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Defendant Trustee successful in BA pension scheme litigation – British Airways plc v Airways Pension Scheme Trustee Ltd [2017] EWHC 1191 (Ch)

The High Court has handed down judgment in the British Airways pension scheme litigation, dismissing BA’s claim.

The dispute arose following the Government’s announcement in 2010 that it intended to use CPI instead of RPI for increasing public sector pensions. Due to its public sector origins, this new practice applied to the Airways Pension Scheme.

In early 2011 the Scheme’s Trustees decided to use their unilateral power of amendment to amend the Scheme’s Rules by inserting a power to grant discretionary increases. On 26 June 2013 the Trustees decided to exercise this power to grant a discretionary increase of 0.2%, being half of the gap between RPI and CPI. On 19 November 2013, following a challenge to that decision by BA, the Trustees took their decision afresh and reached the same result.

On 6 December 2013 BA issued proceedings against the Trustees challenging these decisions on a wide range of grounds.

The trial was heard between October and December 2016 before Mr Justice Morgan. Shortly before trial, and by agreement with BA, the Trustees were replaced by a corporate Trustee.

In giving judgment for the Trustee, Morgan J held that the amendment of the Scheme’s rules was valid and effective. He found that:

  • the amendment was not contrary to the purposes of the Scheme;
  • the amendment was not beyond the scope of or an abuse of the Scheme’s power of amendment; and
  • the Trustees were not guilty of pre-determination, but had actively and genuinely engaged with the decision-making process that led to the decision to amend.

In relation to the Trustees’ decision on 26 June 2013 Morgan J held that, because no effective date for the increase had been specified, there was no effective exercise of the discretionary increase power.

In relation to the Trustees’ decision on 19 November 2013, however, the exercise of the discretionary increase power to grant an increase with effect from 1 December 2013 was held to be valid and effective. Morgan J held that:

  • the decision did not change the purposes of the Scheme, nor did it constitute a benevolent or compassionate payment (such payments being expressly prohibited by the Scheme’s purpose clause);
  • the decision was not beyond the scope of or an abuse of the discretionary increase power; and
  • the Trustees were again not guilty of pre-determination, having actively and genuinely engaged with the process of deciding whether to award a discretionary increase, and had had regard to all relevant considerations and no irrelevant considerations.

The Trustee was represented by Keith Rowley KC, Jonathan Hilliard KC and Henry Day, instructed by Eversheds Sutherland (International) LLP.

The full judgment can be found here.

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