Harland and Wolff Pension Trustees Ltd v AON Consulting Financial Services Ltd [2006] EWHC 1778 (Ch)

[2006] EWHC 1778 (Ch)

Case No HC04C01475

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 14/07/2006

Before

MR JUSTICE WARREN

Between

HARLAND AND WOLFF PENSION TRUSTEES LIMITEDClaimant

AON CONSULTING FINANCIAL SERVICES LIMITEDDefendant

Mr Paul Newman (instructed by PricewaterhouseCoopers Legal LLP for Claimant Mr Nicholas Paines QC and Mr Nicolas Stallworthy (instructed by CMS Camero n McKenna LLP) for the Defendant

Hearing Hearing date: 7th July 2006

Judgment

Mr Justice Warren :

Introduction

[1]This is the trial of a preliminary issue in a claim by the Claimant ("the Trustee"), as trustee of the Harland and Wolff Pension Scheme ("the Scheme"), against the Defendant, Aon Consulting Financial Services Ltd, ("Aon") the former professional advisers to the Scheme (known at all material times as Goodwins Ltd). The claim is for breach of duty relating to the steps taken by the Trustee, on the advice of Aon, to comply with the European law requirement to remove discrimination between the pension benefits of male and female members of the Scheme. Mr Newman appears on behalf of the Trustee; Mr Paines QC and Mr Stallworthy appear on behalf of Aon.

Agreed Statement of Facts

[2]There is an Agreed Statement of Facts which I set out as follows.a. The Claimant is the trustee of the Scheme.

b. Prior to 7 September 1993, the Scheme was governed by a trust deed and rules dated 6 September 1988 ("the 1988 Rules").

c. The 1988 Rules provided (so far as material): i. a definition Part IV of the 1988 Rules, that the Normal Retirement Date ("NRD") for a male member (on and after 6 April 1986) was his 63rd birthday and for a female member was her 60th birthday; ii. by rule

32.1 that "the Principal Company may with the consent of the [Trustee] by deed amend the Definitive Deed or the Rules" and: iii. by rule 32.1.2 that "Any change will be effective from the date specified in the document making the change and may be made retrospectively"; and iv. by rule

32.2 that "Amendments shall take effect from the date of the amending deed unless an earlier or later effective date is specified in the deed"; but v. by rule 32.1.4 that "no change shall be made which would reduce benefits then in payment".

d. Aon was retained by the Trustee to provide actuarial and pension benefit consultancy advice and services to the Scheme, including advice and services relating to the equal treatment requirement under Article 119 (now 141) of the Treaty of Rome. [I shall refer to this as Article 119, adopting the number relevant at the time in question].

e. Between early 1992 and early 1993 there was discussion between Aon, the Trustee and the Scheme's Principal Company about the need to equalise the NRD of male and female members of the Scheme.

f. At a meeting on 25 March 1993 the Trustee resolved to equalise the NRD of male and female members of the Scheme by increasing the NRD for women to age 63, such increase only applying in relation to service on and after 17 May 1990.

g. Pursuant to the power of amendment in rule 32 of the 1988 Rules, on 7 September 1993 the Claimant executed a new deed and rules ("the 1993 Deed & Rules") which provided (so far as material): i. within the 1993 Deed, that the 1993 Deed & Rules should be applicable with effect from 1 January 1993 and that up to that date the provisions of the 1988 Rules should continue to apply except where contrary provisions in the 1993 Rules were expressed to be effective before that date; ii. by rule 3.3 of the 1993 Rules, that the pension payable to a female member in respect of service before 17 May 1990 should not be less than a Guaranteed Amount (defined in Part IV of the 1993 Rules), so as to guarantee that pension accrued by a female member prior to 17 May 1990 should not reduced by the 1993 Rules; and iii. a change in definition of NRD so that that the NRD for both male and female members on and after 17 May 1990 was their 63rd birthday.[ I add that for female members, NRD, prior to 17 May 1990, is their 60th birthday].

h. It is common ground between the parties that this retrospective increase in the NRD of female members was lawful and valid under domestic English law.

[3]The Trustee contends that Aon should have advised, but failed to do so, that the period of service for which benefits of male members should be equalised to the level of benefits of female members did not end, according to the Trustee, until the date of the execution of the 1993 Deed and Rules on 7 September 1993 rather than the date on which the 1993 Deed and Rules purported to take effect in respect of the change in NRD, namely 17 May 1990.

