John Bradbury v British Broadcasting Corporation
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 23 May 2012 |
| Neutral Citation | [2012] EWHC 1369 (Ch) |
| Docket Number | Case No: CH/2011/0648 |
| Court | Chancery Division |
| Date | 23 May 2012 |
[2012] EWHC 1369 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE PENSIONS OMBUDSMAN
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Warren
Case No: CH/2011/0648
Andrew Stafford QC and Nicholas Randall (instructed by Walkers Solicitors) for the Appellant
Robert Ham QC (instructed by Olswang LLP) for the Respondent
Hearing date: 17th January 2012
Introduction and Background
This is an appeal by Mr John Bradbury against a determination (" the Determination") of the Pensions Ombudsman (" the PO") dated 24 October 2011 by which he dismissed Mr Bradbury's complaint dated 11 January 2011.
Mr Bradbury is employed by the respondent (" the BBC") as a member of the BBC Philharmonic Orchestra. He is a member of the BBC Pension Scheme (" the Scheme"). The Scheme has four Sections:
a. The Old Benefits Section: this provides benefits calculated as a proportion of a member's final salary. It has been closed to new members since 30 September 1996.
b. The New Benefits Section: this was created for eligible employees who joined the BBC on or after 1 October 1996. The benefits provided are also based on final salary but the benefits differ in some respects from those of the Old Benefits Section.
c. The CAB 2006 Section (" CAB 2006"): this provides defined benefits but unlike the Old and New Benefits Sections, it is a "career average" scheme; that is to say that a member's pension on retirement is a proportion of his earnings in each year of employment (revalued over the period from that year until retirement) and is not based simply on final salary. The CAB 2006 Section has been closed to new entrants since 30 November 2010.
d. The CAB 2011 Section (" CAB 2011"): this is also a "career average" scheme. It commenced on 30 November 2010 and is open to new entrants, provided that they joined before 1 January 2012.
When he made his complaint, Mr Bradbury was a member of the New Benefits Section. He has since elected to join CAB 2011 for his future service.
It is said by Mr Robert Ham QC, who appears for the BBC, that like many other sponsors of defined benefit pension schemes, the BBC has been faced with a growing need to reduce its pension liabilities. The actuarial deficit in the Scheme is large: it was around £2 billion in April 2009 and £1.6 billion in June 2010. The BBC had agreed with the trustee of the Scheme, BBC Pension Trust Ltd (" the Trustee") to repair the Scheme deficit over a period of 11 years. To have continued the arrangements in place without any changes to benefits and/or member contributions would have required a significant increase in contributions from the BBC itself. Mr Ham says that this would have represented an increase in contributions from the equivalent of 3.5% of the licence fee to around 10%. He submits on the basis of what has been said by the BBC in correspondence before the PO, that the BBC believed that this level of funding was unaffordable and would damage its ability to maintain the quality and range of services to the licence fee payer. Mr Ham is no doubt correct to say that there was and is a large deficit, and his identification of the percentages of the licence fee in his forensic appeal to the interests of the licence-fee payer may be more or less accurate. Whether, and if so precisely how, the belief which he ascribes to the BBC was actually held by it is not something which was investigated by the PO since it had not been put in issue and is not something which I can take account of as a matter of established fact.
Nonetheless, Mr Andrew Stafford QC, who appears with Mr Nicholas Randall for Mr Bradbury, accepts that the BBC formed the view, for one reason or another, that it was faced with a need to reduce its pension liabilities. That is why it decided to close CAB 2006. That is also why it decided, as it did, to limit the extent to which any pay rise would count as pensionable pay for the remaining active members of the Old Benefits Section, the New Benefits Section and CAB 2006. That limit imposes a 1% cap on increases in pensionable pay so that, whatever pay increases a member of those sections of the Scheme might receive, the increase in pensionable pay would be limited to 1% in each year.
These changes came about following a consultation process with members and trade unions between July and November 2010. The BBC also informed the Trustee of the proposals it was making and worked with it. Part of the proposals were the subject of what has been referred to as the ACAS Agreement negotiated between the unions and BBC management and set out in Part 5 of the Appendix to the 45 th Deed of Variation dated 30 March 2011 (" the 2011 Deed and Rules"). Mr Ham informs me that the only material before the Court (and the only material which was before the PO) which discloses the existence of such negotiations is the ACAS Agreement itself, the terms of which were appended to the 2011 Deed and Rules as Part 5 of the Appendix at p 137.
Part 5 of the Appendix refers to negotiations between the joint unions and BBC Management at ACAS on 30 November 2010 where agreement was reached in principle to certain words to resolve the pensions dispute, clearly a reference to the way in which the BBC should be able to control its liabilities under the Scheme. The ACAS Agreement appears to be principally concerned with the terms of CAB 2011 and the level of guaranteed increases to the pension building blocks. It is not clear from the provisions of the ACAS Agreement what, if anything, had been agreed or even discussed about how pay increases, would be dealt with for pension purposes in the future so far as concerned Members who remained members of their existing Sections of the Scheme. Mr Ham has nonetheless referred me to the ACAS Agreement: he has done so simply to illustrate the limitations on the factual enquiry carried out to date and to show that there is no material on which the PO or the Court could reasonably make a judgment on whether the BBC was acting in any way improperly vis a vis the alterations effected by the 2011 Deed and Rules.
