Britvic Plc v Britvic Pensions Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nugee,Sir Geoffrey Vos,Lord Justice Coulson |
| Judgment Date | 10 June 2021 |
| Neutral Citation | [2021] EWCA Civ 867 |
| Date | 10 June 2021 |
| Docket Number | Appeal No. A3/2020/0316 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 867
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lord Justice Coulson
and
Lord Justice Nugee
Appeal No. A3/2020/0316
Case No: PE-2019-000013
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
HH Judge Hodge QC, sitting as a judge of the High Court
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Andrew Short QC (instructed by Addleshaw Goddard LLP) appeared on behalf of the Appellant (“Britvic”)
Mr Jonathan Chew (instructed by Gowling WLG UK LLP) appeared on behalf of the first Respondent Trustee (the “Trustee”)
Mr Keith Bryant QC and Mr Philip Stear (instructed by Arc Pensions Law LLP) appeared on behalf of the second Respondent, a representative member of the Britvic Pension Plan (the “representative member”)
Hearing dates: 12 and 13 May 2021
Sir Geoffrey Vos, Master of the Rolls:
Introduction
The main issue in this appeal is beguilingly simple. It is whether the words “or any other rate decided by the Principal Employer” in a pension increases provision in the Rules of an occupational pension scheme mean “any higher rate” or “any other rate, whether higher or lower” decided by that employer. HH Judge Hodge QC (the “judge”) decided in favour of the former interpretation. The appellant employer, Britvic, submits that he should have interpreted the rule (Rule C.10(2)) as meaning the latter. Both Britvic and the respondent representative member pray in aid the guidance as to the interpretation of pension schemes given by Lord Hodge in Barnardo's v. Buckinghamshire and others [2018] UKSC 55 (“ Barnardo's”).
Rule C.10(2) appears in both the Defined Benefit Staff Rules and the Defined Benefit Executive Rules of the Britvic Pension Plan (the “BPP”), which was established by a Trust Deed and Rules adopted on 31 January 2003. The relevant parts of Rule C.10 provide as follows:
“(1) Each pension under the Plan increases in each year after it starts to be paid except …
(2) The part of a pension which exceeds any guaranteed minimum pension in payment is increased on 1 October in each year. The rate of increase is the percentage increase in the retail prices index during the year ending the previous 31 May but subject to a maximum of 5 per cent. [in relation to Pensionable Employment up to and including 30 June 2008 and a maximum of 2.5 per cent. in relation to Pensionable Employment on and from 1 July 2008] (or any other rate decided by the Principal Employer).” 1
Britvic has been the principal employer of the BPP since 2 March 2006 when it replaced Britannia Soft Drinks Limited in that role. The sole trustee of the BPP is Britvic Pensions Limited. The representative member of the BPP is Mr Simon Mohun, who was employed in the soft drinks business of Bass plc and its later iteration, Six Continents plc, which were predecessor employers to Britannia and Britvic. Mr Mohun was a member of the Bass Pension Plan (established in 1946) later called the Six Continents Pension Plan. His benefits were in due course transferred into the BPP.
The judge was asked to construe Rule C.10(2) in the 2003 deed and in a 2007 replacement deed, and the amended version from 2008, but the parties were agreed before the judge and before us that the meanings were the same. It is to be specifically noted, however, that members of the staff section of the BPP were subject to a pension increases clause in substantially the same form as Rule C.10(2) in their predecessor scheme, but members of the executive section of the BPP were not.
