Academics who have brought a case in the High Court against the directors of the UK’s largest pension fund have promised to appeal after a judge dismissed their case.
Neil Davies of the University of Bristol and Ewan McGaughey of King’s College London argued that those responsible for the University Superannuation Scheme (USS) “did not act within their powers” in conducting a controversial assessment at the height of the Covid-19 crisis -Pandemic that forecast a deficit of between £14.9bn and £17.9bn and led to cuts in members’ benefits.
Her case – which was funded by donations of more than £220,000 – also alleged discrimination and accused directors of ignoring the disproportionate impact of the cuts on women, ethnic minorities and young people. A third claim related to USS operating expenses, which were described as “superinflationary” and a breach of duty by the directors to allow such an increase. Fourth, the plaintiffs alleged that the directors failed to act in the members’ best interests by refusing to halt fossil fuel investments, contradicting the results of a poll that found most members supported the move.
Judge Mr. Justice Leech denied a motion to continue the claims because, based on the evidence presented by both sides, he ruled that the plaintiffs had not produced prima facie evidence to justify the costs of a full trial.
An important test in evaluating the case was convincing the court that there was a willful or dishonest breach of duty or that the directors improperly paid themselves at the expense of the USS.
In a joint statement, Dr. Davies and Dr. McGaughey the court’s acknowledgment that beneficiaries of a pension fund have the right to sue directors for dereliction of duty and said their 1843 case was dismissed “on a formality.”
“He [the judge] says duties cannot be enforced unless directors personally benefit from their breach. We are confident that this decision is wrong,” the statement said.
“The legal duties of directors are to obey the rules of their corporation, to use their authority for the purposes of the corporation, to act in good faith and not to engage in conflicting conduct. Enforcement of statutory obligations must not be overridden by common law formalities. The law is on the side of good corporate governance and safe retirement.”
They pledged to “explore all legal remedies” to “obtain justice for the hundreds of thousands of university staff who deserve Social Security.”
Critics have said that the USS 2020 valuation was overly conservative and underestimated the speed of the economic recovery after the pandemic. They say the fund’s finances have since recovered significantly and benefit cuts are no longer necessary, or at least should be postponed until another assessment – due next year – is complete. There have been 13 days of strikes at dozens of universities this academic year, while some university and college union members are currently conducting a flag boycott in protest of the pension changes.
“We are organized and determined to hold the directors of the USS accountable for the damage they have caused … the cuts run into billions, but if we all stand together, we will win,” the plaintiffs’ statement concluded.
A USS spokesman welcomed the ruling and the “thoroughness” with which the judge assessed the case.
“While we are pleased with this outcome, we are concerned that anyone should find it necessary to take such action. We are committed to moving forward and building closer relationships with all stakeholders,” the spokesman added.
“Much of the material examined by the court was already available on our website. We encourage members to use this information to help them better understand the program and how we are delivering it for them.”
It was the second legal victory for the pension system in the past week after a former principal, Jane Hutton, withdrew her wrongful dismissal lawsuit she had filed in response to her dismissal from her post for disclosing information to outside sources.