The Order directing a preliminary point

[4]The relevant part of the order directing the preliminary point is in the following terms:

"UPON the parties having agreed the Statement of Agreed Facts scheduled to this Order. AND UPON the Claimant admitting that in 1993, as a matter of domestic English law: (i) rule 32 of the Scheme's rules gave power to change the Scheme rules retrospectively, subject to not affecting pensions in payment and not increasing contributions without the member's consent; and (ii) save for any application of Article 119 (now Article 141) of the Treaty of Rome, such a power was lawfully and validly exercised in the circumstances of this case. AND UPON the Defendant, in consideration of those admissions, consenting to the terms of this Order BY CONSENT IT IS ORDERED THAT: 1. The following issue be tried by a Judge as a preliminary issue (the "

Issue") on the agreed facts as annexed to this order and initialed by the Master "Whether, on the true construction of Article 141 (formerly Article 119) of the Treaty of Rome and on a proper application of European case law, the requirement for male and female members of an occupational pension scheme to be provided with equal pension benefits for the same period of pensionable service served on or after 17 May 1990 is satisfied where: (i) an amendment of the Scheme made on 7 September 1993 altered the Normal Retirement Date for female members of the Scheme on and after 17 May 1990 from their 60th birthday to their 63rd birthday (the Normal Retirement Date for a male member of the Scheme being his 63rd birthday); (ii) in accordance with rule 32 of the Scheme rules the effective date of that amendment is 17 May 1990; and (iii) the governing provisions of the Scheme and domestic English law otherwise permitted the amendment to be made retrospectively, save to the extent that such amendment operated to reduce benefits then in payment."

Article 119 and Community law

[5]Article 119 requires Member States to ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied. This Article is of direct effect and can be relied on by, for instance, employees against employers to secure equality of pay. In the seminal case of Barber v Guardian Royal Exchange

[1991] 1 QB 344

, the ECJ stated the application of this provision to pension benefits, in particular deciding that it was unlawful to discriminate between men and women by providing benefits by reference to different ages at which pension becomes payable. It was, as is well known, common for pension schemes to provide different retirement ages for men and women (typically 65 and 60 respectively); the decision in Barber and the requirement to remove this discrimination was a cause of great activity in the period after the judgment of the ECJ (which was delivered on 17 May 1990).

[6]Because of the uncertainty, partly engendered by certain Community instruments and the decision of the ECJ in Newstead v Department of Transport

[1988] 1 WLR 612

, about whether Article 119 applies to benefits provided by a contracted-out pension scheme (the Scheme in the present case was such a scheme at the time of the amendments in 1993), a temporal limitation was laid down by the ECJ in its decision in Barber: as the court put it, overriding considerations of legal certainty required the effects of the judgment to be limited in time.

[7]Unfortunately, the scope of that temporal limitation was itself a matter of great uncertainty. Many of the uncertainties were resolved in a series of cases: van den Akker v Stichting Shell Pensioenfonds

Case C-28/93

; Coloroll Pension Trustees Limited v Russell

Case C-200/91

; Smith v Avdel Systems Limited

Case C-408/92

. These are conveniently reported together at

[1994] PLR 211

. The effect of these cases is summarised by Lewison J in Trustee Solutions v Dubery

[2006] EWHC 46 (Ch)

at paragraph 4:

"Following subsequent cases, particularly Coloroll Pension Trustees Ltd v Russell [1994] OPLR 179 the effects of the Barber judgment on the requirements for equal treatment of men and women were confirmed as follows: i) For pensionable service prior to 17 May 1990 (the date of the Barber judgment) it was not unlawful for male and female pension benefits to be provided at different retirement ages; ii) A scheme could be amended so as to equalise benefits for men and women, if the rules of the scheme permitted such amendment. The nature of the amendment could either reduce the normal male retirement age, or increase the normal female retirement age, or both; provided that both sexes were treated equally; iii) For pensionable service between 17 May 1990 and the operative date of any valid amendment [I will need to look at what is meant by the operative date in more detail later] male members of a pension scheme were entitled to be treated as if their normal retirement age was the same age as that applicable to female members (usually 60). This period is known, in the jargon, as 'the Barber window'."

[8]Many pension schemes contain powers of amendment which can be used to achieve compliance with the requirements of Article 119. Often, these powers contain express restrictions prohibiting any adverse effect on accrued benefits. Other schemes, as in the case of the Scheme itself, contain powers of amendment which are less restrictive. In the case of the Scheme, there are two important features of the power of amendment: first, although it prohibits reduction of benefits already in payment, it does not prohibit reduction of accrued benefits which are not already in payment, in particular the prospective benefits of active members; and secondly, it states expressly that any change may be made retrospectively. The actual amendment effected in 1993 provides that, for a female, her NRD from 17 May 1990 is her 63rd birthday. This is a change in the Scheme which is clearly made retrospectively for the purposes of Rule 32.

