Alexander Forbes Trustees Services Ltd v Doe & Anor

In a hybrid occupational pension scheme with a single fund, regulation 13 of the Occupational Pensions Scheme (Winding-up) Regulations 1996 modifies section 73 of the Pensions Act 1995 by excluding relevant money purchase liabilities and the corresponding assets from the section 73 calculation. The resulting statutory scheme exhaustively governs the priorities applicable to those assets, subject only to section 73(4). Scheme rules cannot give defined benefit members a further priority over the extracted money purchase fund. The court must construe the words enacted, using legislative purpose and practical consequences only to choose between meanings that the words can bear. For a trustees’ application seeking determination of a pure question of law, proceedings may be issued without naming a defendant where the procedural rules permit it. Fictional representative defendants are generally unnecessary where the trustees are before the court and the beneficiaries are bound.

The claimant was the statutory independent trustee of two hybrid occupational pension schemes in wind-up. Each scheme had a single fund containing both money purchase and defined benefits, and the schemes were in deficit.

The trustee sought determination of whether assets attributable to money purchase benefits could be diverted to satisfy defined benefit liabilities. The issue turned on the interaction between section 73 of the Pensions Act 1995, regulation 13 of the Occupational Pensions Scheme (Winding-up) Regulations 1996, section 117 of the 1995 Act and the scheme rules. The court also considered whether the use of fictional representative defendants was procedurally necessary.

1. Construction of the pension legislation. Regulation 13 modifies section 73 so that relevant money purchase liabilities and the assets by reference to which those benefits are calculated are excluded from the section 73 fund. The regulation does not merely remove money purchase benefits from the statutory order of priorities while leaving the extracted assets subject to the scheme rules.
2. The modified section 73 scheme provides an exhaustive code governing the priorities to which defined benefit members are entitled in relation to the relevant funds, subject only to the limited operation of section 73(4). The assets extracted for relevant money purchase benefits must be applied in satisfying those benefits. Section 117 therefore overrides inconsistent scheme provisions.
3. The construction was supported by the approach in Bridge Trustees v Holdsworth [2011] 1 WLR 1912, including the legislative assumption that money purchase benefits would ordinarily be adequately, but not excessively, funded. The court also applied the approach to statutory construction described by Lord Simon of Glaisdale in Stock v Frank Jones (Tipton) Ltd [1978] 1 All ER 948: purpose and avoidance of anomaly may guide the choice between meanings capable of being borne by the enacted words.
4. The earlier decision in Bainbridge v Quarters Trustees Ltd [2008] EWHC 979 (Ch) decided that the relevant scheme had one fund, but did not decide the statutory construction issue. The reasoning in British Vita Unlimited v British Vita Pension Fund Trustees Ltd [2007] PLR 157 was useful general guidance on conflicts between legislation and scheme rules, but could not control the construction of regulation 13.
5. Procedure. Trustees seeking determination of a pure question of law may, with the court’s permission and appropriate directions, issue a claim without naming a defendant under CPR 8.2A and Practice Direction 64B. Where trustees are before the court, beneficiaries are bound under CPR 19.7A(2), unless the court orders otherwise. The fictional defendants were therefore unnecessary, although no prejudice had resulted.
6. The statutory construction issue was determined in favour of the money purchase members.