British Airways - the return flight to the Court of Appeal

Whilst we have seen a number of cases coming through the Courts that have had a pensions element to them I wanted to concentrate on one that I had looked at before. This is the Court of Appeal decision in British Airways plc v Airways Pension Scheme Trustee Ltd [2018] EWCA Civ 1533 (5 July 2018). Back in 2017 I looked at the original decision which the Court decided in favour of the Trustee (https://www.dalriadatrustees.co.uk/archives/british-airways-v-aps-trustees-ltd-a-flight-of-fancy-for-trustees/). The facts of the case and the learning points for trustees are set out in this blog.

The issues (and the costs) involved always meant that this case was going to be appealed and earlier this month we had the outcome. As is sometimes the case when two heavyweights step into the legal ring there was a split decision with the majority of Judges eventually finding in favour of British Airways and the original decision was reversed. What this meant was that the Court of Appeal found that the decision of the Trustee of the Airways Pension Scheme to exercise its unilateral power of amendment to introduce a new trustee power to provide discretionary pension increases was invalid. In reading the judgement (at 39 pages a lot easier read than the original 164 page decision) a couple of points stood out. In paragraph 102 Lewison LJ noted

“… the function of the trustees is to manage and administer the scheme; not to design it. The general power that is given to them is limited to a power to do all acts which are either incidental or conducive to that management and administration.”

In paragraph 121 Peter Jackson LJ said

“… there is nothing to suggest that the power of amendment was intended to give the trustees the right to remodel the balance of powers between themselves and the employer”

Now it is always difficult to highlight only two points of interest in a complex case (which relies on the facts) but it struck me that these two points in particular indicated the attitude of the Court to the exercise of a unilateral power by trustees and what their parameters should be. Indeed, the balance of power between trustees and employers is very much a fine balance.

Trustees have to be cognisant of their powers and duties and take care in exercising them properly ensuring the “… journey itself is permitted… “ [paragraph 122], especially in the area of discretionary increases. If trustees are unsure then they may need to take legal advice and I am sure their legal advisers will be taking this case into account. If they don’t then I am sure the lawyers for employers will.

It should be noted that the Court of Appeal granted the Trustee permission to appeal to the Supreme Court and I would be very surprised if this did not happen.