[9]Mr Newman submits that the 1993 Deed and Rules are ineffective to substitute an NRD of age 63 for females in respect of the Barber window which he says is the period from 17 May 1990 to 7 September 1993. His argument, in summary, is this: As a result of the direct effect of Article 119, men were entitled, during the Barber window, to accrue benefits on the same basis as women, that is to say with an NRD of age 60. This right of the disadvantaged sex (in the present case, men) to equal treatment is a free-standing right (although it reflects, of course, the level of benefit which the advantaged sex is enjoying). The decision in Smith v Avdel is clear authority in a pensions context that it is not permissible to achieve, in respect of service during the Barber window, equality by reducing the benefits of the advantaged sex; rather, the benefits of the disadvantaged sex must be increased to those of the advantaged sex in respect of that period.

[10]He also submits that the amending power is restricted in its operation in a way which removes a man's existing and accrued right to be treated as the equal of a woman with regard to his pensions benefits, a right which arises under Article 119 quite separately from the benefit provisions of the Scheme. This right, deriving directly from Article 119, overrides the provisions of the Scheme. Accordingly, the Scheme cannot by its own terms remove the right conferred by Article 119, so that men are entitled to benefits based on an NRD of age 60 in relation to service during the Barber window. This is another aspect of the allegedly free-standing nature of the rights arising under Article 119. Mr Paines says that it is not open to Mr Newman to take this point in the light of the terms of the order directing the preliminary issue. But if, contrary to that submission, the point can be taken, he says it is a bad one.

[11]Accordingly, Mr Newman concludes that a man is entitled, in respect of the Barber window, to accrue benefits as if he had an NRD of age 60 rather than 63. This benefit is, according to him, entrenched and cannot subsequently be reduced even if such reduction is part of a package which reduces the corresponding benefit for women. Article 119 would then apply to a woman's benefit accrued during the Barber window, thus preventing a reduction in those benefits. The result is a ratchet effect: as the result of a requirement to equalise upwards the benefits of men, women's benefits become entrenched when previously they were not.

[12]Mr Paines submits that the 1993 Deed and Rules give effect to the requirements of Article 119 and are accordingly effective according to their terms. In essence, his argument in summary is this: Article 119 requires equality of treatment; it does not require that any particular level of benefit must be provided. Prior to the amendment of the Scheme in 1993, the benefits which were provided under the 1988 Deed and Rules were subject to amendment pursuant to the power contained in Rule 32 and such amendment could result in a reduction. Pursuant to the exercise of that power, the Rules were rewritten; and, so far as concerns the NRD of women, the new NRD applies with effect from 17 May 1990, an element of retrospection expressly permitted by the amendment power. Accordingly, as from 17 May 1990, the benefits of men and women have been (retrospectively) equalised. He rejects the ratchet result which is the consequence of Mr Newman's approach and which produces a benefit to which neither sex is entitled according to the provisions of the amendments (ie the 1993 Deed and Rules) being provisions which provide equal treatment for men and women.

[13]I need at this stage to refer to parts of the various decisions of the court.

[14]In Coloroll, the ECJ held that Article 119 could be relied on by an employee not only against his employer but against the trustees of the pension scheme of which he was a member. As was said in paragraph 22 of the judgment:

"The trustees, although not party to the employment relationship, are required to pay benefits which do not thereby lose their character as pay within the meaning of article 119. They are therefore bound to do everything within the scope of their powers to ensure compliance with the principle of equal treatment."

[15]The court was asked in the reference from the High Court whether, where certain rules of the scheme are incompatible with the principle of equal pay, the trustees must administer the scheme without regard to those rules or whether they must amend them to achieve compatibility; and was also asked whether the only way of achieving equality would be by increasing the benefits of the disadvantaged class or whether equality might also be achieved by reducing the benefits of the advantaged class. As to the first of those questions the court answered in paragraph 27 as follows:

"Employers and trustees cannot, therefore, be allowed to rely on the rules of their pension scheme, or those contained in the trust deed, in order to evade their obligations to ensure equal treatment in the matter of pay."

