IBM United Kingdom Holdings Ltd & Anor v Dalgleish & Ors [2015] EWHC 1439 (Ch)

[2015] EWHC 1439 (Ch)

Case No HC10C01796

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice Strand, London, WC2A 2LL

Date; 19 May 2015

Before

MR JUSTICE WARREN

Between

(1) IBM UNITED KINGDOM HOLDINGS LIMITEDClaimants

(2) IBM UNITED KINGDOM LIMITEDClaimant

(1) STUART DALGLEISHDefendants

(2) LIZANNE HARRISONDefendant

(3) IBM UNITED KINGDOM PENSIONS TRUST LIMITEDDefendant

Andrew Simmonds QC, Paul Newman QC, and Joseph Goldsmith (instructed by Bond Dickinson LLP) for Claimants

Michael Tennet QC, Nicolas Stallworthy QC, and Benjamin Faulkner (instructed by DLA Piper UK LLP) for 1st and 2nd Defendants

Andrew Spink QC, Jonathan Evans QC and Edward Sawyer (instructed by Nabarro LLP)

for 3 rd Defendant

Hearing Hearing dates: 27th and 28th April 2015

Judgment

Date 2015-05-19

[1]This judgment deals with points which I left open for further argument in the Remedies Judgment concerning the need for a further decision to be made to adopt a new ER policy and a need for notice to be given of that new policy before it is implemented. Before coming to what it is that Mr Evans now submits I should decide, I should start by indicating what I have actually already decided and what I have left open. I am certainly not going to change any decisions which I have already made. If any of them are wrong, that is a matter for correction on appeal.

[2]The relevant paragraphs of the Remedies Judgment are [470] to [474]. In [470] I concluded, as a matter of decision, that there would come a time when Holdings could adopt the New ER Policy free from the constraints of Project Waltz. Whether Holdings was required to give notice of a change of policy was not a question which arose in the context of remedies for the breaches of duty involved in Project Waltz but would arise whenever Holdings decided to change its ER policy. In reaching that conclusion I rejected the argument which I had identified in [469] to the effect that a policy identical to or along the lines of the New ER Policy could not be implemented without a further announcement and without giving members the opportunity to take early retirement under the Old ER Policy; this was an argument that in to implement the New ER Policy would simply be to implement a step in Project Waltz, a project which was fatally flawed.

[3]In [471] I recorded that the relevant date was 31 March 2014. I repeated the conclusion that, once the constraint imposed by the Reasonable Expectation had come to an end on that date, Holdings was free to adopt a new ER policy identical to or along the lines of the New ER Policy. If a change of policy could not, as a matter of general approach, be implemented without notice, then notice would be required for Holdings to adopt the new policy. Importantly for present purposes, I also said that, if notice was not required then the fact that the new policy followed on from the end of Project Waltz and took place in the context of the litigation leading to the Breach Judgment and to the Remedies Judgment did not result in notice being required, when otherwise it would not be required. I would add to that last point that it would not result, either, in notice of longer duration being required than would otherwise be the case.

[4]There are two points I wish to make arising out of that: i) First, I was not simply making the observation that, once the Reasonable Expectation had come to an end, Holdings was free to change its ER policy. I was deciding, rightly or wrongly, that it was free to change its ER policy even though the earlier adoption of the New ER Policy and its implementation had given rise to a breach of duty. ii) Secondly, it does not follow from that decision that members who remained in service do not have any remedy for the breach of duty. A member who would have left service had the Old ER terms been available will have a financial claim for the loss which he has suffered.

[5]It was [472] in which I left open the possibility of further submissions. It is helpful to have the paragraph to hand so I set it out here:

“The Trustee’s position is that 6 months’ notice is required but, as I understand the submission, the requirement for notice arises because this is the only way in which a remedy for the breach of duty can be provided. I do not agree with that: if there is a requirement for notice it stems from a more general requirement for the giving of notice when a change of ER policy is to be adopted. The point has not been argued. If any party wants me to deal with the point, I will consider whether I should do so, taking account of any objections to that course. It may help if I provide some very provisional views which are not put forward even as preliminary decisions in principle:”

[6]It should be noted that this paragraph follows on from what I had said, by way of decision, in [471] to the effect that the requirement for notice (if any) would arise only as a matter of general approach and that the fact that the change followed on from the end of Project Waltz would not make notice necessary when otherwise it would not be. I was therefore considering, in [472] the period of notice (if any) which was required as a matter of general approach and not as a method of providing some remedy for the breach of duty to which the change of ER policy gave rise. The Trustee, as can be seen from the opening sentence of [472] considered that 6 months’ notice was required. Importantly, the Trustee’s reason for requiring notice was to provide a remedy for the breach. In other words, the only effective way in which the wrong suffered by the members could be corrected was to give them the opportunity to take early retirement on the Old ER terms of which they had been deprived. That is the argument which Mr Evans has urged on me again.

