Bainbridge v Quarters Trustees Ltd

This is an appeal by the appellant (“Mr Bainbridge”) against a determination (“the Determination”) of the Deputy Pension Ombudsman, Charlie Gordon, (“the DPO”) dated 9 August 2007. The DPO rejected Mr Bainbridge’s complaint against the respondent (“Quarters”) in its capacity as trustee of The Sunley Turriff Pension Scheme (“the Scheme”) formerly known as the Bernard Sunley Pension Scheme. Mr Bainbridge claims that the assets of the Scheme supporting money purchase benefits form a fund or funds distinct from the assets supporting final salary benefits so that, in the winding-up of the Scheme, the former are available only to meet the money purchase benefits which the Scheme provides.

The issue is principally one of construction of the documentation governing the Scheme. But Mr Bainbridge draws attention to certain statutory provisions and other matters which he submits compel the conclusion that the assets of the Scheme must be divided into the separate funds which he describes.

The Scheme was established with effect from 1 August 1989 by an Interim Deed dated 28 July 1989. It was not until 14 March 1995 that the formal Definitive Trust Deed and Rules were executed. Until then, the Scheme had been operating on the basis of the Interim Deed. Recital (B) to the Interim Deed states that the initial benefits and provisions are to be those described in certain announcements copies of which were annexed to the Interim Deed.

At that stage, and in accordance with the announcements, the Scheme was a conventional defined benefit, balance of cost Scheme which was also contracted-out of the State Scheme. However, prior to the execution of the Definitive Trust Deed and Rules, what has been described as a money purchase section was introduced into the Scheme. It was referred to as such, that is to say as“the Money Purchase Section” with the original defined benefit provisions being referred to as “the Final Salary Section”; I shall use the same terms. It does not appear that any announcement concerning the Money Purchase Section was put before the DPO and I have not been shown any. The DPO did, however, have booklets for both the Final Salary Section and the Money Purchase Section, dating from September 1994, before the date of the Definitive Deed. I shall call the booklet in relation to the Money Purchase Section “the MPS Booklet”.

I turn to the relevant provisions of the Interim Deed, the MPS Booklet and the Definitive Deed and Rules.

I need to mention only a few provisions of the Interim Deed:

The MPS Booklet sets out in summary form the provisions of the Money Purchase Section. It contains a “health warning” in the following terms:

“The booklet does not cover all the details included in the Trust Deed and Rules which govern the Scheme and in the event of any difference between this booklet and those documents the Trust Deed and Rules will prevail. A copy of the Trust Deed and Rules is available from the Pensions Administrator.”

There is a page headed “Important Pension Terms”. In particular,

“Retirement Fund is the monies held in the Scheme on your behalf to purchase pension on your retirement. It equals the contributions paid on your behalf together with investment returns added to such contributions. Each year you will receive a personal Benefits Statement which will provide you with details of the current value of your Retirement Fund”.

There is a page headed “Summary of Scheme Features” which states the benefits to be provided: in particular

There is a page headed “Retirement Benefits”. It includes the following:

“The contributions paid by the Company and by you will be credited to your Retirement Fund and then invested on your behalf – so your Retirement Fund should grow each month as more contributions are paid and as the investments grow in value.

When you retire at age 65 the money in your Retirement Fund is used by the Trustees after paying out any cash sum as described [later in the booklet], to purchase a pension with an insurance company in order to provide income in your retirement.

The amount of the pension will depend upon the value of your Retirement Fund together with the costs of buying the pension from an insurance company. The pension will carry an attaching spouse’s pension and a lump sum will be payable if you die within 5 years of retirement, as described [later in the booklet]”.

Finally, I mention the pages headed “General Notes”. Paragraph 7, headed “Alteration and Termination”, explains that the Trustees have power, with the consent of the Company, to alter the Scheme and that the Company has power to terminate the Scheme in which case “appropriate benefits would be provided”.

There have been alterations to the MPS Booklet from time to time but I do not think that anything turns on them.

The Money Purchase Section came into operation before the execution of the Definitive Deed and Rules. Accordingly, prior to the time of such execution, there had been no compliance with Clause 6 of the Interim Deed. But if one were to have asked in that period on what terms the Money Purchase Section was operating, it could not sensibly be suggested that it was not operating at all (on the basis that there had been no compliance with Clause 6) and the answer to the question would surely be that it was being operated on the terms of any announcement which had been made (as to which, as I have said, nothing was before the DPO or me) and the MPS Booklet, there being no inconsistency between the Interim Deed and the MPS Booklet.

