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

Factual and Procedural Background

This appeal concerns an occupational pension scheme known as the Merchant Navy Ratings Pension Fund ("the MNRPF"). In 2001, the trustee adopted a deficit repair scheme ("the 2001 scheme") to address a substantial deficit, which included removal of a provision in the rules that allowed trusts to be terminated if there was a deficiency and no agreed measures acceptable to the Participating Employers to overcome it. A new substantial deficit has since arisen, and the trustee is likely to propose another deficit repair scheme affecting all Participating Employers, not only the Current Employers who approved the 2001 scheme. The legal question is whether the power of amendment in the rules is subject to an implied restriction requiring that if any affected Participating Employer outside the Current Employers does not accept the new proposal, the trusts must terminate.

The appellant, Company A (representing the Specified Employers, i.e., Participating Employers other than those consenting to the 2001 scheme), appeals a decision by Judge Briggs, who ruled that no such implied restriction exists. The appeal focuses on whether the appellant has been deprived of rights under the previous provisions to oppose the new deficit repair scheme.

The MNRPF was established in 1978 as a defined benefit scheme and governed by a trust deed and rules, with Participating Employers adhering via accession agreements. Prior to the 2001 scheme, the rules included provisions (OR 29.1, 29.2, 31.0, and 32) addressing deficiencies, surpluses, continuation or termination of trusts, and amendment powers. Clause 30 of the trust deed provides the power to amend the rules subject to certain restrictions.

In 2000, a significant deficiency was identified, leading to the 2001 scheme, which included various measures such as establishing a new defined-contribution pension plan, closing the scheme to future accruals, allocating contributions among Current Employers, and modifying provisions for termination of the scheme. Notably, the 2001 scheme removed the veto right formerly held by Participating Employers under OR 31.0(ii).

The appellant conceded that the removal of OR 31.0(ii) was valid as part of the 2001 scheme, which was accepted by all Participating Employers affected at the time. The appellant now argues that an implied restriction should be read into the power of amendment to protect Specified Employers from being bound by future deficit repair schemes without their consent.

Legal Issues Presented

1. Whether the power of amendment in clause 30 of the trust deed is subject to an implied restriction requiring the reintroduction of a provision equivalent to OR 31.0(ii) before imposing deficit repair obligations on Participating Employers not party to the 2001 scheme ("the entrenchment issue").
2. Whether, on a true construction of OR 31.0(ii), the MNRPF could be forced into winding up if affected Participating Employers do not consent to a new deficit repair scheme ("the construction issue").

Arguments of the Parties

Appellant's Arguments

• The power of amendment can bring Specified Employers into a new deficit repair scheme, but only if the protection through OR 31.0(ii) is first reintroduced as an implied restriction.
• OR 31.0(ii) was expressly deleted but remains impliedly incorporated because it was removed only as part of a temporary package affecting a limited number of Participating Employers.
• The removal of OR 31.0(ii) without the consent of Specified Employers deprived them of a fundamental protection.
• The implied restriction is necessary to give the rules business efficacy and protect Specified Employers who lack specific representation on the trustee board.
• The 2001 scheme did not permanently resolve deficit repair issues, so the power of amendment should be subject to an implied balancing provision requiring equivalent protection for Specified Employers.

Respondents' Arguments

• The removal of OR 31.0(ii) in the 2001 scheme was a once and for all removal; the power of amendment is unlimited and can be exercised without implied restrictions.
• Rule OR 32 allows amendment of any rules, including OR 31.0(ii), with no indication of entrenchment.
• The importance of a provision does not imply it is entrenched against modification or removal.
• The trustee's overriding concern is to avoid forced winding up of the MNRPF against its wishes, and the trustee must exercise powers for proper purposes.
• The Specified Employers, having adhered to the scheme providing for amendment, have no entitlement beyond the trustee exercising powers lawfully and properly.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering the established principles of interpreting pension schemes, emphasizing that such schemes should be given reasonable and practical effect without undue technicality. It noted that pension schemes often evolve through amendments and must be interpreted in light of circumstances prevailing at the time of each amendment.

The court accepted the appellant's concession that the removal of OR 31.0(ii) in the 2001 scheme was valid and binding on those Participating Employers affected at the time. It found that the trust deed's clause 30, which governs amendments, contains an exhaustive list of restrictions, none of which include an implied limitation to reintroduce OR 31.0(ii) or an equivalent provision.

The court considered the admissible background, including a circular sent to Current Employers in 2000 explaining the suspension and removal of OR 31.0(ii) as part of the 2001 scheme. This background indicated that the removal was integral to the package of measures and that it was not intended for the provision to survive by implication.

The court rejected the appellant's argument that an implied restriction was necessary to give business efficacy or protect Specified Employers, noting that statutory developments since 1978 reduced the incentive to terminate the scheme and thus diminished the relevance of the veto provision. The court also found that the governance arrangements, including equal representation on the trustee board, provided some protection to Participating Employers.

It was further reasoned that the power of amendment should be interpreted according to its terms without extending its scope beyond what the parties agreed, balancing the interests of consenting and non-consenting parties. The court drew an analogy with modification of rights clauses in debenture deeds, emphasizing that powers to bind dissenting minorities should not be construed more broadly than their true meaning.

Given the valid removal of OR 31.0(ii) and the absence of any express or implied restriction in clause 30, the court concluded that no implied entrenchment exists to protect Specified Employers from future amendments imposing deficit repair contributions.

Accordingly, the court dismissed the entrenchment argument and declined to address the construction issue regarding the meaning of OR 31.0(ii).

Holding and Implications

DISMISSED

The court upheld the decision that the power of amendment in the trust deed is not subject to an implied restriction requiring reintroduction of a veto-like provision equivalent to OR 31.0(ii) before imposing deficit repair obligations on Specified Employers. This means the trustee may validly propose deficit repair schemes affecting all Participating Employers, including those not party to the 2001 scheme, without the trusts being required to terminate due to lack of unanimous consent.

The direct effect is that the appellant’s appeal fails, and no additional legal protections are implied for Specified Employers beyond those expressly set out in the trust deed and rules. The decision does not establish new precedent beyond the interpretation of the specific amendment powers and provisions in the MNRPF trust deed.