Thales Uk Ltd v Thales Pension Trustees Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 31 March 2017 |
| Neutral Citation | [2017] EWHC 666 (Ch) |
| Court | Chancery Division |
| Date | 31 March 2017 |
| Docket Number | Case No: HC 2016 002740 |
[2017] EWHC 666 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Justice Warren
Case No: HC 2016 002740
Robert Ham QC and Emily McKechnie (instructed by PricewaterhouseCoopers LLP) for the Claimant
Brian Green QC and James McCreath (instructed by Gowling WLG (UK) LLP) for the Defendants
Hearing dates: 13 and 14 March 2017
Introduction
In this part 8 claim, the Claimant, Thales UK Limited, (" the Company") asks a number of questions concerning the meaning of the provisions of the Thales UK Pension Scheme (" the Scheme"). The Company is the principal employer under the Scheme. The first Defendant is the trustee of the Scheme. The second and third Defendants are parties to the Definitive Deed constituting the Scheme and Rules dated 9 January 2008 and carry out certain functions which are not relevant for the purposes of this claim. I shall refer to the Defendants together as (" the Trustees"), adopting the Claim Form in that respect. The questions raised are concerned with the powers which the Company and the Trustees have under the rules of the Scheme to change the index by reference to which (i) pensions in payment are to be increased and (ii) the rate of revaluation of annual salary for the purpose of calculating career average revalued earnings benefits is to be calculated.
The current index by reference to which benefits are increased and revalued is the index commonly known as the Retail Prices Index, or RPI. The Company wishes to replace RPI with another index which will cost less to implement than RPI. The candidate index favoured by the Company is the index commonly known as the Consumer Prices Index, or CPI. I am concerned only with questions of construction of the rules. If, as a matter of construction, it is possible to change the index, separate questions will arise as to whether the Trustee will exercise such discretions as it has to effect the change or to consent to a change which the Company has power to effect.
The Scheme is currently governed by the Second Definitive Deed and Rules dated 30 June 2008. The Scheme received transfer payments from some final salary schemes and, broadly speaking, it provides (a) final salary style benefits in accordance with the trust provisions and rules of each of the transferor schemes in respect of the benefits transferred in, and (b) career average revalued earnings (" CARE") style benefits in respect of service from January 2008. It is closed to new entrants.
It is common ground that, in the case of provisions governing CARE benefits, the Court can answer the questions raised by reference to the rules relating to CARE for Former Racal Decca Beneficiaries, without having to consider the other Rules, which are mutatis mutandis in the same terms. The principal question here is whether the compilation of the RPI has been "materially changed" within the meaning of the relevant rule. I will refer to these rules as " the CARE Rules".
Another group of members, transferred in from the Thales Optronics Pension Scheme (" TOPS"), are entitled to final salary benefits calculated in accordance with the Deed and Rules dated 16 September 1991 of the Barr & Stroud Limited Pension and Life Assurance Scheme. The principal question here is whether the RPI has been "otherwise altered" within the meaning of the relevant rule. I will refer to these rules as " the TOPS Rules".
The Rules
Although the Rules are long and complex, as the result of the merger of a number of schemes, there are not many rules to which it is necessary to refer. I take the CARE Rules and the TOPS Rules in turn.
For the purposes of this case, I have been provided with the CARE Rules to be found in Appendix One and Two of Schedule One of Part E of the Rules forming part of the June 2008 Deed and Rules. The parties are agreed that the other relevant provisions in the Rules are materially identical. I mention the following:
i) Rule 4 deals with the calculation of the CARE pension. Rule 4.1 provides a formula for the calculation. The pension is (X-Y) x Z. "X" is defined as 1/720 th of Averaged Revalued CARE Salary for each complete calendar month of Pensionable CARE Service earned up to the date when an active member leaves pensionable service. It is not necessary for present purposes to consider or understand "Y" and "Z" which concern certain deductions and a longevity adjustment factor.
ii) Rule 4.2 contains a number of definitions relevant to that formula.
iii) "Averaged Revalued CARE Salary" is (i) the aggregate of Revalued CARE Salary at each 1 April during pensionable service divided by (ii) the number of years in which the member was in pensionable service on a 1 April.
