Urenco UK Ltd.v Urenco UK Pension Trustee Company Ltd & Anor [2012] EWHC 1495 (Ch)

[2012] EWHC 1495 (Ch)

Case No HC10 003401

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

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

Date 31/05/2012

Before

MR JUSTICE WARREN

Between

URENCO UK LIMITEDClaimant

(1) URENCO UK PENSION TRUSTEE COMPANY LIMITED (as Trustee of the URENCO UK Limited Pension Scheme ("the Scheme"))Defendants

(2) FRANCIS GREGORY ALLEYNE MOSSOPDefendant

Richard Hitchcock (instructed by Brabners Chaffe Street LLP) for Claimant

Naomi Ling (instructed by Brabners Chaffe Street LLP) for First Defendant

Andrew Short QC (instructed by Russell Jones & Walker) for Second Defendant

Hearing Hearing dates: 23rd and 24th April 2012

Judgment

Introduction

[1]This Part 8 Claim concerns an occupational pension scheme known as the Urenco UK Limited Pension Scheme (“the Scheme”). It was established with effect from 26 March 1993 and is currently governed by a Trust Deed dated 21 April 2009 (“the Trust Deed”). It is a hybrid scheme providing benefits on both a defined contribution and a defined benefit basis. This action is concerned only with the defined benefits section.

[2]The Claimant (“Urenco”) is the principal employer under the Scheme. Its business is the production of enriched uranium for the nuclear industry. Mr Richard Hitchcock appears on its behalf.

[3]The first Defendant (“the Trustee”) is the sole trustee of the Scheme. Miss Naomi Ling appears on its behalf.

[4]The second Defendant (“Mr Mossop”) is an active member of the Scheme. He had formally been a member of the Combined Pension Scheme (“the CPS”), a pension scheme provided by the United Kingdom Atomic Energy Authority (“the Authority”), a scheme which is not, it is to be noted, a trust scheme. He had been entitled to membership of the CPS by virtue of his employment by Sellafield Limited (formerly British Nuclear Fuels Ltd “BNFL”). His employment was transferred to Urenco with effect from 1 October 2008. This transfer took place as the result of a Sale and Purchase Agreement dated 29 February 2008 (“the SPA”) made between the Nuclear Decommissioning Authority (“the NDA”), Sellafield Ltd and Urenco (under its then name Urenco (Capenhurst) Limited) to which I will come in due course. Mr Mossop was one of a small number of employees whose employment transferred under the SPA. I shall refer to them collectively as “the Transferred Employees”. An order is sought pursuant to CPR 19.7(2) appointing Mr Mossop as representative of the Transferred Employees in whose interests it is to oppose certain changes to their future service benefits which have been proposed by Urenco and agreed to in principle by the Trustee. Although the SPA affects only a small number of individuals, the points in issue in this claim, or some of them at least, are relevant to a large number of other employees in the nuclear industry.

[5]The issues raised on the Claim Form are essentially these: i) Whether the Scheme’s power of amendment (in relation to the future service benefits of the Transferred Employees) is constrained by Part 4 Schedule 8 Energy Act 2004 and if so, in what way and to what extent. ii) Whether the Scheme’s power of amendment (in relation to the future service benefit of the Transferred Employees) is constrained by the SPA or the Undertaking referred to below.

The Scheme

[6]It is necessary to mention for the purposes of these proceedings only a few provisions of the Scheme.

[7]The first relevant provision is the contribution rule applicable to the Transferred Members. It is common ground that this currently requires a member contribution of 7.5% of Pensionable Earnings under Clause G.2.1(b). That does not appear clearly from that Clause alone, but must, I think, be the result of that provision in the light of Clause F.1.2 notwithstanding that Clause G.2.1(b) applies only to Pensionable Members and that Pensionable Member is defined as a person admitted to membership “on or before 31 December 2007 under clause F.1.2…”. Clause F.1.2 clearly envisages that certain post-31 December 2007 joiners will be Pensionable Members so that the words “or recognised as such” are to be treated as read into the definition after “31 December 2007”.

[8]The second relevant provision is Clause K which is concerned with pension increases. The rate of increase in any year is to be agreed by Urenco and the Trustee but with a minimum of “the Indexation Factor”. This factor is related to the “Index” which is the RPI or any index which may replace it or which might be used by the Secretary of State for the purposes of increases in public sector pensions. There is a slightly complex cap on indexation. If the employer contribution rate exceeds 12.5% (the Contributions Limit defined in Clause K.1.2), the minimum rate of increase may be reduced by such amount as the Actuary determines to be appropriate to reflect the increased employer contribution rate over the Contributions Limit. But this is subject to a proviso that the increase shall be 5%, or if it is less, the Indexation Factor. The effect of this appears to be that, if employer contributions are in excess of 12.5%, there is a cap on increases of the lesser of 5% and RPI (or some other appropriate index).

[9]The third relevant provision is the power of amendment found in Clause B.3. This is a power for the Trustee with the consent of Urenco by deed to “amend, modify, add to or replace all or any of the trusts, powers or provisions of [the Trust Deed]. Such deed may have retrospective effect”. No such retrospective change may be made without the consent of the Member concerned, if “in the opinion of the Trustee, the amendment materially and prejudicially affects the overall value of the accrued benefits of any Member…in respect of Pensionable Service prior to the date of the amendment and to which the Member would be entitled (ignoring any discretionary augmentation) if the Scheme had been would up on the date of the amendment.” All amendments must be made in accordance with section 67 of the Pensions Act 1995 (as amended).

[10]The fourth relevant provision is found in the definitions clause which provided for a normal retirement date on which a member attained the age of 65.

The CPS

[11]The corresponding provisions of the CPS at the time of the transfer of Mr Mossop’s employment were these: i) First, the contribution rate was, at the time of the transfer of Mr Mossop’s employment, 5% (made up of a basic contribution of 3.5% and a family benefit contribution of 1.5%). ii) Secondly, increases to benefits are to be “in step with increases in the cost of living” to the extent corresponding to increases in official pensions pursuant to statute; in effect, the link was, at the time of the transfer of Mr Mossop’s employment, to the RPI. iii) The power of amendment permits the Authority, with the approval of the Secretary of State, from time to time to amend any Rule, or to make or amend any additional Rule. The only fetter on this power is that no amendment or additional Rule should alter the main purposes of the scheme.

The Energy Act 2004 (“EA 2004”)

[12]EA 2004 makes provision for, among other matters, the decommissioning and cleaning-up of sites previously used for or contaminated by nuclear activities. It envisaged that responsibility for some of those tasks would be transferred, under the direction of the NDA, to public bodies (including companies owned by the UK government) or to private contractors (such as Urenco). This would involve the transfer of staff from one employer to another. In many, if not all cases, transferring staff would cease to be members of their existing pension schemes. Schedule 8 EA 2004 (“Schedule 8”) makes provision in relation to pensions for such staff. Reference is made in Schedule 8 to the UKAEA: this is the Authority. Schedule 8

[13]Schedule 8 is divided into five parts: i) Part 1 sets out definitions. ii) Part 2 enables the NDA to modify a pension scheme maintained by or on behalf of a nuclear company which is wholly owned by the Crown or a scheme designated by the Secretary of State in order to extend, to the extent specified, the groups of persons who can participate in the scheme. I am not concerned with the detail. iii) Part 3 makes provision for continuity of pension provision within a UKAEA scheme (such as the CPS) and for the making of transfer payments from such a scheme following a nuclear transfer scheme. Again, I am not concerned with the detail. iv) Part 4, which I come to in detail in a moment, is concerned with pension protection on the transfer to a private sector scheme such as the Scheme. v) Part 5 makes provision to enable a UKAEA pension scheme to apply to employees of designated BNFL companies while such companies are publicly controlled. Again, I am not concerned with the detail.

Part 4 of Schedule 8 (“Part 4”)

[14]The structure of Part 4 is as follows: i) Paragraph 9 identifies the criteria which determine the categories of employee who are entitled to “pension protection”. ii) Paragraphs 10 and 11 set out what that protection is and how it is to be provided. Paragraph 10 deals with nuclear transfer schemes managed by the Secretary of State and paragraph 11 deals with other arrangements (that is to say transfer arrangements as defined) under the auspices of the NDA. The present case falls within paragraph 11. It is to be noted that in either case, the transfer might be to certain public sector employers (the UKAEA, the NDA or a publicly controlled company) or to a private sector employer. iii) Paragraph 12 deals with modifications of NDA Schemes but nothing turns on its provisions for present purposes.

[15]The purpose of paragraph 9 is to identify the persons who are entitled to pension protection, that is to say the protection afforded by paragraphs 10 and 11. A person is entitled to protection in relation to a nuclear transfer scheme or any transfer arrangements if sub-paragraph (2) applies to him and he is a person falling within sub-paragraph (5). His employment immediately after the transfer must be for “NDA purposes” (a phrase defined in paragraph 3 of Part 3). He must be a person to whom sub-paragraph (7) applies immediately before “the relevant time”; that time is defined in sub-paragraph (12) and for present purposes can be taken as the time when the transfer of employment takes place. I shall refer to it as “the transfer date”. In the present case, this was 1 October 2008. It is common ground that the Transferred Employees satisfy the conditions of paragraph 9 and are entitled to “pension protection”

[16]Sub-paragraph (7) applies to a person if: i) he is a participant in a nuclear pension scheme; ii) he is eligible to become such a participant; or iii) he would be so eligible had he attained an age, or fulfilled a condition, specified in the pension scheme.

[17]The present case is concerned with paragraph 11 rather than paragraph 10. Paragraph 11 is in the following terms: “Protection on a transfer in accordance with transfer arrangements 11(1) It shall be the duty of the NDA to secure that provision is made for ensuring that consultation with the persons specified in sub-paragraph (2) takes place before any transfer arrangements in relation to which persons are entitled to pension protection take effect.

(2) Those persons are – (a) the NDA itself; (b) the Secretary of State; (c) the Treasury; (d) persons appearing to the NDA to represent persons who will be entitled to pension protection in relation to the arrangements.

