Farrington et Al v Allen et Al

JurisdictionBahamas
JudgeWinder, J.
Judgment Date27 March 2015
Docket Number2014CLE/gen/251
CourtSupreme Court (Bahamas)
Date27 March 2015

Supreme Court

Winder, J.

2014CLE/gen/251

Farrington et al
and
Allen et al
Appearances:

Ferron Bethell with Adrian Hunt for the plaintiffs

Renae McKay with Norwood Rolle and Alexandria L. Collie for the 1st defendant

Craig Butler with Erica Darr for the 2nd through 8 th defendants

Trusts and Trustees - Trust of pension fund established to provide health and welfare benefits — Participation agreement — Whether Board of Trustees of the Fund should commence legal proceedings to recover outstanding arrears of contributions owed to the fund by Union — Disqualification of the Union trustees to any vote on the issue — Overriding duty of the Court to protect the assets of the fund — Finding that disqualification of union trustees would skew voting process in manner not contemplated by trust — Suspension of the pension whilst contributions remain outstanding — Benefits to be readjusted and restored.

Winder, J.

This is an action by the plaintiffs seeking relief as against their co-trustees relative the management and operation or the Bahamas Hotel and Allied Industry Pension Fund and the Bahamas Hotel and Allied Industries Health and Welfare Benefits Fund.

1

The plaintiffs' Originating Summons was filed on February 26, 2014 and is settled in the following terms:

LET ALL PARTIES CONCERNED ATTEND before the Honourable Justice_____, a Judge of the Supreme Court of the Commonwealth of The Bahamas on ____ the _____ day of ____ AD 2014 at _____ o'clock in the ___ noon, on an application by the above named plaintiffs pursuant to Section 77 of the Trustee Act, Ch. 176, and the inherent jurisdiction of the Court for the opinion, direction and/or advice of the Court with respect to the management of the Trust Property of the Bahamas Hotel and Allied Industries Pension Fund (“the Fund”), in particular, whether the Board of Trustees of the Fund ought to commence legal proceedings to recover the outstanding arrears of Contributions owed to the fund by the Bahamas Hotel Catering and Allied Workers Union, or accede to the request from the Union to reduce the rate of their monthly contributions to the Fund.

FURTHER OR ALTERNATIVELY for an Order and or Directive that the 2nd -8th defendant be barred from casting a vote as to whether legal proceedings ought to be commenced.

FURTHER OR ALTERNATIVELY for an Order that accrual of Pension credits to the members of the Bahamas Hotel Catering and Allied Workers' Union (“the Union”) who are participants in the Bahamas Hotel & Allied Industries Pension Fund (“the Fund”) be suspended until such time as the Union has satisfied its indebtedness to the Fund.

2

The Originating Summons is supported by the affidavits of Michael C. Reckley, which was also filed on 26 February 2014, 24 April 2014 and 24 October 2014.

3

The 1st defendant relies on the Affidavit filed on 7 May 2014. The 2nd through 891 defendants rely on the Affidavits of Krystle Saunders (5 May 2014, 29 October 2014 and 13 November 2014) and Darrin Woods dated 7 May 2014 and 26 September 2014.

4

Michael Reckley says in his first affidavit that:

5
    The management, operation, and administration of the Fund lie solely with the Board of Trustees. The said Board is made up fourteen (14) Trustees, seven of whom are appointed by the Association, and the remaining seven of whom are appointed by the Union (hereinafter referred to as ‘the Industry Trustees’ and ‘the Union Trustees’ accordingly). The plaintiffs are the Industry Trustees, and the 2nd - 8th defendants are the Union Trustees. 6. The Board also consists of an Independent Chairman, a position currently held by Sir William C. Allen, the first above named defendant. As the Independent chairman of the Board, Sir William is empowered to cast the deciding vote to break any deadlock between the Union Trustees and the Industry Trustees. Together, the entire Board has a duty to preserve and safeguard the property of the Fund, which consist primarily of the contributions made to the Fund in accordance with Section 2.03 of the Trust Declaration and the investment earnings made on those contributions. 7. The Union participates in the Fund as an employer as defined by Section 1.07 of the Trust Declaration. As such, the Union is required to make monthly contributions to the Fund. Further, as reflected in section 2.03 of the Trust Declaration, it was agreed that the Union's rate of contributions would be governed by the provisions of the Rules and Regulations of the Fund, and any Participation Agreement between the Trustees, the Association, and the Union. 8. Pursuant to Article 4.1 of the Participation Agreement, it was provided that the Union's rate of contributions would be equal to: a) six percent (6%) of an Employee's gross wage with respect to the Pension Fund; and b) two percent (2%) of an Employee's gross wages with respect to the Health and Welfare Fund. 9. The Participation Agreement also stipulated, among other things, that: a) The Trustees, after consultation with the Union, could vary the Union's contribution rate with the goal of ensuring that the Funds were maintained on a sound actuarial basis; b) The union would pay interest on all contributions in arrears for at least sixty (60) days at a rate of one and one half percent 1 % %); c) All Contributions and interest thereon owing to the Funds by the Union would, until paid, be trust monies belonging to the Funds in the Union's possession; and d) The Trustees were at liberty to take whatever action deemed necessary to recover any outstanding contributions owed to the Fund by the Union, the costs of so doing, inclusive of attorney's fees, to be the liability of the Union. 10. The Union has been delinquent in its contributions for a number of years. The Union's delinquency has persisted despite efforts and measures taken by the Board to assist the Union in settling its arrears. In particular, in December 2008, the Trustees of the Fund entered into a delinquency payment agreement with the Union to facilitate the Union's payment of its contributions arrears, which then stood at One Million One thousand and Sixty-three Dollars and Sixty-eight cents ($1,001,063.68). 11. By virtue of the delinquency payment arrangement, the Trustees of the Pension Fund agreed to reduce the interest owing on the Union's delinquent contributions by fifty percent (50%), in consideration for the Union keeping current with its present and future contributions. However, despite initial payments, the Union failed to honour the terms of the delinquency payment agreement. 12. The Union's indebtedness has ever since been an issue of much debate at meetings of the Board of Trustees. At the meetings, the Union Trustees have repeatedly acknowledged the Union's debt, and expressed their commitment to satisfying the same. By a letter dated 11th May 2012, Mr. Darrin Woods, the 3rd above-named defendant, wrote to the Executive Director of the Fund seeking a reduction in the Union's rate of contributions. 13. The Board of Trustees secured the services of The Segal Company, an actuarial firm based in New York, USA, with respect to the Union's request to reduce its contributions. By a memorandum dated 18th June 2012, Mr. Darrin S. Owens of the Segal Company advised the Board to consider other alternatives than the proposed reduction in contributions. As reflected in Mr. Owens' memorandum, his reasoning was that any reduction in the Union's...

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