The English High Court was asked to interpret the wording of certain pension scheme deeds in two recent contrasting cases that highlight the limits, as well the flexibility, of the modern approach of the courts to the construction of scheme documents.
Honda case
This case concerned the interpretation of provisions of a Deed of Adherence. The Trust Deed and Rules of the scheme allowed employers associated with the principal employer, Honda Motor Europe Limited (“HME”), to participate in the scheme. Honda opened a manufacturing branch of its business, Honda of the UK Manufacturing Limited (HUM), and announced that scheme membership would be extended to HUM employees, but only on the basis that the benefit scale offered to those employees would be less generous than the benefits offered to HME’s employees.
HME and HUM subsequently sought a declaration from the English High Court that the related Deed of Adherence extended “the benefits of the Scheme” to the HUM employees on the basis set out in the announcement and claimed that the Deed of Adherence had the same effect as a Deed of Amendment.
The Court disagreed and held that the provision in the Deed of Adherence purporting to “extend the benefits of the Scheme to the employees” of a new participating employer did not constitute a Deed of Amendment introducing a new benefit scale for these employees. The Court further found that a reasonable person taking into account all the background knowledge would have assumed that these operative words referred to access to the pre-existing scheme rather than the creation of a wholly new category of benefits.
Honda Motor Europe Limited v Powell EWHC 3149 (Ch)
ICM case
In this case, the principal and participating employers claimed that a Deed of Amendment operated to raise the normal retirement date (NRD) of members from 60 to 65, so as to align the NRDs of male and female members of the scheme in accordance with the requirements of EU law. While the Deed of Amendment set out the effect of equalisation in relation to a period up to a certain date, there remained a period of time in respect of which no NRD was specified in the Deed.
The Court was asked to construe the words of the Deed of Amendment so that the scheme documentation would align to what was intended (ie an NRD of 65), even though the wording of the amendment did not clearly state this.
The Court held that a reasonable reader having all the relevant background knowledge would have concluded that something had clearly gone wrong with the language of the amendment. In this instance the Court took a fairly wide view of the matter and saw fit to fill in the missing words.
ICM Computer Group Limited v Stribley EWHC 2995 (Ch)
Comment
While these are judgments of the English High Court, they would likely be of persuasive value to the Irish courts when dealing with the construction of pension scheme deeds. In both cases, the Court reiterated that the general principles to be applied to the construction of pension scheme documents do not differ from the general principles applicable to the construction of contracts and other written instruments. The judgments illustrate the willingness of the courts to use those principles to interpret the meaning of pension scheme documents.
