International Management Group (UK) Ltd v German & Anor

Section 91 of the Pensions Act 1995 does not make a bona fide compromise of a disputed or doubtful pension claim unenforceable merely because the compromise involves waiving the claim. The prohibition concerns the deliberate surrender of an established or accepted pension entitlement or right. It does not extend to a putative entitlement whose existence is genuinely disputed or uncertain and is settled to avoid litigation. The absence of an express compromise exception in section 91(5) is immaterial because such compromises fall outside the prohibition. Court approval cannot override a statutory bar, but a court-approved compromise of disputed pension rights is not caught by section 91.

The appeal and cross-appeal arose from judgments of Arnold J concerning the construction of an occupational pension scheme established in 1977. The judge held, on question 6, that compromises involving the waiver of pension entitlements or rights were unenforceable under section 91 of the Pensions Act 1995: [2009] EWHC 2785 (Ch); supplementary judgment, [2009] EWHC 3410 (Ch).

During the appeal, the parties sought approval of a global compromise. The agreed preliminary question was whether section 91 rendered unenforceable a court-approved compromise of all issues in the appeal and cross-appeal.

The court unanimously ruled that section 91 of the Pensions Act 1995 would not render unenforceable a bona fide compromise of the appeal and cross-appeal. The remainder of the appeal was adjourned while settlement discussions continued.

1. Section 91(1)(a) is directed to the deliberate surrender of an actual existing pension entitlement or right. Its language does not extend to a claimed entitlement or right whose existence is genuinely disputed or doubtful and remains to be established by legal determination.
2. A bona fide compromise waives a putative claim in order to avoid litigation. It does not surrender an established pension entitlement or right. Section 91 therefore does not prevent such a compromise, including a compromise requiring court approval.
3. The protective purposes of section 91, including protection against improvidence and protection of the public purse, support restraint on surrender of established rights. They do not support making bona fide compromises unenforceable. Such a result would force pension disputes to be litigated to judgment and would be inconsistent with the general policy favouring settlements.
4. The absence of an express compromise exception in section 91(5) provides no assistance to the contrary interpretation. No exception is required where the compromise falls outside the scope of section 91(1).
5. The court rejected the separate argument based on CPR 19.7(6). If section 91 applied, court approval could not override the statutory prohibition or make an agreement enforceable. The court’s conclusion instead rested on section 91 not applying to a bona fide compromise of a disputed or doubtful claim. Analogies with sections 203 of the Employment Rights Act 1996, 77 of the Sex Discrimination Act 1975 and 72 of the Race Relations Act 1976 required caution because those provisions concerned specific statutory rights.

• Court of Appeal (Civil Division): In [2010] EWCA Civ 1349, the court unanimously determined the preliminary point in favour of the enforceability of a bona fide court-approved compromise.
• High Court, Chancery Division: Arnold J’s main judgment, [2009] EWHC 2785 (Ch), and supplementary judgment, [2009] EWHC 3410 (Ch), held that the relevant compromises constituted unenforceable surrenders under section 91.