Keymed (Medical & Industrial Equipment) Ltd v Paul Arthur Hillman
| Jurisdiction | England & Wales |
| Judge | Mr Justice Marcus Smith |
| Judgment Date | 11 March 2019 |
| Neutral Citation | [2019] EWHC 485 (Ch) |
| Docket Number | Claim No: HC-2015-003797 |
| Court | Chancery Division |
| Date | 11 March 2019 |
[2019] EWHC 485 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
BUSINESS LIST (ChD)
Pensions
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
THE HONOURABLE Mr Justice Marcus Smith
Claim No: HC-2015-003797
and
Mr John Wardell, QC, Mr Andrew Mold and Mr Tim Matthewson (instructed by Fieldfisher LLP) for the Claimant and Third Party
Mr Simon Salzedo, QC, Mr Paul Newman, QC and Mr Stephen Midwinter, QC (instructed by Simmons & Simmons LLP) for the Defendants
Hearing dates: 13, 14, 15, 16, 19, 20, 21, 22, 23, 26, 27, 28 March, 3 and 4 May 2018
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.
| CONTENTS | ||
| A. | INTRODUCTION | §1 |
| (1) | The Claimant: KeyMed | §1 |
| (2) | The Defendants: Mr Hillman and Mr Woodford | §2 |
| (a) | The Defendants generally | §2 |
| (b) | Mr Woodford | §3 |
| (c) | Mr Hillman | §9 |
| (3) | KeyMed's allegations against Mr Woodford and Mr Hillman and the structure of this Judgment | §12 |
| B. | THE PENSIONS BACKGROUND | §23 |
| (1) | The Staff Scheme | §23 |
| (a) | Constitution | §23 |
| (b) | The trustees | §24 |
| (c) | The Staff Scheme actuaries | §32 |
| (d) | The 2000 Staff Scheme Definitive Deed and Rules | §35 |
| (i) | The deed | §35 |
| (ii) | Relevant parties | §37 |
| (iii) | Differences between Members in the Staff Scheme | §38 |
| The distinctions drawn | §38 | |
| Category 1 and Category 2 Members | §39 | |
| Pre-21 July 1997 joiners and post-21 July 1997 joiners for the purpose of calculating rates of increase for pensions in payment | §43 | |
| The obligation to contribute | §47 | |
| (2) | A move away from defined benefits to defined contributions | §49 |
| (3) | The Revenue Limits | §52 |
| (4) | The Pensions Act 2004, the Finance Act 2004 and A-Day | §57 |
| (a) | Reform of the pensions regime | §57 |
| (b) | §58 | |
| (c) | The Finance Act 2004 | §59 |
| (d) | A-Day | §60 |
| (5) | Relevant Members | §62 |
| (6) | The establishment of the Executive Scheme | §66 |
| (7) | KeyMed's treatment of the Revenue Limits after A-Day | §70 |
| C. | KEYMED'S ALLEGATIONS AND THE RELEVANT LAW | §73 |
| (1) | KeyMed's case | §73 |
| (2) | Causes of action relief upon by KeyMed | §75 |
| (a) | Overview | §75 |
| (i) | The pleaded causes of action | §75 |
| (ii) | KeyMed's ability to maintain an alternative case against Mr Hillman | §79 |
| (b) | Directors' duties | §82 |
| (i) | Introduction | §82 |
| (ii) | Duty to act within powers | §84 |
| (iii) | Duty to promote the success of the company | §91 |
| (iv) | Duty to exercise independent judgment | §96 |
| (v) | Duty to exercise reasonable care, skill and diligence | §100 |
| (vi) | Duty to avoid conflicts of interest | §105 |
| (c) | Tortious and contractual duties | §113 |
| (d) | Duty to report misconduct | §115 |
| (e) | Duties owed as trustees of the Schemes to KeyMed | §117 |
| (f) | Conspiracy | §121 |
| (3) | The pleading point: KeyMed's alternative case | §123 |
| (a) | The ambit of KeyMed's case: KeyMed's contentions | §123 |
| (b) | The ambit of KeyMed's case: ruling | §124 |
| (i) | The ambit of the Particulars of Claim | §126 |
| Introduction | §126 | |
| The centrality of the Conspiracy plea | §127 | |
| The substance of the breaches of duty alleged | §130 | |
| KeyMed's pleaded case in relation to the specific allegations regarding the Executive Scheme | §132 | |
| (ii) | If the ambit of the Particulars of Claim is clear, then that ambit cannot be widened by the Claim Form or the Reply | §136 |
| (4) | Specific aspects of breach of duty alleged by KeyMed | §138 |
| (a) | Introduction | §138 |
| (b) | Conflicts of interest in the context of pensions schemes | §139 |
| (c) | Dishonesty | §143 |
| (d) | The inter-relationship between the duty to declare an interest and other director's duties | §147 |
| D. | THE CONTEXT WITHIN WHICH MR WOODFORD AND MR HILLMAN OPERATED | §148 |
| (1) | KeyMed's position within the Olympus group | §148 |
| (2) | The KeyMed Board | §150 |
| (3) | ExCom | §154 |
| (4) | Administration within KeyMed | §156 |
| (5) | The operation of the Staff Scheme | §159 |
| E. | THE EVIDENCE | §161 |
| (1) | Introduction | §161 |
| (2) | The importance of documentary evidence | §163 |
| (3) | Factual witnesses called by the parties | §167 |
