The Airways Pension Scheme (APS) trustees were "entirely reasonable" when including £55m annual recovery payments and a £250m contingent payment in their discretionary increase framework, their lawyer has said.
Concluding APS' closing statement on 8 December in the High Court, Keith Rowley QC said the trustees could take the money into account according to their actuarial advice.
The comment was made on the penultimate day of the landmark trial where British Airways (BA) is contesting the decision by APS trustees to award a 0.2% increase - above the Consumer Price Index (CPI) - in the 2013/14 financial year. The award was granted after the scheme was moved from the Retail Price Index (RPI) in 2011.
Rowley said BA had committed to the payments in the scheme's 2009 triennial valuation, and trustees could therefore fairly consider them in its future funding position.
"It became a contractual sum on behalf of BA and reliance on that contractual commitment was an entirely reasonable and proper course for them to take, given their unanimous aspiration to return to RPI," he said.
Rowley noted that the agreement had been reached unanimously when current BA chief executive officer Steve Gunning was a member of the trustee board.
"It is entirely justifiable for trustees to wish to retain the existing level of funding," he continued. "The objective test was the discretionary increase framework. It wasn't to be any old test. It came from an eminent actuarial adviser; there was no reason for trustees to think otherwise.
"The assumption for pension increases was there in the actuarial valuation signed by Mr Pardoe in accordance with his duties as scheme actuary. The valuation was freely negotiated and that was something the trustees could therefore take into account as part of their decision-making process."
"The whole thrust of the covenant advice was that it was reasonable to believe BA would pay both of the sums under the recovery plan and the £250m," he later added.
Rowley contested the agreement had been reached both within the statutory regime but also with a separate contractual funding agreement with BA.
He also asserted trustees were right to assume payment of the full £250m contingent sum in 2019, which had been promised to the scheme if it was in deficit at the time. Any remaining sum would be given to its sister scheme, the New Airways Pension Scheme (NAPS).
"[The £250m] was part and parcel of what was agreed as part of the 2009 valuation," he added. "It was a quid pro quo for the APS trustees accepting a lower rate of contributions. It was a unilateral right on the part of APS, with a secondary right on the part of NAPS if anything was left over."
Speaking in reply to the trustees' statement, BA's lawyer Michael Tennet QC questioned the decision not to call all of the APS member-nominated trustees (MNTs) during the period as witnesses in the trial.
The court has heard from MNTs Paul Douglas and Stephen Mallett, but fellow MNTs Mike Post, Sandra Sellers, Tom Mitchell and Graham Tomlin have not taken to the stand. Cliff Pocock, who has been mentioned throughout the trial, died in 2015.
Tennet argued their evidence was necessary to properly consider whether the MNTs had a predetermined and rigid mind-set throughout the period, as has been the company's case.
"We are effectively being asked to assume in the favour of the trustees that their views suddenly changed and melted away before the November meeting," he said. "That might be something we do if they came and gave evidence.
"The idea that their conduct and thoughts were not an issue is absolutely ridiculous. We heard from the more presentable face of the trustee board."
Tennet called for the court to make an "adverse inference" from the trustees.
"It is clearly reasonable to suggest [their views] didn't melt away and that their reason for not turning up was tactical," he continued. "We are effectively being forced to accept that their views disappeared without any chance to cross-examine them.
"That can't be fair on the employer in this case and [the court] should therefore draw an adverse inference from their failure to appear."
However, Rowley countered, arguing the court had been provided with adequate evidence to rule in the case, and that BA's claims did not necessitate all trustees appearing in court.
"[There is a] very full picture of what was happening here and why the trustees took the decisions which they did," he said. "No useful purpose would be provided by parading the other trustees through the witness box.
"There is no basis for drawing any adverse inference."
Tennet expects to complete his reply to the trustees' closing statement on 9 December, after which the trial will end.
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