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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Aitken v Standard Life Assurance Ltd [2008] ScotCS CSOH_162 (03 December 2008) URL: http://www.bailii.org/scot/cases/ScotCS/2008/CSOH_162.html Cite as: [2008] ScotCS CSOH_162, [2008] CSOH 162 |
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OUTER HOUSE, COURT OF SESSION [2008] CSOH 162 |
|
PA89/07 |
OPINION OF LORD GLENNIE in the cause JOHN GRAHAM AITKEN Pursuer; against STANDARD LIFE ASSURANCE LIMITED Defender: ннннннннннннннннн________________ |
Pursuer: Beynon; Lefevre Litigation
Defenders: Sellar QC & Cunningham; Balfour
+ Manson LLP
Introduction
"to inform their
policyholders in writing, including the Pursuer, within a reasonable time (and
not exceeding four weeks) of a material fact or matter pertaining to change or
changes to policy valuations and anticipated values namely transfer and final
or bonus values at retirement, and in particular a decision to reduce final
bonuses by an average of 10%."
In the course of the discussion, the last five words
were at times substituted by the expression "by a material amount", but nothing
turns on this for present purposes. The
pursuer also has an esto case, namely
that if the obligation on the defenders was not absolute but was qualified by
reference to a duty to take reasonable care, the defenders were in breach of
that qualified duty in that they ought to have taken steps to ensure that their
computerised mailing system sent notification to all policy holders, including
himself, who provided them with contact details.
The relevant facts
[7] A
number of the Annual Statements were lodged in process. That for September 2000 is typical. It describes itself as "Yearly update no.7,
as at
"You'll get an update every
year to help you review your pension needs."
Underneath all that there is a section about Standard
Life. This is followed on the next page
by an "Illustration of your future pension benefits", with a caveat in a
marginal note that the figures are not guaranteed. On the third page, under the heading
"Guaranteed minimum pension", it sets out the minimum amounts which the
defenders were required to pay the pursuer at age 65. Below this, under the heading "Progress
towards your pension", are set out the payments received since the plan started
(only the initial г115,453.00) and details of the value of the fund as at the date
of the update.
[8] It is
clear, and I did not understand this to be in dispute, that the promise in the
Annual Statement that the policyholder would "get an update every year to help
[him] review [his] pension needs" is properly to be understood as a statement,
or promise (call it what you will), that every year the policyholder will
received an Annual Statement of the kind which I have described, tailored
specifically to giving an update of his own policy.
"... the persistent severity
of recent investment conditions has made it necessary for us to reduce our
terminal bonus rates, and to make additional adjustments to some surrender and
transfer values."
On page 4, under the heading "Bonus Declaration" it
stated the following:
"In order to ensure fairness
for all policy holders we have taken
the decision to declare new final bonus rates now. These changes have the effect of reducing
maturity pay outs by an average of around 10%.
If we waited until February next year and did not take action now, it
would mean that maturing policies could be treated more generously than those
with a number of years to run."
It is not necessary to look in any greater detail at
the Updates.
The pursuer's averments in
support of the implied obligation
"... arose out of Standard
Life's said conduct in issuing the annual statements containing the statement
'You will get an update every year to help you review your pension needs.'"
In addition, the pursuer contends that the implied
contract and/or obligation and the implied term have an underpinning in necessity
and the need for business efficacy. It
is explained that:
"The absence of the implied
term would mean that Standard Life were under no duty to keep policy holders
properly informed of policy decisions or changes (whether positive or negative)
to pension values or anticipated values, including transfer values and final
bonus entitlements, on retirement."
The pursuer avers that that would be entirely
unreasonable and inequitable. After
certain other averments, the pursuer says this:
"Given the scale of the
decision to reduce the final bonuses it would not have been open to Standard Life
to postpone intimation of that decision having been made until the sending out
of the next annual statement in September of the following year. It is accepted by the pursuer that Standard
Life were required to make the relevant decision and then to intimate it to all
policy holders so that fairness would ensue.
