Airways Pension Scheme (APS) trustees did not intend to hardwire Retail Price Index (RPI) during a test for awarding discretionary increases, a trustee has told the High Court.
Continuing to give evidence on 24 November, member-nominated trustee Paul Douglas refuted a claim by British Airways' (BA) lawyer that he and other MNTs were determined to bring the scheme back to RPI.
In this landmark trial British Airways (BA) is contesting the decision by APS trustees to award a 0.2% discretionary increase - above the Consumer Price Index (CPI) - in the 2013/14 financial year. This was after the scheme was moved from the Retail Price Index (RPI).
Douglas was elected to the board alongside Cliff Pocock and Graham Tomlin who had both resigned as trustees in April 2011 over the RPI issue. Around this time the trustees began designing a two-stage test for determining whether to pay discretionary increases.
When BA's lawyer Michael Tennet QC suggested Douglas had wanted the scheme to return to RPI when appointed to the board, he said: "I hadn't meant to come to the board with the expectation of going back to RPI."
Douglas later said: "I had no ambition to hardwire RPI; I realised the world had moved on and I wasn't going to enter a battle of the past."
BA's lawyer also argued that Pocock was just concerned about trying to avoid failing the two-stage test rather than making it as fair as possible. He suggested Pocock was trying to get to RPI by any way possible.
However, Douglas said that was not his fellow trustee's position, adding Pocock was a "very balanced and responsible trustee" and "was keen to achieve consensus across the board."
Tennet suggested Pocock had wanted the opportunity to re-run the debates, and move back to RPI.
However, Douglas said: "No. The risk was there could be emotions, and people needed to know what the fallout from the meeting would be."
"I wasn't convinced we had the employer-nominated trustees (ENTs) in the same position as MNTs in developing a fair process. Several of the trustees were in favour of the closed fund test which I thought was completely unjustified."
He added: "In early 2012 we still had the issue of the ENTs not getting into the debate, and only voting. It made it seem they were paying lip service to the aspiration on behalf of the company."
The two-stage test "wasn't coherent" and "we were barking up the wrong tree", he said.
Tennet later asked Douglas about a disagreement in 2013 over a £250m contingent payment. This was created to be paid out to APS if the scheme was not fully funded in 2019, with any remaining reserves paid to New Airways Pension Scheme (NAPS).
The lawyer said NAPS had complained the payment was going to be used to pay APS's discretionary increases.
Douglas said: "BA introduced doubt, particularly Nick Swift [BA's former chief financial officer], over the intention of the funding agreement."
He added: "Swift wrote to The Pensions Regulator (TPR) and the NAPS trustees, and then us, - that's when it became an issue."
He also argued that NAPS "latched" onto the argument made by Swift.
Tennet QC suggested that Douglas saw TPR as a sign of threat to discretionary increases, and was keen to keep the regulator out of the picture.
"We didn't want TPR unmeasurably influencing what we were doing. BA presented a very one-sided view to TPR."
The trial is due to finish on 9 December.
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