In the original High Court case, the issue was whether the provision under the scheme rules which stated that contributions were “determined by the scheme actuary without the agreement of the employer” gave the actuary unilateral power to determine the contributions payable by the employers. The rules also provided that “the Participating Companies shall collectively pay such an amount …as…will, in the opinion of the Actuary, restore the solvency of the Fund.”
Under the statutory scheme funding regime, this meant that the scheme actuary would need to provide a certificate confirming that the rates of contribution agreed by the trustees and the employer were no lower than he would have provided for if he, rather than the trustees or managers of the scheme, had the responsibility for making the decision. In practice, this would give the actuary a veto over the contribution rates.
The High Court held that the scheme actuary did have the unilateral power to determine contributions and that the certificate would be required. The employer appealed.
The Court of Appeal delivered its judgment in October 2008 and held that the scheme rules should not be construed in a way which conflicted with legislation. It also held that the rules required that the rate at which contributions were to be paid by the employers collectively was to be determined by the Actuary unilaterally without the consent of the Principal Company. The employer’s appeal was therefore unsuccessful.
Comment: the legislation which applied when the scheme rules were drafted was that governing the minimum funding requirement (MFR) regime and that was the relevant statutory context, rather than scheme specific funding which was not then in force. The Court of Appeal therefore did not accept that the reference in the scheme rules to “solvency” meant that the buy-out level applied.
View the judgment.