Burley v Joseph W Burley and Partners Ltd & Anor

J U D G M E N T

1. LORD JUSTICE BAKER: There is before the Court an appeal by Mr Kenneth Burley against the decision of His Honour Judge Bush, sitting as a High Court judge, on 5th September of last year when he decided two preliminary issues in favour of the respondents. The second of those preliminary issues has been resolved by a consent order to which I shall refer in due course.

2. The case has something of a history that it is necessary to recite briefly. Kenneth Burley, who is 79, was employed by the Automobile Association from 1947 to 1966. In 1966 he left the AA and went to work for Joseph Burley and Partners, who at the time comprised the appellant's brother, Joseph, and his nephew Alan. Joseph died in 1975 and the firm of Joseph Burley and Partners was incorporated into a limited company. The company is the first respondent and Alan Burley the second respondent. Nothing turns on the incorporation.

3. The appellant would, if he had continued working for the AA, have been entitled to a pension of two thirds of his final salary at 65. His case is that it was agreed with the respondents that, if he left the AA and went to work for them, his pension would be at least as good as the one provided by the AA. He was to receive two thirds of his final salary less whatever he was to receive under the AA pension.

4. On 1st August 1966 he left the AA and started work with the respondents. That same month the Norwich Union provided two policies to secure pension benefits; one was a money purchase scheme and the other a death in service life insurance policy. The respondents agreed to fund these policies. Two further policies of a similar nature were entered into in 1968.

5. In 1972 the respondents set up a one sixtieth accrual final salary occupation scheme. Benefits from the 1966 and 1968 policies were paid into the 1972 scheme. Under the 1972 scheme, due to his age, the appellant would not normally have been entitled to a pension of two thirds of his final salary at normal retirement date. His case is that he discussed his concerns with his brother who assured him that his pension under the new scheme would still be two thirds of final salary, less the AA pension.

6. In 1990 the appellant became 65, but the 1972 scheme did not produce a pension which, after taking account of the AA pension, would have left him anywhere near two thirds of final salary. He decided to work on.

7. In the proceedings that he has brought he claims damages broadly under the following heads: (1) loss of lump sum; (2) arrears of pension to the date of trial; and (3) enough money to buy an annuity on the open market to compensate for the future loss of pension. The case was fixed for trial on 27th October 2001, but the respondents applied very shortly before the trial for summary judgment on the main aspect of the claim. Their application succeeded. The main aspect of the claim was dismissed. The parties compromised the remainder of the claim.

8. The appellant, however, appealed against the summary judgment, and on 2nd July 2002 the Court of Appeal allowed the appeal.

9. The case was due to be heard in the High Court on 15th December of last year with a time estimate of no less than five days. The balance of the claim had, of course, been compromised. The respondents, from late 2002 or early 2003, were contending that, even if the appellant succeeded in principle on liability, he would suffer no loss for two reasons. (1) That the level of final remuneration to calculate the two thirds pension was fixed by reason of the order of 27th November 2001 at the figure advanced by the respondents in their defence, and (2) even if entitled to a two thirds pension, the appellant had received more from the Norwich Union than he was allowed under the Inland Revenue maxima.

10. The appellant did not and does not accept either of these points, but both parties agreed that the court should resolve two preliminary issues in advance of the trial. This was provided for by the order of District Judge Lord on 12th May of last year. He defined the issues in these terms:

"a) whether, on the true construction of the order of His Honour Judge Behrens dated 27th November 2001 the claimant is precluded from arguing at trial that his claim for a contractual entitlement from the first defendant to a pension based on two thirds of his final remuneration can be based upon the sum alleged in paragraphs 9 and 10 of the amended particulars of claim, or any other sum than that put forward by the defendants at the original trial of the case, i.e £18,616.65.

b) whether the basis permitted by the Inland Revenue for increasing the claimant's pension benefits between normal retirement date and the age of 75 is that set out in paragraph 7.43 of IR12 (1997) or paragraph 10.12 of IR12 (1997)."

11. This second issue was amended by agreement to include the additional words at the end of the paragraph:

"All the relevant provisions in force at the material time or times."

In fact the word "all" should be "or", and this is plain from the judgment.

