Britvic Plc v Britvic Pensions Ltd & Anor

A pension scheme provision stating that increases are linked to capped RPI, followed by a power to substitute “any other rate”, may on proper construction permit only a higher rate. Construction is a unitary exercise directed to the objective meaning of the words in their documentary, factual, statutory and practical context. Where the scheme’s structure, legislative background and contemporaneous member communications show that the provision was intended to guarantee capped RPI increases, “any other rate” may be read as “any other higher rate”. The trustee must first apply the RPI-based default rate. The principal employer may then direct a higher rate, but may not reduce or eliminate the default increase. A cross-reference applying the same mechanism to deferred benefits generally imports the same rate and does not permit a separate rate.

Britvic Plc, the principal employer of the Britvic Pension Plan, brought a Part 8 claim concerning the construction of pension-increase provisions in the 2003 and 2007 Trust Deeds and Rules, as amended in 2008.

The rules provided for increases by reference to capped RPI, followed by the words “or any other rate decided by the Principal Employer”. The court had to determine whether that power allowed the employer to substitute a lower rate, including a rate near zero, or only a higher rate. It also had to decide whether different rates could be set for different service periods and whether rule C2(2), concerning revaluation of deferred pensions, permitted a rate different from that under rule C10(2).

1. Construction of rule C10(2). The words “any other rate” were construed in context. Rule C10(2) created a two-stage mechanism: the trustee had first to calculate and apply the guaranteed annual increase based on capped RPI; the principal employer then had a discretion to substitute a higher, but not a lower, rate.
2. The court treated the wording as requiring a contextual construction. The scheme’s purpose, its legislative background, the division of functions between trustee and employer, and the contemporaneous transfer documentation all supported guaranteed capped RPI increases. The phrase “any other rate” therefore meant “any other higher rate”. If that result could not be achieved by ordinary construction, the draftsman had clearly made an error by using “other” instead of “higher”, and the correction was sufficiently clear.
3. The conclusion was highly sensitive to the facts. The scheme was established for identifiable members transferring existing benefits, who had received explanatory material stating that RPI increases were guaranteed and additional increases were discretionary. The court therefore placed greater weight on that admissible background than might be appropriate in an ordinary pension scheme involving later members without access to the original context.
4. The employer could not direct different rates for separate tranches of service, apart from the expressly different caps applicable to pre- and post-1 July 2008 service. It could not direct a rate at or near zero unless that rate exceeded the applicable default rate, and it could not make an advance direction for future increase dates.
5. Rule C2(2) incorporated the same increase mechanism as rule C10(2). Deferred pensions were therefore to be increased on 1 October by the same percentage, and subject to the same cap, as pensions in payment. A different discretionary rate could not be selected under rule C2(2).
6. The construction applied to both the 2003 and 2007 Trust Deeds and Rules, subject to the 2008 amendment. The court expressed no concluded view on the meaning of the earlier 1996 rules.