Before turning to the substantive provisions of the Scheme, I need to refer to a few definitions and interpretation provisions which are to be found in Schedule 8 (which is incorporated by Clause 2.3):

As to the Fund, it is constituted under Clause 4 which provides at Clause 4.1 as follows:

“THE FUND

4.1.

Fund Assets

The Fund to which the trusts of the Scheme shall apply shall consist of sums and assets received by the Trustees in accordance with the following provisions and all sums and assets for the time being representing them and all income derived therefrom the Trustees being under no obligation to distinguish between capital and income in any application of the Fund”

Clauses 4.2 to 4.4 deal with the contributions and transfer payments by which the Fund is constituted. Clause 4.3 empowers the Employers and the Trustees to agree contributions.

As to the “Retirement Fund”, it is to be noted that the definition is materially different from the definition in the MPS Booklet.

Clause 1 of the Definitive Trust Deed deals with the establishment of the Scheme, referring in Clause 1.1 to the Interim Deed. By Clause 1.5 it is provided as follows:

“Trust

The assets of the Scheme shall be held by the Trustees upon irrevocable trust to be applied in or towards the provision of benefits in accordance with and subject to the provisions of the Trust Deed.”

Clause 2.4 is a wide power of amendment. It is exercisable by the Trustees with the consent of or at the request of the Principal Employer. It is exercisable during the course of a winding-up of the Scheme; and that can be done without the need for consent of the Principal Employer where, among other cases, a liquidator or administrator has been appointed.

Clause 10.3 deals with the provision of benefits so that the Trustees “shall pay or secure out of the Fund benefits in accordance with the provisions of the Rules…”.

Clause 13 deals with the winding-up of the Scheme. There are various events which give rise to a winding-up; the Scheme is in fact now in winding-up. Clause 13.1 provides for the realisation of the Fund and for the proceeds of such realisation to be applied as set out. Clause 13.3 states:

“The Trustees shall apply the assets of the Fund…”

after which there follows a list of priorities in respect of liabilities but “setting aside such of the said liabilities as relate to any fund representing Voluntary Contributions against that fund”.

The priorities as set out in the remaining paragraphs of Clause 13 do not distinguish between liabilities of the Scheme for benefits which arise under the Final Salary Section and the Money Purchase Section. I do not need to say anything about the details of these priorities except to note that the first calls are:

Once those calls have been met, the (first) priority in relation to benefits is “pensions and other benefits in respect of Voluntary Contributions…”. Succeeding priorities cover all the other benefits which could arise under the Scheme without apparently distinguishing between benefits under the Final Salary Section and under the Money Purchase Section.

It appears, therefore, that in the winding-up of the Scheme, the entirety of the assets of the Scheme are applied in accordance with this scheme of priorities to meet benefits whichever section of the Scheme those benefits arise under. I say “appears” because Mr Bainbridge argues that the Scheme is to operate as if it provided for separate funds supporting the benefits of the Final Salary Scheme and of the Money Purchase Scheme respectively. There are, in effect, two (or more) funds with the money purchase fund being used to provide, and only to provide, the money purchase benefits to which members of the Money Purchase Section are entitled. I will turn to that argument in due course.

Schedule 6 deals with the Final Salary Section (which is not actually a term used in the Definitive Trust Deed or Rules) although Schedule 6 itself is headed “Final Salary Membership”. I do not need to deal with Schedule 6 in any detail. However, I do need to mention Rule 1.11 which explains the relationship between Schedule 6 and Schedule 7. Schedule 7 deals with the Money Purchase Section (again a term which is not used in the Definitive Trust Deed or Rules) Schedule 7 corresponding to Schedule 6, is headed “Money Purchase Membership”. By Rule 1.11.2, an employee who satisfied certain criteria can cease to accrue benefits under the Money Purchase Section (into which all new employees are initially put). In those circumstances, the employee may elect, as from a date defined as the Conversion Date (1 October after the member attains the age of 35) to take a preserved pension under Schedule 7 or he may elect to take benefits as if they had accrued under Schedule 6 during the period when he had in fact been accruing benefits under Schedule 7. This is subject to a provision that, for that earlier period, no right to Guaranteed Minimum Pension arises.

