The IMG Case

Legal Principles

The Court is not permitted to construe a power ‘to alter or add to any provisions’ of a pension scheme in such a way that an amendment may remove or override a fetter also contained in the relevant instrument” {Thomas on Powers, 2nd Ed [16.33], citing Re IMG Pension Plan [2009] EWHC2785.

At [25.20] under “Power of variation in the trust instrument”, in Equity and Trusts in Australia (4th Edition) , GE Dal Pont and DRC Chalmers state:

“There are further general law restrictions on the scope of an even apparent unfettered power to vary, Firstly, a power to vary will not permit a variation removing a restriction of that power, secondly, its exercise cannot affect any vesting that has already taken place…..Thirdly, a power to vary a trust deed arguably does not extend to a variation that would alter the substratum of the trust {Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at 602}

The Case

Re IMG Pension Plan [2009] EWHC 2785.

A defined benefit pension scheme was made by a Deed dated 12 October 1977. This Deed included a

Power of Amendment in Clause 7 which included a restriction or fetter on the exercise of the Power of Amendment.

A supplemental set of “Rules” was adopted in 1981 which purportedly provided another power of amendment which did not include the fetter imposed by Clause 7 in the original Trust Deed.

The Hon Mr Justice Arnold stated that:

“Clause 7(i) of the 1977 Deed was plainly intended to protect the interests of the members by preventing amendments which had an effect detrimental to their interests.”

The Hon Mr Justice Arnold ruled that the purported Power of Amendment introduced by the 1981 “Rules” to be invalid and the Power of Amendment contained in the original Trust Deed remained valid.

The ruling of the Privy Council in Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 , in support of the principle that a Power of Amendment cannot be used to remove a fetter imposed by the Power of Amendment.

The judgement of the Privy Council was delivered by Lord Millett, who said at 1411G:

“… their Lordships are satisfied that [the plan] could not be amended in order to confer any interest in the trust fund on the company. This was expressly prohibited by clause 4 of the trust deed. The 1994 amendments included a purported amendment to the trust deed to remove this limitation, but this was plainly invalid. The trustees could not achieve by two steps what they could not achieve by one.”

The ruling of Warren J in BHLSPF Pty Ltd v Brashs Pty Ltd [2001] VSC 512 was also cited where the trustees had replaced the original trust deed with a deed which contained no provisions corresponding to rules 15 or 18 which contained fetters on how the scheme could be amended. Warren J in the Supreme Court of Victoria held that the deletion of rules 15 and 18 was ultra vires rule 9, the Power of Amendment.

The ruling of Cooke P in UEB Industries Ltd v W S Brabant [1992] 1 NZLR 294 was also cited where an attempt to remove a fetter imposed by the Power of Amendment in the original Trust Deed was ruled to be “not something the trustees had the power to do”. {ie it was ultra vires the power provided by the Power of Amendment}.