Any reasonable provider of pension policies would, as at September of
2002, have regarded themselves as under an implied contractual obligation to
send [the Autumn 2002 Update] to all policy holders affected by the decisions
therein specified in the absence of an express obligation to do so. That approach would have been arrived at for
the reasons already given and as part of the regulatory regime relating to the
provision of information to policy holders under the principle of 'policy
holder's reasonable expectations'. That
approach would have been in accordance with usual or ordinary market practice
with respect to providers of pension policies of the type that the pursuer had
taken out with Standard Life."
Submissions
[12] Mr
Sellar made his submissions by reference to a Note of Argument dealing in
detail with the different ways in which the pursuer's case was advanced. In view of the conclusion I have reached on
this matter, and at risk of failing to do justice to them, I do not propose to
set out his submissions at great length.
He made a number of observations about the difficulties inherent in
attempting to imply a contract or unilateral obligation from conduct. If the parties would (or might) have acted as
they did without there being any such contract or obligation, there was no
necessity to imply one. He referred, in
the context of implied contract, to Baird
Textiles Holdings Limited v Marks &
Spencer Plc [2002] 1 All ER (Comm) 737, in particular per Mance LJ at para.61. The question was whether the conduct was
unequivocally referable to there being such a contract rather than it being
explicable on some other basis. The same
test applied mutatis mutandis to an implied
unilateral obligation, though he doubted whether a statement giving rise to a unilateral
obligation could ever be inferred from conduct - the textbooks, such as Gloag
on Contract (2nd ed), did
not suggest that it could be. The usual
tests for implication of terms (as to which, see below) were relevant here too. It was difficult to interpret a statement as
one creating a legal obligation, whether unilateral or contractual, when the
parties were already bound together by an existing contract, a fortiori where that contract was
lengthy and detailed and in a standard form.
In addition to the cases already mentioned, Mr Sellar also referred to Equitable Life Assurance Society v Hyman [2002] 1 AC 408, Goshawk Dedicated Limited v Tyser & Co Limited [2006] 1 All ER
(Comm) 501, Pagnan SPA v Feed Products Limited [1987] 2 Lloyds
Rep 601, Jayaar Impex Limited v Toaken Group Limited [1996] 2 Lloyds Rep
437, Cawdor v Cawdor [2007] SC 285 and Scott
v Dawson (1862) 24 D 440, as well as
to various passages in McBryde, The Law of Contract in Scotland.
[13] Turning
to deal with the case based upon an implied term of the policy, Mr Sellar
referred to the well known tests for implication. The term must be necessary to make the
contract work in the way in which the parties clearly intended it to work; and,
though this may simply be another way of saying the same thing, it must be
obvious, i.e. one to which each party would have agreed without hesitation. Further, it must be certain; it must be
reasonable; and it must not contradict the express terms of the contract. Mr Sellar emphasised the difficulties of
implying a term into a very detailed contract such as the policy in
question. On the implied term issue generally
he referred to Equitable Life Assurance
Society v Hyman (supra), Scally v Southern Health Board
[1992] 1 AC 294, Thomson v Thomas Muir (Waste Management) Limited 1995
SLT 403 and Lothian v Jenolite Limited 1969 SC 111, as well as
to Lewison, The Interpretation of Contracts (4th ed) at para 6.07
[14] Mr
Sellar submitted that the pursuer had not put forward a relevant case. Although the word "necessity" was used in the
averments, the pursuer did not offer to prove anything to support that, or to
suggest that an obligation of the type sought to be implied, whether by way of
contract or unilateral obligation, was the only explanation of the defenders
having done what they did. The defenders
sent out Annual Statements. It was
questionable whether they were obliged to do so, but that question did not
arise in the present case. No complaint
was made that the Annual Statements were not sent out. Those Annual Statements contained a statement
that the policy holder would get "an update every year" to help him review his
pension needs. Even if that could be
taken as a promise, it was not a promise which could translate into the implied
obligation which the pursuer sought to establish. Indeed, a promise to send out an update every
year was inconsistent with any obligation to notify policy holders within a
reasonable time (and not exceeding four weeks) of any material fact or matter
or decision to change policy valuations or transfer values or bonuses by a
material amount.