It is also necessary to note Rule 2.2.4. This expressly provides for the Trustees to set aside within the Fund a separate fund or funds to receive Voluntary Contribution. This fund is ear-marked to meet the additional benefits secured by Voluntary Contributions and to meet related administrative expenses. It is provided that

“subject only to the provisions of the Trust Deed as to Winding Up such fund shall not be used to meet any other liabilities of the Scheme and the Trustees shall ensure that the assets and the liabilities relating to Voluntary Contributions remain separately identifiable and isolated from other assets and liabilities of the Scheme.”

Schedule 7 contains the detailed Rules relating to Money Purchase Membership.

Under Rule 2.1, each active member “shall contribute towards his Retirement Fund” at a specified rate. Likewise, Rule 2.3 provided for employer contributions “towards the Retirement Fund”. Rule 2.2.4 reflects the corresponding Rule of the Final Salary Section providing for the setting aside of a separate sub-fund representing Voluntary Contributions. Rule 10 gives the Trustees power to buy out benefits with an insurance company.

Benefits are dealt with in Rules 11 to 14. It is not necessary to refer to them other than, by way of illustration, the main benefit that is to say a pension upon retirement. That is dealt with in Rule 11.1 which provides as follows:

“Upon the retirement of an Active Member at Normal Retirement Date, his Retirement Fund (excluding any amount used to provide a lump sum under R14 [which provides for commutation within Inland Revenue limits]) shall be used to provide a pension for his life…..of such amount (subject to Revenue Limits) as it is sufficient to provide.”

Mr Bainbridge was employed and became a member of the Scheme some time in 1998, following which he accrued benefits under the Money Purchase Section. He was provided with a copy of the MPS Booklet. He ceased to be an active member of the Scheme in November 2002. His Normal Retirement Date has just passed, earlier in this month, April 2008.

Quarters were appointed as independent trustee of the Scheme on 25 September 2003, following appointment of administrators of the Principal Employer on 2 July 2003. It is in deficit and according to the findings of the DPO, there is no prospect of any additional funds becoming available from the Principal Employer. The Scheme is now in winding-up, the Principal Employer having given notice to cease payment of contributions and six months having passed since the date of the notice without a substitute principal employer being appointed.

The Scheme accounts for the year ended 31 December 2001 contain a note under “Accounting Policies” in the following terms:

“Money Purchase Assets

Money purchase assets are allocated to provide benefits to the individual on whose behalf the contributions were paid. The assets identified as designated to members do not form a common pool of assets available for members generally. Members receive an annual statement confirming the contributions paid on their behalf and the value of their money purchase rights.”

It is quite probably the case that similar wording has appeared in previous and subsequent accounts.

The Scheme assets are separated in the accounts into a Defined Benefits Section and a Defined Contribution Section. The note, under “NET ASSETS”, states “All defined contributions assets are designated to members”.

Mr Bainbridge’s Annual benefits Statements regularly referred to his “Retirement Fund” which was invested in the Scottish Widows Managed Fund and the value of which was based on the price of investment units at the relevant time. The statements contained a conventional caveat that they were for guidance purposes only. His Statement of Leaving Benefits contained the information “as a former member of the….Scheme you are entitled to the value of your Retirement Fund from your Normal retirement Date and certain other benefits…..”. The statement contains the following “health warning”:

“All benefits are subject to the Trust Deed and Rules governing the Scheme….”

Quarters took advice from Leading Counsel specialising in pension matters, Mr Nigel Inglis-Jones QC who appeared on behalf of Quarters on this appeal. He advised that there was a single fund which fell to be dealt with on a winding-up of the Scheme. Under the Definitive Trust Deed and Rules, it could not be said that there were separate funds allocated to the benefits of the Final Salary Section on the one hand and the Money Purchase Section on the other. Instead, the Fund had to be applied under a combination of the statutory requirements relating to hybrid schemes (ie broadly speaking a scheme such as the present providing both defined benefits and money purchase benefits) and the Scheme documentation. The result, which is not disputed assuming that Mr Inglis-Jones is correct in saying that there was a single fund which had to be applied in that way, is that the benefits of members of the Money Purchase Section which have not come into payment are effectively reduced to nil, there being no assets available to meet the priorities in Clause 13 after meeting (and then only in part) guaranteed minimum pensions. I shall refer to the construction which Mr Inglis-Jones advised to be correct as “the Single Fund Construction”.

