England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		12th February 2002

The Vice-Chancellor :

Introduction
1. The claimant, Redrow plc (“Redrow”), is a substantial public company which carries on the business of housebuilders. It has an annual turnover of £350m and about 1,100 employees. In 1984 Redrow established a pension scheme (“the Scheme”) for the benefit of its employees and those of its subsidiary and associated companies. The Scheme is a final salary scheme, that is to say the benefits of members are computed by reference to their salary during the period immediately before they retire or leave the scheme. The Scheme is approved by the Inland Revenue pursuant to Chapter I of Part XIV Income and Corporation Taxes Act 1988 (“ICTA”).
2. The documents regulating the Scheme have been, successively, an Interim Trust Deed dated 29th March 1984 (“the Interim Deed”), the First Definitive Trust Deed dated 20th July 1989 (“the 1989 Deed”) and a second Definitive Trust Deed dated 23rd March 1995 (“the 1995 Deed”). The first four defendants (“the Trustees”) are the present trustees of the Scheme. The fifth and sixth defendants (“the Employees”) are or were employees of Redrow. They have been joined to represent those presently or contingently entitled to benefit under the Scheme.
3. In relation to both the 1989 Deed (including the Interim Deed as the background to the 1989 Deed) and the 1995 Deed the question has arisen whether the yardstick by which the members’ entitlement to benefits and liability to make contributions, variously described as “total pay”, “total salary”, “total remuneration” and “total earnings”, includes benefits in kind. By deeds dated 30th April 1998 and 26th June 2000 the 1995 Deed was amended so as to exclude benefits in kind in relation to pensionable service of new members joining after 30th April 1998, and then to exclude benefits in kind for all members in relation to their pensionable service after 29th June 2000
4. If that issue is answered in an affirmative sense then there arise further questions of construction concerning the application of that yardstick. In addition there arises the question whether there is an estoppel by convention such as to preclude either Redrow or any member of the Scheme claiming an entitlement to benefit or liability to contribute on the footing that benefits in kind are included in any of those yardsticks.
5. The benefits in kind provided by Redrow for employees of the requisite type and seniority included cars, fuel for cars, contributions to private telephone bills, permanent health insurance, private medical insurance, mobile telephones, share options and long term share incentive plans. Some explanation of their treatment for tax purposes, the mechanism of PAYE and the conditions to be satisfied if a pension scheme is to obtain the approval of the Inland Revenue is an essential introduction to the basic question of construction and the submissions of the parties.
Fiscal Background
6. Income Tax is chargeable under Schedule E on all emoluments arising from an office or employment. ICTA 1988 s.19(1). Emoluments include all “salaries fees wages perquisites and profits whatsoever”. Ibid s.131(1). Such emoluments include all cash payments and all non-cash benefits which are capable of being turned into cash and whether paid by the employer or by a third party. Heaton v Bell 46 TC 211. Benefits which do not have a cash value do not constitute emoluments. Tennant v Smith [1892] AC 150.
7. Thus benefits which did not have a cash value, otherwise known as benefits in kind, were not taxable as emoluments without some further statutory intervention. Such intervention is now contained in s.154 ICTA which charges to tax under schedule E as though they were emoluments the wide range of benefits to which that section applies. The amount charged to tax is the cost of providing the benefit. ICTA s.156.
8. Of the benefits to which I have referred in paragraph 5 above I should make specific reference to cars and motor fuel, permanent health insurance, mobile telephones and share options. In the case of car and associated fuel benefit the amount of the benefit depends on the extent and purpose of the use of the car during the year of assessment in question. Thus the amount chargeable to tax cannot be known until the end of that year. S.157 ICTA From 1991 to 1999 there were similar provisions for mobile telephones. S.159A ICTA. There is no charge to tax on the provision of permanent health insurance, only on any amounts payable in accordance with its terms.
9. Share options granted pursuant to schemes approved by the Inland Revenue pursuant to s.185 ICTA do not attract a charge to tax on either their grant or exercise. Until 1st July 1996 the only options granted by Redrow were in accordance with such a scheme. Subsequently Redrow provided to its employees long term share incentive plans otherwise than under such a scheme. Initially such plans could only give rise to a liability to tax under s.135 ICTA on the exercise of the options. But they later became taxable because of an amendment made in 1998 which brought share options when exercised within the charge for tradeable assets imposed by s.203F ICTA. S.203FB ICTA. Accordingly such benefits did attract liability to tax but only after the execution of the 1995 Deed.
10. PAYE is authorised by s.203 ICTA. It operates by way of deduction from payments of income assessable to tax under Schedule E. It is operated in accordance with regulations, now Income Tax (Employments) Regulations 1993 SI 744. At the commencement of a person’s employment his employer submits an initial return and thereafter at the end of every relevant year giving details of his gross pay and, with some exceptions, other emoluments. On the basis of those returns a code appropriate to that person and his emoluments is determined by the Inspector. The Inspector is required, so far as possible, to ensure that tax for the year is deducted from emoluments paid in that year. The employer is required to deduct tax from payments of emoluments to that employee in accordance with the code. Reg.6.
11. If a pension scheme is to enjoy favourable tax treatment it must have the approval of the Inland Revenue in accordance with the provisions of Chapter I of Part XIV ICTA. If the scheme satisfies the conditions contained in s.590(3) ICTA then the Revenue is obliged to approve it. Paragraphs (a) and (d) of that sub-section impose limits on the amount of the pension payable on retirement and on the amount which may be commuted into a lump sum by reference to the employee’s “final remuneration”. By s.591 the Revenue may also approve schemes not complying with s.590(3) if other conditions exist of which one is that the lump sum death in service benefit does not exceed four times the employee’s final remuneration.
12. Final remuneration is defined by s.612(1), except where the context otherwise requires, as the average annual remuneration for the last three years service. That subsection also provides that

