Whitney v Monster Worldwide Ltd

A pension assurance may be contractual where the objective circumstances show a binding commitment, even though the parties contemplated a later formal letter and the precise formation date cannot be identified. Assurances given during a corporate acquisition may amount to a novation binding the company that later becomes the employee’s employer. Where the parties intended to agree the basis of pension increases, the court should determine the agreed terms from the commercial and documentary context. An agreement for increases linked to the Retail Price Index, subject to a 5% annual cap, is not an unconditional promise of 5% increases.

Mr Whitney appealed from the decision of HHJ Behrens, sitting as a High Court judge, reported at [2009] EWHC 2993 (Ch). The judge held that he had a contractual entitlement to a pension equivalent to that available from his former employer, with annual increases reflecting the Retail Price Index.

The appeal concerned whether the original employer had given a binding no-detriment pension guarantee; whether that obligation had been novated when Mr Whitney’s employment transferred to Monster Worldwide Ltd; and whether the agreed annual increases were fixed at 5% or linked to the Retail Price Index.

Longmore LJ gave the leading judgment. Jacob LJ and Kitchin J agreed.

1. Binding pension commitment. The existence of the no-detriment guarantee was to be determined objectively from the communications, documents and surrounding circumstances. The evidence showed that the original employer intended to give Mr Whitney and the other identified key employees a binding commitment. The absence of a formal side letter did not prevent contractual formation. Nor was it necessary to identify the precise date of formation where the court could say that a binding commitment certainly existed by a particular date.
2. Novation. The assurances given during the acquisition and subsequent integration were intended to be relied upon. They communicated that employment terms and benefits would remain unaltered. The involvement of the senior officers of the company that later became Mr Whitney’s employer supported the conclusion that the assurances were given on behalf of the future employer as well as the holding company. The no-detriment obligation was therefore novated to Monster Worldwide Ltd. The statutory exemption for occupational pension terms under the Transfer of Undertakings (Protection of Employment) Regulations 2006 did not prevent that contractual novation.
3. Annual increases. The parties intended to agree the basis of pension increases, so it was unnecessary to conduct a hypothetical inquiry into what trustees would have awarded under the former scheme. The relevant context showed that 5% operated as a ceiling against increases measured by the Retail Price Index, rather than as a freestanding guaranteed rate. Mr Whitney was therefore entitled to annual increases reflecting RPI, capped at 5%.
4. Disposition. The appeal and Mr Whitney’s cross-appeal were both dismissed.

• Court of Appeal (Civil Division): In [2010] EWCA Civ 1312, the appeal and cross-appeal were dismissed.
• High Court of Justice, Chancery Division: HHJ Behrens held that Mr Whitney had a contractual no-detriment pension entitlement, with annual increases reflecting RPI, in [2009] EWHC 2993 (Ch).