[16]It is clear from subsequent paragraphs of the judgment that the employer and the trustees are obliged to use all means available under domestic law to amend the provisions of the scheme to achieve compliance with Article 119, including recourse to the courts if the scheme does not contain adequate powers of amendment. Further, the domestic court is obliged to disapply any incompatible domestic provision. In the present case, in the light of the wide power of amendment, it has at all times been open to the Principal Employer and the Trustee to achieve compliance with Article 119 without the intervention of the court.

[17]In relation to the question concerning the method to be used to achieve equal treatment, the court referred, in paragraph 30, to Defrenne v Sabena (Case 34/75)

[1976] ICR 547

, 566 paragraph 15) and the conclusion in that case against the argument that compliance with Article 119 could be achieved otherwise than by raising the lowest salaries. It referred also, in paragraph 31, to Nimz v Freie und Hansestadt (

Case C-184/89

)

[1991] ECR I-297

, paragraphs 18-20) where the court had held that the national court must set aside any discriminatory provision of national law without having to request or await its prior removal by collective bargaining or any other constitutional procedure (which would include, I consider, the exercise of a power of amendment), and must apply to members of the disadvantaged group the same arrangements (I use the words of the judgment) as those enjoyed by the other employees, arrangements which, failing correct implementation of Article 119 in national law remained the only valid point of reference.

[18]Pausing there for a moment, it is not clear whether in referring to the "same arrangements" and the "only valid point of reference", the court is considering only the benefits conferred by the scheme as it then stands (eg the amount of pension payable at normal retirement date, and the ascertainment of that date) or whether it is looking at the constitutional arrangements of the scheme as a whole. Suppose, for instance, that a scheme includes, as is common, a provision for forfeiture of benefits in case of fraud by the employee against the employer (ignoring for the purpose of the example statutory restrictions on forfeiture). Is it seriously to be argued that the disadvantaged class is to receive its improved benefit free from the provision for forfeiture in case of fraud? think not since, to achieve equality, all that is required is that the disadvantaged class receives the same benefit as the advantaged class, that is to say the increased amount or the more advantageous date for commencement of payment but nonetheless subject to the same provision for forfeiture. If that were not correct, then the improved benefit for the disadvantaged class being free of the provision for forfeiture would be a better benefit than that originally enjoyed by the advantaged class with the result that the forfeiture provision would have to be struck out in relation to the original benefit of the advantaged class. That would, to my mind, be an extraordinary result and one which I would reject unless compelled by authority to reach a contrary conclusion.

[19]It seems to me, therefore, that the court, in referring to the "same arrangements" and the "only valid point of reference" must have been intending to refer not simply to the level of benefit and its time of payment, but also to the other provisions of the scheme which define and limit the benefit. However, even adopting that approach, it remains unclear from this judgment whether or not account is to be taken of a power of amendment which might be exercised – validly under domestic law – to reduce accrued benefits. There is, however, nothing in the proceedings before the court in Coloroll to indicate whether any power of amendment still subsisted – quite possibly none did subsist since the schemes were in winding-up and usually powers of amendment come to an end with the commencement of a winding-up.

[20]The court concluded, in paragraphs 32 and 36, in this way:

"32. It follows that, once the court has found that discrimination in relation to pay exists and so long as measures for bringing about equal treatment have not been adopted by the scheme, the only proper way of complying with article 119 is to grant to the persons in the disadvantaged class the same advantages as those enjoyed by the persons in the favoured class. … 36….. Moreover, as regards periods of service completed after the court's finding of discrimination but before the entry into force of the measures designed to eliminate it, correct implementation of the principle of equal pay requires that the disadvantaged employees should be granted the same advantages as those previously enjoyed by the other employees…"

[21]The position in relation to periods of service completed after the entry into force of rules designed to eliminate discrimination is different. Article 119 does not then preclude measures to achieve equal treatment by reducing the advantages of persons previously favoured, the reason, apparently being that "Article 119 merely requires that men and women should receive the same pay for the same work without imposing any specific level of pay".

[22]The critical difference between the two situations – before and after the entry into force of new rules -appears therefore to be that after that time, Article 119 imposes no specific level of pay, whereas before that time, it is the rules then in force which are the only valid point of reference so that equal treatment requires the same level of pay to be enjoyed by both classes as were enjoyed by the advantaged class.

