UKPC 39
Privy Council Appeal No 0086 of 2013
Vincent L Nelson QC
Stephen Shelton QC
(Instructed by Myers, Fletcher and Gordon Solicitors)
Michael Hylton QC
Kevin O Powell
(Instructed by Charles Russell Speechlys LLP)
(a) (para 1) the trustees "shall consist" of the first to sixth respondents and the second and fourth appellants together with Mr Ivan Irikov and Mr Ivan Makarenko;
(b) (para 5) the first to sixth respondents "undertake not to take any decision regarding the distribution of or to distribute any surplus declared without the agreement of all the trustees", but, "in the absence of agreement, the parties are at liberty to apply to the court for directions";
(c) (para 6) the first to sixth respondents appoint Mr Astor Duggan of the fund actuary, Duggan Consulting Ltd ("Duggan"), to provide or make available to an actuary nominated by Rusal, Mrs Constance Hall of Eckler, Consultants and Actuaries, "all information, calculations and assumptions which may be used and made in the preparation of the Winding Up report, the scheme of distribution of the surplus and the winding up process generally".
The deed and rules
The main purpose of the Plan administered and funded in accordance with this Deed is the provision of retirement benefits upon retirement at a specified age for the members and/or to provide pensions to their surviving spouses or dependents. The portions of the Plan referring to Life Assurance are provided through a Group Life Insurance Policy or Policies. The administration and management of the Plan shall be vested in the Trustee and the Fund shall be vested in the Trustees and shall be held by them upon irrevocable trust for application in accordance with the Trust Deed and the Rules."
"8.1.2 to pay benefits
to pay or cause to be paid out of the Fund the pensions and other benefits prescribed by the Rules
8.1.3 to pay additional benefits
to pay or cause to be paid such benefits in addition to those specified in the Plan as the Employer may request provided that the Employer agrees in writing by an appropriate officer or other person duly authorised by a Resolution of the Board of Directors of the Employer that the Trustee will be reimbursed therefor ."
"ALTERATION OF THE DEED OR RULES
19.1. The Trustee and the Employer may at any time amend any of the provisions of this Deed and the Rules by Supplemental Deed PROVIDED THAT no amendment shall be made which:-
19.1.1 varies the main purpose of the plan as administered and funded in accordance with this Deed, namely the provision of pensions for employees upon their retirement and for their surviving spouses and dependants.
19.1.2 reduces the benefit of any pensioner or affects the accrued benefits of any member or alters the rates of their contributions except in either case with the consent of that Member.
19.1.3 authorises the return of any part of the Fund to the Employer or any of the Associated Employers.
19.1.4 extends the operation of the Plan beyond the Trust Period.
PRIORITIES ON DISSOLUTION OF THE FUND
18.1 In the event of the Fund at any time being dissolved as aforesaid the Trustee shall cause to be computed by the Actuary, the assets due in respect of each Member of the Plan as follows:
18.1.1 Assets in the sub-Account for each Member's Voluntary Additional contributions as provided for in Clause 3 hereof shall be allocated to the Member to whose credit the account stands:
18.1.2 In the computation the remaining assets shall be allocated so far as it has not already been done towards liabilities for pensions and other benefits in the following order of priority that is to say:-
(i) pensions whether in payment status or deferred to normal retirement date or other benefits under the RILA Plan (more particularly described in the Rules of the Plan);
(ii) employee contributions after the Commencing Date less payment made in respect of the employee other than payments in respect of benefits described in sub-paragraph (i) above all accumulated with interest;
(iii) to the extent not provided in sub-paragraphs (i) or (ii) above towards liabilities for pensions or persons already in receipt or entitled to be in receipt of or entitled to retire and commence receiving pension on the date of dissolution;
(iv) to the extent not provided in sub-paragraphs (i) or (ii) above towards liabilities for pensions payable at normal retirement date as defined in the Rules of the Plan to those whose employment has terminated and are entitled to or if their employment terminated would under the Rules of the Plan be entitled to a deferred pension at normal retirement date as defined in the Plan;
(v) all other benefits provided for under the Plan.
Liabilities for benefits referred to in sub-paragraphs (i), (iv), (v) above shall be increased as recommended by the Actuary to allow for the value of any options which would have been available to the Member.
18.1.3 Such part of the balance of the assets of the Fund not already allocated as above shall be allocated to augment proportionately the liabilities for pensions under (ii) of this clause for each Member subject always to such limitations as are consistent with the approval of the Fund by the Commissioner Taxpayer Audit & Assessment.
PROVIDED that such computations shall not create new liabilities to pensions or any new right in any Member to assets allocated in respect of him.