[7]However, I rejected that argument in the second sentence of [472]. The points which had not been argued referred to in the third sentence were whether notice was required as a more general requirement and, if it was required the length of notice appropriate. It was in that context that I set out some provisional views in sub-paragraphs [472 i) to vi)] which demonstrate that I was speaking of notice to change the policy in accordance with that more general requirement.

[8]Mr Evans for the Trustee has made a number of submissions (supported by Mr Stallworthy for the RBs) in an attempt to demonstrate that the appropriate remedy for the breach of duty is to require a period of notice before a change of policy can come into effect and that, until it does come into effect, to require that the Old ER Policy will apply. This includes the proposition that IBM UK was in further breach of duty in refusing to open a new ER window having wrongly denied Eligible ER Members their right to take early retirement for almost 4 years and now seeking to take advantage of the delay in the determination of their rights past the end date of the Reasonable Expectation. But these arguments are inconsistent with my reasoning in [466] to [468]. I can see, in the light of Mr Evans’ submissions, that there is an arguable point on appeal that my reasoning and conclusions are wrong. But this is not a case where I am persuaded that I am so obviously wrong (or indeed actually wrong) that the Remedies Judgment needs revising.

[9]I do not, in any case, accept that the course which Mr Evans’ advocates is the only way in which to provide a fair remedy to the disappointed members. Even if a new ER policy has now been validly adopted (a matter to which I will be coming in a moment), the affected members may, as I have said, have a financial remedy. I appreciate that the vindication of their rights might require further litigation in which they will need to demonstrate, on an individual basis, that they would have taken early retirement if the Old ER terms had been available. It is, I readily accept, not as clean a remedy as the one which Mr Evans advocates. But to provide the remedy for which Mr Evans contends would not seem immediately fair to IBM UK since, on one view, the remedy is unprincipled. This is because it gives the affected members something to which they would never have become entitled if Holdings had not acted in breach of duty.

[10]Had there been no breach of duty, then, to take one example, an affected member would have been able to take early retirement. Had he done so, he would have received an early retirement pension based on his then salary and period of service. If he is allowed to take early retirement now, he will receive an early retirement pension based on his current salary and his period of service to date. That is not a remedy which puts the member in the same position as he would have been in the absence of the breach. To take another example, a member who would not have taken early retirement before 31 March 2014 (the end date of the Reasonable Expectation) would now be able to take early retirement on beneficial terms which he would not have been entitled to even if Holdings had not acted in breach of duty.

[11]I appreciate, of course, that equitable remedies are not always compensatory. In particular, breach of duty can result in the exercise of powers being set aside; and so I have held the Exclusion Notices to be voidable. So too, the New ER Policy as originally implemented cannot be relied on by Holdings. It would not in my view, however, be in accordance with principle for the court to restrict the exercise by Holdings of its power to change ER policy in order to provide a remedy for a past breach of duty, at least if there is an alternative and suitable alternative remedy. In my view, the financial remedy available to members is a suitable alternative remedy notwithstanding that such a remedy has to be sought on an individual basis.

[12]This is particularly so given the logical consequence of Mr Evans’ submissions. Although one course which Holdings might adopt would be to open a new ER window and apply the Old ER terms, by doing so it would prejudice its overall position. Thus were it to win an appeal against some or all of the parts of the Breach Judgment and the Remedies Judgment on which it is seeking leave to appeal, it might be the case that the change in ER policy did not give rise to a breach of duty in the first place. In order to preserve its position, Holdings could not safely adopt the course which I have just mentioned. And yet if Mr Evans’ argument is correct, and if IBM UK’s appeals all fail, Holdings will then have to open a new ER window once the appeal has been determined. It is no answer to this, in my view, to say that IBM UK has only itself to blame for having acted in breach of duty.

[13]That is not an end of the matter, however. This is because it may be the case that Holdings has not in fact yet brought any replacement new ER policy into effect.

