Holloway & Ors -v- Damianus B.V. & Ors [2015] IECA 19

On 10 February 2015 the Court of Appeal affirmed the recent decision of the High Court in favour of the trustees of a defined benefit scheme who served a contribution demand on the principal employer of the Omega Pharma Ireland Pension and Death Benefits Scheme. The central dispute revolved around whether the trustees were entitled to claim a contribution amount in excess of the statutory minimum funding standard (MFS) once the employer had terminated its obligations to contribute to the scheme.

In his judgment of 25 July 2014, Moriarty J had declared that the amount demanded was reasonable, particularly given the decision by the trustees not to seek the higher annuity buy-out basis and also the lack of engagement by the employers.

“They sought to gauge reasonability effectively in a vacuum … Leaving to one side an actuarial analysis of the computation method, the trustees appear to have been acting in good faith in pursuit of what they believed to be the best interests of the members of the Scheme, in accordance with their fiduciary responsibilities.”

Much like Moriarty J in the High Court, the decision of the Court of Appeal did not opine on whether a demand calculated by reference to what has become known as the ‘Omega Pharma basis’ is the appropriate standard by which trustees should frame contribution demands.

There is therefore still scope for employers to challenge a demand made on that basis. Nevertheless, both the trial judge and the appellate court upheld the validity of a contribution demand made by trustees which was in excess of MFS, and this is significant in and of itself.

Indeed, the wording in the Court of Appeal judgment is surprisingly emphatic when it considered whether the appellant employer’s funding obligation was limited to the MFS. The Court determined that the amount demanded by the trustees was valid as it was based on what was assessed as being necessary to “provide the benefits under the scheme”.

As a result, trustees are now arguably entitled to seek more than the statutory MFS from an employer on a scheme wind up, subject of course to the terms of the individual trust deed and rules governing the scheme. Consequently, it may prove more difficult and/or costly for an employer to wind up a defined benefit scheme where a termination notice is not immediately effective, and trustees are satisfied the employer has the resources to meet a contribution demand in excess of MFS.