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Remedy issues determined in IBM “Project Waltz” proceedings


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Following on from the liability judgment in the IBM Project Waltz proceedings which was handed down on 4th April 2014, a further lengthy and important judgment has been handed down that deals with the remedies available to members of the scheme. Outer Temple barristers Andrew Spink QC, Andrew Short QC and Saul Margo appeared for the Trustee whilst Nicolas Stallworthy QC and Lydia Seymour, also of Outer Temple, appeared on behalf of the Representative Beneficiaries.

In the judgment, Warren J dealt in turn with each of the elements of Project Waltz that breached the “Imperial” duty of good faith and the contractual duty of trust and confidence.

Warren J found in favour of the members on the vast majority of the remedy issues.

In respect of the “Non Pensionability Agreements” (NPAs) (intended to ensure that members future salary increases would not be pensionable), the Judge found that they introduced an express term of “non-pensionability” into each salary increase granted by IBM, but that the non-pensionability term was unenforceable. After considering the analysis in South West Trains, the Judge held that, because IBM obtained the NPAs in breach of contract, no court of equity would grant injunctive relief to IBM if it sought to prevent the members from claiming pension benefits based on the salary increases being pensionable. Further, the main consideration for the salary increases was found to have been the labour and services provided by the members; it followed that the members were entitled to keep those salary increases and to have them treated as pensionable.

Additionally, it was held that members are, in principle, entitled to damages as a result of their entry into the NPAs.

The Exclusion Notices, which purported to exclude members from their respective DB plans, were held to be voidable and liable to be set aside at the election of the member. Crucially, IBM’s argument that the notices should be held to take effect from some future date (when Reasonable Expectations had elapsed) was rejected. If IBM wishes to effect termination of pensionable service then it will now have to serve fresh Exclusion Notices with prospective effect. However, the Judge went on to find that IBM must carry out a further consultation before terminating DB accrual. Moreover, the Court will grant injunctive relief in relation to the service of fresh Exclusion Notices unless IBM gives a binding commitment to the Trustee and members and/or an undertaking to the court, that it will not serve such notices without conducting a proper consultation. The members were also found to be entitled to damages and equitable compensation as a result of the service of the Exclusion Notices.

In respect of the new restrictive early retirement policy introduced as part of Project Waltz, any member who retired earlier than they otherwise would have as a result of that policy was found to be entitled, in principle, to damages. In addition, IBM cannot rely on the new early retirement policy in relation to members that would have been entitled to greater benefits had the old early retirement policy remained in force.

A number of legal issues arose in respect of members who had left IBM’s service under a series of “Separation Programmes” under which they had purported to waive their rights to enhanced early retirement benefits. The Judge considered in detail the line of cases that includes AGCO v Massey and found that for the purposes of the scheme rules, compulsory and voluntary redundancies did constitute “retirement” and that voluntary redundancy constituted retirement “with consent”. However, the “pension waivers” were held to be effective in preventing members who entered into them from claiming enhanced early retirement benefits. Nevertheless, members were found not to have waived a claim in damages that arises out of a breach of IBM’s Imperial duties as opposed to arising out of their redundancy.

Finally, members were found to be entitled to damages in respect of the breach of the contractual duty of trust and confidence that arose as a result of the manner in which IBM conducted the statutory consultation process. In addition, as well as consulting in respect of fresh Exclusion Notices, IBM must consult on any matters that it intends to implement which can be said to form a part of Project Waltz.

IBM is expected to seek permission to appeal this judgment along with last year’s liability judgment. A permission to appeal hearing is due to take place in due course.


Barristers: Lydia Seymour | Nicolas Stallworthy QC | Saul Margo | Andrew Short QC | Andrew Spink QC
Categories: News