National Grid Company Plc v Mayes and Others International Power Plc (formerly National Power Plc) v Healy and Others

JurisdictionEngland & Wales
JudgeLord Justice Brooke
Judgment Date10 February 1999
Judgment citation (vLex)[1999] EWCA Civ J0210-13
Docket NumberCHANF 97/0941/3 CHANF 97/0943/3 CHANF 97/0944/3 CHANF 97/1198/3
CourtCourt of Appeal (Civil Division)
Date10 February 1999

Re National Grid Group of the Electricity Supply Pension Scheme

Re National Power Group of the Electricity Supply Pension Scheme

(1) National Grid PLC
and
Mayes & Ors
National Grid PLC
and
Laws & Ors
Jefferies & Ors
and
Mayes & Ors
Jefferies & Ors
and
Laws & Ors
(2) National Power PLC
and
Feldon & Ors

[1999] EWCA Civ J0210-13

Before:

Lord Justice Nourse

Lord Justice Schiemann and

Lord Justice Brooke

CHANF 97/0941/3

CHANF 97/0942/3

CHANF 97/0943/3

CHANF 97/0944/3

CHANF 97/1198/3

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(Mr Justice Robert Walker)

Royal Courts of Justice

(1) MR N INGLIS-JONES QC and MR G TOPHAM (instructed by Messrs Stephens Innocent, London EC4) appeared on behalf of the Appellants Mayes & Laws

MR P CRAMPIN QC and MR M FURNESS (instructed by Messrs Eversheds, London EC4) appeared on behalf of the Respondent National Grid Company

MR R HAM QC and MR P NEWMAN (instructed by Messrs Dibb Lupton Alsop, Birmingham) appeared on behalf of the Respondent National Grid Group Trustees

(2) MR A STEINFELD QC and MR J STEPHENS (instructed by Messrs Lovell White Durrant, London EC1) appeared on behalf of the Appellant Machin

MR N WARREN QC and MR C NUGEE QC (instructed by Messrs Linklaters & Paines, London EC2) appeared on behalf of the Respondent National Power

Wednesday, 10th February 1999

Lord Justice Brooke

This is the judgment of the court.

2

These appeals against the judgments of Mr Justice Robert Walker which were delivered on 10th June and 30th July 1997 raise points of interest and difficulty in relation to the treatment of an actuarial surplus in an occupational pension scheme known as the Electricity Supply Pension Scheme ("the scheme"). In the first group of appeals Mr Inglis-Jones QC and Mr Topham appear for Mr Laws and Mr Mayes, who were the respondents before the judge in appeals brought by the National Grid Company plc and the National Grid Group Trustees against determinations made by the Pensions Ombudsman on 7th February 1997. On the other appeal Mr Steinfeld QC and Mr Stephens appear for Mr Machin, who was the respondent to an Originating Summons issued by National Power plc, to which their group trustees were also respondents, seeking the ruling of the court on similar issues to those which arise in the National Grid litigation. Mr Crampin QC and Mr Furness appear for National Grid and Mr Warren QC and Mr Christopher Nugee QC for National Power. In addition to the two employers, the National Grid Trustees appear by Mr Ham QC and Mr Newman to resist the appeals by Mr Laws and Mr Mayes, although charges of maladministration are no longer being pursued against them. Solicitors for the National Power Group Trustees informed the court that while their clients supported the judgment they did not intend to appear on Mr Machin's appeal. The Pensions Ombudsman has taken no part in the first group of appeals.

3

The underlying facts are set out in the admirably clear judgment in the court below. All the parties who appeared before us agreed that they were fairly and accurately stated there (although there were incorrect references in paragraphs 45 and 46 to Section 147, not 146, of the Pension Schemes Act 1993, and Mr Warren drew our attention to matters in paragraphs 32 and 33 that he would wish to rephrase). Although it will be necessary to revisit the terms of the scheme in the course of this judgment, it is certainly unnecessary to repeat here all the detailed facts set out in paragraphs 1–52 of the judge's judgment, as they are numbered in the report of the case in [1997] PLR 167. These paragraphs should be treated as incorporated in this judgment and read with it accordingly. On that footing we are able to deal with the matter more briefly than the judge.

