England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(QUEEN'S BENCH DIVISION)
HHJ FOSTER QC (SITTING AS A DEPUTY HIGH COURT JUDGE
OF THE QUEEN'S BENCH DIVISION)

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/12/2008

Lady Justice Arden :

1. Mr Allan, the appellant, appeals against the order dated 1 February 2008 of HHJ Foster QC, sitting as a deputy judge of the Queen's Bench Division. The judge dismissed the action brought by Mr Allan to establish an agreement for an enhanced pension entitlement against his former employer, Johnson Controls Automotive (UK) Ltd ("JCA"). The thrust of the challenge made by Mr Allan is to the judge's findings of fact. The judge found that Mr Allan, together with his witnesses Mr Beeson and Mr MacDonald, were honest witnesses. Nonetheless, he found that no agreement for enhanced pension terms was made. Mr Allan's principal case is that the judge's decision was perverse. For the reasons given below, the judgment of the judge is not vulnerable to challenge on any of the grounds raised by Mr Allan.

Background

2. Most of the background can be taken from the very succinct judgment of the judge.
3. Mr Allan joined a company called Premier Polymer Mouldings Ltd ("PPM") as its managing director on 1 January 1990. He was then 50 years old. PPM was a subsidiary of CH Industrials PLC ("CH"). PPM went into receivership on 1 March 1991, but its business was acquired by JCA on 12 April 1991. JCA obviously had an interest in retaining good quality staff for the business. Mr Allan became the managing director of JCA Foam Ltd.
4. JCA operated a number of pension schemes. In his original employment, Mr Allan was originally on a scheme known as the CHI scheme. That scheme was absorbed into the JCA Foam scheme. That scheme was itself absorbed into the JCA UK scheme. Those schemes gave Mr Allan a pension entitlement with an accrual rate of 1/50th per annum.
5. JCA also operated a scheme known as the 1/30th scheme, which was capable of treating employees as paid up to their maximum final salary pension rate despite the fact that they had not provided forty years' service on the specified 1/60th per annum accrual rate. This scheme was subject to normal Inland Revenue restrictions. It was therefore subject to a maximum accrual rate of 1/30^th. Under this scheme it would take twenty years to earn the maximum pension entitlement of two-thirds of final salary.
6. Mr Allan's case was that it was orally agreed between him and JCA that his accrual rate would be varied from 1/50th to 1/30th. This represented a very substantial improvement in his pension entitlement. Mr Allan says that the variation was agreed at a meeting held at JCA's premises in about April 1991. He states that the offer was made by Mr McDonough, then the UK managing director of JCA, and explained by Mr Beeson, their financial director. Mr Stuart MacDonald was present.
7. The documentary evidence was sparse. There were no documents to support the variation. All the documentation that Mr Allan received from JCA asserted a 1/50th per annum accrual rate, and Mr Allan made no objection to those documents at the time. Thus, Mr Allan received special members' letters which specified the accrual rate as 1/50th and such letters were probably received yearly. Mr Allan also received wage slips, which the judge found would have shown the employers' and employees' contributions to the pension schemes. Furthermore, in 1995 and 1996, Mr Allan received notices showing how the CHI scheme had been absorbed into JCA's pension schemes. He received notices about mergers of the schemes and contractual documents in 1995 and 2000, which made reference to his pension entitlement. Mr Allan challenged some of the less important details in these documents, but not the accrual rate.
8. Mr Allan remembered that Mr Beeson referred to his enhanced pension provision on at least two further occasions. Mr Allan's understanding was that he did not need to do anything more to acquire the benefit of the enhanced pension.
9. In 2000, Mr Allan received an early retirement quotation. At the end of the document there was a calculation based on the 1/30th accrual rate. The judge held that this was no more than a final check that the Inland Revenue maximum was not exceeded.
10. Mr Allan did not assert his right to an accrual rate of 1/30th until, at the earliest, the spring of 2001 when he allegedly had a meeting with an employee of JCA, Mr Callum Allison, in the spring of 2001. He retired in on 31 August 2004, aged 65 years. At that point he had only fifteen out of fifty years paid up on his pension.