The DPO referred to information which had been provided by Punter Southall & Co who were the administrators of the Scheme between 1997 and 2003. I read the DPO as accepting the accuracy of that information. What is said is this:

After summarising the documentation and the background (including a long citation from Counsel’s opinion), the DPO recorded the submissions made by Mr Bainbridge and on behalf of Quarters. In essence, Mr Bainbridge argued that there are two separate funds within the Scheme. On this argument, there is a separate fund which supports the benefits of the Money Purchase Section; the winding-up provisions of Clause 13 do not apply to that separate fund at all or, if they do apply, they do so only in relation to that fund as a separate fund to provide the benefits of that section and only that section. I shall refer to the construction advocated by Mr Bainbridge as “the Separate Funds Construction”. The DPO rejected Mr Bainbridge’s argument finding in favour of the Single Fund Construction. He decided that there is a single Fund within the Scheme; and that, in a winding-up of the Scheme, that Fund is available to meet all the benefits of the Scheme with Clause 13 drawing no distinction between benefits which arise under the Final Salary Section and those which arise under the Money Purchase Section.

The DPO records Mr Bainbridge as saying that he relied on the advice which he received that his fund was “ring fenced” and that had he known there was any doubt about this, he could easily have altered his position, in particular by transferring his funds to another pension arrangement when he learned that the Principal Employer might be facing difficulty. However, the DPO rejected that argument, observing that “the matter currently under consideration is not a complaint against the Trustees for misleading information. In any event, the Booklet makes clear that it is subject to the provisions of the Trust Deed and Rules and it does not, therefore, greatly assist Mr Bainbridge’s case”. (I add that I do not understand Mr Bainbridge to argue that this “advice” is any more than the statements made in the various documents which I have mentioned.)

The DPO also rejected any suggestion that the true meaning of the Definitive Trust Deed and Rules could be divined from the statements from Punter Southall & Co and the one trustee whom I have already mentioned. He said this:

“Mr Bainbridge argues that separate funds must have been the intention of the Trustees when the MPS was established. The contents of the Booklet and the letter of instruction referred to by Punter Southall appear to confirm that, at least so far as Punter Southall were concerned, this was what they envisaged. However, this is not the same as saying that this what the Trustees and the Principal Employer envisaged. Moreover, the Booklet and the instructions predate the execution of the Trust Deed and Rules which therefore take precedence…….”

In his admirably succinct submissions to me, Mr Bainbridge made the same arguments, with some elaboration, which he had made before the DPO adding in the alternative that, rather than a single separate fund, there should be separate funds for each member. He relies on a number of statutory and regulatory provisions referring to money purchase schemes at least some of which he referred to before the DPO. They are as follows:

It is really on the basis of those provisions that Mr Bainbridge submits that a scheme under which the fund supporting money purchase benefits can, in a winding-up, be used to provide other benefits, cannot properly be described as a money purchase scheme at all. I therefore need to identify what it is that each of those provisions actually says. I take them in turn but, before doing so, I need to make one general point which is that nowhere is the Scheme described as a money purchase scheme. The Scheme as whole is not, of course, a money purchase scheme in the sense that it provides only money purchase benefits. It is rather, a hybrid scheme providing both final salary and money purchase benefits. Instead, what one does find is the heading “Money Purchase Membership” in Schedule 7 and the MPS Booklet” bearing the title “Money Purchase Section”.

FRS 17 is, as mentioned, an accounting standard laid down for the preparation of company accounts. It does not apply to pension schemes accounts. In the accounts of the Principal Employer, it seems that the Money Purchase Section has been accounted for as though it were a money purchase scheme for the purposes of FRS 17. If the Single Fund Construction is correct, it may be that that accounting treatment is incorrect. The starting point must, however, be the true construction of the Definitive Trust Deed. That construction cannot depend on how the Principal Employer has treated the Scheme in its own accounts.

ICTA 1988 does not appear to me to have any relevance or to assist in the resolution of the issue of construction. Whether there is one Fund or two separate funds, the Scheme will fall within the definition of “retirement benefits scheme”.

