This case involves the construction of the rules of a pension scheme (“the Scheme”) and the effect, if any, of an announcement dated October 1994 which referred to that scheme.

The Scheme is called the A. C. Skelton Pension & Life Assurance Scheme. It is a defined benefit, final salary, occupational pension scheme.

The Scheme was established by an interim trust deed dated 6^th December 1974. A. C. Skelton & Sons Limited (“Skelton”) was defined as the Principal Company and the interim trust deed appointed three individuals as the trustees of the Scheme.

On 30^th November 1976, Skelton as the Appointor, acting under the Trustee Act 1925 and its powers under the interim trust deed, appointed itself as the new trustee of the Scheme. On the same day, by a declaration of trust, Skelton and another company, Humber Refrigeration Limited (“Humber”) (described in the declaration of trust as the Associated Company) adopted a set of rules as to the operation of the Scheme. Those rules defined “Normal Retiring Date” as being the day before a 65^th birthday for male members and the day before a 60^th birthday for female members of the Scheme. Rule 36 provided for later alteration of these rules.

New rules for the Scheme were made by a deed dated 8^th October 1993. The deed was executed by Skelton alone. Skelton was described as the Principal Company and the deed stated that the Principal Company was the trustee of the Scheme. These new rules are the rules which are relevant for the purposes of this case and I will refer to them as “the Rules”.

The Rules stated that they took effect from 1^st February 1978. The Rules were divided into Parts. Part I was headed “Preliminary” and contained Rules 1 to 6. Rule 3 contained definitions of terms used in those Rules. The definitions were to apply where the context did not otherwise determine. The terms defined included Associated Company (this applied to Humber), the Employers (this applied to the Principal Company and any Associated Company and so that, in relation to the Service of any person, the phrase referred to the employer of that person), Normal Retiring Date (which I set out below), the Scheme and the Trustees.

Normal Retiring Date (to which I will refer as “NRD”) was defined in the Rules to mean:

Part VI of the Rules was headed “Miscellaneous” and contained Rules 29 to 45. Rule 41 provided for later alterations to the Rules and was in these terms:

The reference in Rule 41 to the “Pensions Act” was a reference to the Social Security Pensions Act 1975. I have considered Rule 3 in Part VII of the Rules (as referred to in Rule 41) but I need not set out its terms.

I was also asked to note the provisions of Rule 35(A)(ii) of Rules (in Part VI) which is in these terms:

The definition of NRD in the Rules differentiated between male and female Members in that the reference in paragraph (i)(a) of the definition referred only to female Members, and not to all Members, who joined the Scheme before 30^th September 1992.

As is well known, the operation of European law in relation to a provision in a pension scheme which differentiated between the position of male and female members was very much debated before and after the adoption of the Rules on 8^th October 1993. The impact of Article 119 (now Article 141) of the EEC Treaty was considered by the European Court of Justice in three cases in particular, namely, Barber v Guardian Royal Exchange Assurance Group Ltd [1991] QB344, Coloroll Pension Trustees Ltd v Russell [1995] ICR 179 and Smith v Avdel Systems Ltd [1995] ICR 596. These three decisions were recently considered, along with section 62 of the Pensions Act 1995, by Patten J in Foster Wheeler Ltd v Hanley [2008] EWHC 2926 (Ch) and he summarised the effect of these three decisions in the following passage in his judgment, which I gratefully adopt:

(i) In relation to pensionable service prior to 17th May 1990, Article 119 has no application with the result that disparate retirement ages remain permissible and consequently the accrued pension rights of women based on a lower NRD of 60 remain unaffected by the application of Article 119 with effect from 17th May 1990;

(ii) As from 17th May 1990, Article 119 has direct effect and ipso facto operates to amend a pension scheme so as to eliminate discriminatory provisions relating to pension entitlement. But the existence of the accrued rights of women (in a case like the present) to retire at 60 and the inability of employers or trustees to backdate subsequent equalisation measures to 17th May 1990 mean that, for the Barber window, the only possible modification of the scheme in relation to retirement dates is the levelling up of retirement ages so as to grant members of the disadvantaged class the same rights as those of the advantaged class who, in most cases, will be women;

(iii) The adverse financial consequences for the employer and/or the pension scheme of the application of Article 119 after 17th May 1990 do not justify any alternative interim regimes such as the levelling down of normal retirement age to 65 for both sexes; and

(iv) The imposition of modifications to a scheme in this form with effect from 17th May 1990 does not preclude the ability of the trustees and the employer to use their powers of amendment under the scheme to bring into effect measures of their own choosing which achieve equal treatment between men and women in relation to their pension based on future pensionable service. These measures can involve levelling down the normal retirement age so long as equality is maintained.

