Appeal Court upholds ruling on Alcoa pension fund

In a majority decision, the Court of Appeal has upheld a Supreme Court ruling that certain amendments to the rules of the pension scheme of Alcoa Minerals of Jamaica were validly made and the trustees of the pension fund acted fairly in their distribution  of the surplus when the scheme was wound up.

However, the court said  it would have been a preferable course for the trustees to have obtained independent legal advice or to have sought the direction of the court in the matter.

Junior Mills and Norval Thompson, former employees of Alcoa and members of the pension fund were the appellants.

They had wanted the rulings of Supreme Court judge Lloyd Hibbert to be overturned.

The respondents — Alcoa and the  trustees of the fund Stainton Knott, Benjamin Beale Jnr, Llewellyn Christian, Lascelles Wisdom, Derrick  Spence and Clifton Grant — had asked the court to dismiss the appeal because Justice Hibbert gave the correct decision.

The Appeal Court in outlining the circumstances filed which led to the claim said in 1986, Alcoa and the trustees executed a trust deed, creating a pension fund for the benefit of Alcoa's hourly paid employees upon their retirement and for their dependents.

Rules were established for the fund and Life of Jamaica was contracted by the trustees to manage the pension fund. 

They fell in the category of the superannuation schemes  and each member was required to contribute a specific percentage of his salary to the fund.

Alcoa was required to pay an amount into the fund  representing a percentage of the members' pensionable earnings.

In 1998, there was a surplus and in April 1999, Alcoa, in breach of the pension fund rules, stopped paying its monthly contributions.  

The default continued for several months and was referred to as a "contribution holiday".

An actuarial report in 2001 disclosed that there seemed to be a contradiction in rule 13 of the pension fund guidelines which dealt with winding up of the scheme. 

It was recommended in the report that the windup rules be clarified  to avoid future misunderstandings.

After  a series of meetings, the trustees requested Life of Jamaica to draft amendments to the pension fund rules. 

The amendments were made in October 2001 and purportedly signed by the trustees.

On October 9, 2001, an industrial dispute arose between Alcoa and its hourly paid workers.

Following that dispute, on October 15, 2001, Norval Thompson who the chief union delegate for the hourly paid workers and the union's representative on the board of trustees of the pension fund was fired as an employee  and trustee.

Alcoa made the entire hourly paid workers unit redundant on December 5, 2001, discontinued the pension scheme and instructed the trustees to wind up the pension scheme.

In July 2001, the trustees paid out all contractual benefits to the members of the scheme.

Following the payout, there remained a surplus of $255 million.

The trustees distributed the surplus in September 2003 and the greater share was allocated to Alcoa.

After accounting for winding up expenses, the trustees allocated $66 million to the membership of  the scheme and allowed Alcoa to retain $110  million (resulting from the contribution holiday) and allocated a further $79 million to Alcoa. 

The workers were given 26 per cent of the surplus while 74 per cent went to Alcoa.

The  appellants Mills and Thompson, representing some of the beneficiaries of the pension scheme, filed a suit in the Supreme Court in October 2007.

They sought declarations to set aside the amendment to the pension scheme rules and to have the monies which were paid over to Alcoa, refunded to the pension fund.

They also accused the trustees of having breached their duties to the beneficiaries of the scheme.

President of the Court of Appeal Justice Seymour Panton and Justice Patrick Brooks today ruled that the evidence demonstrated that the amendment to the pension scheme was authorised and was validly executed.

They said there was evidence to support Justice Hibbert's  finding that the subsequent distribution of the surplus was carried out on an objective basis  and in good faith  by the trustees after  having consulted with stakeholders. 

The Appeal Court judges also said they carefully considered all the matters and the decision that the trustees did not act unfairly must be upheld.

However, the two judges said it would have been a preferable course for the trustees to have obtained independent legal advice or to have sought the direction of the court.

Justice Carol Lawrence-Beswick (acting), in her dissenting judgment,  said she agreed with the submissions made by attorney Brian Barnes  for the appellants in so far as it concerned the lack of fairness in the trustees' decisions.

She pointed out that the lawyers and the actuaries advising the trustees were not independent as they were  for Alcoa. 

She said the insurance brokers were Alcoa's business advisers and Life of Jamaica was the manager of the fund which was appointed by Alcoa to manage the fund.

"This leads me to conclude that the trustees' decision were based on advice from persons who were employed by Alcoa and who could properly be expected to have the interests of Alcoa as their primary, if not only, focus," the judge said.

She held that there was insufficient evidence to support the judge's finding that the trustees, in deciding on the distribution of the surplus acted fairly in regard to all the circumstances, or that they acted in good faith and considered everything.

It was her finding that not only was independent advice absent but the trustees accepted Alcoa's precise approach and the exact figure which Alcoa said it should be paid.

Justice Lawrence-Beswick further said in her opinion, the evidence of what may be considered to be a biased unfair approach of the trustees  concerning the distribution of the surplus strikes at the foundation of the appeal as it would mean that all their actions and decisions were at risk of being tainted.

Garth McBean QC represented the six trustees while John Vassell QC, and attorneys-at-law Emile Leiba and Cindy Lightbourne represented Alcoa.