The context to that distinction was that the BPP was established for employees and former employees of the soft drinks business of Six Continents plc as part of a
demerger. Before the inception of the BPP on 1 April 2003, a bulk transfer of assets and liabilities was effected by transfer deeds from the existing Six Continents Pension Plan (for staff) and the Six Continents Executive Pension Plan (for executives) to the BPP. A clause in the form of Rule C.10(2) had appeared since 24 July 1996 in Rule 23 of the Six Continents Pension Plan, but such a clause had not appeared, as I have said, in the predecessor Six Continents Executive Pension Plan. Instead, Rule 24 of that Plan provided simply for increases at RPI subject to a 5% cap. 2 It is to be noted that Rule 23 is the subject of an interpretation and rectification claim in proceedings concerning the Six Continents Pension Plan, 3 which are coming to trial in late June 2021.The judge's decision
The judge recorded at [95] that the representative member had recognised that “construed strictly literally, the phrase “any other rate” clearly [did] not mean “any higher rate””, but that the Rule had to be construed “with an eye to giving reasonable and practical effect to the scheme”. In reaching his conclusions, the judge said that the words “any other rate” qualified the rate of increase, not the capped rate of RPI of 5% or 2.5%. He decided that both the drafter of Rule C.10(2) and the parties to the 2003 and later deeds “clearly had in mind only increases in the capped percentage increases in the retail prices index”. That interpretation gave “better reasonable and practical effect” to Rule C.10(2), which created a two-stage mechanism, whereby (i) the trustee calculated and applied guaranteed increases based on the capped percentage increase in the RPI over the year to the end of May each year, and (ii) the employer then had a discretion to direct that a higher, but not a lower, rate of increase was to be applied.
The judge said that the power of augmentation in General Rule C.6(1) was directed to increasing benefits under the BPP generally, and not, like Rule C.10(2), to the determination of the annual increases to reflect inflation. The employer's interpretation involved an excessively literal reading of Rule C.10(2) which was at odds with its contextual purpose. Even without considering the admissible context, something had clearly gone wrong with the language of Rule C.10(2) and he was satisfied that the error was: “No doubt failing to address himself to the fact that the word “other” might permit of a lower rate of increase than the default rate by reference to the capped retail prices index, the draftsman has used the word “ other” when he really meant the word “ higher””. The legislative and documentary background made that “even more pellucidly clear”.
In relation to that background, the judge decided that: (i) the drafter would have had the provisions of section 51(3) of the Pensions Act 1995 (the “1995 Act”) in mind and would have wished to create a provision which complied with it, (ii) Rule C.10(2) was excluded from section 51(2) because it satisfied section 51(3), (iii) the outline benefit summary in the employer's letter of 17 December 2002 had said that the benefits would replicate the current terms of the Six Continents Pension Plan and the Six Continents Executive Plan, when the latter had “no power to alter the rate of inflationary increase”, (iv) the outline benefit summary for both staff and executive plans said that there were to be guaranteed increases in excess of Guaranteed Minimum Pension (GMP) and
The judge emphasised that his decision was “highly sensitive to the facts of the present case, where the [BPP] was not addressed to future new members”, but only to those who had consented to the transfer in accordance with the documents provided to them. The fourth and fifth of the specific distinctive characteristics of pension schemes identified by Lord Hodge at [14] in Barnardo's had no application here, because (a) there were no members who joined after the BPP started, and (b) the members did not lack easy access to expert legal advice and knowledge of the circumstances when the scheme was established. The interpretation exercise was a unitary one and it was unhelpful to consider whether the court was engaged on pure construction or corrective construction. The question was what an objective observer, with full knowledge of the admissible background, would have concluded was the true intention behind Rule C.10(2). The answer was that it was intended to provide guaranteed, but capped, increases each year, with a discretion on the employer to award a higher rate of increase. The judge concluded that “any other rate” in Rule C.10(2) meant “any higher rate”. If that could not be achieved by a literal reading, an objective observer would conclude that something had gone wrong with the wording and how it should be corrected.
The parties' submissions in outline
Mr Andrew Short QC, counsel for the employer, submitted that, having accepted that the literal meaning of the words “any other rate” was not “any higher rate”, the judge could not properly, applying the recent Supreme Court decisions in Rainy Sky SA v. Kookmin Bank [2011] UKSC 50 at [14]–[30] (“ Rainy Sky”), Arnold v. Britton [2015] UKSC 36 at [14]–[22] (“ Arnold v. Britton”), Wood v. Capita Insurance Services Ltd [2017] UKSC 24 at [8]–[15] (“ Wood v. Capita”), and Barnardo's at [13]–[18], conclude that the words in Rule C.10(2) meant “any higher rate”. As Lord Briggs had said in Safeway Ltd v. Newton [2017] EWCA Civ 1482 (“ Safeway”) at [22], the pension scheme context was “inherently antipathetic to the recognition, by way...
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