Davidson v Arla Foods UK Plc & Anor

A negotiated pension-enhancement clause may fix the pension payable at normal pension date by reference to an agreed projected salary and service. Where that is its proper construction, the beneficiary cannot also claim statutory or scheme-based revaluation of the enhanced pension. A general reservation of accrued pension rights preserves only rights not expressly or necessarily surrendered by the bargain. Early termination under the agreement does not remove benefits which the agreement preserves as if employment had continued. Taking a reduced transfer value and discontinuing proceedings against pension trustees does not, without more, bar a damages claim against an employer already in breach.

The claimant sought summary judgment under CPR 24 against his former employer concerning pension benefits promised by a compromise agreement. The agreement provided for an 18-month pension credit, an augmentation of pensionable service and a projected final salary, together with alternative pension and transfer-value options.

The claimant had taken a transfer value from the pension scheme and discontinued proceedings against the trustees. He contended that the enhanced pension remained subject to annual revaluation under the scheme rules and the Pension Schemes Act 1993. The employer argued that the compromise agreement substituted a fixed pension entitlement for further revaluation. The principal issue was the proper construction and effect of the enhancement clause.

1. Summary judgment dismissed. The claimant’s application for specific performance or judgment concerning additional pension benefits failed.
2. Clause 7.3 of the compromise agreement imposed a primary obligation on the employer to procure an augmentation of the claimant’s pension rights. It treated the claimant as having additional service and an agreed projected final salary, subject to his contribution. Properly construed, the clause created a predetermined pension of approximately £331,000 payable at age 60.
3. The agreed pension was fixed by reference to the normal pension date. It was not a pension entitlement at the termination date which remained subject to a further revaluation exercise. The claimant therefore gave up, by necessary implication, any further right to revaluation under the scheme’s early-leaver provisions in exchange for the agreed pension basis.
4. The general reservation of accrued pension rights in clause 4.18 did not preserve rights which had been surrendered by the specific bargain in clause 7.3. Applying revaluation to the agreed projected salary would give the claimant two successive exercises designed to preserve the pension fund.
5. The argument based on paragraph 1(4) of Schedule 3 to the Pension Schemes Act 1993 did not affect the construction. Clause 7.3 was a negotiated contractual term, not a scheme rule attracting that provision.
6. The claimant’s transfer of benefits and discontinuance against the trustees did not extinguish a claim against the employer. The employer’s breach had already occurred when it failed to make the required payment by the termination date, and mitigation by accepting a lower transfer value did not prevent a damages claim in principle. Early termination under clause 12 likewise preserved the clause 7 entitlements.
7. The court deferred the form of order and costs.