Bradbury v British Broadcasting Corporation

Where pension-scheme rules define Basic Salary by reference to an amount determined by the employer, an employer may, where the employee has no entitlement to a pay rise, decide what part of a prospective rise will be pensionable.

Section 91 of the Pensions Act 1995 protects actual pension rights, including an existing right to a future pension under the scheme. It does not protect a possible future right which depends on a future increase in designated Basic Salary. A change to the future content of an employment contract therefore does not itself surrender pension rights.

An employer does not breach the implied duty of trust and confidence where a pension reform responding to a substantial deficit is supported by reasonable and proper cause and is not calculated or likely seriously to damage that relationship.

The appellant was a member of the final-salary New Benefits Section of the BBC Pension Scheme. Faced with a substantial scheme deficit, the BBC offered existing members a choice between remaining in their section with only 1% of a future pay rise counting as Basic Salary, moving to a new career-average section, or joining a defined-contribution plan.

The Pensions Ombudsman rejected the appellant’s complaint. On the first appeal, the High Court held that the cap did not infringe section 91 of the Pensions Act 1995 and remitted the implied-term issue: [2012] EWHC 1369 (Ch). The Ombudsman rejected that issue, and the High Court dismissed the further appeal: [2015] EWHC 1368 (Ch).

The central issues were the construction of Basic Salary, the effect of section 91, the relevance of an individual agreement, and whether the BBC had breached the implied duty of trust and confidence.

Appeal dismissed unanimously. Lady Justice Gloster gave the judgment, with which Lord Justice Henderson and Lord Justice Lewison agreed.

1. On the proper construction of the Scheme rules, the BBC could determine whether, and to what extent, a prospective pay rise would count as Basic Salary and therefore as Pensionable Salary. The appellant had no contractual right to a pay rise. The power did not permit the BBC unilaterally to redesignate an existing part of Basic Salary which had already become an employee’s contractual entitlement. The cap affected only a future increase, not the pension expectation founded on existing Basic Salary.

2. Section 91(1) of the Pensions Act 1995 protected actual accrued pension rights. The appellant had a right to a future pension calculated under the Scheme rules, but no right to a future increase in either pay or Pensionable Salary. If designated Basic Salary increased, the Scheme required that increase to be pensionable. That contingent possibility was not itself a protected pension right. The cap changed the future content of the employment contract and did not involve a surrender of rights under the Scheme.

3. Since the cap neither breached the Scheme rules nor engaged section 91, it was unnecessary to decide the hypothetical application of the principle in South West Trains v Wightman. Any view on that issue would have been obiter.

4. The High Court had not confused irrationality or perversity with the implied duty of trust and confidence. It had considered whether the BBC lacked reasonable and proper cause and had acted in a manner calculated or likely seriously to damage the employment relationship. The Ombudsman’s and judge’s conclusion of no breach was unimpeachable. The BBC acted against a multi-billion-pound deficit which required reform. Employees received the same choice, so the cap did not single out a class for differential treatment. The allegations of an improper collateral purpose were unsupported and did not establish a breach.

• Court of Appeal (Civil Division): Dismissed the appeal and upheld the High Court orders.
• High Court, Chancery Division: Dismissed the appeal from the second Pensions Ombudsman determination: [2015] EWHC 1368 (Ch).
• Pensions Ombudsman: Rejected the complaint that the BBC had breached the implied duty of trust and confidence in its pension-reform process.
• High Court, Chancery Division: Held that section 91 of the Pensions Act 1995 was not breached, but remitted the implied-duty issue to the Ombudsman: [2012] EWHC 1369 (Ch).
• Pensions Ombudsman: Initially rejected the complaint concerning the cap on pensionable pay rises.