumfrey
Case No: HC 0103128
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand. London. WC2A 2LL
Edward Nugee QC and Caroline Furze (instructed by Weightmans) for the Claimant
Robert Ham QC and Nigel Ginniff (instructed by Bermans) for the first Defendant
Nigel Inglis-Jones QC and Nicolas Stallworthy (instructed by Nabarro Nathanson) for the Trustee
Hearing dates: 22, 25 February, 1 March 2002
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.
INTRODUCTION
This case is concerned with the provisions of the Hoover (1987) Pension Scheme, to which I shall refer as 'the Scheme'. The Scheme is a contributory, balance of cost, defined benefit occupational pension scheme. The question which arises for decision relates to the defined benefits payable to a Member upon early retirement, either from service with Hoover or, in the case of deferred pensioners, some other employer.
As at 31 March 2001, it appears that the Scheme has 18,883 Members, of whom 1,534 are active; 9,369 are deferred pensioners, who retain accrued rights under the scheme but are not at present paid a pension; and 7,980 pensioners. The scheme assets are £399.3 million.
The first defendant, Mr Hetherington, was employed by the claimant in 1987, and he left in 1998. He was 57 when he left employment, and when he left he asked to be paid an early retirement pension. He is now employed full time by NACCO. The Employer's case is that Mr Hetherington is not entitled to be paid a pension until he retires from any employment. Mr Hetherington is sought to be made a representative defendant. It is intended that he should represent the scheme's active members and deferred pensioners, who for this purpose have the same interest. I think it is clear that he cannot represent all persons interested, but he can represent all active Members and deferred pensioners in whose interest it is to argue that an immediate pension is payable on early retirement. He does not represent existing pensioners.
For present purposes, the Scheme is governed by the Second Definitive Trust Deed and Rules brought into force by a Supplemental Deed made the 8 May 1990, which by clause 2 provides that the Supplemental Deed and the Second Definitive Trust Deed and Rules shall take effect and shall be read and construed as if they had been adopted on 17 March 1987. The Rules have been amended from time to time by deed and the copy with which I was provided shows the various interpolations and amendments. I shall refer to the Second Definitive Trust Deed and Rules as amended as the 'Deed' and the 'Rules'. Since 10 April 2001, the Scheme has been governed by the Third Definitive Trust Deed.
THE QUESTIONS
The questions raised by the Claim are as follows:
'1. Whether on a true construction of the Deed and Rules, and in the events which have happened,
(1) A Member "retires" within the meaning of Rule 5.3.1 if he:
(a) ceases to be in Service, as defined in Rule 1; or
(b) ceases to be in service with the intention of not taking any other full time employment; or
(c) ceases to be in service with the intention of not taking up any other full or part time employment; or
(d) in some other and if so, what, circumstances.
(2) A Member who pursuant to Rule 9.4 is entitled to preserved benefits under the Scheme is entitled pursuant to Rule 9.4.1 to a pension upon "early retirement" under and subject to the terms of rule 5.3:
(a) in all circumstances, irrespective of whether he remains in or intends to return to full or part time employment; or
(c) if he ceases to be in and has no intention of returning to full or part time employment; or
(d) in some other and, if so, what, circumstances.
(3) The principal Company under the Scheme is entitled to withhold its consent to the grant of an immediate pension under Rules 5.3.1 and 9.4.1 (otherwise than in the case of a Member who retires from Service on account of ill-health or incapacity):
(a) in all circumstances;
(b) in all circumstances, provided that it exercises such power in accordance with its implied obligation that it will not conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between it and its employees and former employees;
(c) in no circumstances; or
(d) in some other, and, if so, what, circumstances.'
THE RELEVANT PROVISIONS OF THE DEED AND RULES
The crucial provisions of the Scheme relating to retirement are found in Rule 5. I shall set the relevant rules and introduce the definitions. The central question will be what 'retires from Service' in rule 5 means. It is simplest to run through the provisions in the order in which they become relevant.
