Strand, London, WC2A 2LL
B e f o r e :
| BT Pension Scheme Trustees Limited
|- and -
|(1) British Telecommunications PLC
(2) Secretary of State for Business, Innovation and Skills
Andrew Simmonds QC and Henry Legge (instructed by British Telecommunications PLC Legal & Business Services) for the First Defendant
Jonathan Evans (instructed by the Treasury Solicitor) for the Second Defendant
Hearing date: 13th & 15th July 2011
Crown Copyright ©
Mr Justice Mann :
The concession and its significance
"12. Irrespective of the answer to the other issues (including Issue 3), to the extent, if any, that:
(i) bulk transfers into or out of the Scheme; or
(ii) apportionment of Section 75 debts away from the other Participating Companies to the Company; or
(iii) any Post-Transfer Date Event that does not fall within (i) or (ii)
increase the size of
(a) the Buy-Out Lump Sum (if any); and/or
(b) any Deficiency Contributions that fall due on or after the Company's entry into winding-up or fall due before that date but are unpaid at such date, and this extra quantum is not excluded from the scope of the Guarantee by the answers to the other issues, does this extra quantum of Company Contributions fall outside the scope of the guarantee?
[(1) HMG has put forward the argument that this quantum of the Company's Contributions falls outside the scope of the Guarantee.
(2) The Trustee's position is that this quantum of the Company's Contributions is covered by the Guarantee.
(3) HMG's position is as follows:
(a) HMG accepts that a bulk transfer out, on a share of fund basis, causes no extra quantum.
(b) HMG also accepts that a bulk transfer in on a past service reserve basis does not in itself cause any extra quantum, provided that the past service reserve is calculated in accordance with the actuarial assumptions used by the BTPS, as the receiving scheme. If, on the other hand, the reserve was calculated by reference to the actuarial assumptions used by the transferring scheme and the reserve would have been higher if calculated on the actuarial assumptions used by the BTPS, then the difference would be extra quantum.
(c) HMG emphasises the words "in itself". It is HMG's case that the Guarantee cannot extend to any BT liability for contributions other than in respect of pensionable service of BT employees. Hence, if on bulk transfer in, the transferring members are granted past service credits in respect of service with an employer other than BT, the Guarantee does not extend to any BT liability to contribute in respect of such past service credits. Equally, if, after transfer in, the transferring members are employed by a participating employer other than BT, any resulting liability to contribute in respect of such service is also outside the guarantee.] "
"However, if a transfer in is, at the time of the transfer, full-funded [sic] on the above basis, it is accepted that liabilities in respect of the members transferring in are not, under the ambit of this Appendix excluded from the guarantee. …
NB It is accepted that the transfer on the merger by BTNPS was fully funded on the above basis [and there is a footnoted cross-reference to evidential material]"
"12. Does the Crown Guarantee exclude an increase in the Company's liability to pay contributions (whether Buy-Out Lump Sum or Deficiency Contributions) which results from:
(a) an amendment of the rules made after the Transfer Date (that does not fall within any of the other issues)?
Trustee's position: No
BT's position: No
HMG's position: Yes.
(b) (as a particular actual example of (a)), the merger of the BTNPS with the Scheme in 1993?
Trustee's position: Issue already determined, alternatively No
BT's position: Issue already determined under Issue 3 and/or HMG's concession on this point cannot now be withdrawn, alternatively No
HMG's position: Yes. The increased liabilities resulting from the BTNPS merger in 1993 arise as a result of a post-Transfer Date rule amendment and therefore fall outside the scope of the Crown Guarantee.
(c) (as a further potential example of (a)), any bulk transfer made into the Scheme in the future, pursuant to a specifically introduced transfer-in rule
Trustee's position: Issue already determined under Issue 3, alternatively No.
BT's position: Issue already determined under Issue 3 and/or HMG's concession on this point cannot now be withdrawn, alternatively No
HMG's position: Yes. Increased liabilities resulting from such a future bulk transfer would be pursuant to a post-Transfer Date rule change and therefore would fall outside the scope of the Crown Guarantee.