“remuneration does not include –

(a) anything in respect of which tax is chargeable under Schedule E and which arises from the acquisition or disposal of shares or an interest in shares or from a right to acquire shares; or

(b) anything in respect of which tax is chargeable by virtue of section 148;”

Tax is payable under s.148 in respect of payments known as “golden handshakes”.

13. Ss.591(5) and 612(3) also authorise the Inland Revenue to make regulations imposing further conditions for discretionary approval. From time to time the Inland Revenue issues Practice Notes known as IR12 followed by the year in which it was made. Succeeding versions of IR12 have made provision for what is or is not to be included in final remuneration for the purpose of the limits on benefits. Thus paragraph 6.12 of IR12 (1979) provided that for the purpose of that paragraph

“remuneration means basic pay, eg wage or salary, for the year in question, plus the average....of any fluctuating emoluments such as commission or bonuses.”

Paragraph 6.16 provided that benefits in kind might be taken into account when they are assessed to tax as emoluments and will normally be regarded as fluctuating emoluments, but that benefits not so assessable may not be included as final remuneration without the consent of the Superannuation Funds Office.

14. In IR12 (1991) it was pointed out that final remuneration needed to be defined in scheme rules and should not be greater than basic pay for the year in question plus the yearly average of fluctuating emoluments, which include benefits in kind. It was pointed out that final remuneration was defined in the legislation in the form I have quoted.
Construction of the Deeds
15. The fiscal background is relevant to the construction of the three deeds to which I have referred. National Grid Co.plc v Mayes [2001] 1 WLR 864, 870 para 18. Similarly earlier documents implementing the scheme or its “archaeology” may be relevant to the construction of later documents. Ibid. paras 22 and 23 and Harwood-Smart v Caws [2000] PLR 101, 105 para 5. The evidence included the Barnett Waddingham Report dated 19th December 2000 and the Combined Code of Principles of Good Governance and Code of Best Practice dated May 2000. They were of some help in explaining terms of art, but were not otherwise either admissible or relevant to the questions of construction.
16. In the end it was not, I think, in dispute that on questions of construction explanatory booklets were not, without more, relevant or admissible on points of construction. This is correct for a number of reasons. First, the booklets in question all point out that they are no more than an attempt to summarise the effect of the operative documents and could not override them. Second, booklets written after the execution of a relevant deed can only reflect the opinion of the writer of the booklet on the meaning of the deed, which is not relevant; and booklets written before the execution of the relevant deed are of little, if any, help if, as in this case, the later deed uses different language.
The Interim Deed
17. As I have indicated the Interim Deed is relevant as providing the background against which to consider the 1989 Deed. It recited the intention to establish a retirements benefit scheme for the employees of Redrow and associated and subsidiary companies to be approved by the Inland Revenue and covered by insurance. It provided that the Scheme was established with effect from 1st April 1984 under irrevocable trusts, was to be administered in accordance with a Definitive Deed and Rules to be executed in due course and

“In the meantime the Scheme shall be administered on the basis of this Interim Trust Deed and the notice previously given to those employees who are to become Members of the Scheme.”

