On 4 February 2013, the Commercial Court dismissed a claim for breach of trust taken by more than 100 members against the trustees of an occupational defined benefit pension scheme which was wound up with a considerable deficit in 2011. The Irish Courts are seldom asked to adjudicate on pension disputes and this case sets out some key lessons which trustees, employers and advisers can learn from when making difficult and possibly controversial decisions, such as whether or not to serve a contribution demand.
The members claimed the trustees breached their duties to the beneficiaries by accepting a final contribution offer of €23.1m (plus €14m to a defined contribution scheme) from the sponsor of the scheme, Element Six Limited, to terminate its liability to contribute. The members argued that the trustees should have made a contribution demand of €129.2m to make up the funding deficit and that their failure to do so was a wilful default. The members also submitted that the trustees’ decision was tainted by certain conflicts of interest and that they took irrelevant matters into account while ignoring relevant issues. You can read a full article on the background to the case here.
This judgment is important as it underlines and reinforces some of the core legal principles to be followed by pension scheme trustees. For the first time it also gives some judicial guidance on contribution demands and funding proposals as well as on some other relevant questions that crop up in practice from time to time.We have set out six key lessons from the decision in a special pensions e-zine.