IBM United Kingdom Holdings Ltd and Another v Stuart Dalgleish and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren,MR JUSTICE WARREN |
| Judgment Date | 04 April 2014 |
| Neutral Citation | [2014] EWHC 980 (Ch) |
| Docket Number | Case No: HC10C01796 |
| Court | Chancery Division |
| Date | 04 April 2014 |
[2014] EWHC 980 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: HC10C01796
Andrew Simmonds QC, Paul NewmanQC, Henry LeggeQC, andJoseph Goldsmith (instructed by Dickinson Dees LLP) for the Claimants
Michael Tennet QC, Nicolas StallworthyQC, Benjamin Faulkner, andBobby Friedman (instructed by DLA Piper UK LLP) for the 1st and 2nd Defendants
Andrew Spink QC and Edward Sawyer (instructed by Nabarro LLP) for the 3 rd Defendant
Hearing dates: 18th, 19th, 20th, 21st, 22nd, 25th, 26th, 27th, and 28th February, 1st, 4th, 5th, 6th, 7th, 8th, 11th 12th, 13th, 14th, 15th, 18th, 19th, 20th, 21st, and 27th March, 8th, 9th, 10th, 11th, and 12th, April 2013
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 is an application for declaratory relief concerning certain proposed changes first announced by the First and Second Claimants in July 2009, and announced in their final form in October 2009, in relation to two final salary pension plans that operated for the benefit of their UK workforce, namely the IBM Pension Plan (" the Main Plan") and the IBM IT Solutions Pension Scheme (" the I Plan", together " the Plans"). These changes were announced following a project known internally as "Project Waltz".
In these proceedings, the changes are challenged on behalf of the members of the Plans.
The First Claimant (" Holdings") is the principal employer for the purposes of the Plans (which means that certain important powers and discretions under the relevant rules are vested in it). The Second Claimant (" IBM UKL") also participates in the Plans and is the employer of most of the active members. I shall refer to them together as " IBM UK" in order to distinguish them from the US parent IBM Corporation. IBM Group's headquarters is in Armonk and is known as " CHQ". I use " IBM" as a catch-all to include the Group as a whole.
The First and Second Defendants, Mr Dalgleish and Ms Harrison, have been selected to be representative beneficiaries (" RBs") for the purposes of the Project Waltz Proceedings. They are respectively members of the Main Plan and the I Plan.
The Third Defendant (" the Trustee") is (and has at all material times been) the sole corporate trustee of the Plans. It takes a neutral role in these proceedings (although it has adduced factual evidence that it considers to be of assistance to the Court).
Trust Deeds and Rules; Notices of Exclusion
The Deeds and Rules which currently govern the Plans are described in the following paragraphs.
The Main Plan is currently governed by three Deeds dated 24 April 1997 (as amended) comprising:
i) the 1997 Definitive Trust Deed (" the Main Plan Definitive Trust Deed") setting out the general provisions governing the Main Plan as a whole;
ii) a Deed comprising the 1997 Defined Benefit Section Rules (" the Main Plan DB Rules") setting out the Rules for the C, N and DSL Plans and other defined benefit (" DB") sections;
iii) a Deed establishing the 1997 Money Purchase Section Rules (" the Main Plan DC Rules") setting out the Rules for the defined contribution (" DC") sections.
There were many earlier editions of the Main Plan Trust Deed and Rules pre-dating 1997, stretching back to 1957. References in this judgment to the Main Plan Definitive Trust Deed, the Main Plan DB Rules or the Main Plan DC Rules are (unless otherwise stated) references to the then current version of these instruments as they stood at the time of Project Waltz, as reflected in the informal consolidations.
The Main Plan has separate DB and DC sections. The DB sections comprise the following structures:
i) 'N Plan' (closed to new joiners with effect from 5 July 1983 and now having about 270 active members);
ii) 'C Plan' (closed to new joiners with effect from 5 April 1997 and now having about 2,400 active members);
iii) 'E Plan' (closed to new joiners with effect from 5 July 1983 and now having a single active member); and
iv) 'DSL Plan' (in practice closed from its inception, being the product of a scheme merger under which a cohort of members transferred into the Main Plan and now having about 150 members across various sub-categories of membership).