Following the decision of the ECJ in Coloroll, the following announcement was drawn up in relation to the Scheme. I will refer to this announcement as “the Announcement”. It was in these terms:

On 26^th March 2007, the Principal Company, Skelton went into administration.

By a deed dated 24^th May 2007, Capital Cranfield Trustees Limited was appointed as the sole trustee of the Scheme. Capital Cranfield Trustees Limited is a professional independent trustee and is the Claimant in these proceedings.

Humber, who was the other participating employer in the Scheme, went into administration on 11^th July 2007.

The Scheme is currently in an Assessment Period for the Pension Protection Fund (“PPF”) and, accordingly, accrual of pension entitlements has ceased. The Scheme is not yet in winding up. The Scheme is significantly in deficit relative to the cost of securing all benefits with an insurance company (i.e. on a ‘buy out’). The extent of the ‘buy out’ deficit – and whether the Scheme may ultimately enter the PPF – depends on whether or not the NRD of male and female Members under the Scheme was validly equalised in 1994 to comply with European law. The PPF has asked the Claimant to obtain confirmation as to whether or not the Scheme’s NRD was so equalised.

The Claimant has brought these proceedings in order to ascertain whether the announcement of October 1994 had effect to equalise the NRDs for male and female Members of the Scheme. The claim, as it is expressed in the Claim Form, asks the following two questions:

whether paragraph (ii) of the definition of NRD in Rule 3 of the Rules confers a free-standing power to increase NRD for future pension accrual in respect of existing Members; and

if so, whether the Announcement was an effective exercise of that power.

These questions require one to construe the definition of NRD in Rule 3 of the Rules and to consider the effect, if any, of the Announcement.

If the Announcement were not effective to equalise the NRDs, the liabilities of the Scheme are assessed as likely to increase by approximately £1 million. As explained earlier, the answer to the issue may determine whether the Scheme enters the PPF (with the prescribed PPF level of compensation being paid in lieu of benefits); or whether it can instead be wound up outside the PPF (on the basis that the Scheme’s funds can provide benefits equal to the compensation which would be afforded by the PPF).

As explained above, the Claimant is the current trustee of the Scheme.

The Claimant seeks the appointment of the Defendants as representative beneficiaries under CPR 19.7.

The First Defendant joined the Scheme on 1 February 1975 and was still in Pensionable Service (as defined in the Scheme) when the Principal Company went into administration. He was also a trustee of the Scheme between 1^st February 1999 and 24^th September 2000. His appointment is sought to represent all Members in whose interests it may be to argue that the questions raised in the Claim Form be answered in the negative (together with all beneficiaries entitled through such Members).

The Second Defendant joined the Scheme on 22^nd February 1999 and left Pensionable Service (as defined in the Scheme) on 30^th May 2003. She was also a trustee of the Scheme between 24^th September 2000 and 31^st May 2003. Her appointment is sought to represent all other Members of the Scheme (together with all beneficiaries entitled through such Members) and also the Principal Company and all Associated Companies. The administrators of Skelton, the Principal Company, and Humber, an Associated Company, have agreed to be represented by the Second Defendant and thus to be bound by these proceedings.

I indicated at the outset of the hearing that I would make the representation orders which are sought.

The Claimant is represented by Mr Stallworthy. The First Defendant is represented by Mr Grant. The Second Defendant is represented by Mr Moeran. I am grateful to all counsel for their most helpful submissions.

In addressing a question as to whether the NRDs in a pension scheme have been equalised by a document in the form of an announcement, one would expect to go, first of all, to the rule which provides for alterations to the rules, in order to ascertain what that rule requires and then to ask oneself whether the document relied upon, to effect an alteration of the rules, is effective under the rule permitting alterations. The parties before me have obviously carried out that exercise and have agreed that the Announcement is not effective under Rule 41, which is the rule providing for alterations of the Rules. The reason for this conclusion is that the Announcement is not in a form which satisfies the requirements of Rule 41.