Whatever was agreed at the meeting on 30 November 2010, it does appear that the outcome of the consultation announced in November 2010 was that Members were to be offered a number of options:
a. To remain in their current section of the Scheme but with any future pay awards limited to 1% for pension purposes.
b. To opt out of their current section and a join a new career average section of the Scheme (in the event, CAB 2011) in which any future pay awards would not be subject to the 1% cap. Mr Bradbury eventually elected for this option along with about 8,000 other members.
c. To opt out of the Scheme altogether and to join the BBC Life Plan, a defined contribution arrangement.
Implementation of the proposals
By the 2011 Deed and Rules, the BBC and the Trustee closed the existing career average section, CAB 2006, to new members, although that section remained in existence as a separate section for existing members who elected not to opt out. The 2011 Deed and Rules also created a new career average section, CAB 2011. Option b above was implemented: Section 2 of the Rules provided for an Employee (being a member of the Old Benefits Section, the New Benefits Section or CAB 2006) to be admitted to Membership of CAB 2011 provided that the member elected to opt out of the previous category of membership and made an application to join CAB 2011 prior to 1 January 2012 (although the BBC was able to waive all or any of these eligibility conditions in individual cases).
Option a above was not reflected in any amendment to the pre-existing trust deed and rules of the Scheme so that one finds nothing in the Rules expressly limiting the amount of any pay increase which counts for pension purposes. Mr Ham submits that it was not necessary to make any such amendment, for two reasons. The first is that the Rules then (and now) in force define "Pensionable Salary" (that is to say, the amount used in the formula for the calculation of the emerging pension) by reference to "Basic Salary" which is in turn defined as
"the amount determined by the BBC as being an Employee's basic salary or wages payable under the terms of his or her Continuing or Fixed Term Contract….."
Mr Ham submits that the words "determined by the BBC" are effective to allow the BBC to determine what part of an Employees' remuneration is to count as his basic salary or wages so that the BBC is able to limit the extent to which any increase in remuneration is pensionable. Unsurprisingly, Mr Stafford does not agree with that. I will consider the point further in due course.
The second reason is that it was decided by the BBC that any increase to pay would be offered on terms that the increase would, for pension purposes, be limited to 1%. If a member did not agree to those terms, he would not get a pay increase (at least, not one above the 1%). If he did agree, then it said by the BBC that the agreement would be binding so that the Trustee should give effect to it. Reliance is placed on South West Trains v Wightman [1998] PLR 183 (" SWT") and Trustees of the NUS Officials and Employees Superannuation Fund v Pensions Ombudsman [2002] PLR 93 (" the NUS case").
On 11 January 2011, Mr Bradbury made his complaint to the PO. In his application form, he complained as follows:
"The BBC has changed the definition of Pensionable Salary without consulting the Trustees. My 13 years of contributions were made in good faith that my pensionable salary was my basic pay (please see accompanying letter).
The new definition will injure the contributions that I have made and I will probably lose thousands of pounds (please see accompanying letter).
I would like the...
To continue reading
Request your trial
-
Between IBM United Kingdom Pensions Trust Ltd v Ibm United Kingdom Holdings Ltd and Others
...2785, [2010] PLR 23 (" IMG") shows that this principle is not unrestricted. I considered these cases in my own decision in Bradbury v British Broadcasting Corporation [2012] EWHC 1369 (Ch). 466 It is important to note that IMG, like SWT, was concerned with changes to the benefits of existin......
-
Briggs v Gleeds (Head Office)
...some Existing Members, they received the impression that they would not be adversely affected by the change." 136 In Bradbury v BBC [2012] EWHC 1369 (Ch), [2012] PLR 283, Warren J said this about the second and third sentences of the passage quoted in the previous paragraph: "Those comment......
-
Bradbury v British Broadcasting Corporation
...multi-billion pound deficit in the Scheme. 3 The judge's reasons for upholding the PO's determinations are set out in two judgments: [2012] EWHC 1369 (Ch) ("the first judgment") and [2015] EWHC 1368 (Ch) ("the second judgment"). 4 Mr Andrew Stafford QC and Mr Nicholas Randall QC appeared ......
- Stodart [78763/3]
-
Changing Pension Arrangements - Extrinsic Contracts - Pensions In 30 Podcasts, Episode 19
...be used with care and only after taking legal advice Main sources South West Trains v Wightman [1997] EWHC 1160 (Ch) Bradbury v BBC [2012] EWHC 1369 (Ch) Briggs v Gleeds [2014] EWHC 1178 (Ch) Pensions Act 1995 What is an extrinsic An extrinsic contract in relation to a pension scheme is an ......