(3) Before such transfer arrangements take effect, the NDA must satisfy itself that every person entitled to pension protection in relation to the arrangements will be entitled, by virtue of the employment that he will hold after the relevant time— (a) to exercise an option of becoming a participant in an appropriate pension scheme; or (b) in the case of a person to whom paragraph 9(7)(c) will apply immediately before the relevant time, to exercise such an option on or before attaining the age or fulfilling the condition in question.

(4) The NDA’s duty under sub-paragraph (3) is owed to every person who is entitled to pension protection in relation to the transfer arrangements.

(5) In the case of a person to whom paragraph 9(5)(d)(ii) applies, the references in sub-paragraph (3) to a person being entitled to exercise an option are to be construed as references to a person being entitled to exercise an option if his employer exercises the entitlement mentioned in paragraph 9(5)(d)(ii).

(6) For the purposes of sub-paragraph (3), a pension scheme is an appropriate pension scheme in relation to a person if the NDA is satisfied that – (a) taking into account the other benefits (if any) that are conferred on or made available to him as a result of the employment that he will hold after the relevant time, and (b) taking the benefits that are available under the provisions of that pension scheme as a whole, the benefits that are available under those provisions are no less favourable than the benefits available under the provisions (taken as a whole) of the nuclear pension scheme in respect of which he is entitled to protection under this Part of this Schedule.

(7) In sub-paragraph (6) the reference to the scheme in respect of which a person is entitled to protection under this Part of this Schedule is a reference to – (a) in the case of a person who has not previously been owed a duty under either sub-paragraph (3) or paragraph 10(2), the scheme by reference to which paragraph 9(7) will apply to him immediately before the relevant time; and (b) in other cases, the scheme by reference to which paragraph 9(7) applied to him immediately before the time that was the relevant time in relation to him on the first occasion on which he was owed such a duty; and the reference, in relation to such a person, to the provisions of that scheme is a reference to its provisions as in force immediately before the time specified in sub-paragraph (8).

(8) That time is – (a) in a case falling within sub-paragraph (7)(a), the relevant time; or (b) in a case falling within sub-paragraph (7)(b), the relevant time in relation to the person on the first occasion on which he was owed a duty under either sub-paragraph (3) or paragraph 10(2).

(9) Where a person – (a) is a participant in a non-nuclear pension scheme by virtue of the exercise of an option in a case in which the NDA discharged its duty to that person under sub-paragraph (3) by reference to that option, or (b) is or will become entitled to exercise an option to become a participant in such a pension scheme in a case in which the NDA discharged its duty to that person under sub-paragraph (3) by reference to that entitlement, this Part of this Schedule shall have effect in relation to that person as if that scheme were a nuclear pension scheme.

(10) Sub-paragraph (9) does not apply in relation to a person to whom paragraph 9(5)(d)(ii) applied when the NDA discharged its duty to that person under sub-paragraph (3) unless the person’s employer exercises the entitlement mentioned in paragraph 9(5)(d)(ii).”

(11) In this paragraph “relevant time” has the same meaning as in paragraph 9.” (a) the NDA itself; (b) the Secretary of State; (c) the Treasury; (d) persons appearing to the NDA to represent persons who will be entitled to pension protection in relation to the arrangements. (a) to exercise an option of becoming a participant in an appropriate pension scheme; or (b) in the case of a person to whom paragraph 9(7)(c) will apply immediately before the relevant time, to exercise such an option on or before attaining the age or fulfilling the condition in question. (a) taking into account the other benefits (if any) that are conferred on or made available to him as a result of the employment that he will hold after the relevant time, and (b) taking the benefits that are available under the provisions of that pension scheme as a whole, (a) in the case of a person who has not previously been owed a duty under either sub-paragraph (3) or paragraph 10(2), the scheme by reference to which paragraph 9(7) will apply to him immediately before the relevant time; and (b) in other cases, the scheme by reference to which paragraph 9(7) applied to him immediately before the time that was the relevant time in relation to him on the first occasion on which he was owed such a duty; (a) in a case falling within sub-paragraph (7)(a), the relevant time; or (b) in a case falling within sub-paragraph (7)(b), the relevant time in relation to the person on the first occasion on which he was owed a duty under either sub-paragraph (3) or paragraph 10(2). (a) is a participant in a non-nuclear pension scheme by virtue of the exercise of an option in a case in which the NDA discharged its duty to that person under sub-paragraph (3) by reference to that option, or (b) is or will become entitled to exercise an option to become a participant in such a pension scheme in a case in which the NDA discharged its duty to that person under sub-paragraph (3) by reference to that entitlement,

[18]There are thus the following obligations on the NDA, owed to every person who is entitled to pension protection: i) to consult (sub-paragraphs (1) and (2)); and ii) to satisfy itself that persons entitled to pension protection are given the option of participating in an appropriate pension scheme either at once or on fulfilling certain age or other conditions as to membership.

[19]As to the protection afforded, the person entitled to pension protection is afforded that protection by being able to participate in “an appropriate pension scheme”. A scheme is an appropriate pension scheme only if the NDA is satisfied that taking account of the benefits conferred on or available to the protected person as a result of his new employment and of the benefits available under the provisions of that scheme as a whole, the benefits that are available are no less favourable that the benefits taken as a whole of the scheme in respect of which he is entitled to protection. In other words, a comparison is to be made. I shall refer to this as “the no less favourable” test or assessment.

[20]Paragraph 11 applies not only on a first-generation transfer but also on second-generation (and subsequent) transfers. It is therefore necessary to identify the scheme and the point of time to be used in making the comparison and this is done by sub-paragraphs (7) and (8). On a first-generation transfer, the comparison is to be made between the receiving pension scheme and the relevant nuclear pension scheme as it stood immediately before the transfer: see sub-paragraphs (7)(a) and (8)(a). In the case of a second-generation (or subsequent) transfer, the comparison is to be made between the second receiving scheme and, as before, the relevant nuclear pension scheme as it stood immediately before the first-generation transfer: see sub-paragraphs (7)(b) and (8)(b)). In other words, any actual change to the relevant nuclear pension scheme after the first-generation transfer is ignored.

[21]In the present case, what this all means is that the NDA had to be satisfied that, taking account of the benefits conferred on Mr Mossop as a result of his employment with Urenco and taking the benefits that would be available to him under the provisions of the Scheme as a whole, his benefits were no less favourable than his benefits under the CPS as it stood on 1 October 2008.

The SPA

[22]The SPA was made between the NDA, Sellafield Limited and Urenco (under its then name of Urenco (Capenhurst) Limited). The background to the SPA is helpfully set out in paragraphs 6 and 7 of Mr Short’s skeleton argument, summarising the evidence in the witness statements of Mr Mossop and Steven Ball, head of HR for Urenco:

“6. In summary, there has been a nuclear site producing enriched uranium at Capenhurst in Cheshire since the 1950s. In 1993 this was divided into two abutting Nuclear Licensed Sites, one continuing in the ownership of BNFL (which had been a public limited company, albeit wholly owned by the UK government, since 1984) with the other being transferred to the claimant….. Following the [Energy Act 2004] the BNFL site was transferred to the newly established [NDA] on 1 April 2005. However, although the NDA is the Responsible Organisation, Sellafield Limited (the name by which BNFL has been known since 2007) has continued to manage and operate the site and remains the Site Licence Company under section 3 of the Nuclear Installations Act 1965. The other site was transferred to the claimant in 1993, since when it has been the Site Licence Company. This site currently operates three plants producing enriched uranium for nuclear power stations. 7. Certain of the services used by both the sites at Capenhurst were provided by either NDA/Sellafield or by the claimant but used by the other under appropriate service agreements. One example was the high voltage electricity distribution system and related services. Although the claimant owned its own part of the distribution system, the whole of the system was operated and maintained by NDA/Sellafield Ltd. The employees who worked on this system (including Mr Mossop) were employees of Sellafield Ltd.”

[23]In 2007, the NDA/Sellafield Ltd wanted to sell their part of the system and the related service organisation to Urenco as a going concern. This resulted in the SPA which was eventually entered into on 29 February 2008 although the actual transfer did not take place until 1 October 2008.

[24]Mr Mossop’s employment with BNFL and his membership of the United Kingdom Atomic Energy Authority Industrial Superannuation Scheme commenced on 6 September 1982. He became of a member of the CPS when it was formed in 1997 by the merger of a number of schemes.

[25]As a result of the transfer made in 2008 and the effect of the Transfer of Undertakings (Protection of Employment) Regulations 2006, the employment of Mr Mossop and the other Transferred Employees transferred from Sellafield Ltd to Urenco with effect from 1 October 2008. They were entitled to a level of pension protection under the provisions of Part 4.

[26]Clause 6 of the SPA is headed “PENSIONS AND EMPLOYEES”. Under Clause 6.1, Urenco is to procure that the Scheme (then called the Urenco (Capenhurst) Limited Pension Scheme) was a registered contracted out scheme capable of receiving a transfer payment from the CPS. Urenco is to procure that each of the Relevant Employees (the same class as I have called the Transferred Employees) will be offered membership of the Scheme and will be offered the opportunity to transfer his accrued benefits from the CPS to the Scheme.

[27]Clause 6.3 provides as follows:

“[Urenco] shall procure that the Relevant Employees are offered benefits for past and future service in line with the GAD Certificate of Broad Comparability and associated undertakings……..”

I shall refer to that certificate as “the Certificate”; it is the certificate issued to the NDA and Sellafield Ltd dated 2 August 2007. The associated undertakings (“the Undertakings”) are those referred to in the Certificate itself.

[28]Under Clause 6.5, Sellafield Ltd is to pay to Urenco the sum of £56,000 in full and final settlement of all of NDA’s and its own obligations as provided for in Schedule 9 in respect of the Relevant Employees; this was called “the Pension Equivalence Payment”. And Clause 6.6 provides that certain additional payments are to be made, which I deal with in paragraphs 31 and 32 below.

[29]Clause 17.7 is concerned with third party rights. Generally, the Contracts (Rights of Third Parties) Act 1999 is excluded. But this exclusion does not extend to the rights of Employees (which includes the Transferred Employees) to enforce the provisions of Clause 6.