| (4) | Factual witnesses not called by the parties | §172 |
| (5) | The experts | §178 |
| F. | THE ESTABLISHMENT OF THE EXECUTIVE SCHEME AND THE DISAPPLICATION OF THE PIP LIMIT | §182 |
| (1) | Introduction | §182 |
| (2) | The Board's decision to establish the Executive Scheme | §185 |
| (a) | The Board's composition | §185 |
| (b) | Mr Williams' state of mind in 2005 | §187 |
| (c) | The minutes of the Board meetings in December 2005 | §192 |
| (i) | The Board meetings | §192 |
| (ii) | The minutes | §197 |
| (iii) | Circulation of the minutes | §201 |
| (iv) | Analysis | §203 |
| (d) | The drafting of Item 53 in the minutes | §205 |
| (i) | Draft minutes prior to the meeting | §206 |
| (ii) | Communications with Mr Craig | §207 |
| (iii) | Communications with Mr Wright | §210 |
| (e) | The evidence of the persons present at the relevant part of the meeting | §213 |
| (i) | The evidence of Mr Woodford | §214 |
| (ii) | The evidence of Mr Hillman | §219 |
| (iii) | The evidence of Mr Williams | §221 |
| (f) | Prior discussions and documentation regarding the Executive Scheme | §224 |
| (i) | Introduction | §224 |
| (ii) | Discussions regarding the effect of the Pension Protection Fund on the Executive Members | §225 |
| The 4 April 2005 trustees' meeting | §225 | |
| Mercer's paper “Pension Options for Senior Executives following A-Day” | §228 | |
| The trustees' meeting on 17 November 2005 | §230 | |
| The trustees' meeting of 27 March 2006 | §241 | |
| (iii) | No evidence of other reasons for the creation of the Executive Scheme | §242 |
| (iv) | The question of distortion | §245 |
| (g) | Points made by Mr Williams | §248 |
| (i) | The points | §248 |
| (ii) | Draft minutes not being circulated to attendees | §250 |
| (iii) | A rush to get the unapproved minutes to Japan | §256 |
| (iv) | Extract of the December minutes presented to the Board and ExCom meetings in March 2006 | §258 |
| (v) | Mr Williams and Mr Calcraft were not made members of the Executive Scheme | §263 |
| (h) | Findings regarding the Board's decision to establish the Executive Scheme | §266 |
| (3) | The decision voluntarily to apply the PIP Limit | §268 |
| (a) | Introduction | §268 |
| (b) | How the decision came to be made: the evidence | §271 |
| (i) | The documentary evidence | §271 |
| (ii) | The evidence of the factual witnesses | §280 |
| The evidence of Mr Hillman | §280 | |
| The evidence of Mr Woodford | §283 | |
| The evidence of Mr Rowe | §286 | |
| The evidence of other witnesses | §291 | |
| (c) | Findings as regards the decision to voluntarily impose the PIP Limit | §292 |
| (4) | The circumstances in which the Defendants came to know of the decision to retain the PIP Limit | §293 |
| (a) | Introduction | §293 |
| (b) | The relevant documents | §295 |
| (c) | The evidence of the witnesses | §299 |
| (i) | Mr Woodford | §299 |
| (ii) | Mr Hillman | §302 |
| (iii) | Mr Rowe | §304 |
| (iv) | Mr Williams | §308 |
| (d) | Findings | §312 |
| (5) | The agreement to remove, and the removal of, the PIP Limit in the case of the Executive Scheme | §313 |
| (a) | Introduction | §313 |
| (b) | Was KeyMed's consent needed at all? | §321 |
| (c) | Was informed consent obtained at the meeting(s) in November 2007? | §329 |
| (i) | Introduction | §329 |
| (ii) | The evidence of the factual witnesses | §330 |
| Mr Woodford | §330 | |
| Mr Hillman | §332 | |
| Mr Williams | §334 | |
| Mr Rowe | §337 | |
| Ms McBrearty | §340 | |
| (iii) | The documents | §342 |
| The date of the ExCom meeting | §342 | |
| The Executive Scheme documents | §343 | |
| The “plan of action” | §345 | |
| Chronology | §348 | |
| (iv) | Findings as regards the execution of the Executive Scheme documents | §351 |
| (v) | The assent of Mr Williams and Mr Calcraft | §361 |
| The signing of the Interim Trust Deed on 12 November 2007 | §361 | |
| Signing the other documents on the day of the ExCom meeting (13 November 2007) | §366 | |
| (vi) | Other points regarding process made by KeyMed | §370 |
| G. | AMENDMENT OF THE SPOUSAL BENEFIT RULE | §373 |
| (1) | Introduction | §373 |
| (2) | The effect of Item 53 on future enhancements to the benefits under the Executive Scheme | §379 |
| (3) | Proper agreement to the Amending Deed | §382 |
| (i) | Introduction | §382 |
| (ii) | Mr Hillman's version of events | §385 |
| (iii) | Mr Woodford's version of events | §387 |
| (iv) | Mr Williams' version of events | §389 |
| (v) | Mr Rowe's version of events | §393 |
| (vi) | Findings | §394 |
| H. | CONSERVATIVE... |
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