Stena Line Ltd (1st Respondent) (1) Merchant Navy Ratings Pension Fund Trustees Ltd (2nd Respondent) v (2) P & O Ferries Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Toulson,Lord Justice Rimer |
| Judgment Date | 12 May 2011 |
| Neutral Citation | [2011] EWCA Civ 543 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2010/2278 |
| Date | 12 May 2011 |
and
[2011] EWCA Civ 543
Lady Justice Arden
Lord Justice Toulson
and
Lord Justice Rimer
Case No: A3/2010/2278
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
BRIGGS J
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Andrew Spink QC and Mr Richard Hitchcock (instructed by CMS Cameron McKenna LLP) for the Appellant
Mr Brian Green QC and Mr Jonathan Hilliard (instructed by Travers Smith LLP) for the First Respondent
Mr Christopher Nugee QC and Mr Edward Sawyer (instructed by Mayer Brown International LLP) for the Second Respondent
Hearing dates: 28–29 March 2011
This appeal concerns an occupational pension scheme known as the Merchant Navy Ratings Pension Fund ("the MNRPF"). In 2001, the trustee of the MNRPF adopted a scheme ("a deficit repair scheme") to meet a substantial deficit which had emerged in the assets available to meet the MNRPF's liabilities. As part of this scheme ("the 2001 scheme"), a provision in the rules of the MNRPF was removed. This had provided that the trusts should be terminated if (among other events) there was a deficiency and there were "no agreed measures acceptable to the Participating Employers" for overcoming that deficiency. There is now another very substantial deficit in the fund. (It is estimated at some £370m on the basis of the cost of transferring the liabilities to an insurer). In these circumstances the trustee is likely to propose another deficit repair scheme, involving, by way of further amendment to the rules, the imposition of an obligation that would affect all Participating Employers, not only the group of forty or so current employers invited to approve the 2001 scheme and required to contribute to it (called below "the Current Employers"). The question has arisen whether, in that event, the power of amendment in the rules must be interpreted as subject to an implied restriction that, if the new proposal is not acceptable to any of the Participating Employers (other than a Current Employer) who is affected by it, the trusts must determine. By his order dated 27 July 2010, Briggs J, in a careful and comprehensive judgment, answered this question of interpretation in the negative. The appellant, P & O Ferries Ltd, the party appointed to represent the Specified Employers, being the Participating Employers other than those who had consented to the 2001 scheme, appeals from that part of his order. The short point is whether it has now been deprived of its ability to rely on the rights conferred by the previous provisions of the rules in order to oppose the new deficit repair scheme.
Background
I confine my description of the background to those matters which are relevant to this judgment. The MNRPF was constituted in 1978. It was originally a defined benefit scheme ("a DB scheme"). There is a sister scheme for merchant navy officers, known as the Merchant Navy Officers Pension Fund ("the MNOPF"), set up in 1937. The MNOPF was originally a money purchase scheme but in 1978 it became a DB scheme by reference to average earnings over the pensioner's working life.
The basic governance structure of the MNRPF should be noted. At the outset the powers of management were exercisable by a council of management and the trustee was simply a custodian but in 1986 this system was altered. There is a now a corporate trustee and the trust deed provides that there should be equal representation of employers and employees on the board of the trustee. I will refer to the relevant organs as simply the "trustee".
The MNRPF is governed by a trust deed and rules. Employers adhere to the trust deed and rules by executing an accession agreement, and then become "Participating Employers". I refer to a rule in force immediately prior to the 2001 scheme by its number and the prefix "OR". The provisions of the trust deed and rules have been varied from time to time, and new trust deeds have been adopted. The rules set out the basis for members' and employers' contributions. Immediately prior to the 2001 scheme, they contained the following further provisions:
"29.1 IF, as a result of the Actuary's report, it shall appear that there is a deficiency or anticipated deficiency in the Scheme's resources, the Trustees shall consider what if any action, having regard to any recommendations made by the Actuary in his report, should be taken either by way of increasing contributions or decreasing benefits to render the Scheme solvent. If necessary, the Trustees shall take such steps as are hereinafter laid down for amendment of this Deed and the Rules, or if the deficiency or anticipated deficiency cannot be made good, for the winding up of the Scheme.
