Irish Pensions Magazine Spring 2015
14
Expert Opinion
What is the Omega Pharma case?
The Omega Pharma case has confirmed that the
scheme’s governing documentation and not the
Pensions Act minimum funding standard determine
the employer’s liability to contribute to defined
benefit schemes on wind-up.
On 25 July 2014, Mr Justice Moriarty in the Commercial
Court handed down judgment in the case of Holloway
& Ors v Damianus BV & Ors
1
and found in favour of
the trustees of the Omega Pharma defined benefit
scheme in their claim for deficit contributions against
the scheme’s employers. The trustees succeeded in
obtaining judgment in the amount of €2,439,193.56
(inclusive of interest) against the employers. On
appeal, the newly established Court of Appeal
affirmed the judgment in favour of the trustees.
If the Element Six case (Greene & Ors v Coady &
Ors
2
) was the most important pensions law case for
trustees in the recent past, the Omega Pharma case
was not far behind. The Omega Pharma case is also
particularly relevant to employers who operate or
participate in defined benefit schemes. However, a
number of key issues remain unanswered.
Some questions and answers
1. If a scheme is 100% funded on the Pensions Act
minimum funding standard basis can an employer
walk away from the scheme and pay no further
contributions?
Not necessarily. Employer funding obligations are
not determined by reference to the Pensions Act.
They are primarily determined by reference to the
relevant scheme’s governing documents (usually the
trust deed and rules).
2. What is the relevance of the contribution rule?
In the Omega Pharma case, the Court focussed on
the words of the rule and the purpose of the rule;
that is to pay the moneys “necessary to support and
maintain the Fund in order to provide the benefits
under the Scheme”. What is noteworthy is that the
Court had no difficulty allowing a contribution rule
which would initially have been drafted to provide
for ongoing employer contributions to be used to
ground a once off lump sum deficit demand where
the scheme was about to wind up.
3. How are two apparently inconsistent provisions
in a trust deed to be interpreted?
This question was the main focus of the judgment of
the Court of Appeal. One clause in the trust deed
provided that the employer could terminate its
contribution liability by serving three months’ notice
on the trustees of its intention to do so. Another
clause provided that the scheme would commence
winding up on the service (rather than the expiry) of
that notice. In dismissing the employers’ arguments
that contribution liability terminated immediately
on serving the notice the Court applied the rule of
interpretation generalia specialibus non derogant.
This effectively requires a term in a contract which is
of a general or standardised nature to yield to more
specific terms.
The Court of Appeal found that the term which
provided for wind-up to commence on service of the
notice had to be read as being subject to the term that
provided for a three month notice period, as to do
otherwise would make the notice period ineffectual.
TheOmega Pharma case – Trustee and Employer Guidance
by Chris Comerford and David Francis