The judgment of the Judge

11. So far as the critical meeting was concerned (see paragraph 6 above), the witnesses were Mr Allan, Mr Beeson and Mr MacDonald. The judge held that all three witnesses appeared honest witnesses, and that he had no reason to doubt the genuineness of their testimony. The judge noted that Mr McDonough was not called on behalf of JCA.
12. The judge noted the submission of the defendant that, while it might be thought that evidence of the oral variation was all one-way, the passage of time and contrary documentary evidence should make him cautious about accepting the contention that an oral variation had been agreed in the absence of contemporary confirmation. The judge held that a pension entitlement could be varied orally, and there has been no challenge to the correctness of his conclusion on that point.
13. The judge continued:

"11. I observed the claimant, Mr. Ian Allan, give evidence for over an hour and watched him carefully over the two days that we were in court. I reached the following conclusions: (i) Ian Allan was and is a capable man. He has achieved and maintained high positions of responsibility during his working life; (ii) he is a careful man who realises the significance of actions and records; (iii) he would have understood the significance of the pension offer, that is that it was a very considerable enhancement to his existing pension and remuneration; (iv) he was a trustee of the early pension funds. He can therefore be taken to understand how pension schemes operated and the type of documentation which was sent out to members; (v) he would have realised the importance of ensuring that verbal agreements were evidenced in writing; (vi) he would have realised the importance of being able to establish his pension right; (vii) he would have realised the significance of not receiving any documentation about his 1/30^th per annum accrual rate. It was of course theoretically possible for the offer to be implemented in other ways but in the real world highly unlikely; (viii) when he did allegedly raise the matter with Mr. Allison in 2001 he was invited to get supporting information but effectively did nothing about it. It will be apparent from the above that I am very surprised that Mr. Allan did not challenge the repeated 1/50^th per annum accrual rate assertion or assert his own right to a 1/30^th per annum accrual rate.

12. In addition, I heard evidence from Richard Beeson and Stuart MacDonald. Although Mr. Beeson was a very senior director of the defendant company and obviously experienced and successful in the world of finance, I found him curiously casual in the manner in which he gave his evidence. He was inaccurate in the way in which he described the enhanced benefit scheme. Having said that, he was consistent in the thrust of his evidence. He was first asked to remember these events in 2005, that is 14 years after they took place.

13. Stuart McDonald was an obviously decent man. He said he had reason to remember the conversation because he was envious of the offer made to Ian Allan. Again, he was first asked to remember events 15 years later.

14. Experience has shown that it is very difficult to accurately remember the detail of events in the comparatively recent past. There is a very very real temptation to rationalise. I am left with the unenviable task of having to balance the testimony of three decent and honest men with the inherent unlikelihood that Ian Allan said nothing about this agreement until he retired 13 years later.

15. Having heard all the evidence and assessed the witnesses, I have concluded that something probably was said about pensions at a meeting in April 1991. However, on the balance of probabilities whatever was said fell well short of an agreement to provide a pension on a 1/30^th accrual rate. The claimant does not therefore make out his case for a contractual entitlement to a pension based on a 1/30^th per annum accrual rate."

14. The judge held that it was unnecessary to consider a further argument based on estoppel. He ordered that the appellant's action should be dismissed.

Discussion

15. The starting point is, as Mr Tim Sheppard, for Mr Allan, pointed out, to recall the standard of review in relation to a judge's findings of fact. The law on this point is set out in a well-known passage from the judgment of Clarke LJ in Assicurazione Generali spa v Arab Insurance Group plc [2003] 1 WLR 577 at [14] to [17]:

"[14] The approach of the court to any particular case will depend upon the nature of the issues and the kind of case determined by the judge. This has been recognised recently in, for example, Todd v Adam [2002] EWCA Civ 509, [2002] 2 All ER (Com) 97 and Reef Trade Mark v Besant (t/a REEF) [2002] EWCA Civ 763, [2003] RPC 101. In some cases the trial judge will have reached conclusions of primary fact based almost entirely upon the view which he formed of the oral evidence of the witnesses. In most cases, however, the position is more complex. In many such cases the judge will have reached his conclusions of primary fact as a result partly of the view he formed of the oral evidence and partly from an analysis of the documents. In other such cases, the judge will have made findings of primary fact based entirely or almost entirely on the documents. Some findings of primary fact will be the result of direct evidence, whereas others will depend upon inference from direct evidence of such facts.