[23]In Smith v Avdel, the scheme provided, prior to 1 July 1991, different normal pension ages for men (age 65) and women (age 60). Sometime before 1 July 1991, the trustees and the employer agreed that equalisation should be effected by providing a common normal pension age of 65. It is not clear from the decision of the Industrial Tribunal in making a reference to the ECJ (see

[1993] PLR 19

) when the deed or other document amending the rules was executed; what we are told is that the members were notified of the change in June and that the women's normal retirement age was increased to age 65 as from 1 July 1991. The change was applied to benefits earned in respect of years of service after 1 July 1991 (referred to by the Tribunal as "the future years") and benefits earned in respect of years of service before that date ("the past years"). The effect, broadly speaking, on the female applicants before the Tribunal of this change was a reduction in pension payable of up to 20% if they were to retire between the ages of 60 and 65. It is to be noted that this reduction applied in respect of pension earned in respect of all periods of service, whether before 17 May 1990, from that date to 1 July 1991 or thereafter.

[24]A number of questions were referred to the ECJ.a. The first question asked whether it was inconsistent with Article 119 for the employer to adopt a common pension age of 65 for men and women in relation to benefits based on three different periods of service namely

(a) years of service "after the date of equalisation which was 1 July 1991"

(b) years of service on or after 17 May 1990 "but before the date of equalisation when the date of equalisation was 1 July 1991" and

b. If the answer to any of the foregoing was in the negative (ie so that equalisation for the periods concerned was consistent with Article 119), the second question was whether Article 119 imposed any obligation on the employer to minimise the adverse consequences to women whose benefits were (adversely) affected.

c. The third question asked whether an adverse effect on benefits could be objectively justified by reference to the needs of the undertaking or the scheme itself.

[25]It does not appear from the decision of the Tribunal (nor anywhere else) what the terms of the amending power were. However, what is clear is that the Tribunal, the Advocate General and the court itself proceeded on the basis that, as a matter of domestic law, the amendments to the scheme were valid so that, absent any intervention of Community law, the amendment was effective to reduce the benefits for women in respect of each of the three periods(i) prior to 17 May 1990

(ii) from then to 1 July 1991 and

(iii) thereafter. In substance, therefore, the amendment was of retrospective effect: for her entire period of service, the benefits of a woman who had not attained 60 by 1 July 1991 ceased to be based on a normal retirement age of 60 and instead became based on a normal retirement age of 65.

[26]It is interesting to note that no-one argued before the court that it was permissible to reduce women's benefits earned in respect of the period from 17 May 1990 to 1 July 1991. The submission of the employer, in whose interests such an argument might have been raised, is recorded in the Report of

the Judge Rapporteur (see paragraph 18 on p 603):

"…as regards pension benefits to be earned by future service after the date of equalisation, there is no obligation on the employer to maintain benefits at any specific level…….Community law simply requires that, whatever level of benefits is provided in respect of future service, there should be equal treatment for men and women….. As regards, on the other hand, benefits to which entitlement has already been earned by virtue of periods of service prior to the date of equalisation but subsequent to 17 May 1990, the obligation to provide equal treatment requires that the less favourably treated person must be accorded the benefits already accorded to the more favourably treated person. However, that is not the case in respect of periods of service prior to 17 May 1990 owing to the temporal limitation of the Barber judgment."

[27]In his opinion, Advocate General Van Gerven, also the A-G in Coloroll, regarded the fundamental answer as clear under Community law. He referred, in paragraph 9 of his Opinion (see

[1995] ICR 612

), to Coloroll and what he had said there, pointing out again the distinction between pension benefits according to whether they were based on discrimination occurring in the past (after the judgment in Barber) or they were related to service performed "after the introduction a new rules adapted to the principle of equal treatment". He turned, then to consider benefits "based on periods of service in the past" (see paragraph 10) and benefits "based on new rules adapted to the principle of equal treatment and relating to future periods of service, that is to say periods completed after the entry into force of the rules" (see paragraph 11).

[28]In relation to past periods of service, he stated that the court "has consistently held that the more favourable rules must be applied to the less favoured sex", those rules forming "the only valid frame of reference" for immediate implementation of the principles of "equal treatment". He then went on to explain that the case law on the "only valid frame of reference" can be applied only in respect of service completed after 17 May 1990.

[29]In relation to future periods of service, he regarded the position as "fundamentally different", sharing the view of the employer, the UK, the German Government and the Commission that Community law does not preclude a lowering of such benefits so long as the benefits are set at a level which is the same for both men and women.

[30]In his conclusions, found at paragraph 29 on p 624, he expressed the view that it is not contrary Article 119 to raise pensionable age for future periods of service and similarly for periods of service prior to 17 May 1990. Community law does preclude such a step in relation to periods of service completed between 17 May 1990 and "the date on which pensionable ages are levelled". In that case, the principle of equal treatment must be implemented by applying the rules enjoyed by the members of the more favoured sex.

