Pell Frischmann Consultants Ltd and Another v Mr Ashu Prabhu and Others
| Jurisdiction | England & Wales |
| Judge | Miss Penelope Reed |
| Judgment Date | 25 July 2013 |
| Neutral Citation | [2013] EWHC 2203 (Ch) |
| Docket Number | claim no: HC12E02792 |
| Court | Chancery Division |
| Date | 25 July 2013 |
[2013] EWHC 2203 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Rolls Building
110 Fetter Lane EC4A 1ES
Miss Penelope Reed QC Sitting as a Deputy Judge of the Chancery Division
claim no: HC12E02792
Mr. Robert Levy QC and Mr. James Rickards (instructed by Messrs Olephants Solicitors) for the Claimants
Mr. Andrew Short QC (instructed by Bevan Kidwell LLP) for the First, Second and Third Defendants
Mr. David E. Grant (instructed by Shoosmiths LLP) for the Fourth Defendant
Hearing dates: 9 th and 10 th July 2013
Judgment (as approved by the Judge)
Miss Penelope Reed QC
Background
The Claimants ("the Companies") are the sponsoring employers of the Pell Frischmann Retirement Benefits Scheme ("the Scheme") of which the First to Third Defendants ("the Trustees") are the present trustees. The Fourth Defendant ("Dr. Lamb") was an employee of one or other of the Companies from 1987 to December 2011 when he retired. He was a director of Pell Frischmann Civil and Structural Engineering Limited ("Engineers") from 3 May 1990 to 15 October 2003.
This is an application brought byDr. Lamb to strike out the Companies' claim on the grounds of abuse of process or in the alternative for a prospective costs order against either the Scheme or against the Companies.
The Scheme is a registered balance of cost final salary defined benefits scheme which closed to future accrual in June 2010 and Dr. Lamb became a member of that Scheme in 1988. The dispute between Dr. Lamb and the Companies and Trustees is a simple one. He claims to be entitled to an enhanced pension from the Scheme of two-thirds of his final salary rather than the one-third everyone accepts he is entitled to.
These proceedings are at an early stage in that Dr. Lamb has not yet served his defence. There is a defence from the Trustees but the application is made at a time when the issues between the parties are not clear. I have therefore proceeded on the basis of the issues as presently pleaded and indeed the application was argued before me on that basis.
It is accepted by all parties that there is power under Clause 8 of the Trust Deed dated 28 May 1991 ("the Trust Deed") which governs the Scheme to augment benefits. It may be that there are other powers which are relevant but they are not currently in play. Clause 8 reads as follows:-
"SUBJECT to the payment by the Employer of such additional contributions (if any) as the Trustees on the advice of the Actuary may consider appropriate and subject to any undertakings given by the Trustees to the Board of the Inland Revenue the Trustees may with the consent of the Employer and (if appropriate) the Member augment any of the Relevant Benefits to which any person may be entitled… as the Trustees may determine but so that the amount of any Relevant Benefits shall not exceed the appropriate maximum referred to in Part I of the Schedule to the Rules."
Therefore the Trustees have to agree to exercise their power under clause 8, and under the Trust Deed they may do so by majority; the Employer has to consent to their doing so and the exercise is subject to any additional contributions being made by the Employer as the Trustees on the advice of the Actuary may consider appropriate. There has been some question raised as to whether the Trustees are obliged to seek actuarial advice as a matter of construction of the clause but my understanding is that this is no longer a live issue in this claim. The Companies are prepared to accept for the purpose of this claim that the Trustees were not obliged to seek actuarial advice before exercising their powers.
On 28 June 1991 a letter was written to Dr. Lamb by one of the then trustees of the Scheme, Mr. Jeffery Goodwin. I will quote it in full as it is the central plank of Dr. Lamb's claim:-
" The Trustees have received a request from your Employer, Pell Frischmann Consulting Engineers Ltd. to enhance your pension benefits with effect from 1 st of April 1991.
I am now pleased to inform you of the Trustees' approval to the request and to confirm the change as follows:—
With effect from the 1 st of April 1991, the annual rate of accrual for pension benefit is increased from one sixtieth of final pensionable salary to such factor as necessary in order to achieve at age 65, the maximum pension entitlement of two-thirds of final pensionable salary. The enhancement will accrue at an equal annual rate between the 1 st of April 1991 and the 19 th February 2012.
