Harris v Lord Shuttleworth

Under an occupational pension scheme, retirement by reason of incapacity may occur when the employer terminates the employment. The manner of termination is not decisive.

The governing phrase must be construed as a whole and in the context of the scheme. The member must probably remain unable, because of physical or mental disability or ill health, to undertake the same or similar employment for the scheme employer or another employer throughout the period ending at normal pension age.

The appellant was dismissed on notice after prolonged sickness while a member of her employer’s contributory pension fund. She claimed an immediate incapacity pension under rule 19. The trustees rejected her claim, and Judge Moseley QC dismissed her action in the High Court.

On appeal, the parties asked the Court of Appeal first to determine the proper construction of retirement from service by reason of incapacity. In particular, the court had to decide whether dismissal by the employer necessarily precluded such a retirement. The separate question whether the trustees’ decision was perverse or based on irrelevant considerations was reserved.

1. The agreed questions were determined unanimously. Lord Justice Glidewell delivered the judgment, with which Lord Justice Evans and Lord Justice Waite agreed. The appeal was stood out for restoration before the same constitution for further order or directions.

2. The expression retirement from service by reason of incapacity in rule 19 had to be construed as a whole and in the context of the fund rules. It was an error to construe retirement and incapacity separately. Each word qualified the other.

3. A member satisfied the expression where, before normal pension age, she left the Society’s service because of physical or mental disability or ill health so serious that, on the balance of probabilities, she would remain unable to undertake her present or similar employment, for the Society or another employer, throughout the period ending at normal pension age. Incapacity likely to endure until normal pension age was, for practical purposes, equivalent to permanent incapacity.

4. The manner in which the employment ended was not conclusive. Where qualifying incapacity caused the employment to end, termination by notice from the Society could constitute retirement by reason of incapacity just as termination on the member’s notice could.

5. Brooks v National Westminster Bank Ltd was not conclusive because its pension scheme expressly provided a deferred pension following honourable dismissal as an alternative to incapacity retirement. Under the present scheme, rule 18 applied only where no other benefit became payable. An incapacity pension under rule 19 would therefore exclude, rather than be excluded by, the deferred benefit under rule 18.

6. The court answered the preliminary construction issue only. It did not decide whether the appellant’s condition met the required standard or whether the trustees’ decision was perverse or based on irrelevant considerations.

1. Court of Appeal: Unanimously held that dismissal by the employer could constitute retirement by reason of incapacity under rule 19. The remaining issue was reserved, and the appeal was stood out for restoration.
2. High Court: Judge Moseley QC dismissed the claim on 27 July 1992, holding that retirement did not include dismissal and that incapacity meant permanent incapacity.