Court blocks Rusal manoeuvre in pension surplus case
UC Rusal Alumina Jamaica Limited has lost in its bid to quash a 2018 decision of the Financial Services Commission (FSC) regarding the distribution of billions in surplus in a pension fund for its former employees.
The Russian-owned mining company was denied the chance to seek a judicial review of the FSC’s sign-off on a plan that, according to documents seen by the Financial Gleaner, would see $3.5 billion of surplus for distribution to the participants and beneficiaries, and $210.7 million to the sponsor, the employer.
It was the latest in a series of legal action that began just over nine years ago on the arrangement to wind up the plan established in 1974 to provide pensions and other benefits for employees of companies in the Alcan group. Alcan’s Jamaican assets was later acquired by Glencore International in 2001, and Glencore later merged with UC Rusal.
According to judgments on hearings in the Supreme Court, the latest on July 5, as well as at the Privy Council, the plan is the subject of a March 2005 trust deed between UC Rusal Alumina Jamaica, under its former name Glencore Alumina Jamaica Limited, and the Manchester Pension Trust Fund.
By 2010, the trustees had come to consist of employees of Rusal, although Manchester Pension Trust continued to act for them.
On March 31 of that year, Rusal gave notice to all its employees, including those under the pension scheme, that their employment was terminated with immediate effect, and Manchester Pension Fund wrote to all plan participants that same day advising that the scheme would be wound up. The next day, the trustees sought the FSC’s approval to wind up the plan.
The background to Rusal’s decision to discontinue the pension scheme was an inability to agree with the trustees on the terms of a revised deed to be submitted to the FSC for approval. The bone of contention concerned the distribution of assets, including the surplus.
The Rusal Jamaica board subsequently voted on May 27, 2010 to replace two of the trustees, but their ouster was challenged in court.
Justice Marjorie Cole-Smith subsequently ruled that the fund should be managed by the original trustees, as well as two court-appointed trustees, among others, but she also ordered that any decision regarding distribution of the pension surplus had to be unanimous, and if not, directions could be sought from the court.
Cole-Smith also approved the appointment of actuary Astor Duggan, who was directed to share information with Rusal’s appointed actuary, Constance Hall of the consultancy firm Eckler.
The court would later side with Duggan’s recommendation on how the surplus should be distributed.
Rusal challenged the decision made by Supreme Court Justice Donald McIntosh all the way up to the Privy Council, which set aside a part of the Jamaican court of appeal ruling. The Privy Council held that on the winding up of the pension plan, the trustees could grant an “uplift”, or increase, in pension benefits in line with inflation.
The Supreme Court subsequently set the ‘uplift’ at 3.85 per cent in September 2017.
The FSC on August 24, 2018, approved the scheme of distribution drafted by Duggan and submitted by the trustees. Rusal Jamaica was dissatisfied with the distribution scheme and approached the court in January of this year for permission to apply for judicial review of the FSC decision.
In denying the request, Justice Christine McDonald noted that Rusal had bypassed the FSC Appeal Tribunal, which is independent of the regulator and set up to consider such disputes, and had offered up no exceptional circumstances for its action.
“This matter has had a very long journey in the courts, from the Supreme Court up to the Privy Council, and we hope that the matter is now resolved and the payout of the surplus can take place in accordance with the scheme as approved by the FSC,” said Patrick Foster, QC, the lawyer who represented the regulator in the case, in a comment to the Financial Gleaner.
One of the attorneys who represented UC Rusal, Christopher Kelman, said he could not comment at this time on whether the company would continue pursuing the case.