British Telecommunications Plc v Michelle Luck and Others

Hearing dates: 6 February 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Claimants were, prior to August 2000, employees of the Defendant ("BT"). In that month their employment was transferred to e-peopleserve Ltd. ("EPS"), a joint venture vehicle established by BT and Accenture. Whilst employed by BT the Claimants were members of the BT pension scheme. It is the Claimants' case that BT represented to them that the terms of their employment (including pension) would be the same following their transfer to EPS and that their ability to participate in the BT pension scheme would not be prejudiced and would continue indefinitely. However, by a share acquisition agreement dated 28 February 2002 BT sold its shareholding in EPS to Accenture and on 31 August 2002 1 the Claimants ceased to be members of the BT pension scheme. The Claimants say that the replacement scheme (the Accenture HR Services Pension Plan) is a defined contribution scheme and a not defined benefit scheme (as is the BT pension scheme) and was therefore to the significant financial detriment of the Claimants.

The Claimants allege that the representations made by BT were false in that in August 2000 BT knew that it would withdraw from EPS within 3 years and that the Claimants would thereafter cease to be eligible as members of the BT pension scheme. The Claimants say that BT had agreed with Accenture to withdraw from the joint venture and therefore that the Claimants would be removed from the BT pension scheme. They say that if the representations had not been made they would not have entered employment with EPS. They say they have suffered loss in that their pensions will be significantly lower in value than they would have been had the Claimants remained in the BT pension scheme after 31 August 2002.

The Claimants commenced proceedings against BT on 27 August 2008 which was just 3 days before the expiry of 6 years from the Claimants ceasing to be members of the BT pension scheme but more than 6 years from the Claimants being transferred into the employment of EPS.

Particulars of Claim were served on 22 December 2008 and amended on 28 September 2009. The Claimants advanced claims both in contract and in tort. The claim in tort is that the representations were made fraudulently or negligently. The claim in contract is that it was an implied term of the Claimants' contract of employment that reasonable care would be taken in the making of the representations.

A Defence was served on 3 February 2010. BT said that the claim was time barred in that any cause of action in contract or tort had accrued more than 6 years before 27 August 2008. As to the merits of the claim BT said that the representations they had made were true, alternatively, that they had an honest and reasonable belief that they were true. As to the suggested loss BT said that the joint venture was inevitable and that was nothing the Claimants could have done to negotiate the opportunity to remain in the BT pension scheme. Apart from further amendments to the pleadings little progress appears to have been made in the action.

On 13 February 2013 the Claimants issued an application notice seeking an order that the limitation defence be struck out on the grounds that it had no real prospect of

Master Leslie ordered that the claim in contract, but not the claim in tort, be struck out. He ordered that the limitation defence to the claim in tort be struck out. His reasoning was that, as was common ground, the cause of action contract had accrued more than 6 years before the action was commenced, namely, in August 2000, and there was no triable issue that the commencement of the limitation period had been postponed by reason of section 32 of the Limitation Act 1980. So far as the claim in tort was concerned he held that the cause of action in tort accrued less than 6 years before the action was commenced, namely, on 31 August 2002, and he therefore struck out the limitation defence. (He also gave directions for the future conduct of the proceedings. Disclosure was to take place by 10 January 2014 and witness statements were to be exchanged by 28 February 2014. My understanding is that no disclosure has taken place, the parties having agreed a stay pending the appeal.)

BT now appeals (with permission granted by Bean J.) from the Master's decision to refuse to strike out the claim in tort and his decision to strike out the limitation defence to the claim in tort. By a Respondents' Notice the Claimants have said that the claim in tort should not have been struck out on the additional ground that the Claimants have raised a triable issue that the start of the applicable limitation period was postponed as a result of section 32 of the Limitation Act 1980. For the same reason it is said that the claim in contract ought not to have been struck out.

The accrual of the cause of action in tort

It is common ground that a cause of action in tort does not accrue until actual damage has been suffered.

BT says that on the basis of the Claimant's pleading, which must be assumed to be true for this purpose, the Claimants suffered actual damage when they left the employment of BT and became employees of EPS in August 2000, for from that date the Claimants' position had changed. They were then exposed to the risk, indeed the likelihood (and arguably the inevitability 2), that BT would leave the joint venture and that the Claimants would be removed from the BT scheme. Since the Claimants did not commence proceedings until 2008 their claim in tort must be time-barred, subject always to the effect of section 32 of the Limitation Act.

The Claimants say that they did not suffer loss in August 2000 when they were transferred to the employment of EPS for the terms upon which they were employed were no different from what they had been when employed by BT. That is the purpose of the TUPE regulations. In addition they remained members of the BT pension

Master Leslie held that the Claimants' claim in tort was not time barred. His reasoning (in an ex tempore judgment) was as follows:

"17. …………….If one of the Claimants, a BT employee, had resigned two years into his new employment of two years after his transfer to EPS, he would have suffered no damage. The Claimant who remained in EPS suffered no damage ….. A BT employee after transfer into EPS who died, (any surviving spouse) would suffer no loss; there would be no loss to his estate, no diminution in the value of his pension. …………So at the time that the employees were transferred into EPS' employment, but remained in the British Telecom pension scheme, it is clear that they suffered no loss. In my judgment, their position was precisely the same before as after the transfer. Indeed, as Mr. Cohen pointed out and I accept, whilst there always a mechanism by which the British Telecom pension scheme could be disappplied to any particular employee under the terms of the scheme it remained the same both before and afterwards……So the only time that actual damage is suffered is when the employees are removed from the BT pension scheme. "

This approach was, said Mr. Cohen, on behalf of the Claimants, based upon common sense. However, it was attacked by Mr. Grant, on behalf of BT, by reference to several recent authorities. Mr. Grant submitted that the mere possibility of loss was actual damage. Similarly, the fact that a claimant could prevent such loss materialising by taking his pension after he had been transferred into the employment of EPS but before he had ceased to be a member of the BT pension scheme does not lead to the conclusion that he did not suffer a loss when he was transferred into the employment of EPS.

Determining when economic or financial damage has been suffered as a result of negligence is not a simple task. The question has been reviewed by the House of Lords in Law Society v Sephton [2006] 2 AC 543 and since then by the Court of Appeal in at least three cases; see Shore v Sedgwick Financial Services [2008] PNLR 874, Pegasus Management Holdings v Ernst & Young [2009] PNLR 209 and [2010] PNLR 438 and Axa Insurance v Akther & Darby [2009] PNLR 455 and [2010] 1 WLR 1662.

However, none of the authorities concerns facts similar to those of the present case. The question when damage is suffered must be a fact sensitive matter. Indeed, I note that in Axa Insurance v Akther & Darby [2009] PNLR 455 at p.463 Flaux J. observed that "any number of the cases emphasise that whether or not actual damage has been suffered is, in each case, a fact specific question…". The authorities have been analysed in considerable detail in the recent cases and so I do not consider it necessary to embark upon my own analysis of them....