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Pensions equalisation case

On 31 January 2014 judgement was handed down by the High Court in the case of Vaitkus and others v Dresser-Rand UK Limited and another [2014] EWHC 170 (Ch). In this case the court considered whether certain steps taken to equalise the normal retirement date of members were effective.

The outcome further demonstrates the commercial approach that the courts can take in equalisation cases.  The court ruled that an announcement amending the original interim deed had also amended a later definitive deed, despite the fact that the announcement was made before the execution of a definitive deed, which contained conflicting provisions. The court appeared to take into account evidence showing the intention of the trustees and principle employer, and took a purposive approach in interpreting the scheme rules.

Background

In Douglas Harvey Barber v Guardian Royal Exchange Assurance Group (Case C-262/88), the European Court of Justice (ECJ) ruled that benefits under a defined benefit pension scheme were ‘pay’ for the purposes of Article 157 (then Article 119) of the EU Treaty. This made it unlawful to discriminate between men and women by providing for retirement at different ages. It therefore became necessary to equalise retirement benefits under schemes that made such a distinction.

In Vaitkus the scheme in question provided that members could retire from age 60 (rather than 65) but their benefits would be reduced by the application of an early retirement factor. An exception to this reduction was made for certain female members. It was this exception that was discriminatory.

The scheme had been established by interim deed dated 5 April 1988 (the Interim Deed). Clause 11(a) of the Interim Deed provided that:

"The Trustees will as far as is practicable operate the Scheme so as to give effect to the Explanatory Literature. For the purpose of this Deed Explanatory Literature means any literature setting out the provisions of the Scheme (including any amendment of those provisions) and issued or to be issued to members and prospective members of it."

A notice dated 6 April 1991 (the Notice), addressed to the relevant female members, revoked the discriminatory exception.

The definitive deed (the 1992 Deed) was signed on 22 December 1992. The 1992 Deed actually restated the exception made for certain female members that had been present in the Interim Deed. Clause 1(a) of the 1992 Deed stated  that the deed: "shall be read and construed and shall take effect in like manner as if it had been executed on the same day as and immediately after the Interim Trust Deed".

Decision

The court held that the notice was sufficient to amend the Interim Deed under clause 11(a). The Notice formed part of the Explanatory Literature and it was sufficient that it was only issued to the affected female members.

Further to this, the court held that the Notice was also effective in amending the 1992 Deed, despite the fact that the 1992 Deed was executed after the date of the Notice and appeared to reintroduce the discriminatory provision.

Key to this ruling was the fact that Clause 1(a) of the 1992 Deed stated that it would take effect as if it had been executed immediately after the Interim Deed. This created a legal fiction that the 1992 Deed was in effect by the time the 1991 Notice was issued and was thus modified by the Notice.

This is another example of an equalisation case where the court seemed to take into account employer and trustee intention to make the amendment. Although this in of itself is nothing new, the decision demonstrates the extent of this approach and the surprising effect that it can have in practice.

 

 

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.