Durkin v Pensions Ombudsman and Others
| Jurisdiction | Ireland |
| Judge | Kearns P. |
| Judgment Date | 09 September 2015 |
| Neutral Citation | [2015] IEHC 566 |
| Court | High Court |
| Date | 09 September 2015 |
[2015] IEHC 566
THE HIGH COURT
AND
AND
Pensions – S. 140 of the Pensions Act, 1990 – Appeal against the determination of Pensions Ombudsman – Consent to salary cap – Jurisdiction of High Court
Facts: The appellant sought an order for annulment of the determination of the Pensions Ombudsman in relation to his pension arrangements. The appellant contended that his acceptance to the said pension arrangement was conditional and that such change in reduction of pension entitlements would not take place unless there had been a benefit change under s. 50 of the Pensions Act, 1990.
Mr. Justice Kearns P dismissed the appeal of the appellant. The Court observed that the jurisdiction of the High Court in appeals against the determinations of statutory bodies having relevant expertise and experience was limited and interference would only be warranted where there was a grave error of law. The Court found that the decisions of the first named respondent were cogent and reasoned. The Court observed that the first named respondent had aptly determined that there was adequate and sufficient consent of the appellant to the pension arrangement and the error on the part of the employer in not taking the written consent of the trustees was indicative of failure to follow the best practices rather than an intentional or deliberate act.
JUDGMENT of Kearns P. delivered on the 9th day of September, 2015
The appellant seeks an order pursuant to s.140 of the Pensions Act 1990, as amended, annulling the determination of the Pensions Ombudsman of the 6 th May, 2014 in respect of certain aspects of his pension entitlements.
Mr. Durkin was employed by SIAC Construction from November, 1990 to 20 th January, 2012. He was made redundant on 20 th January, 2012. Mr. Durkin was a member of the 'Non-Contributory Pension and Death Benefits Plan' known as the SIAC Construction Limited Non-Contributory Pension and Death Benefits Plan which was established by a document entitled 'Second Definitive Deed and Rules', dated 29 th April, 1999.
The issues in this case arise from a 'Deed of Amendment', dated 31 st March, 2008, whereby SIAC sought to limit its exposure to pension liabilities by capping the salary level at which pensions were to be assessed. The document states that:-
"… the Employer may, upon notification in writing to the Trustees, and upon receipt by the Trustees of the prior written consent of the Member, impose a limit on the Member's annual rate of basic salary as at the renewal Date in any year and on the annual average amount of bonus received by the Member from the Employer over the preceding 3 calendar year period (i.e. ending on the 31 st day of December in each such year) or over such shorter period as they have been received."
On the 3 rd December, 2008, the appellant received a memorandum from Mr. Hank Fogarty, then managing director of SIAC, regarding salaries for 2008. That letter set out the pensionable salary as being €105,000 per annum. The same letter also set out what was being provided as consideration for this concession, among which was a profit share/LTI (Long Term Incentive) scheme. A summary of the proposed new arrangement was circulated and received by the appellant on the same day. Discussions had been ongoing prior to that date about that arrangement, but the appellant avers that the proposals had not been fully developed.
Mr Durkin had two primary issues with the new pension arrangement. The first was when the accrual of pension benefits would begin, whether it was the first year of his employment or from the fifth year. The second issue was the nature of the LTI, the long term incentive scheme under which he was being offered a benefit in return for capping his pension.
On the 16 th December, 2008, Mr. Durkin replied to Mr. Fogarty. Referring to previous correspondence of 3 rd and 4 th December, he stated that:-
"I confirm my acceptance of the offer contained within the two letters subject to the following as discussed:"
1. 'Pensionable Service' shall be defined as 'the full period from commencement of employment with SIAC Construction Ltd, to date of leaving service
2. That the LTI Bonus Scheme is fully clarified and is in accordance with undertakings given to date."
The appellant contends that this communication represents a conditional acceptance of the offer, which conditions have not been satisfied.
