Singapore Airlines Ltd & Anor v Buck Consultants Ltd

In construing pension scheme rules, the court must give effect to each operative provision where the wording permits. A provision averaging fluctuating emoluments may form part of the definition of pensionable earnings, even where the drafting is imperfect. Regular payments forming part of an employee’s remuneration may be basic remuneration rather than fluctuating emoluments. Difficulties in valuing benefits in kind are matters of machinery and do not exclude them where the rules contain no substantive limitation. The court may supply or permit machinery necessary to operate the scheme.

The employer and trustees of the Singapore Airlines Pension and Life Assurance Scheme brought a negligence claim against the scheme consultants concerning amendments made by a 2000 deed. The parties agreed that construction of the 1981 Rules should be determined as a preliminary issue, with the defendant representing affected scheme members.

The court considered whether fluctuating emoluments formed part of Earnings; whether 13th month payments and London Weighting Allowance were fluctuating emoluments or basic remuneration; and whether benefits in kind were excluded because the rules contained no valuation machinery.

1. The court determined that fluctuating emoluments were included in Earnings under the 1981 Rules. The second paragraph of the definition had to be given operative effect by applying the three-year averaging provision. Treating Earnings as limited to basic remuneration would render that provision and the corresponding cap in rule 17 redundant.

2. London Weighting Allowance and 13th month payments were not fluctuating emoluments. They were regular payments forming part of the remuneration package, and the possibility that their amount might be reviewed did not make them fluctuating.

3. Both payments were nevertheless included in basic remuneration. The court considered that the 1981 draftsman was unlikely to have intended retrospectively to remove accrued benefits, particularly in relation to London Weighting Allowance. Once that payment was included, there was no sufficient basis for distinguishing the 13th month payment.

4. The rules imposed no limit on the types of fluctuating emoluments included in Earnings beyond the averaging mechanism. Benefits in kind were therefore capable of inclusion. The absence of valuation machinery was a matter of administration, not a substantive exclusion. The court applied the principle in Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 that necessary machinery may be supplied, and distinguished the different trust deed considered in Redrow v Pedley [2002] PLR 339.

5. The agreed construction issues were answered accordingly: fluctuating emoluments were included; London Weighting Allowance and 13th month payments were not fluctuating emoluments; both were basic remuneration; and no further limit applied to fluctuating emoluments.