Rule 5.1 is concerned with 'normal' retirement. The 'Normal Retirement Age' is 65, subject to a qualification immaterial for present purposes.
'5.1 Normal Retirement Pensions
Subject to the provisions of Rule 14 (Inland Revenue Limits) and Rule 15 (Guaranteed Minimum Pensions) a Member who retires from Service at his Normal Retirement Age and who was in Pensionable Service on the day immediately preceding his Normal Retirement Age shall be entitled to an immediate annual pension payable during his lifetime equal to one-seven hundred and twentieth of his Final Salary for each month or part of a month of Pensionable Service subject to a maximum of two-thirds of his Final Salary.'
'Service' is defined to mean 'employment as a director or permanent employee with any of the Employers' and it is provided that Service shall be deemed continuous although broken by periods of one month or less or performed partly with one Employer and partly with another Employer. For this purpose, 'Employer' means member of the Hoover Group.
Hoover does not contend that there are any circumstances in which leaving Hoover's employment at or after the Normal Retirement Age will not trigger the payment of an immediate pension under Rule 5.1, provided that the employee was in Pensionable Service on the preceding day. 'Pensionable Service' is defined in Rule 1 (the definitions Rule) as follows:
'PENSIONABLE SERVICE means the aggregate of:
(1) any period of the Member's service while a member of the Staff Scheme and any other periods of service treated as pensionable thereunder;
(2) the period of the Member's continuous membership of the Scheme until his Normal Retirement Age, termination of Service, leaving active membership (if after 5 April 1988), retirement or death (whichever shall be the earliest), subject to Rule 7 in respect of temporary absence; …'
The basic provision in relation to early retirement is contained in Rule 5.3.
'5.3 Early Retirement
5.3.1 If a Member retires from Service on account of ill-health or incapacity at any age, or for any other reason after reaching the age of 55 or in the case of retirement on or after 1st February 1993 the age of 50, the Member shall, subject to the consent of [Hoover, be entitled to an immediate annual pension payable during his lifetime as an alternative to any benefit payable under the provisions of Rule 9.'
The second and third questions raised by the Claim relate to the power of Hoover Limited ('the Company') to withhold consent under Rule 5.3.1 to the payment of an immediate pension on early retirement, both 'from Service' and by the holder of a deferred pension.
Rule 9 applies on the termination of Pensionable Service where no immediate pension becomes payable under Rules 5 or 6. It provides the Member with the return of his contributions or, if he has completed five or more years of Qualifying Service, with either the preservation of his benefits under the Scheme or the application of the Cash Equivalent of his contributions as either a transfer payment into a New Scheme or for the purchase of an annuity. The provisions of Rule 9.4, which deals with the preservation of benefits in the Scheme, are directly relevant to the issue which I have to decide, and I will come to it below. Rule 9.4 is directly relevant since it concerns the principal alternative to an immediate pension for a Member with more than five years' service.
The computation of the pension in the case of early retirement other than on grounds of illness or incapacity is dealt with by Rule 5.3.2:
'5.3.2 In the case of early retirement for any reason other than illness or incapacity, the pension shall be calculated in accordance with Rule 5.1 by reference to the Member's Final Salary and Pensionable Service at retirement [reduced according to the appropriate reduction provisions]'
Until about the time that Mr Hetherington left his employment with Hoover, the Company had in practice not withheld its consent to Members who had attained the qualifying age drawing an early pension. The expense of paying an immediate pension, rather than requiring the Member's entitlement to be treated in accordance with the provisions of Rule 9 now motivates the Company's approach. The Company wishes to reduce to a minimum the number of persons in respect of whom it has a discretion. Obviously, since the Company has no power under clause 5.3 to consent to the payment of a pension to any departing Member who has not, 'retired from Service', the first question is designed to determine the scope of those words. Of course, the Company has no discretion in respect of retirement for reasons of ill-health or incapacity: but the question whether the Member in question has the capacity to work is expressly taken into consideration.
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