[15] In appeals against conclusions of primary fact the approach of an appellate court will depend upon the weight to be attached to the findings of the judge and that weight will depend upon the extent to which, as the trial judge, the judge has an advantage over the appellate court; the greater that advantage the more reluctant the appellate court should be to interfere. As I see it, that was the approach of the Court of Appeal on a "rehearing" under the RSC and should be its approach on a "review" under the CPR.

[16] Some conclusions of fact are, however, not conclusions of primary fact of the kind to which I have just referred. They involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ. Such cases may be closely analogous to the exercise of a discretion and, in my opinion, appellate courts should approach them in a similar way.

[17] In Todd v Adam [2002] 2 ALL ER (Com) 97http://login.westlaw.co.uk/app/document?src=doc&linktype=ref&&context=5&crumb-action=replace&docguid=ID6535060E42811DA8FC2A0F0355337E9 at [129], where the question was whether a contract of service existed, Mance LJ drew a distinction between challenges to conclusions of primary fact or inferences from those facts and an evaluation of those facts, as follows:

"With regard to an appeal to this court (which would never have involved a complete rehearing in that sense), the language of 'review' may be said to fit most easily into the context of an appeal against the exercise of a discretion, or an appeal where the court of appeal is essentially concerned with the correctness of an exercise of evaluation or judgment—such as a decision by a lower court whether, weighing all relevant factors, a contract of service existed. However, the references CPR 52.11(3) and (4) to the power of an appellate court to allow an appeal where the decision below was 'wrong' and to 'draw any inference of fact which it considers justified on the evidence' indicate that there are other contexts in which the court of appeal must, as previously, make up its own mind as to the correctness or otherwise of a decision, even on matters of fact, by a lower court. Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellate court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence. In the present case, therefore, I consider that (a) it is for us if necessary to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that the judge made or drew and the claimants challenge, while (b) reminding ourselves that, so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, this court ought not to interfere unless it is satisfied that the judge's conclusion lay outside the bounds within which reasonable disagreement is possible. In relation to (a) we must, as stated, bear in mind the important and well-recognised reluctance of this court to interfere with a trial judge on any finding of primary fact based on the credibility or reliability of oral evidence. In the present case, however, while there was oral evidence, its content was largely uncontentious."

