The Pensions Ombudsman v EMC Europe Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Briggs |
| Judgment Date | 14 December 2012 |
| Neutral Citation | [2012] EWHC 3508 (Ch) |
| Date | 14 December 2012 |
| Court | Chancery Division |
| Docket Number | Case No: HC11C00743 |
[2012] EWHC 3508 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Briggs
Case No: HC11C00743
In the Matter of a Reference Under Section 150(7) of the Pension Schemes Act 1993
Mr Jonathan Evans (instructed by The Office of the Pensions Ombudsman) for the Claimant
Mr Nigel Giffin QC and Mr Nicolas Stallworthy QC (instructed by Taylor Wessing LLP) for the Defendants
Hearing dates: 20, 21 November 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is a reference of a question of law by the Pensions Ombudsman pursuant to section 150(7) of the Pension Schemes Act 1993, arising for determination in connection with a complaint by a Mr Ralph Dilley relating to the Data General Employee Benefits Plan ("the Scheme"), of which he is a member. The question for the court is whether the Ombudsman should accept jurisdiction over the complaint.
The Scheme is a defined benefit occupational pension scheme currently in the course of being wound up. The first defendant to this application, EMC Europe Limited ("EMC Europe"), formerly known as Data General Limited, is the principal employer under the Scheme. The second defendant EMC Computer Systems (UK) Limited ("EMC UK") is the parent of EMC Europe and a participating employer in the Scheme. The third defendant, EMC Corporation ("EMC"), is incorporated in Massachusetts, USA. It is the parent of EMC (UK) but is not, and never has been, a participating employer in the Scheme.
Mr Dilley's complaint relates to a Compromise Agreement dated 2 August 2002, by which all outstanding liabilities of EMC (UK) and EMC Europe to fund the Scheme were compromised, in return for a single lump sum payment of £1.2m, and the Scheme then put into winding-up. Mr Dilley says that the Compromise Agreement ought to be set aside, and the Scheme administered as if it had never been made. His grounds for that assertion are first, that the three EMC companies failed to disclose full details of their financial position to the then trustees of the Scheme before the Agreement was made and, secondly, that the then trustees failed to obtain up to date financial information about the Scheme's employers.
The main ground for the defendants' case that the Ombudsman should not accept jurisdiction over the complaint is that EMC is a necessary party to any claim to set aside a compromise agreement, but that (as is common ground) it is not subject to the Ombudsman's jurisdiction. Accordingly, a decision that the Scheme should be administered, and the liabilities of EMC Europe and EMC (UK) in relation to it determined upon the basis that the Compromise Agreement should be set aside would not be binding upon EMC, but would nonetheless be prejudicial to its interests, specifically because of the adverse effect of any such determination upon the value of its shareholding in EMC (UK).
An alternative ground for the defendants' challenge to the Ombudsman's jurisdiction is that it is said that the Ombudsman failed, contrary to Rule 5(2) of the Personal Occupational Pension Schemes (Pensions Ombudsman) (Procedure) Rules 1995 ("The Procedure Rules") forthwith to inform the defendants of its decision, by February 2006, to investigate Mr Dilley's complaint. It did not do so until 2008. This second ground for challenge arises only if the first is not made out.
The Facts
The facts about the negotiation of the Compromise Agreement are, of course, hotly disputed. Nonetheless the facts relevant to the determination of this application are un-contentious, and may be shortly stated.
The Scheme was established by EMC Europe in 1981. It was at all relevant times governed by a trust deed dated 16 July 1993, as amended. In relation to employer contributions, the Scheme provided, by Rule 5.1:
"Each of the Employers shall contribute such amounts to the Scheme as may be determined by the Trustees acting on Actuarial Advice, after consultation with the Principal Employer, to be necessary, having regard to its Employees who are Members of the Scheme and to the assets and liabilities of the Scheme."
The Scheme contained power for the Principal Employer to suspend or terminate contributions due from participating employers. Rule 5.3 provided:
"Subject to the provisions of Section 16 the Principal Employer may from time to time give notice to the Trustees to reduce or suspend or terminate all or any of the contributions due under the provisions of Rule 5.1 and, upon such notice being given, the Employer or Employers concerned shall not be bound to pay any contributions, or more than the reduced contribution, as the case may be, nor shall the Trustees be required to seek such payments as may be required in order to maintain benefits."