[It is common ground that other than the amendment falling into 12(b), there have been no amendments to date that fall within 12(a)]"
The critical point for the purposes of the present hearing is the response to (b) and (c). The Secretary of State would wish to answer Yes to the issue. Each of BT and the trustee would wish to say No, if they had to argue the point, but crucially, for the purposes of this hearing, they say that the position is governed by the above concession which cannot now been withdrawn. They say that the Secretary of State has conceded that if the transfers in were fully funded (and the Secretary of State has accepted that the 1993 transfer was, and has not sought to withdraw that acceptance) then the liabilities in respect of the members who joined under that bulk transfer are covered by the Crown guarantee, and that that concession cannot be withdrawn.
i) The Secretary of State should be held to his concession.
ii) The matter is res judicata.
iii) It would be an abuse under Henderson v Henderson principles.
The concession - overview
i) Was there a relevant concession?
ii) If so, does the Secretary of State's proposal involve resiling from the concession?
iii) If so, would there be prejudice to the recipients of the concession such as would make it wrong to allow the Secretary of State to resile.
The content and scope of the concession
"The Crown Guarantee only extends to liabilities that vested in BT under s.60 at the transfer date. Accordingly it is our case that the only scheme liabilities so vesting were liabilities arising under the provisions of the scheme as it then stood – by reference to its then current membership, its then current rules and benefit structure, and with one sponsoring employer and no other participating employers ...
"… as a general proposition it is our case that scheme liabilities of BT that do not represent the liabilities inherited by BT under s 60 fall outside the guarantee. This applies, inter alia, to liabilities that BT has voluntarily undertaken, or arising from corporate transactions that BT has entered into, such as takeovers and related bulk transfer in. Examples of these are:
(iv) Any liabilities arising from additional funding strain as a result of bulk transfer in (or bulk transfers out). I explain this below."
"As a practical matter, bulk transfers represent a difficult area. With the assistance of GAD's advice, we have tried to adopt an approach which is broadly consistent with our overall position but also offers a workable, pragmatic solution.
Hence, we accept that a bulk transfer in, that is fully funded on the then actuarial assumptions of this scheme (not the transferring scheme) does not itself place any additional strain on the scheme funding. In this instance, and where the transfer was fully funded at the time, we do not seek to exclude from the guarantee liabilities in respect of transferred members by reason only of the bulk transfer.
But those liabilities may well be excluded for other reasons e.g. that they relate to post-transfer date joiners or that they relate to service with an employer other than BT.
As mentioned above, our stance on fully-funded bulk transfers is, however, an ad hoc solution to a specific problem. We do not accept that it is definitive of HMG's case on the principles relating to PTDEs or extends by analogy to other PTDEs. Our general position remains as set out in bold above."
"1. General power
As you point out, the general power of augmentation did not exist in the 1983 Deed and formed no part of the benefit structure at that time
Consistently with HMG's overall approach, it is our case that the Crown Guarantee does not extend to BT's liabilities, at wind up, to fund any benefits granted in exercise of this power."
"We do not accept that there is an effective analogy with bulk transfers into the scheme. The original scheme contemplated transfers in: it did not contemplate augmentation in exercise of a general power. See also my comments on bulk transfers under 2 below."
i) The Secretary of State was firmly taking the stance that additional liabilities arising as a result of post-transfer date voluntary acts did not fall within the guarantee.
ii) He took that point in relation to the post-transfer date amendment which created the augmentation power. Post-transfer date amendments were therefore treated as being the sort of event which fell within (i) (as one would expect on this logic – it is almost a paradigm).
iii) He was aware that the 1993 bulk transfer fell within that description as a matter of technicality. There had been an amendment to create Section C, to which the transferred-in members thereafter belonged.
iv) Nonetheless, the Secretary of State acknowledged that the original scheme had contemplated bulk transfers in (which is right – there is a provision in the rules about values transferred in for incoming members).
v) Against that background, the Secretary of State expressed the firm view that bulk transfers in which were fully funded, and which therefore did not create an additional quantum of liability, would be treated as creating liabilities within the guarantee subject to certain specified possible exceptions (not including an amendment). It seems to have been the fact that quantum was not increased which was significant.
vi) This concession, which was articulated in the formal concession, was made to offer a "workable, pragmatic solution".
vii) The concession was thus deliberate, made with eyes wide open and obviously intended to be acted on.