18. It is common ground that the notice in question is the explanatory booklet issued to members in 1984. The booklet provided that both contributions and benefits were a percentage of “your scheme salary”. Paragraph 3 pointed out that

“Your Scheme Salary in a month is your total pay less 1/12th of the Lower Earnings Limit in force from time to time under the National Insurance Scheme.”

The booklet also explained the entitlement of a member to commute part of his retirement benefit for a tax free cash lump sum. It said

“Normally your lump sum will be worked out as 3/80ths of your salary....... for each year of your actual service with the Company ......or such greater amount as allowed by the Inland Revenue.”

The booklet or notice was amended by a Deed dated 14th April 1998 necessitated by the new provisions for contracting out. The liability to contribute and the entitlement to benefit continued to be measured by reference to “your scheme salary” which was not further defined. Likewise entitlement to commute for a tax free cash lump sum depended on “the annual rate of salary”.

19. In my view the amendments to the booklet so effected did not alter the meaning of scheme salary as “your total pay”. In my judgment that phrase in that context denotes cash payments only and so excludes benefits in kind. I base that conclusion on the use of the word “pay”, the absence of any reference to benefits in kind and the omission of any mechanism whereby such a benefit could be valued, particularly those which could only be quantified after the year end. That conclusion, in my judgment provides the starting point from which to analyse the provisions of the 1989 Deed.
20. Before turning to the provisions of the 1989 Deed, for completeness, I should refer to the December 1988 explanatory booklet. It did not purport to do more than give a general outline of the Scheme and pointed out that nothing in it could override the provisions of the formal trust deeds. It introduced the concept of pensionable earnings as the yardstick by which to measure benefits and contributions. “Pensionable earnings” were defined as

“...your total salary from the Group (as taken into account for PAYE purposes before deduction of your contributions to the Scheme) less an amount equal to the National Insurance lower earnings limit...”

For the reasons I have already given I do not consider that this document can affect the construction of the Interim Deed and 1984 booklet effectively incorporated into it. Nor can it affect the construction of the 1989 Deed which followed it because the latter uses different terminology.

The 1989 Deed
21. The 1989 Deed comprises 24 clauses extending over 28 pages. The schedule to the deed, comprising 3 further pages, contains definitions for the purposes of both the Deed and the Rules. The Rules cover a further 40 pages. The Rules themselves have an appendix of 5 pages containing further definitions applicable to the Rules. The verbiage is dense even by the standards of pension schemes.
22. The operative part of the 1989 Deed provided that any deed or agreement hitherto governing the Scheme should cease to have effect from the date thereof. The Rules provided that they should apply from 1st April 1984. Thus, with effect from 20th July 1989, the 1989 Deed governed the Scheme from its inception on 1st April 1984, thereby superseding both the Interim Trust Deed and the 1984 booklet. The provisions of the 1989 Deed material to these proceedings are clauses 6(b) and 16. By the former power was conferred on the Trustees

“to determine all questions and matters of doubt arising in connection with the Scheme whether relating to the construction thereof or the benefits thereunder or any segregation of the Scheme Assets or otherwise...”

By the latter the trustees were given power with the authority of Redrow to amend the Rules or Deed provided that such alteration did not prejudicially affect

“any rights or interests which shall have accrued to each prospective beneficiary in respect of pension or other retirement benefit secured... up to the date on which such alteration or addition takes effect....”

23. The appendix to the Rules contains the following material definitions:

““Earnings” means for each Member at any date the Member’s total remuneration from the Employers during the 12 months immediately preceding that date. For directors the term “earnings” excludes directors’ fees.”