[15] Responding
for the pursuer, Mr Beynon did not contend for any different approach to the
question of implication (whether of contract, unilateral obligation or term of
the policy). He referred to the advice
of the Privy Council in BP Refinery
(Western Point) Pty Limited v Shire of
[16] Mr
Beynon's submissions concentrated more on showing how the alleged implication
might arise on the facts averred on record.
He said that there were a number of non-contentious facts. First, the pursuer was a policy holder with
Standard Life. The policy was a s.32
policy (c.f. section 32 of the Finance Act 1981). Second, the pursuer had a contractual right
to transfer his pension to another provider.
Third, there was no dispute about the policy schedule and terms. The policy terms in the booklet were silent
as to the provision of material financial information - they did not give
policyholders any express right to receive financial information from Standard
Life. Fourth, from 1999 onwards Annual Statements
were sent to policy holders, including the pursuer, which included the
statement: "You'll get an update every year to help you review your pension
needs". The Annual Statements gave
details of payments made, units held, predicted benefits and guaranteed minimum
payments. They were intended to
represent the state of play at the particular moment. Fifth, the defenders did not send the Autumn
2002 Update to the pursuer. Sixth, it
was clear that the defenders intended to send the Autumn 2002 Update to the
pursuer. The defenders accepted that it
was intended to be issued to all policy holders in October and they accepted
that, having checked their records, it had not been issued to the pursuer.
[17] Mr
Beynon stressed the importance of the Autumn 2002 Update. The introduction made it clear that there was
to be a bonus reduction and adjustments to some surrender and transfer values. Page 4 (which I have already quoted) gave
further information bringing this home to the reader. Although the Update was a very different type
of document from the Annual Statement, any reasonable policy holder receiving the
Autumn 2002 Update would have been able to work out what his position was and
take decisions about his policy. This
was admitted by the defenders on record.
The Autumn 2002 Update was obviously a document which enabled a
reasonable policy holder to carry out a review, just as was envisaged in the
marginal note in the annual statement.
[18] Mr
Beynon explained that the pursuer's case on implied contract or unilateral
obligation started with the sentence in the Annual Statements that the policy
holder would get an update every year to help him review his pension
needs. That sentence was perfectly clear
in its terms. It was expressed in
absolute terms ("you will get"). This
was the language of promise, i.e. of contract or obligation. It was not the language of reasonable care. It was up to the defenders to promise what
they wanted to promise. Their failure to
fulfil their promise arose from a failure of their internal procedure, a
failure to merge one list with another. That
was no excuse. The promise was made in
the context of providing assistance to the policyholder with reviewing his
pension needs. If there were a material
decision made, it could not simply wait for up to eleven months for the next
annual statement before it was communicated to policyholders. The sentence was therefore indicative of a
wider obligation. The essential basis
for expanding that sentence to the obligation for which the pursuer contended was
the reasonable need for a policyholder to be able to review the adequacy or
otherwise of his pension in light of material decisions taken about the
reduction of final bonuses. The Annual
Statement for 2002 was sent to the pursuer on
[19] In
answer to a question from the court, Mr Beynon accepted that the promise of an
"update every year" in the marginal note in the Annual Statements was a promise
of a policy specific update. It was not
an Update of the type that was sent out in October 2002 (the Autumn 2002
Update). Accordingly, the pursuer did
not take the "direct route" and argue that the promise in the Annual Statement
led directly to a complaint that the Autumn 2002 Update should have been sent
out to each policyholder. The Autumn
2002 Update was not the "update every year" contemplated by the marginal note
in the Annual Statement. The pursuer had
to argue that, by reason of their conduct in sending out the Annual Statements
and (from 2001) the Updates and their promise in the Annual Statements that
policy holders would get "an update every year" to help them review their
pension needs, the defenders impliedly undertook to inform policyholders promptly
of any decision having or likely to have a material effect on final
bonuses.