"These detailed issues include the practical application, and consequences, of the main issues of principle that the Court is asked to decide.
26, Those main issues are as follows:
… (C) Liabilities arising by reason of transactions and amendments occurring post-Transfer date
In any event, are the liabilities falling within the guarantee:
(i) limited to the comparable liabilities in respect of benefits that would have arisen in accordance with the provisions and structure of the scheme at the Transfer Date? or
(ii) not so limited, and extend to liabilities that have arisen or (to the extent of the increase) have been increased by reason of transactions, and scheme amendments, occurring after the Transfer Date."
"By parity of reasoning the guarantee does not extend to
(i) Liabilities in respect of increases in benefits voluntarily granted by BT after the Transfer Date (see Appendix A); and
(ii) Other changes to BT's liabilities to the scheme, resulting from changes to the scheme or affecting the scheme, procured by BT or to which BT agreed (see Appendix B).
The latter are referred to in the agreed list of issues by the phrase 'Post Transfer Date Events', though it would be more accurate to describe them as 'Transactions', rather than events."
"This Appendix relates to 'Post-Transfer Date Events' as defined in the list of issues. Without prejudice to that definition, the expressions can be explained and clarified as relating to transactions made or procured to be made by BT, after the Transfer Date, that increase, or might increase, the liabilities of BT to the scheme, in a manner not permitted by the provisions of the scheme as it stood at the Transfer Date (i.e. under the 1983 Deed). It is not intended to relate to events entirely outside BT's control, such as higher scheme liability arising from increased longevity of member, post transfer Date.
The transfers listed below indicate the transactions or type of transactions, falling within the description of Post-Transfer Date Events, that have or might have occurred since the Transfer Date or might occur in the future.
(i) Underfunded scheme mergers and bulk transfers in
If a bulk transfer is made from another scheme into this scheme, and if the transfer is not fully funded … the transfer weakens the funding position of the scheme as a whole. It thereby increases the liability of BT in respect of the other members of the scheme, who were members prior to the transfer.
Such increased liability would not fall within the guarantee.
However, if a transfer in is, at the time of a transfer, full-funded [sic] on the above basis, it is accepted that liabilities in respect of the members transferring in are not, under the ambit of this Appendix, excluded from the guarantee. But they are likely to be excluded on some other footing, e.g. (a) that they relate to Post-Transfer Date Joiners, and/or (b) that they relate to pensionable service of members as employees of some company other than BT, and/or (c) that the liabilities are properly liabilities of some Participating Employer other than BT.
NB. It is accepted that the transfer in on merger by the BTNPS was fully funded on the above basis."
The italicisation is in the original. The Appendix in question
"BT's liabilities would accordingly be increased by those transactions, in a manner wholly outside the contemplation of section 68."
The correct approach to permitting departure from a conceded position
"The stance which an appellate court should take towards a point not raised at the trial is in general well settled … It is perhaps best stated in Ex parte Firth, In re Cowburn (1882) 19 Ch D 419, 429 …
"the rule is that, if a point is not taken before the tribunal which hears the evidence, and evidence could have been adduced which by any possibility would prevent the point from succeeding, it cannot be taken afterwards. You are bound to take the point in the first instance, so as to enable the other party to give evidence."
Even if the point is a pure point of law, the appellate court retains a discretion to exclude it. But where we can be confident, first, that the other party has had opportunity enough to meet it, secondly, that he has not acted to his detriment on the faith of the earlier omission to raise it and, thirdly, that he can be adequately protected in costs, our usual practice is to allow a pure point of law not raised below to be taken in this court. Otherwise, in the name of doing justice to the other party, we might, through visiting the sins of the adviser on the client, do an injustice to the party who seeks to raise it."