A valuation of the Scheme's assets and liabilities as at 1 April 1997 revealed that the Scheme had a deficit of approximately £2.5m, measured on an on-going valuation basis. The then trustees made a written demand to EMC Europe of £2,523,234 ("the First Demand"), among other suggested measures to reduce the deficit.
EMC (UK) acquired EMC Europe on 1 February 2000 and became a participating employer with effect from the beginning of that year. A valuation of the Scheme's assets and liabilities as at 1 April 2000 revealed that the deficit had increased to approximately £5m, again measured on an on-going valuation basis. The then trustees repeated the First Demand and made a further request for the balance of the then current deficit, i.e. a demand for a further £2.8m ("the Second Demand"). EMC Europe then served notice under Rule 5.3 of its intention to terminate liability for future contributions, by letter dated 15 December 2000.
There followed protracted negotiations leading to the making of the Compromise Agreement on 2 August 2002, between the three EMC companies and the then trustees.
The main provisions of the Compromise Agreement (so far as is relevant for present purposes) are as follows. It recited that the Scheme was in deficit, that the principal Employer intended to cease contributing to the Scheme, thereby triggering its winding-up, and it asserted the inability of the participating Employers to pay what the then trustees asserted to be their debt ("the Debt") to the Scheme. The operative parts of the Compromise Agreement provided that EMC would put EMC (UK) and EMC Europe in funds with which to pay £1.2m to the then trustees, and that it would be paid to the trustees within 29 days. Subject to receipt of that sum by the then trustees, the Employers (defined for this purpose as including EMC) were to be released from any further obligation to the Scheme, save that they would facilitate the provision of independent financial advice to active members of the Scheme about their pension arrangements, for which EMC would contribute a further £60,000 and the participating Employers would make available their premises. The Compromise Agreement provided a full indemnity for the then trustees for their participation in the Agreement and, in particular, their release of the EMC companies from further liability.
The £1.2m (and £60,000) were duly paid and contributed from funds derived entirely from EMC, and the Scheme thereupon put into winding-up as contemplated by the Compromise Agreement.
Having without success pursued his complaint through the Scheme's internal dispute resolution procedure, Mr Dilley lodged his complaint with the Ombudsman's office on 13 May 2005, identifying the then trustees and EMC as the intended respondents, but giving EMC Europe and EMC (UK)'s address.
On 16 February 2006 the Ombudsman informed Mr Dilley of his view that the complaint fell within his jurisdiction, quo ad the trustees of the Scheme, but that the investigation would be put on hold until a pending investigation of the Scheme by the Pensions Regulator had come to an end. The Ombudsman sought clarification from Mr Dilley as to which of the EMC companies he was complaining against. In May 2007 Mr Dilley said that his complaint was against all three EMC companies.
In July 2007 the Ombudsman wrote to Mr Dilley stating that the Pensions Regulator's involvement with the case had concluded and asking whether Mr Dilley wished to pursue the complaint. On 21 August 2007 he said that he did.
On 18 April 2008 the Ombudsman wrote to Mr Dilley (via his solicitors), the then trustees and all three EMC companies, notifying them of a decision that the complaint had been accepted for investigation, as against the trustees and all three EMC companies. The challenge to the Ombudsman's jurisdiction in relation to EMC was notified in September 2008. Mr Dilley did not respond to this challenge until December 2009, following which, in February 2010 the Ombudsman acknowledged his lack of jurisdiction over EMC. There followed extended correspondence in which the EMC companies asserted that the Ombudsman should not accept jurisdiction at all in relation to the complaint, at the conclusion of which the Ombudsman issued the present application, in March 2011. The EMC companies' alternative challenge based upon delay was raised by way of response and, to avoid that issue having to be resolved (if the first ground of challenge failed) by a subsequent application for judicial review, the Ombudsman sensibly agreed to permit it to be resolved, if necessary, as part of this application.
The Statutory Scheme
Part X of the ...
To continue reading
Request your trial