Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustees Ltd & Anor

This Part 8 claim concerns the Merchant Navy Ratings Pension Fund (“the Scheme”) established with effect from 6^th April 1978. The Scheme is a non-sectionalised industry-wide defined benefit occupational pension scheme, established for the benefit of ratings of the British Merchant Navy. During its existence, some 240 employers of ratings have adhered to the Scheme under standard form accession documentation (“the Accession Agreement”) and thereby become what are defined under the Scheme’s Trust Deed and Rules as Participating Employers.

The Scheme is, and has since the late 1990s been, in serious deficit. Its most recent actuarial valuation, conducted as at 31^st March 2008, revealed that the Scheme had an on-going deficit of £175 million (representing 78% funding) and a buy-out deficit of £370 million (representing 63% funding).

Pursuant to a proposal designed to repair the then deficit (“the 2000 Proposal”) and with the approval of the Court on behalf of the Scheme’s members, a new deed and rules were executed on 31st May 2001 (“the 2001 Deed and Rules”). They introduced a regime (“the 2001 Regime”) pursuant to which the whole of the legal liability for repair of the deficit was thrown upon those 40 Participating Employers which, as at 31^st October 1999, employed active members of the Scheme, or persons eligible to join it (“the Current Employers”). The 2001 Regime also involved the closure of the Scheme to new members with effect from 31^st May 2001. From the same date continued employment as a rating ceased to constitute a basis for the accrual of additional years’ pensionable service under the Scheme.

The 2001 Regime was introduced pursuant to a power of amendment conferred upon the Trustee by clause 30 of the then applicable trust deed dated 3^rd October 1994 (“the 1994 Deed”). Together with its accompanying rules (“the 1994 Rules”) it was one of a series of successive amendments which occurred during the life of the Scheme, in each case by a complete replacement and restatement of the relevant deed and rules. The complete list of such replacements is as follows: July 1985, August 1990, October 1994, May 2001 and August 2007. Other significant amendments occurred without the need for a comprehensive replacement of the deed and rules, in particular in July 1986, when functions, including the amendment power, were transferred from a Committee of Management to the Trustee. Further amendments were made in June 2000 and in February 2001 about which I shall have more to say in due course.

An issue has arisen between the 40 Current Employers and those remaining Participating Employers of the other 200 or so employers which adhered to the Scheme (to which I shall refer, adopting the definition used in the Claim Form, as “the Specified Employers”), due to the fact that some 75% of the present deficit for which, under the 2001 Regime, the Current Employers have the entire repair liability is attributable to the pensionable service under the Scheme of ratings whilst in the employment of the Specified Employers. From 2001 to 2006 the apparently disproportionate effect of the 2001 Regime in throwing the whole of the responsibility to repair a deficit upon employers whose ratings have been a cause of only a minority of it was largely mitigated by voluntary, ex gratia, payments made by or on behalf of a small group of Specified Employers. During that period those voluntary payments amounted to approximately half the annual deficit repair payments required under the 2001 Regime. When, in 2006 most, but not all, of those voluntary payments were discontinued, the financial burden on the Current Employers in terms of annual deficit repair payments increased by some 80-85%, with effect from March 2007.

The issue between the Current and Specified Employers is whether it is now competent for the Trustee, by exercise of its power of amendment under what is now clause 30 of the 2007 Deed, to alter or replace the 2001 Regime by imposing deficit repair contribution obligations on Specified Employers. The Current Employers, led by Stena Line Limited (“Stena”) (which, under the 2001 Regime, bears approximately 60% of the Scheme’s liabilities) contends that the Trustee can do so. The Specified Employers, led by P&O Ferries Limited (“P&O Ferries”) (on whose behalf one of the largest voluntary contributions was made, ceasing in 2006), contend that the Trustee may not do so.

For reasons which I shall explain in due course, the Trustee, Merchant Navy Ratings Pension Fund Trustees Limited, was reluctant to assert the disputed right of amendment as claimant. In consequence, Stena has brought this claim, as a representative of the Current Employers, joining both the Trustee and P&O Ferries as the representative of the Specified Employers. It is agreed that I should make representation orders to that effect. The Trustee has adopted a broadly neutral stance in this litigation, but has indicated (without of course fettering its discretion) that if the court concludes that it has the requisite power, it would be minded to exercise it, upon the basis that any broadening of the pool of contributors to the deficit must, prima facie at least, be beneficial to the Scheme’s members.

During the course of sensible discussion between the parties before trial, it became common ground that, under the 1994 Deed and Rules (in force until replaced in 2001), the power to amend contained in clause 30 would have enabled the Trustee to make the disputed amendment. The case for the Specified Employers is that the Trustee lost that power by reason of the introduction, by amendment, of the 2001 Regime. The case is put first as a matter of interpretation of the 2001 Deed and Rules, considered as a whole (for all relevant purposes replicated in the 2007 Deed and Rules). Alternatively a case is advanced based upon estoppel by convention.

The thrust of the Specified Employers’ case, under both those legal headings, is substantially the same. It is that the formulation of the 2001 Regime involved a consensus among all Participating Employers that, once implemented by the 2001 Deed and Rules, the Specified Employers were irrevocably and for all time released from any further legal liabilities to make deficit repair contributions to the Scheme, save only for certain statutory obligations (to which I will refer in due course, and which have in any event been paid).

Subject to certain embellishments relied upon in favour of Specified Employers who made voluntary payments, and to a particular factual case supporting Specified Employers in the P&O Group, the common thread which lies at the heart of the Specified Employers’ case is that the 2001 Regime involved them for ever giving up, in favour of the Current Employers, what they allege was a power under Rule 31.0(ii) of the 1994 Rules (“Old Rule 31”) to force the Scheme into a winding up by objecting to deficit repair measures proposed by the Trustee. That removal necessarily involved, so they say, a concurrent narrowing of the Trustee’s power of amendment so as to exclude any power thereafter to include them within the class of contributing employers, an amendment which, without Old Rule 31, they would be powerless to prevent.

The resolution of this issue has not involved the determination of any disputed issues of fact. It has been acknowledged that the occasional differences of recollection and emphasis revealed by the witness statements do not affect the outcome, so that cross-examination has been unnecessary. The relevant facts consist of the terms of the Deed and Rules, before and after the amendments made in 2001, the matrix of fact against which the amendments made to introduce the 2001 Regime have to be interpreted, and the negotiations between the parties which led to the introduction of the 2001 Regime, from which the convention alleged to found an estoppel is said to have arisen, together with the matters alleged to constitute the requisite detriment. Subject to one small exception, the content of the negotiations relied upon sufficiently appears from copies of relevant correspondence and minutes of meetings.

Nor was there any specific dispute between the parties as to the relevant legal principles, although of course the parties placed emphasis on different aspects of them, in particular in relation to questions of interpretation of pension schemes. In the end the lengthy and helpful skeleton arguments, coupled with three and a half days of vigorous debate by way of submissions, concerned the application of well settled legal principles to uncontentious, if complicated, facts.

During the whole of the period of the negotiation and implementation by amendment of the 2001 Regime the Scheme was regulated by the 1994 Deed and Rules which, as recital (c) to the 1994 Deed explains, were promulgated as a replacement for the 1990 Deed and Rules, pursuant to the amendment power contained in clause 30 of the 1990 Deed. The 1990 Deed and Rules had themselves been introduced by way of replacement for the 1985 Deed and Rules, which had in turn replaced the original Deed and Rules dated 16^th January 1978, in each case by a similar process, which depended upon a substantially identical power of amendment.

With one exception, it is unnecessary to trace the process of amendment from 1978 to 1994 in any detail, because the provisions of the 1994 Deed and Rules relevant to the issues which I have to decide were in all respects substantially the same as they had always been, from the inception of the Scheme. The only change of any relevance was that, from 1978 until July 1986, the whole of the management of the Scheme was vested in a Committee of Management, the Trustee being no more than a custodian of the assets of the Scheme from time to time. Thereafter both the custodianship of the assets and the management of the Scheme were vested in the Trustee, with a constitution (provided for in its Memorandum and Articles) which reflected the substance of the regime which had, until then, governed the powers and modus operandi of the Committee of Management.

The following elements of those constitutional provisions deserve emphasis. Under clause 3.1 of the 1978 Deed, the Committee of Management was to consist of ten members, of whom one half were to be Employers’ representatives (appointed by the then employers’ side of the Deck, Engine Room and Catering Ratings Panels of the National Maritime Board) and one half were to be Members’ representatives (appointed by the employees’ side of the same Panels). Strict provision was made to preserve equality of representation of the employers and the employees on the Committee of Management, as well as on any sub-committee.

By clause 4 of the 1978 Deed the provisions as to quorum required at least two Employers’ representatives and two Members’ representatives to be present, and clause 4.4 provided that no resolution or proposal of the Committee should be regarded as carried unless it had been approved not only by the majority of all members present, but also by a majority of the representatives of the Employers and a majority of the representatives of the Members, in each case present at the relevant meeting. Similar provision was made by clause 4.6 in relation to the decisions of any sub-committee.

With effect from 1986, that same structure was carried forward into the constitution of the Trustee. Article 5 of its original Memorandum and Articles provided that its shareholders should consist of an equal number of Employer and Employee members, nominated by the same employer and employee sides of the Panels. Article 15 provided that no resolution or proposal put at a General Meeting could be regarded as carried unless approved not only by a majority of all members present but also by a majority of the employer members present and by a majority of the employee members present. Article 17 provided that all members should be directors, so that one half of the directors should be employer representatives and one half should be employee representatives. Article 23 made the same provision in relation to decisions of directors as Article 15 made in relation to decisions at a general meeting, and Article 25 made similar provision in relation to committees of directors.

Subsequent revisions and reissues of the Trustee’s Memorandum and Articles incorporated substantially the same constitutional provisions for shareholding, board membership and decision-making, save that in the revision made on 1^st May 2001 it was recognised (as was the case) that the functions of the former employers’ and employees’ sides of the Panels had devolved respectively upon the Chamber of Shipping (for the employers) and the Rail Maritime and Transport Union (“the RMT”) for the employees. As will appear, it was in fact the Chamber of Shipping and the RMT which performed those functions throughout the negotiation of the 2001 Regime. I shall refer to the provisions which I have just described, whereby nothing could be decided in connection with the management of the Scheme without separate majorities of each of the employers’ and employees’ representative committee members and then directors, as “the dual majority principle”.

Both the Committee of Management and (of course) the Trustee performed fiduciary functions under the Scheme. The only difference between the Committee and the Trustee is that the former was a fiduciary manager, whereas the latter is both a manager and custodian, in each case of the trust assets. The references both before and after 1986 to committee members and directors as consisting of representatives of employers and employees respectively, and the conferring upon each group of representatives of powers, in effect, to veto any decision of the Committee or of the Trustee’s Board gives rise at least at first sight to an apparent tension between their duties of undivided loyalty to the Trustee on the one hand, and their representative function for employees or employers as the case may be, on the other hand. Nonetheless, it was or became common ground before me that the description of (for example) employer directors as representatives of the employers and the conferring upon them of the powers of veto which I have described did not mean that they were entitled to prefer the interests of the employers over the best interests of the Trustee in performing its fiduciary duties under the Scheme.

“… an appointed director without being in breach of his duties to the company, may take the interest of his nominator into account, provided that his decisions as a director are in what he genuinely considers to be the best interests of the company; but that is a very different thing from his being under a duty to his nominator by reason of his appointment by it.”

See Re: Neath Rugby (No 2) [2009] EWCA Civ 291, per Stanley Burnton LJ at paragraphs 32 – 33.

It should not be supposed that there is any necessary or permanent conflict between the interests of the employers and the duties of a trustee in an occupational pension scheme. Although not beneficiaries of the trust in a traditional sense, employers have an interest in the effective management of a pension scheme for their employees, since it provides a mechanism for assuring to their employees an important part of the quid pro quo for their labour, and (as is evident from the facts of the present case) underperformance of the pension scheme is, unless addressed by remedial measures, likely to aggravate industrial relations.

Each Participating Employer joined the Scheme and thereby became bound by the Deed and Rules of the Scheme from time to time by means of an Accession Agreement in standard form, the operative part of which was as follows (which for convenience I have taken from the First Appendix to the 1994 Deed), addressed to the Trustee:

“WE of [address] having received a copy of the revised Trust Deed and Rules dated [date] and constituting and regulating the Merchant Navy Ratings 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 duly made therein and promptly to pay to the Fund all contributions due under the Rules.”

Clause 30 of the 1994 Deed, which contained the relevant amending power exercised by the Trustee in introducing the 2001 Regime, provides as follows:

“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 may 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 purposes of the Scheme, namely the provision of pensions for Members on retirement; or

b)

would operate in any way to diminish or prejudicially affect the rights in respect of any Member annuitant or other beneficiary already earned; unless the Actuary shall advise that no other course is reasonably practical having due regard to the interests of all persons interested in the Scheme; 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.”

