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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> MNOPF Trustees Ltd. v FT Everard & Sons Ltd. & Ors [2005] EWHC 446 (Ch) (22 March 2005) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2005/446.html Cite as: [2005] OPLR 315, [2005] PLR 225, (2004-05) 7 ITELR 687, [2005] EWHC 446 (Ch), [2005] Pens LR 225 |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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MNOPF Trustees Limited |
Claimant |
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- and - |
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(1) F T Everard & Sons Limited (2) Pandoro Limited (3) Everard (Guernsey) Limited |
Defendants |
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Christopher Nugee QC and Paul Newman (instructed by CMS Cameron McKenna) for the First Defendant
Andrew Simmonds QC and Barbara Rich (instructed by Freshfields Bruckhaus Deringer) for the Second Defendant
Brian Green QC and Michael Tennet (instructed by Sacker & Partners) for the Third Defendant
Hearing dates: 8th - 11th March 2005
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Crown Copyright ©
Mr Justice Patten :
Introduction
"In the Trust Deed and in these Rules the following expressions have the following meanings unless inconsistent with the context."
"Participating Employers" means
"such companies or firms as may have become Participating Employers in accordance with Clause 6.0, or which have previously become Participating Employers under other documentation which then governed the Scheme."
"6.0 A company or firm may take part in the Scheme and so become a Participating Employer if:
(i) the Trustees determine that it falls within one of the categories set out in Clause 6.1 below
(ii) it agrees to enter into the form of agreement set out in the First Appendix to this Trust Deed, or in such other form as shall be determined by the Trustees
(iii) its participation will not prejudice Approval.
6.1 A Participating Employer must be either:
(i) an employer of British Merchant Navy Officers and/or former British Merchant Navy Officers (whether or not the employer is resident for tax purposes in the UK) who the Trustees in their absolute discretion determine to be eligible to be a Participating Employer; or
(ii) an employer of staff engaged in the administration of the Scheme or the National Sea Training Trust or other institution or undertaking formed for purposes connected with or relating to the British Merchant Navy as the Trustees in their absolute discretion may from time to time determine to bring within the Scheme.
In the case of a Participating Employer who is not resident for tax purposes in the UK, the Trustees may enter into such special arrangements with such Participating Employer as the Trustees in their absolute discretion may consider appropriate including variation in the calculation of contribution and benefit according to the particular circumstances of the participation."
"FORM OF AGREEMENT FOR
PARTICIPATING EMPLOYERS
To: THE TRUSTEES OF THE MERCHANT NAVY OFFICERS PENSION FUND
WE, of
having received a copy of the Trust Deed and Rules dated 199[ ], constituting and regulating the Merchant Navy Officers Pension Fund HEREBY AGREE to assume and be bound by the obligation undertaken by Participating Employers thereunder or under any subsequent variation that may be made therein and promptly to pay to the Scheme all contributions due under the Rules.
DATED 199[ ]"
The Scheme
"Subject to the provisions of these Rules every Member shall be entitled on retirement at the age of 65 years or older to a pension of the amount (to be payable for five years certain) which will be secured in accordance with the Table or other Table in force for the time being appended to these Rules by the contributions paid jointly in equal shares by the Employer and the Member to the Fund and no Member who continues in service after attaining the age of 65 years shall be entitled on his retirement to any larger pension than would have been payable if he had retired on attaining that age."
"The Fund shall be divided into two sections. A first Section to be named the Pre-1978 Section comprising the funds constituting the Fund as at the 5th April 1978 and as provided under Rule 5(b) and all subsequent earnings thereon out of which Section shall be paid the benefits secured by contributions to the Fund in respect of service before the 6th April 1978. A second Section to be named the Post-1978 Section comprising the funds and earnings thereon secured by contributions (except as provided under Rule 5(b)) to the Fund in respect of service on and after the 6th April 1978 out of which Section shall be paid the benefits secured by contributions paid to the Fund in respect of service after that date. The two Sections shall be the subject of separate accounts and valuations and all provisions of the Rules relating to accounts and valuation shall be subject to this overriding provision. Under no circumstances shall benefits payable out of one Section of the Fund be payable out of the other Section nor shall any deficit on one Section be made good out of the other Section. Any surplus arising on a Section shall be employed solely for the purposes of that Section as if constituting a separate Fund.
