The trustee of the Mitchells & Butlers Pension Plan has won a “ground-breaking” High Court case against the scheme’s principal employer over powers to decide which index is used to increase members’ pensions.

The case centred around a change in the schemes’ rules that moved the power to change the default index by which pensions in payment were increased from the trustee to the sponsoring employer.

Prior to 1996, the trustee held the power to change the default index used to increase pension provisions.

However, this power was moved to the sponsoring employer by a 1996 deed, which was then perpetuated by further deeds signed in 2002 and 2006.

On behalf of the scheme’s 20,000 members, the trustee claimed that this change was never intended.

The judge ruled that the shift in power by the three deeds was void because the scheme’s actuaries had not been properly consulted, as required by the scheme’s rules, and the change had not been brought to their attention.

Gowling WLG, which represented the trustee, stated that what the judge said about the actuary needing to be effectively consulted was “likely to be of interest to other schemes”.

Pub chain owner, Mitchells & Butlers, became the scheme’s principal employer in 2003 and argued that it did so as a bona fide purchaser for value without notice, enabling it to avoid the trustee’s claim to rectify the deeds signed in 1996 and 2002.

However, the judge rejected this claim, ruling that the power by which Mitchells & Butlers had become the sponsoring employer in 2003 was not concerned with the sale of property or the transfer of rights, and was therefore not a ‘purchase’.

Commenting on the judgment, Gowling WLG partner, Ian Gordon, said: “This is one of the most significant pension rectification cases in recent years, involving the cross-examination of 16 witnesses, some of whom gave evidence remotely because of Covid.

“It is unusual in that rectification was obtained on behalf of members against a scheme's employer. Also unusually, the court was asked to rectify a pension increase rule so as to take away an employer power and replace it with a trustee power.

“It is so far the only case in which a court had to consider a defence to rectification based on the argument that an entity became the scheme's principal employer as a bona fide purchaser.”

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