Prudential Staff Pensions Ltd v The Prudential Assurance Company Ltd and others [2011] EWHC 960 (Ch), [2011] All ER (D) 142 (Apr)
The obligation of good faith was not to be taken as requiring an employer to arrive at a decision which was substantively “fair” when exercising a power given to him in apparently unfettered terms by pension scheme rules. An irrational or perverse decision by an employer in a pensions context was capable of offending the obligation of good faith.
Assessing whether a decision was irrational or perverse was not to be equated with the application of an objective standard of reasonableness. Members’ expectations might be of relevance when considering whether an employer had acted irrationally or perversely.
However, breach of the contractual obligation of trust and confidence which subsisted between employer and employee required conduct of some seriousness: the test was a severe one. It might be, therefore, that irrational or perverse conduct by an employer in a pensions context would not invariably give rise to a breach of the obligation of good faith, derived as