““Pensionable Earnings” means at any date a Member’s earnings at the Scheme Anniversary Date coincident with or, if not coincident with, immediately preceding that date or at the date of his joining the Scheme if later reduced by an amount equal to the lower earnings limit applicable at such Scheme Anniversary Date [being 1st January in each year] under section 1(1) of the [Social Security and Pensions Act 1975]”

(“Final Pensionable Earnings” is defined by reference to Pensionable Earnings)

“Qualifying Remuneration” means for each Member in each Tax Year his total remuneration from his Employer in such Tax Year, which shall include remuneration from a sick pay or permanent health insurance scheme of the Employer, benefits in kind to the extent that they are assessed or assessable under Schedule E as emoluments....and directors’ fees other than...provided that for the Tax Year ending in 1988 and subsequent Tax Years there shall be excluded from remuneration any amounts chargeable to tax under s.148 [golden handshakes]...and any amounts chargeable to tax under Schedule E which arise from the acquisition or disposal of shares....”

24. Rule 5 provided that the amount of a member’s pension was to be quantified by reference to a member’s final pensionable earnings, that is, ultimately, his “total remuneration from the Employers”. Rule 6 made provision for a life assurance death benefit for a member

“of an amount equal to four times his basic remuneration from the employers, excluding any directors’ fees, at the date of his death.”

Rule 7 provided for death benefits of

“an amount equal to four times his basic remuneration from the Employers, excluding any directors fees...”

Rule 7(a) required a member to contribute

“during each monthly pay period [6%] of the amount by which his total remuneration from the Employers during that pay period exceeds one-twelfth of the lower earnings limit...”

Rule 7(d) imposed a ceiling on the amount of any contribution by reference to the member’s qualifying remuneration, as defined.

25. Rule 11 dealt with the right of a member to commute part of his pension into a tax free cash lump sum. The right so to do was qualified by provisions contained in Rule 17(b) limiting the lump sum, together with other amounts, to a multiple of his “Final Remuneration”. Final Remuneration was defined in Rule 17(k) by reference to a “Member's remuneration” which included

“remuneration from a sick pay or permanent health insurance scheme of the Employer...benefits in kind to the extent that they are assessed or assessable under Schedule E as emoluments...and directors fees other than any...”

but excluded

“any amounts chargeable to tax under s.148 [golden handshakes] and any amount chargeable to tax under Schedule E which arise from [share options] because of events occurring before 17th March 1987”

