Aer Lingus trustees must get notice of move to pay shareholders €500m

The High Court has ruled that the trustees of Aer Lingus workers’ pensions funds must be given prior notice of a proposed €500m distribution from Aer Lingus’s capital reserves so as to pay dividends to shareholders.

It is then open to the trustees to bring a claim against the company given the €930m deficit in the funds and to seek injunctions restraining distribution of the €500m if that brings the reserves below the amount of the claim, Mr Justice Roderick Murphy directed.

He said Aer Lingus was not entitled to an unconditional order concerning the proposed €500m distribution but the trustees’ application for any distribution to be conditional on retaining sufficient reserves to address a claim also “poses a problem”.

While he considered it “not possible at this point” to make an order precluding “the effect” of the reduction, Mr Justice Murphy said he would impose a condition that no distribution of the reserves would be made without notice to the trustees. That gave them a right to make a claim but there was no such claim as of now, he added.

He would also direct no distribution should be made without notice such as would reduce the reserves below the sums of the deficit. Those orders would enable the trustees to formulate a claim and seek such orders as they see fit, he said.

Following the ruling yesterday, Paul Sreenan, for Aer Lingus plc, and Brian O’Moore, for the trustees, asked that the matter he adjourned to tomorrow to allow them take instructions as to the precise wording of the orders and other matters.

The judge agreed to that adjournment.

Mr Justice Murphy was giving his decision on an application by Aer Lingus plc for an unconditional order permitting the proposed €500m reduction in its capital reserves from €859m to €359m.

The judge had last July refused to sanction that reduction unless Aer Lingus provided for potential legal claims resulting from a pensions deficit. He said the shortfalls in the general and pilots’ pension schemes appeared to constitute a contingent future claim against Aer Lingus and the proposed reduction in the capital reserves was “substantially below” the level of the funds’ shortfall.

The trustees had previously expressed concerns, if the company got approval for the share capital reduction before a final agreement was reached on pensions issues, such approval was likely to impact significantly on talks between the sides.

Aer Lingus insisted it needed finality on the matter while the trustees urged further talks or, if not, orders allowing Aer Lingus reduce its share capital on condition it maintained non-distibutable reserves at a level that would deal with the pensions deficit.