4

We will first give a brief summary of the principal issues before the judge and his conclusions on those issues. He said at paragraph 53 of his judgment that the four appeals from the Ombudsman and National Power's originating summons raised similar questions which could to his mind be reduced to two essential issues:

(i)what 'arrangements' are within the scope (or authority) of the power contained in Clause 14(5) of the scheme? In particular is it 'free-standing' or is it restricted, in one way or another, by Clause 41(2)(b);

(ii)what contractual fiduciary or other duties constrain the principal employer in the exercise of the power?

5

The judge went on to mention a third issue, relating to the nature of the certification which the actuaries were required to give pursuant to Clause 14(5) of the scheme, on which he expressed some personal views in paragraphs 93–95 of his judgment. These were not supported by counsel appearing for any of the parties, and since none of the parties wished to resurrect this issue on the appeal we need say no more about it. We have set out the terms of Clause 14(5) in paragraph 32 of this judgment, and the terms of Clause 41(2) in paragraph 35, and we need not anticipate them here. At the risk of over-simplification, the central question is whether in the event of an actuarial surplus the employers are empowered to forgive themselves liabilities that have already accrued due from them to the trustees, in the absence of any express power in the scheme, and in the presence of an express prohibition against any amendment of the scheme which might permit them to take out of it any of its monies.

6

The judge observed that the arguments he had heard from six leading counsel, although identifying separate issues for consideration, inevitably spilled into each other. In particular, he said, the more the exercise of the Clause 14(5) power was constrained by unwritten safeguards such as the duty of good faith or the need for general endorsement by the actuary, the readier the court would be to give wide language its natural meaning. He structured the rest of his judgment by starting with two sections in which he considered the judgment of Vinelott J in British Coal Corporation v British Coal Staff Superannuation Scheme Trustees Ltd [1995] 1 All ER 912 and also made some general observations on the principles a court should adopt in construing a pension scheme. He went on to carry out separate analyses of the scope of Clause 14(5) and of the employers' duty of good faith to employees in the context of pension schemes and included a section in which he expressed his views, quite briefly, on some other submissions which had been put to him, especially by Mr Warren as his fall-back position. He then summarised his conclusion on each part of the case, and made some general observations by way of a postscript to his judgment.

7

In the National Grid case the Ombudsman had held that Clause 14(5) gave rise to an obligation of good faith approaching a fiduciary duty which called for an exercise of discretion by a principal employer in the best interests of the scheme without preferring his other interests. He had also held that the arrangements referred to in that clause must relate to dealings otherwise authorised by powers conferred by the clauses or rules of the scheme, and he could find no power elsewhere in the scheme which permitted the employers to do what they had done. In particular, any unrestricted construction would be quite inconsistent with the express provision in Clause 41(2)(b) which would otherwise be virtually otiose. He therefore made the directions adverse to National Grid which the judge set out in paragraph 48 of his judgment.

8

The judge held that the Ombudsman had misconstrued the terms of the scheme, especially as to the scope of Clause 14(5) and its interrelation with the power of amendment in Clause 41. He had also erred in law either by extending the Imperial Tobacco duty of good faith (for which see Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 583) beyond its proper limit, or by superimposing on it some element of fiduciary duty. He had also been wrong in concluding that the National Grid group trustees had misused surplus at the instance of National Grid. In those circumstances he allowed all four appeals and set aside all the Ombudsman's directions.

9

The core of the judge's reasoning is contained in paragraphs 75–84 of his judgment, and we will return to analyse the reasoning which led him to his conclusion when we consider the different parts of the scheme in the course of this judgment. In essence, he considered that the Ombudsman had attached too much weight to Clause 41(2)(b), which was a survival from what was, or was believed to be, a strict Inland Revenue requirement for the purposes of "old code" approval. In the circumstances the judge felt he was entitled to give effect to what he regarded as the natural meaning of what he called the wide language of Clause 14(5), particularly when he bore in mind that the employers' exercise of the power contained in that clause was constrained by unwritten safeguards such as the implied duty of good faith.

10

In the National Power case, the judge considered that the arrangements the company had made for dealing with surplus in both 1993 and 1996 were valid and effective, for the same reasons he had given on the National Grid appeals. He therefore made a declaration to that effect, coupled with a declaration that in the determination of deficiency payments under Clause 13(1)(e) the employer could take account of any pre-funding that had taken place, whether consciously in respect of deficiency payments or not, and whether under Clause 13(1)(g) or otherwise. In other words, the judge said, the employer was not bound to determine to make deficiency payments under Clause 13(1)(e) unless and except...

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