" Mr Dhillon [for the respondent] submits that there was a concession by Mr Crane that his case was limited to the way it was put at trial. Mr Dhillon's point is that SHS were successful in getting Mr Crane to limit his case; he thus conceded any wider one. But in all the examples we have been given Mr Crane's case was simply clarified. What was outside his case so clarified was abandoned. In my judgment, the word concession adds nothing here and should be reserved for the situation where a party has expressly conceded the position … for example the legal consequence of a particular transaction. There is no statement that Mr Crane was giving up some point that he considered he had. A concession in that sense would be a strong indication that permission to raise a new point should not be given since a party cannot blow hot and cold and be enabled to act in a manner inconsistent with his express act."
"Only rarely and with extreme caution will the House permit counsel to withdraw from a concession which has formed the basis of argument and judgment in the Court of Appeal"
And went on:
"47…. That is a sound policy and in deciding to allow the concession to be withdrawn, their Lordships hope they have displayed the same caution as the House did in the Grobbelaars case. If there were any possibility that the outcome could have been affected if the point had been taken earlier, that would of course have been an entirely different matter."
"38. It is not in dispute that to withdraw a concession or take a point not argued in the lower court requires the leave of this court. In general the court expects each party to advance his whole case at the trial. In the interests of fairness to the other party this court should be slow to allow new points, which were available to be taken at the trial but were not taken, to be advanced for the first time in this court. That consideration is the weightier if further evidence might have been adduced at the trial, had the point been taken then, or if the decision on the point requires an evaluation of all the evidence and could be affected by the impression which the trial judge receives form seeing and hearing the witnesses."
"Likewise, in this case, in my judgment the court has to be satisfied that SHS will not be at risk of prejudice if the new point is allowed because it might have adduced other evidence at trial, or otherwise conduct[ed] the case differently." (my emphasis)
"25. … But it would not be right to allow even important points of law to be litigated if there is a risk of prejudice to SHS in allowing them to be raised at all."
It is apparent from this that clear, actual prejudice need not be demonstrated. A risk of prejudice is sufficient.
i) The resiling party has the burden of establishing that the previously forgone point should be raised.
ii) It will be harder to raise a point which has been expressly conceded.
iii) If taking the point would risk causing prejudice to the other party, in the sense that it might have been deprived of the opportunity of dealing with the case differently in the court below, then it is unlikely that resiling will be allowed. The greater the risk, the less likely it is that it will be allowed.
iv) There is a low threshold of risk for these purposes (see "any possibility" in Paramount).
v) The burden of establishing no risk is on the party who wishes to withdraw the concession, and the other party should have the benefit of any doubt in this area.
"Likewise, in the Paramount case cited by Mr Macpherson, one of the factors which influenced the Privy Council was the fact that it was in the public interest to allow a public body, which would otherwise end up liable to pay large sums, to raise on appeal a point of construction involving no new evidence."
Although Mr Evans did not rely on that particular sentence, I have borne it in mind in this case.
i) The Secretary of State has not really given any good, or indeed any, reason why he now wishes to change his mind, other than that he now wishes to run an important point.
ii) The concession, as described above, was not merely a way in which the case below was run, which now turns out to be less fortunate than was originally appreciated. It was an express concession which (see Arden LJ in Crane) the courts are less likely to allow departure from.
iii) The courts are even less likely to allow a departure from a concession which is part of carefully set up proceedings in the manner in which these were set up. It is not desirable to allow a party to proceed on one basis, get the benefit of a judgment which has been given on that basis, and then seek to change course because that judgment seems to benefit him/her. If the first decision contains unanticipated approaches, or if it seems that it will force the proceedings in a different direction to that which was originally anticipated, then a change of course may become justifiable. But that is not this case.
iv) The person seeking to withdraw the concession is not some under-funded, under-represented individual who has made a litigation career choice which now appears to be unfortunate and with whom the court sympathises for that reason. The person seeking to withdraw the concession is a large government department, with extremely able lawyers, which made the concession in the course of carefully conducted negotiations and with eyes wide open.
Abuse of process