[31]Before turning to the judgment of the court, I make this observation about what the Advocate General said. It seems clear to me that in dividing service after 17 May 1990 into "past" and "future" he is comparing the position before the alteration is made and after it is made. Before the relevant rule change is actually made (conventionally by way of a deed of amendment or resolution in writing) the scheme provides for men and women in a discriminatory way; after the rule change, the scheme provides, from some effective date, for men and women to be treated equally. In dividing the post 17 May 1990 period into past and future, the Advocate General clearly regards the period before the actual amendment as past. He also appears, by adopting 1 July 1991 as the relevant date, to consider that the treatment to be afforded to the entire period prior to 1 July 1991 to be subject to the same requirement to level up.

[32]It is not entirely clear precisely why he says this, particularly as the case material does not, as I have already remarked, set out the amending power nor precisely how it was exercised. For instance, if the actual amendment had been introduced on, say, 1 June 1991, the alteration, for a woman who retires after 1 July 1991, ought, in principle, to be capable of being effective in respect of all service after 1 June 1991 rather than only after 1 July 1991. This is because, for such a woman, she is treated in respect of future service (ie service after the amendment), in the same way as a man in a similar position. However, for a woman who attains the age of 60 during June 1991, the position is different. Since the rule change (effected on 1 June) only takes effect on 1 July, such a woman would remain able to retire on full pension. In respect of service after 17 May 1990, a man should therefore be entitled to a like right. It is perhaps the case that the Advocate General did not distinguish between those two cases concluding simply that, since the amendment did not take effect until 1 July, all service prior to that date falls within "past" service in the sense in which he was using that word. What is absolutely clear, in my judgment, is that he did not regard service prior to the actual amendment, let alone prior to 17 May 1990, as "future" service simply because, after 1 July 1991, the amendment was fully retrospective.

[33]In the judgment of the court, it is noted, at paragraph 5, that with effect from 1 July 1991, retirement age was set at 65 years for men and women, the changes relating to benefits payable in respect of service both prior to and subsequent to 1 July 1991. Like the Advocate General, the court drew no distinction between the date on which the amendment was made (which may have been before 1 July 1991) and the date on which it was expressed to take effect, 1 July 1991.

[34]The question then identified (see paragraph 14) was whether it was permissible to take away from the favoured class "the advantage enjoyed" by that class, the reference date being either the "date of entry into force of such a measure (in this case 1 July 1991) or the date (17 May 1990) of the Barber judgment…". Then, after referring to Defrenne v Sabena, the court, in paragraph 16, repeated verbatim what it has said in paragraph 31 of its judgment in Coloroll and adopted, in paragraph 17, the same conclusion as it reached in Coloroll (see paragraph 20 above). The court then concluded at paragraph 18 as follows:

"Application of this principle to the present case means that, as regards the period between 17 May 1990 (the date of the Barber judgment) and 1 July 1991 (the date of which the scheme adopted measures to achieve equality) the pension rights of men must be calculated on the basis of the same retirement age as that for women."

[35]In relation to the third question asked by the Industrial Tribunal, the court concluded (see paragraphs 28 to 31) that, even if account could be taken of objectively justifiable considerations relating to the needs or the undertaking or of the scheme, the administrators of the scheme could not reasonably plead, as justification for raising the retirement age for women during the Barber window, financial difficulties as significant as those taken into account in Barber, since the space of time was relatively short and attributable in any event to the conduct of the scheme administrators.

Discussion

[36]There is a certain logic in Mr Paines' submissions in relation to the Scheme in the present case. In particular, if one looks at the benefits which a woman was entitled to receive under the Scheme prior to its amendment in September 1993, those benefits were always vulnerable to reduction pursuant to a proper exercise of the power of amendment, at least until they had fallen into payment. Accordingly, there is no obvious reason why a requirement to treat men and women equally should result in men being granted a benefit which is better than that of women, that is to say one which is, at least according to Mr Newman, entrenched against subsequent amendment, particularly given that the result would be to entrench the same benefit for women (otherwise there would be infringement of Article 119 because men would then have a better benefit than women). There can, according to Mr Paines, be nothing objectionable, in these circumstances, in levelling down the women's benefits to achieve equality since that is precisely what the power of amendment permits.