Rule 41 requires, amongst other things, that the document which is to have effect under Rule 41 must either be a deed or consist of writing effected “under hand” by the Trustees and the Principal Company. The form of the Announcement which is in evidence in this case has not been signed by anyone, although it does bear the name of “A. M. Skelton”, who is described as “Managing Director”. There is no evidence that there ever was a document in the form of the Announcement and bearing the signature of anyone.

In Trustee Solutions Ltd v Dubery [2007] ICR 412, Lewison J had to consider whether a rule permitting alteration to the rules of a pension scheme, the rule requiring the alteration to be effected by writing “under hand”, permitted the use of an unsigned document. The judge held that the ordinary meaning of the words “under hand” was that the document in question was signed by its maker. He further held that the requirement of a signature was a substantive requirement. If such a requirement were not complied with, then the document did not conform to the power to alter the rules and it was ineffective. This ruling by the judge was not the subject of the appeal to the Court of Appeal in that case: see [2007] EWCA Civ 771.

The parties before me have accepted the reasoning of Lewison J in the Trustee Solutions case and they have also accepted that his reasoning applies with the same result in the present case. The agreed conclusion is that the Announcement was not effective to alter the Rules pursuant to the power of alteration conferred by Rule 41.

Against this background, the question is asked: what about the definition of NRD in Rule 3? That definition refers to the Employers determining a day which is to be the NRD in any particular case. In terms of formality, all that seems to be required is: (a) for the Employers to determine the relevant day in a particular case; and (b) to notify that day in writing to the Member concerned. If the Employers can operate this power of determination in one particular case, it might be asked: why can they not operate this power in several cases? If they can, the next question is: why can they not operate this power in relation to a defined group of Members, the group being defined as e.g. all male Members, or all Members who became Members before, or after, a specified date? If so, why can they not operate this power in relation to all Members?

The question or questions as to the intended operation of the Employers’ power of determination within the definition of NRD in Rule 3 were very thoroughly examined by all counsel. Their arguments were sometimes straightforward, sometimes very sophisticated, as to the approach to be adopted to the questions of construction and as to all the considerations which should, or should not, weigh with me in deciding the issues.

The First Defendant argued that the definition of NRD in Rule 3 did not allow the Employers to equalise NRDs to achieve the resulting position described in the Announcement. He argued that the definition of NRD was intended to operate only at the commencement of a particular Member’s service. I was asked to read the definition of NRD in the context of the Rules as a whole. If I did so, I should pay attention to the safeguards expressly written into the power of alteration conferred by Rule 41, and to the fact that no comparable safeguards were expressly provided in the definition of NRD. I was also asked to consider the safeguards or, at any rate, pre-conditions to the power of augmentation in Rule 35(A)(ii) and the absence of anything similar in the definition of NRD. It was also pointed out that the definition of NRD does not even require the Employers to notify the Trustees of the Scheme of the determination which has been made by the Employers. It was therefore submitted that the suggestion that the definition of NRD would allow the Employers to act unilaterally and inform all the Members that their NRDs had been deferred would be incompatible with the safeguards in Rule 41 in particular. Further, it would be perplexing to find pre-conditions to an augmentation of benefits under Rule 35(A)(ii) and no real pre-conditions to a deterioration of a Member’s position by a deferral of his or her NRD. If the power now claimed by the Second Defendant as arising under the definition of NRD had really been intended to be conferred, it was to be expected that such a power would have been expressed in clearly advertised terms and not as part of a definition. Further, there was no need to read the definition of NRD in a wide way. An increase in a Member’s NRD for future service could be provided under Rule 41; a decrease, under Rule 35(A)(ii). Accordingly, the First Defendant submitted that the power to determine a day for the purposes of the definition of NRD was subject to one or more of the following limitations: first, the power could only be exercised at the commencement of a Member’s service; secondly, the power could only be exercised to the advantage of the Member; thirdly, the power could only be exercised in the case of an individual Member and not in the case of a whole class of Members.