The main DC section of the Main Plan is known as " the M Plan". There is also a DC section known as " the Enhanced M Plan" which was established in 2006 to which various DB members had a one-off option to transfer at that time as I explain below, an option arising in the context of Project Soto.
The I Plan is currently governed by a single Definitive Trust Deed and Rules dated 25 July 1994 (as amended) (" the I Plan Deed and Rules" or " the I Plan Rules" as appropriate). The I Plan Deed and Rules are the instruments which originally created the I Plan; there were no previous editions. References in this judgment to the I Plan Deed and Rules are (unless otherwise stated) references to the then current version of those instruments as they stood at the time of Project Waltz, as reflected in the informal consolidation.
The I Plan is a separate trust from the Main Plan. It provides defined pension benefits. I will refer to the I Plan together with the DB sections of the Main Plan as " the DB Plans", or the " UK DB Plans".
Although reference is made in the Main Plan to "sections", it is not in fact a sectionalised plan in the sense of having separate funds appropriated to different sections of the membership and their benefits. There is a single trust and single trust fund albeit that different classes of member have different benefits under the rules of the DB sections and the DC sections.
I will come to the package of changes comprising of the Project Waltz changes in due course. One element (" Element 1") was the closing (subject to certain exceptions) of both of the DB Plans to future benefit accrual with effect from 6 April 2011. This was purportedly effected by IBM pursuant to the exercise of a power to direct that any specified person or class of persons shall cease to be a member. There is an issue about whether that power was validly introduced into the Main Plan and there is an issue about whether the powers in both the Main Plan (assuming it was properly introduced) and the I Plan were validly exercised. Although neither power contains the word "exclude" or similar words they have been referred to as " the Exclusion Powers" and that, or its singular, is the expression I will use. I use that expression generally to refer to the power in the Main Plan whether in the 1990 Trust Deed and Rules or in the Main Plan Trust Deed and Rules ( ie the 1997 iteration). The wording is the same and it is not suggested that the meaning has changed. These issues have given rise to Issues 1 to 3 in the List of Issues (see paragraphs 46 ff below).
IBM's case (subject to a detailed point to which I will come in due course) is that the Exclusion Powers, as a matter of construction, can be exercised so as to direct that all existing active members shall cease to be members. IBM also contends that, having that construction, the Exclusion Power was validly introduced by way of amendment into the Main Plan. The RBs' case is that the Exclusion Powers cannot, as a matter of construction, be exercised in that way, so that the purported exclusion of all members from membership of the Main Plan and the I Plan, was invalid. Further, they contend (i) that if the Exclusion Power has the construction for which IBM contends, then it was not validly introduced into the Main Plan in the first place and (ii) that the Exclusion Powers were exercised in the case of both of the DB Plans for an improper purpose.
Quite apart from those differences between IBM and the RBs in relation to the Exclusion Powers, the RBs challenge each element of the proposals arising out of Project Waltz (including the exercise of the Exclusion Powers) as a breach of what, by way of short-hand, I refer to as the Imperial duty (discussed in detail later in this judgment).
Project Waltz in outline
The parties, in their written opening and closing submissions, have all described the essential elements of Project Waltz. They have done so focusing in different ways on different aspects. I have taken account of all of it in setting the background. I have found particularly helpful the written opening submissions on behalf of the Trustee which I consider present an accurate description of the background. What follows, all the way to paragraph 59 below, is taken largely from those submissions. Although I interpose my own comments on a number of occasions, the substantial work is that of the Trustee's team. It seemed to me that I would be re-inventing the wheel in the most unnecessary way if I were to re-write this work in my own words when it is essentially uncontentious. I do not need to identify, as I go along, where I am taking verbatim or almost verbatim what appears in those submissions but I readily acknowledge that a substantial part is not my own work. I am very grateful to the Trustee's team for their thorough, neutral and objective work which I consider to be wholly reliable.
Holdings presented the proposed Project Waltz changes to the Trustee in May 2009 and to the IBM UK employees in July 2009. Approximately 5,000 employees were affected by Project Waltz, being, broadly, the then active membership earning DB benefits. The Project Waltz proposals, as presented to the...
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