[37]Even if that is wrong, so that the rules had to be amended, in respect of the period of the Barber window, to provide men with the same benefits as women, there would be nothing to prevent the reduction, pursuant to the power of amendment, of the benefits of both sexes. The court should not require two steps to be taken but should give effect, in accordance with the principles exemplified in Re Collard's Will Trusts

[1961] Ch 293

, to the actual amendme nts which achieve, in one step, what could validly have been achieved in two.

[38]Clearly, Smith v Avdel presents difficulties for these arguments. As I have observed, the amendment in that case was fully retrospective and was, or was taken, as a valid amendment according to national law. It might be thought, therefore, that the very point in issue in the present case was in fact decided in Smith v Avdel.

[39]Mr Newman submits that that is indeed the case. But Mr Paines says that a careful reading of Smith v Avdel shows that it does not establish the proposition that benefits must be levelled up in respect of the Barber window in all cases. It depends, he says, on the precise scope of the amending power and how it has been exercised.

[40]The first point he raises is that the court, in using the phrases "date of entry into force" of the equalising measure, was looking at the date from which it took effect according to its terms. Thus, in Smith v Avdel itself, that date was 1 July 1991. In the present case, so far as the change in NRD is concerned, the amendment is expressly back-dated to 17 May 1990 and that backdating was expressly authorised by the amending power in Rule 32. The second point, which goes with it, is that when one reads the 1993 Deed and Rules after their execution, it can be seen that the benefits accruing for both men and women during the Barber window were based on a common NRD of age 63: because the amending power is expressly retrospective, the amendment takes effect, he says, for all purposes as if the new NRD had actually been in place on 17 May 1990.

[41]I reject that interpretation of the judgment in Smith v Avdel. Now, there may be good reasons (perhaps nothing to do with the merits of the point but more to do with the politics of what was achievable before the ECJ) why the point was not taken by the employer that the benefits provided by the scheme were susceptible to reduction through a valid exercise of the amending power. Be that as it may, what the court decided was that benefit accrua l during the Barber window had to be at the rate appropriate to the advantaged class. It reached that conclusion against the background of the exercise of a power of amendment which resulted, as much for women attaining age 60 after 1 July 1991 as for tho se attaining that age during the period 17 May 1990 to 1 July 1991, in a reduction in benefits. I am of the firm view, on a proper reading of the judgment, that the court was concerned to look at the (discriminatory) benefits before any change in the rules designed to achieve equalisation had been made and to compare that position with the position which obtained after that change. More generally, I observe, that the exercise of a power of amendment may result in an immediate change to the rules of a scheme, or it may take effect at a date after the exercise of the power: that contrast could be one explanation for the difference in language which the court uses at different times, sometimes the "date of entry into force" (eg paragraph 36 of the judgment in Coloroll and paragraph 14 of the judgment in Smith v Avdel) and at other times "the date at which the scheme adopted measures to achieve equality" (eg paragraph 18 of the judgment in Smith v Avdel).

[42]Mr Paines says that what the court did not have in mind was the possibility that an amendment might have retrospective effect in the sense of rewriting the scheme from an earlier date than the date of the amendment itself, the rewrite being compliant with Article 119. I agree with him that the court probably did not have that particular form of amendment in mind. But this is a question of form not of substance. The substance of the amendment in Smith v Avdel was that, after 1 July 1991, the benefits of men and women were based on a pensionable age of 65, not only in respect of service on or after 17 May 1990 (in which case an express provision to that effect would have been included) but for all service. In other words, the substance was that the amendment was fully retrospective for all service.

[43]It is impossible, to my mind at least, to think that the court's approach would have been any different from what it was in Smith v Avdel in the case of an amendment which, as a matter of form, stated that it was retrospective and was made pursuant to a power of amendment expressly providing for such retrospectivity. In both cases, the apparent benefit provided by the scheme prior to amendment is subject to reduction. The right arising under Article 119 prior to the actual amendment ie the right to equal treatment, is a substantive right. If it is correct that the Article 119 right immediately before the making of an amendment can be adversely affected by the exercise of a power where both the power and its exercise are expressed to be fully retrospective then I can seen no reason why the same should not apply in the case of the exercise of a power where the power can be, and has in fact been, exercised in a way which is retrospective. There is, in my judgment, no valid distinction for present purposes between the two types of power and their exercise.

[44]Another way of making this point is to look at the position immediately before the execution of the 1993 Deed and Rules in the present case. At that stage, before any attempt has been made to rewrite history by making a retrospective amendment, men are entitled to claim, in respect of service after 17 May 1990, benefits on the same basis as those accruing to women. The question is then asked: Can this right which men have be adversely affected, as a matter of Community law, by amendment? The answer to that question cannot, it seems to me, depend on the precise wording of the power under which it is sought to act. The question in all cases, assuming that the amendment is effective under national law, is whether levelling down in permitted. Smith v Avdel has answered that question in the negative.

