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Burgess & Ors v BIC UK Ltd
Factual and Procedural Background
This case concerns the BIC UK Pension Scheme ("the Scheme"), a balance of cost defined benefit occupational pension scheme where members pay contributions and the principal employer, the Defendant ("BIC UK"), meets the balance of the cost. In the early 1990s, the Scheme had a large surplus which the Trustees were obliged to reduce under tax regulations. The current Trustees ("the Claimants") contend that the then Trustees and BIC UK decided to apply limited price indexation increases ("Pre-97 Increases") to pensions in payment exceeding the Guaranteed Minimum Pension ("GMP") annually from April 1992. BIC UK has challenged the validity of these increases since 2011, and payment of the Pre-97 Increases has been suspended since March 2013.
The main issues for determination are whether the Pre-97 Increases were properly paid, whether they can now be stopped if properly paid, and whether the Trustees can recover payments made since 1992 if the increases were not properly paid. By consent, the Claimants were appointed to represent those supporting the validity of the Pre-97 Increases and continuation of payments, and BIC UK to represent those opposing.
The Scheme closed to further accrual in December 2010. As of April 2015, the Scheme was in deficit, which would be significantly larger if Pre-97 Increases were included in the liabilities. BIC UK is paying repair contributions under an agreed recovery plan. As of April 2017, the Scheme had 377 members, including pensioners and deferred members, with varying entitlements or potential entitlements to Pre-97 Increases.
The evidence includes witness statements from Trustees and executives, some of whom had no direct involvement in the relevant period, and documentary evidence such as Scheme rules, Board and Trustee minutes, actuarial valuation reports, and member communications. The case also involves complex historical corporate and Scheme governance arrangements, including the amalgamation of the Scheme with the Works Scheme in 1990.
Legal Issues Presented
- Were the Pre-97 Increases properly paid?
- If the Pre-97 Increases were properly paid, can they now be stopped?
- If the Pre-97 Increases were not properly paid, can the Trustees recover payments made since 1992 from the pensioners?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| British Airways Pension Trustees v British Airways plc (Stevens v Bell) [2002] EWCA Civ 672 | Principles of pension scheme interpretation, including contextual and purposive construction | Guided the court to interpret Scheme provisions giving reasonable and practical effect, considering factual background and avoiding technicality |
| Sovereign Trustees Ltd v Glover [2007] EWHC 1750 (Ch) | Interpretation of trustee resolutions and policy adoption | Distinguished on facts; court found 1991 Minutes were a decision, not mere policy |
| HR Trustees Ltd v Wembley plc [2011] EWHC 2974 (Ch) | Application of equitable maxim "equity looks on that as done which ought to be done" to cure formal defects in trustee decisions | Held equitable maxim applied where trustees had an obligation to declare amendment but failed formalities; court analyzed applicability to current case |
| Briggs v Gleeds [2014] EWHC 1178 (Ch) | Formalities required for amendments; limits of equitable maxim in curing defects | Considered limitations of equitable maxim; court applied reasoning to reject its application here due to discretionary nature of power |
| Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 | Principles governing implication of terms in contracts | Applied to reject implied term contended for by Claimants regarding use of surplus contributions |
| National Grid Co plc v Mayes [2001] UKHL 20 | Construction of pension scheme powers; avoidance of surplusage | Considered in construing rule 3(c)(iii) and other powers; court found rule 3(c)(iii) confers a free-standing power |
| Trollope & Colls Ltd v Atomic Power Constructions Ltd [1963] 1 WLR 333 | Validity of retrospective contractual provisions | Supported principle that contracts may have retrospective effect |
| Bank of New Zealand v Board of Management of the Bank of New Zealand Officers' Provident Association [2003] UKPC 59 | Scope and fairness considerations in retrospective amendments to pension schemes | Guided court's approach to retrospective effect of 1993 Deed and Rules |
| Shannan v Viavi Solutions UK Ltd [2016] EWHC 1530 (Ch) | Fairness and scope in retrospective pension scheme amendments | Further developed principles on retrospective amendments; court applied to validate 1993 Deed and Rules effect |
| Revenue and Customs Commissioners v Benchdollar Ltd [2009] EWHC 1310 (Ch) | Elements of estoppel by convention | Summarized principles applied to evaluate Claimants' estoppel arguments |
| Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustee Ltd [2010] EWHC 1805 (Ch) | Adjustment to estoppel by convention principles in pensions context | Applied in assessing difficulty of establishing estoppel by convention here |
| Steria Ltd v Hutchison [2006] EWCA Civ 1551 | Fiduciary duties of trustees in pensions context | Supported argument that trustees cannot prefer some members’ interests to others |
| Re Musgrave [1916] 2 Ch 417 | Equitable right of recoupment by trustees for overpayments | Recognized principle that trustees have duty to recover overpayments |
| Pensions Act 1995, section 91 | Restrictions on set-off against pension entitlements, including requirement for court order in disputes | Interpreted to mean Pensions Ombudsman determinations are not orders of competent court |