29.2 IF the report shows a surplus, all or part of that surplus may be applied by the Trustees, having regard to any recommendations made by the Actuary, to do any one or more of the following:
(i) to create a reserve fund;
(ii) to decrease contributions;
(iii) to increase or extend benefits; or
(iv) to lower the pensionable age.
The Trustees' approval to such application as aforesaid shall be signified in like manner as is laid down under the Trust Deed for an alteration of the Rules except that a Deed executed under the seal of the Trustees shall not be required to give effect to such application.
…
31.0 THE trusts hereby constituted shall continue unless and until:
(i) determined by a resolution to determine the Scheme passed by the Trustees in accordance with the Trust Deed; or
(ii) there be a deficiency or anticipated deficiency in the Scheme's resources with no agreed measures acceptable to the Participating Employers and approved by the Actuary for overcoming that deficiency.
…
32. THESE Rules may be varied or added to in accordance with the provisions of the Trust Deed (Clause 30)."
The trust deed constituting the MNRPF contains the following power to amend the rules, which was, so far as material, identical in earlier versions of the trust deed:
"30. THE provisions of the Trust Deed or of the Rules may be varied or added to in any way by Deed executed under the seal of the Trustees. Every such variation must first be approved by a majority of the full number of Participating Employers' representatives and also a majority of the full number of the Members' representatives serving as Trustees or as Directors on the Board of any Corporate Trustee which approval may be signified either by a resolution passed by such majorities or by an instrument in writing signed by such majorities PROVIDED that no variation or addition shall be made which:
a) would have the effect of changing the main purposes of the Scheme, namely the provision of pensions for Members on retirement; or
b) would operate in any way to diminish or prejudicially affect the rights in respect of any Member annuitant or other beneficiary already earned; unless the Actuary shall advise that no other course is reasonably practical having due regard to the interests of all persons interested in the Scheme; or
c) would be contrary to the principle that the Participating Employers and the Members shall be equally represented on the Board of the Corporate Trustee of the scheme;
d) would contravene the requirements of sections 67 to 67L of the 1995 Act."
It will be observed that OR 31.0(ii) gave Participating Employers in effect a veto over the trustee's proposals for meeting a deficiency. In 1978 there were no statutory requirements for making good the deficit of a pension scheme which was wound up. The Pensions Acts of 1995 and 2004 have progressively increased the obligations of employers in the winding up of a pension scheme so that there would be little incentive today for an employer to seek to terminate a pension scheme and to wind it up. Thus, as of the date when the MNRPF was established, the Participating Employers might well have wished to bring the trusts established by the trust deed to an end in order to reduce their liabilities. That option would not be open to them in the same way today. However, the fact that the logic behind OR 31.0(ii) has changed does not mean that that provision ceases to be a binding obligation. If it was desired to eliminate this provision, the rule would have to be amended in accordance with clause 30 of the trust deed.
In 2000, it became apparent that there was a substantial deficiency of some £103m to £213m in the fund and the trustee made a proposal for amending the trust deed and rules so that the deficiency could be funded by the Current Employers. This proposal became the scheme to which I have referred above as the 2001 scheme. The trustee applied to the court for a direction that it be at liberty to enter into the scheme, and Blackburne J in due course heard the application. The trustee did not surrender its discretion to the court and accordingly the question for the court was not whether the scheme should be implemented but whether, in reaching its decision to implement the proposal, the trustee had taken into account irrelevant, improper or irrational factors, or reached a decision that no reasonable trustee properly directing himself could have reached (see generally Edge v Pensions Ombudsman [1998] Ch 512, approved by this court [2000] Ch 602). Blackburne J gave the direction that was sought. In his judgment he stated that the proposal had the support of all but two of the Participating Employers (and was opposed by none). But it is common ground in these proceedings that only the Participating Employers who were required to contribute to the then current deficit were consulted, and that there were some 200 other Participating Employers, including the appellant, who were...
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