18.2. the Trustee shall then divide the Members into groups based on employment with the Associated Employer. The Members most recently employed by a particular Associated Employer are allocated to that Associated Employer.
18.3. assets, based on the computations in sub-clause 18.1 above in respect of the group of Members allocated to each Associated Employer shall be either:-
18.3.1 transferred by the Trustee to a scheme adopted by the particular Associated Employer and approved or capable of approval by the Commissioner Taxpayer Audit and Assessment under section 44 of the Income Tax Act, or
18.3.2 be applied by the Trustee to provide the benefits computed in accordance with sub-clauses 18.1.1 and 18.1.2 above to the Members in some other approved way. Any remaining assets shall be returned to the particular Associated Employer or at the request of that Employer shall be used to provide such additional benefits as the Trustee may see fit. Notwithstanding any provision in the Rules, benefits hereunder may, with the consent of the Trustee, to the extent permitted by Jamaican Law, be commuted for cash.
18.3.3 if there are no Associated Employers the balance remaining in the Fund after the payment of all benefits under sub-clauses 18.1.1 and 18.1.2 shall be paid to the Employer."
It is common ground that in clause 18.1.3 the words "under (ii) of this clause" are a slip and should be read as "under 18.1.2 of this clause".
"1.4 Object of the Plan
The object of the Plan which is covered by the Deed is to provide pensions, retirement benefits and certain other benefits for those employees of the Employer who participate in the Plan and for their surviving spouses and dependents. The part of the Plan referring to Life Assurance is covered by a Group Life Assurance Policy or Policies.
1.5 Other Definitions
In the Trust Deed and the Rules unless the context otherwise requires:
1.5.17 "Income Tax Act" means the Income Tax Act of Jamaica and any statutory modification or re-enactment thereof for the time being in force. .
1.5.19 "Member" shall mean an Employee who has joined the Plan and who is currently in Pensionable Service ...
1.5.23 "Pensioner" means a former Member whose pension under the Plan has come into payment ..
5.7 General Augmentation of Benefits
5.7.1 At the request of the Employer (or at the discretion of the Trustee but in that even (sic) subject to the agreement of the Employer) the Trustees may:
(i) increase all or any of the provisions and other benefits payable under the Plan; or
(ii) provide benefits or additional benefits under the Plan for Members, Pensioners, former Members with vested rights or beneficiaries:
subject to the payment to the Plan of such additional contributions (if any) as the Trustee and the Employer (acting on the advice of the Actuary) shall determine to be necessary to ensure that the actuarial solvency of the Plan is not thereby impaired, PROVIDED THAT approval of the Plan under the Income Tax Act would not be prejudiced.
15.3 Maximum Lump Sum and Retirement Income Payments
Annual Retirement Income may not exceed 2% of your annual salary at the date of your retirement for each year of service with the Employer up to a maximum of 33 1/3 years."
"27 (4) Where trustees intend to voluntarily wind-up an approved superannuation fund or approved retirement scheme, they shall notify the Commission of their intention no later than ninety days before the winding-up and obtain the prior approval of the Commission for such winding-up.
31. Notwithstanding anything to the contrary in this Act, upon the winding-up of an approved superannuation fund or approved retirement scheme, all assets for the time being of that fund or scheme shall be delivered to the trustee or provisional trustee who shall pay all debts in the following order of priority:
(a) Expenses of the fund or scheme;
(b) Voluntary contributions and transfer values;
(c) Pensions owing to pensioners or their beneficiaries;
(d) Pensions for members eligible for early retirement and their beneficiaries;
(e) Pensions owing to deferred pensioners and their beneficiaries;
(f) Prospective pensions for the remaining active members and their beneficiaries;
(g) Any other liabilities relating to the approved superannuation fund or approved retirement scheme.
32 (1) If after discharging the liabilities specified in section 31(a) to (f) any surplus exists, the trustees or provisional trustees shall employ an actuary approved by the Commission to verify the amount of the surplus.
(2) The trustees or provisional trustees shall, on receipt of the verification of the surplus, forward a copy thereof to the Commission together with a scheme of distribution of the surplus for the Commission's approval.
(3) The Commission shall examine the scheme of distribution before giving its approval, so, however, that where the Commission thinks it necessary, it may, after consultation with the trustees or provisional trustees, amend such scheme.
(4) The Commission shall after approving the scheme of distribution, with or without amendment, return it to the trustees or provisional trustees who shall distribute the surplus in accordance with the scheme of distribution as approved.
(5) The Commission shall, in approving a scheme of distribution, have regard to the payment of assets in the following order of priority -
(a) to the current pensioners and their beneficiaries;
(b) providing additional benefits for the remaining members and their beneficiaries;
(c) subject to subsection (6), to the sponsor.