The Certificate and the Undertakings

[30]The first page of the Certificate sets out the background leading to its issue. On the second page, it is stated that “BNFL has asked the Government Actuary’s Department (“GAD”) for its impartial assessment of whether Urenco (Capenhurst) Limited’s proposals satisfy the broad comparability requirements”. The evidence before me does not reveal how the proposals placed before the GAD came to be formulated in the way which they were; nor is there any relevant evidence as to the matrix of fact against which the SPA and the Certificate are to be construed other than the obvious fact that the proposals were designed to satisfy the NDA that the Scheme was indeed an appropriate pension scheme. It is clear that the Scheme taken by itself and as it stood prior to the transfer was not an appropriate pension scheme because, for instance, it provided for a member contribution rate of 7.5% rather than the 5% rate under the CPS and the less generous rate of increase of pensions in payment without providing other, more generous, benefits on which reliance could be placed to produce a favourable comparison. Accordingly, steps were taken to ensure that the benefits to be conferred on the Transferred Employees as a result of their employment by Urenco, taken with their benefits under the Scheme as a whole, were no less favourable.

[31]Those steps appear to have resulted in three things. First, the Scheme itself was to apply to the Transferred Members in a slightly modified form; secondly, Urenco was to give certain undertakings; and thirdly compensation was to be provided to ensure that the take-home pay of the Transferred Members was not reduced as a result of their paying the higher contribution rate of 7.5% rather than 5%.

[32]The third of those matters is reflected in Clause 6.6 of the SPA. It provides that,until a member attains age 65 or leaves service, whichever is earlier (his “Employment Term”), Urenco is to make a guaranteed monthly payment from the Pension Equivalence Payment to each of the Relevant Employees “in accordance with the payment profiles set out in Schedule 9” (their “Employee Pension Equivalence Payments”). Urenco is at liberty to amend or to cease making these payments solely upon the condition that it has provided the Transferred Employees with a guaranteed increase in basic pensionable income and the effect of such increase is equivalent to or greater than their respective Employee Pension Equivalence Payments for their Employment Term.

[33]There seems to be a drafting error here. Schedule 9 in fact contains the Certificate and there is nowhere to be found in the SPA (or anywhere else) the payment profiles referred to. I am told that the reference to payment profiles originated in an earlier draft and remained in the final version in error. It is common ground that Clause 6.6 is intended to reflect the understanding that the Transferred Employees should be compensated in respect of the higher contribution rate under the Scheme (7.5%) as compared with the contribution rate under the CPS (5%). The matter of compensation is dealt with in both the Certificate (see paragraph 11 Annex A) and in the Undertakings (see paragraph 9 Annex B); there can be do doubt that the Transferred Employees are entitled to some compensation.

[34]The first and second of those matters are reflected in the Certificate and the Undertakings. The third page of the Certificate refers to the “main terms of the proposal made” by Urenco which were set out in a document attached as Annex A. Mr Johnston, the actuary within the GAD giving the Certificate, stated that he had compared the value of the proposals with the value of the benefits in the CPS; that he had considered the design of the two sets of arrangements including the benefits which are available, when they are payable and to whom; and the level of employee contributions as well as other matters concerning service, gender, marital status and salary levels. In this part of his certification, he said nothing expressly about any power to amend either the CPS or the Scheme or about whether, and if so how, such powers were to be factored into the comparability assessment. He nonetheless expressed his view that the requirements of Schedule 8 were met in the third paragraph on the third page of the Certificate in the following terms:

“I confirm that the proffered arrangement offer a package of benefits, which are broadly comparable to those provided by the package of benefits provided prior to the transfer, and as such the requirements of Energy Act 2004 are met for staff who are covered by Schedule 8 of that Act.”

[35]The third and fourth pages of the Certificate contain twelve notes to which Mr Johnston stated his opinion was subject. I mention the following: i) Note 5 explains that the Certificate is only concerned with benefits to be provided in respect of service with an employer participating in the Scheme. Past service benefits in the CPS were to be dealt with by other arrangements. ii) Note 8 states that, in giving his opinion, he had assumed that “any commitments made by Urenco will be fulfilled….”. iii) Note 9 draws attention to the fact that his opinion covers the terms of the CPS which applied as at the date of the Certificate (11 September 2008) noting that changes to the CPS which are made after the employees had transferred fall outside the broadly comparable commitment. iv) Note 10 observes that the broad comparability assessment and the Certificate do not prevent transferring employees from negotiating new pension arrangements with their employer after the transfer. v) Note 11 states that Urenco or any associated or subsidiary company “has agreed that the [Scheme] will provide the benefits described in this Certificate”. Mr Johnston also stated that the GAD had examined the current scheme documentation of the Scheme and that “our understanding is that his documentation is consistent with the provisions set out in the Annex to the Certificate”. I will come to that Annex in a moment. He included a disclaimer about the adequacy of the documentation and recorded that the GAD had not obtained legal advice to confirm their understanding. vi) Finally, in Note 12, he stated that Sellafield Ltd should confirm the validity of the Certificate in the light of potential amendments to the CPS which were apparently on the cards.

[36]The fifth page of the Certificate contains a health warning about security of benefits, pointing out that the CPS was backed by central or local government. The Scheme was unable to provide the same degree of security. Mr Johnston recorded that no assessment had been made of the Scheme’s current funding position.

[37]Annex A then followed on from the pages I have referred to. It is headed “Main Terms of the [Scheme] as Applicable to Members of the [CPS] transferring from BNFL Capenhurst EDT to Urenco UK”. These terms are, in a number of respects, different in substance from those of the Trust Deed. I note the following paragraphs: i) Paragraphs 4, 12 and 13 which, taken together, deal with retirement age. The combined effect is that the Transferred Employees are to have a normal retirement age of 60 being able to retire at that age without the need for consent from either Urenco or the Trustee and without any reduction in benefits. Retirement is also to be permitted after age 50 with the Trustee’s consent (but with no requirement for Urenco’s consent). Benefits are to be reduced for early payment. These provisions contrast with the provisions of the Scheme documentation where the normal retirement age is 65 and there are no general provisions (in contrast with special conditions relating to eg redundancy) for retirement at age 60 without consent or retirement after age 50 with Trustee consent. The basic level of benefit at age 60 is 1/80th of Final Pensionable Pay for each year of Pensionable Service plus a lump sum. ii) Paragraph 6: This refers to Pensionable Pay which is stated to include all those elements of remuneration pensionable under the CPS. iii) Paragraph 11: Members’ Contributions are stated to be at 7.5% of Pensionable Pay. Members will receive a non-pensionable allowance to ensure that their take-home pay is no lower after joining the Scheme than when they were active members of the CPS (to which members, it is recorded, contribute 5%). iv) Paragraph 14: This deals with pension increase. Statutory increases are to be paid on the GMP. The excess pension over the GMP will be increased with the RPI. v) Paragraph 25: This states that no amendments may be made to benefits which would reduce the value of accrued benefits on a past service reserve basis unless such amendments are required by legislation or are made with the written consent of all the Members affected. The Undertakings

[38]The Undertakings were given by Urenco to Mr Selby (of the GAD) by a letter dated 18 April 2007. They can be found at Annex B to the Certificate. A “Protected Member” is any person who is entitled to pension protection as defined in Schedule 8, a class which included Mr Mossop. Urenco gave the Undertakings “so long as it is the principal employer of [the Scheme]”. I note the following provision: i) Paragraph 6: Normal retirement age is to be 60. ii) Paragraph 9:

“Protected Members will receive a non-pensionable allowance to ensure that their take home pay is no lower after the [Scheme] than when they were active members of the CPS.” iii) Paragraph 11: “The excess pension over the GMP for protected members will be increased in payment in line with…[RPI]. The increase will not be reduced if the employer contribution rate exceeds the Contribution Limited, as defined in Rule K.1.2 of the [Scheme] Rules.” iv) Paragraph 12: “In deferment the total pension is increased in line with RPI. The increase will not be reduced if the employer contribution rate exceeds the Contribution Limit, as defined in Rule K.1.2 of the [Scheme] Rules.”

Amendment of the Scheme: the Proposed Changes

[39]An actuarial valuation of the Scheme carried out during 2009 and 2010 disclosed a substantial deficit in the Scheme. As at 20 October 2009, this deficit, on the Scheme’s funding assumptions, was £26 million, a funding level of 87% of the Scheme’s technical provisions (the relevant jargon for what are essentially the liabilities). Two changes were proposed to address this deficit: i) an increase in Members’ contributions from 7.5% to 9.5%; and ii) a decrease in the maximum rate of increase to be applied to pensions in payment to the lower of RPI and 2.5% pa rather than the lower of RPI and 5% pa.

[40]These changes are intended to apply to all Members, including the Transferred Employees. So far as they relate to the Transferred Members, I will refer to them as “the Proposed Changes”. The Proposed Changes would make the Scheme less favourable to the Transferred Members than the benefits provided for them under the CPS immediately before the transfer and ignoring any amendments which might be made to the CPS thereafter. The question which arises is whether the power of amendment in the Scheme (which is the only relevant power) can be used to make them. The answer to that question turns on the scope of the statutory protection under Schedule 8 and the combined effects of the SPA, the Certificate and the Undertakings. It is not, I consider, possible to reach a conclusion about the effects of the SPA, the Certificate and the Undertakings without an understanding of the scope of Schedule 8 which is the issue I address first. The scope of

Schedule 8

[41]The particular matter of concern for present purposes is how it is to be judged whether a scheme is an appropriate pension scheme for the purposes of paragraph 11 of Part 4 in the light of the powers of amendment which subsist in the relevant nuclear pension scheme and in the appropriate pension scheme. I shall refer to the former as “the nuclear scheme” and the latter as “the receiving scheme”.It is for the NDA to be satisfied that the receiving scheme is an appropriate pension scheme; the NDA is obviously able to take advice (as it did from the GAD in the present case) in making its assessment. But it is NDA which must be satisfied; the decision is not one for the GAD (or any other expert) to make.

