British Telecommunications Plc v BT Pension Scheme Trustees Ltd & Anor

Under a pension scheme rule providing that RPI is the default measure unless it ceases to be published or becomes inappropriate, those events are conditions precedent, not matters entrusted to the employer by implication. RPI is either appropriate or inappropriate. The question is binary but requires a fact-sensitive evaluative judgment directed to the rule’s purpose. If disputed, the court determines it. The threshold is high: a rival index being better, or RPI being undesirable, is insufficient. In assessing appropriateness, the court may consider the purpose of protecting pensioners, the available alternative measure and the evidence as a whole. An amending deed does not reset the temporal operation of an unchanged rule without clear language.

British Telecommunications plc appealed from the judgment of Zacaroli J in the High Court, Chancery Division, reported at [2018] EWHC 69 (Ch). The dispute concerned the construction of the BT Pension Scheme rules governing increases in pensions in payment and the use of the Retail Prices Index.

BT argued that it could determine, in consultation with the trustees, whether RPI had become inappropriate and that the issue was subject only to rationality review. Linda Bruce-Watt, representing beneficiaries, supported the judge’s objective construction and argued that the 2016 Rules did not reset the relevant temporal starting point. The central issues were the meaning of the gateways in rule 10.2, the effect of the 2016 amending deed, and whether developments affecting RPI had passed the contractual threshold.

1. Disposition. BT’s appeal was dismissed. The argument that the 2016 deed reset the relevant starting point failed. Grounds 2 and 3 of Ms Bruce-Watt’s cross-appeal were unnecessary to determine. The respondent’s application to admit the Royal Statistical Society evidence was allowed; BT’s application to admit a later Office for National Statistics article was dismissed.
2. Rule 10.2. The words making substitution available if RPI ceased to be published or became inappropriate establish conditions precedent, not an implied decision-making power in BT or the trustees. The second gateway is binary, although deciding whether it is satisfied requires a fact-sensitive evaluative judgment. If the parties dispute whether the gateway is satisfied, the court determines the issue. The existence of an alternative measure is relevant but does not assign the decision to BT. Practical concerns about delay were neutral.
3. Appropriateness. The question had to be assessed in the context and purpose of the rule: protecting pensions in payment against the relevant cost of living. It was not enough that another index might be preferable or that RPI was undesirable. The judge was entitled, on the expert and documentary evidence, to conclude that the clothing change, the freeze and de-designation of RPI had not caused it to become inappropriate, whether separately or cumulatively. The views of the ONS and UKSA were important evidence but were not decisive because they had not determined the contractual question.
4. Temporal operation and the 1993 Rules. The 2016 deed amended the existing rules from 6 April 2016 and did not reaffirm unchanged provisions so as to reset rule 10.2. The phrase “becomes inappropriate” was forward-looking from 1 May 2002, but the parties’ actual knowledge of earlier events was irrelevant. Under rule 25(3) of the 1993 Rules, an amendment meant a direct change to RPI’s compilation or calculation which invalidated year-on-year comparison. Neither the freeze nor de-designation qualified, and the clothing change did not invalidate continuity.
5. Appellate review. Applying the approach in Smech Properties, Biogen, Assicurazioni Generali and Datec, the Court reviewed rather than reheard the evaluative judgment and gave proper weight to the trial judge’s assessment. No error of principle or lack of legitimate and proper grounds was shown.
6. Fresh evidence and privilege. The Ladd v Marshall criteria remained highly relevant under CPR 52.21(2)(b). The RSS evidence was admissible and could be used as historical evidence of the RSS’s views without infringing article 9 of the Bill of Rights 1689. The Court did not need to decide whether a public weblink repeating parliamentary evidence would itself remove privilege; Lord Justice Richards and Lord Justice Patten reserved that issue.

1. Court of Appeal (Civil Division) — In [2018] EWCA Civ 2694, the Court dismissed BT’s appeal, rejected the “clock reset” argument, and dealt with the fresh-evidence applications as stated above.
2. High Court of Justice, Chancery Division — Zacaroli J decided the construction issues and held that RPI had not become inappropriate for rule 10.2 purposes: [2018] EWHC 69 (Ch).