Avon Cosmetics Limited v Dalriada Trustees Limited & Ors

The court may approve a compromise binding represented beneficiaries only where the represented classes have the same interest and the compromise benefits all persons bound by it. The court must be satisfied that the compromise strikes a fair balance between competing arguments, recognising the value of avoiding litigation, cost, delay and uncertainty. A compromise may adopt practical differentiated outcomes despite the underlying issue having a binary result at trial, provided the settlement is fair and workable. The statutory restrictions on surrendering pension rights do not prevent a compromise of this kind.

The proceedings concerned amendments to the Avon Cosmetics Pension Plan. The amendments closed the final-pay section to future accrual and treated accrued final-pay benefits of continuing employees as deferred benefits subject to revaluation. The claimant contended that this was valid; a representative beneficiary contended that the amendment prejudiced accrued rights and was ineffective under the amendment power’s restriction.

The court made representation orders for opposing classes and was asked to approve a negotiated compromise under CPR rule 19.9(5) and (6). The compromise provided different benefits for final-salary winners, transferees, dependants and lifetime-allowance members.

1. Representation orders. Representatives may be appointed by reference to specific issues. The represented persons had the same interest in the relevant issue, and the orders furthered the overriding objective. Any possible divergence between sub-categories did not prevent representation because the interests were sufficiently aligned and the representatives had been properly advised.
2. Approval of compromise. Under CPR rule 19.9(5) and (6), the court had to be satisfied that the compromise benefited all represented persons. The relevant standard was whether it was mutually beneficial and struck a fair balance between competing arguments. The court considered the realistic prospects of success on the underlying amendment issue, the additional risks affecting transferees and the tailored provisions for lifetime-allowance members.
3. The compromise was not required to reproduce the binary result that litigation would produce. Its percentage benefits, cash alternatives and administrative provisions were rational responses to litigation risk and achieved certainty, speed, reduced costs and workable administration. The calculation methodology was appropriate, and the limited departures from the general calculation date were justified.
4. The court distinguished Newell Trustees Ltd v Newell Rubbermaid UK Services Ltd & Putland, because that case concerned transfer from a final-salary basis to a money-purchase basis, whereas the compromise here concerned an ongoing career-average revaluation basis. The compromise was approved as being for the benefit of all represented persons.
5. Section 91 of the Pensions Act 1995 was no bar to the compromise. The court accepted the distinction between surrendering pension rights and compromising a dispute of this kind.

First instance decision. The judgment refers to an earlier judgment in the same proceedings, [2024] EWHC 34, which addressed the position of revaluation winners.