Mixed outcome for employers in pension scheme changes ruling
A Scottish company has had only partial success in a court case brought to establish whether changes to its pension scheme, acted on by trustees since 1992, were agreed at the time under the scheme rules.
Bett Homes Ltd, and the trustees of the Bett Ltd superannuation and life assurance scheme, asked three judges of the Inner House under the special case procedure to decide whether it could be inferred that the trustees had exercised powers under clause 19th of the scheme to apply special terms, both in respect of escalation of benefits and equalisation of pension age, that the company had consented and that intimation had been duly made to members. The company maintained the affirmative; the trustees were unable to make that concession. The contrary outcome would require substantial further contributions from the company, with additional benefits being payable to some members.
The changes had been implemented following the European Court ruling in the Barbour case in 1990 which required equal treatment of men and women in relation to pension benefits. The company sought to establish that a particular policy on annual increases had been properly applied from 28 Octoner 1992, and that a common normal pension age of 65 years had been properly applied from 1 January 1993.
Lady Paton, Lord Menzies and Lady Clark of Calton agreed that the company's position could be accepted, with one qualification, in relation to escalation of benefits, but not in relation to equalisation of pension age.
The rules of the scheme provided an amendment procedure in clause 18th, which it was accepted had not taken place, and by clause 19th (d) also conferred power on the trustees to determine special terms in relation to any member, with consent of the company and on intimation to the member.
Lady Clark of Calton, delivering the opinion of the court, said the court accepted that clause 19th was stated in the widest possible terms, giving the trustees "extensive powers of decision making, with no restrictions relevant to the present case" – provided there was the necessary agreement and intimation.
Clause 19th (d) did not require any formalities, and as respects annual increases it was plain that there was consent by the company, and a memorandum dated 10 November 1992 from the trustees to all members was sufficient to enable the court to conclude, by implication, that the trustees agreed to the new formula. However the court expressed no opinion about the administration of the scheme in relation to individuals who became members after 10 November 1992.
On the other hand there was no documentation from which it might be inferred that the trustees (as distinct from the company and its secretary and directors) had made any determination in relation to pension age. A 1992 letter provided evidence of a discussion between the company and the trustees, but not of any outcome. It was possible to infer a decision by the company; but the company had sent intimation to "all members of staff", as opposed to all members of the scheme, and while it had been copied to the trustees, there was no evidence of any response by the trustees.
"In our opinion clause 19th (d) requires a decision by the trustees and consensus between the trustees and the company about the special terms prior to intimation to members", Lady Clark stated. "We are unable to infer from the agreed documentation and facts that there was any decision-making by the trustees in 1992 about equalisation of pension age. The mere fact that the trustees were copied in to the letter of intimation to members of staff of the company does not, in our opinion, entitle any inference to be drawn that the essentials of clause 19th (d) were complied with. Counsel for the parties correctly, in our view, conceded that the mere fact that the trustees administered the scheme post-1992 on the basis of equalisation of pension age was not sufficient of itself to allow the inference to be drawn."
For members joining the scheme on or after 22 March 1991 there was however a common pension date of the 65th birthday.