Greene & Ors -v- Coady & Ors, [2014] IEHC 38 (2014)

Docket Number:2012 7254 P
Party Name:Greene & Ors, Coady & Ors
Judge:Charleton J.
 
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THE HIGH COURTCOMMERCIALRECORD NO. 2012/7254 PBETWEEN:JOHN P GREENE, MARCUS AUSTIN, GERALD BARRY, DAVID BEDDAR, DEIRDRE BRODIE, EDWARD A BROOKS, ANDREW PHILLIP BROWNE, PAT BUCKLEY, LES P BYRNE, BRIAN CASLEY, PATRICK CHAPLIN, NOEL CLIFFORD, JOHN CRONIN, THOMAS CULBERT, MARY CULLIGAN, DAN CULHANE, PAT CURRAN, DECLAN CUSACK, KIERAN CUSACK, JOHN AIDAN DALTON, MARGARET DALY, COLM DE BARRA, WILLIAM G DELANEY, CLINTON BRYAN DICKERSON, JOHN DOLAN, GERRY DONNELLAN, TOMMY DOYLE, JOHN L DUDLEY, PATRICK DESMOND EUSTACE, GERARD FAHY, CYRIL FINNUCANE, MARY FITZGIBBON, PAUL FITZGERALD, PETER G FITZGERALD, DAVID FRAHILL, PATRICK J GALLAGHER, BRIAN GREANEY, ANNE PATRICIA GRIFFIN, SHANE GRIFFIN, LIAM HALL, DENIS HARNETT, JOHN HEHIR, THOMAS GERARD HEHIR, JOHN HEALY, MARY HENNESSY, GER HICKEY, PATRICK GERARD HOGAN, TOM HOGAN, MICHAEL HOWE, MICHAEL HUNT, JOHN JAMES KELLY, MARIE KENNELLY, P J KENNEDY, PAUL KENNY, MICHAEL KENNY, EOIN KILKER, JOHN KILLEEN, KEVIN KINSELLA, MICHAEL LAFFIN, CATHERINE LEAHY, MICHAEL LIDDANE, ELWOOD KEVIN LYNCH, JIMMY LYONS, MARIAN E M MALONE, TOM MOLONEY, FINTAN A MOLONY, JOHN FRANCIS MULLEADY, SEAMUS MURRAY, PATRICK JOSEPH MURPHY, KIERAN JOSEPH MCAVINUE, JOHN MCCORMACK, ADRIAN MCEVOY, JIM MCGEE, PAT MCGRATH, MARY MCGUANE, JOHN MCINERNEY, ELIZABETH MCMAHON, ROSE MCMAHON, DAN MCNAMARA, JOHN MCNAMARA, PAUL MCNAMARA, GERALDINE NEYLON, MICHAEL NEYLON, PETER GEOFFREY NICHOLSON, MARY NOLAN MURPHY, JOHN NOLAN, DON NOLAN, MARGARET NOLAN, COLM O'BRIEN, BRENDAN O’BRIEN, GERALDINE O’BRIEN, MICHAEL O’CONNELL, MICHAEL O'CONNELL, TONY O’CONNELL, MOSSY O’CONNOR, RORY O’CONNOR, BRIAN O’DRISCOLL, DOMINICK O’DWYER, GERARD P O’GRADY, RAY O’HALLORAN, MARY O’LOUGHLIN, PEADAR O’LOUGHLIN, JIM O’MEARA, GERRY O’ROURKE, EILEEN O’ROURKE, PAT O’ROURKE, JOHN POMEROY, ALAN POWER, COLM J POWER, JOHN POWER, MICHAEL REA, SHIRLEY REA, PAT REGAN, TONY RYAN, BRENDAN SLATTERY, JAMES P SEXTON, RUTH STANLEY, PETER TALBOT, CHRISTOPHER TAYLOR, NOEL B TAYLOR, SHEILA TREACY, DONALD WALSHE, LIAM WALSHE, EAMONN WELSH,And by OrderJOHN BOWLER, THERESA DARCY, MICHAEL MAGUIRE AND JOHN MCMAHONPlaintiffs- and -DANNY COADY, SIOBHAN DUFFY, DANNY MURPHY, THOMAS O’BRIEN, GERARD O’SULLIVAN AND DERMOT TUITEDefendantsJudgment of Mr Justice Charleton delivered on the 4th of February 20131.0 The plaintiffs are beneficiaries or potential beneficiaries of the pension fund of Element Six Limited at Shannon Industrial Estate in County Clare. The defendants are the trustees of that fund. The plaintiff beneficiaries claim damages against the defendant trustees for breach of trust in accepting, on 25th of November 2011, an offer of €23.1 million (plus €14 million outside that fund) from Element Six Limited, as the contributor of the pension fund, to close its liability to contribute from the end of 2011. Instead, the plaintiff beneficiaries claim that the defendant trustees should have made a contribution demand for €129.2 million, or more, to make up the funding deficit to the pension fund and that their failure to do so was a wilful default. The trustees divided equally on the issue: the three company nominees voting in favour and the three worker nominees voting against with the chairman Danny Coady exercising his casting vote in favour. That vote is alleged by the plaintiff beneficiaries to have been vitiated by conflict of interest, to have taken into account irrelevant matters, to have ignored relevant issues and to be a decision that no reasonable body of properly informed trustees could have taken. Of the six defendant trustees, three came from company management; Danny Coady, Siobhán Duffy and Dermot Tuite. They gave evidence in this action. Three others came from the operations side; Danny Murphy, Thomas O’Brien and Gerard O’Sullivan. They did not give evidence. Danny Coady, Siobhán Duffy, Gerard O’Sullivan and Dermot Tuite were at the time of the decision active members of the pension scheme, meaning eligible members of the payroll, while Danny Murphy had taken voluntary redundancy in 1993 as had Thomas O’Brien in 2008.1.1 Pension funds have come under severe strain over the last seven years. With the national banking crisis of 2008 and the context of bank failures in the United States of America, the European Central Bank has set historically low rates of interest. A hidden subsidy from ordinary people to the poor performance of financial institutions is the paltry rate that any bank will now pay a depositor. Deposit rates depend largely on loan rates. Current loan rates are in contrast to what were predicted in business circles in 2006 to be interest rates for bank loans that would rise from already quite high levels. If an income on a fixed capital sum is sought through the banking sector, to now generate a return through a bank deposit equivalent to that of 2006 requires, perhaps, double or more. With the financial turmoil has also come a less certain return on business investments