Airways Pension Scheme Trustee Ltd v Fielder & Anor

Approval of a pension scheme trustee’s proposed settlement depends on whether the decision falls within the limits of rationality and honesty. The court examines both the decision-making process and the outcome. The trustee must consider relevant matters, disregard irrelevant matters, and reach a decision which a rational trustee could make. The court does not substitute its own view merely because it might have exercised the power differently. In assessing rationality, trustees may prefer the certainty and prompt availability of benefits for existing members over the prospect of obtaining greater future contributions. Where dispositive powers are concerned, trustees need not act impartially between members, because those powers may lawfully favour some members over others.

The corporate trustee of the Airways Pension Scheme sought approval of a settlement with British Airways plc. The settlement would permit access to the Scheme surplus to fund pension increases, including catch-up payments and future increases linked to RPI, while releasing British Airways from further contributions under a deficit payment plan.

The settlement arose against pending proceedings concerning the validity of an amendment to the Scheme rules and an appeal to the Supreme Court from the Court of Appeal’s decision in British Airways plc v Airways Pension Scheme Trustee Ltd [2018] EWCA Civ 1533. The representative beneficiary argued that changed circumstances, particularly the possible future convergence of RPI and CPIH, created a conflict between older and younger members. The central issue was whether a reasonable body of trustees could rationally enter into, and maintain, the settlement.

1. Approval granted. The Trustee’s decision to enter into the settlement, and to continue with it in light of changed circumstances, was one which a reasonable trustee could rationally take.
2. The applicable test had two aspects. First, the court considered whether the Trustee had properly taken relevant matters into account and excluded irrelevant matters. Secondly, it considered whether the outcome fell within the limits of rationality and honesty. The court would not withhold approval merely because it might have exercised the power differently: the principle stated in MF Global UK Ltd [2014] EWHC 2222 (Ch) at [32] was applied.
3. The possible convergence of RPI and CPIH did not make the settlement irrational. There was no certainty that convergence would occur. Even if it occurred in 2030, members would receive immediate catch-up payments, eleven years of increases, and the benefit of compounding. The Scheme’s maturity and the age profile of its membership were relevant considerations.
4. The Trustee could rationally prefer the certainty of using the existing surplus to enhance benefits rather than seeking to maximise further contributions from British Airways. The additional contributions arising from delay in resolving the underlying litigation were relevant but not critical.
5. The Trustee did not owe a duty to act impartially between members when exercising dispositive powers. Such powers may favour some members over others: Edge v The Pensions Ombudsman [2000] Ch 602 at 627.
6. The Trustee had properly considered the relevant issues and obtained appropriate professional advice. The settlement was therefore approved.

The judgment records that the settlement would compromise pending proceedings in which an appeal was pending to the Supreme Court from the Court of Appeal’s decision in British Airways plc v Airways Pension Scheme Trustee Ltd [2018] EWCA Civ 1533. This judgment was a first-instance approval decision.