The main provision requiring Participating Employers to contribute to the Scheme, under the 1994 Deed and Rules, was to be found in Rule 5.2, as follows:

“EACH Participating Employer shall contribute 8% of aggregate Pensionable Salaries, of the Members in his employment or such other rate as may be decided by the Trustee on the advice of the Actuary.”

Two points are to be noted from that formulation. First, because contribution was to be by reference to salaries of Members in the employment of the Participating Employer, an employer who employed no members at a particular time would, although still a Participating Employer, be liable for a nil contribution, even if he employed ratings eligible for membership of the Scheme. Secondly, each Participating Employer was contractually bound in to paying contributions at an increased rate, should the Trustee so decide, albeit that any such decision would be subject to the dual majority principle. Finally, clause 26 of the 1994 Deed provided that the administrative and other expenses of the Scheme were to be borne by the Scheme or by the Participating Employers in such manner and in such proportions as the Trustee should determine. By contrast with Rule 5.2, that formulation did not limit the class of Participating Employers liable to contribute to those employing Members of the Scheme from time to time.

Turning to the provisions relating to deficiency and winding up, Rule 29 of the 1994 Rules provided for triennial valuations of the financial position of the Scheme by the Actuary (as defined) in the form of written reports to the Trustee together with such recommendations as the Actuary might think fit. Rule 29.1 provided as follows:

“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 hereinafter laid down for amendment of this Deed and the Rules, or if the deficiency or anticipated deficiency cannot be made good, for the winding up of the Scheme.”

The reference in the last sentence of that sub-rule to “such steps as are hereinafter laid down for amendment of this Deed and the Rules” is a reference to Rule 32, which provides that:

“THESE Rules may be varied or added to in accordance with the provisions of the Trust Deed (Clause 30).”

Rule 31 of the 1994 Rules (which I have labelled Old Rule 31) provides (so far as is relevant) as follows:

“31.0

THE trusts hereby constituted shall continue unless and until:

(i)

determined by a resolution to determine the Scheme passed by the Trustees in accordance with the Trust Deed; or

(ii)

there be a deficiency or anticipated deficiency in the Scheme’s resources with no agreed measures acceptable to the Participating Employers and approved by the Actuary for overcoming that deficiency.”

The phrase in Rule 31.0(ii) “with no agreed measures acceptable to the Participating Employers” has given rise to prolonged uncertainty and to extended debate in these proceedings as to its precise meaning, to which I shall return. It is sufficient to note for present purposes that the Specified Employers’ case is that there was a general belief during the negotiation of the 2001 Regime that its effect was that any single Participating Employer who objected to deficit repair measures proposed by the Trustee could thereby force the Scheme into winding up, or at least that there was a real fear that this might be its effect.

Apart from the 1994 Deed and Rules, the main part of the relevant matrix of fact against which the changes wrought by the 2001 Deed and Rules fall to be interpreted is the statutory structure pursuant to which, starting in 1992, Parliament intervened so as to impose obligations on employers in connection with deficits arising in pension schemes both on, and prior to, winding up. Save to note that there were no such obligations in force when the Scheme was created, it is necessary only to summarise the statutory structure as at 2001. It did not materially change during the process of negotiation of the 2001 Regime, which itself began in 1998.

The statutory structure, imposed by the Pensions Act 1995, may be analysed under two headings, first the Minimum Funding Requirement or “MFR”; and second the section 75 debt obligation. Both were required to be complied with in relation to certain occupational pension schemes, including this Scheme, and both imposed contribution obligations on a specified class of employers, defined in section 124 as follows:

“ “Employer”, in relation to an occupational pension scheme, means the employer of persons in the description or category of employment to which the scheme in question relates … ”

In practice that means, at any moment in time, an employer who employs one or more members of the relevant scheme, or one or more persons who qualify for membership, in the sense of being eligible to join it. It is on the basis of that statutory definition that the class of Current Employers is identified both in these proceedings, and in the 2001 Rules. The inclusion within the statutory framework of an employer of one or more ratings who, though not members of the Scheme, were eligible to join it, had the effect of extending the class of statutory contributor slightly beyond the confines of Rule 5.2 of the 1994 Rules. Nonetheless, employers who had already given up employing eligible ratings when the statutory obligations came into force were unaffected by them.

The MFR obligations were imposed, in the main, by sections 56 to 58 of the Act, and by the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996, and may be summarised as follows. First, section 56(1) provided that every relevant occupational pension scheme was subject to a minimum funding requirement, namely that the value of the assets of the scheme is not less than the amount of its liabilities. Regulations prescribed the valuation method to be used, which was generally perceived to be less rigorous than that preferred by the Scheme’s Actuary, at least for as long as the Scheme contained a substantial proportion of active members. Furthermore, the prescribed valuation method was such that, in relation to any particular scheme, a much larger deficiency would be thrown up on a winding up basis than on an ongoing basis.

Sections 58 and following of the Act provided that the minimum funding requirement was to be met (to the extent not available from employees’ contributions) by contributions from employers (as defined) pursuant to a schedule of contributions, prepared, maintained and from time to time revised, either by agreement between the scheme trustees and the employers or, in default, as determined by the trustees, in each case such that the rates of contributions were certified as MFR compliant by the scheme’s actuary.

Payments shown as due in any schedule of contributions were, by section 59(2) of the Act, recoverable as, or as if they were, debts due by the relevant employers to the trustees. In relation to continuing schemes, regulations imposed time limits both for the first MFR valuation and for the issue of the first schedule of contributions. In relation to schemes in deficit, regulations imposed a time limit for the achievement of full MFR solvency which, in relation to the Scheme, was April 2007. The time limit for the preparation by the Trustee of its first statutory schedule of contributions was, pursuant to paragraphs 10 and 15 of the MFR Regulations, 23^rd June 2000.

The section 75 Debt obligation was, in relation to a single employer scheme, designed to impose as a debt on the employer the full amount of any MFR based deficiency at the moment when the employer became insolvent or, if earlier, when the scheme began to be wound up. In relation to multiple employer schemes (including an industry wide scheme such as this Scheme) the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1996 both extended and expanded the section 75 Debt obligation. Paragraph 4(2) of the Regulations inserted into section 75 a method of apportionment of the deficiency between multiple employers, upon a winding up of the scheme.

Because of the restricted definition of employer to which I have already referred, it imposed statutory obligations only upon persons employing eligible or member employees at the applicable time. Nonetheless, paragraph 4(3)(b) of those Regulations imposed a modified form of section 75 Debt obligation on any employer which, prior to the winding up of the relevant scheme, either suffered an insolvency event or ceased to be such an employer, by ceasing to employ any scheme member or person eligible to join. In order no doubt to avoid retrospectivity, the Regulations imposed no historic obligation on an employer of that type who had ceased to be an employer as defined (or become insolvent) prior to the coming into force of the Regulations on 6^th April 1997.

The combined effect of these statutory obligations, viewed from the perspective of a Participating Employer in the Scheme considering what to do about its reported serious deficit in and after 1997 may be summarised as follows. Current Employers (i.e. employers as defined in the legislation) faced two types of statutory liability. The first was to comply with schedules of contributions to be issued from time to time for the purpose of remedying the MFR deficiency over time. The second was a much larger capital liability which would be triggered by the Scheme going into winding up. Alternatively, a Current Employer could, by ceasing to employ eligible ratings, avoid future schedule of contributions’ liabilities and any section 75 liability on winding up, but only by incurring a section 75 Debt upon ceasing to be such an employer.

Secondly, a number of Participating Employers (about twenty as far as the evidence goes) had already triggered a section 75 Debt by ceasing to employ eligible ratings after 6^th April 1997, but before the beginning of discussions about the deficit. They included a number (but not all) of the P&O Participating Employers. It is common ground that, at least in relation to P&O, they ceased to employ eligible ratings not out of any desire to reduce or avoid their contribution obligations to the Scheme, but rather to take advantage of savings in national insurance liabilities available from sourcing ratings from non-UK companies, estimated to save the P&O Group some £10 million a year. That group of twenty Participating Employers forms a sub-group of the Specified Employers which has come to be known as the Debt Employers. That label precisely identifies the full extent of their then statutory obligations to the Scheme, namely to pay the exit debt imposed by section 75, as amended by the Regulations.

The final class of Participating Employers, in terms of statutory obligations, consisted of those who had ceased to employ eligible ratings prior to 6^th April 1997. That class of some 180 Participating Employers formed the other sub-group of the Specified Employers, and were subjected to no statutory liability at all in relation to the Scheme during the negotiation of the 2001 Regime.

Two final points about the statutory structure need emphasis. The first is that neither the MFR contribution obligation nor the section 75 Debt obligation excused Current Employers (i.e. employers as defined by the Act) from having to make good that part of any Scheme deficit attributable to service by ratings in the employment of Specified Employers. For example, paragraph 4 of the Deficiency on Winding Up Regulations apportioned a deficiency on winding up between employers (as defined) by reference not to the share in the deficiency attributable to the service of ratings employed by them, as a fraction of the total deficiency, but rather to that proportion of the total deficiency represented by their share, as a fraction of the shares of the other Current Employers. But secondly, and as a corollary, it was not suggested to me that anything in the statutory structure prohibited the Trustee from amending the constitution of the Scheme, at any time prior to May 2001, so as to impose a contractual obligation on Specified Employers to contribute to deficit repair, and the concession that this was within the scope of the power of amendment conferred by clause 30 of the 1994 Deed makes that clear. As is implicit in its title, the MFR structure was designed to impose a minimum level of statutory funding obligation on certain employers. It did not prohibit anything greater by way of contractual obligation, either on the Current Employers, or any other employers or persons who could be persuaded to undertake a contractual obligation, or compelled to contribute by a contract already entered into.

The Deed and Rules which contain the provision for amendment the subject matter of these proceedings are the 2007 Deed and Rules. They do not differ in any material respect from the 2001 Deed and Rules, and it is the latter which, from and by reason of their introduction, are claimed to have circumscribed the power of amendment formerly in clause 30 of the 1994 Deed. It is therefore both convenient and sufficient to focus upon the changes made in 2001. Apart from the references to the Chamber of Shipping and RMT in place of the employers’ and employees’ sides of the former Panels to which I have already referred, the constitution of the Trustee was not altered in any relevant way by the revised Memorandum and Articles which took effect in May 2001. Accordingly, the requirement for equal employers’ and employees’ representation and the dual majority principle remained intact. Similarly, no change was made to the terms of the Accession Agreement.

Nor was any relevant change made to the amendment power itself. Clause 30 of the 1994 Deed was carried over word for word into clause 30 of the 2001 Deed, save only that an additional proviso was added, to the effect that no variation or addition should be made which:

“(d)

would contravene the requirements of section 67 of the 1995 Act.”

In order to keep pace with legislative change, proviso (d) to clause 30 of the 2007 Deed replaces the reference to section 67 with a reference to section 67 to 67I. It is not suggested that the disputed amendment would contravene proviso (d).

By Rule 3, the expression “Current Employer” is defined as meaning:

“A Participating Employer named in Appendix I to the Rules or a company or organisation which has become a Current Employer in place of an existing Current Employer under Rule 30.”

The effect of this definition was, subject to the Rule 30 addition (to which I will return), to fix the class of Current Employers by reference, not precisely to the statutory definition of employer, but to a list of persons who were believed by the Trustee to satisfy the statutory definition at a fixed date, namely 31^st October 1999. Its effect was, therefore, ‘once a Current Employer, always a Current Employer’ by contrast with the statutory regime under which the status of employer would cease once the employer no longer employed eligible ratings, while incurring at the same time a section 75 Debt obligation.

Rule 5 of the 2001 Rules introduced a wholly new contribution regime. Rule 5.1 provided that there should be no further contribution to the Scheme by members, following its closure both to new members and for the purposes of service accrual. Clause 5.2 provided as follows:

“With effect from the Closure Date, the Current Employers shall contribute such amounts as are necessary to give effect to the Schedule of Contributions for the time being in force. Each Current Employer shall pay that Current Employer’s Percentage of those contributions (disregarding contributions payable under Rule 5.3).”

The detailed definition of “Current Employer’s Percentage” in Rule 3 shows that, both as initially fixed, and as might subsequently be varied, the percentage was designed to reflect the share attributable to that employer’s Employed Members expressed as a percentage of such liabilities for all Current Employers. The effect of Rule 5.2 was therefore to throw upon Current Employers the whole of the responsibility for deficit repair, since it was in the Schedules of Contributions that the MFR deficit repair requirements needed to be satisfied.

Rule 5.3 provided that:

“Each Participating Employer shall contribute 2% of the aggregate MNRPP Pensionable Salaries of the Active members in its employment ….”

The 2001 Deed also retained the old clause 26, but with the prefix “subject to Rule 5”. In practice, as that prefix contemplated, the Trustee recouped the administrative expenses of the Scheme by including them within the Schedules of Contributions. It therefore chose (but was not obliged) to recover the whole of the expenses from the Current Employers, while preserving a right to seek contributions from all or any Participating Employers by way of an alternative.

