Honda Motor Europe Ltd and Another v Tony Powell and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Sir Stanley Burnton,Lord Justice Maurice Kay |
| Judgment Date | 11 April 2014 |
| Neutral Citation | [2014] EWCA Civ 437 |
| Docket Number | Case No: A3/2013/3344 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 April 2014 |
[2014] EWCA Civ 437
Lord Justice Maurice Kay, VICE PRESIDENT OF THE COURT OF APPEAL
Lord Justice Lewison
and
Sir Stanley Burnton
Case No: A3/2013/3344
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
Mrs Justice Asplin
HC12F04112
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Brian Green QC & Mr Andrew Mold (instructed by Sacker & Partners LLP) for the Appellants
Mr Andrew Simmonds QC (instructed by Osborne Clarke) for the First Respondent
Mr James Clifford (instructed by Burges Salmon LLP) for the Second Respondent
Hearing dates: 2 and 3 April 2014
The issue
Until 1986 Honda Motor Europe Ltd ("HME") was the sole participating employer in the Honda Group UK Pension Scheme. By a Deed of Adherence dated 6 October 1986 Honda of the UK Manufacturing Ltd ("HUM") became a participating employer in the scheme and membership of the scheme was opened to its employees ("HUM members"). The question is whether the Deed of Adherence conferred scale benefits on the HUM members ("the HUM scale benefits") which differed from (and were much less generous than) those in the existing scheme, or whether further documentation was required to produce that result. This turns on the meaning of the provision in clause 1 of the Deed of Adherence which stated that:
"[HME] … hereby extends the benefits of the Scheme to all eligible employees and directors of [HUM] with effect from [1 August 1986]"
A lot of money (at least £47 million) turns on the answer.
The judge (Asplin J) held that the Deed of Adherence did not confer scale benefits on HUM members which differed from those under the existing scheme. Her judgment is at [2013] EWHC 3149 (Ch); [2013] Pens LR 417.
HME and HUM, represented by Mr Brian Green QC and Mr Andrew Mold, appeal. Mr Powell (a representative HUM member) appears by Mr Andrew Simmonds QC to resist the appeal. The trustee of the scheme, represented by Mr James Clifford, takes a neutral position. HME and HUM have indicated that if unsuccessful on this appeal, they may bring proceedings for rectification of the Deed of Adherence. It was agreed between the parties that that claim would be parked for the time being, and that the current proceedings would be limited to questions of interpretation. In retrospect that was an unfortunate decision.
For the reasons that follow, I would dismiss the appeal.
The relevant terms of the scheme
The Scheme was established in 1973. It was governed by a Definitive Trust Deed and Rules dated 24 November 1981 ("the 1981 Trust Deed and Rules"). The relevant provisions of the 1981 Trust Deed and Rules are:
"Any employer which desires to become a party to the Scheme at any time after the date hereof and is associated with the Principal Employer and the participation of which therein is approved by the Principal Employer the Trustees and the Commissioners of Inland Revenue shall enter into an agreement with the Principal Employer and the Trustees supplemental hereto binding itself to observe and perform the provisions hereof and of the Rules and shall thereby become a party to the Scheme and to this Deed as from a date to be specified in such agreement." (Clause 15)
"The Principal Employer may from time to time without the concurrence of the Members authorise the Trustees in writing to alter or add to the terms and provisions of the Rules and/or the trusts powers and provisions of this Deed and any such alteration or addition may have retrospective effect. The Trustees shall forthwith declare any such alteration or addition to the Rules in writing under their hands and any such alteration or addition to this Deed in writing under their hands and seals … This Deed and/or the Rules shall stand amended accordingly with effect from the date of such declaration or from such other date (whether future or past) as is stated in such declaration. In the event of the Trustees making any such alteration or addition to the Rules the Trustees shall forthwith notify or arrange for the notification of each Member affected thereby individually in writing of the effect thereof …" (Clause 16)
Rule 3(a) dealt with admission of new members and provided for completion of "a written application in such form (if any) as the Trustees may require".
The judge set out the benefits to which members of the scheme were entitled under the 1981 Trust Deed and Rules ("the HME scale benefits"). The details do not matter. All that matters is that they are much more generous than the benefits intended to be conferred on HUM members.