The investments and moneys comprising the two Sections of the Fund shall at all times be kept entirely separate and shall not be allowed to become intermixed."
"Subject to the provisions of these Rules, every Member shall be entitled on retirement at Normal Pension Age or older to a pension
(i) in respect of Service prior to the Appointed Day, of annual amount secured to him at that date under the Rules in force immediately prior to that date; and
(ii) in respect of Post-1978 Service for which contributions are received by the Fund, of annual amount equivalent to 1/40th of his Pension Denominator for each year of such Post-1978 Service and proportionately for part of a year."
"additional contributions to be paid to the Pre-1978 Section of the Fund to fund liabilities in respect of past Service already accrued prior to the Appointed Day [6th April 1978], namely
(i) .62% of such Pensionable Salary for a period of 14½ years from the Appointed Day;
(ii) .93% of such Pensionable Salary for a period of 4 years from the Appointed Day; and
(iii) 2.11% of such Pensionable Salary for a period of 15 years to be counted from June 1974."
The burden of making up the existing deficiency was therefore imposed on employers who continued to participate as "Employers" in the Scheme (or joined it before October 1992) and not on employers who had ceased to employ active members of the Scheme by 5th April 1978 and therefore never became liable to pay "Pensionable Salary" as defined.
The Rule Change
"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 herein laid down for amendment of the Trust Deed and the Rules, or if the deficiency or anticipated deficiency cannot be made good, for the winding up of the Scheme."
" "Participating Employers" means such companies or firms as may have become Participating Employers in accordance with Clause 6.0, or which have previously become Participating Employers under other documentation which then governed the Scheme. No company or firm shall cease to be a Participating Employer either as a result of ceasing to employ Active Members on or after 8 June 2000 or otherwise as a result of ceasing to employ persons in the categories described in Clause 6.1 of the Trust Deed on or after that date or otherwise (save in accordance with Rule 5.2A.)"
The 2000 Deed also introduced a new Rule 5.2A:
"Without prejudice to Rule 5.2, each Participating Employer (whether or not employing Active Members and whether or not employing persons in the categories described in Clause 6.1 of the Trust Deed) shall make such further contributions (if any), which may include lump sum contributions, from time to time as may be decided by the Trustees, having regard to the advice of the Actuary, in order to reduce or eliminate any deficiency or anticipated deficiency in the Scheme's resources. Such deficiency shall be calculated for this purpose by reference to the ongoing basis of calculation adopted in the then most recently completed actuarial valuation of the Scheme (that is, the basis which assumes that the Scheme remains in full operation), with such modifications, if any, as the Trustees shall determine having regard to the advice of the Actuary in order to take account of the lapse of time and any events during the intervening period. For the purposes of the calculations in this Rule 5.2A, the Trustees and the Actuary shall take into account, to the extent that they consider it appropriate:
(i) the proportion of the amount of the deficiency or potential deficiency which the Scheme's liabilities attributable to employment with that Participating Employer bear to the total amount of the Scheme's liabilities attributable to employment with all of the Participating Employers;
(ii) any lump sums or other contributions paid, payable or prospectively payable by any Participating Employer for the purpose of reducing or eliminating a deficiency or potential deficiency, whether under this Rule 5.2A, Section 75 of the Pensions Act 1995 or otherwise; and
(iii) any debt which, in the opinion of the Trustees, is unlikely to be recovered.
A Participating Employer may, if the Trustees consent, cease to be a Participating Employer for the purposes of the Scheme on such date as the Trustees shall determine if it shall make such contributions (or undertakes to do so in terms satisfactory to the Trustees) as the Trustees, having regard to the advice of the Actuary, shall determine, or if the Trustees, having regard to such advice, shall determine that no such contribution shall be required. Such determination shall be made in accordance with this Rule 5.2A, but having regard to such basis of calculation as the Trustees may reasonably determine in order to protect the interests of the Members."