The Second Defendant argued for a construction of the definition of NRD which could be relied upon to produce the result described in the Announcement. She submitted that I should recall the well established principles as to the interpretation of the rules of a pension scheme as identified in Mettoy Pensions Trustees Ltd v Evans [1990] 1 WLR 1587 at 1610-1611 and Stevens v Bell [2002] PLR 247 at [28]. Those principles are well known and I do not need to set them out in this judgment. The Second Defendant pointed out that the definition of NRD plainly gives the Employers a power of some sort; the only question is as to the extent of the power. There were no express limitations on the scope of the power; it should be concluded that the power was intended to be available in a wide range of circumstances. There would, of course, be limits in practice so that the court need not be concerned about giving the power its literal meaning so that it did indeed apply in a wide range of circumstances. The limitations were to be found in statutes and the principles of European law, in a rule against retroactive operation, in the employer’s duty of trust and confidence, in a requirement as to reasonableness and possibly also the requirements of obtaining Inland Revenue approval. The power within the definition of NRD did not conflict with Rule 41. It was a separate and distinct power. The draftsman had chosen to express limits on the Rule 41 power and had chosen not to do so in relation to the power in the definition of NRD. It was entirely plausible that the power in the definition of NRD in Rules made in October 1993, after the decision in Barber, was precisely because it was foreseen that the question of equalisation of NRDs would have to be addressed later when the European law on the subject became clearer than it was as at October 1993. The requirements for Inland Revenue Approval had in any case always pointed out the possible need to change NRD when required to reflect changes in employment policy. Employment policy would be determined by an employer; it was therefore natural that the NRD should be determined by an employer. Further, a deferral of NRD was not necessarily bad. It could allow a Member to continue to accrue benefits for a longer period than would otherwise be possible.

The Claimant was, of course, neutral on this question which divided the First and the Second Defendants. However, the Claimant did put forward a range of competing arguments, some eleven arguments in favour of the First Defendant’s position and, with commendable and mathematical even-handedness, some eleven arguments in favour of the Second Defendant’s position. The Claimant’s arguments and discussion of the points in play were of great assistance to me but, in view of the fact that I have already set out the arguments for the two Defendants, it is not necessary to summarise the particular points made on behalf of the Claimant.

In assessing the competing arguments, the first matter which forcefully strikes me, and which should be given proper consideration and weight, is that the power, in the definition of NRD, is to determine a day “in any particular case” and the determination is to be notified to the Member concerned. This language is to be contrasted with the earlier part of the definition of NRD which uses a formula in relation to “a female Member” who joined before 30^th September 1992 and in relation to “any other Member”. The reference to “a female Member” is plainly to “any such female Member”.

These questions therefore arise: can the power be exercised not only in one particular case, but also in several cases, and, indeed, can it be exercised by reference to a whole class of Members or to all Members. The definition, as I have emphasised, expressly refers to “any particular case” and the words suggest an important limitation on the type of case which will fall within the power. If the power is available to be used in a particular case, it is of course hard to avoid the conclusion that it can also be used in two particular cases or several particular cases. Nonetheless, it seems to me that there is difference in kind, and not just a difference in number, between a particular case of a Member or particular cases of Members (on the one hand) and a class of Members, or all Members (on the other). If the power in the definition were to be available to be used in the case of a class of Members and, even more so, all Members then one has moved away from exercising a power “in any particular case”, and it is only “in any particular case” that the power is available to be exercised.

What the Announcement sought to do in this case was not the determination of a day for a “Member concerned” in “any particular case” but was something different from that. In substance, it was an alteration of the Rules of the Scheme itself. The Rules make express provision for how, and in what circumstances, the Rules may be altered; that is provided for by Rule 41. In my judgment, the alteration of the Rules intended to have effect, as per the Announcement, falls squarely with Rule 41 and does not fall squarely within the definition of NRD in Rule 3. In that case, one should not construe the power in the definition in Rule 3 more widely than it clearly provides (that is, confined to a particular case or particular cases) because one would thereby produce a power to alter the Rules in a most important respect, that is the NRD for Members, without complying with the safeguards expressly laid down in Rule 41.

The above reasoning is decisive of this case. Based on that reasoning, I would hold that the result sought to be achieved by the Announcement was not within the power contained in the definition of NRD. Nonetheless I will deal briefly with certain other arguments raised as to the scope of that power and, further, certain arguments as to the form of the Announcement.