iv) "Revalued CARE Salary" is the active CARE member's salary "as at each 1 April revalued by the Revaluation Factor up to 1 April immediately preceding the date [when the member leaves pensionable service]".
v) "Revaluation Factor" is "the Revaluation Rate compounded over the Revaluation Period". That period is the period from 1 April to which the relevant CARE Salary relates to the 1 April immediately preceding the date the member leaves pensionable service.
vi) "Revaluation Rate" is "the rise in the Government retail prices index for all items compound each year for the "Revaluation Period". This is capped at the "Maximum Revaluation Rate" which is what the Revaluation Rate would be if the rise in that index was 8% compound for each year for the Revaluation Period.
vii) The rise in that index used for the Revaluation Rate is the one published before each 1 April for the immediately preceding month of September.
viii) Rule 14 deals with increases to pensions in payment. Increases can, for present purposes, be taken to be at "the annual rise in the published Government retail prices index for all items for the immediately preceding month of September". Increases take place on 1 April each year. In other words, the increase on 1 April in a particular year is assessed by reference to the increase in the RPI between the September 19 months earlier and the September 7 months earlier.
ix) It is not necessary to consider separately the benefits for early leavers. An early leaver is entitled to a deferred pension under Rule 6.2 calculated under Rule 4 up to the date when he leaves service with statutory revaluation on that amount.
The critical provisions which I need to construe are found in Rule 4.2(vi) (so far as concerns the amount of the initial pension) and Rule 14.1(C) (so far as concerns increases to pensions in payment). Each is in identical terms and provides as follows:
"If the Government retail prices index for all items is not published or its compilation is materially changed, the Principal Employer, with the agreement of the Trustees, will determine the nearest alternative index to be applied."
The principal questions which arise are whether the compilation of the RPI has been "materially changed" and if so what are the candidates for the "nearest alternative index".
The TOPS Rules are to be found in the Deed and Rules dated 16 September 1991 of the Barr & Stroud Limited Pensions and Life Assurance Scheme. I mention the following:
i) "Retail Price Index" is defined as:
"the General Index of Retail Prices maintained by the Department of Employment or any Index which may replace that Index for the purposes of determining the value of the principal on repayment of Index Linked Government Stock and which is approved by the Trustees for the purpose of the Scheme".
Although the RPI is no longer maintained by the DoE, it is clear that the current RPI falls within this definition.
ii) "Relevant Retail Price Index" on any particular date means the RPI figure applicable to the month which commences 3 months before the month in which that particular date occurs.
iii) Rule 4.4 deals with increases to pensions in payment. The rate of increase to pension in excess of guaranteed minimum pension is to be found in Rule 4.4.1(b) is
"the normal rate detailed in Rule 4.4.4, or such other rate, if any, as the Trustees, with the agreement of the Employer, shall from time to time decide…."
iv) Under Rule 4.4.4, the normal rate of increases is the lesser of (a) 5% pa compound and (b) the amount of the increases if any in the Relevant Retail Prices Index at the date of calculation over the Relevant Retail Prices Index 12 months earlier. But that is subject to the following provisos which are the critical provisions for present purposes:
"(i) if the Retail Prices Index is revised to a new base or if that Index is otherwise altered after a date which is relevant in respect of a pension in terms of this Rule, all subsequent variations in that pension will be on a basis determined by the Trustees having regard to the alteration made to the Retail Prices Index; and
(ii) if the Retail Prices Index is not published for a month for which it is relevant for the purposes of this Rule, a substitute figure determined by the Trustees will be used for the purpose of this Rule and no adjustment will be made in the event of the subsequent publication of the Relevant Retail Prices Index; and
(iii) if at the date on which a pension is due to be varied in terms of this Rule there are not Government Index Linked Stocks available for the investment of funds from exempt approved retirement benefit schemes, the variation in the amount of the pension will be on a basis determined by the Trustees and certified as reasonable by an actuary."
The principal questions which arise are whether the RPI has been "otherwise altered" and if so what are the candidates for the basis...
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