26. The basic question is what, in that context, is meant by “total remuneration from the Employers”. Does it include all or any benefits in kind?
27. For Redrow it is submitted that it does not. It relies on the contrast with the expression “qualifying remuneration”, which is defined to include benefits in kind so far as assessable to tax. It suggests that basic remuneration, used to quantify the death benefit, is contrasted with total remuneration because the latter does, but the former does not, include fluctuating cash benefits. Redrow points to the absence of any provision in the Deed or the Rules enabling the trustees to value non-cash benefits, particularly on a monthly basis for contribution purposes. Reliance is placed on further problems and anomalies which arise if total remuneration includes benefits in kind in the form of cars or share options.
28. The Employees challenge this interpretation. For them it is submitted that the word remuneration is apt to cover benefits in kind and the adjective “total” means what it says. The force of this submission is undermined by the concession that non-taxable benefits in kind are not included. Their counsel points out that the phrase total remuneration is a constituent element in the definition of “qualifying remuneration”. He contends that a new definition was required because of the change from scheme year to tax year. He suggests that total remuneration is limited to taxable remuneration so that there is no difficulty in ascertaining the amount thereof as the valuation machinery for tax purposes is equally applicable for scheme purposes.
29. I prefer the submissions for Redrow. I start from the proposition that from 1st April 1984 to the execution of the 1989 Deed the yardstick for both contributions and benefits, “total pay”, did not include benefits in kind. The 1989 Deed could change that; but had that been intended some clear indication, whether by way of recital or rule, is to be expected, if only because the amount of the monthly contributions of many employees would have gone up overnight. Not only is there no such indication but, in my judgment, there are indications in the Rules to the opposite effect.
30. First, if total remuneration from the Employers included benefits in kind the definition of qualifying remuneration would not need to include them expressly. The contrast is between “total” and “qualifying”. If the draftsman intended that remuneration should include benefits in kind, which it is capable of doing, then he would not have needed the express inclusions in the case of qualifying remuneration. The express inclusion cannot be accounted for by the change from scheme year to tax year.
31. Similarly if “total remuneration from the Employers” included benefits in kind there would have been no need for their express inclusion in the definition of Member’s remuneration in Rule 17(k). Some confirmation as to the limits of what is and is not included in remuneration is afforded by the reference to basic remuneration in Rule 6(a). That envisages that normally directors’ fees would be included, as would be other fluctuating cash benefits, but such variable amounts may not be easy to accommodate into an insured death benefit. Thus the use of the word “basic” operates to exclude fluctuating cash benefits and can be given sufficient weight without including in the word remuneration non cash benefits in kind.
32. The foregoing points are somewhat literal and may be of limited value in the construction of a document such as the 1989 Deed. But the omission of any express reference to any machinery for the valuation and apportionment of benefits in kind for both benefit and contribution purposes is astonishing if it had been intended to include benefits in kind in the phrase “total remuneration from the Employers”. Clause 6(b) of the 1989 Deed cannot supply this omission. The solution suggested by counsel for the Employees is that a term should be implied to the effect that the provisions of ICTA relating to such matters should be applied by the trustees. But the provisions of ICTA cannot be so applied without amendment; both uncertainty as to the amount until after the year end, the problems of time apportionment when switching from a tax year to a scheme year and the valuation of non-taxable benefits in kind preclude a simple application of ICTA. Nor is it necessary to make such an implication unless and until it is determined that benefits in kind are included in “total remuneration from the Employer”. In my view the intention to be ascribed to the draftsman must be that benefits in kind were not included in total remuneration. On this hypothesis no machinery for valuation or apportionment, whether based on ICTA or not, nor any implied term to that effect is required. I consider that the alternative that the draftsman intended both to include benefits in kind and a machinery for valuation and time apportionment but failed to make express provision for either is most improbable.
33. For all these reasons I conclude that the phrase “total remuneration from the Employers” as used in the definition of “earnings” in the 1989 Deed does not include benefits in kind. It follows that they are not to be taken into account in the computation of either benefits or contributions payable into or out of the Scheme.
The 1995 Deed
34. The 1995 Deed is even longer than the 1989 Deed, the index alone runs to 10 pages. Once again it is necessary to appreciate its structure. The Deed comprises 26 clauses extending over 44 pages. There are 18 rules and a schedule divided into 4 parts covering 96 pages. Clause (1)(b) declares, in exercise of the power of amendment contained in clause 16 of the 1989 Deed (see para 22 above), that the provisions of the 1989 Deed and Rules

“are hereby deleted with effect from the date of execution of this deed and the following provisions substituted for them EXCEPT THAT

[(1)]

(2) despite Rule 2, any person who was a member of the Scheme immediately before the deletion of the Existing Rules shall be deemed to be a member in relation to any benefit which he or any other person continues to remain entitled to (contingently or otherwise) under the Scheme, and

[(3)]

35. Clause 15, interestingly entitled “Matters of Doubt and Polygamous Marriages", provides in sub-clause (a) that

“the Trustees shall decide all questions and matters of doubt arising under this deed or the Rules whether relating to the construction thereof or the benefits thereunder or any segregation of the Fund or otherwise...”

There are no other provisions of the 1995 Deed which appear to have any relevance to any of the questions I have to decide.

36. The relevant definitions are contained in Part I of the Schedule to the Rules. Those relevant to the basic issues of construction are

““Basic Salary” means the basic annual salary or wages of a Member (excluding bonuses, commission, overtime and any other fluctuating emoluments) at the date in question.”

““Contribution Salary” means the Member’s total earnings as taken into account for Schedule E income tax purposes.”

““Pensionable Salary” on the date in question means the member’s total earnings from the Employers during the calendar year ending on the Renewal date immediately prior to or coincident, before the deduction of contributions to the Scheme but otherwise as taken into account for Schedule E income tax purposes.”

(Final Pensionable Salary is defined by reference to Pensionable Salary.)

