Ibekwe v London General Transport Services Ltd. [2003] EWCA Civ 1075

Case No B2/2002/2718 CCRTFNeutral Citation Number: [2003] EWCA Civ.1075
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BOW COUNTY COURT
(His Honour Judge Bradbury)
Venue Royal Courts of JusticeDate Friday 25 th July 2003
Strand,
London, WC2A 2LL
Before
LORD JUSTICE BROOKELADY JUSTICE ARDENLORD JUSTICE SCOTT BAKER
Between
Daniel IbekweClaimantApClaimantLondon General TransportRespondentServices LtdRespondentRespondenRespondentDaniel Ibekwe ApAppellant/Claimant- and -London General Transport Services Ltd RespondenRespondent/Defendantt
(Transcript of the Handed Down Judgment ofSmith Bernal Worwave Limited, 190 Fleet StreetLondon EC4A 2AGTel No: 020 7421 4040, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Michael Hartman (instructed by Aina Khan Partnership) for AppellantMr Russell Bailey (instructed by Moorhead James) for RespondentJudgmentAs Approved by the CourtCrown Copyright ©

Introduction

[1]This is an appeal by Mr Daniel Ibekwe against the order dated 5 December 2002 of HHJ Bradbury sitting in the Bow County Court dismissing Mr Ibekwe’s claim for damages for failure to inform him of his pension entitlement following the trial of preliminary issues. The claim had arisen in this way. Mr Ibekwe was a bus driver employed by London Transport Executive (“LTE”) and subsequently London General Transport Co Ltd (“LG”), then a subsidiary of LTE. As such, Mr Ibekwe was a contributory member of LTE’s pension scheme, known as the London Regional Transport (“LRT”) pension scheme. The shares of LG were subsequently purchased by a management and employee buy out (“MEBO”) completed in November 1994. At that point Mr Ibekwe ceased to be a contributory member of the LRT pension scheme and became a member of the LG pension scheme. However, in January 1995, he was dismissed because of incapacity. He then discovered that, by reason of his failure to exercise an option to transfer the accrued value of his pension rights in the LRT pension scheme, he was unable to claim the same ill-health retirement pension that he could have claimed under the LRT pension scheme and that his benefits were limited to a deferred pension under that scheme.[2]There were three preliminary issues which the judge had to determine:- “[Duty](1) The extent to which, if at all, [LG] had a duty to inform [Mr Ibekwe] of the proposed alterations to his pension arrangements which would arise on privatisation and in particular of the availability of a transfer of his interest in the LRT pension scheme with a special enhancement. [Breach of duty](2) Whether or not [LG] satisfied that duty. [Causation](3) If [LG] was in breach of any duty to[Mr Ibekwe], whether that breach of duty caused [Mr Ibekwe’s] omission to apply for a transfer with special enhancement and, if so, whether, if he had applied, he would have received a transfer with special enhancement. It is agreed whether or not [Mr Ibekwe] would have qualified for an early pension on medical grounds and the valuation of those benefits on that basis or otherwise are matters to be dealt with as quantum.” [Breach of duty]

[Causation]

[3]As of January 1995, Mr Ibekwe could no longer claim an ill-health retirement pension from the LRT pension scheme because he had by then ceased to be an employee of the LTE group. LG concedes that if Mr Ibekwe had effectively transferred his accrued benefits in the LRT pension scheme to the LG pension scheme he would in the events which happened have been better off because he would have been credited with at least the minimum number of years’ service necessary for an ill-health pension (in his case, about 75% of a full pension) from the LG scheme. That is to say, he would have been better off unless the trustees of the LG scheme refused his claim to such a pension on the grounds that he had been an employee for less than six months at the date of his dismissal. It is clear that in fact the trustees did refuse (or purport to refuse) to accept that Mr Ibekwe could exercise his option to transfer his accrued benefits with the LRT pension scheme to the LG pension scheme after the date of his dismissal. This matter has implications for the third issue above.