[42]It is a conceptually straightforward exercise, albeit a technically complex exercise requiring actuarial expertise, to carry out the “no less favourable” comparison required by paragraph 11(6) in relation to factors which can be objectively assessed and do not depend on the natures of the two schemes. Thus it is possible to compare, on the one hand, the benefits of the nuclear scheme as they stand on a particular date, ignoring the state of funding of the scheme and the existence of any power of amendment, and, on the other hand, the benefits of the receiving scheme as they stand on that date, again ignoring the funding of that scheme and the existence of any power of amendment, taken together with the benefits referred to in paragraph 11(6)(a). The exercise will, of course, require a number of assumptions to be made of the sort which actuaries are accustomed to make in valuing the assets and assessing the technical provisions of a scheme, but this does not give rise to any sort of conceptual uncertainty. It will be further complicated if the exercise of discretionary powers, such a power to augment benefits, is to be factored into the comparison.

[43]The position becomes conceptually far less certain if the comparison has to take account of factors which impact differently in relation to the different schemes. One factor is funding. The nuclear pension schemes to which the protection afforded by Schedule 8 is relevant are backed by central or local government; realistically, there is no chance of benefits not being met. In contrast, a private sector scheme may not be able to give the same level of security of benefits. Mr Johnston made this point when subjecting the Certificate to the caveat mentioned in paragraph 36 above. It is not, I have to point out, clear that funding is in fact a factor which has to be taken into account by the NDA in deciding whether a scheme is an appropriate pension scheme; but if it is a relevant factor, then it would be necessary for some sort of investigation to be made of the strength of the employer’s covenant. I raise funding only because it provides an easy-to-grasp illustration of the difficulty of making a comparison when taking account of factors which impact differently on different schemes.

[44]Another factor is the power of amendment. If the powers of amendment in the nuclear pension scheme and the receiving scheme are to be taken into account at all, it is not at all clear how that is to be done. In the present case, for instance, the CPS contains a very wide power of amendment, but it is one exercisable in the context of a public sector scheme with a public sector employer and one which can only be exercised with the consent of the Secretary of State. The prospect of detrimental amendments might have been thought, in 2008, to have been remote. Although there is currently great pressure to reduce the cost of public sector pension schemes, the perception in 2008 was, I think, very different.

[45]In contrast, the power of amendment under the Scheme is vested in the Trustee. It might be said that the Transferred Employees could therefore have derived some comfort in 2008 from that fact since the Trustee would be subject to fiduciary obligations in exercising that powerso that, again, the prospect of detrimental amendments might have been thought to be remote. That is true to some extent. But it must be remembered that the Trustee has a wider concern than the interests of the Transferred Employees alone. The Trustee must act taking account of the interests of all the beneficiaries and indeed of Urenco itself. In the current circumstances of the Scheme, that means that the Trustee must bear in mind not only the significant deficit in the Scheme’s funding but also Urenco’s legitimate concerns in constraining pension costs. Indeed, changes (the same as the Proposed Changes) have already been made to the contributions of Members other than the Transferred Employees and to the pension increases to which they will become entitled and it is not suggested by anyone that the Trustee was not acting properly in making those changes. Thus, assuming that the powers of amendment are to be taken account of at all, it cannot be said, a priori, that otherwise broadly equivalent benefits for Transferred Employees in the CPS and the Scheme satisfy the “no less favourable” test. There would have to be some assessment made about the comparative likelihood of detrimental amendments being made to(i) the CPS under its power of amendment and

(ii) the Scheme under its power of amendment.

[46]Mr Short submits the comparison required by Part 4 does not require the NDA to take account of the powers of amendment in the CPS when carrying out the “no less favourable” assessment. The comparison is to be made with the terms of the CPS as they stood at the transfer date so that not only are actual amendments to the CPS after that date to be ignored, but the potential for amendment is also to be ignored. Taken together with benefits under paragraph 11(6)(a), an “appropriate pension scheme” must provide benefits which are no less favourable than those in fact provided by the CPS on the transfer date. In order to ascertain what is in fact provided by the CPS on the transfer date, the focus is on the Rules of the CPS as they stood on that date. The benefits might be changed by the exercise of the power of amendment contained in the CPS, but those benefits are not to be seen, for the purposes of the comparison, as including within them the potential for change. Benefits which are subject to reduction by a power of amendment are not capable of being “no less favourable”. Thus to take the simple case where a scheme provides precisely the same level of benefits (including increases in deferment and payment) and has precisely the same contribution rate as the CPS, the scheme could be an appropriate pension scheme if it contained no power of amendment which might result in a reduction of benefits or an increase in contributions, but would not (ignoring benefits within paragraph 11(6)(a)) be an appropriate pension scheme if did contain such a power.

[47]Mr Short says that the statutory provisions are, on their face, to be construed in the way which he suggests. But if that is wrong, he submits that the there is just the sort of ambiguity or absurdity which justifies resort to Parliamentary materials in accordance with Pepper v Hart

[1993] AC 593

and, if such resort is had, it leads inevitably to the conclusion for which he argues.

[48]Mr Hitchcock submits that this “snapshot” approach is wrong. The powers of amendment in the CPS cannot simply be ignored in ascertaining what are the benefits available under the provisions of each scheme “taken as a whole”. There is no objection in principle to including in an “appropriate pension scheme” a power of amendment such as is found in the Scheme and which is applicable to the benefits of the Transferring Employees. He submits that the criteria by which reference can be made to Hansard are not present and, even if they were, there are no clear statements to be found leading to the result for which Mr Short contends.

[49]What support do the rival contentions find in the actual words of paragraph 11?

[50]I start with paragraph 11(6), and do so in the context of what has been called a first-generation transfer, that is to say, a transfer (such as the present case) which takes place in the context of the first transfer arrangements in relation to which persons are entitled to pension protection. Typically this will involve a transfer of employees (being members of a nuclear pension scheme) from a public sector employer to a private sector employer and will also involve their becoming members of an appropriate pension scheme. I will come to second-generation (and subsequent) transfers later.

[51]One thing at least is clear, which is that there is no ongoing requirement for the NDA to be satisfied that a scheme is an appropriate pension scheme: there is a single point of time – “the relevant time” – as at which the “no less favourable” test is to be satisfied. That time in the context of a first-generation transfer is the time at which the transfer of employment of the person concerned takes place under the transfer arrangements concerned. I shall refer to that time as “the transfer date”. In the present case, the transfer date was 1 October 2008 when the Transferred Employees transferred their employment to Urenco.

[52]Turning then to the comparison which has to be carried out as at the relevant time, the “no less favourable” test is to be applied by identifying two sets of benefits: i) The first set of benefits are those “that are available under those provisions”, the reference being to the benefits referred to in paragraphs 11(6)(a) and (b). Paragraph (b) refers to “the benefits that are available under the provisions of [the receiving scheme] as a whole”. ii) The second set of benefits are “the benefits available under the provisions (taken as a whole) of [the nuclear scheme identified]”.

[53]Although paragraph 11(6) is drafted in the present tense, referring to “benefits that are available” and to “the benefits available”, it is obviously directed at the benefits to which a person will become entitled in respect of service after the relevant date. The right to a pension on retirement based on length of service and final pensionable salary is within each of those quoted phrases notwithstanding that it has not yet been earned.

[54]The relevant nuclear pension scheme is the scheme “in respect of which [the person] is entitled to protection under [Part 4]”. Questions could arise about the date to be adopted when identifying the provisions of that scheme for the purposes of making the “no less favourable” assessment. This would be so, for instance, where a person falls within paragraph 9(7)(c), when it would not be clear, absent express provision, whether the relevant provisions were those in force at the date of the main transfer, or those in force when the qualifying condition was satisfied, and it would be so in the case of a second-generation (or subsequent) transfer where, absent express provision, it might be said in making the “no less favourable” assessment, that the comparison should be made with the terms of the nuclear scheme as they stood at the date of the second (or subsequent) transfer. This is dealt with by the closing words of paragraph 11(7) which provide that the reference in paragraph 11(6) to the provisions of that scheme is a reference to “its provisions as in force immediately before the time specified in sub-paragraph (8)”.

[55]The question then arises whether the power of amendment contained in the nuclear scheme is one of the provisions referred to in the closing words of paragraph 11(7) and thus one of the provisions referred to in the final part of paragraph 11(6). If it is such a provision, then it is clear that the power of amendment contained in the receiving scheme is also one of the provisions of that scheme referred to in paragraph 11(6)(b). The “no less favourable” test therefore has to be conducted taking into account the powers of amendment in each scheme.

[56]In contrast, if the power of amendment in the nuclear scheme is not such a provision, the comparison must be between the benefits available under the “provisions” of the receiving scheme on the one hand, and those available under the provisions of the nuclear scheme ignoring its power of amendment on the other hand. That leads to the question whether the “provisions” of the receiving scheme nonetheless include its own power of amendment. If they do, then it is not easy to see how the “no less favourable” test could be fulfilled. But if they do not, then the protection apparently afforded by the legislation is, according to Mr Short, illusory since the benefits under the receiving scheme would be susceptible of downward amendment for future service.

[57]In approaching the answers to those issues, I must bear firmly in mind that the word “provisions” where it appears in different places in paragraph 11(6) does not appear in isolation but as part of the phrases “benefits that are available under [the/those provisions]….”; and I must bear in mind also that the word does not necessarily mean the same in paragraph 11(6)(b) as in the closing part of paragraph 11(7). When the focus is placed on those phrases, it can be seen that a conceptual issue arises, an issue which I can best illustrate by an example.