The combined effect of the definition of Current Employer, Rule 5 and clause 26 may therefore be summarised for present purposes as follows, at least for as long as the 2001 Regime endured un-amended. First, all on-going deficit contributions were to be recoverable solely from a fixed list of Current Employers, via the Schedules of Contributions, under Rule 5.2. Secondly, there existed two limited situations in which, at least in theory, other Participating Employers could be looked to for contributions. The first was, under Rule 5.3, where a Participating Employer re-employed a Scheme member after 31^st October 1999, for the duration of that re-employment, but only in respect of 2% of his MNRPP Pensionable Salary. The other, (although this was not implemented in practice) is that Participating Employers generally could be required to contribute to the Scheme’s expenses.

In relation to deficiency, the 2001 Rules repeated the old Rule 29.1 verbatim, save for the qualification that it could only be triggered by an Actuary’s report made on or after 31^st March 2006. The significance of that date appears from the evidence to be that it was the objective of the promoters of the 2001 Regime that it would remedy the then identified deficit by that date, albeit without any certainty that it would do so. On its face it appears to express the clearest contemplation that if either that objective was not achieved, or, even if it was, if a further deficit were subsequently to be identified, further action might have to be taken including the increasing of contributions, and, if necessary, further amendments of the Deed and Rules.

Rule 30 of the 2001 Rules made brand new provision designed to enable a Current Employer, in strictly limited and regulated circumstances, to cease to be a Current Employer. It would be disproportionate to set out its detailed provisions in this judgment but, in summary, it provided two alternative exit routes. The first, headed “Substitution of new Current Employer” enabled a Current Employer with the consent of the Trustee to arrange for one or more other companies to assume its responsibilities as Current Employer under the Scheme, including in particular its Rule 5 contribution obligations. The new Current Employers by substitution were required to become Participating Employers (no doubt by signing Accession Agreements) and the Trustee was given an “absolute discretion” as to whether or not to agree to such a request for substitution. Rule 30.2 provided that:

“Where a Current Employer is permitted to withdraw from the Scheme under Rule 30.1, it shall cease to have any liabilities under the Scheme apart from any liabilities which arise under section 75 of the 1995 Act as the result of its withdrawal.”

The quoted passage suggests that the substituted Current Employer would cease not merely to be a Current Employer, but to be a Participating Employer, at least for any purpose connected with liability under the Scheme.

The second method of withdrawal consisted of what is headed “Withdrawal with transfer-out”. It was designed to enable a Current Employer to withdraw from the Scheme, again only with the consent of the Trustee, provided that, first, there was a simultaneous transfer to what is described as a Receiving Scheme both of the Scheme’s liabilities to that employer’s employees, and of a transfer payment designed to fund those obligations, and secondly, a premium to be fixed by the Trustee in its absolute discretion, designed to protect both the interests of the remaining beneficiaries of the scheme, and the interests of the remaining Current Employers, having regard to the reduction in the number of Current Employers thereby brought about. Again, the repeated use in the relevant parts of Rule 30 of the phrase “may withdraw from the Scheme” suggests, although it is not expressly so stated, that a Current Employer withdrawing by transfer-out ceases to be a Participating Employer. Whether that is the effect of either of the two limbs of Rule 30 is not a matter which I have been asked to decide, but, as will appear, Rule 30 is heavily relied upon by the Specified Employers as part of their case.

Finally, the 2001 Rules introduced a wholly new Rule 31, in place of its 1994 predecessor. In fact, Old Rule 31 had been suspended, in exercise of the Trustee’s power of amendment under clause 30 of the 1994 Trust Deed, before the 2001 Regime was brought into force. This suspension was effected first by a deed dated 15^th June 2000, and again by a deed dated 7^th February 2001. There is no challenge to the validity of that suspension. I shall describe the reasons for it in due course. The new Rule 31 is, again, long and complex. It is sufficient to set out the material parts of it as follows:

“Winding up

31.0

The trusts hereby constituted shall continue unless and until

(i)

determined by a resolution to determine the Scheme passed by the Trustees in accordance with the Trust Deed, or

(ii)

determined by written notice to the Trustees given either by (1) all the Current Employers or (2) not less than five Current Employers, between them representing not less than five separate corporate groups, which together contain Current Employers whose Current Employer’s Percentages total at least 30% Provided that the effective date of such a notice may not be before the earliest of (a) 31 March 2006 (b) the date on which the Fund attains 100% funding on an “equity/gilt” basis under the minimum funding requirement contained in section 56 of the 1995 Act and (c) the date on which the aggregate annual contributions required from Current Employers under the Schedule of contributions exceeds £16 million (increased in line with the increase in the Index of Retail Prices since 31 March 2000). The £16 million figure will be adjusted in the event of any Current Employer withdrawing under Rule 30.3.”

Although heavily circumscribed, 2001 Rule 31.0(ii) gives to Current Employers, but not other Participating Employers, an express right to call for a winding up of the Scheme. It therefore forms another main plank in the Specified Employers’ case.

The main relevance of the evidence about the negotiation of the 2001 Regime is that it constitutes the source from which (if at all) the alleged convention as to the effect of the 2001 Deed and Rules must be drawn, if the Deed and Rules did not do so as a matter of interpretation. Mr Andrew Spink QC for the Specified Employers pressed hard for the admissibility of that evidence as an aid to interpretation. For reasons which I shall explain when I come to deal with the relevant legal principles, I have not been persuaded to that view. Accordingly, this section of my judgment is relevant only to the alternative case based on estoppel. Even for that purpose, the focus of the inquiry is as to the parties’ mutual dealings, rather than as to their innermost thoughts. In the account which follows I have therefore concentrated upon the relatively few occasions when there were relevant “crossings of the line” by way of communication between the Trustee and the Specified Employers, between whom it is alleged that an enforceable convention was created. In that context, I do not overlook the fact that directors of the Trustee may routinely have reported back to their appointing employers, or more generally to the Chamber of Shipping, and thereby communicated the Trustee’s understanding about what was taking place to one or more classes of relevant employers. Nonetheless, as Mr Spink sensibly acknowledged, his case for a convention estoppel must rest fairly and squarely upon the content of written communications passing between the Trustee and one or more classes of the Specified Employers, rather than what may have taken place by way of informal, and probably oral, reporting back, the precise content of which must in any event be a matter of unreliable inference after the passage of ten years.

The first formal communication by the Trustee to the Specified Employers consisted of a letter to all Participating Employers from Mr Peter Pratt, the then chairman of the Trustee’s Board, dated 10^th March 1998. It followed a series of debates at Board level going back at least to July 1997 and (of course) the taking of legal advice by the Trustee upon the options available to repair the deficit, consistent with the statutory structure which I have summarised. The letter began by reminding Participating Employers that the Trustee had been reviewing the financial position of the Scheme in the light of changes introduced by legislation, and by the July 1997 Budget (which had removed tax relief for pension funds on dividends), and warned that, although a final Actuarial report as at 31^st March 1997 was still awaited, it appeared clear that there was “a deficiency or anticipated deficiency in the Scheme’s resources” within the meaning of Rule 29.1, and also that the Scheme fell short of the statutory MFR requirements of the 1995 Act.

Under the heading “Legal position” the Trustee drew attention to the 1994 Deed and Rules, and in particular to its perception (described as a fact) that:

“−any measures proposed by the Trustee for overcoming a deficiency must be acceptable to the Participating Employers. In the absence of agreed measures, a winding up of the Fund would ensue under Rules 31.”

Copies of the 1994 Deed and Rule were enclosed with the letter.

There followed a section, headed “MFR and Employer Debt” in which the Trustee summarised its understanding of the statutory requirements imposed by the 1995 Act, including the fact that the statutory deficit repair obligations were imposed on a defined class of employers, rather than upon Participating Employers as a whole.

The Trustee then identified what it regarded as the two main options under consideration, namely an immediate winding up of the Scheme or (described as the “most likely alternative to winding up”) reliance by the Trustee on the MFR legislation to impose additional contributions in the context of an on-going Scheme. In relation to the second alternative, under the heading “Apportionment of costs between Participating Employers”, the letter stated that:

“The Trustee’s current view is that, for reasons of consistency, any MFR shortfall contributions would need to be apportioned between Participating Employers on the same basis as is specified for an Employer Debt, i.e. between the Employers in the proportions prescribed in the legislation, rather than being related to the current level of pensionable salaries.”

Under the heading “Conclusions”, the letter expressed the Trustee’s “clear preference in principle” for the second alternative, rather than for an immediate winding up, and invited comments from all Participating Employers, including in particular a statement from any recipient which considered that it was not an employer within the statutory definition.

The March 1998 letter from the Trustee did not in terms propose, as part of the second alternative, that the Scheme should be closed, either to new members or for the purpose of further accruals based on continuing service. It was considered in detail by the Pensions Committee of the Chamber of Shipping, upon which a substantial number of Participating Employers of all relevant classes were represented. At a meeting held on 3^rd June 1998 the Pensions Committee approved a letter to be sent to its members, which in turn attached the draft of a letter which employers might wish to use by way of response to the Trustee’s March 1998 letter. The evidence suggests that the draft response was in fact used by a number of Participating Employers. Its message may be summarised as follows:

The next formal communication from the Trustee consisted of a letter to all Participating Employers dated 17^th September 1998, the main purpose of which was to enclose the Actuary’s Valuation Report as at 31^st March 1997, identifying a deficiency of £14 million and an MFR deficiency of £22 million, and to warn readers that the Actuarial Valuation for 31^st March 1998, then being prepared, was likely to disclose a substantial deterioration, with deficits likely to be of the order of £30 million and £40 million (MFR) respectively. The letter emphasised that the Trustee was not then in a position formally to decide on the action to be taken to remedy the deficiency, encouraged all Participating Employers (whether or not members of the Chamber of Shipping) to treat the Chamber as a forum for the discussion of Participating Employers’ views, and concluded by emphasising that, pending that consultation, no final decision would be taken. More generally, the letter cautiously reiterated the view expressed in the March 1998 letter as to the two available alternatives, from the Trustee’s viewpoint.

The initiative had by then passed to the Chamber of Shipping, which developed a proposal for the closure of the Scheme to future accrual from the end of 1998, and the establishment in its place of a new defined contribution scheme. The proposal contemplated the continuation of the Scheme on a closed basis and the agreement of a schedule of contributions designed to restore the Scheme to 100% MFR funding by April 2007, apportioned between employers as defined in the legislation. It included an outline of an early exit route for individual employers, which in due course found its way into 2001 Rule 30.

In October 1998 the Chamber of Shipping took that proposal to the RMT. By mid-December 1998 the Chamber of Shipping and the RMT had reached agreement in principle upon a draft proposal, substantially along the same lines, which they sent to the Trustee.

On 11^th February 1999 the Trustee wrote its last letter consisting of an identical text to all Participating Employers. It enclosed the ‘as at’ 31^st March 1998 Actuarial Valuation revealing an MFR deficit of £32 million on long term assumptions. It warned that a “gilt matching” basis of valuation appropriate to a winding up would disclose an MFR deficit as at the same date of £54 million, and warned that the Actuary’s opinion was that the financial position of the Scheme had continued to deteriorate after March 1998. The letter then summarised what it described as “an agreed proposal for the future of the Fund” which had been developed by the Chamber of Shipping and the RMT as follows:

“In essence, the proposal is that the Fund would be closed to further accruals of benefit and the assets and liabilities of the Fund transferred to a new closed fund. Participating Employers who at the date of closure employ active members or have eligible employees (“Current Employers”) would undertake to fund all the MFR deficit in the new closed fund in the proportion that liabilities accrued in respect of members who had been in service with them and arising from that service bore to the total of such liabilities for those Current Employers. A new, defined contribution plan would be set up to make future pension provision for ratings.”

After stating that the Trustee was seeking legal advice as to whether the proposal could be accommodated within the Scheme and, in particular, within the Trustee’s amendment power, it expressed the Trustee’s view that the proposal was only likely to be acceptable if the employers clearly rejected the Trustee’s originally preferred alternative (not involving a closure of the Scheme to further accruals), so that winding up appeared to be the only other possibility than an acceptance of the new proposal.

The letter concluded as follows:

“If your company is considered to be a Current Employer, it would be appreciated if you could let the Secretary know whether your company would agree to make additional contributions to maintain the Fund as currently constituted, under a schedule of contributions, having regard to the fact a winding-up may otherwise occur on which the MFR deficit (probably on a “gilt-matching” basis) would become payable as a lump sum. It would be most helpful if we could have your reply by 12 March 1999.

If your company is not considered to be a Current Employer this letter is for information.

In due course, the Board will make a decision regarding the measures which it wishes to put forward formally for overcoming the deficit and at that stage will write to all Participating Employers.”

