Michael John Burgess v BIC UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Arnold |
| Judgment Date | 17 April 2018 |
| Neutral Citation | [2018] EWHC 785 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2017-000289 |
| Date | 17 April 2018 |
[2018] EWHC 785 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (CHANCERY DIVISION)
Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Arnold
Case No: HC-2017-000289
Andrew Short QC (instructed by Stephenson Harwood LLP) for the Claimants
Keith Rowley QC and Elizabeth Ovey (instructed by Trowers & Hamlins LLP) for the Defendant
Hearing dates: 12–13, 15–16 March 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
| Topic | Paragraphs |
| Introduction | 1–6 |
| The witnesses | 7–13 |
| The Claimants' witnesses | 7–11 |
| BIC UK's witnesses | 12–13 |
| Legislative background | 14–16 |
| Factual background | 17–75 |
| BIC SA and BIC UK | 17–25 |
| The Scheme | 26–29 |
| The Works Scheme | 30–32 |
| Appointment of Noble Lowndes | 33–35 |
| BIC UK reduces its contributions | 36–40 |
| Amalgamation of the Scheme and the Works Scheme | 41–47 |
| Equalisation | 48 |
| Trustees' meeting on 18 February 1991 | 49–51 |
| April 1991 booklet | 52 |
| March 1992 Announcement | 53–54 |
| Pre-97 Increases applied | 55–56 |
| December 1992 Announcement | 57 |
| The 1993 Deed and Rules | 58–59 |
| 1994 Actuarial Valuation Report | 60–65 |
| Subsequent events | 66–75 |
| Relevant provisions of the Fourth Edition of the Rules | 76 |
| Relevant provisions of the 1991 Deed and Rules | 77–78 |
| General principles of construction of pension schemes | 79 |
| What decisions were made with respect to the Pre-97 | 80–92 |
| Increases and by whom? | |
| Issue 1: Were the pre-97 Increases properly paid? | 93–147 |
| Rule 32 of the Fourth Edition | 94–98 |
| Rule 36 of the Fourth Edition | 99–117 |
| Do the 1993 Deed and Rules have retrospective effect for these purposes? | 118–125 |
| A general point on the 1993 Deed and Rules | 126 |
| Clause 4 of the 1993 Deed | 127–132 |
| Clause 9 of the 1993 Deed | 133–136 |
| Rule 3(c)(iii) of the 1993 Rules | 137–142 |
| Rule 4(a) of the 1993 Rules | 143 |
| Rule 9(a) of the 1993 Rules | 144–146 |
| Former members of the Works Scheme | 147 |
| Issue 2: If the Pre-97 Increases were properly paid, can they now be stopped? | 148 |
| Issue 3: If the Pre-97 Increase were not properly paid, can the | 149–177 |
| Trustees now recover from the pensioners the payments were | made since 1992? |
| Estoppel as to validity | 150–161 |
| Was there a common assumption? | 156 |
| Was the common assumption shared between the Trustees and BIC UK? | 157 |
| Did BIC UK assume responsibility for the common assumption? | 158 |
| Did the Trustees rely upon the common assumption? | 159 |
| Would it be unconscionable for BIC UK to assert the true legal position? | 160 |
| Equitable recoupment | 162 |
| Section 91 of the Pensions Act 1995 | 163–168 |
| Limitation | 169–172 |
| Laches | 173–176 |
| Estoppel as to remedy | 177 |
| Summary of principal conclusions | 178 |
Introduction
This case concerns the BIC UK Pension Scheme (formerly called the Biro Bic Superannuation Fund, “the Scheme”). The Scheme is a balance of cost defined benefit occupational pension scheme under which the members paid contributions and the balance of the cost of the Scheme must be met by the principal employer, the Defendant (“BIC UK”). In the early 1990s, the Scheme had a large surplus which its trustees (“the Trustees”) were obliged to reduce under the applicable tax regime. The Claimants, who are the current Trustees, contend that the then Trustees and BIC UK decided to apply limited price indexation increases to pensions in payment insofar as they exceeded Guaranteed Minimum Pension (“GMP”). (GMP is a minimum level of pension that had to be provided by schemes contracted out of the State Earnings-Related Pension Scheme (“SERPS”) or the Additional State Pension.) These increases were applied annually from April 1992 onwards. The validity of the increases relating to service prior to April 1997 (“Pre-97 Increases”) has been challenged by BIC UK since 2011. Payment of Pre-97 Increases has been suspended since 6 March 2013.
These proceedings have been brought to determine the following main issues of principle:
i) Were the Pre-97 Increases properly paid?
ii) If the Pre-97 Increases were properly paid, can they now be stopped?
iii) If the Pre-97 Increases were not properly paid, can the Trustees now recover from the pensioners the payments made since 1992?