[58]Consider, then, a scheme which provides a number of benefits, including a pension at normal retirement date of 1/60th of final pensionable salary for each year of service but where the scheme is subject to a power of amendment. Suppose that an amendment is proposed to reduce future accruals to 1/80th. Then consider this question: What benefits are available under the scheme, immediately before the amendment, in respect of future service? At least two answers can be given: i) The first is that the benefits available include a pension based on 1/60th of final pensionable salary for each year of future service since that is what the scheme currently provides. But, because the scheme can be amended, that pension may cease to be available in respect of service after an amendment is made. On this approach, the power of amendments sits, as it were, outside the benefit: the benefit is not defined by reference to the fact that it might be changed for the future by exercise of the power of amendment. Accordingly, the benefit under the provisions of the scheme for the purposes of paragraphs 11(6) and (7) is based on a 1/60th accrual not on 1/60th or such other rate as may be determined by amendment. ii) The second answer is that the benefits available under the provisions of the scheme do not include a pension based on 1/60th of final pensionable salary; rather, what is available under the provisions of the scheme is a pension based on 1/60th of final pensionable salary or such other amount as may result from an exercise of the power of amendment. On this approach, it is inherent in, or part and parcel of, the benefit itself that it is subject to amendment.

[59]That question, and its two (at least) possible answers illustrates the conceptual problem which the interpretation of paragraphs 11(6) and (7) raise. But that question may not be the right one to ask in relation to paragraph 11(7). Rather the question is this: What benefits are available under the provisions of the scheme as in force immediately before the amendment, in respect of future service? This is a subtly different question from that raised in the preceding paragraph since it raises the point, already identified, that those provisions do not include the power of amendment itself. Indeed, it might be said that the words “as in force at” a given time necessarily entail that the focus is on the provisions of the scheme excluding the power of amendment. The power to amend is precisely that: what it permits will depend on the precise wording of the power in question but what can be said in general terms is that it can bring about a change in the provisions which currently apply. Thus the power of amendment itself stands apart from the provisions on force at a given time.

[60]In the light of that analysis, it is strongly arguable that any power of amendment in the nuclear scheme is to be ignored when it comes to identifying the benefits available under its provisions in force at a particular date. This result may be arrived at in one of two ways. i) First, the power of amendment is not a relevant “provision” at all. ii) Secondly, even if it is one of the “provisions” of the scheme in force at the relevant time, it cannot be taken into account because a hypothetical future amendment would result in provisions which were not in force at the relevant time. Those new provisions would not be admissible in carrying out the “no less favourable” assessment; a distinction is to be drawn between a provision already in the scheme and a provision which may be introduced pursuant to a power of amendment even if that power is itself a provision of the scheme. To put the point another way by reference to the example: suppose that an amendment were made to reduce future accrual to 1/80th of final pensionable salary for each year of future service. If one puts oneself back in time to the transfer date and to the date of the amendment to ask what benefits are available under the provisions of the scheme in force at those two dates, the answers would be different. The benefits available have been reduced from 1/60th to 1/80th, albeit that in each case the benefit is subject to further exercise of the power of amendment: it cannot be said that they are the same benefit and therefore it cannot be said that reduced benefit was one which was available under the provisions in force at the transfer date.

[61]These arguments turn, however, on giving a narrow meaning to the words “provisions as in force immediately before” the specified time in paragraph 11(7). Insofar as the first route to the result is relied on (ie the proposition that the power of amendment in the nuclear scheme is not one of the “provisions” in force at the relevant date), there is considerable force in the argument that the same should apply in relation to the receiving scheme as well. This would lead to the adoption of the same approach to the benefits under “the provisions of that scheme as a whole” in paragraph 11(6)(b) and to the benefits under “the provisions (taken as a whole) of” the relevant nuclear pension scheme in the final part of paragraph 11(6). To adopt a different approach in relation to each scheme would not be to compare like with like. If that is correct, then the power of amendment in each scheme is ignored and the comparison is made between the provisions of each scheme as they stand.

[62]The second route does not face that particular difficulty. It acknowledges that the power of amendment in the nuclear scheme is, indeed, one of the provisions of the scheme in force on the transfer date, but draws the distinction between what is already provided and what can only be provided by way of amendment. It does, however, require one to conclude that the overall package of benefits provided under the receiving scheme cannot be reduced pursuant to a power of amendment because, if they were to be reduced, the benefits available cease to be “no less favourable” than the benefits available under the provisions of the nuclear scheme as at the transfer date. And this is so notwithstanding that, at that date, the nuclear pension scheme could itself be amended to reduce the benefit.

[63]But another conclusion is possible. It can be argued that the reference in the closing words of paragraph 11(7) to the provisions in force immediately before the specified time was included only to identify the time at which one is to look at the extant provisions of the scheme and not to set those provisions in stone for all the purposes of paragraph 11. On this reading, what is being said is no more than that the receiving scheme must provide benefits no less favourable than those available under the nuclear pension scheme as in force at the transfer date and not those in force at some earlier date (for instance, when a transfer agreement is entered into) or at some later date following an amendment. On this argument, the “provisions in force” in paragraph 11(7) include the power of amendment; and the benefits under those provisions for the purposes of the closing words of paragraph 11(6) include benefits which can be brought into existence pursuant to any provision in force at the transfer date including the power of amendment itself. That is a possible construction of paragraphs 11(6) and (7). It is then for the NDA, in assessing whether the “no less favourable” test is satisfied, to judge, as best it can, the likelihood of the exercise of each power taking account, in the case of the receiving scheme, of who is able to exercise the power of amendment, recognising the fiduciary nature of the power if it is vested in the trustee and, taking into account the constraints on the employer, for instance its duties under Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd

[1991] 1 WLR 589

(“Imperial”), if the power is exercisable by or on behalf of the employer.

[64]To put that in the context of an example, consider otherwise identical schemes but with different accrual rates, based on 1/60ths and 1/80ths of pensionable salary respectively. The latter cannot, I consider, possibly be said to provide benefits which are no less favourable than those provided by the former even though both schemes are subject to an identical power of amendment which might be used to bring about some other rate of accrual. In order for the latter to provide benefits which are no less favourable, it too must provide for an accrual rate based on at least 1/60ths. In the context of paragraph 11(6), for the “no less favourable” test to be satisfied, the benefits of the receiving scheme ignoring its power of amendment must be compared with the benefits of the nuclear scheme ignoring its power of amendment; it is in that context that the advice of the GAD can be of particular assistance. The effect of the powers of amendment in each scheme can, on this approach, then be taken into account by the NDA in deciding whether it is satisfied that the test is passed.

[65]What other indicators are there to suggest than one interpretation is to be preferred? In terms of a purely textual analysis, Mr Short relies on how paragraph 11 applies in relation to second-generation (and subsequent) transfers. Let me give an example of a second-generation transfer: i) A first-generation transfer (either pursuant to a nuclear transfer scheme or transfer arrangements) has taken place with the result that relevant employees have been transferred from one employer to another with a connected termination of membership of one pension scheme and participation in another scheme. This is what happened in the present case where the employer of the Transferred Employees changed to Urenco and the Transferred Employees ceased to participate in the CPS and began to participate in the Scheme. ii) There then follows a nuclear transfer scheme or transfer arrangements under which some or all of those employees transfer to a third employer and participate in a third scheme. For instance, Urenco might transfer part of its business to another company with one or more of the Transferred Employees becoming employed by that company for NDA purposes with an associated change of pension provision to a third scheme.

[66]The third scheme, like the second scheme, must be an appropriate pension scheme so that the “no less favourable” test must be satisfied. Paragraph 11(7)(b) in effect provides that the scheme by reference to which those employees are entitled to protection is not the second scheme, but the original scheme in which they participated immediately before the first transfer. Further, the reference in paragraph 11(6) to the provisions of that scheme remain the provisions as in force immediately before the first transfer; the comparison is not made by reference to the provisions (if different) at the time of the second transfer. Thus, when it comes to a second-generation transfer, paragraph 11 is not concerned at all with what has happened to the original scheme since the first transfer; nor is it concerned, in relation to the second transfer with the provisions of the first appropriate pension scheme, the provisions of which do not feature in paragraphs 11(6) or (7).

[67]All of that makes perfectly good sense on Mr Short’s approach to the construction of paragraph 11. But on Mr Hitchcock’s approach there is what at best from his point of view is a curiosity and at worst an anomaly. Suppose that the receiving scheme on the first transfer (I will call it the first receiving scheme) is validly amended some time after the first transfer to reduce the accrual rate of the main pension benefit. Suppose that after a further period of time, say 2 years, a second-generation transfer takes place, with another pension scheme (I will call it the second receiving scheme) being the intended appropriate pension scheme. In order to satisfy the “no less favourable” test, the necessary comparison will have to be made of the benefits available under the provisions of the second receiving scheme with the benefits available under the provisions of the nuclear scheme at the time of the first transfer. In other words, the second receiving scheme will have to provide a higher accrual rate for future service than the first receiving scheme provides at the time of the second-generation transfer. The result is that the employees initially accrue benefits in the first receiving scheme which are no less favourable than those of the nuclear scheme; then, following the amendment, they accrue benefits at a reduced rate for the period from the amendment to the date of transfer to the second receiving scheme; and thereafter, at least for a period of time until amendment of the second receiving scheme, they will again accrue benefits no less favourable than those under the nuclear scheme as in force at the time of the first transfer. It is a curious, and perhaps even anomalous, result.

[68]Mr Short suggests that there is a similar curiosity, or anomaly depending on one’s viewpoint, which arises in this way. A person does not have to be an actual participator in a nuclear pension scheme to be entitled to pension protection. It is enough (see paragraph 9(7)) for him to be eligible to become a participant had he attained an age, or fulfilled a condition, specified in the relevant nuclear pension scheme. In this context, a person whose participation in the scheme is temporarily suspended (eg while he is on secondment) is treated as being eligible to become a participator subject to fulfilment of the conditions which would bring the suspension to an end. This could be some considerable time after a relevant transfer. In the case of such a person, he must, under paragraph 11(3) be given, like actual participants, an option to become a participator and must be able to exercise that option on or before attaining the age or fulfilling the condition in question.

[69]Consider, then a case where the receiving scheme is adversely amended, after the transfer but before the relevant employee has satisfied the condition and exercised his option. He subsequently fulfils the condition and exercises his option. He will not become entitled to the benefits in place at the transfer date because they have been reduced as a result of the amendment. Mr Short submits that the “no less favourable” test is not fulfilled in relation to that employee since the benefit of that employee under the provisions of the receiving scheme are not as favourable as the benefits of the nuclear scheme as in force at the transfer date.

