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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Jones v Bright Capital Ltd & Ors [2006] EWHC 3151 (Ch) (07 December 2006) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2006/3151.html Cite as: [2006] EWHC 3151 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
ANDREW STEWART ROSS JONES |
Claimant |
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- and - |
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(1) BRIGHT CAPITAL LIMITED (4) OLD MUTUAL PLC (3) OLD MUTUAL FINANCIAL SERVICES (UK) PLC |
Defendants |
____________________
Mr Nigel Inglis-Jones QC and Mr Deepak Nambisan (instructed by McDermott, Will & Emery UK LLP) for the Defendants
Hearing dates: 29th and 30th November 2006
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Crown Copyright ©
The Chancellor :
"(1) It is admitted that the Claimant is entitled to receive a pension on such date earlier than 2 September 2011 as procured by three payments made into the scheme of £35,000 per annum from 2001 to 2003 inclusive;
(2) Accordingly, and before giving credit for the impact of the three augmentation payments referred to in the preceding paragraph, the Claimant having commenced pensionable service under the Scheme on 1 June 1980, he is entitled to receive a pension on 2 September 2011 when he is aged 52½ amounting to two-thirds of his final salary of £230,000 (i.e.£153,333.33 per annum) prior to any commutation for a cash lump sum and with allowance for annual indexation by the lower of RPI and 5% between the date of termination of the Claimant's employment (i.e. 31 December 2003) and 2 September 2011;
(3) The effect of giving credit for the impact of the three augmentation payments (pursuant to the terms of the Pension Benefits Letter) is that the Claimant is entitled to either:
(a) £157,633 per annum from 2 September 2011 prior to any commutation for a cash lump sum and with allowance for annual indexation by the lower of RPI and 5% between the date of termination of the Claimant's employment (i.e. 31 December 2003) and 2 September 2011; or
(b) £153,333 per annum from 2 January 2011 prior to any commutation for a cash lump sum and with allowance for annual indexation by the lower of RPI and 5% between the date of termination of the Claimant's employment (i.e. 31 December 2003) and 2 September 2011…"
"In addition to the above payment in, our client is prepared to allow your client to retain … the benefit of the three augmentation payments paid to the Gerard & National Retirement Benefits Scheme to reduce his normal retirement age."
On 6th June Mr Jones' solicitors sought clarification pursuant to CPR Rule 36.9 in these terms:
"Please clarify the pension offer. In particular, does it contain the terms set out in (a) para 38(3)(a) of the Re-Amended Defence, or (b) para 38(3)(b) thereof, or (c) both, or (d) different (and, if so, what) terms?"
The defendants' solicitors replied on 8th June:
"The offer to allow your client to retain the 3 augmentation payments of £35,000 paid to the Gerrard & National Retirement Benefits Scheme does not alter paragraphs 38(3)(a) and (b) of the Re-Amended Defence."
On 17th June 2005 Mr Jones accepted the payment in and the offer so clarified ("the Compromise"). In due course he elected to take option (a) as set out in paragraph 38(3) of the defence.
"Following your withdrawal from pensionable service your benefits under the Scheme are as follows:
Deferred Pension £118,674.00 per annum
[Spouse's Pension]
The above Deferred Pension will become payable from our Normal Pension Date.
Your pension will be increased over the period up to your Normal Pension Date by the increase in the Retail Prices Index, up to a maximum of 5% per annum.
Once in payment, your pension will increase in line with the annual rise in the Retail Prices Index subject to a minimum increase of 3% and a maximum of 7.5%."
"5. PENSION SCHEME
5.1 The Executive Director shall be a member of the Gerrard & National Retirement Benefits Scheme ("the Scheme") in accordance with the Trust Deed and Rules.
5.2 The Company shall procure that subject to Inland Revenue limits the Executive Director's pension on retirement shall be two thirds of the higher of his actual final pensionable salary or £160,000 adjusted for inflation. Inflation shall be calculated from 1 April 1997 by reference to the retail price index subject to a maximum annual increase of 5%.
5.3 In the event of early retirement of the Executive Director before age 55, the base pension payable subject to clause 5.2 above will be as provided by the Rules of the Scheme provided that the Company will procure that there will be no actuarial discount for early retirement if at the date of termination:-
5.3.1 the Executive Director has completed 20 years of service with the Company or an associated company whether as a director or employee; and
5.3.2 the Executive Director is not voluntarily resigning his employment or his employment is not being terminated under the terms of clause 14 of this Agreement."