In considering how the power in the definition of NRD was intended to be operate, it is desirable to focus on how the power was intended to operate in the case of a particular Member. It is likely that the draftsman contemplated that the power in question would be available to be used at the commencement of the employment of the employee or, if later, the commencement of that employee’s membership of the Scheme. For that purpose, it was plainly appropriate that the power should refer to “such day” and “any particular case” and to giving notice to the Member. I do accept that the identification of the principal case in which it would have been contemplated that the power should be available does not automatically produce the conclusion that the power applies only in that case. However, it strikes me as a very considerable power to confer on an Employer, for the Employer to be able to defer the NRD of a particular Member, possibly against that Member’s wishes, while leaving unchanged the original NRDs of all other Members. I accept that there may be limitations to be read into the power along the lines suggested by the Second Defendant and those limitations might avoid the worst cases of abuse of the power but another approach is to hold that the power is only available to be exercised at a time when the Member decides whether or not to join the Scheme, at the commencement of his membership. In the end, I do not need to decide this point and I do not do so. I do comment however that the argument in favour of this suggested limitation on the power is a strong and persuasive one.

It was suggested by the First Defendant that the power in the definition of NRD could only be used to advance the NRD of a particular Member and not to defer the NRD. Plainly, there is no express limitation to this effect and I find it difficult to think that such a limitation is necessarily to be implied. For example, if at the commencement of the membership of the Scheme, a particular Member wished to have a deferred NRD with all the consequences which that entailed, some beneficial and some not beneficial, why should the Employer not be able to accede to that by making a determination accordingly. However, if what I have suggested makes sense, it is only because the example I have given refers to the commencement of the membership of the Scheme. This consideration might therefore support the idea that the power in the definition is intended to be by reference to the circumstances at the commencement of the membership and not otherwise.

Another limitation on the power in the definition of NRD might be that it only applies where the Employer’s determination is with the consent of the Member. However, there is no express limitation to that effect and I find it difficult to imply such a considerable limitation on the power. Of course, there is no need to imply such a limitation if the power is being exercised at the commencement of the membership.

I will also deal briefly with the arguments as to the form of the Announcement in case that would be of assistance to the parties.

If a power to alter NRDs for a class of Members or all Members had been conferred by the definition of NRD, than what was required in order to exercise the power was: (1) a determination to that effect; (2) by the Employers; (3) notified to the Members concerned. (As to the third requirement, I understand that the parties are agreed that the Announcement was notified to the Members concerned.)

As to its form, the Announcement is not in the form of a determination of the day which is to be the NRD; it is in the form of an alteration of the Rules. It refers to “changes to the Scheme”. However, it may be permissible to read the Announcement as a relevant determination in that it refers to the fact that the maker of the Announcement “has decided” to make the changes which are changes in relation to NRD.

In my judgment, the Announcement cannot be said to be a determination by “the Employers”. First, at the date of the Announcement, the Employers were Skelton and Humber. The Announcement is by one company only. It is plain which company is the company making the Announcement. That company is the company which is the “sole Trustee”, as referred to in the Announcement. That is Skelton, to the exclusion of Humber. “Employers” is defined in Rule 3 so that it: “in relation to any person means whichever it is of the Employers whose Service that person is in at the relevant time”. As the Announcement was made by Skelton alone, Skelton if acting as Employer would not be able to make a determination for Members who were in the Service of Humber. A determination by Skelton would be expected to state that it was in relation to only those Members who were in the Service of Skelton. The Announcement does not state that fact and that suggests that the Announcement is not a determination by an Employer and so an exercise of the power, which for present purposes I am assuming exists, to determine NRD pursuant to the definition of NRD. I have not been told in terms that there were Members who were in the Service of Humber at the date of the Announcement, but even if there were no such Members, the fact that the assumed power is a power to be exercised by the Employers and there were two Employers, as defined and the Announcement is not confined to the Members of one Employer only, suggests that the Announcement is not an exercise of the assumed power.