[70]Mr Hitchcock says that that is not right. The time for assessing whether the receiving scheme is an appropriate pension scheme is before the relevant transfer (be it a first-generation transfer or a second-generation (or subsequent) transfer takes effect. It follows that the “no less favourable” test is to be judged before the transfer. If, under the rules of the receiving scheme as they stand at that time, the employee will become entitled to benefits which are no less favourable, then the scheme will, on Mr Hitchcock’s construction, be an appropriate pension scheme notwithstanding that the employee may never, in fact, accrue benefits on that basis because the scheme has been amended before his participation commences. It is no more surprising that this should be the result than that the future service benefits of an actual participant should be reduced by an amendment.

[71]Mr Hitchcock also asks rhetorically why, if Mr Short is right, it would ever be necessary on a second-generation transfer to go back to the nuclear scheme given that the relevant member would have protection by reference to the provisions of the first receiving scheme. The answer to that is that the first receiving scheme may have been amended to provide increased benefits. The member is not entitled to protection in respect of the increases.

[72]Mr Short also argues that, if Mr Hitchcock’s construction is correct, the protection which it is the purpose of Part 4 to provide is rendered worthless. Instead of providing a guaranteed level of benefit in respect of the period of participation in the scheme of a protected person, an employer will simply be able to amend the scheme, for instance by reducing future accruals or increasing contributions or to reducing increases to benefits in deferment or payment. I consider that this argument is to state the case much too highly. There are two protections which are afforded even on Mr Hitchcock’s construction. The first is that, on any view, the appropriate pension scheme must provide benefits which, on the transfer date, satisfy the “no less favourable” test. In other words, ignoring the powers of amendment in each scheme, the benefits must be no less favourable on the transfer date. Secondly, benefits could subsequently be adversely affected only if the power of amendment is properly exercised. If Mr Hitchcock is correct as a matter of construction, then the NDA, in judging the “no less favourable” test will have had to consider the possible impact of any power of amendment. It would be an unusual case if the power were wholly unconstrained. There may actually be relevant express fetters on the power, to be taken account of on a case-by-case basis and, even if there are no general fetters, the NDA could insist on their being imposed in order to express itself satisfied that the “no less favourable” test is fulfilled. In many cases – the present case is one – the power to amend will be vested in trustees in which case the exercise of the power will be constrained by the usual fiduciary constraints. And in all cases where the power is vested in the employer, or where its consent to its exercise is vested in the employer, the implied duties explained in Imperial will arise. Those are factors which the NDA would take into account, as I have already said in paragraph 63 above.

[73]Mr Hitchcock suggests that where Parliament has wanted to entrench a particular scheme of benefits in respect of future service, it is able to do so expressly. He points to the relevant statutory instrument applicable to the Electricity Supply Pension Scheme, the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990 (SI 1990/346) as an example. I accept, of course, the proposition and acknowledge those regulations as an example. But I do not gain any assistance from the proposition or the example in support of the implicit suggestion that, because express provision was not made, therefore the provisions of a nuclear pension scheme are never to be entrenched when transfer arrangements are made.

[74]There is one consequence of Mr Short’s construction which I should mention and that is its impact within a purely public sector nuclear transfer scheme or transfer arrangements. Nuclear transfer schemes and transfer arrangements are not restricted to transfers to the private sector. As can be seen from paragraphs 9(2)(a) and (3), such a transfer might be to the UKAEA, the NDA or a publicly owned company. This may result in an employee ceasing to be an active member of one public sector scheme and becoming a member of another public sector scheme. It might be thought to be surprising that the second public sector scheme could not be an appropriate pension scheme because it happened to contain a power of amendment.

[75]I have found the arguments to be finely balanced. However, in my judgment, Mr Short’s interpretation is to be preferred so that the “no less favourable” test is to be judged by the NDA ignoring the power of amendment contained in the relevant nuclear pension scheme but taking into account the power of amendment which is available under the receiving scheme. My reasons for reaching this conclusion are as follows.

[76]Mr Short’s interpretation of paragraph 11(7) taken in isolation has a great deal to commend it (see in particular the argument at paragraphs 60 to 62 above). It is, nonetheless, to be noted from its opening words that the purpose of that paragraph is to explain the meaning of certain terms in paragraph 11(6). Reading the provisions of paragraph 11(7) into paragraph 11(6), the comparison to be made in the present cases is as follows: i) on the one hand, there are the benefits available to a Transferring Employee(i) taking into account the benefits available to him as a result of his employment by Urenco and

(ii) “taking the benefits that are available under the provisions of [the Scheme] as a whole”; and ii) on the other hand, there are the benefits available “under the provisions (taken as a whole) of the CPS as in force immediately before [the transfer]”.

[77]When provisions of paragraph 11(6) are expanded in that way, the argument at paragraphs 60 to 62 above is less strong than when viewing paragraph 11(7) in isolation but it remains an argument of considerable force and one which I consider to be correct. The contrast is between the provisions of the receiving scheme and the provisions of the nuclear scheme as in force at the relevant time. The more natural reading of this distinction is, in my view, to treat the first as referring to the provisions as they stand from time to time and second to the provisions as they stand at the relevant time.

[78]Further, this interpretation avoids the curiosity or anomaly which arises in relation to second-generation (and subsequent) transfers which arises on Mr Hitchcock’s interpretation.

[79]Moreover, it avoids a potential anomaly in relation to paragraph 9(3)(b). Under Mr Short’s interpretation, the benefits under the provisions of the receiving scheme as a whole, cannot be reduced below the benefits under the provisions of the nuclear pension scheme at the transfer date but ignoring its power of amendment. Accordingly, the receiving scheme will be an appropriate pension scheme at the time when the person in question exercises his option, if one applies the “no less favourable” test at that time by reference to(i) the provision of the receiving scheme at that time and

(ii) the provisions of the nuclear scheme at the transfer date that is to say the date of the original transfer.

[80]In contrast, on Mr Hitchcock’s interpretation, the person in question would never become a participant in a scheme which provides for him benefits no less favourable than those he would have been entitled to under the nuclear scheme according to its provisions as in force on the transfer date since, by the time he actually becomes a participant, the benefits, in the example, will have been reduced. It is correct, of course, that the NDA has to be satisfied before the transfer date, that the receiving scheme is an appropriate pension scheme in relation to the person concerned and it is also correct that the NDA does not have to be satisfied on an ongoing basis that the receiving scheme is an appropriate pension scheme. But it does not follow from those propositions that the NDA is not concerned with whether the receiving scheme will continue to satisfy the “no less favourable” test by reference to the provisions of the nuclear scheme in force as at the transfer date. Mr Hitchcock has to say that the NDA does not need to be concerned with that but only needs to make a single assessment prior to the transfer date. That assessment will test the benefits under the provisions of the receiving scheme at the transfer date against the benefits under the provisions of nuclear scheme including its power of amendment at that time. The fact that the benefits under the former may be reduced before the person in question becomes a participator is, on his argument, beside the point.

[81]In my judgment, not only is that a surprising result, but it is also contrary to the natural reading of the words used. What the person in question must be able to do is to exercise an option to become a participant in an appropriate pension scheme. That suggests that the receiving scheme must be an appropriate pension scheme in relation to that person when he exercises his right of election. The receiving scheme will be an appropriate pension scheme in relation to the person in question in the example if, before the transfer date, the NDA is satisfied, that the benefits available under the provisions of the receiving scheme, taken together with the benefits under paragraph 11(6)(a), are no less favourable than those under the provisions of nuclear scheme in force as at the relevant date. The natural interpretation of that requirement is, in my view, that the NDA must, before the transfer date, compare the benefits which will be available to the person in question once he has exercised his option with the benefits under the nuclear scheme at the transfer date. If the benefits under the receiving scheme can be reduced before the person in question exercises his option, that scheme cannot be an appropriate pension scheme in relation to him at the transfer date.

[82]It is a consequence of Mr Short’s interpretation that even a transfer within the public sector requires that the receiving (public sector) scheme must provide benefits which cannot be reduced by amendment in respect of service after the date of the amendment. This is a surprising result, but it is not enough to persuade me that Mr Short’s approach is wrong.

[83]Accordingly, I conclude that, after taking account of benefits falling within paragraph 11(6)(a), a receiving scheme must provide benefits in respect of all future service which are no less favourable than the benefits provided by the nuclear scheme on the transfer date ignoring its power of amendment.

[84]This makes it strictly unnecessary to decide whether the conditions laid down in Pepper v Hart to justify recourse to Hansard are fulfilled. Mr Hitchcock says that there should be no such recourse (hardly surprisingly because if recourse is had, the material certainly does not support his case). In the light of the decision which I have reached without recourse to that material, Mr Short does not need to rely on it. However, in case I am wrong in my decision on statutory construction (and, as I have said, I have found the arguments finely balanced), I will say something about the statements in Hansard on which Mr Short relied.

[85]I do so for two reasons. First, I may be wrong in thinking that there is not present the sort of ambiguity sufficient to justify reference to Parliamentary material particularly if I am wrong, as a matter of law, in my interpretation. Secondly, it provides a convenient way of introducing certain material to which I wish to refer anyway. And, in the light of that material, it can be seen that the statements relied on by Mr Short do not provide that level of clarity which is necessary before such statements can be relied on.

[86]The well-known statement of Lord Browne-Wilkinson in Pepper v Hart at p 640B-D sets out the three conditions to be fulfilled if Parliamentary material is to be referred to:(a) the legislation is ambiguous or obscure or leads to an absurdity;

(b) the material relied upon consists of one or more statements by a Minister or other promoter of the Bill together if necessary with such other Parliamentary material as is necessary to understand such statements and their effect; and

(c) the statements relied on are clear. The courts have expressed concerns about the use sometimes sought to be made of Pepper v Hart and the extent to which it should go: see for instance Lord Bingham in R v SoS for the Environment ex p Spath Holme Ltd

[2001] 2 AC 349

at 391D – 392 F; Brooke LJ in Flora v Wakom (Heathrow) Ltd

[2007] 1WLR 482

at [12] and [13]; and Lord Steyn in R(Jackson) v A-G

[2006] 1 AC 262

at [97] and [98]. I do not need to enter into further discussion of those aspects of concern identified.