This letter, and in particular the passage quoted above, marks a turning point in the Trustee’s perception as to the class of Participating Employers from which it needed to obtain a consent or other response. It arose from an understandable perception that since, under the Chamber of Shipping/RMT proposal and indeed its own earlier proposal, the burden of deficit repair was to fall on Current Employers, it was from them rather from the remainder of the Participating Employers (i.e. the Specified Employers) that it needed to obtain consent. By contrast, Specified Employers needed only to be kept informed. It was therefore at this point that what I have described as negotiations ceased in substance to be negotiations between the Trustee and the Specified Employers, but continued to be negotiations in every sense between the Trustee and the Current Employers. As will appear, the picture is not quite as simple as that, because the Trustee did involve the Debt Employers in further discussions, which eventually bore fruit in the preparedness of some of them to make voluntary payments.

Negotiations between the Chamber of Shipping and the RMT matured from agreement in principle to an amended written agreement dated 28^th April 1999, substantially as I have already summarised it, making it clear that the project to restore the MFR funding level of the closed Scheme to 100% by April 2006 was to be undertaken by the Current Employers. The agreement included this paragraph:

“During the period to April 2006, any change in the funding position would result in an adjustment to the schedule of payments being made by the employers. Thereafter subsequent deficits on the MFR basis would have to be made good by further contributions from the employers, with an appropriate payment schedule agreed at the time.”

A fair reading of that paragraph in the context of the document as a whole suggests that the reference to “employers” in both sentences of that paragraph was to Current Employers, rather than to employers generally.

The Chamber of Shipping/RMT Agreement formed the basis upon which, in due course, the 2001 Regime was introduced. It became known as the April 1999 Proposal.

At a meeting of a working party established by the Trustee’s directors on 2^nd July 1999, attention was directed to the particular position of what I have called the Debt Employers. It was noted that about 52% of the Scheme’s deficiency was attributable to pensionable service of ratings employed by the Debt Employers, and that most of it was in relation to P&O companies, as was the bulk of the section 75 Debt by then incurred. This in due course led to a decision by the Trustee to pursue the negotiation of the April 1999 Proposal by separating the Participating Employers into four classes, at least for the purposes of the next round of correspondence. They were (1) the 40 Current Employers (2) the 9 P&O Debt Employers (3) the 11 other Debt Employers and (4) the remaining Participating Employers (“the Former Employers”).

Four types of standard form letter were therefore prepared and sent by the Trustee to each of those different classes in September 1999. The letter sent to the Current Employers (“Letter 1”) sought their approval in principle to the April 1999 Proposal, and provided indicative figures as to the likely consequences for Current Employers on the alternative bases that (a) the Debt Employers agreed to contribute as if they were Current Employers and (b) the Debt Employers declined to contribute, but paid their section 75 Debts. Letter 1 also informed the Current Employers that it was intended that they should be represented at the contemplated court application for approval of the Proposal by a single Current Employer, Everard (Guernsey) Limited, and enclosed a consent form for the authorising of such representation.

The letter to the P&O Debt employers (“Letter 2”) enclosed a copy of Letter 1, noted that there was ongoing discussion as to whether the P&O Debt Employers would continue to contribute as if they were Current Employers, and provided indicative figures of the financial consequences if all Debt Employers so agreed.

The letter to the other Debt Employers (“Letter 3”) also enclosed a copy of Letter 1 and invited them to consider contributing to the deficiency as if they were Current Employers, on the basis that if Debt Employers did not do so, the increase in the burden on Current Employers would be such as might lead to a decision by them that the Scheme had to be wound up. Again, it provided indicative figures as to financial consequences if the Debt Employers did contribute as requested. The invitation to contribute was made on the basis that payment of the section 75 Debt would be treated as a payment on account of the requested contributions towards the deficit.

Finally, the letter to Former Employers (“Letter 4”) also sent a copy of Letter 1, stating that:

“It is enclosed primarily for your information to ensure your knowledge of the Fund’s position and the action being taken is up to date.”

In its final paragraph it notified Former Employers of advice received by the Trustee that:

“because of the way in which the documents governing the Fund are worded, it might still be necessary for your company to be formally bound by, or given the opportunity to participate in, proceedings, even though your company may not be a Current Employer.”

It then invited recipients to sign the same consent form enclosed with Letter 1 so that Everard (Guernsey) Limited could be appointed to represent all Participating Employers, if necessary. In the event, as will appear, that precautionary route was not pursued.

The only reply to those letters relevant for present purposes is that which came from the P&O parent company (the Peninsular and Oriental Steam Navigation Company) dated 17^th November 1999, and written on behalf of eight P&O Debt Employers (labelled Former Employers) and six P&O Current Employers. The letter declared the P&O Group’s overall support for the April 1999 Proposal, and in particular the P&O Current Employers’ support, provided that all other Current Employers also gave their support. As for the P&O Debt Employers, the letter acknowledged their statutory debt liabilities and declined on their behalf to undertake any ongoing legal liability to the Scheme. Nonetheless it proposed that the Group would arrange for one or more of its subsidiaries to make ex gratia payments to the Scheme, based on the liabilities of the Scheme attributable to service of members with the P&O Debt employers, but net of statutory debt obligations. The letter concluded:

“We trust you will see the strong support that this offer represents. We believe that the reconstruction planned, including these additional payments from the P&O Group, offers the only reasonable prospect of avoiding a winding up of the Fund.”

The Trustee had not, prior to formulating the September 1999 Letters, addressed its corporate mind to the question of what if any alteration of Old Rule 31 would be either a necessary or appropriate part of the implementation by amendment of the April 2009 Proposal. This issue was focussed upon for the first time at a Board meeting on 14^th September, at which it invited the Trustee’s solicitors (Rowe & Maw) to discuss with the Chamber of Shipping’s solicitors (Sackers) the removal of 1994 Rule 31.0 (ii), while recognising that a less attractive alternative might be to modify it so as to allow a percentage of employers to terminate the Scheme collectively. The Board also considered, but rejected, a suggestion that it might be expedient temporarily to suspend Old Rule 31 pending the obtaining of court approval to the proposal, in order “to try to prevent an individual employer seeking to trigger the wind-up of the Fund before the resolution of the court case.” Suspension was rejected because, on advice, the Trustee thought it would be necessary to inform employers in advance, and that this might provoke an adverse reaction.

The question of suspension of Old Rule 31 was revisited at a Board meeting on 7^th December, by which time it had become apparent that there was a risk that the April 1999 Proposal might not have been approved by the Court and implemented before the statutory deadline for the first MFR Schedule of Contributions, namely June 2000. The Board was advised by Rowe & Maw that there was a risk that such a Schedule might be treated as a “measure” under Old Rule 31.0(ii), such that an objection to it by an employer might trigger a winding up of the Scheme. No decision for or against suspension was taken at that stage.

During the early part of 2000, incoming responses by Current Employers to Letter 1 of the September 1999 correspondence were sufficient to satisfy the Trustee’s Board by 21^st March that agreement in principle had been received from Current Employers representing some 88% of the contribution burden which the April 1999 Proposal would throw upon them. Meanwhile the Trustee with the assistance of its solicitors, and in consultation with the Chamber of Shipping, worked up the April 1999 Proposal into its final form, so that it could be made the subject of a formal (rather than in principle) request for consent from Current Employers before the obtaining of court approval, and implementation.

The Proposal in its final form (“the 2000 Proposal”) was sent to all Current Employers under cover of a standard form letter dated 8^th May 2000, which was expressed to be a joint letter from the Trustee, the Chamber of Shipping and the RMT, each of which expressed the opinion that the 2000 Proposal represented the best way forward for the Scheme. Both the letter and the accompanying 2000 Proposal made it clear that it was conditional upon both the acceptance of it by Current Employers who would, under its terms, be responsible for not less than 80% of the Scheme’s liabilities, and the approval of the court. The letter revealed that the then thinking of the Trustee was that Everard (Guernsey) Limited would be joined to represent only the Current Employers in the contemplated proceedings.

Each letter was tailored so as to identify the percentage of the burden being undertaken by each Current Employer recipient, with an explanation that, although the percentage looked high, the amount of the aggregate debt burden was expected to be substantially reduced by voluntary payments by some, but not all, of the Debt Employers. The letter enclosed an acceptance form, seeking a response from each recipient by 5^th June 2000.

Section 8 of the 2000 Proposal, headed “Termination of the Fund by the Employers”, explained that the Trustee had decided (without waiting for consent) to suspend Old Rule 31.0(ii) until the earlier of the conclusion of the contemplated court proceedings or 31^st May 2001. It also provided an explanation of the proposed deletion of Old Rule 31, and its replacement by a qualified power for Current Employers to require a winding up of the Scheme (substantially in accordance with what became Rule 31 of the 2001 Rules), but subject to court approval.

The evidence does not show that the 2000 Proposal was sent to the Specified Employers, or to any of them. It is nonetheless a reasonable inference that at least the P&O Debt Employers became aware of it, if only because there were six Current Employers within the P&O Group. It is nonetheless clear that the Trustee did not seek the formal consent of anyone other than the Current Employers to the permanent deletion of Old Rule 31, or the formal consent of any employers to its temporary suspension, although Current Employers were notified that it was about to happen, as it duly did by a Deed of Amendment made pursuant to clause 30 of the 1994 Deed executed by the Trustee on 15^th June 2000.

The conclusion of the negotiating process can be briefly described. It involved no further communication, formal or otherwise, between the Trustee and the Specified Employers of any kind. The 2000 Proposal passed its 80% acceptance condition by 19^th July, and the application for court approval was issued on that day. By 18^th October 2000 the Trustee had received consents from 90% of the Current Employers and, by 13^th December, from all but three of them. In the end, all but one consented, and the final absentee proved on further inquiry not to be a Current Employer.

The court proceedings were between the Trustee as claimant, two representative members of the Scheme and Everard (Guernsey) Limited as a Current Employer. Representation orders were made to ensure that all members were represented, but in the event no representation order was made in relation to Everard (Guernsey) Limited, (I infer) on the basis that it was by then assumed that the combination of consents received from Current Employers, together with a notice under RSC Ord 15 r13A(4) to the outstanding supposed Current Employer would be sufficient for the Trustee’s purposes.

In paragraph 18 of Mr Pratt’s witness statement in support of the application, made on 18^th July 2000, he explained that a constant concern of the Trustee in seeking a solution to the deficiency was that:

“It would not be able to impose any solution on the Participating Employers without their agreement, without running the risk of a single Participating Employer causing the Fund to go into winding up.”

He explained Part 8 of the Proposal (which provided for the permanent deletion and replacement of Old Rule 31) as follows:

“The concept behind this section (in conjunction with the provisions allowing individual employers to withdraw from the Fund, discussed above) is to remedy the unsatisfactory situation which previously pertained, whereby a single employer could bring about a winding up of the whole Fund, replacing it with a closer balance between the Trustee’s powers and those of the employers. As formulated, the Agreed Proposal: (1) ensures that, subject to (2), the Fund will be continued until it attains a funding level of 100% MFR; but (2) allows the Current Employers scope to terminate the Fund in the event that their contributions reach an unacceptable level. The figure of £16 million per annum as the “trigger” level of contributions under (2) was put forward by the actuaries advising the Chamber and accepted by the Trustee, after advice from Mr Hill, as reasonable in all the circumstances.”

In paragraph 34 of his witness statement he explained that the implementation of Part 8 of the Proposal would be achieved by amendment of the Rules.

The application was heard by Blackburne J in December 2000. In his judgment, handed down 7^th February 2001, he approved the 2000 Proposal and by his Order of the same date directed that the Trustee was to be at liberty to implement it. It appears that the distinction between Participating Employers and Current Employers was insufficiently explained to the learned judge. His judgment, at paragraph 2, suggests his understanding that “all but two or so of the participating employers” supported the 2000 Proposal. It was common ground before me that this was a reference to the Current Employers. He accepted, at paragraph 24 of his judgment, that:

“After so many months of negotiation, the proposal represents the best arrangement which the participating employers will agree and therefore that, realistically, the choice is between implementing the proposal and a winding up. It is clear that an immediate winding up will lead to serious prejudice to all persons with accrued benefits other than those in pension, while implementation of the proposal holds out a realistic prospect, but certainly not a guarantee, that all benefits will eventually be provided in full.”

He declined, at paragraph 26, to allow the fact that a tiny minority of Current Employers had not by then consented to impede his approval of it. At various stages in his judgment he made clear his understanding that, far from being a once and for all final solution to the deficiency in the Scheme, the proposal was one which might or might not achieve its expressed purpose of restoring 100% MFR solvency by 2006. His view was that it might achieve that objective, or it might stave off a winding up for a period which might be as short as “a couple or so years” or “for many years”.

On the same day the Trustee further suspended the operation of Old Rule 31, until the earlier of the date upon which the Trustee permanently replaced that rule by amendment or 31^st May 2001, the date upon which, in the event, the 2001 Deed and Rules were in fact made. Thereafter, very substantial voluntary payments were made by some of the Debt Employers. P&O ceased making such payments in 2006, but certain other Debt Employers have continued to do so.

