PI Consulting (Trustee Services) Ltd v The Pensions Regulator & Ors

The court was asked to decide whether nine schemes or arrangements were "occupational pension schemes" for the purposes of section 1 of the Pension Schemes Act 1993. The court proceeded on the agreed assumption that the deeds and rules creating the schemes were genuine and not shams. Two principal statutory questions were framed: the purpose question (whether each scheme was established for the purpose of providing benefits to people with service in employments of a description, or for that purpose and also for other people) and the founder question (whether the scheme was established by, or by persons including, a person to whom section 1(2) applied when the scheme was established).

Applying an objective construction to the scheme documents, the judge held that, on their true construction, the schemes were established to provide benefits to officers and employees of the founder companies and to other people, satisfying the purpose test in section 1(1)(a)(ii). On the founder issue the court held that the founder companies had directors who were "in employment" under the statutory definitions and that the natural construction was that the company employed the director; accordingly the founder test in section 1(2)(a) was satisfied. Because both limbs were satisfied, the court concluded that the 5G Futures Pension Scheme and the eight representative Dalriada schemes were occupational pension schemes within section 1 of the Pension Schemes Act 1993.

This case concerned declarations and determinations as to the statutory status of nine pension arrangements. Two separate Part 8 proceedings were before the court: one by Pi Consulting (Trustee Services) Ltd seeking a declaration that the 5G Futures Pension Scheme was an occupational pension scheme; the other by Dalriada Trustees Ltd seeking determinations as to eight schemes, one of which (the Ironstream Scheme) was treated as representative.

Background and parties: The Pensions Regulator had in 2013 suspended trustees and appointed independent trustees under powers exercised on the basis that the schemes were occupational pension schemes. Doubts were raised as to that legal character and the trustees brought proceedings. The Pensions Regulator advanced alternative arguments, including that the schemes were not genuine or were shams; by agreement the court was to determine the statutory questions on the assumption that the deeds and rules were genuine.

The nature of the applications: (i) Pi sought a declaration the 5G Futures Pension Scheme was an occupational pension scheme under section 1 of the Pension Schemes Act 1993. (ii) Dalriada sought a determination whether each of eight schemes was an occupational pension scheme on the true construction of the deeds and rules and the factual circumstances.

Issues framed: The court framed two main issues: (A) the purpose issue — whether the scheme was established for the purpose identified in section 1(1) of the Pension Schemes Act 1993; and (B) the founder issue — whether the founder of the scheme was a person to whom section 1(2) applied when the scheme was established. The founder issue raised two sub-questions: whether the founder had to employ a relevant person at establishment, and if so whether that was satisfied.

Court's reasoning: The judge applied objective construction to the Deeds and Rules and the admissible background, but not any allegations of sham. For the purpose issue the court analysed the express terms (recitals and rules) and concluded that the documents, on true construction, limited membership to past, present or future officers and employees of the provider and their immediate family members while permitting other persons in some cases; thus the schemes were established to provide benefits to people with service in employments of a description and also to other people, satisfying section 1(1)(a)(ii).

On the founder issue the judge considered the statutory definitions in section 181 and concluded that company directors were "in employment" for these purposes; it was natural to treat the company as the person who employed its director. Because each founder was a limited company with a director at the time of establishment, the founder test in section 1(2)(a) was satisfied. The judge therefore did not need to decide whether the founder must have employed a relevant person at the exact moment of establishment in all circumstances.

Procedural and wider comments: The court expressly left open any later contest that the deeds or rules were shams. The judgment noted that much factual material was not necessary to decide the statutory construction questions and might be relevant in other proceedings. The court declared that the schemes were occupational pension schemes and thereby called into question the Pensions Regulator's earlier exercise of powers only if the schemes had been non-occupational.

This was a first-instance determination. The court declared that the 5G Futures Pension Scheme and the eight Dalriada schemes are occupational pension schemes within section 1 of the Pension Schemes Act 1993. The court reached that conclusion because (1) the schemes, on their true construction, were established to provide benefits to people with service in employments of a description and also for other people, satisfying section 1(1)(a)(ii), and (2) the founder companies had directors who were "in employment" under the statutory definitions and, on the natural construction, the companies employed those directors so that the founder test in section 1(2)(a) was satisfied.