Landmark pension case could have far-reaching consequences
MORE than 100 members of a pension scheme have lost a High Court action which could have far-reaching consequences for pension schemes.
The case arose after members of a scheme for an industrial diamond manufacturer took a case against the trustees of their scheme over the winding up of the fund.
Judge Peter Charleton yesterday ruled the trustees of the scheme of Element Six in Shannon, Co Clare, had acted reasonably and in the interests of the members as a whole when they agreed in November 2011 to accept an offer to wind it up on the basis of a contribution of €37.1m from the company.
Members sued the six trustees claiming breach of trust and conflict of interest in accepting the offer and said they should instead have demanded the company make a €129.2m contribution to make up the deficit. The claims were denied.
The trustees – three management nominees and three worker nominees – accepted the €37m offer in a 3-3 vote in which one of the management nominees exercised their casting vote.
The commercial division of the High Court heard Element Six, part of a multinational conglomerate including DeBeers diamonds, employs 359 people in Shannon. There are around 800 workers in the pension scheme.
Judge Charleton, who heard the case over 14 days, said steps were taken in 2008 to address a €100m deficit which had emerged by the company agreeing to pay €10.75m per year into the fund.
But within two years the deficit returned and the company sought to wind up the scheme.
In 2009 a rationalisation plan had also been implemented, involving 300 redundancies, to save the plant from closure.
Negotiations took place between management and the trustees over the continuing €10.75m annual contribution and, the judge said, without authority from Element Six's parent company in Luxembourg, the Irish branch "began to stonewall" and adopted an attitude far from conducive to a solution.
At a meeting in October 2011, the company offered €35m (later €37m) to wind up the scheme saying it was unsustainable.
It warned that, if it was not accepted, the plant would be shut down with the loss of the 359 jobs.
The trustees obtained financial and legal advice as to what would happen with the scheme if the company itself was liquidated.
On November 25, 2011, they decided to accept the €37m offer to wind up.
The judge noted profit levels of the entire Element Six group over the three previous years had not exceeded €35m.
If the company were to be wound up as insolvent, the liquidated assets would not cover the €107m that had been promised in 2009 for 10 years to fund the deficit, the judge said.
There had been allegations of syphoning off of large sums of money into other Element Six group companies. The judge said he could not decide whether the company wrongfully depleted assets as this had not been properly debated before the court.