By further letter dated 25 th February, 2009 and signed by Mr. Durkin on 2 nd April, 2009, he states that:-
"I wish to confirm my agreement that, notwithstanding the statement to the contrary in the Rules attaching to the SIAC Pension Plan, any bonus or other payment over and above my normal salary entitlement either received by me or paid on my behalf during 2008 will be deemed to include a pension contribution and consequently will not be used in the calculation of either Final Salary, Pensionable Salary, or deferred Benefit or in the calculation of any other benefit under the Pension Plan."
Having been made redundant in January, 2012, Mr. Durkin was provided with a document entitled 'Illustration of Options on Leaving Service' which states that his 'Final Pensionable Salary' was €87,036.60. Correspondence ensued between the appellant's legal advisors and AON Hewitt, who issued the 'Illustration of Options on Leaving Service'. By letter to Ms. Carmel Higgins of AON Hewitt dated 4 th May, 2012, the appellant's legal advisers state that the appellant's basic salary was €114,500 at the relevant time and, having regard to bonuses, his final pensionable salary was €161,242.60.
Subsequently, on 26 th April, 2012, Mr. Durkin issued a double-faceted complaint pursuant to the 'Internal Dispute Resolution Procedure' ('IDRP') to the Trustees of the SIAC Construction Ltd. Non-Contributory Pension and Death Benefits Plan ('the Trustees'). The first aspect of Mr. Durkin's complaint is that he believes the 'Illustration of Options on Leaving Service' document to be incorrect. He states that 'pensionable salary' is defined in the Deed of Amendment of 31 st March, 2008 and requires the consent of a member to any reduction in pensionable salary and this consent must be provided in writing to the Trustees. He states that his pensionable salary has not been calculated in accordance with the scheme rules and should be calculated in the basis of the applicable preceding three calendar years, namely, 2009, 2010, and 2011.
The second aspect of the complaint is that even if consent was provided, the preservation requirements of the Pensions Act, 1990 (as amended), set out under Part III of the Act and in the Second Schedule to the Act, require that any reduction in a members preserved pension entitlements can only accrue uniformly from the effective date of change over the member's future working lifetime. Therefore, any benefit reduction does not take effect immediately unless there has been a benefit change under s.50 of the Pensions Act 1990, which it is submitted is not the case.
The Trustees dismissed Mr. Durkin's complaint in a determination issued on 25 th July, 2013. It was found that Mr. Durkin had consented to the salary cap on two occasions, namely in the 16 th December, 2008 memorandum to Mr. Fogarty, and also in a letter dated 2 nd April, 2009.
In relation to Mr. Durkin's contention that the effect of the new agreement should be 'phased-in', the trustees, having regard to legal advice received, held that "a cap on pensionable salary implemented in this manner is not a reduction in long service benefit taking account of the provisions of this Scheme. In these circumstances 'phasing in' does not apply to this cap on pensionable salary."
Subsequently, on 16 th September, 2013 the appellant issued a complaint to the Pensions Ombudsman based on the same two complaints as raised in the IDRP.
The impugned determination of the Pensions Ombudsman dismissing the complaint of Mr. Durkin issued on the 6 th May, 2014. The Pensions Ombudsman was satisfied on the basis of the information and documentation available to him, which he found to be sufficient, that:-
· - it was clear that the company wished to limit its liabilities under the Pension Plan and proposed that basic salary would be capped, and that bonuses would no longer be pensionable. This was done by the Deed of Amendment of 31 st March, 2008;
· - this plan was part of a range of measures, and was discussed between the Company and senior staff as one of several changes to employment and remuneration terms;
· - bonuses were not specifically excluded in the Deed of Amendment but allowed the Company discretion to limit the amount of basic salary and bonuses to be used in determining Pensionable Salary at a later date, subject to notifying the trustees and obtaining the written consent of the members;
· - the company, and not the Trustee, sought Mr. Durkin's written consent, and that consent was sought for a range of employment/remuneration terms, and not only pension related matters;
· - the qualifications in Mr. Durkin's letter of the 16 th December, 2008, did not render it an invalid consent:
· The request that his pensionable service be defined as service with the Company, which was in accordance with the plan rules and was the basis applied to him under the plan;
· The...
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