Hodgson & Ors v Toray Textiles Europe Ltd

A statement that pension benefits will be identical to those under an earlier scheme does not necessarily incorporate all future changes or provisions of that scheme. The statement must be construed in its contractual and temporal context.

A court will not imply a restriction on a power of amendment where the proposed restriction conflicts with an express, unrestricted power. A benefit dependent on the employer’s consent is not an accrued benefit merely because the member has a right to be considered. Trustees therefore act within their powers when executing a later definitive deed that alters prospective or contingent benefits, unless the governing instruments impose a valid limitation.

The claimant members sought declarations concerning the benefits payable under the Toray Textiles Europe Pension Scheme. The issue arose from an earlier judgment concerning the construction of the scheme and a further question raised by the second defendant, Mr Skinner.

Mr Skinner had transferred from the Courtaulds pension scheme. The Toray interim deed stated that the scheme’s main provisions had been made known in an attached announcement, which described the benefits as identical to those under the Courtaulds scheme. The later definitive deed introduced provisions under which early-retirement pensions were always subject to actuarial reduction.

The central question was whether the interim deed or the obligation to execute a definitive deed contained an implied restriction preventing retrospective removal of an alleged accrued benefit.

The court held that the trustees had acted within their powers in executing the Toray definitive deed.

1. Construction of the announcement. The statement that benefits would be identical to those under the Courtaulds scheme did not promise that benefits would remain identical indefinitely. The acceptance that prospective amendments were permitted showed that the statement could not have that absolute meaning.
2. The natural interpretation was that the announcement referred to benefits available under the Courtaulds scheme at the date of the announcement. At that time Mr Skinner had no accrued right to an immediate early-retirement pension, because payment depended on the employer’s consent. A right to be considered was not a “Benefit” under the Courtaulds scheme.
3. The announcement was made before the Barber judgment. It could not sensibly be read as incorporating additional benefits created by a future judgment of the ECJ. Nor did it incorporate the Courtaulds scheme’s administrative provisions, including its amendment powers.
4. The proposed implied restriction conflicted with clause 17 of the Toray interim deed, which contained an unrestricted power to cancel, amend or add to the trusts, powers and provisions retrospectively, immediately or prospectively. A term will not be implied where it conflicts with an express term.
5. There was accordingly no basis for implying a restriction into clause 17 or into clause 4’s obligation to execute a definitive deed. The trustees had not acted in excess of their powers.