BIC UK Ltd v Burgess [2019] – employer appeal successful: retrospective amendment re-wrote history to an impermissible extent

The Court of Appeal (CA) has unanimously ruled that a retrospective amendment to the deed and rules of the BIC UK Pension Scheme (the Scheme) was invalid.

Last year, the High Court had ruled that whilst the relevant deed of amendment had involved “an element of re-writing history” it did “not involve doing so impermissibly”. The CA disagreed and said that “…the past cannot be rewound and replaced with a different version of history in reality…In that important and literal sense, history cannot be re-written.”

However, some questions considered by the High Court were not in issue in this appeal. These included the judge’s decision that a statutory limitation period does not apply to the remedy of equitable recoupment and that the Pensions Ombudsman (PO) is not a competent court for the purposes of section 91 of the Pensions Act 1995. Section 91 provides that where there is a dispute regarding an amount to be repaid, set-off cannot be exercised unless the repayment obligation has become enforceable under an order of a ‘competent court’.

Background

The trustees had resolved in 1991 to award certain pension increases but the relevant deed of amendment was not executed until 1993. A disagreement arose around the issue of retrospectivity, and whether or not the increases had been validly awarded.

The trustee resolution had been recorded in minutes of a 1991 meeting. In 1993, a new deed and rules was executed and expressed to be effective from 1990. The amendment provisions gave the trustees power to make changes by deed executed by the principal employer and the trustees or “by resolution (in writing) of the trustees in the case of the rules only.”

BIC claimed that the minutes neither amounted to a trustee decision to award increases, nor did they evidence its consent as the employer, whereas the trustees argued that the minutes were effective in this regard.

The appeal decision

The CA was doubtful that those Scheme powers relied on could have validated the introduction of the increases at all. It found that the trustees’ minutes simply recorded a resolution on future policy, leaving the implementation of that policy to “be carried out as soon as possible”. There was no immediate alteration of the Scheme rules, and if that had been the intention, the text of the necessary amendments would have been set out in a written document signed by all three of the trustees.  In addition, formal reference would have been made in the amending document to BIC’s consent.

Comment

The case highlights that the proper and formal process set out in a trust deed and rules must be followed in order to made valid benefit amendments.

As the rule amendment has been judged invalid by the CA, those increases will now need to be recouped from members via the adjustment of future payments, to the tune of approximately £5 million in total. This process will not be limited by a statutory limitation period.

When the High Court judgment was reported in 2018, most of the headlines in the legal press emphasised that part of the decision holding that the six-year limitation period does not apply to claims for equitable recoupment. The decision does not overrule the High Court judgment in Webber, which ruled that the recovery of overpayments was subject to the limitation period of six years. This means there are two High Court decisions taking different views on the same issue and schemes should consider the treatment of overpayments on a case by case basis.

On the point of its competency as a court for section 91 purposes, the PO published a fact sheet in April 2019 setting out its view that it considers the High Court judge’s comments on the issue as obiter and thus not forming part of his decision as a whole.

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