[87]As to what is to be found in Hansard itself. There are two passages that I would mention. i) On 27 January 2004, Lord Whitty (the government spokesman in the House of Lords) was dealing with concerns about giving effect to the undertakings said to be found in the White Paper Managing the Nuclear Legacy – A Strategy for Action. There had been concerns about comparability and transferability between public and private sector employees, particularly with regard to pensions. As to that, in the course of a rather longer answer the detail of which adds nothing, he said: “Their pension entitlement, whether it is ongoing pension benefit or accrued rights, is protected – statutorily in this case. Because of the anxiety that has been expressed, we were persuaded that it was sensible to put the matter in statute….. It is absolutely there, and it is there in a way which few employees of any private or public sector have previously received.” ii) On 22 March 2004, Lord Whitty was dealing with three amendments which really related to accrued benefits. In the course of his answer he said this: “….we intend to protect the existing employees and their future benefits in circumstances where, as a result of a decision by the NDA, they are required to transfer either to new employers…. or to the private sector….. …… As I said a moment ago, we intend to protect the future pension benefits of existing employees during this restructuring, and that essentially means employees of AEA and BNFL who are required to transfer to a new employer by the NDA. This policy is applied to a whole host of comparable systems where public sector workers have been required to transfer to a new employer, or to the private sector. There is well established documented guidance on that. ….. we have taken the rather exceptional step of underpinning in statute the policy to protect the future pensions of employed staff, with careful drafting of the Bill….. ….. Given that we have made the exceptional step of protecting in statute future benefits provisions of existing employees in the nuclear clean-up industry…….I cannot accept the amendments……” iii) Reference to well established documentation includes reference to the government policy document published in 1999, Fair Deal for Staff Pensions.

[88]I do not consider that the statements from Lord Whitty provide the clear statement required by Pepper v Hart. Although the statements do make clear what is in any event obvious, that some sort of protection is to be afforded to relevant employees in respect of their future service, the extent and duration of that protection is totally unclear. Indeed, it is impossible to read Lord Whitty as indicating that there would be protection going beyond what was already government policy generally. The difference was that that policy was to have statutory recognition in the context of the nuclear industry.

[89]As to that policy at the time when Lord Whitty said what he did, Fair Deal for Staff Pensions was the relevant guidance in force. Attached to that document was a Statement of Practice issued by the GAD explaining what was required for a scheme to be broadly comparable to existing public sector pension arrangements for an individual (“the GAD Statement”). This did not require the new employer’s scheme to be identical to the public sector scheme but it did mean that, taking all of the differences between the schemes into account, the effect should be that “no identified individual or group of individuals in the transferred workforce should suffer material detriment overall to the terms for accrual of further pension rights through their future service”. The GAD Statement recognised that security in private sector schemes could not be provided in the same form as that applying in the public service. The same point is made, as I have already mentioned, by Mr Johnston in the caveat which he included in the Certificate.

[90]However, the GAD Statement of Practice stated that specific safeguards would be sought including “protection of accrued rights, on an on-going basis, on any rule change”. It can be seen from this that there was a recognition that the private sector scheme might be amended in the future and that the protection, on such an amendment, would be for accrued rights (the words “on an on-going basis” being intended, I imagine, to include(i) benefits accrued not only up to the time of the transfer but also from the time of the transfer up to the date of the amendment and

(ii) to ensure a final salary link in relation to benefits accrued up to the date of the amendment). The same recognition can, I think, be found in paragraph 25 of the Summary of the Main Terms of the Scheme forming Annex A to the Certificate: see paragraph 37.v) above.

[91]Mr Short nonetheless submits that the contents of the GAD Statement show that the policy of Fair Deal for Staff Pensions was to provide continuing protection for future pension rights. He says that the policy was to provide substantive and enduring protection which he identifies as protection that would not be subject to any subsequent rule change. He relies on paragraphs 9 to 19 of Fair Deal for Staff Pensions. In particular, he refers to: i) paragraph 9 where it is said that “staff should continue to have access after the transfer to a good quality occupational pension scheme under which they can continue to earn pension benefits through their future service” [emphasis in original]; ii) paragraph 11 where the policy is aid to be to prevent “the unintended upshot of a business transfer [being] a detriment to staff pension benefits”; and iii) paragraph 14 where it said that “A broadly comparable scheme is one which, in the professional opinion of the actuary, satisfied the condition that there are no identifiable employees who will suffer material detriment overall in terms of their future accrual of pension benefits under the alternative scheme”.

[92]These statements are not, in my view, sufficient to displace the recognition that the private sector scheme might be amended in the future and that the protection, on such an amendment, would be for accrued right. There is more force, I consider, in his point concerning paragraphs 20 and 21 which, in effect, envisage the provision, on a second generation transfer, of a scheme broadly equivalent to the original public sector scheme. This is the same curiosity or anomaly as the one which I have addressed at paragraphs68ff above. It is, I accept, a point in favour of Mr Short’s approach. But it does not result in Fair Deal for Staff Pensions providing the clear guidance necessary for it to be relied on, by reference, in relation to Lord Whitty’s statements.

[93]Mr Short further submits that Lord Whitty’s use of the phrases “ongoing pension benefit” and “future pension benefit” make it clear that the protection to be afforded was that the value of future benefits (taken as whole) should never be less that the value of future benefits (taken as a whole) under the nuclear pension scheme in question. That clear statement is not to be limited by reference to Fair Deal for Staff Pensions. He submits that where the statement of the relevant Minister is, on its face, sufficiently clear to pass the Pepper v Hart test, it would be inappropriate to seek to cast doubt on that by reference to what is said in a document referred to by the Minister in a slightly different context. Still less would it be appropriate to seek to do so by reference to a document (the GAD Statement of Practice) referred to in the document (Fair Deal for Staff Pensions itself) referred to by the Minister. I reject those submissions. First, I do not agree that the words on which Mr Short relies, even taken by themselves, provide the clear guidance which he submits they do. Secondly, they cannot, in any case, be taken in isolation. It would be quite wrong to read those words as a statement that protection going beyond what was already policy was intended; quite the opposite: if anything is to be derived from what Lord Whitty said, it is that the existing policy, and no more, was to be given statutory force. To identify that existing policy, it is necessary to look not only at Fair Deal for Staff Pensions but also at the GAD Statement of Practice, since the latter is attached to the former and reflects how the policy set out in the former is to be understood.

[94]In my judgment, nothing in Hansard or the policy guidance found in Fair Deal for Staff Pensions including the GAD note throws any helpful light on the true meaning of Part 4. My conclusion therefore remains as I have stated it in paragraph 83above. The SPA and the Certificate including

The Undertakings

[95]It remains to consider the effect of the SPA, the Certificate and the Undertakings against the background of Part 4 construed as I have held it should be. There is a short answer to this so far as benefits are concerned since it is accepted by Mr Hitchcock that, if Mr Short is right on his construction of Part 4, then the SPA, the Certificate and the Undertakings cannot be construed, or given effect to, so as to permit the Scheme to be amended to reduce the benefits currently provided. Mr Hitchcock must be right to make that concession since those documents can and should be construed and implemented consistently with the statutory requirements. The position in relation to an increase in contributions is more complex. In principle an increase in contributions is as objectionable as a decrease in benefits. However, as we have seen, the SPA and the Certificate (including the Undertakings) make special provision for an allowance to the Transferring Employees to protect their take-home pay. But that allowance appears to be subject to an off-set in respect of pay increases under clause 6.6 of the SPA. I shall address this aspect in more detail later. Subject to that, the Proposed Changes cannot properly be made.

[96]In case I am wrong in my interpretation of Part 4, it might be helpful to the parties to have my views on the effect of the SPA and the Certificate including the Undertakings on that basis.

[97]As to the SPA, I start with Clause 6.3 which provides for the Transferred Members to be offered benefits in line with the Certificate and the Undertakings, it is the provisions of those documents to which one must turn to see what it is, contractually, that Urenco has to provide.

[98]Clause 6.6 appears to reflect the agreement that the take home pay of Transferred Members should not be reduced as a result of the payment of contributions of 7.5% rather than 5%. However, as already explained the reference to “payment profiles” appears to be an error. Given that error, the Clause, up to the end of the second sentence, really makes little sense. It seems to me, however, that Clause 6.6 is to apply to the special allowance envisaged by the Certificate and the Undertakings in the way in which it would have applied to the guaranteed payments made by the non-existent payment profiles.

[99]Turning to Annex A of the Certificate, this sets out the main terms of the Scheme applicable to the Transferred Employees. It is a slightly curious feature of the arrangements agreed as they were actually implemented that the main terms, or at least some of them, have not found their way into the formal scheme documentation: and this is so notwithstanding that the Trust Deed contains, at Schedule 2 some special provisions which do apply to the Transferred Employees. The evidence does not reveal whether Annex A is a summary of proposals prepared by the GAD, reflecting the contents of other documents containing proposals agreed by the NDA and Urenco, or whether it simply sets out verbatim such agreed proposals. Having no other material, I proceed on the assumption that the main terms as summarised do indeed reflect agreed proposals. I also note that there is not an exact overlap between the main terms and the Undertakings.

[100]I have set out at paragraph 37 above the relevant provisions of Annex A. As appears from the heading (quoted in that paragraph) Annex A is concerned with the provisions of the Scheme as applicable to the Transferred Employees. It is not, of course, (and does not purport to be) an exhaustive set of provisions applicable to the Transferred Employees: rather, it is concerned with identifying provisions under which the Transferred Employees are treated differently from other members. It might be thought that the power of amendment in the Scheme is seen by the GAD as applicable to the provisions of Annex A subject, always, to the effect of the Undertakings; indeed, paragraph 25 of Annex A can be seen as, express recognition that the power of amendment is to apply.

