Allied Domecq (Holdings) Ltd v Allied Domecq First Pension Trust Ltd & Anor

In a multi-employer occupational pension scheme, the collective contribution rate must be distinguished from the contributions and payment periods attributed to individual employers. Employer agreement to individual payment arrangements does not make the collective rate employer-controlled. Scheme rules should be construed against the applicable statutory funding regime, preferring a construction which avoids conflict and gives effect to statutory requirements. Here, the actuary determined the aggregate amount and rate needed to restore solvency without the principal employer’s consent. The employer’s agreement concerned individual employers’ payment rates and timing. The schemes therefore fell within regulations 5(3)(b) and 8(2)(e), and paragraph 9(5) of Schedule 2 to the Occupational Pension Schemes (Scheme Funding) Regulations 2005.

The appellant employer brought Part 8 proceedings against the trustees of two occupational pension schemes. The issue was whether the scheme rules required the employer’s agreement before contribution rates could be determined by or on the advice of the actuary.

The High Court, in [2007] EWHC 2911 (Ch), declared that regulations 5(3)(b) and 8(2)(e), and paragraph 9(5) of Schedule 2 to the 2005 Regulations, applied to both schemes. The employer appealed, contending that rule 18.7.5 required agreement to the period for restoring solvency and therefore to the relevant contribution rate. The central issue was whether that agreement related to collective contributions or only to the payments of individual participating companies.

The Court of Appeal unanimously dismissed the appeal. Sir John Chadwick gave the leading judgment, with Lady Justice Smith and Lord Justice Ward agreeing.

1. Construction of rule 18.7.5. The rule contained an initial condition followed by two groups of directions separated by a semi-colon. The first group concerned the amount and manner of the collective payment required to restore solvency. The actuary determined the aggregate amount. The second group concerned individual employers, including apportionment and the period within which each employer was to pay. The requirement for agreement with the principal company therefore related to individual payment rates and timing, not to the period for restoring the fund collectively.
2. Statutory context. The rules had to be construed in the context of both the Pensions Act 1995 and the 1996 Regulations in force when the consolidated deeds were executed, and the later Part 3 regime under the Pensions Act 2004. Under the earlier regime, schedules had to identify each employer’s rates and due dates. After 30 December 2005, the relevant rates for the statutory provisions were the rates payable by the employers collectively.
3. Construction avoiding conflict. The contractual rules were not displaced by the statutory regime except where they conflicted. Following the approach accepted in British Vita Unlimited v British Vita Pension Fund Trustees Ltd, [2007] EWHC 953 (Ch), a construction which avoided conflict with the legislation and met the evident statutory need was preferred.
4. Result. The collective directions in rule 18.7.5 had the same effect as rule 12.1.1: the actuary determined the collective contribution rate without the principal employer’s consent. Regulations 5(3)(b) and 8(2)(e), and paragraph 9(5) of Schedule 2 to the Occupational Pension Schemes (Scheme Funding) Regulations 2005, therefore applied to both schemes.

• Court of Appeal (Civil Division): Appeal dismissed. The declarations that the relevant provisions of the 2005 Regulations applied to both schemes were upheld.
• High Court, Chancery Division: Mr Justice Blackburne made the declarations on 7 December 2007 in [2007] EWHC 2911 (Ch).