| Webber v Department of Education (No 2) [2014] EWHC 4240 (Ch) & (No 3) [2016] EWHC 2519 (Ch) | Application of Limitation Act 1980 section 5 to claims for overpayment of pensions | Supported that six-year limitation applies to overpayment claims |
| D v BIC UK Pension Scheme (PO-1918, 2017) | Application of Limitation Act 1980 section 5 to equitable recoupment | Held equitable recoupment is restitutionary claim subject to limitation |
| Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015] UKSC 38 | Limitation Act 1980 section 5 applies to restitutionary claims | Supported application of limitation to equitable recoupment claims |
| Lewin on Trusts (19th ed) 29-204, 29-205 | Equitable maxim and discretionary powers of trustees | Applied to reject equitable maxim curing formal defect in discretionary power exercise |
| Re Robinson [1911] Ch 502 | Limitation and equitable recoupment | Supported view that equitable recoupment is not subject to Limitation Act 1980 |
| Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 | Doctrine of laches in equity | Guiding principle for assessing delay and waiver in equitable claims |
| Fisher v Brooker [2009] UKHL 41 | Doctrine of laches requiring detrimental reliance | Applied in considering whether laches could bar recovery of overpayments |
Court's Reasoning and Analysis
The court first examined the factual and documentary evidence to determine what decisions were made regarding the Pre-97 Increases and by whom. It found that the Trustees decided on 18 February 1991 to increase pensions in payment by 5% LPI, and that BIC UK agreed to this, despite the absence of formal Board minutes recording such approval. The court accepted the witnesses' evidence and the surrounding circumstances, including the role of scheme advisers Noble Lowndes and the practice of informal Board decision-making.
Regarding the validity of the Pre-97 Increases, the court analyzed multiple provisions of the Scheme's governing documents. It rejected reliance on Rule 32 of the Fourth Edition of the Rules, as it did not evidence an increase in employer contributions or direction to Trustees to provide additional benefits. The court also rejected Rule 36 of the Fourth Edition as validating the increases due to failure to observe required formalities and the discretionary nature of the power, making equitable remedies inapplicable.
The court then considered the 1993 Deed and Rules, which were expressed to have retrospective effect from 6 August 1990. It held that this retrospective effect was permissible unless it impermissibly rewrote history. The court found that the 1993 Deed and Rules could validly validate the Pre-97 Increases under Clause 4 (amendment power with Principal Employer consent), Clause 9 (power to grant or augment benefits on Principal Employer direction), Rule 3(c)(iii) (power to reduce surplus by altering benefits with Principal Employer consent), and Rule 9(a) (power to increase pensions in payment with employer consent). The court interpreted these provisions broadly and rejected arguments that they applied only to individual members or excluded new joiners.
The court applied established principles of pension scheme construction emphasizing practical and reasonable effect, consideration of factual background, and avoidance of technicality. It found that the 1991 Minutes constituted a valid resolution to modify benefits, that BIC UK consented to the increases, and that the decision was irrevocable.
On the issue of stopping payments, the court held that if the increases were validly granted, they could not now be stopped.
Regarding recovery of overpayments if the increases were invalid, the court addressed estoppel, equitable recoupment, and statutory constraints. It found that estoppel by convention was not established, primarily because the common assumption was not shared between Trustees and BIC UK as distinct entities, and because asserting estoppel would conflict with Trustees' fiduciary duties. Estoppel by representation was also rejected.
The court recognized the Trustees’ equitable right of recoupment but held that its exercise is subject to section 91 of the Pensions Act 1995, requiring a court order for set-off in disputes. The Pensions Ombudsman’s determinations are not orders of a court, but County Court enforcement orders are.
The court considered limitation and laches. It concluded that equitable recoupment is not subject to the six-year limitation period under section 5 of the Limitation Act 1980 but is subject to the doctrine of laches. It also found that the court could not determine on a group basis whether recovery would be barred by laches or estoppel, as these depend on individual circumstances.
Holding and Implications
HOLDING: The court held that the Pre-97 Increases were validly granted by virtue of Clause 4 and Clause 9 of the 1993 Deed and Rules 3(c)(iii) and 9(a) of the 1993 Rules, which can take effect retrospectively from 6 August 1990 without impermissibly rewriting history. The decision to pay the Pre-97 Increases was irrevocable and cannot now be stopped.
If the Pre-97 Increases were not validly granted, the Trustees cannot assert that BIC UK is estopped from denying validity. The Trustees have an equitable right of recoupment subject to statutory conditions, and recovery is not barred by limitation but may be barred by laches or estoppel on an individual basis.
IMPLICATIONS: The direct effect is that BIC UK must continue to pay the Pre-97 Increases as an irrevocable obligation. No new precedent is set beyond the application of established principles to these facts. The court declined to determine recovery of overpayments on a group basis, leaving individual cases to be addressed separately.
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