International law firm Eversheds has advised leading independent trustee Alexander Forbes Trustee Services in obtaining a judgment in a novel test case that involved suing members who do not exist.

 
The Pensions Regulator had appointed Alexander Forbes to the GBP14m Sunley Turriff Pension Scheme. This is in wind up with a big deficit and heading for rescue by the DWP’s Financial Assistance Scheme (FAS). It is a hybrid scheme with some members having final salary benefits and others just money purchase benefits.

Alexander Forbes Director, Andrew Bakewell, says: “We inherited a Leading Counsel’s advice to the effect that the law [Section 73 of the Pensions Act 1995] operated on the Scheme rules to leave money purchase members with nothing from the Scheme - but no protection from FAS either, as the DWP had assumed money purchase members never need protecting.

“The point needed to be tested, but with the Scheme being in deficit we wanted to minimise the costs.”

Giles Orton, Partner who acted for Alexander Forbes explains the solution: “The usual procedure is to find members of the Scheme in the different interest groups, bring them into the action as representative defendants, with each one appointing his own solicitors and counsel.

“Eversheds short cut that by suing mythical defendants – the historical characters John Doe and Richard Roe who were regularly used in previous centuries. This meant only one firm of solicitors was needed.

“We were pleased that Judge Purle approved this innovative practice in this case, and went even further. He suggested that Doe and Roe could go back into retirement, as in suitable test cases such as this the court should dispense with representative defendants altogether. This opens the way to make test cases even more cost effective."

On the substantive legal point Judge Purle held that Section 73 should be interpreted to give money purchase members full protection in a wind up.

Bakewell says: “We are pleased Judge Purle brought the money purchase members in from the cold by adopting the more purposive interpretation that best protects all members.”

Orton adds: “This ruling affects insolvent hybrid pension schemes that went into wind up before 2005. Some Trustees will need to re-appraise old wind ups of schemes like this as the more orthodox technical view that Judge Purle rejected was commonly advised in the past.”