NBPF Pensions Trustees Ltd v Warnock-Smith and another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Floyd |
| Judgment Date | 14 March 2008 |
| Neutral Citation | [2008] EWHC 455 (Ch) |
| Docket Number | Case No: HC0005013 AND HC0005014 |
| Date | 14 March 2008 |
| Court | Chancery Division |
[2008] EWHC 455 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand. London, WC2A 2LL
The Hon Mr Justice Floyd
Case No: HC0005013 AND HC0005014
Nigel Inglis-Jones QC and Michael Tennet QC (instructed by Taylor Wessing) for the Claimants in both actions
Michael Furness QC (instructed by Baker & Mckenzie) for the Defendants in both actions
Hearing dates: 5th March 2008
HTML VERSION OF JUDGMENT
This is an application by trustees to obtain the sanction of the court to the distribution of remaining surplus funds the subject of two occupational pension schemes, and to their purchase of insurance to obviate the need for the further retention of reserves. It is all about the last knockings of the fund.
The two pension schemes are known as BEST and NBPF. The Trustees are Bus Employees Pension Trustees Limited (“BEPTL”) and NBPF Pension Trustees Limited (“NBPFPTL”) respectively, the Claimants in the two actions.
BEST and NBPF are the former pension schemes of the National Bus Company (“NBC”) which was privatised between 1986 and about 1989. At the conclusion of that process BEST and NBPF were purportedly wound up and the benefits of those members who had not already left as a result of the privatisation process or otherwise were bought out with Standard Life, the insurance company. In 1990 (pursuant to a Deed of Variation entered into in relation to each scheme dated 14 November 1986), the surplus in both schemes (amounting jointly at that time to about £200 million) was paid to NBC. The Secretary of State for the Environment Transport and the Regions (“the SoS”) later became the statutory successor in title to NBC.
The assets which have been and are to be distributed were recovered by BEPTL and NBPFPTL in late 1999 in settlement of actions brought by them against the SoS, following a complaint to the Pensions Ombudsman by Mr Frank Wheeler, a BEST pensioner and now one of the representative Defendants in the BEST action. The recoveries amounted to about £300 million in BEST and about £55.77 million in NBPF.
Doubts about the validity of the 1986 Deed of Variation were compromised in July 2001 in Part 8 Claims on 7 November 2000 brought by BEPTL and NBPFPTL to determine these questions. The so-called “Eligibility Compromise” in relation to NBPF and BEST was approved by Mr Justice Hart and embodied in two Orders dated 24 July 2001.
The Eligibility Compromise determined which categories of person in each scheme were eligible to benefit from the exercise of the Trustees' discretion over the sums which had been recovered from the SoS. The Eligibility Compromise also determined which powers were available to the Trustees. The broad effect of the compromise was that all persons who had been members of BEST and NBPF since 30 April 1986 (and those claiming through them) became eligible to benefit from the exercise of the Trustees' discretion over the surplus recovered from the SoS, but the varying strengths of their respective cases would be reflected in percentage discounts applicable to different categories of claimant.
Schemes of distribution (the so called Final Distribution, although, because of the need for the Reserve, it was not) were proposed by the Trustees in relation to NBPF and BEST. By Orders dated 27th March 2002 Lloyd J, as he was then, authorised and permitted the Trustees of each of the schemes to distribute the assets of their respective scheme in the manner set out in the schedule to his Order.
The Schedules to Lloyd J's orders provided for a untraced beneficiaries and a Reserve fund as follows —
“12.4 Untraced beneficiaries: where [NBPFPTL][BEPTL] is unable to trace any Included Beneficiary despite having made all reasonable efforts to do so, the Actual Share attributable to that Included Beneficiary shall, if [NBPFPTL][BEPTL] so decides, be added to the Reserve.
Reserve
[NBPFPTL][BEPTL] will set aside an initial amount of [£4.5 million][£8.5 million] to deal with unexpected issues which, although anticipated, cannot be dealt with in advance of distributing the bulk of the Actual Shares (since to do so would severely delay the distribution) or which require to be dealt with in a manner that could not reasonably be foreseen in advance.”
