Paul Holloway and Others v Damianus B. v and Others

 
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[2014] IEHC 383

THE HIGH COURT

Record No. 6239P/2013
Holloway & Ors v Damianus BV & Ors

BETWEEN

PAUL HOLLOWAY, TIMOTHY CROWLEY and GRIET VANDENHEEDE
PLAINTIFFS

AND

DAMIANUS B. V., OMEGA TEKNIKA LIMITED and CHEFARO IRELAND LIMITED
DEFENDANTS

PENSIONS ACT 1990 PART III

FINUCANE & ORS IRISH PENSIONS LAW & PRACTICE 2ED 2006 265

PENSIONS ACT 1990 S48

MCCLELLAND v UNISYS NEW ZEALAND LTD 2002 PENS LR 87

PINSENT CURTIS v CAPITAL CRANFIELD TRUSTEES LTD 2005 4 AER 449 2005 ICR 1767 2005 EWCA CIV 860

SWEENEY v DUGGAN 1997 2 IR 531 1997 2 ILRM 211 1997/6/2236

GREENE & ORS v COADY & ORS UNREP CHARLETON 4.2.2014 2014 IEHC 38

Plenary proceedings - Payment of €2.23 million sought - Trustees of defined benefit pension scheme - Intention of employers to discontinue contributions to pension scheme - Contribution demand issued by trustees to the employers - Relevant provisions of Trust Deed - Pensions Act 1990 - Mode of computation - Minimum funding standard- Lack of engagement by employer - Trustees acting in good faith - In the best interests of the members of the scheme - Fiduciary responsibilities

2013/6239P - Moriarty - High - 25/7/2014 - 2014 24 6848 2014 IEHC 383

Facts The plaintiffs are trustees of a defined benefit pension scheme operated for the benefit of employees of Omega Pharma Ltd, an Irish subsidiary of a European multinational company. The defendants are employers in respect of the scheme. In September 2012, the employers announced redundancies within the company and their intention to wind down the pension scheme. On 1 st October 2012, the principal employer served notice on the trustees of its intention to discontinue contributions to the scheme. The notice requested the trustees agree the date of winding up of the scheme to be the 31 st December 2012. On the 26 th October 2012, the trustees acknowledged receipt of the notice and advised the principal employer of the sum required to secure the scheme”s benefits and formally requested a consultation process. No response was provided. A further letter was issued requesting a written response to the proposed final contribution amount by 30 th November 2012, in absence of which the trustees would determine the amount without the employer”s consultation. No response was provided. Thus on 7 th December 2012, a contribution demand was served on the employers. By letter dated 28 th January 2013, the trustees requested an urgent meeting with the employers and referred to possible legal action if no response was received. The employers replied to acknowledge receipt of correspondence. On 25 th April 2013, the trustees were informed that the principal employer would not engage with them on the demand. The trustees therefore instructed solicitors and on 17 th May 2013 issued a demand letter requiring the specified amount to be paid within 7 days.

Held The judge emphasised the employers had the opportunity to negotiate the appropriate mode of computation with the trustees and were expressly invited to do so in October and November, 2012. After the expiry of the notice period, the employers were again invited to discuss the contribution amount in January, 2013. On the basis of the evidence, it appears that a deliberate decision was made by the employers to take this course of action and not to avail of these opportunities for discussion or negotiation. Further, receipt of the trustees' correspondence of October and November, 2012 was not even acknowledged by the employers at that time.

Clause 8.1 of the Trust Deed states “the employers shall… subject to the rights reserved to them by clause 18… pay the trustees the moneys which the trustees determine, after consulting the actuary and the principal employer, to be necessary to support and maintain the fund in order to provide the benefits under the scheme”.

The trustees sought to consult the principal employer on two separate occasions before determining the amount they deemed necessary to provide the benefits under the scheme. The trustees did consult the scheme actuary and the amount ultimately demanded by the trustees was determined in accordance with his advice. In accordance with Green and Ors v Coady and Ors [2014] IEHC 38 the decision of the trustees to issue a contribution demand on 7 December, 2012, did not appear to be one which no reasonable body of trustees would have made. The judge acknowledged the trustees appeared to have been acting in good faith in pursuit of what they believed to be the best interests of the members of the scheme, in accordance with their fiduciary responsibilities. Thus, considering the relevant documentation and assessing all that transpired between the parties, the judge was satisfied the plaintiffs were entitled to succeed in their claim in the sum of €2.23 million.