The definition of money purchase scheme in the Pension Schemes Act 1993 (the same definition applying, incidentally, for the purposes of the Pensions Act 1995) throws one back onto the definition of money purchase benefits which are defined, as already mentioned, as benefits the rate of amount of which is calculated by reference to a payments made by or in respect of the member. If the Single Fund Construction is correct, then of course the benefits provided by the Money Purchase Section are money purchase benefits. But that is equally the case if the Separate Funds Construction is correct since the benefits under the Money Purchase Section are benefits the rate of amount of which is calculated by reference to a payments made by or in respect of the member that is to say the contributions made by the member and his employer towards his Retirement Fund (as defined). It is therefore perfectly correct, at least in the context of the definition in the Pension Schemes Act 1993, to describe this Section as a money purchase section.

The same observations apply in relation to the definitions in the Companies Act 1985 and the Finance Act 2004. In any event, the relevant Scheme documentation pre-dates Finance Act 2004 by many years; that Act cannot be relevant to the construction of the Scheme documentation.

The FSA and PAS web-sites referred to by Mr Bainbridge all seem to describe schemes where separate funds are built up for the members; the PPF web-site is consistent with a scheme of that sort but also with a scheme where the level of benefit is assessed by reference to contributions and investment returns but without the need for allocated funds. However, the parts of the FSA and PAS web-sites which I have seen do not deal with hybrid schemes which have different sections providing final salary and money purchase benefits respectively. It is not, I think, a justifiable conclusion that the FSA and PAS consider that a hybrid scheme with a money purchase section necessarily has either a separate fund for the members of that section as a whole or allocated funds for each member.

But even if the FSA and PAS websites had described a money purchase section of a hybrid fund is a section with segregated assets, it would not be anywhere near enough to show that a money purchase section of a hybrid scheme is conventionally viewed as one with a separate fund or separate funds.

Accordingly, the material on which Mr Bainbridge particularly relies really contains very little support for the conclusion which he would wish to be drawn. It is certainly of insufficient weight to displace the Single Fund Construction if that would otherwise be the proper construction of the Definitive Trust Deed and Rules applying ordinary canons of construction unless, perhaps, there were real ambiguity or a very fine balance indeed between rival constructions.

Mr Bainbridge also relies on the way in which the Scheme has in fact been administered, on the basis of separate funds, as well as on the passages in the Scheme accounts and his benefit statements which I have referred to. Unfortunately for him, I do not consider that these factors are relevant to the construction of the Definitive Trust Deed and Rules although they may be relevant to other questions such a misrepresentation and estoppel.

The same has to be said about the MPS Booklet too, subject to one aspect which I will come to in a moment. The MPS Booklet is not relevant to the question of construction.

Mr Inglis-Jones submits that it is clear that the Single Fund Construction is correct. Summarising his main points:

Mr Inglis-Jones has helpfully identified such provisions as he thinks might assist Mr Bainbridge. The first is the provision stating that the singular includes the plural giving rise to an argument that references to “Fund”, I suppose through the documentation, can be read as “Funds”. The second relates to the power to agree contributions under Clause 4.3 giving rise to an argument that an agreement could be made to make contributions to different funds. To Mr Inglis-Jones short list, I would add Rule 11.1 of the Money Purchase Section dealing with benefits where it is provided that the Retirement Fund “shall be used to provide” giving rise to an argument that a separate fund must have been envisaged since one cannot use a notional asset, but only a real asset, to provide benefits.

I have no doubt that the DPO was correct to adopt the Single Fund Construction. Reading the Definitive Trust Deed and Rules as a whole it is impossible, I consider, to reach any other conclusion. In particular, I find it impossible to read Clause 4 as creating or authorising the creation of more than one fund. “Fund” is a defined term meaning “the Fund described in [clause] 4.1”. It is not, in my view, an admissible application of the “singular includes plural” rubric to treat the definition of “the Fund” as though it was a definition of several “Funds”. I do not, therefore, consider that the first provision identified by Mr Inglis-Jones in support of Mr Bainbridge assists Mr Bainbridge. Nor do I consider that there is anything in the second provision identified.