and the capital value of many pension funds has dropped. In addition, those buying into any annuity fund on retirement these days can expect to live for several years longer than their parents’ generation.1.2 The sixth element in the periodic table of elements is carbon; hence Element Six Limited as the name of the company which was the funder of this defined benefit pension scheme. The company is part of a worldwide multi-national conglomerate that deals in diamonds, including the De Beers companies in South Africa. The Shannon entity used to manufacture diamonds from other forms of carbon in high-pressure presses. The plant was started in 1961. At its height, in 1988, it employed over 1000 people. Since then employment has declined. In 2001 the equipment for manufacturing was moved by the group away from Ireland and other European locations to South Africa; presumably for reasons of cost. This was a big blow to the sustainability of the Shannon plant which was then left with administration and the finishing and distribution of raw industrial diamonds. In 2009, the head company in the group, Element Six Abrasives SA in Luxembourg, announced the closure of the Shannon plant. Apparently this must have been qualified since a plan of survival was quickly put together by the Shannon management. This involved about 300 redundancies and other savings amounting to some €30 million off operating costs. It resulted in the plant being saved. The group then publicly announced that it was in Shannon for sustainable employment into the long term. On the evidence, there are now some 359 employees of Element Six Limited in Shannon of whom about 270 are involved in factory work involving finishing raw industrial diamonds and coating and preparing these for various uses. The rest of the staff members are administrative, management and distribution workers.1.3 Some employees of the Shannon plant gave evidence. They described it as a very pleasant place to work with good conditions and an uplifting sense of comradeship. Part of the remuneration package up to 2001 was a defined benefit scheme. That is the pension trust in issue here. A defined benefit scheme is one where people work on a promise that on retirement they will get a fixed percentage of their wages. This is in contrast to a defined contribution scheme, where each individual builds up a pot of money by contributions over their working life and it is that pot which is used to fund a pension on retirement; the amount dependent on the vagaries of the market. A defined benefit scheme can be seen, and was presented during this hearing by the plaintiff beneficiaries, as part of the ongoing remuneration of a worker, albeit deferred. From 2001 on, workers joining the Shannon plant could not join the defined benefit scheme. Instead they were entered into a defined contribution scheme. This fixes contributions by the employer as part of the remuneration package and by the employees out of wages towards the build up of an invested fund that can be used to buy a retirement annuity on the open market, or to otherwise encash the fund on payment of appropriate tax. The contributions here were 5% from wages and 5% from the employer. As markets go up and down, there is little certainty as to how well anyone’s defined contribution fund will do, so there is no guaranteed income when they come to retire or when they die and their spouse inherits the benefit. People also retire at different ages from paid employment. With the redundancy package of 2009 tempting many people into finishing paid work early, many people are awaiting their 65th birthday, the current age for eligibility, before the benefit of their work flows as a pension. From 2009, even for employees in the Shannon plant from prior to 2001, the defined benefit fund was shut to future increases. Instead, such employees kept their defined benefit, as then earned, but could not add to their entitlements in that regard; being put as regards future gains in potential pension into the defined contribution scheme for as much as they would contribute from then until retirement.1.4 On the defined benefit scheme, there are 173 active working members, 258 pensioners and 375 people who have retired under 65 but whose entitlement to their pension is deferred until age 65.1.5 Pensions are regulated by the general law, by specific statutory provision and, inevitably also, by a trust deed.The trust deed2.0 Central to this litigation is the consolidating deed and rules governing the trust of 20th of May 1994. The deed traces its origins back to 21st of June 1961. It provides that the plan for defined benefit is to be administered in accordance with the deed and with the rules attached. The main purpose of the plan is to provide relevant benefits for directors and employees of the company and any associated employees who are admitted to membership in accordance with the rules. The plan was classified as a retirement benefits scheme as defined by section 14 of the Finance Act 1972 and is stated to be an...

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