The judgment below

[4]The judge gave a detailed judgment, extracting the relevant parts of the many documents to which we have been referred. In those circumstances, I will treat as incorporated into this judgment paragraphs 5 to 31 of the judge’s judgment, which are set out in the annex to this judgment.[5]The judge made his findings as to the claimant’s knowledge of the options available to him. I need not set these out in full. The judge found that Mr Ibekwe had been concerned in the MEBO and therefore that he would have known about it and that he was particularly interested in matters relating to employment. He found that Mr Ibekwe had received the letters of 17 October 1994 and 2 November 1994. However, he found that Mr Ibekwe had not received the letter dated 22 December 1994 sent on approximately 17 January 1995 or seen the announcement at about the same time. In addition, the judge found that he had not received a statement of the changed terms. Each of these documents is referred to in the annex to this judgment.[6]Having made those findings, the judge then turned to analyse the judgment of Lord Bridge in Scally v Southern Health Board [1992] 1 AC 294. In that case, doctors who entered the health service of Northern Ireland too late to complete forty years’ service before retirement had the right by virtue of a statutory instrument to purchase “added years” of pension entitlement on advantageous terms in order to make up the full forty years’ contributions. However, that right was only exercisable within twelve months of the regulations coming into force or the commencement of employment if later. Four doctors sued their respective health boards for damages on the grounds that they had not been informed of these rights. The House of Lords held that where a contract of employment was negotiated between employers and a representative body and it contained a particular term conferring on the employee a valuable right contingent on his exercising an option, of which he could not be expected to be aware unless the term was brought to his attention, there was an implied obligation on the employer to take reasonable steps to inform him of that term. Lord Bridge (with whom the other members of the House agreed) held:
“I recognise that a quite different situation might arise where the pension rights available to an employee in connection with his employment were not part of the terms of his contract of employment but arose out of a separate contract between the employee and an insurance company or the trustees of a pension fund. But that is not this case. Here there is no doubt whatever that the terms of the superannuation scheme as laid down in the regulations in force from time to time were embodied in the terms of the contract of employment of each plaintiff. Since the relevant board was in each case the employer upon whom, although acting as agent for the department, all liabilities were imposed by paragraph 2 of the Schedule 1 to the Order of 1972, it seems to me beyond question that the legal obligation, if there was one, to notify the plaintiffs of their rights in relation to the purchase of added years rested in each case on the board, not on the department. Will the law then imply a term in the contract of employment imposing such an obligation on the employer? The implication cannot, of course, be justified as necessary to give business efficacy to the contract of employment as a whole. I think there is force in the submission that, since the employee’s entitlement to enhance his pension rights by the purchase of added years is of no effect unless he is aware of it and since he cannot be expected to become aware of it unless it is drawn to his attention, it is necessary to imply an obligation on the employer to bring it to his attention to render efficacious the very benefit which the contractual right to purchase added years was intended to confer. But this may be stretching the doctrine of implication for the sake of business efficacy beyond its proper reach. A clear distinction is drawn in the speeches of Viscount Simonds in Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 and Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239 between the search for an implied term necessary to give business efficacy to a particular contract and the search, based on wider considerations, for a term which the law will imply as a necessary incident of a definable category of contractual relationship. If any implication is appropriate here, it is, I think, of this latter type. Carswell J accepted the submission that any formulation of an implied term of this kind which would be effective to sustain the plaintiffs’ claims in this case must necessarily be too wide in its ambit to be acceptable as of general application. I believe however that this difficulty is surmounted if the category of contractual relationship in which the implication will arise is defined with sufficient precision. I would define it as the relationship of employer and employee where the following circumstances obtain: (1) the terms of the contract of employment have not been negotiated with the individual employee but result from negotiation with a representative body or are otherwise incorporated by reference; (2) a particular term of the contract makes available to the employee a valuable right contingent upon action being taken by him to avail himself of its benefit; (3) the employee cannot, in all the circumstances, reasonably be expected to be aware of the term unless it is drawn to his attention. I fully appreciate that the criterion to justify an implication of this kind is necessity, not reasonableness. But I take the view that it is not merely reasonable, but necessary, in the circumstances postulated to imply an obligation on the employer to take reasonable steps to bring the term of the contract in question to the employee’s attention, so that he may be in a position to enjoy its benefit. Accordingly I would hold that there was an implied term in each of the plaintiffs’ contracts of employment of which the boards were in each case in breach.”

The judge also considered three other cases:

[7]University of Nottingham v Eyett and the Pensions Omsbudsman [1999] ICR 721; Outram v Academy Plastics [2000] IRLR 499 and Hagen v ICIChemicals & Polymers Ltd [2002] IRLR 31. The judge concluded that the option for an enhanced transfer was not part of Mr Ibekwe’s contract of employment; nor had it been negotiated by a representative body on his behalf. The judge further concluded that the agreement of 2 November 1994, on which the transfer option was based, could not truly be said to have been negotiated with a representative body for Mr Ibekwe. The agreement resulted from negotiations between the seller and the purchaser of the shares of LG. The judge, therefore, concluded that there was no duty. However, he went on to consider the question whether LG had taken reasonable steps to draw the proposed changes and options to Mr Ibekwe’s attention. On that issue the judge held as follows:- “43. On the evidence, I have already found that probably the Claimant received the letter of 17 October 1994, with its accompanying announcement notice. That was a letter direct from the Defendants. On a balance of probabilities, the Claimant probably also received the letter from the London Transport Executive of 2 November 1994 that stated there would be an option to transfer the value of the deferred pension to the new scheme on a specially enhanced basis. Other documents, on my findings, were not received. LG did have an explanation for a policy of attaching documents to payslips, namely that employees may change home addresses and not notify LG. I am satisfied with the reasonableness of that explanation, coupled with the back-up system by the provision of notices in garages, which in itself reasonably anticipates that employees will look at notice boards. 44. Taking all the circumstances together, I am satisfied that if the Claimant had benefited from the Scally provisions, he would still not succeed in his claim against LG, because they had taken reasonable steps to bring any implied contractual term [sic] to his attention.”[8]In the last sentence it is clear that by “any implied contractual term” the judge meant “any option to transfer the value of the deferred pension”.[9]The judge then considered whether there was any duty of care in tort. He concluded that if there was a duty of care in tort it was co-extensive with the contractual duty. The judge concluded that it was not fair, just and reasonable to impose a duty of care. LG was a bus company and not a pension adviser. It did not assume responsibility to give pension advice. It provided facilities for the dissemination of information and exercised adequately any duty to act with care and prudence. Accordingly, the judge dismissed the claim, both in tort and contract.

Significance of letter of 22 December 1994

[10]The judge found that Mr Ibekwe did not receive the letter apparently sent on 22 December 1994. LG submits that the necessary information had already been conveyed by the letter of 2 November 1994 and that accordingly nothing turns on the failure to communicate this letter. In my judgment, this letter is an important document because it enclosed the form which Mr Ibekwe had to complete if he wished to exercise the option to transfer his accrued benefits under the LRT pension scheme to the new LG pension scheme. The letter of 2 November 1994 had advised Mr Ibekwe fully about the transfer option. However, it had also assured Mr Ibekwe that there was no further action that he needed to take at that stage. The Scally case does not make it clear how much information an employer must give. It seems to me that in principle and in the usual case the employer should send sufficient information to enable the employee to understand the options available to him at the time when he requires to have that information. The term which the Scally case holds is to be implied into a contract of employment does not meet the usual criteria for the implication of terms into a contract but is implied because of the special nature of the contract of employment (see per Lord Bridge, above). The term implied into this contract by the Scally case is analogous to the duty of an employer to look after the physical well-being of his employee (per Lord Woolf in Spring v Guardian Assurance [1995] 2 AC 296, 353). It is implied because of the special nature of the relationship of employer and employee, as between whom there exists “the portmanteau general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract envisages” (see Malik v BCCI [1998] AC 20, 35 per Lord Nicholls). Both that obligation and the Scally implied term can be seen as counterparts to the employee’s duty of co-operation (Chitty on Contracts 28th ed. (1999) Vol.2 para 39-135). In those circumstances, it is inappropriate to give a formulaic answer to the question: was the relevant information brought to the employee’s attention? That question must, in my judgment, be answered by reference to the policy rationale of the implied term. As Lord Bridge’s speech shows, the aim of the Scally implied term is to help ensure that the employee has effective access to information about benefits to which he is entitled. Otherwise an employee might be unfairly exploited. If the employer says to an employee that he is entitled at his option to a certain benefit but that no action needs to be taken at that stage and further information will be sent to him, the employee requires that further information before he can “unlock” the benefit. In those circumstances, in my judgment, the duty to inform is not fulfilled until that further information is in fact sent to him.

Preliminary issue (1) (duty)

[11]Mr Michael Hartman, for Mr Ibekwe, puts his case in two ways. The first way is that Mr Ibekwe had a contractual right to have served on him notification that he could exercise his option for the transfer of his existing accrued benefits under the LRT pension scheme to the new LG pension scheme. He submits that the MEBO was negotiated by trade union representatives and became incorporated into his contract by virtue of the statement of changed conditions. Mr Hartman accepts that Mr Ibekwe is bound by the changed terms even though Mr Ibekwe did not receive a copy.[12]At times in this argument, Mr Hartman put the case on a higher basis. He said that there was, in fact, a promise on the part of LG to provide all the benefits which had been provided under the old LRT pension scheme. For this purpose Mr Hartman bases his submission on clause 7.1 of the third schedule of the MEBO agreement dated 2 November 1994 set out in the judge’s judgment. Mr Hartman further relies on the letter of 2 November 1994 which represented that Mr Ibekwe would not lose any benefits that he had enjoyed under the LRT pension scheme.[13]In my judgment, it is not open to Mr Hartman to raise on appeal a case which was not pleaded. The only way in which this case is put into the particulars of claim is on the basis of an implied term or negligence. Moreover, save for the policy of the trustees of the new LG scheme, the benefits provided under the new scheme were to all intents and purposes the same as those provided under the LRT pension scheme. Accordingly, paragraph 7 of schedule 3 to the MEBO agreement is not in point. So far as paragraph 4.5 of that schedule is concerned, there is no evidence that this was negotiated by trade union representatives for the benefit of employees. This provision was a piece of machinery which LTE and LG agreed for the purpose of communication with employees.[14]Mr Russell Bailey, for LG, submits that under clause 4.5 LG simply became the conduit for communications between LTE and its employees and that the question what should be communicated to employees about the transfer of existing pension rights was a matter for LTE and not for LG. Neither LTE nor the LRT pension fund trustees are parties to these proceedings. I do not express a view on this submission. We have not heard full argument on the question whether any duty on LTE’s part survived the termination of the relationship between Mr Ibekwe and LTE. If it does not survive that termination, and LG does not come under an obligation of its own to comply with the Scally implied term, Mr Ibekwe’s position would be highly vulnerable and anomalous since he would be unable to enforce the term against either his old or his new employer.[15]Mr Hartman alternatively puts the case in his second way on the basis of an implied term that the new employer would take reasonable steps to inform him of his right to transfer existing accrued entitlements under the old scheme to the new scheme. Mr Hartman bases this part of his argument on the Scally case. If he is wrong in saying that it is an implied term of the contract, he argues that there was an assumption of responsibility for the purposes of a duty of care in tort. There was very little evidence at trial as to the circumstances which led to employees of LG prior to the MEBO being offered the transfer option. I am prepared to assume for this purpose that there was either an implied term of the contract of employment or an equivalent duty of care in tort. Either way, there was no promise by LG to ensure that information was actually communicated to Mr Ibekwe. All it had to do was to take reasonable steps.

Preliminary issue (2) (breach)

[16]The judge examined the question of reasonable steps in paragraphs 43 and 44 of his judgment, which I have already set out above. Mr Hartman’s criticism of these paragraphs is that the judge took no account of Mr Ibekwe’s individual circumstances. He was absent through ill health and no letter was sent to him by post about the transfer option despite the fact that the evidence showed that he did respond to letters by attending at LG’s premises when asked to do so. In answer to this, Mr Bailey submits that there was no finding as to why Mr Ibekwe did not receive the statement of changed terms or the letter dated 22 December 1994. LG adopted the practice of distributing official information with payslips because employees often changed address without informing their employers. The evidence showed that Mr Ibekwe collected his pay and indeed had copies of his payslips. But the judge concluded that the usual practice of LG was reasonable in the circumstances, and (by implication) that it had been followed in the case of the documents which Mr Ibekwe did not receive. Since the usual practice enabled information to be conveyed to Mr Ibekwe in a manner which generally achieved its object, I do not consider that the judge’s conclusion on breach can be impugned. The same conclusion follows if the duty to take those reasonable steps is based in tort rather than on implied term.

Preliminary issue (3) (causation)

[17]While this issue does not in my judgment arise, submissions were directed to it with which I should deal. When the trustees of the LRT pension scheme informed Mr Ibekwe that the transfer option was no longer available following his dismissal, Mr Ibekwe elected to receive a deferred pension from the LRT pension scheme which was less than the amount of an ill-health retirement pension. The judge found at the end of paragraph 26 of his judgment that “the probability is that, if the claimant had been denied the opportunity to accept and to receive a special transfer payment to the LG pension fund, he had suffered economic loss.” This is not, however, a finding that LG caused this loss as the rejection came from the trustees of the LRT pension fund. Indeed, the judge made no finding in his judgment on the issues of causation within issue (3) above. Mr Bailey urges us to make such findings in favour of LG. However, having regard to the fact that the respondent’s notice does not ask the court to make findings of causation on the ground now relied on, I consider that it would be inappropriate for this court to make any finding to the effect that any loss suffered by Mr Ibekwe was not caused by any act or omission of LG.[18]In the circumstances, in my judgment, the appeal must be dismissed.[19]I agree.[20]I also agree.