12. As Chadwick LJ pointed out in argument, this case is a claim for damages for breach of contract and the measure of damage is the difference between the value to the appellant of the pension he should have received and that which he in fact did receive.

13. On the face of it the value of what pension the appellant should have received is a matter for actuarial evidence: what was the value of his rights at the date when he could have received them? The appellant was 65 on 15th June 1990. He could have retired then, albeit he could have carried on working, as in the event he did, because, he says, his pension was so small. Until a decision is reached about the date for valuation of the benefits and the assumptions to be made, it seems to me of no benefit to look at what, if any, provisions of the Inland Revenue guidance notes it may have been appropriate to take into account. In compromising the second of the preliminary issues, after argument had commenced, it appears that the parties now accept that view.

14. The first issue, and the remaining issue, is one of the construction of Judge Behrens' order of 27th November 2001. The order is in two parts. The first part concerns the claim in paragraphs 11 and 12 of the Statement of Claim. The respondents obtained summary judgment on this claim and it was this judgment that was subsequently set aside by the Court of Appeal.

15. Paragraphs 11 and 12 of the amended Statement of Claim read as follows:

"The plaintiff contends that he is entitled to a pension of two thirds final remuneration as at 15th June 1990 enhanced by the normal terms of enhancement offered by the Norwich Union (the administrators of the first defendant's pension fund) over the period 15th June 1990 to 31st August 1996 (with a guaranteed payment of ten years and widow's pension of 50 per cent).

12. Alternatively the second defendant, in his capacity as partner of the firm at the material time, is in breach of his obligation to pay the said pension in the terms and sums set forth in paragraph 11 hereof."

16. The second part of the order provides for the dismissal by consent of the remaining elements of the claim. This is on the basis that the money in court, plus accrued interest, is paid out to the respondents' solicitors and that there is no order as to costs, with one proviso that is not material.

17. The point in issue is this. The appellant contends that the amount of his final remuneration as at 15th June 1990 remains in dispute between the parties because it is very much an integral part of his claim under paragraph 12. The respondents say not so. The issue as to the amount of his final remuneration disappeared under part 2 of the order of the 27th November 2001 as one of the "remaining elements" of the claim that was dismissed.

18. I begin by looking at the amended Statement of Claim to see what it is that the appellant was claiming. It seems to me that this can be divided into the following: (1) a pension of two thirds of his final salary, or, more accurately, the difference between that and the pension that he in fact received; (2) an alternative claim for breach of trust against the second respondent. This is put in this way at paragraph 13 of the amended Statement of Claim:

"Further or alternatively the second defendant has been, at all material times, either the sole trustee or a trustee of the Joseph W Burley and Partners Limited Pension Scheme as well as a beneficiary or potential beneficiary thereunder. To the extent that the second defendant has declined to authorise payment of the said pension to the plaintiff out of the assets of the said scheme he is in breach of his duty as trustee of the said scheme."

19. Then, thirdly, damages for terminating his contract of employment on three months' notice rather than four, which is particularised at paragraph 17, and includes loss of salary, free petrol and the use of the car.

20. The amount of the appellant's final salary is crucial to ascertaining the pension figure, which, on the appellant's case, is two thirds of it. The amount of the appellant's final salary is completely irrelevant to the success or failure of the claims under the second or third heads to which I have just referred.

21. The claim in paragraph 11 and 12 of the Statement of Claim cannot be resolved without resolution of the issue about what was the true final remuneration, an issue which is pointed up by paragraph 9 of the amended Statement of Claim and paragraph 18 of the defence.

22. Paragraph 9 of the Statement of Claim says:

"The value of the plaintiff's final remuneration at 15th June 1990 was £25,995.83 per annum and in August 1996 it was approximately £24,000 per annum.

10. The first defendant, in breach of contract, has offered a pension of only £12,076.80 per annum of which £564.73 thereof increases by 3 per cent per annum, with a guaranteed payment period of five years and widow's pension of 50 per cent. For the avoidance of doubt, the plaintiff contends that any calculation of his pension based on any figure for final remuneration other than £25,995.83 per annum is wrong."