Participating Employers
"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 must first 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 purpose of the Scheme, namely the provision of pensions for Members on retirement or of giving to the Participating Employers or any of them a right to the return of their contributions or any part thereof; or
(b) would operate in any way to diminish or prejudicially affect the rights of any person in receipt of a pension or the pensionable or other rights already earned by any Member or former Member; unless the Actuary shall advise that no other course is reasonably practical having due regard to the interests of all persons interested in the Fund; or
(c) would be contrary to the principle that the Participating Employers and the Members shall be equally represented both in the membership of the Trustees and on the board of any corporate Trustee."
Subject to the express safeguards and limitations contained in the proviso, the power is a general one, which enables the Trustee to vary the Trust Deed or the Rules in any way. The power may therefore be exercised so as to impose on Participating Employers (as defined) obligations which they had not previously been subject to under the Scheme. Both Mr Nugee QC (for the First Defendant) and Mr Simmonds accept that. The real issue, therefore, is a more complex one than simply whether the First and Second Defendants were Participating Employers within the meaning of Rule 3, although that issue lies at its heart. It also involves a consideration of whether they undertook a more restricted range of obligations as a result of signing what have been referred to as the accession agreements, the current version of which I set out earlier in paragraph 5 of this judgment.
"If, as a result of his report, it shall appear that there is a deficiency or anticipated deficiency in the Fund's resources the Committee shall consider what, if any, action having regard to the recommendations of the Actuary should be taken, either by way of increasing contributions or decreasing benefits to render the Fund solvent and, if necessary, shall take such steps as are hereinafter laid down for amendment of this Deed or the Rules, to amend this Deed or the Rules accordingly."
The use of the word "accordingly" suggests that the power of amendment was to be used for the purpose of increasing contributions as a means of remedying the deficiency. The same formula was retained in Rule 28(a) of the 1978 Rules, but in Rule 29(1) of the 1992 Rules the word "accordingly" is omitted, and this form of drafting has continued into the 1999 Rules.
(1) Members of a scheme are not volunteers: the benefits which they receive under the scheme are part of the remuneration for their services and so are in a different position in some respects from beneficiaries of a private trust;
(2) a pension scheme should be construed so to give a reasonable and practical effect to the scheme;
(3) pension schemes are often subject to considerable amendment over time: the general principle is that each new provision should be considered against the circumstances prevailing at the date when it was adopted rather than as at the date of the original trust deed;
(4) a provision of a trust deed must be interpreted in the light of the factual situation at the time it was created: this includes the practice and requirements of the Inland Revenue at that time, and may include common practice among practitioners in the field;
(5) the function of the Court is to construe the document without any predisposition as to the correct philosophical approach;
(6) a pension scheme should be interpreted as a whole: the meaning of a particular clause should be considered in conjunction with other relevant clauses.
"Lastly, any surplus then remaining shall, subject to complying with the requirements of the 1995 Act, be paid to the Participating Employers in such manner as the Trustees may determine to be just and equitable."
Pre-1978 Employers
"The Fund is divided into a Pre 1978 Section and a Post 1978 Section.
The two Sections shall continue to be segregated and be the subject of separate accounts and valuations but the Trustees shall have power for the purpose of investment only to pool the assets comprising the two Sections and apply the provisions of the Trust Deed and Rules relating to investment to the single, pooled fund."
This division is carried right through the life of the Scheme, to the extent that in Rule 31.0 there is provision enabling the separate winding up of each section:
"It shall be competent for the Trustees to so resolve that one Section of the Scheme only shall be determined. In any event, on a winding-up, each Section of the Scheme shall be the subject of a separate winding-up with the intent that no benefit payable out of one Section shall be paid out of the other Section but that each Section shall be employed solely for the purpose of providing benefits in respect of Service covered by that Section."
Similarly, a surplus arising in one section cannot be shared with the other section: see Rule 29.3.
"the Merchant Navy Officers Pension Fund governed by the Trust Deed and Rules."
Conclusions