BT Pension Scheme Trustees Ltd v British Telecommunications Plc & Anor

A statutory transfer of liabilities under Telecommunications Act 1984, section 60, includes a contractual pension obligation extending into the future. Where the obligation is single and indivisible, later members joining the existing employer’s scheme may increase its amount without creating a new liability. Section 68 guarantees liabilities vested under section 60, but does not extend to liabilities first created by later amendments to the pension deed or rules. This includes liabilities for employees of participating employers who were not originally employed by BT. A statutory guarantee provision cannot be used to distort the proper construction of the primary vesting provision. Parliamentary material concerning the guarantee does not establish the meaning of section 60 where the statutory wording is unambiguous.

The claimant trustee sought declarations concerning the scope of the Crown guarantee given in 1984 for liabilities of British Telecommunications plc under its pension scheme. The issues concerned whether the original scheme deed required BT to provide sufficient funds on termination to purchase annuities, whether that obligation continued under the 2002 and later rules, and whether the guarantee covered liabilities relating to post-transfer joiners and employees of participating employers.

BT was neutral on the scope of the guarantee but supported the trustee on the pension obligation. The Secretary of State contended that the guarantee was limited principally to liabilities relating to members existing at the transfer date. The court determined the issues selected for trial.

1. Buy-out obligation. Clause 20 of the 1983 scheme deed required the employer to provide sums necessary to restore the solvency of the fund on termination. Solvency was to be measured by reference to the liabilities arising on termination, including the cost of purchasing the annuities specified in the clause. The obligation was not merely a reference to periodic deficiency contributions under clause 12. The equivalent provisions in the 2002 rules and subsequent versions preserved that obligation.
2. Scope of section 60. The liability transferred under section 60 of the Telecommunications Act 1984 was the single contractual liability of the Corporation to the pension trustees under the deed. It was not divided according to the members by reference to whom its amount was later calculated. The engagement of new BT employees after the transfer date increased the amount of the existing liability but did not create a new liability. Their associated contributions were therefore liabilities vested under section 60 and covered by section 68.
3. Later amendments. A liability created or enlarged by a later amendment to the deed or rules was not the same liability as that vested under section 60. Paragraph 36 of Schedule 5 substituted BT as the relevant contracting party, but did not bring such newly created liabilities within the guarantee. The same applied to liabilities arising when the scheme was amended to admit employees of participating employers who had never been employed by BT.
4. Construction and Parliamentary material. The court rejected the attempt to use the alleged width of the guarantee to give “liabilities” in section 60 an artificial meaning. The wording was unambiguous in the context of the pension deed. The gateway in Pepper v Hart was not satisfied. Even if the Parliamentary statement were admissible, it addressed section 68 and the guarantee’s effect, rather than the meaning of the primary vesting provision in section 60.
5. Hypothecation. The court declined to determine whether a guarantee payment would have to be applied exclusively for the benefit of pre-transfer joiners. The premise for the argument was rejected, and potentially affected parties had not been given an opportunity to address the issue.