It is common ground that, estoppel apart, the answers to the questions raised by this application turn on the true meaning or interpretation (or construction as it is traditionally called) of the 2007 Deed and Rules. It was also common ground that the now well established principles of interpretation of business contracts and other documents are fully applicable to the interpretation of the constitution of a pension scheme, whether established, as here, by a Trust Deed and Rules, or by any other form of documentation.

A number of authorities demonstrate that the application of those general rules of interpretation to pension schemes, and in particular to amendment powers contained within them, call for an appreciation of particular features common to that type of business structure, which has led from time to time to the authoritative expression of what I shall call certain generally applicable sub-principles. Again, there was no dispute as to the authorities from which those sub-principles are to be derived, but some differences as to the meaning of them.

Lengthy submissions were made to Warren J about the application of the general principles of interpretation to pension schemes and amendment powers in The PNPF Trust Company Limited (as Trustee of the Pilots National Pension Fund) v. Taylor & ors [2010] EWHC 1573 (Ch) (“Pilots”). At paragraphs 127 to 147 he sets out his conclusions which, with the parties’ invitation, I am content to adopt. In particular Warren J provides a convenient summary both of the relevant general principles and of the sub-principles applicable to pension schemes and powers of amendment, which it is therefore unnecessary for me to repeat, save in the barest outline, and save to the extent necessary to resolve the few points of difference in counsel’s submissions before me.

The central general principle is that interpretation is the ascertainment of the meaning which a reasonable person having all the background knowledge which would have been available to the parties would attribute to the language used in the document, rather than a search for the supposed actual common intention of the parties to it. Thus when applied to the law about the interpretation of powers of amendment, for which the leading authority is Hole v. Garnsey [1930] AC 472, phrases such as Lord Tomlin’s “such amendments as can reasonably be considered to have been within the contemplation of the parties when the contract was made” must be understood to be a reference to the same objective, rather than subjective, search for meaning: see in particular the Pilots case at paragraph 144.

There has throughout the evolution of the modern approach to interpretation been an unresolved question as to the extent which that objective search calls for, or even permits, recourse to evidence about the parties’ negotiations. It began in Prenn v. Simmonds [1971] 1 WLR 1381 and ended in Chartbrook Limited v. Persimmon Homes Limited [2009] 1 AC 1101 when, after careful review of all the intermediate authorities, the exclusionary rule in Prenn v. Simmonds was upheld: see per Lord Hoffmann at paragraphs 28 to 42, with an addendum rejecting the ‘private dictionary principle’ as illegitimate, in paragraphs 43 to 47.

Mr Spink QC tried hard to persuade me, by reference in particular to paragraph 38 of Lord Hoffmann’s speech in Chartbrook, that recourse could still be had to evidence of the parties’ negotiations, at least for the purpose of identifying, as a relevant background fact, “a provisional consensus which may throw light on the meaning of the contract which was eventually concluded”. With respect, I disagree. Paragraph 38 forms part of Lord Hoffmann’s weighing of the pros and cons of the exclusionary rule. His decision is to be found in paragraph 41 and his explanation of its effect in paragraph 42, as follows:

“The rule excludes evidence of what was said or done during the course of negotiating the agreement for the purpose of drawing inferences about what the contract meant. It does not exclude the use of such evidence for other purposes: for example, to establish that a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel. These are not exceptions to the rule. They operate outside it.”

From time to time in his submissions Mr Spink sought to suggest that the common understanding of the parties, or of a group of them such as the Specified Employers, as to the pre-2001 legal and commercial realities, was itself capable of amounting to a relevant background fact, even if that understanding was itself mistaken. Thus in his submissions in reply Mr Spink said that I could take into account for the purposes of interpretation a common but (by his concession) mistaken assumption on the part of the Specified Employers that, even before the introduction of the 2001 Regime, they were permanently ‘off the hook’ so far as any further contribution to the Scheme was concerned.

Again, I disagree. Lord Hoffmann’s acknowledgement that the parties’ negotiations may demonstrate that they may reasonably be supposed to be cognizant of relevant background facts was not intended to widen the category of background facts so as to include the parties’ own subjective but mistaken understandings about them. In the present case the relevant background facts consisted almost entirely of the 1994 Deed and Rules, the statutory structure which I have described, and what was known (because it was communicated to all the Participating Employers by the Trustee) about the then deficiency in the Scheme, as advised by its Actuary. For that purpose, the Actuary’s opinion about the deficiency, expressed in a formal report, was of course a relevant background fact, but he was not a negotiating party.

I therefore reject Mr Spink’s submissions about the extent to which, after the decision in Chartbrook, recourse may be had to evidence of the parties’ negotiations. Apart from that, there was no relevant difference between counsel on this application as to the general principles.

The sub-principles specific to the interpretation of pension scheme documents are, as Warren J summarised and counsel agreed, mainly to be found, at least for present purposes, in the judgment of Arden LJ in British Airways Pension Trustees Limited v. British Airways plc [2002] EWCA Civ 672, at paragraphs 26 to 32, and in Re Courage Group’s Pension Schemes [1987] 1 WLR 495. Again, for their general import, I shall take them as recited by Warren J in Pilots, at paragraph 129.

Two particular points of difference arising out of those two authorities were the subject of submissions on this application. The first may be described as a timing question. In the British Airways case, at paragraph 29 Arden LJ said this:

“29.

Third, in pension schemes, difficulties can arise where different provisions have been amended at different points in time. The effect is that the version of the scheme in issue may represent a “patchwork” of provisions: see per Robert Walker J in the National Grid case. 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: see per Millett J in Re Courage Group’s Pension Schemes, above, at 505-506.

Likewise, the meaning of a clause in the scheme must be ascertained by examining the deed as it stood at the time the clause was first introduced….”

In the present case, the issue between counsel was whether that guidance meant that, where a provision such as the amending power in clause 30 of the Deed was originally introduced at the inception of the Scheme, and then re-enacted without relevant alteration at a later date, this compelled a conclusion that it continued to have precisely the meaning which would be arrived at by an interpretation as at the date of its original introduction. The submissions of Mr Brian Green QC for the Current Employers were heavily based upon the proposition that the deliberate reintroduction of clause 30 in 2001 necessarily meant that it continued to have the same meaning as (by concession) it had as part of the 1994 Deed and Rules.

In challenging that, Mr Spink relied upon a passage in Millett J’s judgment in Courage, at page 505F to 506E where, by reference to Thellusson v. Viscount Valentia [1907] 2 Ch 1, he demonstrated that the validity of an amendment must be tested by reference to the “situation at the time of the proposed alteration”. In Thellusson, an amendment to prohibit pigeon shooting at the Hurlingham Club proposed in 1904 was held to be valid, by reason of changes in the activities of the Club since its foundation in 1868, which could not possibly have been valid by reference to the circumstances originally prevailing, when pigeon shooting was the Hurlingham’s main purpose. There had during the intervening period been no alteration in the express language of the power of amendment.

Mr Spink submitted that if, as in Millett J’s example, a power of amendment could widen in scope without alteration of language, due to change of circumstances, so it must necessarily be capable of being narrowed in scope, without alteration of language over time.

The principle which Millett J extracted from his example was, at page 505H, that:

“In the case of an institution of long duration and gradually changing membership like a club or pension scheme, each alteration in the rules must be tested by reference to the situation at the time of the proposed alteration, and not by reference to the original rules at its inception.”

Applied literally, that simply means that the validity of the disputed amendment proposed in these proceedings is to be tested by reference to the present circumstances of the Scheme, that is in 2010. No-one has challenged that proposition.

Furthermore, this was the second of two principles enunciated by Millett J in Courage, and must be viewed in the light of the first, which was, at page 505G that:

“It is important to avoid unduly fettering the power to amend the provisions of the Scheme, thereby preventing the parties from making those changes which may be required by the exigencies of commercial life.”

In my judgment the answer to this apparent conundrum is as follows. First, the starting point in relation to powers to amend pension schemes is that they should be given a broad interpretation, consistent with the need to preserve their utility over a long period of unpredictable future events, and to be of practical use in circumstances which the original framers of the power may have been unable even to imagine, at the time of its inception. Secondly, but with that important consideration in mind, the starting point for the interpretation of any particular clause in the patchwork constituted by a frequently varied pension scheme is indeed the time at which that clause is first introduced. Thirdly, the analysis does not stop there. As Arden LJ pointed out in British Airways at paragraph 32, a pension scheme is to be interpreted as a whole, and the meaning of any particular clause considered in conjunction with all other relevant clauses. Thus, a clause which is not itself amended may nonetheless take on a different meaning, or at least shade of meaning, by reference to relevant amendments introduced into the scheme at a time when the clause in question is merely repeated verbatim. Fourthly, changes in circumstances which have occurred by the time an amendment power comes to be exercised (even if unchanged in language throughout), may affect the validity of any particular proposed exercise of that power at that later time.

In conclusion, I am satisfied that nothing in that analysis conflicts with the warning against any predisposition as to the correct philosophical approach: see British Airways at paragraph 31 and Pilots at paragraph 146. The wisdom of giving a prima facie broad interpretation to powers of amendment contained in pension schemes derives not from an inappropriate philosophical disposition, but from sound business common sense.

In Pilots, there appears to have been considerable debate about whether the Hole v. Garnsey principle relating to powers of amendment had some continuing life separate and distinct from the general principles applicable to interpretation (construction) and implication, which Warren J categorised as:

“…a somewhat arid debate. The object of the exercise in all three cases is to ascertain the meaning of the language which has been used. The question in the present case is whether the scope of the power under Rule 9(1)(a) is limited in one or more of the ways that some of the CHAs suggest, or is unlimited in the way that the Members suggest. I do not see a different answer to the question being given depending on whether the matter is viewed through a Hole v. Garnsey telescope or a construction/implication telescope. And, as Lord Hoffmann has pointed out in relation to the implication of terms, there is a danger of alternative formulations (in the case of amendments we have reasonable contemplation, no change in the whole substratum, no change in basic purpose) taking on a life of their own when the inquiry, as I see it, is what is meant by the words used.”

In the present case, no attempt was made to irrigate that particular desert, but there was an energetic debate about a supposed difference between scope of an amendment power, a constraint upon the exercise of an amendment power, and the propriety of a proposed exercise of an amendment power.

In my judgment this is another arid debate. Mr Green fairly pointed out that just such a three-pronged analytical tool was proposed by the parties and used by Warren J for the determination of the question about a power of amendment which he had to decide in Pilots. In the present case, the questions which I have to decide are whether, in general, the Trustee’s power of amendment permits an amendment which would impose contribution obligations on Specified Employers, and whether a specific amendment of that general type, in the form of the proposed new Rule 5.3A, would bind the Specified Employers as a valid exercise of the amendment power to which, by their Accession Agreement, they had each subjected themselves contractually. While there may be some utility in distinguishing for the purposes of analysis between scope in the narrow sense (as limiting the Trustee to certain types of amendment), constraints (such as procedural requirements to obtain consents) and propriety (such as would prohibit amendments made dishonestly, for an improper purpose, capriciously, arbitrarily or irrationally (see Chitty on Contracts (30^th ed.) Vol. 1 para 13-026)), I can see no reason why treating them as having separate lives of their own would, or at least should, produce a different result than treating them all as aspects of the overriding question, namely: “what does the amendment power mean?””

Although in form the application raises a question of interpretation of the 2007 Deed and Rules, it is, for reasons already given, in substance a question whether the amendments made in 2001 had the effect of removing from clause 30 of the 1994 Deed an admitted power to make the disputed amendment, notwithstanding the re-enactment of clause 30 in 2001 in substantially identical form. It is common ground that the replacement of the 2001 Deed and Rules in 2007 has no effect, either way, upon the question of interpretation.

The Specified Employers’ case was that, for deficit repair purposes, the 2001 Deed and Rules brought about an irrevocable and permanent release of the Specified Employers from any further contractual liability, leaving only certain statutory obligations on the Debt Employers, which have in any event long since been discharged in full. They did not go so far as to say that the 2001 Regime was a once and for all final deficit repair regime which could never be altered by further amendment, although at times Mr Spink’s submissions appeared to go very nearly that far. Rather, the case was that nothing could, after 2001, be done by way of amendment to impose any further contractual deficit repair liability on the Specified Employers.

The 2001 Deed and Rules did create a deficit repair regime which imposed no contractual obligations on the Specified Employers, so that for as long as it endured un-amended, they were not subjected to any contractual deficit repair liability. But the 2001 Regime was not irrevocable. I consider that the Trustee retained its full power of amendment pursuant to clause 30 of the 2001 Deed, and that power remained broad enough, at least in principle, to permit the Trustee to introduce thereafter a different deficit repair regime, with contractual obligations capable of being imposed on the Specified Employers. My reasons follow.