The amount of the Reserve in NBPF is £ 5.5 million approximately (compared with about £55.77 million recovered, i.e. about 10%) and the Reserve in BEST is £16 million approximately (compared with £300 million recovered), i.e about 5%.
The Trustee of each scheme wishes to complete the distribution of all of the assets under its control and to wind up the scheme of which it is a Trustee. The proposed manner of distribution in relation to the reserve remaining in each scheme is set out in two witness statements in the BEST proceedings of Ms. Carolyn Saunders, the responsible solicitor in Taylor Wessing who are solicitors for the claimants, and a further two witness statements of Ms. Saunders in the NBPF proceedings.
The Trustees' discretion to deal with the Reserves of their schemes stems from proviso (3) to rule 49(b) of the BEST rules and proviso (3) to rule 54(b) of the NBPF rules, in each case as modified by paragraph 3 of the Eligibility Compromise. In each Scheme, the relevant rule reads:
“(b) the Fund shall after payment thereout of
(A) all costs charges and expenses of or incidental to the administration and management of the Scheme and the winding up thereof…
be applied by the Trustee in providing non-commutable (subject to proviso (7) below) and non-assignable annuities or contingent annuities (including for this purpose such ancillary benefits, such as death benefits, as in the opinion of the Trustee may be relevant) for the Beneficiaries of the same amounts and subject to the same terms as the pensions referred to below and in the following order of priority…” (followed by detailed provisions on the orders of priority in which “pensions” were to be secured).”
Proviso (3) to the relevant rule (which has to be read subject to certain provisions of the Eligibility Compromise) in each case reads as follows:
“If the Fund shall be more than sufficient to provide all of the aforesaid benefits then the excess shall (subject to proviso (8) below [Revenue limits in relation to Approved Funds]) be applied in providing additional amounts of annuities (including any ancillary benefits as aforesaid), as the Trustee shall in its absolute discretion determine, for the benefit of all or any of the Beneficiaries to whom this paragraph (b) refers on such basis as the Trustee with the advice of the Actuary shall decide”
The role of the Defendants
As a perusal of the order of Lloyd J shows, the proposals for distribution are necessarily complex. I was told that it was possible to identify over 200 distinct categories of potential recipient.
In order for the Court to form a view on whether it can approve the proposed distributions of the remaining funds, it is necessary to have parties before it who can present the Court with a critical analysis of the proposals, and who can present any arguments for saying that the proposals are wholly or partially invalid. It would have been wholly impractical to divide the potential beneficiaries into classes with separate representation. In whatever way the beneficiaries are divided up there will always be conflicts of interest within the classes. At the Eligibility Compromise hearing, Hart J approved of an approach in which a single legal team would consider all the possible objections to the Trustees' proposals. This team was instructed by the beneficiary Defendants who hitherto had represented the two main classes of members in the eligibility litigation, i.e. “the Standard Life Members” and “the Transferees”. At the hearing of the application for the approval of the Final Distribution they no longer represented their former classes but instead agreed to instruct solicitors and counsel to carry out the task of examining critically the Trustees' proposals on behalf of the membership generally.
The same approach has been taken by the Defendants on the applications now before me. They appreciate that in many cases their legal team will be concerned on behalf of groups of members whose interests conflict with their own. They have nevertheless given their legal representatives a free hand to present any arguments they believe to be relevant. Mr Michael Furness QC appeared at the hearing to perform this function, which I am satisfied he performed with the help of his instructing solicitors Baker & McKenzie, to the very high standards expected in such circumstances.
On the Trustees' side full disclosure has been made of the considerations that they have taken into account in formulating the distribution proposals, and there has been wide publicity for their proposals amongst beneficiaries (who have also been made aware of their right to object to the proposals if they disagree with them). The Defendants' legal representatives have raised a series of points with the Trustees which they have responded to.
It seems to me that this approach, though not of course perfect, is really the only practicable one in circumstances such as these.
The relevant legal principles
It is important to remember that, on these applications, the Trustees are not surrendering their discretion with regard to the manner of distribution. The court is being asked to authorise as lawful the distributions of the reserves formulated by the trustees in the exercise of their discretion: see Hart J in Public Trustee v Cooper (unreported) 20...
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