The High Court has taken a restrictive approach to the interpretation of contractual pension promises in the recent case of In the Matter of Sea Containers Services Ltd ("SCSL") and Others.
This case concerned the liquidators' application for the determination of the extent of the Sea Container Group's liabilities to some 40 female members of a final salary occupational pension scheme (the "1983 Scheme") who had participated in that scheme prior to the equalisation of the Normal Retirement Date ("NRD") for men and women under the scheme in 1994. At that time, SCSL had determined that those women stood to lose significantly as a result of their NRD increasing from 60 to 65, and by letter offered each woman the opportunity to "elect to retire at her previous retirement age of 60" with a pension equivalent to that which would have been available prior to the equalisation. It was agreed between the parties that this offer (the "Special Promise") amounted to a contractual promise; however, its scope was disputed. A representative beneficiary was appointed to speak for the members' interests.
Mr Justice Hildyard largely accepted the restrictive construction of the promise argued on behalf of the liquidators. He found that:
- The Special Promise was only open to a member who retired on or after the date of her 60th birthday but before the date of her 61st birthday.
- In order to "retire" so as to become entitled to enhanced benefits the member had to both leave the service of a relevant Sea Containers company, and take an immediate pension from the 1983 Scheme.
- Special Promise was only enforceable against SCSL and not against other members of the Sea Containers Group of companies.
- In determining what was due under the Special Promise, reference could be made to benefits accrued in the 1983 Scheme after the member's 60th birthday, but not to any benefits accrued in any other scheme.
Although the context of the 1983 Scheme's rules and the commercial purpose of the Special Promise are discussed in the judgment, the case is noteworthy as an example of the courts' tendency to follow the literal meaning of contractual terms when it considers that they are without significant ambiguity.
The judgment can be read by clicking here.