The starting point lies in a legitimate predisposition to confer a broad interpretation on a power of amendment when contained in a pension scheme designed to last over many years, through unpredictable changes in circumstances, and changes in statutory structures. That approach requires a case that an amending power has been cut down, without any change in its own language, to be closely examined, all the more so where Rule 29.1 of the 2001 Rules expressly contemplates that further deficit repair measures might have to be taken after March 2006, including by way of further amendment of the Deed and Rules. That provision expressly recognises the possibilities (a) that the 2001 Regime might not in fact remedy the deficit within the contemplated timeframe (i.e. by 2006) and (b) that it might do so, but that a further deficit might arise thereafter. Mr Spink submitted that deficits existing after March 2006 could simply be repaired by Schedules of increased Contributions on the Current Employers, without any amendment. So they could, at least in theory, but 2001 Rule 29.1 expressly contemplates that amendment might be necessary.

It is not difficult to envisage a scenario under which, after March 2006, the burden of ongoing deficit repair contributions on Current Employers might become so grave that they, or a sufficient minority of them, were minded to call for a winding up under 2001 Rule 31.0(ii), where recourse by the Trustee to Specified Employers by a further amendment could provide sufficient additional funding to avoid winding up. Although it has not been suggested that this was the reason for the present application, for the purposes of interpretation the question is what possible future events might justify an amendment of the Deed and Rules, viewed as at 2001, looking forward.

It is convenient therefore next to examine the main reasons put forward for the Specified Employers’ narrower interpretation. Although it is necessary to review each one individually, I have of course weighed them in the balance collectively.

Mr Spink started by focussing on the occasions when the proponents of what became the 2001 Regime put it forward as a permanent solution to the deficit. I consider that there is nothing in this point. The Trustee’s obligation under 1994 Rule 29.1 was either to take the steps necessary to make good the deficiency or anticipated deficiency, or to wind up the Scheme. Any proposal put forward as an alternative to winding up had to be one which was reasonably capable (although of course not certain) of providing a full deficit repair. To the extent that the Trustee advanced the Proposal on that basis, it may fairly be said that the amendments necessary to bring about the 2001 Regime had as their purpose a full repair of the deficit by 2006. But that does not begin to justify interpreting the 2001 Deed and Rules by reference to an assumed purpose that this was a once and for all deficit repair regime which would never, after 2006, need to be replaced by amendment with another one, if the Trustee’s hopes and expectations were not in the event fulfilled.

Mr Spink’s next main point was based upon the removal of Old Rule 31. That Rule, he submitted, gave all Participating Employers a right to object to any deficit repair regime proposed by the Trustee (whether or not it required amendment of the Deed and Rules), and the Specified Employers cannot rationally be supposed to have assented to its removal (with no express right to call for its reinstatement) unless they were at the same time being permanently released from any further contractual deficit repair obligation.

There are I think three answers to that submission. The first is that I do not consider that Old Rule 31 provided the level of protection to Participating Employers upon which the submission is based. The second is that the Specified Employers were not in any event directly consulted about the suspension and then removal of Old Rule 31, still less invited to assent to it. The third answer is that even if the removal of Old Rule 31, as part and parcel of the 2001 Regime, would leave Specified Employers unfairly exposed to being brought into contribution as part of some further regime by amendment, their remedy is not a permanent restriction on the scope of the amendment power, but rather a requirement that any amendment proposed to bring them into contribution should either be preceded by, or accompanied with, a reinstatement of Old Rule 31, or some altered version of it. I shall expand upon each of those answers in turn.

Uncertainty about the true interpretation of Old Rule 31 was a feature both of the negotiation of the 2001 Regime, and of this hearing. Five alternatives were considered. The first, and most draconian, was that any Participating Employer could, by objecting to any form of deficit repair measures taken by the Trustee under 1994 Rule 29.1, bring about a winding up of the Scheme. The second was that the same result could be achieved by any Participating Employer, but only if its interests were adversely affected by the measures proposed. The third was that any Participating Employer could trigger a winding up by objecting to a proposed deficit repair measure, but that its consent could not be unreasonably withheld. A variation on that was that the employer’s objection was subject to the good faith test in Imperial Group Pension Trust Limited v. Imperial Tobacco Limited [1991] 1 WLR 589, at 599, namely that a refusal to consent was valid provided that the employer was acting fairly and in good faith towards its employees. The fourth alternative was that the right to object under Old Rule 31 had no application to a measure which consisted of an amendment to the Deed and Rules. The fifth alternative was that the phrase “agreed measures acceptable to the Participating Employers” was just shorthand for the provisions both in clause 30 of the 1994 Deed and in the Trustee’s Articles of Association, whereby any measures for deficit repair would have been conditional upon the approval of a majority of the Participating Employers’ representatives on the Trustee’s Board. A possible sixth alternative, not addressed at the hearing , is that the agreement of, or acceptability to Participating Employers of measures for the purposes of sub-rule (ii) might be found in the Chamber of Shipping, which had by then succeeded to the former role of the employers’ Panels.

Putting to one side the fourth alternative mentioned in the preceding paragraph, there was broad agreement that the phrase “measures … for overcoming that deficiency” would include anything proposed by the Trustee under Rule 29.1. Thus a proposed deficit repair regime could include one or both of the following classes of measures: (1) steps taken under the existing Deed and Rules requiring no amendment, such as an increase in the contribution rate under 1994 Rule 5.2; (2) measures consisting of amendments to the Deed and Rules pursuant to clause 30 of the 1994 Deed.

The first three alternative interpretations of Old Rule 31 all assume that the phrase “agreed measures acceptable to the Participating Employers” means unanimously agreed and/or acceptable to each and every one of them, or to every one of those affected. While that may be the traditional starting point in interpreting a provision requiring the consent of a class, I consider that it produces absurd and uncommercial results in the context of an industry wide pension scheme, under any of the first three alternatives. There were, by the mid-1990s, some 240 Participating Employers large, small and very small. When it is borne in mind that until 2001, the Scheme contained no way out of any kind for a Participating Employer which had signed an Accession Agreement, the class of Participating Employers would be likely over time to include entities which had ceased to employ any active or eligible members of the Scheme, entities which had ceased to carry on any shipping or shipping related business, and entities which were in a process of insolvency. The notion that any single one of them, even if constrained by the restrictions implicit in the second and third alternatives, could bring about a winding up of the Scheme by objecting to a deficit repair package proposed by the Trustee, approved by the Chamber of Shipping and the RMT, and supported by (say) some 230 of the Participating Employers, simply flies in the face of business common sense. None of those alternatives are therefore within the meaning attributable to Old Rule 31 by a reasonable onlooker properly cognizant of the relevant matrix of fact.

Mr Spink pressed me to have regard to indications from the evidence of the negotiation of the 2001 Regime that the Trustee and the Chamber of Shipping both thought that Old Rule 31 did have the meaning attributed by one or other of the first three alternative interpretations. He did so both to dissuade me from the conclusion which I have just expressed, and because he submitted that the parties’ assumptions as to the interpretation of Old Rule 31 formed part of the relevant matrix of background fact.

I have resisted that pressure for two reasons. The first is that the evidence does not in my judgment display any unanimity as to what Old Rule 31 meant, or even unanimous views as to what it probably meant. The particular concern of the Trustee throughout the negotiations leading to the 2001 Regime was not accidentally to trigger a winding up of the Scheme by reason of Old Rule 31, and for that purpose their concern was not to do anything which, on any possible interpretation of Old Rule 31, could trigger a winding up if objected to by one or more Participating Employers. I accept that, on occasion, the Trustee appeared to assert that Old Rule 31 did confer a veto on any Participating Employer, but it was not a view consistently stated.

My second and more general reason is that I doubt the propriety of having regard to mistaken assumptions about the meaning of a contractual framework, however widely shared, as part of the factual basis for interpreting an amendment of it. Such matters are, in my judgment, within the province of rectification and estoppel, rather than interpretation.

Much more realistic than interpreting Old Rule 31 as containing a requirement for unanimous agreement is one which assumes that the phrase “agreed measures acceptable to the Participating Employers” is a reference to some form of majority, as one would expect to find in any constitutional document governing the affairs of a substantial number of persons, whether it be members of a company or a club, of a trade association or of an industry wide pension scheme. At first sight it appears difficult to tease out any defined concept of majority from Old Rule 31, but it is to be found buried in 1994 Rule 29.1, to which Old Rule 31.0(ii) clearly refers back. The substantive provision by way of rules for deficit repair is to be found in Rule 29.1, which required the Trustee (if it was to avoid a winding up) to take action, which may include increasing contributions, and may also include amendment of the Deed and Rules pursuant to Rule 32, which itself refers back to clause 30 of the 1994 Deed. To the extent that this is to be achieved by amendment, clause 30 of the 1994 Deed contains its own express provisions about majority, namely that no amendment may be made which has not first been approved by a majority of the full number of Participating Employers’ representatives on the Board of the Trustee. Similarly, taking steps by way of increased contributions (for example under 1994 Rule 5.2) would require a resolution of the Trustee’s Board, which was itself, pursuant to its Articles of Association, dependent upon obtaining precisely the same majority of the same Employers’ representatives.

Old Rule 31 is (as its marginal note “Winding Up” reflects) not in terms about deficit repair, but about when the Scheme should terminate by winding up, and sub-rule (ii) simply requires it to be wound up if there is a deficiency or anticipated deficiency with no agreed measures acceptable to the Participating Employers (and approved by the Actuary) in place for the purpose of overcoming it. In my judgment the expression “with no agreed measures acceptable to the Participating Employers …” is simply a reference back to 1994 Rule 29.1, and the words “agreed” and “acceptable to” are no more than shorthand for the processes which would have to be undertaken under Rule 29.1 before any such deficit repair regime could be put in place.

To this Mr Spink objected that a member of the Trustee’s Board described as a “representative” of a participating Employer, or group of them, or of the Chamber of Shipping, would not in approving or objecting to a proposal for deficit repair be acting so as to bind his appointor as if he were its delegate. He submitted, and I agree, that the representative is a fiduciary with a duty of single-minded loyalty to the Trustee. Nonetheless, the authority on nominee directors to which I have already referred shows that they are entitled to have regard to the views of the appointors, and the evidence shows that, in relation to the negotiation of the 2001 Regime, the Chamber of Shipping negotiated an agreed deficit repair regime in the form of the April 1999 Proposal which was, after further development, that which the Trustee’s Board proposed to implement, with the requisite representative majority. Mr Spink’s point is of real force, but nowhere sufficient to lead to a conclusion that Old Rule 31 gave any one or more Participating Employers a veto over measures agreed by a majority. It may be that his point is met by identifying the Chamber of Shipping as the relevant representative of the Participating Employers for the purpose of agreement and acceptability, within the meaning of Old Rule 31.

It is not necessary for me finally to resolve the difficulties arising from the fact that the Participating Employers’ appointed directors are fiduciaries rather than delegates, provided that I am satisfied (as I am) that the first three alternative interpretations of Old Rule 31, based on unanimity, cannot be correct and that the 2001 Regime did in fact consist of “agreed measures acceptable to the Participating Employers” (which in my opinion it did).

My second reason for rejecting Mr Spink’s submission based on Old Rule 31 is that, although its removal was part of the agreed measures acceptable to the Participating Employers (within the true interpretation of sub-rule (ii)) the Specified Employers were neither individually consulted about it, still less asked whether they approved or objected to it, otherwise than as part of the general consultation which went on between the Trustee and the Chamber of Shipping. At the time of the last meaningful direct communication to the Specified Employers (in September 1999) the Trustee had not started to consider what to do about Old Rule 31, although they began to do so very soon afterwards. Although the suspension and then removal of Old Rule 31 was then communicated to the Current Employers as part of the Proposal, the Specified Employers were not as a class still directly included within the consultation process, although for reasons for which I have given, the Debt Employers and P&O in particular may have known what was going on, in the context of the invitation to them to contribute as if they were Current Employers, and the later invitation to make voluntary payments. The Chamber of Shipping was also kept fully informed. Mr Spink’s case was that the permanent release from liability to make deficit repair contributions was a sort of implied quid pro quo for the Specified Employers’ assent to the removal of Old Rule 31. In my judgment the factual basis for that implication is simply absent.

My third reason for rejecting the case based on Old Rule 31 is that, even if my analysis of its meaning and effect has thus far been wrong, there is still no basis for implying as the quid pro quo for its removal, a permanent release of the Specified Employers from deficit repair liability. They were of course released for the duration of the 2001 Regime. On any view, Old Rule 31 had to be replaced for the duration of the 2001 Regime, since otherwise it would have conferred upon Specified Employers, with no legal contribution liabilities either during or on the winding up of the Scheme, an entirely inappropriate status as potential objectors to the continuation of a Scheme funded entirely by others. The appropriate quid pro quo for the removal of Old Rule 31 would, on Mr Spink’s interpretation of it, not be a permanent narrowing in the scope of the amendment power, but an implied requirement for the Trustee to consider some form of replacement of Old Rule 31 in connection with the implementation of some replacement regime by amendment in which persons other than the Current Employers were under a legal obligation to make deficit repair contributions. In short, the protection for the Specified Employers would not be to make their release from contribution liability permanent, but to make the wholesale removal of Old Rule 31 temporary. I shall return to that issue in due course.

