Sea Containers Services Ltd

Contractual interpretation is an objective, unitary exercise directed to the meaning conveyed to a reasonable person with the relevant background knowledge. Commercial common sense may assist where language has more than one possible meaning, but it cannot justify extending clear words beyond the agreement made.

Where a document is the exclusive record of the parties’ contractual terms, evidence of subjective intention and subsequent conduct is inadmissible to alter its meaning. A promise to provide a pension equivalent to pre-existing benefits at a stated retirement age must be applied according to its terms. It does not extend to materially different events merely because a broader construction might appear commercially attractive.

The court determined questions concerning a contractual letter issued to certain female members of the Sea Containers 1983 Pension Scheme after changes intended to equalise male and female retirement benefits. The letter promised a pension at age 60 equivalent to the benefits available before the scheme changes.

The applicants were liquidators of the relevant Sea Containers companies. A representative respondent represented the interests of members who might claim under the promise. The issues concerned the timing and circumstances in which the promise could be invoked, the identity of the liable company, and whether benefits from the scheme or other pension arrangements should be taken into account.

1. Construction and evidence. The court treated the Special Promise letter as the exclusive record of the contractual terms. The proper approach was objective and contextual. Contractual interpretation is a unitary exercise, and commercial common sense may assist where language admits of more than one possible meaning. It cannot, however, justify supplying a broader bargain than the words support. Evidence of subjective intention, individual discussions and post-contractual treatment was inadmissible, and in any event lacked sufficient consistency to establish additional terms (paras 87–98).
2. Timing. The promise was available only where a Special Member elected to retire at age 60. The parties’ agreed position, reflected in the order, meant that an election made from the 60th birthday until before the 61st birthday qualified. Retirement before that period, or after it, did not qualify (paras 96–98; 141).
3. Meaning of retirement. The promise required retirement in the sense of ceasing work and taking an immediate pension. It did not apply where the member left employment without taking an immediate pension, later called for payment of a deferred pension, drew a pension while remaining in employment, left a subsequent employer, or transferred benefits to another scheme. The commercial advantages of a broader interpretation could not overcome the wording of the promise (paras 101–120; 141).
4. Liability. The promise was made by SCSL. Its headed paper, the related correspondence, the signature and SCSL’s role as principal employer did not establish a direct legal obligation on SCL or on another participating employer. The promise was therefore enforceable only against SCSL (paras 121–129; 141).
5. Valuation. The promise operated as a top-up intended to enhance post-1994 benefits under the 1983 Scheme to the level that would have been available before the changes, within the limits identified by the court. Benefits accrued under the 1983 Scheme after age 60 were to be taken into account. Benefits under separate pension schemes or personal pension policies were not to be taken into account (paras 130–140; 141).