[101]However although paragraph 25 does provide support for that conclusion, it is important to remember Note 9 to the Certificate, see paragraph 35iii) above: changes to the CPS after the transfer date fall outside the scope of the “broadly comparable” certificate.

[102]On one view, this is simply a reflection of the provisions of paragraph 11(7) referring to the provisions of the nuclear scheme in force as at the transfer date. The fact that benefits are actually increased after that date does not mean that the receiving scheme must follow suit. Equally, the fact that the benefits under the nuclear scheme are actually reduced after the transfer date does not allow the receiving scheme automatically to follow suit either.

[103]On another view, Note 9 goes further than that and is indicating that the “broad comparability” certificate is given on the basis that the potential for change in the provisions of the CPS is ignored. This is my own view of what Note 9 is saying. And if that is so, Mr Johnston can have been certifying no more than that the “broadly comparable” assessment is being made ignoring the powers of amendment in each scheme.

[104]That approach is consistent with the part of the Certificate quoted at paragraph 34 above. It is the package of benefits under the Scheme which are said to satisfy Part 4: that package is the package as it stood at that time, not a package subject to amendment at a later date pursuant to a power of amendment.

[105]It follows, in my view, that Clause 6.3 of the SPA requires benefits to be provided which reflect the basis on which Mr Johnston gave the Certificate, namely a package of benefits which is not subject, as a whole, to any power of amendment which might reduce those benefits even for service after the date of the amendment.

[106]An increase in contributions, such as is envisaged by the Proposed Changes, can be seen as detrimental to the Transferring Members in the same way as a reduction in benefits. However, the SPA and the Certificate (including the Undertakings) make specific provision for this. Thus Clause 6.3 of the SPA requires provision to be made in accordance with the Undertakings, paragraph 9 of which provides for an allowance to ensure take-home pay is not reduced, something which is also reflected in paragraph 11 of the main terms. Flesh is put on this by Clause 6.6, which I have considered at paragraphs 31, 32 and 98 above. This regime was expressly taken into account by Mr Johnston in signing the Certificate.

[107]It might therefore be argued, that contributions under the Scheme can be increased provided that the special allowance is correspondingly increased. I do not know whether pay increases have already resulted in a reduction of the special allowance to nil; if they have, it is arguable that there is some headroom to introduce an increase in contributions without triggering further liability to make a special allowance. I would reject such an argument. In my view the Certificate is to be read in the context of the package of benefits, and implicitly, contributions which Mr Johnston refers to. Although he must have accepted that the special allowance would compensate for the immediate increase in contributions from 5% to 7.5%, he cannot be seen as saying anything about potential increases in contributions. Clause 6.3 of the SPA requires benefits to be provided in accordance with the Certificate. That, in my view, requires contributions to be made in accordance with the provisions of the Scheme as contemplated at the time. That is to say at 7.5% and no more.

[108]I have set out in paragraph 38 the relevant provisions of Annex B to the Certificate which contains the Undertakings. The Undertakings appear to be free-standing and are not expressed to take effect as amendments to, or special provisions of, the Scheme. In that respect, they differ from the provisions of Annex A. The Undertakings are referred to indirectly in the Certificate in the third paragraph on the third page which I have set out at paragraph 35 above. The Undertakings are part of the “proffered arrangement”. To the extent that benefits provided under those arrangements are not available under the provisions of the Scheme, they are to be brought into account under paragraph 11(6)(a).

[109]In that last context, paragraph 9 of the Undertakings provides, it will be remembered, for the payment of an allowance to Transferred Employees to ensure that their take home pay is no lower after joining the Scheme than when they were active members of the CPS. This undertaking covers the shortfall in take-home pay as a result of the higher contribution rate payable under the Scheme as compared with the CPS. I have already explained how I see the provisions of Clause 6.6 of the SPA (and those of paragraph 9 of the Undertakings) operating in the context of the Certificate, concluding that the contributions cannot be increased. However, viewing paragraph 9 in isolation, the position would be different. In that case, pay increases, insofar as they result in an increase in take-home pay, would frank the obligation to make payments in accordance with the Undertaking. Once take-home pay had increased by 2.5%, nothing would be payable pursuant to this undertaking assuming that the Scheme contribution rate remained at 7.5%. If the contribution rate were to increase (as it will under the Proposed Changes if they could be validly implemented) the undertaking would then bite in relation to any shortfall in take-home pay on the basis of the proposed 9.5% contribution rate, that shortfall being assessed by reference to take-home pay immediately prior to the transfer.

[110]It is clear that the power of amendment under the Scheme is irrelevant to the undertaking given in paragraph 9. The benefit of that paragraph is not one which arises under the provisions of the Scheme. It is not in fact subject to the power of amendment; nor, in my view, is there any justification for implying into the Undertakings, a power similar to the power of amendment or any other power to remove or reduce the value of that undertaking.

[111]The other undertakings which are of relevance in the present case are those found in paragraph 6 (providing for a normal retirement age of 65), paragraph 8 (providing for all elements or pensionable remuneration under the CPS to count as Pensionable Pay) and paragraphs 11 and 12 (providing for RPI increases of benefits in payment or deferment).

[112]Those undertakings listed are all reflected in Annex A as part of the main terms. All of those undertakings relate in one way or another to benefits under the Scheme: paragraph 6 of the Undertakings corresponds with paragraph 4 of Annex A, paragraph 8 corresponds with paragraph 6 and paragraphs 11 and 12 correspond with paragraphs 14 and 23.2. They could have been reflected in the Scheme by the introduction of express amendments although this was not in fact done.

[113]The question then arises whether the Undertakings (apart from paragraph 9) are subject to variation. This issue only arises if I am wrong in my conclusions in paragraph 107 above. What follows proceeds on the basis that I am wrong. Mr Hitchcock says, perfectly correctly, that the Undertakings were provided in the context of the requirements of Part 4. He says that they go no further than is needed to give effect to those requirements. Had the protection for the Transferred Employees been provided not by way of undertaking but by amendments to the Scheme, the power of amendment would have applied. Accordingly, if an amendment to the Scheme were made, the amendment would override the Undertakings to the extent necessary.

[114]I accept, of course, that the Undertakings must be construed in the context of the requirements of Part 4. But Mr Hitchcock’s argument is to some extent to put the cart before the horse. The GAD relied on the Undertakings as part of the certification process. I do not know (and direct evidence might well be inadmissible anyway) what approach the GAD took to the Undertakings. Mr Johnston might have read them as permanent undertakings and not subject to the power of amendment or he might have read them as Mr Hitchcock would have me read them. If it were obvious that the GAD would have been able to give his certificate even adopting of Mr Hitchcock’s approach, there might be something in the argument. That, however, is not the actual position. It seems to me that the Undertakings must be construed according to the language which they use, an exercise to be carried out against the background of Part 4. But the court cannot carry out that exercise on the assumption that Mr Hitchcock’s approach would necessarily have led Mr Johnston to give the Certificate.

[115]In my judgment, the Undertakings are to be read as permanent in their effect. There is nothing in their wording or on the context in which they were given to suggest that they were time limited or subject to unilateral variation. This is clearly the case in relation to paragraph 9 which suggests that the starting point in relation to the other paragraphs is that they are permanent in their effect. It does not make any difference, in my judgment, that those undertakings could have been given effect to by amendment to the Scheme itself. The fact that that course could have been taken does not lead to the result that the provisions giving effect to the amendment could then have been further amended by, for instance, removing an element of remuneration from Pensionable Pay or reducing the increase of benefits in payment or deferment. To say that it would lead to that result would be to beg the question of what, if any, constraints on the power of amendment it would be necessary to impose in the first place in order properly to recognise the scope of the Undertakings. As to that, I consider that any amendments would have to reflect the irrevocable nature of the Undertakings and that would entail the imposition of constraints on the power of amendment itself. Accordingly I consider that permanent effect must be given to paragraphs 11 and 12 of the Undertakings.

Conclusions

[116]My conclusions on the effects of the EA 2004, the SPA and the Certificate (including the Undertakings) are as follows: i) Part 4 Schedule 8 EA 2004 requires the “no less favourable” assessment under paragraph 11(7) to be carried out by reference to the provisions of the nuclear scheme in force on the transfer date ignoring its power of amendment. ii) Accordingly, benefits for future service under the Scheme, taken together with any benefit within paragraph 11(6)(a) cannot be reduced below the benefits for future service under the CPS in accordance with its provisions (ignoring its power of amendment) in force on 1 October 2008. iii) So far as initial contributions are concerned, it was permissible for the Scheme to provide larger contributions than the CPS in the light of the benefit represented by the special allowance, which could be brought into account under paragraph 11(6)(a). Mr Johnston took this into account in providing the certificate. iv) Increases in contributions to the Scheme are, in principle, to be treated in the same way as reductions in further service benefits, and are therefore objectionable. v) If I am wrong under i) above, Clause 6.3 of the SPA nonetheless requires benefits to be provided which are broadly equivalent to those under the CPS as at 1 October 2008. Benefits for future service cannot be reduced consistently with that contract. In any event, the Certificate only relates to the package of benefits provided by the Scheme, which were assessed ignoring the power of amendment in the CPS. The Scheme could not be said to have satisfied the “no less favourable” test if benefits for future service are subject to reduction. vi) If I am wrong in giving Clause 6.6 of the SPA and the Certificate such a restricted meaning, paragraph 9 of the Undertakings nonetheless requires any increase in contributions to be matched by an increase in the special allowance after taking account of any pay increases since 1 October 2008; pay increases may “frank” the special allowance.

Disposition

[117]The answers to the questions raised on the Claim Form are as follows: i) The protection afforded to the Transferred Employees pursuant to Part 4 is such that, so far as they are concerned, the power of amendment in the Scheme may not be exercised so as to vary detrimentally their future service benefits. ii) The effect of the SPA and the Undertaking is such that, so far as the Transferred Employees are concerned, the power of amendment in the Scheme may not be exercised so as to vary detrimentally their future service benefits. Accordingly, the Proposed Changes are not permissible.