Davies v Meadwestvaco Calmar Ltd

An appeal from a determination of the Pensions Ombudsman on a point of law may challenge both the determination and any direction. The court must read the direction in the context of the complaint and the determination as a whole. A party that seeks to challenge the substance of the determination should ordinarily serve a notice of appeal; failure to do so is a procedural irregularity which the judge may waive, subject to fairness and prejudice.

Where the issue depends on the communications and factual matrix from which a pension agreement arose, it is not a pure question of law. The appellate court need not entertain it where the point was not properly raised and the respondent lacked fair warning. Contractual interpretation requires the true construction of the agreement, not merely a reasonable construction. A term cannot be implied unless necessary to make the agreement work.

Phillip Davies, a former employee and beneficiary of the Calmar Plan, complained to the Pensions Ombudsman that his former employer and scheme trustee had sought arbitrarily to reduce his pension benefits. The Ombudsman found that the Company had promised a pension of two-thirds of final salary at age 65 and directed that the pension be administered by reference to the Calmar Plan Rules, including its definition of Final Salary.

Davies appealed to the High Court on the treatment of benefits such as housing allowance, home-leave air fares and other benefits in kind. Pumfrey J allowed that appeal: [2007] EWHC 438 (Ch). The Company sought to raise further challenges without filing its own notice of appeal. The issues before the Court of Appeal included appealability, the scope of the Ombudsman’s directions, the Final Salary and Schedule E issues, and whether an implied term excluded certain benefits.

1. Appeal dismissed. The Court of Appeal, in the judgment of Lady Justice Arden agreed by Lord Justices Sedley and Buxton, upheld the High Court’s refusal to entertain the Company’s unnotified challenges to the Final Salary and Schedule E issues, and upheld the decision on the implied term issue.
2. Under section 151 of the Pension Schemes Act 1993, an appeal lies to the High Court from both a determination and a direction of the Pensions Ombudsman, and is confined to a point of law. There is no bright line between a direction and the remainder of the determination. Lake v Lake does not prevent such an appeal where the challenge concerns the substance of the Ombudsman’s determination.
3. The absence of a notice of appeal was a procedural irregularity which the judge could waive. The judge had exercised that discretion in relation to the scope-of-directions and implied-term issues, but was entitled to refuse to waive it for the Final Salary and Schedule E issues because Davies had received only about two clear days’ notice and would risk prejudice in preparing issues dependent on the factual material before the Ombudsman. That discretionary decision could be disturbed only for perversity, wrong principle or irrelevant consideration, none of which was shown.
4. The Ombudsman’s directions had to be read in the context of the complaint and the preceding findings. Their reference to pension entitlement under the Calmar Plan therefore covered the whole pension promised by the Company, not merely the benefits funded by the defined-contribution arrangement. The directions would otherwise have little practical value and would not implement the Ombudsman’s resolution of the dispute.
5. The Final Salary issue depended on identifying and interpreting the communications between the parties after Davies’s posting to Singapore. It was therefore not a pure question of law. Arden LJ also observed that the decision-maker had to apply the true interpretation, rather than merely a reasonable interpretation.
6. The Company’s argument that benefits assessable under Schedule E should be excluded could not be raised effectively without fair notice. The construction of the pension arrangements required consideration of the factual matrix, including whether generous expenses were intended partly as a supplement to salary.
7. The proposed implied term excluding benefits assessable under Schedule E did not satisfy the threshold of necessary implication. The express exclusion of two benefits did not establish that all other benefits were excluded and could support the contrary inference that other benefits were included.

• Court of Appeal (Civil Division): Appeal by Meadwestvaco Calmar Ltd dismissed on 30 January 2008: [2008] EWCA Civ 8.
• High Court (Chancery Division): Pumfrey J allowed Davies’s appeal from the Pensions Ombudsman’s determination: [2007] EWHC 438 (Ch).
• Pensions Ombudsman: Determination dated 14 July 2006, with directions concerning administration of the Calmar Plan.