(6) Subsection (5)(c) shall not apply to assets of an approved retirement scheme."
"Additionally, although the Plan has not been approved by the Financial Services Commission (FSC) and it is not clear whether, or to what extent, the provisions of the Pensions (Superannuation Funds and Retirement Schemes) Act, 2004 (the Pensions Act) apply to the Plan; we took these provisions into account in conducting our review."
Validity of clause 18.3.3?
Which version the Income Tax Act is relevant?
"the Commissioner shall not . approve any fund unless it is shown to his satisfaction that:-
(b) the fund has for its sole purpose the provision in any case, of lump sums not exceeding $120,000 or pensions and annuities not exceeding two-thirds of the salary of the employee at the date of his retirement, for all or any of the following persons in the events respectively specified, that is to say for persons employed in the trade or undertaking, either on retirement at a specified age or on becoming incapacitated at some earlier age, ..."
"the Commissioner shall not . approve any fund unless it is shown to his satisfaction that -
(b) the fund has, for its principal purpose, the provision of lump sums, pensions and annuities for its members, and in the case of -
(ii) pensions and annuities -
(A) an amount not exceeding seventy-five per cent of the remuneration of an employee at the date of his retirement at a specified age after a period of not less than thirty-seven and one-half years of service or on becoming incapacitated at an earlier age; or
(B) a proportionate percentage in respect of a shorter period of service,
for all or any of the following persons in the events respectively specified, that is to say, persons employed in the trade or undertaking, either at a specified age or on becoming incapacitated at some earlier age .."
"The Consolidating Trust Deed and Plan Rules of Glencore Alumina Jamaica Ltd., Pension Plan is now in order.
The Pension Scheme is hereby approved effective August 31, 2004 pursuant to Section 44 of the Income Tax Act.
For the approval to remain in force, you are to supply the Department with the following:
1. Annual accounts of the Fund along with:
(a) A list of contributions by each member together with the salaries on which these contributions are based.
(b) Contributions by the employer in respect of the members.
(c) Details of any payment or repayment out of the fund to either member or employer.
2. Triennial Actuarial Valuation Reports of the Fund
3. In the event of the termination of the Scheme:
(i) A copy of the resolution by the Trustees for the winding up within 14 days of the date of the Resolution.
(ii) Full details of the distribution of the assets of the Fund.
4. Any further information that may be required."
Scope of clause 18.1.3?
Uplift for inflation?
"Increases were last granted to pensioners and spouses on 1 January 2008. Regular and supplementary augmentations were calculated by reference to the pensioner's retirement date. The regular augmentation was subject to a maximum of 19.5% of the pension in payment as at 31 December 2007 whilst the supplementary augmentation was subject to a maximum of 10.4%".
"Provided that the Commissioner may, if he thinks fit, and subject to such conditions, if any, as he thinks proper to attach to the approval, approve a fund, or any part of a fund, as a superannuation fund for the purposes of this Act -
(iv) Notwithstanding that the fund makes provision for pensions and annuities, the employer may increase the post retirement benefit of a pensioner member; however, the increase shall not exceed the annual changes in the Consumer Price Index."
The sense of this ungrammatical amendment is fairly clear. It provides or possibly confirms that a fund may enable an employer to grant post-retirement pension increases, but limits such increases by reference to a maximum derived from the Consumer Price Index.
"shall not be exercised so as to destroy or seriously damage the relationship of confidence and trust between the company and its employees and former employees". (P 598E-F)
"My own view is that members' interests and expectations may be of relevance when considering whether an employer has acted irrationally or perversely. There could potentially be cases in which, say, a decision to override expectations which an employer had engendered would be irrational or perverse. On the other hand, it is important to remember that powers such as that at issue in the present case are not fiduciary."
i) a hearing to consider and give directions as to the potential significance of the 2004 Act (see paras 13, 48 and 49).
ii) Unless the trustees then agree on whether and how their discretion should be exercised, instructions to the actuary in the light of the directions given under (i) as well as in the light of the Board's advice generally.
iii) Guidance by the actuaries as to why and how the present surplus has arisen (see paras 46-47 above) and as to the likely impact of future inflation, and as to the nature and implications of any proposals which the trustees might, if they so decided in their discretion, adopt to cater for such inflation, bearing in mind all parties' respective interests.
iv) A decision by the trustees as to whether or not and how to exercise their discretion, or, failing agreement, a further hearing before the court of first instance followed by directions given to the trustees in that regard (paras 44 to 49 above).
v) If and so far as the trustees' discretion is in the event exercised in favour of making an inflation allowance under Rule 5.7, a decision by Rusal as to whether or not to consent thereto (paras 50 to 57 above).
vi) Any further necessary hearing and determination.