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JUDGMENT of Mr. Justice Michael Moriarty delivered on the 25th day of July, 2014.

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1. These are plenary proceedings in which the plaintiffs seek payment of the sum of €2.23 million from the defendants. The plaintiffs are the current trustees of a defined benefit pension scheme ("the Scheme") operated for the benefit of employees of Omega Pharma Limited, an Irish subsidiary of a European multinational company. The first named defendant is the principal employer for the purposes of the Scheme and the second and third named defendants are associated employers in respect of the Scheme (collectively "the employers"). The dispute arises from a contribution demand issued by the trustees to the employers on 7 December, 2012.

Background Facts
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2. The background to the issue of the contribution demand by the trustees is as follows. In September, 2012 the employers announced redundancies and their intention that the pension scheme would be wound down. On 1 October, 2012, the principal employer served notice on the trustees of its intention to discontinue contributions to the Scheme. The notice requested that the trustees agree the date of winding up of the Scheme to be 31 December, 2012. Following legal advice and consultation with the Scheme actuary, by letter dated 26 October, 2012, the trustees acknowledged receipt of the notice, advised the principal employer of the sum required to secure the Scheme's benefits and formally requested the employer enter a consultation process, seeking a reply by 23 November, 2012. There was no response to this letter.

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3. A further letter dated 22 November, 2012, was sent by the trustees to the employers, which requested a written response to the proposed final contribution amount by 30 November, 2012, in the absence of which the trustees would determine the final contribution amount without the employer's consultation. There was no response to this letter and on 7 December, 2012, a contribution demand was served on the employers for the sum of €3,010,000. Prior to the expiry of the notice period on 31 December, 2012, two Scheme members requested a transfer of their entitlements, which reduced the additional contribution required by the trustees, as of 31 December, 2012, to approximately €2.25 million, which was revised to the figure claimed in these proceedings of €2.23 million.

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4. By letter dated 28 January, 2013, the trustees requested an urgent meeting with the employers and referred to the possibility of legal action if no response was received. On 29 January, 2013, the employers replied to acknowledge receipt of correspondence and to say that a response would be issued after advice had been taken. There were some without prejudice discussions between the first named plaintiff and a representative of the employers in March and April, 2013. On 25 April, 2013, the trustees were informed by telephone that the principal employer would not engage with them on the demand or take further actions in relation to the Scheme. The trustees decided to instruct solicitors to begin legal proceedings on 2 May, 2013. The trustees issued a demand letter dated 17 May, 2013, requiring the reduced figure of €2.25 million to be paid within 7 days. These proceedings were issued on 19 June, 2013, and they were entered into the commercial list on 15 July, 2013.

Relevant Provisions of the Trust Deed
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5. The Scheme was established with effect from 1 June, 2004. It is a defined benefit pension scheme subject to the Pensions Act 1990 (as amended). It is governed by a definitive deed and rules dated 24 November, 2004, which has been amended on a number of occasions subsequently (the "Trust Deed" and "Rules" respectively).

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6. Clause 8.1 of the Trust Deed sets out the trustees' duty to collect contributions from the employers.

"The Employers shall transmit to the Trustees all contributions (if any) collected by each of them respectively from the members and, subject to the rights reserved to them by Clause 18, from time to time shall pay to the Trustees the moneys which the Trustees determine, after consulting the Actuary and the Principal Employer, to be necessary to support and maintain the Fund in order to provide the benefits under the Scheme."

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Rule 5 provides that the employers shall pay the contributions required under clause 8.1, subject to the rights reserved to them by clause 18.

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7. Clause 18 of the Trust Deed provides for the circumstances in which the employer may cease contributions to the Scheme. Clause 18.1 provides that:

"If an Employer ceases to carry on business, or gives three months' written notice to the Trustees of its intention to discontinue contributions (or such lesser period as the Employer shall agree with the Trustees) it shall discontinue contributions to the Scheme with effect from whichever of the following dates is applicable ('the Discontinuance Date'):"

(a) immediately on ceasing to carry on business, or where the Employer is an Associated Employer on such later date as that Employer agrees with the Trustees being not later than the Review Date next but one following the date the Employer ceases...

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