[14]This is the point which I left open in [472] of the Remedies Judgment. Although I left it open in terms of the need for notice, there is a prior point which Mr Evans raises(and which I consider he is entitled to raise). He submits that not only does there need to be notice but there also needs to be a new decision by Holdings to change its ER policy.

[15]In addition, it is said that even if Holdings has in fact made a new decision and given notice of its change of policy, members have not in fact been able to take early retirement because(i) unless and until a member sets aside the Exclusion Notices vis a vis himself, he is treated as a Hybrid Deferred member to whom the New ER Policy does apply and

(ii) execution of the Breach Judgment and the Remedies Judgment is stayed so that members cannot yet seek to set aside the Exclusion Notices.

[16]Let me deal with that last point first. In my view, it is not open to the Trustee and the RBs to take this point. It is essentially an aspect of the point already dealt with at paragraph 8 above that Holdings was in further breach of its Imperial duty in failing to afford a new ER window. This can only be raised, if at all, by way of appeal.

[17]Mr Evans has made the submissions which I have recorded in brief in paragraph 14 above principally in relation to his argument that the members must be given an opportunity to take early retirement because that is the only proper remedy to rectify the breach of duty. He cannot, for reasons given earlier in this judgment, now rely on that argument which is a matter for an appeal. His submissions have force in the context of that argument. But my view is that they do not avail him in seeking to establish a requirement for a decision and a notice aside from issues of breach of duty.

[18]So far as the need for a decision is concerned, I consider that the position is straightforward. Quite clearly, Holdings would not, indeed it could not, implement any ER policy unless it had decided to do so. It may be correct that a decision in 2010 which could not then properly be implemented cannot be relied on as the basis of action after 31 March 2014. Thus it might not be possible for a decision by the appropriate decision maker (eg senior management of IBM UK) made in 2010 to be relied on in 2014 by more junior staff without that decision-making power.

[19]But that is not the position on the facts. It is perfectly clear from its skeleton argument for the Remedies Hearing that IBM UK remained resolved on implementing the New ER Policy. It is, in my respectful view, nonsense to suggest that pressing ahead with that policy was being pursued other than as the result of decision at a high level. If Mr Evans were to suggest that there is no evidence to support that conclusion, I would say that it is inconceivable that it was and still is pursuing this part of its case without a decision having been made to reaffirm the desire to adopt the New ER Policy.

[20]The only real issue, it seems to me, is whether notice of the change of policy is required and if so whether it has been given. Before turning to that issue, I make this observation. Even if notice is required, it does not necessarily follow that, during the currency of the notice, a member can take early retirement on the Old ER terms. It is, no doubt, implicit in the requirement for notice that, until notice is given, the pre- existing policy remains in place; if my judgment is upheld, then the pre-existing policy is the Old ER Policy. But if my judgment is overturned, it may be that that the New ER Policy will be held to have been validly introduced in 2010; in that case, a new notice today would not in fact change the policy but would simply confirm the pre-existing policy, that is to say the New ER Policy. In practice, therefore the needfor notice will not provide the certainty to members which they would like when making a decision about whether to leave service.

[21]In making their submissions about the need for notice of a change in ER policy, the parties have focused on the type of notice which specifies a period of time before the new policy comes into force and during which the pre-existing policy continues. Mr Simmonds asks where the obligation to serve such notice is to be found. He says nowhere. I agree. There is not, I consider, an implied restriction on the exercise of the discretion to determine an ER policy to the effect that it can only be exercised upon giving some reasonable period of notice. This is so even assuming that the same sort of approach to the implication of terms in relation to the exercise of such a discretion is to be adopted as it applies in relation to the implication of contractual claims (as to which I refer again to A-G of Belize v Belize Telecom

[2009] 1 WLR 1988

: see [92] of the Remedies Judgment). Such an approach would be a generous approach from the members’ point of view. However, I do not consider that such an approach would be correct. In my view, the exercise of the discretion could be challenged only on the basis of a breach of its Imperial duty by Holdings. In my judgment, the Imperial duty does not result in any requirement for Holdings to give a notice of this sort before changing its ER policy; it would not be perverse or irrational (in the relevant sense) for it to refuse to give such notice.

[22]This conclusion does not mean, however, that Holdings can simply implement a new policy without telling members that it has been adopted. It would not be open to Holdings to decide to adopt a new policy with immediate effect but not to inform the members of that change. A member might decide to leave service thinking that he would be entitled to take advantage of the Old ER terms only to be told, after he had left, that they were no longer available. That cannot be right. In my view, it is incumbent on Holdings to make an announcement informing members of the relevant change.