The facts
The principal facts are uncontroversial, and I take them more or less verbatim from the judge's judgment. Until the Deed of Adherence was executed the only employer participating in the Scheme was HME (then known as Honda (UK) Ltd). HME was Honda's sales and marketing arm in the UK and was based in Chiswick, West London. Its employees were predominantly office and administrative staff. However, around 1985 Honda in Japan decided to establish a manufacturing base in the UK. HUM was incorporated for this purpose and a manufacturing plant was acquired at Swindon, Wiltshire. It was intended that workers would be recruited by HUM from August 1986 in order to operate the Swindon plant.
After discussion, it was decided by HME and HUM (with approval from Honda Head Office in Japan) that pension benefits for HUM employees would be provided via the Scheme rather than by establishing a new pension scheme; and that the benefit scale for HUM employees should be less generous than the benefit scale provided for HME employees. The Minutes of a meeting of 2 July 1986 record:
"The concept of [HUM] benefits being provided in the HUK Scheme is accepted as is the contracting-out basis. The only matter to resolve is the actual level of benefit provision. It is clear that the MD of Honda UK is also interested in operating on a contributory basis for future HUK people. An early decision is expected on the level of benefit provision.
In the meantime, a Deed of Adherence and Notice of Intention should be prepared."
After discussion and detailed costings of various benefits packages, on 23 July 1986 Mr Webster, HUM's HR Manager, and Mr Stanfield of pensions consultants Noble Lowndes Pensions Ltd ('NLP'), which supplied the then corporate trustee of the Scheme, had a telephone conversation recorded in the following note:
" Telephone conversation with Jeremy Webster
Jeremy contacted me today to confirm that a decision has now been reached as to the form of Scheme required.
We are to proceed on basis b (as per copy statement attached) looking at an effective date of the 1 August 1986.
Martin confirmed this will be on the 'joint' basis i.e. under the umbrella of the current Honda definitive documentation.
We discussed the action that is now required to be taken and the following was agreed:
1) Jeremy will write today confirming decision to proceed.
2) We will progress position on Deed of Adherence and inclusion on the Honda Holding Company contracting out certificate.
3) A short snappy initial announcement letter will be required.
Jeremy wishes to be in a position to deduct reduced rate National Insurance Contributions when he does his August payroll round about the 15 August and I explained to him the requirement for inclusion on the contracting out Certificate and the three month notice period. It was agreed, in practical terms, that reduced rate contributions would be deducted from the commencement date and that Honda would take their chances if things didn't go according to plan."
Basis b referred to in that note is equivalent to the HUM scale benefits.
As envisaged in Mr Stanfield's note Mr Webster wrote to him on the same day. By a letter dated 23 July 1986 Mr Webster confirmed that HUM wanted NLP to proceed with 'the preparation of a Pension Scheme' on the basis of 'Basis B', the details of which were duly set out. The letter concluded:
"Therefore, further to Mr Koch's letter of 4th July, could you now proceed as soon as possible with the preparation of the Deed of Adherence for our Company to participate in the existing Honda UK Pension arrangements. Further, you should proceed with the Notice of Intention to contract out on the understanding that our scheme start date is August 1st 1986.
Please provide as suggested, the draft of an appropriate letter to our staff explaining our new pension arrangements."
Mr Webster did not specify what the letter should say, or from whom it should come. That, apparently, was left to NLP as the pensions experts. In his response of 30 July 1986, Mr Stanfield pointed out a typographical error in the description of the proposed benefits. He said that the necessary steps would be taken to put the arrangements into effect and confirmed that he had arranged for life assurance and disability benefit cover to come into effect from midnight on 31 July 1986. He was not specific about what the necessary arrangements were.
Following on from Mr Webster's letter of 23 July 1986 an announcement to employees was produced and signed by Mr Webster. It is dated 1 August 1986 (i.e. two months before the Deed of Adherence was executed). It read as follows:
"The Company [i.e. HUM] are pleased to announce that arrangements have been made for all full-time permanent employees under age 60 to be included in the Honda (UK) Limited Pension and Assurance Scheme with...
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