IBM United Kingdom Pensions Trust Ltd v IBM United Kingdom Holdings Trust Ltd & Ors

An employer’s duty of trust and confidence in relation to a pension scheme requires a genuine and rational exercise of a contractual consent discretion. The duty is objective and fact-sensitive, but is not equivalent to fairness or ordinary reasonableness. The threshold is severe: conduct must be irrational or perverse, or otherwise objectively capable of seriously damaging the relationship of trust and confidence.

Where legislation has changed and no current statutory or contractual obligation requires a pension amendment, refusing consent to give retrospective effect to former preservation requirements will not necessarily breach the duty. The court must assess the refusal in the circumstances existing when consent is requested.

The judgment supplemented an earlier judgment in the same Chancery Division proceedings. The court had ordered rectification concerning flexible retirement provisions in the C Plan but had reserved the question of IBM’s duties when considering consent to amendments reflecting former preservation requirements.

Written submissions addressed whether further arguments were open, the construction of Clause 13, and the scope and application of the employer’s duty of trust and confidence. The central issue was whether IBM had to consent to an amendment giving deferred members an unreduced pension from age 60, notwithstanding the subsequent change in legislation.

1. Scope of argument. The Trust Company could argue the meaning of Clause 13 because that issue was relevant to the Imperial duties. It could not reopen the equitable maxim argument, which had not been properly pursued at trial and fell outside the invitation for further submissions.
2. Clause 13. IBM could not simply refuse consent to any amendment. The clause had at least one purpose of ensuring that proposed amendments were limited to what was necessary to comply with the relevant preservation requirements. IBM was required to consider a proposal genuinely. An irrational or perverse refusal to consider it could damage the relationship of trust and confidence, even if the matter could ultimately be referred to the OPB.
3. Applicable duty. The duty was objective and severe. It was not a test of fairness or ordinary reasonableness. A genuine and rational exercise of the discretion was required, alongside the wider question whether the conduct was objectively capable of seriously damaging trust and confidence.
4. Application. Rectification did not itself require IBM to consent retrospectively. The relevant question was whether refusal was improper when the request was made. By then, the statutory landscape had fundamentally changed. No current statutory or contractual obligation required the requested amendment, and the Clause 13 power was not available to enforce past preservation requirements. The parties had intended flexible retirement but had not intended an unreduced deferred pension at age 60. Refusal was therefore not irrational, perverse, unreasonable in the relevant sense, or objectively destructive of trust and confidence.
5. Disposition. IBM was not required by its Imperial duties to consent to the requested amendment, and the Trust Company could not make it without that consent.

First-instance supplemental judgment following the court’s earlier judgment in the same proceedings. No appellate decision is stated in the judgment.