John Bradbury v British Broadcasting Corporation  EWHC 1368
Mr Justice Warren’s judgment marks the latest stage in this long-running case concerning the BBC’s imposition of a 1% cap on increases to pensionable salary via Mr Bradbury’s pay award.
Mr Bradbury was a BBC employee and a member of its pension scheme. In order to address a significant deficit, the BBC made future salary increases conditional on employees agreeing that pensionable salary increases would be capped at 1%. If members did not agree to the cap, they were instead permitted to join other arrangements. The cap was implemented by a contractual arrangement, not by amendments to the scheme rules.
In 2011 Mr Bradbury referred a complaint to the Pensions Ombudsman regarding the change. The Ombudsman dismissed the complaint and Mr Bradbury appealed to the High Court, which was also dismissed, save for one issue which was remitted for consideration by the Ombudsman because it had not formed part of the original Ombudsman determination. The issue was whether the BBC had breached the implied duties of trust and confidence/good faith which are contained in all employment contracts. The Ombudsman considered the point and determined that the BBC had not breached the implied duties. Mr Bradbury appealed to the High Court.
Two terms implied into contracts of employment were central to the case:
- that employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee; and
- that employers will not act irrationally or perversely which is equivalent to acting in a way that no reasonable employer would act in the circumstances in question.
Mr Bradbury’s case
Mr Bradbury presented four main arguments to the High Court to support his positon that the BBC had breached the implied duties:
- the BBC improperly coerced the members by imposing the cap by way of contract instead of scheme amendment;
- the BBC acted with a collateral purpose to produce a more agile workforce with greater staff turnover amongst older employees;
- the BBC’s actions amounted to unlawful age discrimination because the cap discriminates against younger members (although Mr Bradbury did not allege that he suffered as a result of this alleged discrimination); and
- there had been no proper consultation with members or scheme trustees.
Mr Bradbury also argued that the BBC had engendered ‘reasonable expectations’ that it would not take the steps it did, and that his expectations had therefore been disappointed resulting in the amendments being a breach of the implied duties.
On the question about whether the BBC’s conduct amounted to improper coercion, the judge found that presenting Mr Bradbury with a ‘hard choice’ did not amount to improper coercion. Mr Bradbury was not forced or coerced into accepting the salary cap; he could instead have refused and accepted no pay rise, or alternatively opted to join a new (albeit less generous) pension scheme and taken a pay rise.
The judge also found that the BBC’s conduct did not amount to a breach of implied term as a result of any collateral purpose or age discrimination. The judge conceded that an individual might bring an age discrimination claim if he or she was discriminated against, but that Mr Bradbury could not claim that the possibility a colleague might be discriminated against undermined the BBC’s implied duties to unaffected employees.
Mr Bradbury had argued that the BBC had approached the consultation over the amendments with a ‘closed mind’, and as such there was not a proper consultation. The Ombudsman decided that the BBC’s pension deficit was so large that something radical needed to be done, and so in this context the BBC’s firm stance was justified.
Further, the judge noted that the Ombudsman had not made any explicit determination as to whether the trustees should have been consulted. However, the judge concluded that the Ombudsman had been aware of the lack of consultation but had decided (implicitly) that the urgency of the amendments due to the deficit was pressing enough that there had been no time to formally consult with the trustees. The judge stated that it was up to the trustees to make representations themselves at the time of the consultation.
The judge reflected again on the circumstances in which a number of smaller complaints such as these considered would amount to a breach of the implied duties. He concluded that “it would require a very strong case indeed for a number of disparate objections (even though they arise out of the same conduct) to give rise when taken together to a breach of the implied duties when none of the objections by itself gives rise to such a breach”.
The claim that the BBC’s actions had disappointed Mr Bradbury’s reasonable expectations had not been put before the Ombudsman and the judge stated that it was “too late” to run the argument. Nevertheless, the judge commented that he considered such a basis for claiming a breach of implied duties to be weak, and that the evidence in this case does not establish that any of Mr Bradbury’s
reasonable expectations had been disappointed. The scheme rules were complied with, and the BBC had not acted wrongly in choosing not to amend the rules and instead impose the change by way of contract. Finally, the judge rejected the argument because it was not open to Mr Bradbury as he had not put this line of reasoning before the Ombudsman.
This case will be welcomed by employers looking to make alterations to pension schemes in order to manage a pension deficit. Both the Ombudsman and the Court accepted that the BBC acted in the best interest of the scheme members as a whole, and that radical action needed to be taken to prevent even greater negative consequences in the long term. The case also confirmed the principle that defined terms in a scheme can be altered by extrinsic contract and that it is not always necessary to alter the trust deed and rules.
The judgment was eagerly awaited in that it was one of the first post- IBM v Dalgleish cases in which the High Court considered “reasonable expectations” and breach of implied duties. The judge provided some useful comments in relation to the point, although declined to consider it in any real detail.
The case may also serve to warn scheme members away from making claims where they cannot categorically establish that a course of events amounts to a breach of implied terms of employment.