Ireland: Landmark High Court Decision Provides Clarity On The Duties Of Pension Scheme Trustees

Greene & Ors v Coady & Ors 2012 / 7254 P

Matheson represented the trustees of the Element Six Contributory Pension Plan in successfully defending a claim taken against them by 128 members of the Plan for alleged breach of duty.

This landmark High Court decision was delivered by Mr Justice Charleton on 4 February 2014. The judgment provides welcome clarity on the duties of pension scheme trustees and the role of the Court in examining trustees' decision-making processes. It also offers useful commentary on a range of ancillary issues, including contribution demands, conflicts of interest issues and the nature of funding proposals.

Background

In 2011, Element Six Limited, the sponsoring employer of the Plan indicated to the trustees that it was seeking to manage its defined benefit pension exposure. Ultimately, it took the view that the only way of doing this was to wind up the Plan.  At the time, the Plan had a deficit of €129 million on the statutory funding standard basis.

On wind up, the sponsor would make a final contribution to the Plan of €23.1 million to bring active and deferred members to 100% funded on the statutory funding standard basis without pension increases.  An additional sum €14 million would be made available outside the Plan to provide enhanced defined contribution benefits to active members and top-up benefits to certain other identified categories of members.  The company clearly stated that this was the only offer available and that it would be withdrawn if the trustees sought to make it liable for any higher amount.

Under the governing trust documentation of the Plan, the company was required to give one month's notice to the trustees of its intention to terminate contributions to the Plan.  Once that notice period expired, the trustees could not require the company to make any further contributions.   

After detailed consideration over the course of a number of meetings and having obtained expert advice, the six trustees of the Plan voted on the company's proposal.  The trustees were evenly split and the chairman, a company appointed trustee, used his casting vote to accept the proposal. 

Shortly afterwards, 128 members of the Plan initiated proceedings against the trustees in the High Court, claiming damages for breach of trust, breach of fiduciary duty, negligence and breach of duty (including breach of statutory duty) for accepting the company's proposal in full and final settlement of all sums payable by the company to the Plan, without issuing a contribution demand to the company to fund the total deficit in the Plan.  The members also alleged that the trustees had been influenced by certain conflicts of interest in their decision-making process. 

Commercial Court Decision

The case was heard over a four week period in November and December 2013 before Mr Justice Charleton in the Commercial Court.  On 4 February 2014, he found in favour of the trustees in a detailed written judgement, fully accepting their evidence and the case put forward in their defence.  In summary, he held that the trustees had at all times acted honestly and in good faith and that their decision to accept the company's proposal was made solely in the best interests of the beneficiaries, taking all relevant factors into consideration. 

The comprehensive judgment of the Court offers a valuable insight into how the decision-making process of trustees will be evaluated and reviewed.  The Court confirmed the following:

  • When examining the trustees' decision, it is not for the Court to be better informed or to make a better judgment than the trustees. The law requires the Court to place itself in the shoes of the trustees at the time the decision was made, with the same information and considerations as were available to the trustees at the time.
  • When making decisions, it is the trustees' duty to act honestly and in good faith, having taken account of all relevant considerations and ignoring all irrelevant considerations.
  • Once a consideration is relevant, it is up to the trustees to give as much or as little weight to that consideration as they think fit in light of the information and advice available to them.  The Court will not substitute its own judgement in this regard: relevance is a matter of law for the Court, weight is a matter of discretion for the decision maker.
  • The Court will only interfere with the trustees' decision or the weight attached to any consideration, if it can be shown that no reasonable body of trustees would have made such a decision.
  • Although trustees have the ability to seek directions from the High Court, they are only obliged to do so where their ability to make a decision is overwhelmed or crippled to such an extent that they must, as a reasonable body of trustees, have their discretion exercised by a judge.
  • Where the governing documentation of a pension scheme allows a trustee to act notwithstanding a conflict of interest, then in normal course no decision of the trustees can be challenged on that ground.  While the Court acknowledged that conflicts of interest arise from the inherent nature of pension schemes in Ireland, it also stated that if the conflict of interest is such as to prevent trustees from acting in good faith and in the best interests of the beneficiaries, such a decision cannot stand as this is the irreducible minimum that beneficiaries are entitled to expect from trustees.
  • The Court stated that funding proposals could be viewed as enforceable contracts.  This part of the judgment will require careful consideration by pension advisers.    
  • The phrase 'wilful default' has a particular resonance in pension trust law and requires nothing less than "conscious and wilful misconduct". It is not sufficient for the act to be done deliberately; it must also contain an element of wrongfulness. 
     

Comment

This decision gives some welcome legal clarity to employers, trustees and their respective advisers when faced with the difficulties that can arise in considering the termination of an underfunded pension scheme.  While the judgment does not answer all the legal questions, it is a very significant step forward in this difficult area of pensions law.

This article was co-authored by associate Orlaith Ní Bhroin.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Arthur Cox
Arthur Cox
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Arthur Cox
Arthur Cox
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions