British Airways Plc v Airways Pension Scheme Trustee Ltd

British Airways Plc v Airways Pension Scheme Trustee Ltd

By a majority, the Court of Appeal held that the amendment to Rule 15 and its exercise by the Trustees to grant discretionary pension increases went beyond the proper purpose of the power of amendment under clause 18 of the Trust Deed. The majority found that the Trustees' constitutional function was to manage and administer the scheme, not to design or unilaterally augment benefits, especially where the scheme was in deficit and the employer would be required to fund additional benefits not previously promised. The amendment and its exercise were therefore invalid as they exceeded the Trustees' proper purpose and altered the constitutional balance between employer and trustees.

Parties
Appellant/claimant: British Airways Plc; Respondent/defendant: Airways Pension Scheme Trustee Limited
Jurisdiction
England and Wales
Judgment Date
05 July 2018
Procedural Posture
Civil Appeal / Court of Appeal Judgment
Outcome
Appeal allowed (by majority)
Legal Topics
Trustee Powers, Proper Purpose Rule, Pension Scheme Amendments, Ultra Vires, Employer Funding Obligations
Trust Law Pensions Law Company Law Trustee Powers Proper Purpose Rule Pension Scheme Amendments Ultra Vires Employer Funding Obligations

Case Brief

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Parties

British Airways Plc

Appellant/claimant

Airways Pension Scheme Trustee Limited

Respondent/defendant

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Whether the Trustees validly exercised the power of amendment under clause 18 of the Trust Deed to confer a discretionary power to increase pensions beyond Rule 15.
  2. 2 Whether the exercise of the amended Rule 15 power in 2013 to grant a discretionary pension increase was ultra vires or for an improper purpose.

Ratio Decidendi

By a majority, the Court of Appeal held that the amendment to Rule 15 and its exercise by the Trustees to grant discretionary pension increases went beyond the proper purpose of the power of amendment under clause 18 of the Trust Deed. The majority found that the Trustees' constitutional function was to manage and administer the scheme, not to design or unilaterally augment benefits, especially where the scheme was in deficit and the employer would be required to fund additional benefits not previously promised. The amendment and its exercise were therefore invalid as they exceeded the Trustees' proper purpose and altered the constitutional balance between employer and trustees.

Court Disposition

Appeal allowed (by majority)

Orders

  • The amendment to Rule 15 and its exercise to grant discretionary pension increases are declared invalid.
  • Any discretionary pension increases granted under the impugned amendment are set aside.