Mr Spink’s next main submissions were based upon the formulation in 2001 of the new Rules 30 and 31, which conferred on the Current Employers qualified rights to achieve individual exit from the Scheme and (but only collectively) to bring about a winding up. How, he asked rhetorically, could Specified Employers still face a potential liability to contribute to future deficit repair if, by contrast, they had no such rights?

Rules 30 and 31 in their 2001 (and current) form are of course appropriate only to a regime under which the Current Employers are the only contributors to deficit repair, and the only persons with a liability to make good a deficit on winding up. But again, I do not consider that this necessitates reading into the 2001 Deed and Rules an implied permanent release from liability of that kind for the Specified Employers. It was or at least became common ground during the process of skeleton arguments and oral submissions that the Trustee would need to give consideration to the amendment of Rules 30 and 31, while at the same time bringing the Specified Employers into a new deficit repair regime as contributors, in order to avoid the apparently discriminatory consequences of affording to a particular class of contributors a means of exit, or of termination of the Scheme, not enjoyed by other contributors. Again, I shall have a little more to say about that in due course.

Having addressed the main submissions in support of the Specified Employers’ case, I will now set out my own reasons for having reached the contrary conclusion. The starting point is that the 2001 Regime was, although designed to be a complete remedy for the then perceived deficit, nonetheless a structure which might have to be revisited by way of further amendment in the event that it failed to achieve its objective, or in the event that, having succeeded, a fresh deficit arose thereafter calling for different measures by way of repair. That is expressly recognised in 2001 Rule 29.1 and in the preservation of the old clause 30 in the 2001 Deed. Both Rule 29.1 and clause 30 were slightly modified, sufficiently to show that they were deliberately preserved for future use rather than merely left in as pieces of redundant machinery.

Secondly, since the Scheme was only closed to new members as part of the 2001 Regime, the amendment power needed to be preserved to deal with unpredictable future eventualities (including but by no means limited to legislative change) which might occur many years thereafter. The Scheme confers benefits on members, widows and dependants so that it must have been assumed in 2001 that it could, unless wound up, endure for many decades into the future. In sharp contrast, it is readily apparent, in particular from the words added to the first sentence of Rule 29.1 “made on or after 31^st March 2006,” that the 2001 Regime was conceived as primarily applicable to a small period of the Scheme’s potential future life, although of course it might have continued to represent the most appropriate structure for deficit repair thereafter.

Thirdly, and in that context, the absence of any change to clause 30, coupled with the express recognition in Rule 29.1 that further deficit repair measures might need to be achieved by amendment, and the broad interpretation prima facie applicable to amendment powers in pension schemes, all point strongly in favour of interpreting clause 30 in the 2001 Deed as continuing to include, at least in principle, scope for widening the class of deficit repair contributors so as to include the Specified Employers.

Fourthly, none of the submissions to the contrary seem to me, for the reasons which I have given, to amount to substantial reasons, let alone prevailing reasons, for adopting the interpretation contended for by the Specified Employers. Put as shortly as I can, there was simply no “once and for all” aspect to that part of the 2001 Regime. For the time being, it excused the Specified Employers from any non-statutory obligation to contribute to the deficit, but not permanently.

In conclusion under this heading, I shall briefly mention two additional arguments submitted by Mr Green against the recognition of any narrowing in the scope of the amendment power in 2001. The first was that, in two limited respects, the Specified Employers remained liable under the 2001 Regime for certain contributory payments to the scheme, namely the 2% contribution under 2001 Rule 5.3 in relation to Active Members in their employment, and their liability if called upon to contribute to the expenses of the Scheme under clause 26 of the 2001 Deed. Mr Green submitted that these provisions made it clear that the Specified Employers were not, for ever or even at all, fully released from any further contribution obligations.

There is in my judgment nothing of substance in that submission. As Mr Spink pointed out, neither of these continuing obligations had anything to do with deficit repair.

The second submission was that a restriction in their amendment power made in 2001 would have involved the Trustee in an illegitimate release of a discretionary power, such that a reasonable interpretation of the 2001 Deed and Rules could not conclude that this is what the Trustee had done.

Again, I respectfully disagree. If I had concluded that, as a matter of interpretation, the 2001 Deed and Rules did forever release a previous power of the Trustee to extend the class of those liable to make deficit repair contributions so as to include the Specified Employers (for example, if that had been spelt out expressly), that would have been a release necessitated by the Trustee’s view that it was in the interests of the beneficiaries to attempt to stave off the winding up of the Scheme, the permanent release of the Specified Employers being a necessary quid pro quo. If the 2001 Regime had been approved by the court on that basis, then it would in my judgment have been binding on the members by virtue of the representation orders made in those proceedings.

There is nothing inevitably improper about the release of a discretionary power by a trustee. For example, a will trustee may sell the testator’s matrimonial home and thereby necessarily release a discretionary power to permit the testator’s children to live in it: see Lewin on Trusts (18^th ed.) paragraph 29-205. Nonetheless, for other reasons as set out above, the Trustee did not in the present case release or restrict its power of amendment under clause 30.

Estoppel by convention arises out of an agreed statement of facts or law, the truth of which has been assumed by convention of the parties as a basis of their relationship. When the parties have so acted in their relationship upon the agreed assumption that the given state of facts or law is to be accepted between them as true, that it would be unfair on one for the other to resile from the agreed assumption, then he will be entitled to appropriate relief: see Spencer Bower on Estoppel by Representation (4^th ed.) page 180. Commonly, such an estoppel arises where parties contract together on terms which mean one thing, but then conduct their relationship under that contract by reference to a subsequently formed convention between them that it means something else: see for example Amalgamated Investment and Property Co Limited v. Texas Commerce International Bank Limited [1982] QB 84.

Estoppel by convention may nonetheless arise otherwise than in a contractual context: see for example Commissioners for Her Majesty’s Revenue and Customs v. Benchdollar Limited [2010] 1 All ER 174, in which a convention was established between HMRC and a number of persons alleged to be liable for employers’ NIC to the effect that a certain course of conduct was effective to prevent time running against HMRC under the Limitation Acts, when in law it was not.

In the present case, counsel were content to accept, subject to one small adjustment proposed by Mr Spink, the summary of the relevant principles in paragraph 52 of my judgment in Benchdollar, after a review of the relevant authorities (beginning at paragraph 42) including Indian Endurance (No 2) [1998] AC 878; Hamel-Smith v. Pycroft and Jetsave Limited (5^th February 1987, unreported), Hiscox v. Outhwaite (No 1) [1992] 1 AC 562, Grundt v. Great Boulder Pty Goldmine Limited (1937) 59 CLR 641, and Keen v. Holland [1984] 1 WLR 251. The summary is as follows:

“…. the principles applicable to the assertion of an estoppel by convention arising out of non-contractual dealings, to be derived from Keen v. Holland, and the cases which comment upon it, are as follows:

i)

It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them.

ii)

The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.

iii)

The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.

iv)

That reliance must have occurred in connection with some subsequent mutual dealing between the parties.

v)

Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.”

Mr Spink’s suggested adjustment was to part (i) of that summary, where I suggested that the common assumption must be “expressly shared between them”. Mr Spink submitted that the crossing of the line between the parties may consist either of words, or conduct from which the necessary sharing can properly be inferred, relying on note 2 at page 180 of Spencer Bower (op. cit.) and The August Leonhardt [1985] 2 Lloyd’s Rep 28 at 34-5. I accept that submission.

The convention asserted by the Specified Employers was, from and after the implementation of the 2001 Regime:

“That the Specified Employers could not be required to contribute to the Scheme, ever again, beyond any existing or future statutory liability” (Mr Spink’s words, during submissions).

.The detrimentally reliant conduct is alleged to have consisted, on the part of all Specified Employers, in not objecting to the introduction of the 2001 Regime by relying upon Old Rule 31. As for P&O Debt Employers (and perhaps the small number of others who made voluntary payments) it was in addition said to consist of the making of the voluntary payments on the assumption that there could never be any further non-statutory contribution liability to deficit repair under the Scheme.

It will be readily apparent from that formulation of the case that the convention relied upon includes, by way of some implied sub-convention, the proposition that the Specified Employers could have prevented the introduction of the 2001 Regime by an exercise of their supposed rights under Old Rule 31. For reasons which will be apparent, I do not consider that any individual Specified Employer had any such right under Old Rule 31, although I am prepared to assume for present purposes that, acting together, they might have persuaded the Chamber of Shipping not to support the 2001 Regime and that representative directors on the Board might, having regard to their strongly expressed views, also have vetoed it.

Mr Spink accepted that he had to identify a sufficient crossing of the line by the Trustee for the purposes of stages (i) and (ii) of my analysis in Benchdollar in the correspondence sent to the Specified Employers by the Trustee between March 1998 and September 1999 (so far as concerns the Former Employers) and, in addition, in the negotiations between the Trustee and the Debt Employers thereafter, including in particular P&O. I have described that correspondence and continued negotiation with the Debt Employers in detail in the Facts section of this judgment. It is convenient to deal with the position of each of the Former Employers, the non-P&O Debt Employers and P&O Debt Employers separately, reflecting the way in which the case was developed on their behalf by Mr Spink.

In my judgment the estoppel by convention case on behalf of the Further Employers fails at every stage of the Benchdollar analysis. The only communications to them from the Trustee otherwise than purely for information, and which therefore called for any kind of decision-making or response, were the standard form letters of 10^th March and 17^th September 1998. Thereafter, the Further Employers were sent (like all other Participating Employers) the Trustee’s letter of 10^th February 1999, expressed to be for information only if the recipient was not a Current Employer, and a copy of the September 1999 Letter to Current Employers, under a cover of a letter to Further Employers stating that it was for information only. The Former Employers were not sent the 2000 Proposal, nor told anything about the proposed suspension or removal of Old Rule 31, otherwise than in the sense that the Chamber of Shipping was kept informed. Furthermore, the only two letters sent to the Former Employers otherwise than for information only were written before the foundations had even been laid for the 2001 Regime, in the form of the April 1999 Proposal agreed between the Chamber of Shipping and the RMT.

All that can be gathered from the two letters sent to Former Employers otherwise than for information only is that the Trustee recognised that deficit repair measures had to be acceptable to the Participating Employers, in order to avoid a winding up under Old Rule 31 (but with no expression as to whether any single Participating Employer or class of them could successfully object) and a statement that, in general terms, the Trustee could only envisage by way of alternative to winding up a contribution regime broadly reflective of the employers’ statutory obligations.

By contrast, nothing remotely reflective of the convention asserted on their behalf was set out in that correspondence. Even when, in September 1999, the Former Employers were copied in on a letter to Current Employers setting out the terms of the April 1999 Proposal, there was still nothing in those letters suggesting that the Former Employers were forever to be released from any non-statutory deficit repair obligation, either expressly, or by supposed implication from the removal of Old Rule 31, which was not at that stage even in contemplation. It follows in my opinion that there was no express sharing of the alleged convention between the Trustee and the Former Employers, no taking of any element of responsibility for any such convention by the Trustee and, ex hypothesi, no detrimental reliance. Furthermore there was, in relation to the formation of the 2000 Proposal, the obtaining of court approval and the implementation of the 2001 Regime, no further mutual dealing between the Trustee and the Former Employers.

In summary, the Former Employers were told (for information only) that a regime for deficit repair had been agreed between the Chamber of Shipping and the RMT which, if implemented, and for as long as it lasted, would involve them in no contribution liability, and the 2001 Regime was thereafter implemented without further direct communication between them and the Trustee.

On Mr Spink’s submissions, their position differed only from that of the Former Employers in that they were, in September 1999, invited to contribute under the April 1999 Proposal as if, contrary to the fact, they were Current Employers. They all declined to do so, although a small number of them agreed, like P&O, to make voluntary payments. Mr Spink submitted that this refusal, followed by the Trustee’s acquiescence in it, represented a sufficient crossing of the line by the Trustee, in effect by its silent acquiescence in a denial of legal responsibility by the Debt Employers for anything more than their statutory obligations.

Again, this seems to me to be nothing to the point. True it is, in the context of the April 1999 Proposal, that the Non-P&O Debt Employers declined an invitation to accept a contractual liability going beyond their statutory obligations, but that negotiation was in no meaningful sense addressed to the question whether, if that Proposal was not implemented or, if implemented, failed to remedy the deficit, the Trustee could then exercise its amendment power at a later date in such a way as to require further contributions from the Non-P&O Debt Employers. That question was simply never addressed between them, so far as the evidence goes.