23. The response comes in paragraph 18 of the defence:

"As to paragraph 9 of the amended Statement of Claim:

i. It is denied that the claimant's final remuneration as at 15th June 1990 was £25,995.83 per annum.

ii. It is averred that:

a) the claimant's alleged final remuneration figure included a car 'benefit in kind' element of £6,048 which has been added to the claimant's P60 earnings for the 1989/90 tax year;

b) the said figure was calculated by the claimant on the basis applicable to employees who used their own car for the purposes of their employment;

c) in fact, the claimant's vehicle was operated and funded by the first defendant and as such the claimant's assessable 'benefit in kind' is calculated by reference to a different basis to that used by the claimant;

d) the correct figure for the claimant's final remuneration for 1989/90 is £20,760.31.

iii. In any event, the claimant's final remuneration had no relevance to the calculation of the claimant's pension entitlements under the new scheme as claimed by the claimant at all times until the amendment of the Statement of Claim on 18th November 1999."

24. Then:

"As to paragraph 10 of the Amended Statement of Claim,

"(i) It is admitted that the claimant's pension has been calculated (by Norwich Union) as set out therein;

(ii) It is denied that the calculation of his pension based on any figure for final remuneration other than £25,995.83 per annum is wrong;

(a) under the New Scheme Rules, benefits are calculated on the basis of Final Pensionable Salary, which is defined as the highest average Pensionable Salaries on any three consecutive Scheme Anniversaries out of the ten Scheme Anniversaries next preceding the date of normal or early retirement, or the date of leaving service.

(b) Pensionable Salary is defined under the said Rules as basic salary or wages together with (inter alia) any fluctuating emoluments received during the previous Scheme Year.

(c) the claimant's best three years' Pensionable Salaries as defined above were as follows:

1987- 1988 £14,989.88.

1988- 1989 £20,099.76.

1989- 1990 £20,760.31.

(d) the average of the above three Pensionable Salaries is £18,616.65.

(e) it follows that the claimant's pension is to be calculated upon the Final Pensionable Salary figure of £18,616.65."

25. The appellant's next argument is that paragraph 12 referred back to paragraph 11 claiming a obligation to pay the pension in the terms and sums set forth in that paragraph. The "sums" can only be ascertained by going back to paragraph 9 which sets out the final remuneration.

26. In order for the respondent's claim to succeed the issue about final remuneration as pleaded in paragraph 9 of the amended Statement of Claim and paragraph 18 of the defence, has to fall outwith the claim in respect of paragraphs 11 and 12 of the Statement of Claim and within the expression "the remaining elements of the claim", (see paragraph 3 of the order of Judge Behrens of 27th November 2001), for it is only "the remaining elements of the claim" that are dismissed.

27. The judge rejected the appellant's argument. His reasoning was, first of all, the consent order provided for payment out of monies in court, and those monies related to the final pensionable salary issue. We were told that the payments in were made in offer of settlement of the whole of the appellant's claim, albeit we have not seen the actual notice. Mr Newman, for the respondents, says that they were calculated on the basis of the respondents' error as to the amount of final salary (that is on the basis of his calculation) as originally pleaded.

28. In my judgment, the judge's reliance on the payment in does not in any way support the conclusion that he reached.

29. The judge, secondly, referred to Part 24.1 of the Civil Procedure Rules which provides a procedure for the court to decide a claim, or a particular issue, without a trial. It is difficult to follow the judge's reasoning as to why this assists his construction of the order.

30. Thirdly, the judge said that the issue on which the court gave summary judgment for the respondents, and which was later reversed by the Court of Appeal, was whether the appellant was entitled to two thirds of final pensionable salary. The issue was whether the appellant's oral evidence could arguably trump the documentary evidence that appeared to be to contrary effect. As I understand it, Judge Behrens decided that it could not. The Court of Appeal allowed the appeal on the ground that it was arguable that it could. Because the question of the amount of the appellant's final salary was never in play, as I understand it Judge Behrens concluded that it was not, therefore, within the dismissed claim referred to in paragraph 1 of the order. Furthermore, the amount of final remuneration was an issue which the judge regarded as quite independent of the two thirds question and would fall to be decided whether or not the appellant succeeded on the two thirds point.

