Whitney v Monster Worldwide Ltd

A pension promise may become contractually enforceable through the parties’ conduct and surrounding circumstances, even where no formal scheme or side letter is executed. Continued employment may provide consideration for improved pension protection. The court should avoid defeating an intended bargain for uncertainty where its substance is sufficiently clear and the parties have acted upon it.

A no-detriment promise is construed by reference to the underlying pension entitlement. It does not automatically include benefits more generous than the former scheme provided. Statutory protection for occupational pensions under TUPE does not prevent the contractual novation of pension rights. Such novation may be inferred from assurances, knowledge of the obligation, transfer of the pension scheme and subsequent conduct.

The claimant had been employed by MSL and had moved from a final-salary pension plan to a money-purchase scheme. He alleged that MSL had promised selected key employees a no-detriment guarantee, preserving the value of their former pension rights.

Following the acquisition of MSL’s holding company, the business and employees were transferred to the defendant under TUPE. The money-purchase scheme continued under the defendant, but the defendant disputed that the no-detriment guarantee had transferred. The issues were whether the guarantee was contractually binding, whether it was sufficiently certain and supported by consideration, whether it transferred to the defendant, and how any loss should be calculated.

1. Contractual guarantee. The no-detriment guarantee had evolved from a statement of intention into a legally enforceable contractual obligation for the relevant key employees. The objective evidence included the commercial purpose of retaining key staff, consistent witness evidence, later acknowledgments of contractual entitlement, payments made under the guarantee and the 1995 board minute recognising the undertakings as company obligations. The obligation was clearly established at least after October 1990.
2. Consideration and certainty. Continued employment was more than adequate consideration for the guarantee, particularly because MSL was changing the claimant’s pension arrangements. The guarantee was not void for uncertainty. Its essential meaning was that the employees should be no worse off than they would have been under the former HAY-MSL Pension Plan. A contract did not require strict legal drafting where the parties had acted upon it.
3. Scope of the guarantee. The guarantee did not include an express automatic compound increase of 5 per cent in pensions in payment. The claimant was entitled only to the position he would have occupied under the former scheme. Nor was the guarantee limited to employment until age 60 or excluded on early departure, since that would have placed him in a worse position than under the former scheme.
4. TUPE and novation. Regulation 7 of TUPE 1981 excluded the relevant occupational pension rights from statutory transfer. The defendant nevertheless contractually novated the claimant’s pension rights. The transfer of the money-purchase scheme, the defendant’s access to the surplus, assurances that terms and benefits would remain unchanged, and the defendant’s knowledge of the guarantee supported the inference that the novation covered all pension rights, including the guarantee.
5. Quantum. The former scheme’s projected pension was to be calculated using the applicable salary provisions and eight annual upratings. Increases in pensions in payment were assessed on the overwhelmingly probable basis of increases linked to RPI. Damages were to be assessed on an FRS17 basis, rather than the cost of purchasing an annuity. Interest was awarded at base rate plus 1 per cent. The claim therefore succeeded.