The story behind the case that concluded in the High Court yesterday will be familiar to Irish workers worried about the risks hanging over money they have put into pension pots sponsored by their employers.
Part of the deal for workers at Shannon-based industrial diamond maker, Element Six, was that it offered employees a defined benefit pension scheme.This paid members about two-thirds of their salary when they retired at 60.
While it had been closed off to new members for some time, the plan still ran into trouble in 2008. The company agreed to tackle the deficit by making an annual contribution of €10.75 million from 2009 until 2020.
However, by late 2011, it appeared that such a sum would no longer be adequate and the company warned the six trustees – Danny Coady, Siobhán Duffy, Danny Murphy, Thomas O'Brien, Gerard O'Sullivan and Dermot Tuite – that it wanted to wind up the scheme.
It offered a final payment of €23.1 million for the defined benefit fund. Alongside that, it pledged a further €14 million, some of which would be used to top up low-paid pensioners, while €8 million would go into a defined contribution fund for members of the original scheme still working for the group.
That offer came accompanied with a threat that if it were rejected and the trustees decided to use their power to demand that it made good the €129 million deficit, it would send the business into liquidation with the loss of almost 360 jobs.
The six trustees were evenly split when they voted in November 2011. Coady, the chairman, used his casting vote in favour of the proposal. As a result, benefits from the plan were severely cut, imposing unexpected hardship on a large number of people, more than 100 of whom sued.
The 14 days of evidence and legal argument and thousands of accompanying documents essentially distilled down to a number of central questions: Did the trustees act reasonably? Were they influenced by conflicting interests? Should they have issued a contribution demand on the company? Had that sparked a liquidation, would the scheme have fared better?
Seven weeks
After considering the issues for seven weeks, Mr Justice Charleton yesterday found in the trustees' favour.
He ruled that, given the information, the circumstances and the available professional and legal advice, they acted reasonably at all times.
Mr Justice Charleton stressed that the law requires the court to judge those factors from what would have been the trustees’ own perspective at the time.
The plaintiffs argued that some of the trustees’ interests conflicted with those of the trust. The bottom line was that Mr Justice Charleton found there was no evidence that any such conflicts influenced them and that they acted honestly and in good faith. In any case, clause nine of the Element Six trust deed rules out invalidating trustees’ decisions on the grounds that they had a personal interest in the result.
While the plaintiffs argued that a liquidation could have yielded up to €42 million for the scheme, the judge found that there were too many variables involved to warrant turning down money that was actually on the table.
Ultimately, he said, the decision to accept this was in all members’ interests.