Discussion
[21] The
obligation contended for is said to stem from two aspects of their conduct,
namely (a) the issuing of Annual Statements every year containing the words
"You'll get an update every year to help you review your pension needs", and (b)
the sending out periodically of "Updates" such as those sent out to
policyholders in February and Autumn 2001 and Autumn 2002. All this set against a background of the need
to give the contract business efficacy, to make it work as the parties must
have intended it to.
[25] Of
course, the Annual Statements and the Updates must be looked at together. But taking them together, I cannot accept
that they give any support to the implied obligation sought to be established. The terms of the Annual Statements, promising
yearly updates, seem to me to point strongly against any obligation to
communicate promptly after major changes or decisions. The terms of the Updates, before the Autumn
2002 Update of which complaint is made, do not suggest that the defenders were
sending out such information in accordance with the obligation contended for
(though this might simply be because there was no such information requiring to
be sent out).
[29] The
second matter relied upon in that passage is that the approach contended for by
the pursuer was in accordance with "usual or ordinary market practice with
respect to providers of pension policies of the type that the pursuer had taken
out with Standard Life". At a By Order
hearing just before the debate, Mr Beynon made it clear that the averment
about usual or ordinary market practice was not intended to be an averment of
custom and usage binding upon the defenders, in the well-known technical sense
of that expression. He was simply
averring that that is what people in the industry had begun to do by that time
- if they did not do it, they too were negligent. Such an averment does not seem to me to
assist, particularly if the time referred to post-dates the inception of the
policy. In answer to a complaint by Mr
Sellar that the averment, even if relevant, was wholly lacking in specification,
Mr Beynon accepted that the only material which could be produced in support of
that averment was certain correspondence from Equitable Life between March 2001
and November 2002, copies of which were lodged in process by the defenders (7/23-34). Mr Sellar took me through these documents. He submitted that it was within judicial
knowledge that Equitable Life had had severe problems at that time and it was
clear from the documents that these were dealing with quite different matters
from those which were the subject of the present action. I accept that submission. It seems to me that I get nothing from them
to assist the pursuer's case. There
being no other specification offered of the averment about market practice, it
seems to me that I should not take it into account.
[30] Mr Beynon
emphasised the importance of the information being given to policy
holders. Final bonuses were not a
"bounty"; they were a significant part of the consideration for the premiums
paid. It was right that policyholders
should be told as and when important decisions were made and important changes
occurred. The sending out of the Updates
in 2001, 2002 and 2003 showed that it was not impracticable to provide policy
holders with information and, indeed, it was the natural thing to do. This supported the "of course" test for
implication. In my opinion, however,
this does not go nearly far enough. The
points made by Mr Beynon may show (I do not express a view) that it would be
reasonable for companies in the position of Standard Life promptly to give such
information to policyholders but, even if that is shown, that is not
enough. The term must be necessary to
make the contract work as the parties must have intended it to work. The policy contains a large number of
detailed terms which do not touch upon an obligation of the type contended for. A judgement has been made by Standard Life,
and no doubt by other policy providers, that the interests of policyholders are
well, or at least adequately, served by information given to them annually
about payments made, units held, predicted benefits and guaranteed minimum
payments. Such information is given
annually in the Annual Statements.
Although I was not taken to the relevant regulations, as I have said Mr
Beynon accepted that the regulatory requirements do not go any further than
this. In those circumstances, I would be
reluctant to impose a contrary view of what is necessary to make the contract
work. Nothing averred by the pursuer
goes as far as to suggest that the term is necessary in this sense. The fact that policies of this sort have been
in existence for many years without it having been found that a term such as
this is necessary is, to my mind, telling.
[31] The
pursuer's case seems to be premised upon the notion that if there was not an
obligation of the type contended for, policyholders such as himself would be
unable to find out what was going on in relation to their policies. If that is the underlying concern, it seems
to me to be based upon a misapprehension.
It is open to a policyholder to ask about the value of his policy at any
time. There are averments and admissions
on record that the pursuer did this, both in correspondence and by telephone. Further, the decision to reduce bonus rates
was the subject of a press release by the defenders on
Disposal
[34] For the
above reasons, I shall sustain the defenders' first plea in law and dismiss the
action.