Hodgson & Ors v Toray Textiles Europe Ltd

Following my judgment handed down on 30 October 2006 Mr Skinner, the Second Defendant, raised a further question. The background to the case is set out in my October judgment, and I will not repeat it all here.

Mr Skinner was a member of the Courtaulds pension scheme before he transferred to the Toray Scheme. Under rule 17 of the Courtaulds scheme a member with more than two years’ service and within ten years of Normal Pension Age was entitled to take an immediate pension if he or she retired (but only with the consent of the employer), or was made redundant. In that event, he or she was entitled to a pension. The pension would be reduced by ¼ per cent per month if the member retired more than five years before Normal Pension Age; but otherwise would be unreduced. Normal Pension Age was 65 for a man and 60 for a woman.

Clause 17 of the Definitive Deed of the Courtaulds scheme contained a “power of amendment”. In principle, the power or amendment could be used to make retrospective amendments. However, this was subject to the proviso (proviso (b)) that no amendment could be made which had the effect of reducing a Benefit (whether or not payable upon a contingency) accrued in respect of Service prior to the date when the Amendment was made. A “Benefit” was defined by Schedule 2 para 1 (8) as meaning “any sum paid or prospectively payable to any person under the Rules” with certain immaterial exceptions.

The Toray interim deed was executed on 5 February 1990. I said in my October judgment that it “[contained] a number of administrative provisions, but [gave] no hint of the benefits to which members of the scheme [were] entitled.” Instead, it recited in recital (B):

“(B)

The establishment of the Plan and details of its main provisions have been made known to all persons eligible for membership in an announcement a copy of which is annexed to this Deed”

I identified the announcement as a circular letter of 29 November 1989. On that footing, I held that the terms of the trusts declared by the interim deed were that the benefits provided by the Toray scheme were “identical” to those in the Courtaulds scheme. By “trusts” I intended to refer to the benefits as opposed to the administrative provisions, since the latter were expressly contained in the Toray interim deed. If my use of language created a contrary impression, that was the result of sloppy writing, for which I apologise.

Clause 4 of the interim deed required the Principal Employer and the Trustee to execute a definitive deed within 24 months. The Toray interim deed contained its own power of amendment, which was to apply until the execution of the definitive deed. It is found in clause 17 which says:

“The Principal Employer with the consent of the Trustees may by deed … cancel, amend or add to all or any of the trusts, powers and provisions of this Deed with retrospective, immediate or future effect.”

Taken literally, this power of amendment does not preclude a retrospective amendment which has the effect of removing a contingent benefit that has accrued in respect of service prior to the date of the amendment. The question is: should any limitations on the exercise of this power be implied, and if so, what limitations?

The immediate target of the argument that there are implied fetters on the power of amendment is rules 10 (a) and 12 of the Toray definitive deed, which was executed on 22 November 1993. Under rule 10 (a) a member in service can take early retirement with the consent of the employer and the trustees. If consent is given the member is entitled to a pension. However, there are two differences between the pension payable under rule 10 (a) of the Toray scheme and the pension payable on early retirement under the Courtaulds scheme. The first is that a pension will always be reduced on early retirement under the Toray scheme, whereas under the Courtaulds scheme the pension was unreduced if the member retired within five years of normal pension age. The second is that the amount of the reduction under the Toray scheme is a reduction determined by the actuary, whereas under the Courtaulds scheme the reduction was a fixed percentage depending on the gap between the date of the retirement and normal pension date. The fixed percentage is more favourable to the member than an actuarial reduction. Rule 12 makes similar but not identical provision for deferred members. But the principle is the same.

Before evaluating the argument, I should recapitulate the key dates. The Toray interim deed was executed on 5 February 1990. The decision of the ECJ in Barber was given on 17 May 1990. Subsequent decisions of the ECJ established that differential treatment of men and women before 17 May 1990 was not unlawful. The Toray definitive deed was executed on 22 November 1993. In my October judgment I held that, as a matter of construction of the Toray scheme, pension accrued outside the Barber window was payable at a rate reduced in accordance with rule 10 of the scheme. The argument is that in introducing this provision into the Toray definitive deed, the trustees were acting outside their powers.