16. This passage was recently approved by the House of Lords in Datec Electronic Holdings Ltd v United Parcel Service Ltd [2007] 1 WLR 1325 at [46]. I do not need to set out that paragraph.
17. Thus, Clarke LJ held that the approach of the appellate tribunal to findings of fact would depend on the extent to which the judge had had an advantage over the appellate court. So, where findings turn wholly or substantially on oral evidence given by witnesses at trial, an appellate court will be slow to interfere. Thus there is in general a greater latitude where the findings in issue on an appeal are not primary facts but inferences from the proved facts. If an appellate court considers that the judge has come to a conclusion that is plainly wrong and outside the ambit within which reasonable disagreement is possible, it is bound to intervene, even though the question is one of fact. This standard does not apply if the judge has misdirected himself in law as to the correct approach to the evidence. If he has made an error of law in this way, there is no further requirement that the judge's finding should be plainly wrong or outside the ambit within which reasonable disagreement is possible.
18. The essential point for present purposes is that this court must review the trial judge's decision even on matters of fact, but this court must also give proper weight to the advantages that he enjoyed as the judge who has heard oral evidence. In this case, the judge had the evidence of the witnesses supporting the existence of the oral agreement. Given that the judge had the advantage of hearing that evidence, it would not be open to this court to set aside the judge's finding as to the honesty of the witnesses even if it were otherwise minded so to do. Unusually, there was no direct evidence on the other side denying the existence of the agreement. So the judge had to test the evidence in support of the agreement by reference to the inherent plausibility or otherwise of the claim alleged and by reference to the contemporaneous documentation. This approach does not disclose any error of law. He was not bound to accept what the witnesses said years after the event simply because there were no witnesses to contradict their evidence. Moreover, the judge had the advantage over this court of having heard the totality of the evidence and thus having an overview of all the circumstances of the case.
19. Mr Sheppard lays emphasis on the failure of JCA to adduce any oral evidence of its own and on the fact that the offer and acceptance was not denied (but simply the subject of a non-admission) by JCA in its defence. The absence of evidence from JCA was clearly a factor to be taken into account in the overall evaluation of the facts and the drawing of inferences. It was, of course, a factor in Mr Allan's favour. Moreover, and this is the point on which Mr Sheppard lays greatest emphasis, the judge found that Mr Allan, Mr Beeson and Mr MacDonald were honest witnesses and that he had no reason to doubt the genuineness of their testimony. Each of them was "decent and honest". Mr Beeson was consistent in the overall thrust of his evidence. Mr MacDonald was obviously a decent man who said he recalled the offer and was envious of it. In the circumstances, submits Mr Sheppard, it was perverse for the judge to hold that this oral evidence was displaced by the inherent unlikelihood of Mr Alan saying nothing about the agreement until he retired 13 years later, or by the absence of contemporaneous documentation asserting a 1/50th accrual rate. In any event, Mr Sheppard submits, the judge was wrong to say that Mr Allan did not raise the point until after he retired. He raised it in a conversation with Mr Allison in 2001. This was before his retirement. However, that was ten years after the alleged oral agreement was made and accordingly I do not for my part consider that much weight can be attached to Mr Allan's raising the point at this late stage.
20. Mr Sheppard submits that JCA was keen to retain the services of its senior executives, and thus it was inherently plausible that the offer of the 1/30th accrual rate was made. Mr Allan, for his part, genuinely felt that his employer would not let him down.
21. These would be powerful arguments supporting the existence of an oral agreement in the terms alleged by Mr Allan if this were all the evidence which the judge had to go on. But the judge also had to consider whether in all the circumstances of the case the claim that there had been an oral agreement was inherently plausible. This depended on all the circumstances of the case. He concluded that this was the sort of situation where it was unlikely that an agreement to confer enhanced pension entitlements would be made without any kind of formality. At the very least the trustees would have to know that what had been agreed in order to take account of their increased liability to him. If JCA was keen to retain his services, that would provide an added incentive for ensuring that there was a written record of the agreement. In these circumstances, it was, in my judgment, entirely reasonable for the judge to hold that it was inherently implausible that there would be no written record of an offer of enhanced pension rights. Moreover, Mr Allan was himself a trustee of the JCA Foam pension scheme, and, on the judge's findings, a man who would in any event have appreciated the importance of documentation. These are further factors making it unlikely that there was a legally binding offer that was not recorded in some way in writing. In addition to those factors, although this may be a less important factor, Mr Allan himself was not clear as to how the 1/30th scheme was to be delivered.
22. There were, moreover, references to Mr Allan's pension entitlement in contemporaneous documentation that were inconsistent with his account of the agreement. Those references are a further factor supporting the inherent unlikelihood of a binding agreement for enhanced pension rights having been made orally. A further contraindication against the agreement contended for by Mr Allan was that Mr Allan took no step to make the point to JCA that there was such an agreement despite the receipt of documentation inconsistent with his understanding of the position until 2001.
23. In my judgment, the judge was entitled to find that the absence of any contemporaneous documentation supporting the making of the oral agreement and the absence of any protest by Mr Allan to JCA were sufficient to defeat the weight of the oral evidence. No doubt for that reason, although the judge was satisfied as to the honesty of Mr Allan, Mr Beeston and Mr MacDonald, he did not express himself satisfied as to the reliability of their evidence as to the making of the agreement.
24. In these circumstances, it is in my judgment impossible to set aside the judge's conclusion that, while something had been said about pension rights, it fell short of a legally binding agreement to provide a pension at a 1/30th accrual rate. A witness may be accepted as honest but his recollection of events may not be accepted as correct. That in short is what happened in this case.

Disposition

25. For the reasons given above, that this appeal should be dismissed. The respondent has filed a respondent's notice relying on estoppel by convention. It is unnecessary for the respondent to rely on any estoppel and accordingly I would dismiss the respondent's notice also.

Lord Justice Jackson:

26. I agree.

The President:

27. I also agree.