[23]An announcement can be made at a time when a new policy can properly be implemented. But if the new policy can validly take effect only at a future date (for instance because of a restraint imposed by a Reasonable Expectation) then a decision to implement the new policy immediately would not be effective and an announcement that it had been changed could not be relied on.

[24]On the evidence, it appears that IBM UK’s position until after the Breach Judgment was that the change of ER policy was effective from 2010. It had never made a decision that the policy should change only from the expiry date of the Reasonable Expectation concerning the Old ER Policy. Mr Simmonds relies on Mr Riley’s email dated 7 July 2009 (see [18] of the Breach Judgment) as an effective notice on the assumption (contrary to his submission) that a notice of the sort discussed in paragraph 21 above is needed; and he can equally seek to rely on it as the sort of announcement which I consider is required. In my view, however, the email cannot be relied on for either purpose. It purports to change the ER policy as from April 2010. A decision to make such a change in relation to the relevant members would not be valid and an announcement of such a change would be of no effect.

[25]More significant are the written opening submissions on behalf of IBM UK for the Remedies Hearing served on 17 July 2014 and referred to in [472 iii)] of the Remedies Judgment on which Mr Simmonds relies in the alternative. By that time, itwas common ground, as a result of the Breach Judgment, that the end date of the Reasonable Expectation in relation to the Old ER Policy was 31 March 2014. IBM UK was therefore in a position at least to make a decision to replace the Old ER Policy; and IBM UK’s whole conduct is consistent only with its having done so (as to which see further at paragraph 19 above).

[26]Mr Simmonds submits that the skeleton argument to which I have referred is a sufficient notice of a future change of policy; a fortiori, it would be enough if only an announcement of a change of policy is required. This was the tentative conclusion which I had reached in [472 iii)] of the Remedies Judgment. Mr Evans and Mr Stallworthy both submit that service of the skeleton argument did not provide a relevant notice (and the same would go for its effect as an announcement). A document sent to the lawyers for the Trustee and the RBs, even if taken as provided to the Trustee and the RBs themselves, cannot be taken as an announcement to the members as a whole. There is nothing to suggest that the RBs communicated the contents of the skeleton argument to members generally let alone the message relating the ER policy which IBM UK was intending to adopt. I think, on reflection, that Mr Evans and Mr Stallworthy are correct in saying that the skeleton argument did not constitute a notice to members and for the same reasons it is not a sufficient announcement either.

[27]In [472 iii)] I also expressed the tentative view that, if my conclusion about the skeleton argument was wrong, there could be no doubt about IBM UK’s position by the end of the Remedies Hearing. That is true in relation to anyone who attended the hearing or received a sufficiently accurate account of the relevant part of the hearing, but the hearing itself was not, I now consider, a sufficient communication to the members as a whole to amount to an announcement of the sort which I consider is required let alone to amount to a notice of a change of policy if such a notice is required.

[28]My conclusions, in the light of this discussion are as follows: i) Whatever the position may have been before 31 March 2014, it was open to Holdings after that date to decide to implement a New ER Policy. Its conduct after that date is consistent only with such a decision having been made. In my judgment, such a decision was made. ii) IBM UK was not required to give notice of the policy to be applied in the future specifying a period before which the new policy would not take effect and which would thus allow for a member to rely on the pre-existing policy for the period of the notice. iii) However, IBM UK was obliged to communicate the new policy to members after 31 March 2014 since it had not, prior to that date, done so prospectively. iv) If, contrary to my decision in ii) above, such a notice is required, then the matters relied on by Mr Simmonds do not constitute a sufficient notice and nor does what was said at the Remedies Hearing.Further, those same matters (including what was said at the Remedies Hearing) do not provide the communication to members of the new policy which they are entitled to receive. v) The current position, therefore, is that no New ER Policy has yet been validly introduced.

[29]It follows that a member is entitled, as of the date of this judgment, to take early retirement on the terms of the pre-existing ER policy. If my decision in the Breach Judgment and the Remedies Judgment are upheld, that is the Old ER Policy. But if, on appeal, it is held that the New ER Policy was validly introduced, it will be that policy which applies. The position hereafter will depend on what actions are taken by members and IBM UK respectively to crystallize their positions.