31. The judge held that the remaining elements of the claim that were stated as dismissed in paragraph 3 of the order related to each component of the claim not adjudicated upon by the court and that this included the issue of the quantification of the final pensionable salary. In his view, therefore, the appellant was estopped from advancing any sum other than that put forward by the respondents in paragraph 19 of their defence, namely, £18,616.65.

32. In my judgment, the question for the Court is the true construction of the order of 27th November of 2001 as varied by the Court of Appeal. The Court looks at the terms of the order in the light of the surrounding circumstances. If the issue about the amount of final remuneration does in truth fall within the words "the remaining elements of the claim", then the claim cannot now be pursued.

33. In my view, however, the final remuneration issue was not compromised by the order of 27th November 2001. The drafting of the order of 27th November was less than satisfactory. When one, however, looks at the natural meaning of the words against the background of the pleadings, it seems to me clear that it was not intended to shut out the appellant from arguing the issue about the amount of his final salary remuneration. That issue had to be resolved, and has to be resolved, to quantify the pension as two thirds of it. Had it been intended to compromise the final remuneration issue, it would have been very easy for the parties to have said so and said so clearly.

34. In my judgment, there is nothing in the other background circumstances, that is apart from the pleadings to which I have already referred, to suggest that the order of 27th November does not mean what it appears to mean in the context of the pleadings. I would, therefore, allow the appeal on the first preliminary issue.

35. However, before leaving this case, I would mention one further matter. This case provides yet another clear illustration of the dangers of inviting the Court to resolve matters as preliminary issues. All too frequently what happens is that this simply adds to the costs rather than saves them. In this particular case additional costs have been run up, in my judgment, by inviting the Court to resolve these two matters as preliminary issues, just as unnecessary additional costs were run up at an earlier stage by the respondents inviting the judge to give summary judgment on the main issue of the case.

36. It is regrettable that this has occurred because it seems to me that the amount of costs that have been incurred are becoming disproportionate to the amount of money in issue between the parties.

37. LORD JUSTICE CHADWICK: I agree. I can express my reasons very shortly.

38. The first preliminary issue for the judge was whether, on the true construction of the order dated 27th November 2001, the claimant was precluded from arguing that his claim for a contractual entitlement to pension could be based on any sum other than £18,616.65 as his final remuneration.

39. It is common ground that if the order of Judge Behrens, dated 27th November 2001, is construed, as it must be, in the light of the Court of Appeal's order of 2nd July 2002, that first issue should receive an affirmative answer if, but only if, the question as to final remuneration raised in paragraph 9 of the amended Statement of Claim falls within the phrase "the remaining elements of the claim" in paragraph 3 of the order.

40. It is important to have in mind that the order of 27th November 2001 is in two distinct parts. The first part, comprising paragraphs 1 and 2, is prefaced by the words - "It is ordered that". The second part, comprising paragraph 3 - - which itself contains three subparagraphs - - is prefaced by the words - "It is further ordered by consent that". The "remaining elements" referred to in paragraph 3 are those elements of the claim remaining after the claim in respect of paragraphs 11 and 12 of the amended Statement of Claim has been dismissed. That is because paragraph 3 follows paragraph 1 of the order; and paragraph 1 of the order dismisses the claim in respect of paragraphs 11 and 12 of the Amended Statement of Claim.

41. The question, therefore, is this. After the claim in respect of paragraphs 11 and 12 of the amended Statement of Claim has been dismissed, did any claim or issue in relation to the amount of final remuneration remain to be resolved in these proceedings? The answer is plainly "No".

42. As Scott Baker LJ has pointed out, the claim for damages - - of which particulars are given in paragraph 17 of the amended Statement of Claim - - did not require determination of any issue in relation to the amount of final remuneration. That is not a claim or issue "remaining" after the dismissal of the claim in respect of paragraphs 11 and 12 and after judgment has been given for the defendants in respect of the issues raised by those paragraphs.

43. As a matter of construction, the question raised by preliminary issue 1(a) has to be answered in the negative.

44. LORD JUSTICE BROOKE: I agree with both judgments. The appeal in respect of the first preliminary issue is therefore allowed.

ORDER : Appeal allowed in respect of the first preliminary issue.