Court of Appeal

Published August 17, 2007

Trustee Solutions Ltd and Others v Dubery and Another

Before Lord Justice Ward, Lord Justice Tuckey and Sir Peter Gibson

Judgment July 26, 2007

In determining the correct statutory apportionment of any available assets upon the winding-up of a pension scheme, careful regard was to be had to the applicable retirement dates as between men and women and at different periods of service.

The Court of Appeal so stated in a reserved judgment allowing the appeal of the second defendant, Mrs Julia Cripps, from Mr Justice Lewison (The Times August 7, 2006; [2007] ICR 412) declaring that the members of a pension scheme having the right to retire at age 60 in respect of any part of their service and aged between 60 and 64 at the commencement of a winding-up of the scheme fell within section 73(3)(b) of the Pensions Act 1995, as amended by regulation 3 of the Occupational Pension Schemes (Winding-Up)(Amendment) Regulations (SI 1996 No 3126)) even in respect of pension or other benefits accrued by service to which a normal retirement age of 65 applied.

The claimants, Trustee Solutions Ltd, Stephen Patrick Comar and Keith James Ed-wards were the trustees of the Colour Processing Laboratories Ltd pension scheme. The scheme rules provided for a normal retirement date at age 65 for a male member and 60 for a female member.

The principal employer went into creditors’ voluntary liquidation on November 1, 2001 and the scheme went into winding-up on February 15, 2002, heavily in deficit. The claimants applied to the High Court for directions as to certain issues including the application of section 73 of the 1995 Act to the scheme and distribution of any assets.

Representative defendants were chosen: the first, Mr Leslie Dubery, had been employed between 1992 and 2000 and was 64 when the winding-up of the scheme had commenced. The second, Mrs Julia Cripps, was 49 when the winding-up commenced and had been employed between 1975 and 1988, and she thus became a deferred member of the scheme within section 73(3)(f) of the 1995 Act.

Under section 73(2) and (3) of that Act, if the assets upon the winding-up of a pension scheme were insufficient to satisfy the liabilities specified in section 73(3), the assets had to be applied first towards satisfying the liabilities specified in earlier paragraphs of section 73(3) before the liabilities specified in later paragraphs; and when the amounts of the liabilities mentioned in one of those paragraphs could not be satisfied in full those amounts had to be satisfied in the same proportions.

On appeal, it was accepted that the power to amend the scheme had never been validly exercised, so as to comply with European Union law as to equality of normal retirement age between men and women), so that the “ Barber window” ( Barber v Guardian Royal Exchange ([1991] 1 QB 344) had not been closed, with consequences as to Mr Dubery’s putative age of retirement during such period.

In looking to the priority of distribution, an issue arose as to the true construction of words within section 73(3)(b), “where a person’s entitlement to payment of pension or other benefit has arisen” and how such construction went to the entitlement of members such as Mr Dubery or other members with different service histories.

Mr Keith Rowley, QC, for Mrs Cripps; Mr Nicolas Stallworthy, QC, for the claimants; Mr Paul Newman for Mr Dubery.

SIR PETER GIBSON said that Mr Dubery was not truly representative: his service was entirely within the so-called Barber window so that, by reason of Barber and Coloroll Pensions Trustees Ltd v Russell ([1995] ICR 179), his normal date of retirement was to be treated as if it were 60, and he was over 60 at the date of commencement of the winding-up.

However, turning to the declaration, the judge had gone too far and had placed too much reliance upon the scheme’s rules and requirements of the Inland Revenue which contemplated a single pension payable on retirement at or after the normal retirement date.

However, the rules and Revenue requirements had to yield to European law and be modified accordingly, but the modification need extend no further than was necessary.

In Barber, the court made it clear that the effect of that case was not retrospective so that the rules continued to apply save to the extent of the necessary modifications.

The Revenue’s requirements also now had to take account of the fact that different benefits could accrue to a member by reference to more than one normal retirement date.

The judge had rightly recognised that there could be an entitlement to pension earned in a particular period to which one normal retirement date applied and an entitlement to pension earned in another period to which another normal retirement date applied.

Section 73 itself recognised different tranches of pension to which different priorities applied. Accordingly, section 73(3)(b) was to be construed as limited to pension and other benefits in payment, or payment of which a member had a right to demand, but not as extending to benefits accrued outside the Barber window when the member had not yet reached the normal retirement date under the scheme’s rules.

Thus a declaration would be substituted that: On a true construction of section 73(3)(b) of the 1995 Act the members of the scheme who had the right to retire at 60 in respect of any part of their service, and who were aged between 60 and 64 on the date that the scheme commenced winding-up, fell within that provision; but not in respect of pension or other benefits accrued by service to which a normal retirement date at age 65 applied.

Had the judge’s ruling been correct, and had the Barber window been validly closed from the date of the purported amendment, October 1, 1991, a male member of the scheme who had attained 60 at the commencement of the winding-up and had 40 years’ pensionable service with benefits accruing both before May 17, 1990 and after October 1, 1991 would have not only his 17-month Barber window benefits but also other benefits in respect of as much as 38 years and seven months of service prioritised; and Mrs Cripps and those like her would have received nothing by way of pension benefit.

Lord Justice Tuckey and Lord Justice Ward agreed. Solicitors: Eversheds LLP, Newcastle upon Tyne; Nabarro; Lee & Priestley.

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