Relief for members and disappointment for employers: on 2
November 2016 the Court of Appeal upheld the High Court decision in
Buckinghamshire v Barnardo's, thus precluding the
Barnardo's scheme trustees from any switch from RPI to CPI for
The Barnardo's scheme rules defined "Retail Prices
Index" as the index published by the Department of
Employment "or any replacement adopted by the Trustees
without prejudicing Approval."
In 2015 the High Court decided that "replacement"
meant officially replaced and that, as RPI remained officially
published, it had not been replaced. Therefore, under the scheme
rules the trustees could not switch from RPI to CPI increase. For
further background please see our November 2015 e-Bulletin article
"To switch or not to switch: that is the
Court of Appeal's decision on 2 November 2016
In the Court of Appeal the employer argued that
"replacement" of the index meant the trustees'
decision to adopt a replacement index in place of RPI whether or
not RPI has been officially replaced. The Court of Appeal disagreed
and, on the particular wording of the Rules, held that the power to
switch arises only if RPI has been officially replaced.
Is the Court of Appeal's decision the end of the road?
Answer, not necessarily. Although the Court of Appeal refused
permission to appeal to the Supreme Court, we understand that
permission to appeal is being sought from the Supreme Court
What are the prospects for a successful appeal to the Supreme
On the face of it, the prospects are in our view good. The Court
of Appeal decision was by only a 2 to 1 majority, with the
Chancellor of the High Court strongly disagreeing with his two
In the Chancellor's view, in interpreting the definition of
"Retail Prices Index" in the Rules less emphasis should
be given to the Appendix to the Rules and more to the Rules
themselves. The Appendix reflected the pre-2006 Inland
Revenue Limits relating to maximum benefits under the scheme
including maximum rates of pension increases. As the Chancellor put
it, the High Court "judge started his approach to
construction [interpretation] with the Appendix and worked
backwards. That approach was, I think, a mistake".
Given the Chancellor considered the Rules ambiguous, he
considered that "business common sense" was also
definitely a factor to be taken into account alongside
interpretational aspects. This led the Lord Chancellor to the
"clear conclusion" that the trustees were
entitled to decide whether to replace RPI and were not reliant on
there first being an official replacement of RPI.
Did the 3 Court of Appeal Judges agree about anything?!
Yes. They all confirmed that the earlier High Court decisions in
"QinetiQ" and "Arcadia" (see our November 2015
article), were correct in deciding that where
scheme rules give trustees' discretion to switch index, members
do not have a right under Section 67 Pensions Act
1995 to a specific index, so as to prevent a switch to a new index
for future pension increases. So at least this point has been
settled, or has it?
If there is an appeal to the Supreme Court, the members may, as
they did in the Appeal Court, cross-appeal and argue that Section
67 prevents any switch in index.
Minute differences in the wording of Rules can lead to different
results. Trustees and employers considering switching index should
obtain detailed legal advice on the impact of the precise wording
in their scheme rules.
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.
In SSE Generation Limited v Hochtief Solutions AG and another decided on 21st December 2016, the Court of Session in Scotland considered a contractor's potential design liability under the NEC Form of Contract.
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).