PART 4 – Old Deeds/New Employer

02 / 02 / 2022

A brief visit to the High Court decision in Mitchells & Butlers Pension Plan, 12 November 2021

What happens when a new Principal Employer (PE) finds the scheme rules in place before it became PE are incorrect?

This and other interesting legal questions are the subject of the High Court’s judgment last November.

This article sketches the facts and highlights the main legal questions. How the questions were answered by the Court is the subject of my podcast which please access here.

Brief facts in tabular form

1946Scheme established
1988Deed and Rules: guaranteed pension increases for pensions in payment, subject to Trustee’s ability to choose a different Index for calculating increases.
1996Deed and Rules: above pension increase rule repeated but the power to choose a different Index now vested in the Principal Employer (PE) instead of the Trustee.
2002Deed and Rules: repeats the 1996 version of the pension increase rule.
November 2003Mitchells & Butlers plc became the scheme PE in place of Bass Plc.
2006Deed and Rules: repeats the 1996 version of the pension increase rule.
2021Scheme Trustee’s High Court proceedings for Rectification (correction) of the pension increase rule contained in the 1996, 2002 and 2006 Deed and Rules -High Court judgment 12 November 2021.


Legal issues

In summary:

  • Was the switch in the power to select the Index for pension increases from the scheme trustee to the PE intended by the PE and the Trustee? If not, can the scheme deed and rules be corrected (rectified)?
  • Is Mitchells & Butler plc bound by any such rectification, as it did not become the PE until 2003?
  • Had the scheme actuary been properly consulted about the alteration to the scheme rules?

Conclusion

These are interesting questions. The upshot is that the Court granted rectification, the power to select the Index for pension increases was restored to the Scheme Trustee and the alteration to the scheme’s Index selection power was invalid in any event as the actuary had not been properly consulted.

So simple conclusions, reached after the High Court received evidence from many witnesses and considered novel arguments on behalf of the new PE, Mitchells & Butlers plc about why it was not bound by the rectification. At some 410 paragraphs, the High Court judgment is no light reading. Worry not – my podcast explains the legal issues in simple terms!