As to the factors on which Mr Inglis-Jones relies, they all point, insofar as they point at all, to the conclusion that the Single Fund Construction is correct. Whilst I do not think there is much, if any, force in factors c, d and f listed in paragraph 50 above and little force in factor e, I do regard factors a and b as significant and important. They confirm what, to my mind, is the natural reading of the whole document. I have dealt with factor a in the immediately preceding paragraph.

As to factor b, the provisions concerning Voluntary Contributions are of some importance because they show two things:

Prior to winding-up, therefore, benefits arising in relation to Voluntary Contributions have a special status, a separate sub-fund being created out of which additional benefits are to be provided. But on a winding-up, that special status is qualified. Reading Clause 13 and Rule 2.2.4 together, it appears that the assets of the sub-fund of the Fund representing Voluntary Contributions are subject to the same provisions as other assets of the Fund. The sub-fund is available to meet the liabilities under Clause 13.3 (borrowings, expenses, tax). Following discharge of those liabilities (which may or may not utilise assets in the sub-fund), benefits in respect of Voluntary Contributions take priority over all other benefits and such priority benefits may be discharged out of any assets of the Fund, not just out of assets of the sub-fund or such of them as remain. This is a strong indication that the Fund is regarded as a single fund to meet all of the liabilities of the Scheme whether they arise under the Final Salary Section or the Money Purchase Section.

I do not consider that the tension which arises on the Single Fund Construction between the definition of “Retirement Fund” as a notional amount and the provisions of Rule 11 is a sufficient pointer in the other direction to lead to the conclusion that the Separate Funds Construction is correct. It is perfectly possible to read the requirement to use the Retirement Fund as a requirement to apply an amount equal to the value of the (notional) Retirement Fund: the word “use” must be read in a sense applicable to the entity – the Retirement Fund – which is to be “used”. I consider it correct to read the provision in that way. It should also be noted that the Trustees are not required (although they do have power to do so) to buy-out with an insurance company pensions for members of the Money Purchase Section when those pension come into payment; it is possible for the Trustees to determine, on actuarial advice, the amount of the pension to which a member should be entitled on the basis of the value of his Retirement Fund; having ascertained that amount, the pension, like the pension of a member of the Final Salary Section, is payable out of the assets of the Fund as a whole and is not restricted to the amount which would be provided were the Retirement Fund to be separated out an earmarked exclusively for the member.

I have already indicated, giving my reasons, that the documents relied on by Mr Bainbridge do not assist him on the question of construction. I now need to see whether they have any other impact on the matters in hand.

FRS 17. This has nothing at all to say about pension scheme accounts. The Trustees do not apply it in their accounts and have, so far as I am aware, made no representation that the accounts of the Principal Employer are accurate, even so far as concerns accounting for pensions. It is not necessary for me to say whether the company accounts are in fact not compliant with FRS 17 assuming the correctness of the Single Fund Construction. But if they are not compliant, that is not a matter which impacts on the Scheme, the Trustees or the members and beneficiaries.

The statutory provisions (Companies Act 1985, ICTA 1988, Pension Schemes Act 1993, Pensions Act 1995 and Finance Act 2004). Again, for reasons already given, I do not consider that these assist Mr Bainbridge on the point of construction. I can see no way that they can assist him in any other way to compel the Trustees to administer the Scheme other than in accordance with its express provisions even if he is entitled to rely on them. As to that, Mr Inglis-Jones says that contentions grounded on the “pensions legislation” as he puts it were not raised before the DPO and cannot therefore be relied on in this appeal, referring me to Hamar v French 1998] PLR 321. So far as the point of construction is concerned, I rather doubt that that is so. So far as any other point is concerned, the provisions do not assist.

Similarly, the web-sites do not assist Mr Bainbridge on the point of construction and, as with the statutory provisions, I do not consider that they afford him any assistance on any other aspect of the case. That leaves the Scheme accounts, benefit statement and MPS Booklet for consideration.

It needs to be noted that the DPO records that the matter currently under consideration was not a complaint against the Trustees for misleading information adding this: “In any event, the Booklets makes clear that it is subject to the provisions of the Trust Deed and Rules and it does not, therefore, greatly assist Mr Bainbridge’s case.” Given the scope of the complaint, it seems to me that the MPS Booklet and the benefit statements ought to have been referred to only insofar as they are relevant to the question of construction (which is not at all).