In addition to the point elaborated in the last paragraph there is the even more powerful point that the Announcement is not a determination by the Employers because it states that it is the act of “the Company as sole Trustee”. The Rules of course distinguish between the functions of the Employers and the functions of the Trustees. The assumed power in the definition of NRD is a power given to the Employers and not to the Trustees. The power conferred by Rule 41 is a power given to the Trustees and not to the Employers. It is clear, in my judgment, that the Announcement was a purported exercise of the power to alter the Rules conferred on the Trustees by Rule 41 and not a purported determination within the assumed power in the definition of NRD. The fact that Skelton was one of the Employers and also the sole Trustee does not affect this conclusion. An alteration of the Rules is something different from a determination within the definition of NRD. Different considerations may have to be assessed in relation to the exercise of the two different powers. The capacity of Skelton as Trustee is different from the capacity of Skelton as one of the Employers. My conclusion that the different capacities of Skelton are material to the validity of the Announcement is supported by the approach of Neuberger J in Bestrustees v Stuart [2001] PLR 283 at [32] - [33], [36] – [40].

I would therefore hold that if the definition of NRD conferred a power on the Employers to equalise NRDs generally for the Members, that power was not validly exercised by a document in the form of the Annoucement.

The Second Defendant submitted that the conclusion in the last paragraph could and should be avoided by the application of the beneficial principle applied by Scott J in Davis v Richards & Wallington Industries Ltd [1990] 1 WLR 1511 (see at 1530-1531) and referred to by the Court of Appeal in Stannard v Fisons Pension Trust Ltd [1991] PLR 225. In the first case, Scott J took the relevant principle from Farwell on Powers, 3^rd ed. (1916) pages 210 et seq and Sugden on Powers, 7^th ed. (1845) vol. 1, pages 356, 358 and 421. In the second case, the Court of Appeal referred to passages in Farwell on Powers. Farwell refers to there being an intention to dispose of property to someone (who is an object of a power) and to the exercise of a power being the only means by which the intention can have effect. In such a case, it will be presumed that the person who has the power intended to exercise it. The intention will be presumed even where it is not proven that the intention actually existed. The intention will not be presumed where the evidence shows that the person had an intention not to exercise the power. In the first of these cases, Scott J applied the principle to a case which did not involve the disposal of property. He held that the principle applied where there was an intention to achieve a particular result and that result was something which was within the scope of an available power.

In my judgment, there is considerable room for argument as to how this principle might apply in the present case. One view would be that the person making the announcement was the Trustee in relation to the Scheme. The Trustee had power to make the Announcement under Rule 41. However, the Trustee did not comply with the requirements of Rule 41 and the purported exercise of the power was ineffective. The Trustee did not have a power under the definition of NRD and it was therefore impossible to presume an intention on the part of the Trustee to exercise such a power.

The Second Defendant contends for an alternative approach. She says that the person making the Announcement should be regarded as Skelton, and not someone in the capacity of the Trustee. Skelton was the Employer. Skelton had the assumed power in the definition of NRD. The Announcement would only be effective if the court presumes that Skelton intended to exercise that available power. Therefore, that presumption should be made.

I am very doubtful whether the principle identified in Farwell on Powers and considered in these cases allows me to ignore the capacity in which the maker of the Announcement was acting. But even if the principle is sufficiently broad to cover such a case, the principle contains this limitation: the intention may not be presumed where the evidence is that the owner of the power intended not to exercise the power. It is probably the law (see the facts of the Stannard case) that if the owner of the power purports to exercise power A (which for some reason is not available) when he could have achieved the desired object if he had exercised power B (which is available), the fact that the act in question refers to power A and does not refer to power B is not sufficient evidence that the owner of the power intended not to exercise power B. However, in this case, the Announcement was made by Skelton professedly as Trustee. That seems to show that Skelton did intend not to act in a different capacity as the Employer (or one of the Employers). Accordingly, in my judgment, the principle referred to above does not save the Announcement from being ineffective. Further, the principle does not seem to me to deal with the difficulty as to the form of the Announcement which was made in relation to all the Members of the Scheme by only one of two Employers under the Scheme.

The result of the above reasoning is that the Announcement was not effective to equalise the NRDs for the purposes of the Scheme because: (1) the described effect in the Announcement is not within the power of determination in the definition of NRD in Rule 3 of the Rules; and, further, (2) the Announcement was not a determination by the Employers for the purposes of the power in the definition of NRD in Rule 3 of the Rules.