Davies v Saint-Gobain Calmar Ltd

A contractual pension entitlement must be determined by the promise made between the parties, read with the applicable pension rules. A court should not imply exclusions or qualifications into a contractual formula unless they are necessary to make the contract work as the parties must have intended. Construction cannot be used to cut down a carefully negotiated list merely because particular payments appear to compensate expenses rather than constitute salary. The court must have sufficient knowledge of the relevant factual matrix before implying any term.

Mr Davies appealed against a determination of the Pensions Ombudsman concerning his contractual pension entitlement from his former employer. The Ombudsman had found that the Company promised a pension of two-thirds of Final Salary at age 65, with Final Salary defined by the Calmar Plan Rules. The dispute concerned whether various Singapore-related payments, including transport, housing, home-leave and storage payments, were excluded from the calculation. The central issue was whether the contractual wording could be construed or supplemented so as to exclude those payments.

1. Appeal allowed in part. The Ombudsman’s determination that Mr Davies had a contractual entitlement to a pension of two-thirds of Final Salary, with the relevant meaning of Final Salary taken from the Calmar Plan Rules, was not open to challenge. The Company’s argument that the pension was limited to the amount produced by the policy itself was rejected.
2. The reference in the Rules to emoluments assessable to Schedule E tax had to be construed by reference to the date on which the Rules became binding. The Ombudsman had determined that the arrangement was to operate as if Mr Davies had been employed and paid in the United Kingdom. There was no basis for interfering with that determination.
3. The two expressly excluded items in the 1994 appointment letter were excluded. The remaining payments could not be excluded merely because they were connected with Mr Davies’s posting to Singapore. The appointment letter contained no recognisable genus by which the general reference to assessable emoluments could be limited. Transport, home-leave and housing payments could also have salary-like characteristics.
4. The court would not imply a term into the agreement unless implication was necessary to make the contract work as the parties must have intended. The warning in Philips v BSB [1995] 1 EMLR 472 against fashioning a term retrospectively by reference to the merits apparent after a dispute was applicable. Any implication also required proper knowledge of the whole relevant factual matrix.
5. The available material was insufficient to justify the proposed implied exclusion, and construction could not achieve it. Mr Davies’s appeal therefore succeeded to the extent indicated.

Pensions Ombudsman: Determined Mr Davies’s complaints and directed the basis on which his pension entitlement was to be administered. The determination was appealed to the High Court.

High Court (Chancery Division): The appeal succeeded to the extent indicated in the judgment.