I should, however, record my agreement with the DPO on the assistance which might otherwise be derived from those documents. In my judgment, it is not possible for Mr Bainbridge to rely on the MPS Booklet as a representation that a separate fund or separate funds would be maintained. Although that Booklet, read by itself does give the clear impression that each members of the Money Purchase Section would have a separate fund allocated to him, the “health warning” which I have set out at paragraph 7 above makes it clear that the formal scheme documentation governs in the case of any inconsistency. In the light of the decision of the Court of Appeal in Steria Ltd v Hutchison [2006] PLR 291, this type of “health warning” has precisely the effect which it is stated to have and negatives the possibility of a successful argument that reliance was placed on a booklet to override the rules. It may be that, in exceptional circumstances – for instance where the “health warning” is tucked away in small print somewhere in the document – reliance could be relied on a booklet notwithstanding such a provision but the present case is not one in which I consider that Mr Bainbridge could rely on the MPS Booklet to override the Definitive Trust Deed and Rules if the Single Fund Construction is the correct construction. The same must be said in relation to the benefit statement which also contains a “health warning”.

So far as concerns the Scheme accounts, I have already said that I do not consider those to be relevant to the question of construction of the Definitive Trust Deed and Rules. Mr Inglis-Jones submits that a statement set out in the notes to the accounts cannot alter the rights of members under the Definitive Trust Deed and Rules. In the accounts, separate columns of figures are provided for the two Sections. He says that designation of certain sums in the accounts was a necessary book exercise if there was to be one Fund in order to determine what benefits attributable to each member of the Scheme participating in the Money Purchase Section in fact were when those came to be calculated. That may be so. But it does not explain away the statement which I have identified at paragraph 31 above which clearly gives the impression that there are segregated funds for each member (not surprisingly if the Trustees in fact thought that this was what was provided for in the formal documentation). There is, so far as I can see, no “health warning” in the accounts. However, whether the accounts were intended by the Trustees to be relied on by members for the purpose of ascertaining their benefits under the Definitive Trust Deed and Rules and whether Mr Bainbridge actually saw and relied on them were not matters investigated by the DPO in the context of misrepresentation and estoppel. This, again, is not surprising given the DPO’s approach which, as I have already said, was on the basis that the matter before him was not a complaint against the Trustees for misleading information.

In his submissions to the DPO, Mr Bainbridge said that it was necessary to imply terms into the Scheme documentation in order, as the DPO put is, “to make sense of the situation and to legitimise the Trust Deed”. It is not, in my judgment, possible to imply terms in effect to treat the Scheme as if assets had been allocated to the Money Purchase Section so as to ring fence them for the provision of money purchase benefits on a winding-up of the Scheme. None of the established grounds for the implication of terms is satisfied in the present case: the Scheme can operate perfectly effectively – albeit it not as Mr Bainbridge would wish – applying the Single Fund Construction and it certainly cannot be said that the “officious bystander” would have said that the Separate Funds Construction must obviously have been intended.

Accordingly, I agree with the conclusion of the DPO for very much the same reasons as he gives with, perhaps, a slight difference of emphasis.

I should, however, re-emphasise that the DPO viewed the complaint before him as relating to the question of the terms on which the Trustees should administer the assets of the Scheme resolving the choice between the Single Fund Construction and the Separate Funds Construction in favour of the former. He did not deal with the complaint as though it were a complaint against the Trustees in respect of misleading information. He did, however, say in relation to the MPS Booklet that, in the light of the “health warning” it did not greatly assist Mr Bainbridge, a conclusion with which I agree for the reasons already given. However, the complaint did not raise, or at least did not clearly raise, the question whether Mr Bainbridge could rely on the statements in the Trustees’ reports and accounts as giving rise to an estoppel or as amounting to a representation which had been relied on, giving Mr Bainbridge rights which, arguably, prevent the Trustees from applying the Rules in accordance with their express terms. The DPO did not address that issue.

The Trustees are sympathetic to Mr Bainbridge’s position but correctly felt constrained by the advice which they had been given by Mr Inglis-Jones and which I have, in effect, held to be correct on the issue of construction. In the course of argument, a number of points were mentioned which Mr Inglis-Jones acknowledged that the Trustees ought to consider, or re-consider. He has made a polite request that I mention them at the end of my judgment. I am happy to mention the following: