Sea Containers Services Ltd [2012] EWHC 2547 (Ch)

Case No 3703/2012[2012] EWHC 2547 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 19/09/2012
Before
THE HONOURABLE MR. JUSTICE HILDYARD
In the Matter of SEA CONTAINERS SERVICES LTD (In Liquidation),
SEA CONTAINERS LTD (In Liquidation),
0438490 TRAVEL LTD (In Liquidation),
1882420 LTD (In Liquidation) &
S.C. MARITIME LTD (In Liquidation)
And In the Matter of the Insolvency Act 1986
Hearing Hearing dates: 18, 19 July 2012
Sarah Asplin QC and Fenner Moeran (instructed by Bingham McCutchen LLP) for the Applicants
Andrew Short QC (instructed by Wragge & Co LLP) for the Representative Respondent
Judgment
Mr. Justice Hildyard :
Introduction
[1]This is an application for the Court to determine various questions arising in respect of a final salary occupational pension scheme called the Sea Containers 1983 Pension Scheme (“the 1983 Scheme”), and more particularly a stand-alone letter relating to the 1983 Scheme and comprising a promise made to various members of the 1983 Scheme which was intended (and accepted by the parties) to have contractual effect. (The terms of that letter are set out in paragraph 8 below.)[2]That letter constituted one element of various arrangements and documents put in place with a view to equalising the benefits of male and female members of the 1983 Scheme in accordance with the decision of the European Court of Justice (then “the ECJ”) Now called the Court of Justice of the European Union. in Barber v Guardian Royal Exchange Assurance Group [1991] 1 QB 344 (“the Barber decision”) whilst (so far as possible) avoiding or alleviating possible adverse effects of the required equalisation process.[3]The Barber decision primarily impacted the 1983 Scheme because, like many pension schemes in the early 1990s, the 1983 Scheme provided different benefits for male and female members. In particular, it provided benefits by reference to a ‘Normal Retirement Date’ (“NRD”) which was stated to be 65 for men and 60 for women. To comply with the Barber decision, as clarified in the further decision of the ECJ in Coloroll Pension Trustees v. Russell [1994] OPLR 179, it was (as in the case of many similar schemes) decided inter alia to ‘equalise up’: that is to say, to raise the NRD for women from 60 to 65.[4]This process of equalisation was intended to take place in two stages:(1) First, all members of the 1983 Scheme who joined after 1 January 1991 Or members who had become an employee before 1 January 1991 but had opted not to join the 1983 Scheme on the first opportunity and joined the 1983 Scheme after 1 January 1991. (generally called ‘new joiners’) were given an NRD of 65 from the outset of their membership. Those members are irrelevant to this action.(2) Secondly, in 1994 all pre-existing (i.e. pre-1991) female members were to have their NRDs equalised up to 65 in respect of future service.[5]In the case of the 1983 Scheme the equalisation process adopted was an uneasy and untidy mixture of formality and informality. This was occasioned at least in part by the initial decision to effect the required changes by way of a public announcement to members (“the 1994 Announcement”), rather than by deed of amendment.[6]These various arrangements and documents (and similar arrangements and documents relating to another Sea Containers pension scheme, known as the Sea Containers 1990 Pension Scheme) have already occasioned two previous applications to the Court. One was before the Chancellor, Sir Andrew Morritt. The other came before Henderson J. I refer briefly to these later.

The document to be interpreted: the Special Promise letter

[7]As indicated above, the present application concerns the construction of a short letter written on the headed notepaper of Sea Containers Services Limited (“SCSL”), which was the then principal employer in the 1983 Scheme. The letter (“the Special Promise letter”) was provided by hand to certain female employees of companies within the Sea Containers group of companies which were also participating employers in the 1983 Scheme.[8]The Special Promise letter comprised a promise (“the Special Promise”) made only to its recipients (“Special Members”). The Special Promise, which (it is common ground) was intended to operate outside the 1983 Scheme with a view to providing enhancements which would not trigger further rights of equal treatment under the 1983 Scheme, was headed “TO WHOM IT MAY CONCERN”. It was in these terms:
“My letter to [employee name] of 15 July 1994 advised her of the contractual [sic] requirement to change female retirement age from 60 to 65. The Company should like to confirm that should [employee name] still elect to retire at her previous retirement age of 60, the Company shall provide a pension at age 60 equivalent to that which would have been available prior to the Pension Scheme changes which were introduced on 1st August 1994.”

The applicants and the respondent: the representative parties and their interests

[9]Before returning to explain the various questions that have arisen as to the meaning and effect of the Special Promise it is convenient to identify the parties and their interests, and the background to this application.[10]The applicants (“the Applicants”) are the provisional liquidators of a Bermudian body corporate, Sea Containers Ltd (“SCL”) and the liquidators of the remaining above named companies (together “the Sea Containers Companies”), including SCSL.[11]Apart from SCL, all the Sea Containers Companies are registered in England. SCL is their ultimate parent company, and the direct holding company of SCSL. SCSL was at all material times until its liquidation the Principal Employer under the 1983 Scheme. The remaining Sea Containers Companies were subsidiaries of SCL and participating employers in the 1983 Scheme.[12]SCSL is in insolvent liquidation, as are the other participating employers. In order to enable the 1983 Scheme to be administered as a closed fund rather than be wound up a new company was constituted as the principal and only participating employer in place of SCSL. The 1983 Scheme was closed to future accrual with effect from 30th September 2006. It is currently continuing to be administered as a closed fund.[13]On 15 October 2006, SCL and SCSL filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. The resulting Chapter 11 Plan ("the Plan") was approved by the US Bankruptcy Court for the district of Delaware and on 11 February 2009, SCL and SCSL emerged from Chapter 11.[14]Under the Plan, SCL's container business was transferred to a new company (Seaco) in consideration of the entire share capital of Seaco being held by SCL and SCSL for distribution, together with a small amount of cash, to holders of allowed creditor claims under the Plan. In consequence of the Plan, the major creditors of SCL and SCSL (former SCL bondholders and the trustees of the 1983 Scheme and 1990 Scheme) became, and remain, the major shareholders in Seaco.

The arrangements for settlement of pension scheme claims

[15]The Plan included a settlement of claims by the trustees of the 1983 Scheme And also by the trustees of the 1990 Scheme. to make good the substantial deficit which had arisen. This included claims relating to the purported 1994 equalisation (which were ultimately resolved by the decision of the Chancellor referred to below (at paragraphs 21 and 29), and equivalent proceedings for the 1990 Scheme).[16]The Plan also made provision for the creation of a trust holding various assets (“the EREC Trust”) in order to satisfy any equalisation-related employee claims (“EREC Claims”) which might be brought against the Sea Containers Companies themselves (i.e. outside the pension schemes). The EREC Claims are those of the Special Members, and possibly the Male Comparators and Piggyback Claimants as defined in paragraph 39 below.[17]If and to the extent there are valid EREC Claims in the respective liquidations of the Sea Containers Companies, the Applicants (as liquidators) are able in turn to make equivalent claims against the EREC Trust and will receive distributions from the EREC Trust. To the extent that there are funds left over in the EREC Trust after all the valid EREC Claims have been met then the surplus is returned to SCL and/or Seaco.

Representation Orders and the interests of the parties

[18]The Applicants’ interest (as liquidators) is simply to establish with certainty the identity of potential EREC claimants, the value of their claims and whether they can be recovered from the EREC Trust. Nevertheless, in order to assist the Court, the Applicants have been appointed as representative parties to argue for the narrowest interpretation of the Special Promise in relation to each of the questions posed.[19]Against that, it is clearly in the interest of the Special Members to maximise their claims against the Sea Container Companies. To present arguments on their behalf, the Representative Respondent, Ms Victoria Mellor (“Ms Mellor”), has been selected and appointed as a representative party to represent all current and former members of the 1983 Scheme in whose interests it is or may be to argue for a broad interpretation of the Special Promise.[20]Ms Mellor is a former employee of one of the Sea Containers Companies, namely Illustrated London News & Sketch Limited. She is a deferred member of the 1983 Scheme. She was a recipient and subscriber of a Special Promise letter. She is a Special Member accordingly.[21]It will be apparent that the representation orders were issue-based. There is an analysis of the jurisdictional basis for such representation orders in the decision of the Chancellor, Sir Andrew Morritt C., in Capita ATL Pension Trustees Limited v Zurinskas [2010] EWHC 3365 (Ch.). That decision (“the Zurinskas case”) also concerned issues as to the interpretation of the 1983 Scheme and contains a summary of the background to it.

The matrix of fact

[22]The documentary background includes most relevantly: (1). the relevant deed and rules of the 1983 Scheme (see below); (2). the 1994 Announcement; and (3). various letters sent to all female employees, comprising three versions (one of which, called Letter “C”, is the letter of 15 July 1994 referred to in the Special Promise).

The 1983 Scheme and the 1988 Rules

[23]The benefits provided by the 1983 Scheme were originally set out in its definitive deed and rules, dated 20th September 1988 (“the 1988 Deed and Rules”). Those benefits were formally amended in 2005 by a further definitive deed and rules (“the 2005 Deed and Rules”). However, the issues in this case relate to the benefits provided by the 1983 Scheme under the 1988 Deed and Rules both immediately before and after the 1994 Announcement, as part of the equalisation process. Accordingly, references in this Judgment to rules are to the 1988 Deed and Rules.[24]There was a dispute between the representative parties as to whether the terms of the 1988 Deed and Rules are properly part of the admissible factual context in determining the questions of construction that arise. For reasons I give later I do not accept the Representative Respondent’s submission at the hearing before me to the effect that they should be excluded from the admissible matrix of fact on the ground that they were not “reasonably available”. I consider they were reasonably available, should not be excluded in construing the Special Promise letter, and provide an important backdrop. Indeed, I note, I hope not unfairly, that Counsel for the Representative Respondent had in his skeleton argument submitted that the “benefit structure prior to the 1994 Announcement” was “the most important element of the factual background.”[25]It is not for present purposes necessary to recite at length all the complicated benefits under the 1988 Deed and Rules. However, specific provisions of the 1988 Deed and Rules seem to me of relevance in determining the intended meaning of the Special Promise; these provide:(1) (by Special Rule 6) for a pension calculated in accordance with Special Rule 4 (a “Normal Retirement Pension”) on retirement of the member from the employment of the relevant participating company on the NRD (then, as explained above, 65 for men and 60 for women);(2) (by Special Rule 7) for a reduced pension on early retirement of a member “from the employment of the Employers before the NRD” where such retirement is either (a) on grounds of incapacity or (b) is after the age of 50 and with the consent of the Principal Employer (SCSL) calculated by the 1983 Scheme Trustees with the consent of the relevant Employer but otherwise at their sole discretion (subject only to a cap provided for by Rule 13);(3) (by Special Rule 8) for “Benefit on late retirement”, where the member remains in employment after NRD, in terms that I set out now since they are relied on especially by Ms Asplin as I later explain: “If, with the consent of the Employersa Member remains in the employment of the Employers after the Normal Retirement Date, he may electeither (a) to receive the Normal Retirement Pension as if he had retiredon the Normal Retirement Date or (b) to postpone payment of the pension until a later date but not later than the date of actual retirementwhen there will be payable a pension (hereinafter referred to as ‘the Increased Pension’) of such greater amount, as determined by the Trustees according to the age of the Member at the date on which the Member elects to take his pension, than the Normal Retirement Pension to which he would have been entitled had he retired on the Normal Retirement Date.”(4) (by Special Rule 13) deferred benefits payable at the NRD on “withdrawal of a Member from the employment of the Employers before the NRD” after not less than 5 years’ qualifying service calculated on a uniform accrual basis (Rule 13(3)), with further provision for reduced or increased benefit amounts in substitution for deferred benefits where the Member withdrew from service prior to NRD and transfers or takes the deferred benefits before or after the NRD.[26]Otherwise, apart from the provisions for differential treatment of males and females that I have already noted I think the only general feature of the 1983 Scheme that for present purposes is relevant is that somewhat unusually, at that time, it provided benefits on an ‘accelerating accrual’ basis.[27]Under most final salary schemes the member would receive a pension of, say, 1/60th of final salary for every year of pensionable service, capped at 2/3 of final salary. This is usually called ‘straight line accrual’. Under the 1983 Scheme, however, the member would receive a final salary calculated at a rate of 1/60th of final salary per year of pensionable service in the first 8 years, accelerating thereafter to a maximum of 2/3 final salary after 20 years of pensionable service; see Special Rule 4 of the 1988 Deed and Rules. This is usually called ‘accelerating accrual’.[28]This accelerated accrual benefit structure of the 1983 Scheme was a further complicating factor in the 1994 equalisation process. With a straight-line accrual benefit structure, changing the NRD only changes when one can take a pension and the impact of reduction / augmentation of the pension in the event of early / late retirement. With an accelerating accrual benefit structure a more complex solution is necessary. The result was that the 1994 equalisation process not only had to equalise NRDs at 65, but also to alter the accrual structure from an accelerated 1/60th accrual rate, to a 1/50th straight line accrual rate NB: This alteration of the accrual rate gave rise to a somewhat complicated actuarial mechanism to ensure that members’ total expected pension fraction when they retired remained unchanged. This was usually described as a ‘credit’ or ‘service credit’. The details of precisely how it worked are irrelevant for the present purposes. .[29]The difficulties of achieving this, and the chosen means (by way of the 1994 Announcement and without a formal deed of amendment) gave rise to questions as to whether equalisation had been effective prior to the effective date of the 2005 Deed and Rules, and if so when and to what extent. The trustees of the 1983 Scheme brought proceedings to determine the various issues. Those proceedings were ultimately settled by means of a compromise agreement approved by the decision of the Chancellor in the Zurinskas case.[30]This compromise provided for benefits to be paid out of the 1983 Scheme on a basis which was somewhere between what would have been provided if it had not been equalised at all, and what would have been provided if the 1994 equalisation exercise were fully effective. In other words, benefits under the 1983 Scheme are treated as if they were partially equalised from 1994 until 2005 and fully equalised thereafter. Questions also arose in the context of the 1990 Scheme, and there were proceedings before Henderson J. A more detailed description of the flaws, the proceedings and the steps taken to rectify the position are set out in the judgments of the Chancellor (in the Zurinskas case) and of Henderson J (in Case No HC10C02253).

The 1994 Announcement

[31]For present purposes those matters are only of contextual significance; but the 1994 Announcement is in any event relevant in determining the intent and effect of what was done in 1994. The 1994 Announcement includes the following passages:
“… After careful consideration of all the issues and options, Sea Containers has decided that, with effect from 1 August 1994, the normal retirement age for all members of the Scheme will become 65. This reflects the announcement in the last Budget that the State Scheme will move towards equalised pension ages at 65. Had a change not been made the cost of improving the benefits for male members would have been very onerous. “The existing design of the Sea Containers 1983 Scheme did not readily lend itself to equalisation. At present members can earn a pension of 2/3rds of Final Pensionable Salary on completion of 20 years service or more at Normal Retirement Date. The proportion of pension earned each year has, therefore, been a function of date of joining and also of Normal Retirement Date which has differentiated between males and females. To achieve equalised benefits for the future we have, therefore, decided to introduce a simpler basis of pension accrual. “THE CHANGES IN BRIEF… “The Normal Retirement Date for all members, both men and women will be the day before your 65th birthday. “For both male and female members of the Scheme who joined the company prior to 1 January 1991 it will be possible as under the existing arrangements, with the agreement of the company, to retire from age 60. For female members who joined the company prior to 1 January 1991 all pension earned up to age 60 on the new basis may be taken at 60 without any actuarial reduction. For male members who joined the company prior to 1 January 1991 a reduction will not be made in respect of the early payment of that part of your pension earned on or after 17th May 1990. However, in all cases, credit will not be given for the service to age 65 which will not be completed. “For all members in respect of future service you will accrue pension at the rate of 1/50th of Final Pensionable Salary for each year of service (With a proportionate amount for months). “For existing male members, a credit of extra 50ths will be granted at age 65 to ensure that your total expected pension fraction (usually 2/3rds - see booklet) remains unchanged. If you leave or retire before age 65, only a proportion of that credit will be granted… “… For existing female members a similar credit will be granted at age 65. However, as for a male, if she leaves before age 65 only a proportion of the credit will apply.”
[32]At the same time as the 1994 Announcement, and in consequence of the fact that actuarial analysis of the effects of the equalisation process appeared to determine that certain long-serving female members of the 1983 Scheme would be especially adversely affected, all female members of the 1983 Scheme were individually sent one of three types of letter, known as “Letter A”, “Letter B” and “Letter C” from Miss A Clarke, the Sea Containers Group Personnel Manager UK.

Letters “A”, “B” and “C”

[33]In summary, the letters provided as follows (emphasis added):(1) Letter A - briefly explains the changes to NRD, referring to the 1994 Announcement, and states that “the Company is confident that you will have the opportunity to benefit overall” from the changes, and asks the recipients to sign and return the duplicate copy of the letter.(2) Letter B - Similar to Letter A (including the statement of confidence in overall benefit) but with additional wording “Your new retirement age will be 65. This change may have some effect on your pension if you elect, as you will be entitled to, to retire before the maximum age. According to calculations that have been done by Sedgwicks Noble Lowndes, actuaries to the scheme, however, your pension does not suffer adversely.”(3) Letter C - Again, similar to Letter A in most of its content (including the statement of confidence in overall benefit), but this time with the words “Your new retirement age will be 65. This change may have some effect on your pension if you elect, as you will be entitled to, to retire before the maximum age. Calculations have therefore been done by Sedgwicks Noble Lowndes, actuaries to the scheme, to ascertain the actual effect these changes will have on your pension. I have these calculations and should like to discuss them with you. I should be grateful if you would make and [sic] appointment with me as soon as possible.”[34]Recipients of Letter C had been identified as members who actuarial advice suggested would be especially adversely affected by the equalisation process (“Special Members”). When a Letter C recipient attended on Ms Clarke at the Personnel Department, they were presented with a letter containing the Special Promise.[35]Each such letter was signed by Miss A.D. Clarke as Group Personnel Manager UK “for and on behalf of the Company”. Each Special Member provided with the Special Promise letter was required to subscribe the letter comprising the Special Promise in the following terms:
“I confirm that I have had sight of this note, that will be attached to my file, and understand its contents.”

Evidence of meetings relating to Letter “C”

[36]Ms Clarke, who drafted the A, B and C letters and also the Special Promise, gave evidence in the 1983 Scheme equalisation proceedings by means of a witness statement dated 24th July 2009. Ms Clarke has this to say about the Special Members and the presentation of the Special Promise letter:
“Special Females. “60. At the same time as the [1994] announcement was being sent out to members, a separate exercise was undertaken, largely addressed at long-serving female members, to ensure they would not be disadvantaged by these changes. “61. As already stated above, in early 1994 a lot of data was gathered by Danny O’Sullivan [SCSL chief financial officer and a trustee of the 1983 Scheme] from both the Personnel Department and from Sedgwicks to identify just how many people would be affected by these changes and by what margin. By the time the July [1994] Announcement was issued, a policy had been agreed between Danny O’Sullivan and Mike Stracey [SCSL’s former CFO and a trustee of the 1983 Scheme]. “62. In relation to female members who were likely to be disadvantaged by the changes in the announcement, I was asked by Danny to implement this policy in my capacity as Personnel Manager which also involved meeting some of the female members who were going to be affected. There were three different categories of female member and so three different letters were prepared… “63. Letter A was sent to female members who were not adversely affected in any way by the equalisation changes, Letter B was sent to female members who were affected by the changes but they were not disadvantaged in any substantial manner, and Letter C was sent to those female members who were adversely affected by the changes. Whereas Letter A and B females were merely required to sign and return the letter confirming their acceptance of the changes, Letter C females were asked to attend the Personnel Department for a meeting with me. “64. At this meeting, which took place on an individual basis, I explained to each member that the Company [SCSL] would promise the member that, should she still be employed and wish to retire at age 60, she could take her pension without any reduction that may arise as a result of her normal retirement age having changed from 60 to 65. In other words, the member would be supplied with a pension at age 60 which was equivalent to that which was available prior to these changes being introduced. “65. An example appears is the case of Mrs Eid… This promise was recorded in the form of a letter ‘to whom it may concern’. The letter was signed by me, on behalf of the Company, and by the member. It was then placed at the back of her personnel file to be used if she elected to retire at age 60. She was not supplied with a copy.”
[37]It would appear that around 40 female members were given this Letter “C”: they are the Special Members. Evidence adduced by and on behalf of the Representative Respondent reveals a different recollection and/or understanding of Ms Clarke’s individual discussions. For reasons I elaborate upon later, I do not think that this evidence is admissible insofar as it is sought to be relied upon in determining the intent of the contractual arrangements agreed. However, it appears to me that it may be admissible in determining what the terms of the contractual arrangements were.[38]In that latter regard, it is important to note, given the questions to which I next turn, that none of the deponents states that Ms Clarke expressly stated that the Special Promise would take effect whatever the age they retired, that it would apply if they had already left their employment with a Sea Containers Company or that further pension benefits would not be taken into account.

The possible claims

[39]Taking into account the fact that the 1983 Scheme is now and is treated to have been providing benefits from 1994 which are (at least partially) equalised (i.e. benefits which are less than was the case pre-1994, for female members), the Special Promises give rise to 3 different possible classes of claims against the Sea Containers Companies:(1) Claims by Special Members who may argue that they are entitled to enhanced benefits by virtue of the Special Promise made to them in about August 1994;(2) Claims by certain male members of the 1983 Scheme who may argue that, to the extent a Special Member is entitled to enhanced benefits, they too should receive those benefits by virtue of the equal pay legislation ("the Male Comparators"); and(3) Claims by certain female members of the 1983 Scheme who may argue that, to the extent a male member of the 1983 Scheme successfully demonstrates that he is entitled to enhanced benefits by virtue of the equal pay legislation, they too should receive those enhanced benefits by virtue of a secondary or "piggyback" claim under the equal pay legislation (“Piggyback Claimants”).[40]At present, the Applicants are not seeking clarification of the nature of the claims of the Male Comparators or Piggyback Claimants. The answers to their claims necessarily depend upon the answers to the questions that arise in relation to the Special Members, and indeed may well be either reduced or removed altogether depending on the outcome of these proceedings.

The questions to be determined

[41]The Special Promise gives rise to three broad questions which can then be further split into sub-questions, as set out in the Schedule to the Originating Application Notice.[42]Question 1 - what does the Special Promise actually mean? In other words:(1) Question 1(a): When does a Special Member have to ‘elect to retire’ in order to benefit from the Special Promise? Is it actually at the age of 60, or could they ‘elect to retire’ before / after 60?(2) Question 1(b): What does ‘elect to retire’ mean? Does it mean: (a) Paragraph 1(b)(i)(a) - leaving service with Sea Containers companies and taking an immediate pension (set out in paragraph 1(b)(i)(a) of the Schedule to the Originating Application), or does it extend to other situations such as: (b) Paragraph 1(b)(i)(b) - leaving service with Sea Containers companies, but not taking an immediate pension? (c) Paragraph 1(b)(i)(c) - leaving service with Sea Containers companies, not taking an immediate pension, but then at some point thereafter taking a pension? (d) Paragraph 1(b)(ii) - taking a pension without leaving service with the Sea Containers companies? (e) Paragraph 1(b)(iii) - leaving service with Sea Containers companies, not taking an immediate pension (i.e. becoming entitled to a deferred pension) and leaving service with a non-Sea Containers company? (f) Paragraph 1(b)(iv) - taking a transfer of pension benefits to another pension scheme entirely, whether or not they take an immediate pension, and leaving service with a non-Sea Containers company?[43]Question 2 - who can the Special Promise be enforced against? Is it simply SCSL, or is it also/only SCL and/or the Special Member’s actual employer (if different from SCSL or SCL)?[44]Question 3 - to what extent should the Applicants take other benefits into account in determining what the Special Promise is worth? In other words, should the Applicants:(1) Reduce whatever is paid by reason of further accrual of benefits by the Special Member under the 1983 Scheme itself after age 60?(2) Reduce whatever is paid by reason of accrual of benefits under a different pension scheme?[45]Thus, all the issues are matters of interpretation of the contractual documentation; and the contest promoted by the representation orders reflects the age old tension between literal construction and a broader, purposive approach.

Applicable principles of interpretation

[46]Before turning to answer each question and sub-question in turn, it may be helpful to address the relevant principles which determine or guide the interpretation of documents, including documents that may be comparatively informal in their expression, and to identify any overall contextual matters that are or may be relevant in this case.[47]In this connection I have been referred to a number of well-known authorities on contractual interpretation, including Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 (especially at 912 per Lord Hoffmann); Chartbrook Ltd v Persimmon Homes Ltd [2009] 11 AC 1101 (both in the House of Lords), and (more recently, in the Supreme Court) Rainy Sky SA and Others v Kookmin Bank [2011] 1 WLR 2900. These authorities grapple with the familiar but elusive questions that arise as to whether in construing words their literal meaning or some more purposive interpretation is to be adopted, and record the swing of the pendulum between the two.[48]The Supreme Court (in allowing an appeal from a majority decision of the Court of Appeal in the Rainy Sky case) has very recently emphasised that the exercise to be conducted “is essentially one unitary exercise”; and where the language used by the parties has more than one potential meaning, the court need not necessarily favour the most natural meaning of the words: it is entitled “to prefer the construction which is consistent with business common sense and to reject the other”.[49]The ultimate task and objective, of course, is (as classically stated by Lord Hoffmann in the ICS v West Bromwich case [supra]):
“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.”
[50]Mr Andrew Short QC for the Representative Respondent also emphasised that amongst the contextual matters to be taken into account is the relative formality or informality of the document to be construed. He submitted in this context that the relatively informal nature of the Special Promise letter should be taken into account in the proper approach to its construction. In addition to ICS at 913D-E and Chartbrook at paragraph 14, see Ravennavi SpA v New Century Shipbuilding Co Ltd[2007] EWCA Civ 58,at paragraph 12, per Moore-Bick LJ:
“Unless the dispute concerns a detailed document of a complex nature that can properly be assumed to have been carefully drafted to ensure that its provisions dovetail neatly, detailed linguistic analysis is unlikely to yield a reliable answer. It is far preferable, in my view, to read the words in question fairly as a whole in the context of the document as a whole and in the light of the commercial and factual background known to both parties in order to ascertain what they were intending to achieve.”
[51]Furthermore, it is not necessary to show that the competing construction makes no commercial sense in order for the construction which makes more commercial sense to be preferred, see Barclays Bank v Luxembourg SARL [2010] EWCA Civ 1248, per Longmore LJ:
“26 The Judge said that it did not flout common sense to say that the clause provided for a very limited level of release, but that, with respect, is not quite the way to look at the matter. If a clause is capable of two meanings, as on any view this clause is, it is quite possible that neither meaning will flout common sense. In such circumstances, it is much more appropriate to adopt the more, rather than the less, commercial construction.”
[52]Lord Hoffmann also set out the approach to be taken in relation to an agreement which (like, the Representative Respondent would say, the Special Promise) is not recorded entirely in writing in Carmichael v National Power [1999] ICR 1226. In particular, he noted that evidence as to the subsequent conduct of the parties and as to their respective understandings of the contract would be admissible in such a case. Although the whole of Lord Hoffmann’s speech is relevant in this regard, at page 1233H – 1234Che said:
“The majority of the Court of Appeal thought that the industrial tribunal should have decided as a matter of law that the exchange of letterswas an offer and acceptance which gave rise to a contract of employment exclusively in writing. It followed that the construction of the letters would then also be a matter of law. For my part, I do not think that was a very realistic conclusion. The letters were not drafted by a lawyer and their language was extremely concise. To construe them as a complete written contract left the Court of Appeal having to interpret the cryptic phrase “on a casual as required basis” in what they, as judges, took to be its natural and ordinary meaning, without the assistance of the evidence of what the parties had understood or how the contract had been operated. By this method they arrived at an interpretation different from that given to the words by the unanimous industrial tribunal, to say nothing of the Employment Appeal Tribunal.”
[53]Subsequent conduct is also admissible to show that a change in the terms of a contract was not intended to produce a change in practice, see Dunlop Tyres Ltd v Blows [2001] IRLR 629, CA at paragraphs 21- 23.[54]Further, subsequent conduct is also admissible to show that a term has been “varied or enlarged”, see Carmichael at 1235C. In the employment field, this would occur through custom and practice. Although it has been suggested that the “reasonable, notorious and certain” test can be applied in cases involving a particular employer (rather than a trade or locality), a different test was applied by the Court of Appeal in Albion Automotive Ltd v Walker [2002] EWCA Civ 946. That test was approved and applied by the Court of Appeal in Garratt v MGN Ltd [2011] ICR 880 at paragraph 35. In Albion Automotive, Peter Gibson LJ said:
“ [15] Mr Brennan submitted that in the light of Duke and Quinn Duke v Reliant Systems Ltd [1982] ICR 449 and Quinn v Calder Industrial Metals Ltd [1996] IRLR 126 there are likely to be a number of factors important in assessing whether a policy originally produced by management unilaterally has acquired contractual status. He suggests that in the present case the relevant factors included: (a) whether the policy was drawn to the attention of employees; (b) whether it was followed without exception for a substantial period; (c) the number of occasions on which it was followed; (d) whether payments were made automatically; (e) whether the nature of communication of the policy supported the inference that the employers intended to be contractually bound; (f) whether the policy was adopted by agreement; (g) whether employees had a reasonable expectation that the enhanced payment would be made; (h) whether terms were incorporated in a written agreement; (i) whether the terms were consistently applied. … [18] I have set out Mr Brennan's helpful arguments in some detail because I am in agreement with them.”
[55]I have carefully re-read each of these authorities, and in seeking a synthesis have reminded myself also of the words of Sir Thomas Bingham MR (as he then was) in Arbuthnott v Fagan [1995] C.L.C. 1396:
“Courts will never construe words in a vacuum. To a greater or lesser extent, depending on the subject matter, they will wish to be informed of what may variously be described as the context, the background, the factual matrix or the mischief. To seek to construe any instrument in ignorance or disregard of the circumstances which gave rise to it or the situation in which it was expected to take effect is in my view pedantic, sterile and productive of error. But that is not to say that an initial judgment of what an instrument was or should reasonably have been intended to achieve should be permitted to override the clear language of the instrument, since what an author says is usually the surest guide to what he meant. To my mind, construction is a composite exercise, neither uncompromisingly literal nor unswervingly purposive: the instrument must speak for itself, but it must do so in situ and not be transported to the laboratory for microscopic analysis.”
[56]With that guidance I turn to the specific questions that have been identified as requiring determination. Question 1(a): When does a Special Member have to ‘elect to retire’ in order to benefit under the Special Promise?[57]This first question raises an issue of time: when is the benefit of the Special Promise available to members?[58]The relevant phrase in the Special Promise letter is:
“should [X] still electto retire at her previous retirement age of 60, the Company will provide a pension at age 60 equivalent to that which would have been available prior to the Pension Scheme changes…”
[59]The Applicants submit that the true interpretation and effect of the Special Promise is that it is restricted in its application to a Special Member who ‘elects to retire’ at the age of 60, i.e. on her 60th birthday, and upon such retirement elects to take her pension. The Applicants accept that “at her previous retirement age of 60” could be read as meaning “in the year following her 60th birthday” rather than simply “on her 60th birthday”. This, it was contended, is the only slight linguistic uncertainty in the phrase. In support of the interpretation contended for by the Applicants Ms Sarah Asplin QC advanced submissions under 3 heads.[60]First, she submitted that the obvious and natural, clear and sensible, meaning of the phrase is retirement only at age 60 (a concept which, as she emphasised, is stated twice in the short promise made). She acknowledged that the old ‘golden rule’ that the natural meaning of words be given effect has, in the approach to interpretation which I have adumbrated above, been subsumed within the wider or overall process of ascertaining the meaning intended (see per Lord Hoffmann in ICS v West Bromwich at 912-913). But she also pointed out that there may be cases where there is no escape from the literal meaning, because the words simply cannot bear any other meaning. She referred me to Lord Clarke’s speech in the Rainy Sky case at paragraph 23:
“Where the parties have used unambiguous language, the court must apply it.”
[61]She accepted that even as to this there is an exception: that is, where the words used are clearly a mistake and it is clear both what the mistake is and what is required (semantically) to correct it (and see per Lord Hoffmann in Chartbrook at paragraph 22). But the mistake must be clear and obvious on the face of the instrument; and that could not be said to be the case here.[62]Secondly, Ms Asplin submitted that if the phrase “at the age of 60” meant anything other than its ordinary and natural meaning of 60, it would have been pointless and misleading to put in a reference to any particular age at all. She elaborated her submission as follows:(1) It is obvious how the Special Promise distinguishes between retirement at 60, and retirement at any other time, i.e. before/after 60.(2) Whilst there are plenty of reasons for distinguishing between retirement at 60 and at any other age, in principle, there is no reason why there should be a difference for these purposes between retirement before and after 60. If the Special Promise were to be effective for one, then presumably it would be for the other as well.(3) So presumably, the Special Promise is either effective only for an election to retire at 60, or it is effective for an election to retire regardless of when that happens.(4) If the Special Promise is effective regardless of when it happens, then why put in any reference at all to the date of the election to retire?(5) If the Representative Respondent is correct, the crucial part of the Special Promise should be read as: “The Company should like to confirm that should [employee name] elect to retire, the Company will provide a pension equivalent to that which would have been available prior to the Pension Scheme changes which were introduced on 1st August 1994"(6) But this is simply not what the Special Promise says.[63]Thirdly, Ms Asplin submitted that such a construction is consistent with the surrounding factual matrix, which in this case includes:(1) The provisions of the 1983 Scheme and especially the 1988 Deed and Rules prior to the 1994 equalisation exercise;(2) The contents of the 1994 Announcement;(3) The contents of the 15th July 1994 Letter C sent to the Special Members; and(4) The nature of the Special Promise letter.

Guidance from special provisions of 1988 Deed and Rules

[64]As to (1) and the pre-1994 provisions of the 1983 Scheme and 1988 Deed and Rules (which I have set out so far as relevant in paragraph 25 above), Ms Asplin submitted that the provisions of the 1983 Scheme provide the key to the use and meaning in the Special Promise of both the term “elect to retire” and also the specific use of age 60.[65]She acknowledged that there is no definition of ‘retirement age’ or ‘retire’ in the 1988 Deed and Rules. However, there is (obviously) a definition of Normal Retirement Age, which for Special Members was 60 Rule 1(h). . Her submission was that the meaning of “retirement” is clear from the wording of the benefit provisions of the 1988 Deed and Rules. More particularly she relied upon the following as connoting that in the context ‘retirement’ means ceasing employment with the Employers:(1) the reference in Special Rule 6 to “retirement of a Member from the employment of the Employers…” which assumes the first is occasioned by the latter;(2) the reference in Special Rule 7 to retirement after the age of 50 but before NRD on account of ill-health or with the Employers’ consent, which again assumes (in the latter case consensual) cessation of employment;(3) the provision in Special Rule 8 for a Member who, with the Employers’ consent, remains in employment after NRD to receive the Normal Retirement Pension as if he had retired on NRD, the deeming provision emphasising that taking a pension without leaving employment is not ‘retirement’ otherwise; and(4) the provision in Special Rule 13 which uses a different concept of withdrawal from employment where the member leaves employment prior to taking an immediate pension (that is, becomes a deferred member), connoting that ‘retirement’ is the simultaneous act of leaving employment at NRD and immediately taking a pension: the references in Rule 13 to ‘withdrawal from employment’ making it quite clear that leaving service without taking a pension is not the same as ‘retirement’.[66]As to why the Special Promise referred to the precise age of 60, Ms Asplin pointed out that all other circumstances were not in the Special Member’s sole power of election: the 1988 Deed and Rules make clear that prior to the 1994 equalisation exercise a female (and accordingly a Special) Member had no rightto a pension at any age other than their NRD of 60, i.e. they could not “electto retire” at any age other than 60. The only way a Special Member could have “elect[ed]” to retire, would have been to retire from employment and take an immediate pension precisely at their NRD of 60. Other than retirement at age 60, prior to the 1994 equalisation exercise:(1) If a Special Member left service prior to NRD then it was at the Employer’s discretion as to whether they could take an immediate pension, and if they did not do so it was at the Trustees’ discretion as to whether they could take an early deferred pension; and(2) If a Special Member did not wish to retire at 60 it was at the Employer’s discretion as to whether they could remain in employment past NRD, and if so then the Member could elect not to take a pension at a later date but to take a pension at NRD (i.e. 60) or postponethe pension to a later date, but even that election was limited to the latest date of when they actually retired.[67]Accordingly, Ms Asplin submitted, looking at the 1988 Deed and Rules, it is clear that the references in the Special Promise to Special Members “still” electing to retire at age 60 can only be by reference to the election occurring at age 60. Otherwise it could not be a reference to a pre-existing ability to ‘elect’ to retire.

Contents of the 1994 Announcement:

[68]Thirdly, Ms Asplin submitted that the 1994 Announcement also made clear that only retirement at 60 was provided for, and that there is no warrant for reading the Letter C, made available in the context of and on the same day as the 1994 Announcement, as providing some further election or flexibility to retire earlier than currently existed.

Contents of the 15th July 1994 Letter C

[69]Ms Asplin also relied on the difference in wording of the 15th July 1994 Letter C when compared to the wording of the Special Promise letter. More particularly, the Special Promise letter uses the date specific term “elect to retire at her previous retirement age of 60”. By contradistinction, the Letter C uses the more general term “retire before the maximum age”. The former is a point in time, the latter a period of time.[70]Ms Asplin submitted that this difference, which highlights the specificity of the date for the Special Promise to be effective, is particularly important given that both letters were written by Ms Clarke in July 1994, and she was the person who had been tasked with implementing the decision that gave rise to the Special Promise. If the draftswoman had wanted to say “elect to retire before 65”, or “elect to retire before the new NRD” in the Special Promise she could have done so - as she effectively did in the Letter C.[71]Furthermore, it was submitted, the Letter C contents show that there was no suggestion of retiring before age 60. There is no reference to a right to retire before age 60, either before or after the changes.

The nature of the Special Promise letter

[72]Ms Asplin’s final argument in this context relied on the nature of the Special Promise letter which she characterised as a formal, legally binding document, addressed “To whom it may concern…” and required to be subscribed by each Special Member intending to invoke its terms. And as Ms Rea says in her witness statement at paragraph 22:
“During the meeting, Alison said that Sea Containers wanted its reassurance to be a legally binding commitment and, to that end, had recorded it in writing.”
[73]Ms Asplin stressed that such a document is intended to record legal terms in an unambiguous and precise manner, and that the words are quite clear: the Special Promise was for equivalent benefits in the event that the employee:(1) remained in employment to age 60; and(2) took a pension at age 60.[74]In summary: Ms Asplin submitted that on each and all these grounds, there is simply no room in the Special Promise for taking a pension before or after age 60.

Contrary submissions on behalf of the Representative Respondent

[75]The Representative Respondent, on the other hand, submits that this narrow interpretation, which confines the Special Promise to the simple right to retire at 60 without actuarial reduction of pension benefits only if exercised within what Counsel on her behalf described as a “vanishingly small window”, lacks commercial sense and was not the intention. Further, it reads nothing into the Special Promise letter that was not already conferred or confirmed by the 1994 Announcement, rendering it (on that view) unnecessary and inexplicable.[76]Mr Andrew Short QC (for the Representative Respondent) put his case forthrightly: the Special Promise is not to be read entirely literally; its true meaning must not only be informed but supplied by the context, and by the evidence (which he necessarily contends is admissible) of the way in which the Special Promise was apparently implemented. He did not shrink from the submission that if the meaning for which he contended was not an available one on the language then “something has gone wrong”, and as a matter of interpretation (there being no claim for rectification) the Court should correct it. He elaborated the case for the Representative Respondent on this first question as follows.[77]First, he submitted that the background to the Special Promise was adverse changes to the pension rights of the Special Members, that its purpose was to make good on assurances that they would not be disadvantaged by the changes, and that in particular its intention was to improve the position of the Special Members from that set out in the 1994 Announcement. He added that its obvious and pressing purpose was to avoid disaffecting a group of long-serving female employees for whom the changes would otherwise have an especially adverse effect.[78]Building on this, Mr Short submitted, secondly, that the true intention and therefore proper interpretation of the Special Promise was that the position prior to the proposed changes was substantially to be maintained for the Special Members, and that to achieve this all the benefits that had been available under the 1983 Scheme prior to the 1994 Announcement were intended to be replicated.[79]Thus, for example, he contended that since under the Rules of the 1983 Scheme prior to the 1994 Announcement, a female Member was entitled at the age of 60 either to take the Normal Retirement Pension and remain in service or to delay their Normal Retirement Pension and take an Increased Pension in due course, that entitlement was intended to be replicated: a promise intended to avoid detriment from the Scheme changes should not be construed so as to remove the option of delaying receipt of the pension in return for an actuarial enhancement (which, by its very nature, would be cost neutral to the Scheme).[80]Thirdly, Mr Short also emphasised the commercial advantage of such a result, in terms of commercial flexibility: if a Member was required to leave service of the Sea Containers group employer in order to take the benefit of the Promise, the whole of that flexibility and the ability to retain the employee would be lost.[81]Further, Mr Short urged, for the same reasons of commercial sense and industrial relations purposes, that the Special Promise should be interpreted as extending other benefits calibrated upon the basis of the NRD remaining (in the case of Special Members) at 60. Thus, before the 1994 Announcement the 1983 Scheme provided, as regards retirement prior to the age of 60, for Members, with the required consent of the Employers (as defined) and subject of course to overriding legal requirements as to permissible early retirement dates, to be able to take benefits either on leaving service or from deferral prior to age 60. Such pensions would be subject to appropriate actuarial reduction (albeit from a notional NRD of age 60 rather than 65), so that they would be no more expensive to the employer than a pension paid at age 60. In fact, given the way in which a deferred pension was calculated, the likelihood is that the pension (and the Promise) would be less expensive in those circumstances. If the employer did not want the Member to leave early (i.e. before age 60), it could withhold its consent. Mr Short urged that the Special Promise should replicate such benefits.[82]Fourthly, Mr Short sought to buttress his arguments based on commercial sense (or perhaps more strictly, the want of it if the Special Promise is restrictively interpreted) by reference to both(a) statements made to certain of the Special Members in relation to the Special Promise and(b) evidence of subsequent practice indicative of an intention or settled practice consistent with the broad interpretation for which he contends.[83]As to both (a) and (b), Mr Short accepted of course that subjective declarations of intent and evidence of subsequent conduct are generally irrelevant and inadmissible in the process of construction of contracts. But he sought to finesse this difficulty by characterising the Special Promise as constituting an informal and incomplete record of arrangements that were of broader extent.[84]He relied in this regard especially on the Carmichael decision to which I have referred briefly above. In that case, the House of Lords accepted that in the particular circumstances letters exchanged between the parties did not constitute an exclusive record of the parties’ agreement (which was for a contract of service), and that other material, including what the parties had said and done both at the time and subsequently, was admissible and probative of a broader engagement than emerged from the letters. Mr Short relied especially on the following extract from Lord Hoffmann’s speech (at pages 1233H-1234C):
“The majority of the Court of Appeal thought that the industrial tribunal should have decided as a matter of law that the exchange of letterswas an offer and acceptance which gave rise to a contract of employment exclusively in writing. It followed that the construction of the letters would then also be a matter of law. For my part, I do not think that was a very realistic conclusion. The letters were not drafted by a lawyer and their language was extremely concise. To construe them as a complete written contract left the Court of Appeal having to interpret the cryptic phrase “on a casual as required basis” in what they, as judges, took to be its natural and ordinary meaning, without the assistance of the evidence of what the parties had understood or how the contract had been operated. By this method they arrived at an interpretation different from that given to the words by the unanimous industrial tribunal, to say nothing of the Employment Appeal Tribunal.”
[85]Mr Short thus sought to justify the introduction of a raft of evidence of subjective intention and subsequent practice in support of the answers for which he contended.[86]I need not refer further to the evidence, which for reasons I set out later I have not been persuaded is admissible. Suffice it to say thaton all these grounds, and with recourse to that evidence (though he did accept that the evidence of subsequent practice was “patchy”), Mr Short thus contended that the Special Promise was intended and understood to be, and acted upon as if it was, available both prior to and post age 60.

My assessment and conclusion on question 1

[87]I address first the issue as to the admissibility of evidence of intention and subsequent conduct.[88]As briefly indicated above, it seems to me that the essential dividing line is between, on the one hand, the process of identifying all the terms of the arrangements said to constitute the contract and requiring interpretation, and on the other hand, the process of interpreting those terms: and see again per Lord Hoffmann in Carmichael at page 1234. The first is a question of fact; the second a question of discerning the objective intention of the parties from the words they used to express their agreement and their admissible context. Once the terms have been identified, their meaning is to be ascertained objectively and without regard to evidence of subjective intent or post-contractual conduct. So the question is: on which side of the divide does the exercise advocated on behalf of the Representative Respondents really fall?[89]In my view what the Representative Respondent is seeking to introduce is not evidence properly characterised as evidence of the terms of the contract, but of subjective intention and subsequent conduct; and that is so notwithstanding that some of the evidence put forward (not of course subjected to cross-examination given the form of the proceedings) might appear to be directed to introducing factual terms.[90]A number of considerations have weighed with me, both individually and cumulatively. First, as I read the evidence in the Witness Statements to which my attention was drawn (especially the Witness Statements of Alison Clarke herself, and of the Representative Respondent and a Special Member namely Irene Rea), the statements made were in the nature of commentary on the terms as set out in the Special Promise letter and, before it, the 1994 Announcement. They are glosses on the terms, and not an expression of new terms.[91]Secondly, what emerges is the sort of inconsistent picture which tends to emphasise the dangers of encouraging resort to individual recollections as the source of contractual rights. Put shortly, there is no sufficient coherence in the oral exchanges relied upon as to yield terms of sufficient certainty to constitute contractual terms.[92]Thirdly, and in any event, the ultimate question is whether the Special Promise was intended to be the exclusive record of the terms of the offer made by SCSL and accepted by the Special Members by subscription of the letter handed to them. In my judgment, it was: I accept Ms Asplin’s submission to this effect, and that concludes the issue as to the admissibility of evidence of subjective declarations or intentions: they are not admissible.[93]The like approach and reasoning lies behind my conclusion that the evidence advanced of subsequent treatment of Special Members is not admissible either. It is well established that post-facto events are not relevant to the construction of a contract: see, for example, James Miller and Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, per Lord Reid at page 603.[94]Further, and even if I am wrong in declining to accept its admissibility, I accept Ms Asplin’s depiction of the available evidence as creating a picture which is entirely unclear. The treatment accorded to Special Members is not uniform: some appear to have received special treatment, whilst others have not; and I understand it to be agreed between Counsel that a review by Mercer of their available relevant records has not revealed why each Special Member was treated in the way she was nor why her treatment was different from others where it was different.[95]It follows from my conclusion that such evidence, and evidence of additional terms, is not admissible, and in any event would lack any requisite consistency, that the answer to the first question must depend on the true construction of the Special Promise as it stands.[96]In my judgment, adopting that approach, I have concluded that the answer to question 1(a) is that contended for by the Applicants: in order to benefit under the Special Promise a Special Member must elect to retire at the age of 60, and not before or after that age.[97]In my view, the words are clear, and do not admit of different interpretation on their face. The commercial reasons for investing them with some broader meaning are debatable; but in my judgment, in any event, there is no warrant for such an extension, and for the Court to conjure such a meaning from the words would be not only to involve itself in an uncertain commercial evaluation, but also then to foist upon the parties and third parties affected a contractual engagement beyond what was actually agreed.[98]As mentioned previously, my understanding is that the Applicants accept that an election will be effective if made at any time between the 60th birthday of the relevant Special Member and her next birthday; the draft Order submitted by the parties after they had considered the draft version of this judgment which was circulated to them reflects, and I take it confirms, my understanding. Otherwise I would have required further argument on the point.

Question 1(b): What does ‘elect to retire’ mean?

[99]As appears from the recitation of the question in paragraph 42(2) above, question 1(b) raises a number of sub-questions. The Applicants’ answer to the first sub-question is ‘Yes’ and to each of the other sub-questions is ‘No’; the Representative Respondent’s answer to each is ‘Yes’.[100]The overriding issue is whether or not the benefit of the Special Promise is limited to those who take a pension immediately upon leaving service with a relevant Sea Containers group company. If so, the answers are as contended for by the Applicants. If not, the differing factual situations posited need to be addressed. I turn to consider and answer each sub-question in turn.

Question 1(b)(i)(a)

(b) (i)(a)

[101]There is no dispute or difficulty in relation to the first sub-question. A Special Member who leaves the service of an Employer and takes an immediate pension plainly ‘elects to retire’ within the meaning of the Special Promise.

Question 1(b)(i)(b)

(b) (i)(b)

[102]This question is whether a Special Member who leaves the service of an Employer but does not take an immediate pension nevertheless is someone who ‘elects to retire’ within that meaning.[103]The Applicants submit that such a Special Member is not thereby electing to retire; she is not retiring but withdrawing from employment, which the Applicants contend is a different matter. Ms Asplin relies in particular on the distinction drawn in the 1983 Rules between retirement in Rule 6 and ‘withdrawal from employment’ in Rule 13, and upon the words in the Special Promise referring to ‘provide a pension at age 60’ (connoting, she submits, simultaneous retirement and receipt of pension). Ms Asplin also prays in aid the fact that there is no provision in Rule 6 for deferral of receipt of pension: Rule 8 (late retirement) only applies if the member remains in employment, and Rule 13 (withdrawal from employment, i.e. deferred benefits) only applies if the member leaves employment prior to NRD. Lastly, she points out that Rule 8 only allows postponement to ‘not later than the date of actual retirement’, and she submits that this would be meaningless if it did not refer to leaving employment and taking an immediate pension.[104]The Representative Respondent, on the other hand, contends that the word ‘retire’ is broad and general and in ordinary parlance extends both to the cessation of employment and/or (whether or not simultaneous) a decision to take accrued pension. Put another way, the words do not limit the Special Promise to a Special Member taking an immediate pension upon ceasing employment by the Employer. Mr Short submitted that such a limitation, which would on the facts (I am told) result in a dramatic reduction of the application of the Special Promise, cannot reasonably have been intended: such a limited application, he submits, would have negated its principal objectives of protecting against the adverse impact of the change in NRD to 65 (which include the adverse impact to deferred pensions) and to insulate Special Members against particular adverse effects of the change in their case not protected against by the 1994 Announcement and Letter C.[105]I have hesitated over this question. I agree that the 1988 Deed and Rules do equate retirement with leaving employment and taking an immediate pension; but whilst that leans me in favour of it that does not seem to me to mandate the same strict interpretation of the Special Promise. However, (and ironically perhaps) Mr Short’s submission that the Special Promise was intended to replicate the pre-1994 Announcement position in the case of Special Members seems to me to tell against his argument in this context, for the reason identified by Ms Asplin – that is, that the pre-1994 position did not cover the situation posited. Furthermore (and the paramount consideration in reaching my conclusion) in my view the words of the Special Promise constitute a commitment only to provide a pension at age 60 upon retirement at the same age.

Question 1(b)(i)(c)

(b) (i)(c)

[106]This question is whether a Special Member who leaves the service of an Employer can then call for payment of a pension at some time thereafter. This is in effect the same as the previous question except that it relates not to an election for a deferred pension but a subsequent ‘calling for’ a pension.[107]For the same reasons as set out in relation to the previous question, in my judgment the Special Promise does not extend to this.

Question 1(b)(ii)

(b) (ii)

[108]This question is whether a Special Member can invoke the Special Promise to call for a pension without having left the service of an Employer.[109]In this context, both parties appeared to base their submissions on the 1988 Deed andRules, but construed Rule 8 differently and reached opposite conclusions as to the consequences.[110]On the Applicants’ construction, Rule 8 did enable a member who remained in the employment of the Employers after NRD with its consent nevertheless to elect to receive the Normal Retirement Pension “as if he had retired on the Normal Retirement Date”, but its use of the device of a deeming provision demonstrates that a member who continues in service is not in fact retiring for the purposes of the Rules. In addition, Ms Asplin pointed out that prior to 6th April 2004 (known as “A” day), when the tax regime for pension schemes changed from the Income & Corporation Taxes Act 1988 to the Finance Act 2004, a pension could not be taken before NRD (changed it will be recalled to 65) if the member remained in service: this was because exempt approved schemes (such as the 1983 Scheme) were required to comply with Inland Revenue Guidance Note 12 which required at paragraph 6.32 (in the 1979 edition applicable in 1994) that “A pension for the employee himself may not commence before the normal retirement date if he is still in service…”[111]Mr Short, on the other hand, drew from Rule 3 that prior to the changes a Member could indeed elect to receive the Normal Retirement Pension at the NRD despite remaining in service, and that it was the purpose and intent of the Special Promise to preserve this right of election intact. Again (this being a theme common to his submissions on all the various sub-questions) Mr Short called in aid the commercial sense of the greater flexibility for both employer and employee that this approach or construction would provide.[112]Although fought on the battlefield of Rule 8 this is in reality a re-enactment of the debate as to the meaning to be given to the words “still elect to retire at her previous retirement age” in the Special Promise, and especially the disagreement as to what ‘retirement’ means in the context. Once again, I can see the commercial sense of a broader interpretation; but it depends upon giving a meaning to “retire” which I do not think was intended. In my view, the Special Promise was intended to permit a Special Member to retire in the sense of stopping to work (or at least stopping to work full time) at the age of 60 rather than grinding on to the age of 65, with no diminution of the Normal Retirement Pension that would have been payable at the age of 60 prior to the 1994 Announcement. As indicated previously, I do not think the wording of Rule 8 mandates that conclusion; but its differentiation between actual retirement by ceasing to work and deemed retirement (continuing to work but electing to draw a pension) is consistent with that view.

Question 1(b)(iii)

(b) (iii)

[113]This question is whether a Special Member who has already left the employment of a Sea Containers Employer and is already entitled to a deferred pension under the 1983 Scheme and who subsequently ceases to work for a third party employer, may invoke the Special Promise.[114]The Applicants dismissed the situation envisaged as one that could not meaningfully have been meant to be covered by the Special Promise, posing rhetorically the question how leaving service with a non-Sea Containers company could be described as “still elect[ing] to retire.” They also contended that this would be a commercially absurd interpretation, there being no commercially sensible (still less compelling) reason why the Sea Containers companies would wish to provide a promise of benefits to persons who would, by that stage and by definition, be non-employees.[115]As I understood it, the Representative Respondent’s counter argument was that since the Special Promise was given deliberately outside the 1983 Scheme, any continuing link either with the 1983 Scheme (through continuing membership) or a Sea Containers Employer (through employment) was not necessary in order to invoke the benefit of the Special Promise, having once been a Special Member. Although in other contexts the Representative Respondent grounded her arguments in favour of a broad interpretation in commercial sense and the need to promote industrial harmony I did not understand them to advance any such arguments in this context.[116]I agree with the Applicants that this yet broader interpretation is not consistent with the words of the Special Promise in their admissible context, and there is no reason for extending their meaning.

Question 1(b)(iv)

(b) (iv)

[117]This is a variant of the previous question but focuses on a former member of the 1983 Scheme, who ceased to be a member when she left the service of a Sea Containers company and took a transfer of benefits to another scheme.[118]The Applicants dismissed this as “the most absurd of all the possible interpretations.” They contended that not only do all the problems referred to in the context of the previous question apply, but there is added in the context of this question the problem of determining what the baseline is for the Special Promise to be calculated against. Again rhetorically they pose the question: Would SCSL be required to top up what the Special Member would have received under the 1983 Scheme had they not transferred their benefits? Or should it top up what the Special Member is actually going to receive by reason of her transfer? If the latter, how can it be commercially sensible or reasonably be thought to have been intended that the risk of investments of the former employee’s other pension scheme be foisted on the Sea Containers company that in time past, but not any longer, was her employer?[119]The Representative Respondent added little to their submissions in respect of the previous question to the effect that the Special Promise was intended to take effect outside the 1983 Scheme and continuing membership of the Scheme was neither necessary nor even relevant in determining the meaning of the Special Promise. Mr Short sought in this context to suggest (by way of justifying the commercial strangeness inherent) an analogy with the position where certain pension related rights transfer under TUPE, and he also cited Procter & Gamble v Svenska Cellulosa Aktienbolaget SCA [2012] EWHC 1257 (Ch), a decision of my own.[120]In my judgment, there is no warrant for reading the words of the Special Promise as extending to cover the situation posited by this question. I accept the Applicants’ submissions. I do not myself see the relevance of the Procter & Gamble case in this context.

Question 2: who can the Special Promise be enforced against?

[121]This question changes the focus away from the extent of the Special Promise to its enforceability; and in particular the question is whether the Special Promise should be treated as given by or on behalf of SCL and/or of the Sea Containers Companies as well as SCSL.[122]The Applicants submitted that the answer is that the Special Promise was given by and may only be enforced against SCSL. There is nothing to indicate that the Special Promise was made by any other company, or even that any other company was aware of it. It can only be enforceable against SCSL.[123]Ms Asplin submitted that this can be seen in a number of different ways:(1) The Special Promise letter is on SCSL headed paper, with SCSL’s company registration number in the footer.(2) The 15 July 1994 Letter C, which the Special Promise letter refers to, is also on SCSL headed paper.(3) The 1994 Announcement, which the 15 July 1994 Letter C refers to, is also on SCSL headed paper.(4) All three of the above documents refer to “the Company” singular, and are signed on behalf of “the Company” singular.(5) In the case of the 1994 Announcement it was signed by Mr Danny O’Sullivan (“Mr O’Sullivan”), the chief financial officer of SCSL.(6) The 15 July 1994 Letter C and the Special Promise letter were both signed by Ms Clarke, who was HR director of SCSL.(7) SCSL was the principal employer of the 1983 Scheme.[124]The Representative Respondent accepted that the primary promisor is SCSL, and that:(1) the Special Promise was made by Ms Clarke, as Group Personnel Manager UK, a position she held as an employee of SCSL;(2) the Special Promise was made in relation to changes to a Scheme of which SCSL was Principal Employer;(3) SCSL was the company making those changes to the Scheme;(4) the Special Promise was made following a series of communications from SCSL regarding those changes; and(5) the Special Promise was recorded / made in a letter from SCSL.[125]However, Mr Short submitted that the word “Company” as used in the Special Promise letter (and prior correspondence) could also be interpreted in a broader sense, meaning the group of companies as a whole, as no distinction is made between the different companies in the group. He suggested that in this sense, the Promise is moving from the group as a whole; and that in respect of any individual Special Member, that would mean SCSL (for the reasons set out above), SCL (as parent company of the Group) and the particular employer (although usually this will be SCSL).[126]Mr Short further contended that it is clear that the term “Company” is not being used in the sense of meaning only the particular employer of the particular recipient of the Special Promise letter. Such specificity cannot stand with the fact that the Special Promise is moving from the Company (singular) rather than the Companies (plural). Whilst the singular is appropriate for a single company (SCSL) making the same promise to all, or a single group making the promise jointly, it is not apt to describe different or several promises (even if in the same terms) being made by a several different companies. Such specificity would have been contrary to the culture at the Sea Containers group, according to the evidence of the Representative Respondent and Irene Rea.[127]Thirdly, Mr Short relied on the evidence of Mr O’Sullivan, a former trustee of the 1983 Scheme and a former Chief Financial Officer of SCSL. Mr O’Sullivan was also a signatory of the 1994 Announcement. In paragraph 31 of his first Witness Statement dated 13th July 2012 Mr O’Sullivan said this:
“I was involved in setting up both the 1983 Scheme and the 1990 Scheme (collectively “the Schemes”). I can say that, for as long as I was with the group, SCL’s support for the Company was intended to apply to the Company’s pension obligations as much as to any other matters and I have no reason to believe that this has changed since, Indeed, the Scheme was regarded as SCL’s own pension scheme. As the Company has no material assets, from a personal point of view as a member of the 1983 Scheme, I would not have been satisfied with having to rely upon the Company’s ability to fund the Scheme’s future obligations to me.”
[128]With respect to both Mr Short and Mr O’Sullivan, I do not think any of this is sufficient to overcome the basic difficulty inherent in the accepted facts as set out in paragraphs 123 and 124 above. Those facts seem to me to be inconsistent with the assumption by any company other than SCSL of direct personal obligation to the Special Member concerned. That is so even if (as Mr O’Sullivan did) the Special Members did indeed envisage and understand that SCL would support and indemnify SCSL and the other Sea Container Employers. SCL may have assumed economic responsibility for pension liabilities vis-a-vis its group companies; but I can see nothing substantively to support the assumption of direct legal liability by it or any other company than SCSL to the Special Members.[129]In my judgment, therefore, the Special Promise cannot be enforced directly against any company other than SCSL.

Question 3: should other benefits be taken into account in determining what is due?

[130]The third and final question posed is in two parts. Assuming that the Special Promise is effective, when determining what is due to a Special Member under it should pension benefits accrued be taken into account:(1) Under the 1983 Scheme after the day of her 60th birthday?(2) Under some other retirement benefit scheme or personal pension policy, whether before, on or after her 60th birthday?

Applicants’ submissions

[131]The Applicants submitted first that the most basic analysis of the Special Promise demonstrates that there is no realistic way to suggest that it is a promise for an entirely free-standing pension: it must be a promise to top up whatever the Special Member is to receive. One example they gave was this: if a Special Member would have received a £100 pension from the 1983 Scheme, but for the 1994 equalisation exercise, but will now receive a £90 pension, it would be utterly absurd to suggest that the Special Promise entitles her to botha £100 pension under the Special Promise anda £90 pension under the 1983 Scheme. The only realistic interpretation in that situation is that it entitles the Special Member to £10 under the Special Promise. In short, the Applicants submitted, the fact that the Special Promise is a top up to a pension, rather than a pension, informs the answer to Question 3. Ms Asplin elaborated her submissions under the two heads as follows.[132]As to post-60 benefits accrued under the 1983 Scheme, the Applicants’ primary position was, of course, that the Special Promise is only effective if the Special Member leaves service and takes an immediate pension at 60, so the situation in question cannot occur. However, if that is wrong, Ms Asplin submitted that common sense dictated that such benefits should plainly be taken into account; the intent was not a free-standing obligation but an obligation to top-up the difference between benefits accrued after age 60 under the post-1994 benefit structure compared to the pre-1994 benefit structure. As a matter of common sense, it was submitted, the Special Members cannot take the benefit of post-60th birthday hypothetical benefit accrual when calculating their pre-1994 benefit structure ‘baseline’, without also taking the burden of their post-60th birthday actual benefit accrual.[133]To test this, Ms Asplin put forward the following example of a Special Member who - contrary to the Applicant’s case on the construction of the Special Promise - elects to retire at 64:(1) Under the pre-1994 benefit structure a Special Member would have accrued a £100 pension by age 60, and a £150 pension by age 64.(2) Under the post-1994 benefit structure the Special Member accrues a £90 pension by age 60, and a £130 pension by age 64.(3) If one ignores all post-60th birthday benefits then the Special Promise is only worth £10, whether at age 60 or age 64.(4) If one includes post-60th birthday benefits, then (on the Applicant’s position) at age 64 the ‘baseline’ is £150, the actual benefits are £130, and the Special Promise is worth £20. In total the Special Member receives £150 - as they would have under the pre-1994 benefit structure.(5) However, on the Representative Respondent’s position at age 64 the ‘baseline’ is £150, but the actual benefits (not taking account post-60th birthday accrual) are £90, and the Special Promise is therefore worth £60. In total the Special Member receives £190 Special promise £60 plus actual benefits £130. - far more than they ever would have received but for the 1994 equalisation exercise.[134]Ms Asplin submitted with some force that this was far more than anyone can reasonably have intended or expected.[135]Turning to the second aspect of the question, she put forward two reasons why benefits from other pension schemes or personal pension policies should be taken account of in determining what is due under the Special Promise. The first was to carry forward the logic of the top-up nature of the Special Promise. If the Special Promise is supposed to put the Special Members in the position they would have been ‘but for’ the 1994 equalisation exercise (in whatever are the relevant circumstances), then why should it not take into account third party benefits? In other words, why not allow for mitigation? The Special Promise, she submitted, was intended to be an indemnity not a bonus.[136]The second reason she advanced assumed that benefits accrued under the 1983 Scheme would be taken into account: on that basis, her simple point that it would be unfair to take into account benefits under other schemes: and that further, that would lead to the absurd and commercially unattractive result that the Special Promise would be of more value to someone who had left employment with the Sea Containers Companies than to someone who had stayed.

Representative Respondent’s submissions

[137]For the Representative Respondent, Mr Short submitted (as to both limbs of the question identified by the Applicants) that the Special Promise simply gives rights to particular benefits as a contractual entitlement. I understood him implicitly to reject the characterisation of the Special Promise as a top-up payment; and he rejected any analogy with a duty to mitigate such as arises in the context of a claim for damages (and he cited as to the distinction the Court of Appeal decision in Abrahams v Performing Rights Society [1995] IRLR 486 at paragraphs 28 onwards).[138]Further, Mr Short urged me to reject any argument that benefits outside the 1983 Scheme should be taken into account as wholly arbitrary and impossible to police.

My assessment and conclusions

[139]In my judgment, I accept the characterisation of the Special Promise as being intended to enhance the benefits to be received by a Special Member under the 1983 Scheme post-1994 to bring them up to what that Special Member would have received pre-1994 (limited as I have described above). I accept the Applicants’ submission that benefits under the 1983 Scheme should be taken into account in determining the amount payable under the Special Promise.[140]However, I do not accept that this means or suggests that benefits accrued under a separate third party scheme should be taken into account. In my judgment, there would be no warrant for such an approach, and I would answer question 3(ii) in the negative.

Summary of conclusions

[141]For the reasons I have sought to set out in my judgment the answers to be given to the questions raised (on the basis of my assumption in paragraph 98 above) are as follows: Question 1(a) “Are the enhanced benefits provided for in the Special Promise available to a Special Member who:-(i) retires on the day of her 60th birthday; and/or(ii) retires at any time on or after the day of her 60th birthday; and/or(iii) retires at any time on or before the day of her 60th birthday?” Answers: 1(a)(i): Yes 1(a)(ii): Yes, insofar as the Special Member retires on or after the day of her 60th birthday but before the day of her 61st birthday, but otherwise No.

(i) : Yes 3(ii): No

[142]As mentioned above, Counsel have, since circulation to them of this judgment in draft, prepared an agreed draft Order setting out the answers I have given (and also reflecting the assumption I have made in paragraph 98 above).[143]As I am content to approve the order in the form of that draft, and in light of the form of the proceedings, it may be that no further attendances are required; but again I would ask Counsel to liaise with my clerk in this respect and to make such arrangements as may be considered necessary.

Cited in 1 later judgment