The foundation of the argument is that because the benefits under the Toray scheme, at least at its inception, were to be “identical” to those available under the Courtaulds scheme, a limitation on the power of retrospective amendment must be implied into clause 17 of the interim deed and/or the duty to execute a definitive deed under clause 4 of the interim deed, such that an amendment could not retrospectively deprive a member of a benefit that had accrued in respect of service before the date of the amendment. Thus, although for present purposes it is accepted that a male member with Barber window rights may retire in order to collect his pension, the issue relates to the level of pension he is entitled to if he exercises his Barber window rights.

Ms Campbell, who advanced this argument on behalf of Mr Skinner, accepted that:

However, by the time that the Toray definitive deed came to be executed, she said, the effect of Barber was that Mr Skinner had a right to retire early on an immediate pension either unreduced (if he retired after the age of 55) or reduced by the fixed percentage (if he retired earlier than that). This came about because the benefits under the Courtaulds scheme (as incorporated into the Toray interim deed) had not been amended, and the Barber judgment meant that Mr Skinner (if he had retired) would have been entitled to a pension at whatever was the rate provided for by the unamended Courtaulds scheme. This was now a “Benefit” as defined by the Courtaulds scheme, and because the Toray scheme was intended to provide “identical” benefits, this accrued benefit could not be retrospectively removed. It did not matter whether the removal of this accrued benefit was purportedly effected by amendment under clause 17 of the Toray interim deed, or (as in fact happened) by the execution of the Toray definitive deed under clause 4. Either way, it was impermissible.

In my judgment this argument reads too much into the announcement that the benefits under the Toray scheme were to be identical to those under the Courtaulds scheme. First, it does not seem to me that the announcement can be read as a promise that the benefits available under the Toray scheme would always be identical to those available under the Courtaulds scheme. Ms Campbell accepted as much, because she accepted that prospective amendments were permissible under the Toray scheme. Once it is accepted that in some circumstances benefits available under the Toray scheme need not always be identical to those available under the Courtaulds scheme, where does one stop? In a sense, therefore, reliance on the statement in the announcement that benefits were to be identical to those in the Courtaulds scheme proves too much. But there is nothing else expressly said on which Ms Campbell can hang her argument. Second, if (as I think) the announcement should be read as referring to the benefits enjoyed by members of the Courtaulds scheme at the date of the announcement, then Mr Skinner did not have an accrued right to a benefit under rule 17 of the Courtaulds scheme, as Ms Campbell also accepted. This is because any pension that might become payable under that rule was subject to the consent of the employer. Thus retrospective alteration of that potential benefit before anyone actually claimed it would not have contravened the terms of clause 17 of the Courtaulds scheme. It was not suggested that the right to be considered amounted to a “Benefit” as defined. Third, the announcement was itself pre-Barber. In referring to benefits under the Toray scheme being identical to benefits under the Courtaulds scheme, it hardly makes sense to attribute to the draftsman of the announcement an intention to include whatever additional benefits a future judgment of the ECJ might impose. The natural meaning of the announcement is that it referred to benefits as provided for in the Courtaulds scheme itself in accordance with its terms. Fourth, the benefits to which the announcement referred did not include the administrative provisions contained in the Courtaulds scheme, as opposed to the benefits provided for by the rules of the scheme. The “trusts” to which I referred in my October judgment were limited to benefits and did not encompass administrative provisions (including powers of amendment) which were not the subject of any argument. If, as Ms Campbell submitted, the announcement was capable of referring to the administrative provisions as well, it would necessitate the most careful scrutiny of all the provisions of the Courtaulds scheme to see which of them had to be imported, as a matter of implication, into the Toray scheme. Moreover, if the announcement had the wide effect for which Ms Campbell contends, it would have rendered more or less pointless the execution of the Toray interim deed at all. Fifth, if “identical” is to be taken at face value, it would preclude the trustees from improving the benefits available under the Toray scheme in comparison to those available under the Courtaulds scheme. In fact the effect for which Ms Campbell contends is a significant improvement on the benefits provided for under the Courtaulds scheme, since the right to retire on full pension (or on pension reduced by the fixed percentage only) is no longer dependent on the discretion of the company. Sixth, the implication of the suggested term conflicts with the unrestricted power of retrospective amendment contained in clause 17 of the Toray interim deed. A term will not be implied if it conflicts with an express term. I do not, therefore, consider that there is any warrant for implying anything into the power of amendment contained in clause 17 of the Toray interim deed or into the obligation to execute a definitive deed under clause 4.

For these reasons I do not consider that in executing the Toray definitive deed the trustees acted in excess of their powers.