By consent, I made orders under CPR rule 19.7 appointing the Claimants to represent those in whose interests it is to argue for an affirmative answer to question (i) and a negative answer to questions (ii) and (iii) and appointing BIC UK to represent those in whose interests it is to argue to the contrary. As counsel for BIC UK pointed out, it is important to appreciate that it is not just in BIC UK's interests to argue to the contrary (because it will have to fund the cost of further payments and will not directly benefit from any recovery), but also members who were not in pensionable service prior to 6 April 1997 and any members who were in pensionable service prior to that date, but who would not be entitled to Pre-97 Increases, depending on the basis on which it is contended that Pre-97 Increases were validly granted.
The present proceedings are not concerned with issues affecting individual pensioners and members of the Scheme. Nor are they concerned with certain other issues affecting the Scheme.
The Scheme closed to further accrual from 1 December 2010. As at 5 April 2015 the Scheme had assets of £34,230,000 against liabilities of £40,060,000 (excluding liability for the Pre-97 Increases) and a deficit of £5,830,000 on a Scheme Specific Funding basis. Had the Pre-97 Increases been included in the valuation, the liabilities figure would have increased to £45,120,000 and the deficit to £10,890,000. BIC UK is paying repair contributions to remedy the deficit under a recovery plan agreed with the Trustees.
As at 6 April 2017, the Scheme had 377 members, of whom 219 were pensioners and 158 were deferred members. Of these:
i) 159 pensioners have received Pre-97 Increases in the past, comprising 21 pensioners aged between 77 and 92 whose pensions commenced prior to 6 April 1992 and 138 pensioners whose pensions commenced after 6 April 1992 aged between 63 and 98 (save for one dependent pensioner with a lifelong condition aged 27);
ii) a further 33 pensioners would have received Pre-97 Increases had they not been suspended in March 2013;
iii) 25 pensioners have not and would not receive Pre-97 Increases even if they were reinstated (either because they have only post-97 service or because they are only in receipt of GMP);
iv) 104 of the deferred members would receive Pre-97 Increases when they take their pension if those increases are reinstated; and
v) 54 of the deferred members would not receive Pre-97 Increases even if they were reinstated.
The witnesses
The Claimants' witnesses
Michael Burgess, the First Claimant, is an independent Trustee who was appointed on 2 April 2015 and therefore had no involvement in the matters giving rise to the proceedings. He made two witness statements of a formal character and was not cross-examined.
Donald Hartridge qualified as a chartered accountant. He joined BIC UK in 1970. He was Finance Director and Company Secretary from October 1974 to February 1980 and Managing Director from February 1980 to September 1997. He was a Trustee of the Scheme from November 1979 to September 2013 (as a member-nominated Trustee from 2006 onwards) and a trustee of the Works Scheme (as to which, see below) until it merged with the Scheme in 1992. Mr Hartridge has been a Scheme pensioner since his retirement on 30 September 2000.
David Everitt, the Third Claimant, qualified as a certified accountant. He joined BIC UK in September 1978 and was Finance Director from April 1979 to September 2002. He was a Trustee of the Scheme from July 1987 to December 2002 and then again (and in succession to Mr Hartridge), as a member-nominated Trustee, from September 2013 to date. Mr Everitt has been a Scheme pensioner since 12 September 2002.
Mr Hartridge's and Mr Everitt's position is that neither of them is affected by the outcome of these proceedings, because, as former directors, they have been paid 5% fixed increases in accordance with an addendum to the 1985 edition of the Scheme's explanatory booklet for directors. BIC UK has recently issued proceedings challenging the validity of those increases, but that issue is outside the scope of these proceedings.
Counsel for BIC UK accepted that Mr Hartridge and Mr Everitt were both honest witnesses, but submitted that they were prone to wishful thinking in their evidence. I do not accept this. I found both to be good witnesses, whose recall of the events of the relevant period was better than might have been expected given that it was over 25 years ago. Nevertheless, both were candid as to the difficulty of accurately recalling the details of the key events. Accordingly, it is necessary for me to place most weight upon the contemporaneous documentation, such as it is, and the inherent probabilities.
BIC UK's witnesses
Bruno Bich has been the Chairman and Chief Executive Officer of Société BIC SA (“BIC SA”), BIC UK's ultimate parent company, since June 2016. He previously held those positions from June 1993 to April 2006. From April 2006 to June 2016 he was the non-executive Chairman. From 1984 to June 1993, he was Chairman and Chief Executive Officer of BIC Corporation, BIC SA's US subsidiary. Prior to that, he had held a number of positions of...
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