This letter should be retained by you with your other Pension Scheme documents as confirmation of your enhanced future entitlement."
Dr. Lamb was employed by Engineers at this time and indeed was a director of that company. The Companies say that Dr. Lamb is not entitled to an enhanced pension because the trustees at the material time did not agree to exercise their powers and did not delegate their functions to Mr. Goodwin; the Companies did not consent to the power being exercised and the trustees did not seek actuarial advice although in light of the concession made by the Companies in respect of the construction of Clause 8, that point may not be material.
The Companies have brought a claim seeking a declaration that Dr. Lamb is only entitled to his basic pension and not an enhanced pension, that the Clause 8 power has not been exercised in his favour and/or that the 1991 letter has no legal effect. In that claim the Trustees are neutral. They simply wish the matter to be decided one way or another so that they can pay out whatever pension is due. As explained below they have played an active role in respect of some parts of this application.
The Lead up to the Proceedings
On 12 January 2012 Linda Roberts ("Ms. Roberts") one of the present trustees and the Third Defendant to this claim wrote to Dr. Lamb indicating that apart from the 1991 Letter there was no record of any decision being made by the then trustees in respect of the enhanced pension and that the Companies were clear they had not approved it. There has been some criticism as to the tone of this letter but Ms. Roberts wrote towards the end:
"I am writing in the hope that you may be able to shed further light on this matter. If you have any further documentation or information regarding the award of this enhancement please let me have it as soon as possible. I stress that this is not an attempt to deny you what is properly due. We simply need to satisfy ourselves as to what is properly due…"
She then asked for a response by the end of the week. The letter does not strike me as unreasonable, particularly in light of the words quoted above although the request for a response might be regarded as setting too short a time scale.
In fact Dr. Lamb responded by e-mail the following day saying that he did not have any records and asked Ms. Roberts to forward minutes and correspondence to him. On 1 February 2012 it seems that in response to a request from Dr Frischmann who is a director of the Companies, and a letter from Olephants Solicitors for the Companies, Mr. Goodwin by then nearly 87 e-mailed to say the 1991 Letter was genuine, that he would not have written it if the employer had not asked him to do so and perhaps Dr. Lamb could tell the Trustees with whom he had agreed the enhancement.
This was sent to Dr. Lamb on 2 February 2012 with a request for more information particularly about any discussions Dr. Lamb had had at the relevant time with the directors of Engineers. On 5 February Dr. Lamb responded that he had had no such discussions with Dr. Prabhu and Dr. Frischmann the then controlling directors of Engineers.
On 16 February Olephant Solicitors wrote a long letter to Dr. Lamb. That letter which is the subject of criticism by Dr. Lamb does not identify itself as a letter of claim but sets out a number of allegations against Dr. Lamb; not only that he is not entitled to the enhanced pension but also that he was in breach of his fiduciary duties to Engineers with regard to agreeing the enhanced pension. None of these additional allegations has found its way into the present claim.
On 7 March 2012 Dr. Lamb invoked the Internal Dispute Resolution Procedure ("IDRP") set up in respect of the Scheme. Section 50 of the Pensions Act 1995 requires trustees of schemes to set up dispute resolution arrangements. The IDRP set up for the Scheme provides for the matter to be considered as a two-stage process: first, by a specified person, in this case Ms. Roberts and then if the member is dissatisfied by her decision by the Trustees. Decisions must be taken within a reasonable period and the IDRP in this case specified 4 months. Ms. Roberts was obliged to notify the member if a decision within that time was not possible. Section 50 (3)(c) provides that the IDRP does not apply to an exempted dispute which is defined as a dispute where proceedings have been commenced in any court or tribunal or the Pensions Ombudsman has commenced an investigation in respect of a complaint made or dispute referred to him (section 50(9)). The IDRP set up under section 50 is specific to the trustees and members of the scheme in question and does not cover disputes with employers. Therefore the Companies were not bound by any decision either Ms. Roberts or the Trustees reached.
Ms. Roberts acknowledged Dr. Lamb's complaint on 9 March 2012 referring to the "investigations" which were underway into the circumstances in which the enhanced pension was claimed. On 3 April Ms. Roberts wrote to Dr. Lamb stating that she expected to have received legal advice by the middle of May...
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