Summary

The court ruled on the proper interpretation of a deed affecting employees' entitlements under an occupational pension scheme.

Facts

The claimants (H1 and H2), being companies within the Honda group, sought a declaration concerning the proper interpretation of a deed relating to the group's United Kingdom pension scheme.

H1 was the principal employer under the scheme, which had been established in 1973. H2 became a participating employer in 1986. The first defendant was an employee of H2 and a member of the scheme; his benefits would be adversely affected were the declaration granted. It was decided by H1 and H2 in 1986 that the benefit scale for employees of H2 should be less generous in certain respects than the benefit scale for employees of H1. A letter sent at the time by H2's human-resources manager to the trustee of the scheme and an "Announcement" signed by that manager and addressed to employees confirmed that the lower benefit scale would apply. A document called a Deed of Adherence was executed in October 1986. Clause 1 of the deed provided as follows: "The Principal Employer with the consent of the Trustees as witnessed by the execution of this Deed hereby extends the benefits of the Scheme to all eligible employees and directors of the New Participant with effect from the first day of August one thousand nine hundred and eighty six". H1 and H2 sought a declaration that, on the true construction of the Deed of Adherence, "the benefits of the Scheme" to which employees of H2 who were admitted to membership of the scheme on or after August 1, 1986 were entitled were in accordance with the arrangements set out in the Announcement. The lower scale benefits structure, in the form set out in the Announcement, was not formally incorporated into the scheme's trust deed and rules until 1998. The issue was whether employees of H2 were restricted, in respect of the period from 1986 to 1998, to benefits on the lower scale or whether they were entitled to benefits on the more generous scale applying to employees of H1.

Held

The reasonable person taking into account all of the background knowledge which would reasonably have been available to the parties at the time that the Deed of Adherence was executed would have taken the operative words to be a reference to the advantage of access to the scheme and the opportunity to accrue benefits thereunder. What was offered or conferred were the benefits of the scheme without reference to the precise details of the benefit scale which was to be applicable to the members in question. Given the context, despite the agreed intention to create a new category of benefits for employees of H2, the reasonable reader would not construe the reference to "benefits", when read in the context of the phrase "extends the benefits of the Scheme" and in the context of the Deed of Adherence as a whole, as a reference to a scale at all. Accordingly, H1 and H2 were not entitled to the declaration sought (see paras 62-64, 76 of judgment).

Judgment for defendants