[45]Whether Smith v Avdel is right or wrong, it is binding on me. Even though the employer did not argue to the contrary, the conclusion that there can be no levelling down is supported by reasoning, both by the Advocate General and by the court itself. I regard the position as clear enough to make it inappropriate for me, rather than for the Court of Appeal if this matter should go further, to make a further reference to the ECJ. The parties have not asked me to do so and I decline to do so of my own motion.

Conclusions

[46]It follows, in my judgment, that, in respect of the Barber window in this case (17 May 1990 to 7 September 1993) men were, entitled to have their benefits levelled up to those of women, that is to say to accrue benefits on the basis of an NRD of their 60th birthday. The 1993 Deed and Rules did not provide for this accrual and therefore, subject to the point to which I come in the following paragraph, cannot, so far as concerns the accrual of benefits for men during the Barber window, stand consistently with Article 119.

[47]The point just referred to is the point based on Re Collard's Will Trusts ie the argument that it would have been possible to achieve the result intended by the Trustee and the employer in two steps – first of all a levelling up of the men's benefits and then a reduction across the board for both men and women. This gives rise to two questions. First, whether the right of the disadvantaged class to levelling up under Article 119 is entrenched for all time. Secondly, if not, whether it would be permissible to effect the two stage process in the space of a short time.

[48]As to the first of those questions, I do not consider that a member's rights under Article 119 are entrenched as a matter of Community law for all time. Although the court rejected, for the reasons I have set out in paragraph 35 above, the idea that objectively justifiable reasons could be pleaded in Smith v Avdel (and on the facts of the present case, the same may apply) to validate the adverse amendment, it does not, in my judgment, follow that an amendment to the Scheme, many years in the future and having nothing to do with equalisation issues, would be invalid. In my view, if a scheme is amended so as expressly to provide benefits in respect of the Barber window which Article 119 itself provided prior to the amendment, those benefits are scheme benefits which in principle should be subject to the scheme amendment power or any other provision affecting benefits (such as, as I have already mentioned, a forfeiture provision).

[49]That, then, leads to the second question. It seems to me that the ECJ would be likely to apply at least as strict approach as would the English court in assessing what might be regarded as a device of this nature. The likelihood is that English law would regard the two transactions as so intimately interlinked as to regard them as one. On that basis, the ECJ would be likely to conclude that the "real" transaction was simply a reduction in benefits of the advantaged class in order to achieve equality, something which, on the hypothesis under consideration, is not permissible. In any event, this point would have been open in Smith v Avdel if, contrary to its actual position, the employer had been arguing in favour of levelling down in respect of the Barber window. Although the precise terms of the power of amendment are not known, I think it is appropriate to infer that the power would have allowed a reduction in benefits after a levelling up just as it in fact allowed a reduction of benefits in respect of the whole period of service as from 1 July 1991. The conclusion in Smith v Avdel is essentially inconsistent with the validity, from a Community law perspective, of the two stage approach.

[50]These conclusion makes it strictly unnecessary for me to decide whether it is open to me to consider the point which Mr Newman wishes to make (see paragraph 8 above) but which Mr Paines says he is precluded from taking by the order directing a trial of the preliminary point and by the admissions, contractually binding on the Trustee, pursuant to which the reference was made. I propose to say no more about it.

Answer to preliminary issue

[51]Accordingly, I answer the preliminary question as follows: On the true construction of Article 141 (formerly Article 119) of the Treaty of Rome and on a proper application of European case law, the requirement for male and female members of the Scheme to be provided with equal pension benefits for the same period of pensionable service served on or after 17 May 1990 is not satisfied by the provisions of the 1993 Deed and Rules so far as concerns the benefits for men in respect of the period 17 May 1990 to 7 September 1993 by reason of the adoption of a common Normal Retirement Date for men and women of age 63.

Harland and Wolff Pension Trustees Ltd v AON Consulting Financial Services Ltd [2006] EWHC 1778 (Ch)

<B>Agreed Statement of Facts </B>

<B>The Order directing a preliminary point </B>

<B>Article 119 and Community law </B>

the Judge Rapporteur (see paragraph 18 on p 603):

<B>Discussion </B>

<B>Conclusions </B>

<B>Answer to preliminary issue </B>

Cited in 3 later judgments