Singapore Airlines Ltd & Anor v Buck Consultants Ltd

A pension scheme must be construed as a coherent whole. A computational provision may also have substantive effect, and a construction which renders a provision redundant is strongly disfavoured.

Contractual payments received regardless of contingencies may constitute basic remuneration. In a fiscal context, fluctuating emoluments can include taxable non-cash benefits, despite the absence of express valuation machinery where the trustees possess adequate powers to resolve practical valuation questions.

The established categories governing costs in trust-construction proceedings are not closed. Where a representative acts both for beneficiaries and in pursuit of a separate financial interest, the additional costs should be apportioned between the trust fund and that separate interest.

Singapore Airlines Ltd brought negligence proceedings against Buck Consultants Ltd concerning its drafting of revised pension scheme rules. A preliminary issue required the court to construe the definition of “Earnings” in the scheme’s 1981 rules. Buck Consultants was also appointed to represent the scheme members on that issue.

Peter Smith J, in [2011] EWHC 59 (Ch), held that Earnings included fluctuating emoluments; that the annual 13th-month payment and London Weighting Allowance were basic remuneration; and that taxable benefits in kind were not excluded merely because the rules contained no express valuation machinery. He also permitted Buck Consultants to recover from scheme assets the difference between its standard and indemnity costs.

The employer appealed on the three construction issues and on costs. The central questions concerned the interaction of the three limbs of the Earnings definition, the classification of contractual allowances and benefits in kind, and the proper costs treatment of a representative pursuing both beneficiaries’ interests and its own financial interest.

1. The appeal was dismissed on the three substantive construction issues and allowed in part on costs. Arden LJ delivered the judgment, with which Sir Mark Potter and Pill LJ agreed.

2. The three limbs of the definition of Earnings formed a coherent ladder. The first limb established the lowest common denominator applicable to every member: basic remuneration counted as Earnings. The second and third limbs made additional substantive provision for particular forms of remuneration. Although the first limb used “means”, it was not exhaustive of every component of Earnings. The computational character of the later limbs did not prevent them from having substantive effect. The second limb therefore included fluctuating emoluments, and its contrary construction would improperly render it redundant.

3. The court did not determine whether the third limb wholly excluded overtime for hourly-paid employees. The point had not been fully argued, and further submissions would be necessary if the parties required its resolution.

4. The London Weighting Allowance and the 13th-month payment were contractual entitlements received regardless of contingencies. They therefore formed part of basic remuneration under the first limb rather than fluctuating emoluments.

5. Taxable car allowances, entertainment allowances and free air travel were fluctuating emoluments. “Emolument” had an established fiscal meaning which included non-cash benefits. In the scheme’s fiscal context, those benefits entered Earnings only to the extent assessable under Schedule E. Their implied exclusion did not follow from the absence of detailed valuation machinery. The trustee’s broad powers under the trust deed permitted a practical solution to timing and valuation difficulties, with court directions available if necessary. Redrow PLC v Pedley & Ors [2002] PLR 339 was distinguished because its scheme contained materially different definitions and limitations.

6. The costs categories derived from Re Buckton [1907] 2 Ch 406 were not closed. Buck Consultants acted both as representative of the members and to protect itself against a negligence claim. The case therefore fell outside the conventional three categories. A principled allocation required the additional costs to be shared equally. Only one half of the difference between the standard costs and actual costs was payable from scheme assets.

1. Court of Appeal (Civil Division): In [2011] EWCA Civ 1542, dismissed the appeal on the three substantive construction issues but allowed it in part on costs. It reduced the amount payable from scheme assets to one half of the difference between standard and actual costs.
2. High Court of Justice, Chancery Division: Peter Smith J decided the preliminary construction issues in [2011] EWHC 59 (Ch). He held that Earnings included fluctuating emoluments, the 13th-month payment and London Weighting Allowance were basic remuneration, and taxable benefits in kind were included. He ordered the additional costs above the standard basis to be paid from scheme assets.