"A request from Old Mutual plc for ASR Jones to be granted the option of retiring at age 50 on an unreduced pension of 2/3 of his salary at age 50 was considered and agreed. The cost of the augmentation would be £35,000 per year over eight years, the cost to be borne by Old Mutual plc."
"Pension benefits under the Gerrard & National Retirement Benefits Scheme
I am pleased to confirm that the Trustees of [the Scheme] have approved an augmentation to your pension benefits upon the following terms:
You will be granted an option to retire two and a half years early (at age 50) from the Scheme, on an unreduced pension of two thirds of your salary (which for these purposes will be based upon your current salary of £230,000 per annum, with allowance for salary increases of up to 6% per annum between now and age 50).
The cost of granting the augmentation will be funded by a level annual payment of £35,000 from Old Mutual Financial Services for eight years, from 2001 until you retire at age 50.
It is important to note that this full augmentation will only apply if you retire from Old Mutual at, or after, age 50. If you leave before age 50, the augmentation will be granted to the extent to which the costs of augmentation have been paid up to the date of leaving unless you have given notice to terminate your employment or your employment has been terminated without notice in accordance with the terms of clause 14 of your employment contract dated 2 June 1998, as amended, in which case the augmentation will not be granted."
"With this as a starting point we have calculated the cost of augmenting Mr Jones pension to a pension of 2/3rds of salary (increased at the lesser of rpi or 5% to retirement) from age 52 years and six months.
We have then calculated the impact of using the sum of £105,000 to purchase additional pension from age 52.5 or to bring the pension age forward."
The figures requested were supplied in the form of a table. It is in the following form:
Benefit at Current date (£pa) |
Retirement Age (years and mths) |
Cost (£'000) | |
Current Entitlement |
£118,673 | 52 y 6m | - |
Initial Augmentation to 2/3rds |
£153,333 | 52y 6m | 845 |
Additional Pension |
£4,300 | 52y 6m | 105 |
Early retirement | £153,333 | 51y 10m | 105 |
"There were prolonged negotiations between solicitors, with exchanges of draft clauses, ultimately emerging in clause 2 of the agreement. The reason for not admitting evidence of these exchanges is not a technical one or even mainly one of convenience, (though the attempt to admit it did greatly prolong the case and add to its expense). It is simply that such evidence is unhelpful. By the nature of things, where negotiations are difficult, the parties' positions, with each passing letter, are changing and until the final agreement, though converging, still divergent. It is only the final document which records a consensus. If the previous documents use different expressions, how does construction of those expressions, itself a doubtful process, help on the construction of the contractual words? If the same expressions are used, nothing is gained by looking back: indeed, something may be lost since the relevant surrounding circumstances may be different. And at this stage there is no consensus of the parties to appeal to. It may be said that previous documents may be looked at to explain the aims of the parties. In a limited sense this is true: the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact. Cardozo J. thought so in the Utica Bank case. And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go;..."
"The principles may be summarised as follows:
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] AC 749."
"If a contract contains words which, in their context, are fairly capable of bearing more than one meaning, and if it is alleged that the parties have in effect negotiated on an agreed basis that the words bore only one of the two possible meanings, then it is permissible for the court to examine the extrinsic evidence relied upon to see whether the parties have in fact used the words in question in one sense only, so that they have in effect given their own dictionary meaning to the words as the result of their common intention."
I was also referred to Re: Nortel Networks UK Pension Plan [2005] EWHC 103 (Ch); Beazer Homes Ltd v Stroude [2005] EWCA Civ 265 and Proforce Recruit Ltd v The Rugby Group Ltd [2006] EWCA Civ 69. They exemplify the application of the principles but do not appear to me to add to them.
"The arrangements in respect of Mr Jones's pension entitlement are that, subject to the augmentation effect described below, the Company will ask the Trustees of the [Scheme] to provide Mr Jones with a pension on 2nd September 2011 when he is aged 52 years and 6 months which is based on two-thirds of his final salary of £230,000 (ie £153,333.33 per annum) prior to any commutation for a cash lump sum and with allowance for annual indexation by the lower of RPI and 5% between his date of termination (31 December 2003) and 2 September 2011.
