PNPF Trust Company Ltd v Taylor & Others

Hearing dates: 2, 3, 6, 7 July 2009

Mrs Justice Proudman :

These proceedings concern the Pilots' National Pension Fund of which the claimant is the trustee. The Scheme has 53 participating bodies and has some 1,800 members who are marine pilots. The second defendant is one of those individual Scheme members. It is an unusual scheme because it has a mix of employed and self-employed members, authorised by Competent Harbour Authorities to operate as pilots in their areas. Some authorities (ECHAs) employ their pilots, others (SCHAs) simply authorise self-employed pilots. Some do both. Each of these classes can be further sub-divided into those CHAs which currently employ or authorise pilots who are members of the scheme (so-called active CHAs) and those CHAs which did so formerly but do so no longer (so-called formerly active CHAs). PD Teesport Ltd (“Teesport”) and the seventh defendant First Corporate Shipping Limited (“Bristol”) are both active SCHAs. ECHAs contribute to the Scheme as employers. The obligation of SCHAs is to collect the contributions made by self-employed pilots and pass them on to the trustee. To date they have not had to make any contributions to the Scheme.

Teesport applies to be joined as a defendant to these proceedings. The application is contested by the claimant (a Board comprising several persons including some CHAs) and the second defendant. Most of the other defendants oppose the application and none of them actively supports it. Several non-parties, both CHAs and individual members, have also written to the trustee expressing their opposition to the joinder.

Teesport's application for joinder is the only application before me, although it is closely related to an application by the claimant for representation orders, which, if granted, will result in Teesport being represented by up to four of the defendants for the purposes of the proceedings. I say 'up to four' because the representation is to be what is termed interest-based or issue-based. Although Bristol has close identity of interest with Teesport, the proposal is for a division of labour between the defendants and their legal teams and no single defendant will represent Teesport's interests for all the purposes of argument.

The decision, whichever way it went, would impinge upon the representation issue in certain respects. Thus, if the application were dismissed, it would be on the basis that Teesport would be adequately and properly represented by others; if granted, no representation order made in future would cover Teesport.

Overview of the parties' positions

Before I consider the legal merits of the parties' respective cases, it is important to take an overview of the practical matters which underlie the present dispute about joinder and representation. Both sides have serious concerns about these issues and the concerns of the losing side will remain as a result of my decision.

The Scheme is in deficit. The latest estimate is a deficit of between £188m and more than £285m. The claimant is obliged by the Pensions Act 2004 to formulate a recovery plan to eliminate the deficit. If it cannot do so it faces regulatory action and may be wound up. The recovery plan should have been in place by March this year, but there is a multiplicity of issues about the trustee's powers and who may be liable to contribute to the Scheme in certain circumstances. These include some issues with which Teesport is not directly concerned.

For the purpose of formulating a recovery scheme the trustee needs to know the scope of its powers to obtain additional funding and in particular whether it is authorised to obtain such powers by amendment. To a similar end it also needs to know whether certain statutory mechanisms apply. The Part 8 proceedings ask for determination of questions of construction of the Scheme and of statute as to the scope of the trustee's powers, for representation orders and for directions. 11 main issues (with numerous sub-issues) of construction have been identified and addressed in the Part 8 claim form.

Teesport's position

Teesport regards the proceedings as hostile. What Teesport means is that the trustee is far from neutral as to the outcome of the questions for the Court. The object of the exercise is to enable the trustee to make certain persons, including the SCHAs, contribute in order to save the scheme. It is likely that, if it has the powers to do so, the trustee will indeed exercise them to amend the scheme and impose liability to contribute on the SCHAs.

Teesport's exposure on such a rule change could be as much as £23m for the past service deficit alone. In addition, if permitted to do so, the trustee may seek to recover from those CHAs which can pay, of which Teesport is one, the amounts due from those who cannot. This would severely prejudice the terms of Teesport's borrowing and could threaten its very existence. The stakes for Teesport are therefore very high.

The evidence is that the stakes are high for all those who are to be represented, not least individual members who are at risk not merely of losing their pensions but, unusually, of having to contribute to the scheme deficit if some of the issues of construction are resolved against them. Teesport has a substantial commercial interest in the outcome of the action, but so do those who have agreed or submitted to representation. In commenting on Teesport's extensive financial exposure, the solicitors for the third defendant, Milford Haven Port Authority, wrote to Teesport's solicitors in these terms:

“We do not believe the exposure of your client is necessarily greater in proportion to their respective business or significantly different from the exposure of any other authority affected by these proceedings, to make the granting of your application desirable…”

Teesport objects to the interest/issue based representation. For example, one of the matters it would wish to argue for itself is to be allocated to the first defendant. Teesport asserts that as the primary interest of that defendant is contrary to that of the SCHAs the argument will necessarily be presented as one of fallback only. Further, because of the issue-based allocation, Teesport cannot rely upon Bristol to protect Teesport's interests. Again because of the allocation, it is difficult for Teesport to present its arguments indirectly as it has to deal with four parties and four teams of lawyers. It is concerned that ultimate decisions as to how the arguments are to be presented lie with others so that it has only what has been described by one of the directors of the claimant as a “measure of influence” over the issues. The sixth defendant, Port of Tyne Authority (“Tyne”), also has some community of interest with Teesport but Teesport is reluctant to disclose details of its concerns and finances to Tyne because Tyne and Teesport are direct commercial competitors.

The crux of Teesport's concern is that because it has such a significant financial interest in the outcome of the action it wants to be able to ensure that it is represented at trial by its own separate independent legal advisers. It objects to the trustee, which has its own objective, dictating the structure of the proceedings and in particular dictating who (both in terms of the selection of representative defendants and in terms of the legal teams acting for those defendants) should present the arguments on Teesport's behalf. It further objects to the trustee dictating how those arguments should be allocated among the defendants.

Teesport accepts that if it is joined it will not be entitled to the kind of protection as to costs afforded to a representative defendant. It is content to be joined on the basis that it takes its chances as to costs, including the increased costs of other parties resulting from the joinder.

The position of the other parties

The claimant's and second defendant's concerns are as to convenience, proportionality, delays and costs.

The proceedings are necessary and it is also necessary that they should be determined as expeditiously as possible. Teesport now accepts this and Mr Martin QC, its leading counsel, said that his client is as eager as the claimant to adhere to the trial date fixed for January 2010.

The proceedings are necessarily complex. Teams of expert lawyers (all leaders in their field) for the existing parties, in consultation with the CHAs which are not parties, have expended a huge amount of time, effort and costs in condensing the issues and allotting arguments to provide as streamlined and intelligible a structure for the proceedings as possible.

Mr Tennet QC on behalf of the claimant has taken the Court through the issues in the claim form and a schedule of the proposed representation on each of those issues. He has satisfied me that there is nothing mutually inconsistent in CHAs or individual members arguing some of the matters which have been allocated to them. Every argument set out against each issue in the schedule is, as far I can tell on the cursory examination I have undertaken, properly assumed by the party to which it has been allocated.

Mr Spink QC, counsel for the second defendant, pointed out by way of example...