Those Non-P&O Debt Employers who agreed to make voluntary payments are in my judgment in no different position from those who refused. The representations made by the Trustee were the same to all the non-P&O Debt Employers, and I do not consider that the Trustee’s silence after a refusal to incur a contractual liability can form the basis of a convention estoppel against the Trustee, whether or not a particular non-P&O Debt Employer then decided or declined to make voluntary payments on a purely ex gratia basis. In any event, it is and always has been part of the case of the Current Employers that any extension of contribution liability to those employers who made voluntary payments could only properly be on the basis of giving full credit for those payments, against any contribution liability thereafter imposed. That would in my judgment be an amply sufficient remedy to satisfy any unfairness or injustice which might otherwise have been caused by the Trustee’s resiling from the alleged convention, if it had been established.

Mr Spink placed heavy reliance on P&O’s letter to the Trustee on behalf of the P&O Debt Employers dated 17^th November 1999, by which time, incidentally, the removal of Old Rule 31.0 was in the contemplation of the Trustee. That letter included these observations on behalf of the P&O Debt Employers:

“Once they have discharged the debts that have already fallen due, the Former Employers do not consider it appropriate for them to make further contributions to MNRPF.”

…

“You will appreciate that the P&O subsidiaries making ex gratia payments will not be able to accept any ongoing legal liability.”

I do not consider that those observations, and in particular the second, went further than to state the position of the P&O Debt Employers in relation to what was then the April 1999 Proposal, namely that the P&O Debt Employers would not accept the Trustee’s invitation to assume legal liability as if they had been Current Employers, within the context of that Proposal, and for its duration if implemented as a deficit repair regime. Neither the invitation to accept legal liability nor the refusal to do so was concerned with what might happen if that Proposal was either not implemented, or implemented but failed to repair the deficit.

I have in that context taken fully into account the witness statement of Captain Frank Marchant MBE who was, at the material time, both the Director for Marine Affairs at the head office of the P&O holding company and an employers’ representative on the Trustee’s Board. At paragraph 8 he states that:

“It is my clear recollection that it was the common intention and understanding of P&O and the Trustee at the time of the Proposal that the Proposal, once implemented, would have the effect of discharging Former Employers of all further obligations towards the MNRPF, and not just debts arising under section 75 of the Pensions Act 1995. Indeed, it was the positive intention of all parties that, following the Proposal, Former Employers could not be compelled to pay further contributions (although, as set out below, a number decided to pay voluntary contributions).”

Captain Marchant uses the expression “Former Employers” to include Debt Employers. Later in the same witness statement he says that P&O was very conscious of the protection provided to Participating Employers by Old Rule 31 and that, had he been aware of the possibility that at some later stage action might be taken to seek further contributions from Former Employers then P&O would not have made the very substantial voluntary contributions on behalf of the P&O Debt Employers, and that he would have advised P&O not to give up “the protection under Rule 31.0(ii) without other protections being introduced to balance the position”.

Finally, Captain Marchant makes it clear that P&O wished throughout the negotiation of the 2001 Regime to avoid a winding up of the Scheme, because of the attendant industrial relations issues that would inevitably have arisen if a winding up had occurred.

In contrast, Mr Hall’s evidence, in the final paragraph of his witness statement was that:

“I thought that the deficit could be addressed by the further contributions to be made by Current Employers and ex Gratia Payers and I did not consider whether the MNRPF Trustee would be able to ask the Former Employers to make further contributions if that proved not to be the case.”

I have not been asked to resolve that difference of recollection between Captain Marchant and Mr Hall, neither of whom were cross-examined. I must I think take the evidence of both of them as their genuine best recollections of their thought processes at the time. For present purposes, what matters is that neither of them point to anything said or done by the Trustee in negotiations, written or oral, with any of the Participating Employers, including for that purpose the P&O Debt Employers, from which a convention could be derived that at no time in the future would Specified Employers ever be called upon to contribute to a deficit in the Scheme, beyond statutory obligations. Captain Marchant may so have assumed, but Mr Hall did not. In that critical respect, nothing crossed the line, by words or conduct from the Trustee to the Participating Employers or any of them sufficient to create, still less bind the Trustee to, any such convention.

So far as concerns detrimental reliance, I have already concluded that the P&O Debt Employers did not on their own have an Old Rule 31 veto which they could deploy as a bargaining counter for the purpose of obtaining a permanent discharge from further contribution liability. As for their very substantial voluntary payments, their remedy if any convention estoppel had been established between them and the Trustee would, as I have already stated, be to have those payments credited against any future obligation, as the Current Employers already propose.

For the above reasons, the estoppel case fails on the facts to assist any of the Specified Employers. If I had concluded otherwise, it would have been necessary for me to address Mr Green’s submission that trustees cannot estop themselves from exercising a discretionary power in the future, since this would be an illegitimate fetter on their discretion. Where the persons claiming the benefit of such an estoppel are, as here, cognizant of the trustee’s powers, that submission has very real force, but it is not without its difficulties. I would prefer to leave the issue to an occasion when it needs to be decided.

The relief sought by Stena on behalf of the Current Employers has mutated over time, both before and during the hearing of this application. Originally, it sought:

By an amendment made shortly before the hearing, Stena sought an additional declaration, to the effect that, if entitled to amend by the introduction of a new Rule 5.3A, it would, in the events which have happened be a proper exercise of that power to do so, such that the Trustee should be authorised to do so.

By the beginning of the hearing it had become common ground that Specified Employers do continue to be “Participating Employers” within the definition in 2007 Rule 3. By an agreed List of Issues signed by counsel, and at the beginning of the hearing orally, I was invited to substitute for the relief sought in the Claim Form (otherwise than in relation to representation and costs) a determination of the following issues:

By that time the parties, and in particular Stena, had moved on a little further since, in response to P&O’s skeleton argument, Mr Green acknowledged in his oral submissions that further amendments beyond those contained within the proposed Rule 5.3A might well be needed so as to remove the prima facie discriminatory treatment of Specified Employers, if 2007 Rules 30 and 31 were to continue to afford exit routes and a collective winding up entitlement only to Current Employers.

Further, as the hearing developed, considerable uncertainty appeared to me to surround issue 3 headed “Authorisation”, not least since no steps had been taken to join any representative member or members of the Scheme, between whom and the Trustee questions as to the propriety of any amendment might be supposed mainly to arise.

In the end, Mr Christopher Nugee QC who appeared for the Trustee, invited the court to view the matter in three stages. The first and overriding question was whether the Trustee had by the 2001 amendments to the Deed and Rules forever put it out of its power to require Specified Employers to make non-statutory contributions to a deficit repair regime, so as thereby to answer Issues 1(b)(i) and 2 with a simple yes or no.

Secondly, he invited me to avoid answering issue 1(b)(ii) (by reference to the proposed New Rule 5.3A) specifically at this stage, because the Trustee had yet to consider a complete package of amendments, with any consequential alterations to, or replacements for, 2007 Rules 30 and 31. Nonetheless he invited me to deal with any apparent overriding objections to the introduction of that type of amendment, by which he meant objections that, if upheld, could lead to Specified Employers obtaining a right to require the winding up of the Scheme, such as would lead the Trustee to decline, at least in the present circumstances, to propose any such amendment.

Finally, he invited me to put on one side, for further application if necessary (to which a representative member or members of the Scheme might need to be joined), questions as to the detailed package of any proposed amendments, and questions as to propriety or authorisation.

For his part Mr Green adopted that approach, and Mr Spink did not object to it. In my view Mr Nugee’s revised approach has much to commend it and, bearing in mind that it is the Trustee which is likely to have to take the lead in framing any package of amendments, the court should accede to the Trustee’s request as to the manner in which to deal with the issues that have arisen, as put forward by Mr Nugee, if there is no obvious reason to do otherwise. I therefore propose to adopt that approach in deciding what relief to grant at this stage.

At stage 1, it will be apparent that my answer to Issue 1(b)(i) is yes. The power of amendment in clause 30 of the 2007 Deed is broad enough in scope to accommodate an amendment of the Scheme which would require Specified Employers (as well as Current Employers) to contribute to the Scheme generally, by reference to liabilities in the Scheme attributable to pensionable service of members whilst in the service of the Participating Employer in question.

As for Issue 2, the Trustee is not estopped from contending that any class of Participating Employer is capable of being brought into contribution by an amendment pursuant to clause 30.

Stage 2 is a little more complicated. Mr Spink’s fallback submission (if unsuccessful on Issue 1(b)(i)) was that no amendment of that type could properly be proposed unless there had first been reintroduced by amendment a Rule substantially to the same effect as Old Rule 31, so as to afford to the Specified Employers an opportunity, by objecting to a proposed amendment to bring them into contribution, to bring about a winding up instead. His submission was, broadly, that if Old Rule 31 was suspended and then removed as part and parcel of a deficit repair package constituted by the 2001 Regime that was not to be of a once and for all nature, then it was necessary to restore to Specified Employers rights of objection to something which would adversely affect them, in circumstances where those rights had been removed merely in connection with a regime which did not have any adverse effect upon them at all.

I have concluded that the 2001 Regime was not a once and for all deficit repair scheme, and it is substantially correct to say that Old Rule 31 was first suspended and then removed specifically to facilitate that potentially impermanent regime, even though the Trustee evidently regarded it as an unsatisfactory rule on wider grounds. There is therefore real force in Mr Spink’s fallback submission, and my understanding is that it was something of that kind, or perhaps a fear of a challenge to the validity of the removal of Old Rule 31 in the first place, that discouraged the Trustee from bringing these proceedings, when invited to do so by Stena.

The Trustee’s concerns in this respect were substantially alleviated when, during discussion prior to the hearing, P&O Ferries on behalf of the Specified Employers formally conceded that Old Rule 31 had been validly suspended and then removed. There were moments both in a supplementary skeleton argument and at the end of his submissions in reply when Mr Spink appeared to come close to withdrawing that concession. In my judgment the concession was rightly made. Although Mr Spink was right to categorise the suspension and then removal of Old Rule 31 as part of the “measures” referred to in that Rule then being proposed by the Trustee, on the interpretation of Old Rule 31 at which I have arrived, the suspension and then removal of Old Rule 31 formed part of the “agreed measures acceptable to the Participating Employers” within sub-rule (ii).

That does not of itself answer the point that, if the 2001 Regime is to be replaced by a new deficit repair regime by further amendment, the protection to Specified Employers constituted by Old Rule 31 should first be restored. I consider however that the point is nonetheless to be rejected for two reasons. The first is that, on its true interpretation, Old Rule 31 did not afford protection to Participating Employers beyond that which lay in the dual majority principle, as applied both to amendment under clause 30 and to resolutions of the Trustee’s Board by its Articles of Association. In particular it did not enable any one or more employers to bring about a winding up of the Scheme by objecting to an agreed deficit repair regime (agreed that is in accordance with the dual majority principle). On that analysis, the removal of Old Rule 31 deprived the Specified Employers of no protection other than that which was inherent in the dual majority principle itself, to which sub-rule (ii) referred by way of shorthand.

It may make little practical difference to that analysis if the power to object under Old Rule 31 lay in the Chamber of Shipping rather than in its appointees on the Board. In the real world a person (like a majority shareholder) who sees his appointee applying a different policy to a decision than his own will usually re-assert de facto control by removing his appointee and appointing a like minded replacement.

The second reason is that, if contrary to my interpretation, Old Rule 31 conferred any more substantial protection upon the Specified Employers than the dual majority principle, that protection was not entrenched against being removed by amendment, in the way that the dual majority principle and certain other provisions of the Scheme were expressly entrenched by clause 30 of the 2004 Deed.

I therefore conclude that a proposed amendment to the Scheme designed to bring Specified Employers into contribution would not need to be preceded by a reinstatement of Old Rule 31, or the prior introduction of some substantially equivalent provision. Apart from that, no overriding objections appear to me to have emerged from the hearing which would render an amendment of the type contemplated by Issue 1(b)(i) a futile exercise, in the sense that it would inevitably lead to the winding up of the Scheme.

That said, and as both the Current Employers and the Trustee appear now to acknowledge, it would be necessary for the Trustee to consider, as part of a new deficit repair regime which included the bringing of Specified Employers into contribution, amendments to 2007 Rules 30 and 31, because they afford rights to a class of employers which would, on any such amendment, be only part of the class of contributing employers. It would nonetheless be wholly inappropriate for the court to seek to lay down in advance the form which amendments of Rule 30 and 31 ought to take, not least because the Trustee has yet to decide, for example, whether Specified Employers should be liable merely to contribute to ongoing deficit repair, or also liable to contribute in the event of a winding up of the Scheme. The re-framing of 2007 Rules 30 and 31 would need to be considered (and no doubt negotiated) in the light of the precise nature and extent of the contributions to be required of the Specified Employers, a process which the Trustee has yet to undertake.

Finally, Mr Nugee’s third stage, relating to authorisation, cannot of course precede the decision by the Trustee in the light of this judgment (and any appeal) whether, and if so in what form, to introduce an amendment designed to bring the Specified Employers into contribution.

That concludes the matters which I have been asked to decide at this stage. I will hear submissions as to an appropriate form of order.