The Company will also arrange that Mr Jones' pension arrangements will benefit from the augmentation payments of £35,000 per annum that have been paid by the Company to the Scheme between 4 May 2001 and 31 December 2003. The benefit of this augmentation can be taken in either of two forms as Mr Jones may elect. The first form is an increase in the amount of the starting pension on 2 September 2011. The second form is an advancement of the starting date to a date earlier than 2 September 2011. The fund actuary has been asked to calculate these alternatives, ie the amount of the increase and the length of the period by which the starting date may be advanced and this information will be provided to Mr Jones as soon as it is available."
"Our client confirms that it will ensure that Mr Jones will receive a pension entitlement which, after giving credit for the augmentation payments referred to in your letter dated 16th January 2004 can be either:
(a) £157,633 p.a from 2 September 2011 prior to any commutation for a cash lump sum and with allowance for annual indexation by the lower of RPI and 5% between his date of termination, 31 December 2003, and 2 September 2011; or
(b) £153,333 p.a. from 2 February 2011 prior to any commutation for a cash lump sum and with allowance for annual indexation by the lower of RPI and 5% between his date of termination, 31 December 2003, and 2 February 2011.
Please inform us which option your client wishes to choose.
As to your claim for enhanced pension benefits.......the [Pensions Benefit Letter] makes clear that if Mr Jones leaves before 50, the augmentation referred to in that letter will be granted to the extent (and therefore only to the extent) set out in the letter."
As I have already indicated the final letter dated 25th February 2004 added nothing to the concluding passage of that dated 13th February 2004. The Pre-action Correspondence came to an end when the claim form was served on 26th March 2004.
"The pension scheme benefits of Ross Jones have not been altered from those accrued under the scheme during the period Ross Jones was employed and it is the Trustees' understanding that, if applicable, any alteration of pension benefits must be requested by [the Company] and will not be authorised by the Trustees unless appropriate funding is in place."
30/09/2011 | 31/03/2012 | 31/03/2013 | |
(1) Estimated Annual Benefit excluding the Additional £4,300 p.a |
145,700 | 148,400 | 153,975 |
(2) Annual Extra Payment - £4,300 at date of leaving | 5,275 | 5,375 | 5,575 |
(3) Total annual benefit from the Scheme (1) + (2) | 150,975 | 153,775 | 159,550 |
(4) Underpin of £157,633 at date of leaving | 193,525 | 193,525 | 193,525 |
(5) Annual top-up payment from the Company | 42,550 | 39,750 | 33,975 |
(6) Total annual payment from the Scheme and the Company | 193,525 | 193,525 | 193,525 |
The figures in rows (1) and (2) are the figures of £118,673 and £4,300 calculated as at 31st December 2003 and revalued as pensions in deferment as provided in Rule 9(7). Under the terms of the first option in the Compromise Mr Jones was to be entitled to an annual pension as from 2 September 2011 of £157,633 subject to revaluation as a deferred pension in accordance with paragraph 38(3)(a) of the defence. This produces the underpin figure of £193,525 and the top-up figure for the first year of £42,550 (i.e. £193,525 - £150,975). As I understand it the top-up represents, in effect, the value of the lost years of pensionable service from 31st December 2003 to 2nd September 2011. The significant point is that the actuary has assumed that the top-up figure is paid by the Company and not the Scheme and is not increased annually as a pension in payment would be under Rule 23(1) or at all. The consequence, as demonstrated in the extension of the table to 31st March 2019, is that the top-up payment ceases altogether in that year because the increases in the pension in payment have removed the need for any underpin.
"what the parties using those words against the relevant background would reasonably have been understood to mean."
"what the parties using those words against the relevant background would reasonably have been understood to mean."
In the context of this case 'those words' must be paragraph 38(3)(a) in the context of the Compromise. It was also common ground that the relevant background included the Scheme and its Rules, the Service Agreement, the Pension Benefit Letter, the first set of proceedings including paragraph 38 of the defendants' defence and the actuary's valuation. In accordance with my conclusion on the admissibility issue it also includes the Pre-Action Correspondence, in particular the three letters to which I have referred.
'As against the defendants, Mr Jones is entitled to be paid as and from 2nd September 2011 the annual sum of £157,633 (i) revalued in deferment as provided for by paragraph 38(3)(a) of the defence of the Defendants in this action, (ii) increased when in payment in accordance with Rule 23(1) of the Scheme and (iii) otherwise in accordance with the rules of the Scheme as if such sum is payable by the Trustees from the funds subject to the Scheme.'