International Management Group (Uk) Limited v German & Anor

The Court of Appeal decided that section 91 of the Pensions Act 1995 does not prevent parties from entering into, or the court from approving or enforcing, a bona fide compromise of disputed or doubtful entitlements or rights under an occupational pension scheme. The court read s91 as targeting the deliberate surrender or assignment of an established entitlement or right, not the settlement of a bona fide dispute as to whether any entitlement or right in fact exists. The court held that statutory language focusing on a person who "is entitled" or "has a right" points to established rights; public policy considerations favouring compromise and the existing rules for court approval of representative settlements support that construction. The court gave no view on provisions of the Finance Act 2004 and emphasised that it was determining the construction of s91 alone.

This appeal concerned whether s91 of the Pensions Act 1995 prevents parties from agreeing, and the court from approving, a global compromise of disputed pension entitlements in representative litigation. The dispute arose from proceedings in the Chancery Division in which the trustee sought clarification of the terms and entitlements under an occupational pension plan. Arnold J had held that purported compromises between the employer and scheme members were "surrenders" or agreements to effect a surrender and were therefore unenforceable under s91, even if the entitlement was disputed.

The parties asked this court, in essence, whether s91 would render unenforceable a court-approved compromise of the appeal and cross-appeal. The appellant argued that s91 does not catch bona fide compromises of doubtful claims and, alternatively, that the court had power to approve such compromises under CPR 19.7(6). The respondents relied on Arnold J's construction that s91 barred compromises which in substance involved waiver of rights which, but for the compromise, the member would have had.

The Court of Appeal analysed the statutory language and purpose. It emphasised that subsection (1) refers to persons who "is entitled" to or "has a right" to a pension and therefore addresses the deliberate surrender of an established entitlement or right. The court concluded that a bona fide compromise of a disputed or doubtful claim does not amount to the surrender of an established entitlement and so is not caught by s91. The court considered policy and purposive arguments, other statutory analogies, and authorities on the enforcement of compromises, concluding that making all such compromises unenforceable would be both unnecessary to the statutory purpose and contrary to the wider public policy favouring settlement. The court did not decide questions about whether a court could make enforceable an agreement that Parliament had made unlawful; it noted that the court could not itself validate an agreement which the statute plainly made unenforceable. The court gave no view on similar provisions in the Finance Act 2004.

Nature of relief sought: approval of a global compromise of an appeal and cross-appeal in representative pension litigation to bind the parties and those represented.

Issues framed: (i) whether s91 renders unenforceable compromises (or agreements to surrender) of pension entitlements where those entitlements are disputed; (ii) whether the court's power under CPR 19.7(6) to approve representative compromises is affected by s91.

Court's reasoning: s91 protects against surrender of established entitlements or rights; it does not extend to bona fide compromises of doubtful claims; statutory language and policy do not require that result; CPR 19.7(6) cannot save an agreement that statute unmistakably renders unenforceable, but where a compromise concerns a putative entitlement it is not a s91 surrender and court approval is permissible.

Appeal allowed. The Court of Appeal reversed the judge's construction that s91 rendered unenforceable bona fide compromises of disputed pension entitlements. The court held that s91 addresses surrender of established entitlements or rights and does not prevent parties or the court from making or approving genuine compromises of doubtful or disputed claims; however, the court cannot validate an agreement that the statute plainly renders unenforceable.

Appeal from Arnold J in the Chancery Division: main judgment [2009] EWHC 2785 (Ch) with a supplementary judgment [2009] EWHC 3410 (Ch); this Court of Appeal judgment reported as [2010] EWCA Civ 1349.