37. Part II of the Schedule contains provisions relating to the Inland Revenue limits. It is stated in the opening note that

“Part II of the Schedule sets out the Inland Revenue’s limits on contributions and benefits which will not prejudice approval. It does not indicate the contributions which a member is required to pay to the Scheme nor confer any benefits of any kind on any member.”

The limits override any contrary provisions in the 1995 Deed or Rules. In that context “Fluctuating Emoluments” are contrasted with the basic wage or salary and specifically include taxable benefits in kind. Similarly “Remuneration” is the aggregate of the total emoluments for the year which are assessable to income tax under Schedule E. Final Remuneration is to be computed by reference to both basic pay and Fluctuating Emoluments. The maximum lump sum benefit is also calculated by reference to basic salary or wages and fluctuating benefits.

38. The only provisions in the 1995 Rules which provide for contributions and benefits are contained in Part III of the Schedule. One of the subsidiary points of construction is to determine how, if at all, they apply to existing members at the time the 1995 Deed became effective. For the purposes of the basic issue I will assume that they do.
39. Part III provides, so far as material, for categories of membership (para.1), Member’s contributions (para 2), Member’s annual rate of pension (para 3), lump sum benefit (para 5). The yardstick for contributions is the member’s “contribution salary”, for pension is the member’s “final pensionable salary” and for the lump sum is the member’s “basic salary”. I have already set out the definition of these terms in Part I of the Schedule in paragraph 36 above.
40. In these circumstances the submissions for the parties follow much the same lines as with the 1989 Deed. For Redrow it is submitted that there is no difference between “total earnings” as used in the definitions of contribution salary and final pensionable salary in the 1995 Deed and “total remuneration” as used in the comparable definitions in the 1989 Deed. In each case the draftsman has cash receipts, not benefits in kind, in mind. Counsel for Redrow suggests that the subsequent words “as taken into account for Schedule E income tax purposes” which replace the former expression “from the Employers” does not enlarge the scope of relevant earnings to benefits in kind. He relies on the fact that if such a change had been intended then it is surprising that it should not have been done clearly. Once again he points to the lack of any provision for valuation or apportionment of benefits in kind to enable the relevant earnings to be taken into account.
41. Counsel for the Employees relies strongly on the use of the words “total” and “as taken into account for Schedule E income tax purposes”. He points out that benefits in kind are taken into account for those purposes. He contends that if they are not taken into account for contribution or benefit purposes then the word total will have been ignored. He submits that any necessary valuation or apportionment provisions may be supplied by an implied term incorporating those to be found in ICTA with or without further resort to the general power contained in Clause 15 of the 1995 Deed.
42. In my judgment the definitions of “contribution salary” and “pensionable salary” which provide the yardstick for contributions and pensions in Part III of the Schedule to the 1995 Rules do not include benefits in kind.
43. First, the background to a consideration of the 1995 Rules is the 1989 Deed. For the reasons I have already given I consider that on the true interpretation of that deed benefits in kind are not included in the yardsticks for the computation of either benefits or contributions. Of course, it is quite possible that one of the purposes of a new definitive trust deed is to change those yardsticks. But if that were intended it is to be expected that there would be some clear indication, whether by recital, in the relevant rules or otherwise. The only indication relied on is the change in wording to be found in the definitions quoted in paragraph 36 above.
44. There are two changes in the relevant wording. The first is the change in the relevant noun from “remuneration” to “earnings”. In my view those words are interchangeable so that the change is of no significance. The second change is in the words which follow the noun. The effect of that change is to bring into the calculation of, at least, Contribution Salary remuneration or earnings not received from the Employers. Such third party cash receipts are taxable under Schedule E but would not have been taken into account under the formulae used in the 1989 Deed. In my judgment there is no reason to give the second change any greater effect than that. As counsel for Redrow points out, the phrase is not “all earnings taken into account for Schedule E income tax purposes” but “total earnings as taken into account...”. The use of the word “as” suggests something more limited.
45. Second, it is remarkable that if the draftsman had intended to achieve the inclusion in “total earnings” of benefits in kind he should have used the definitions he did rather than those to be found in Part II of the Schedule, with or without some further variation. Benefits in kind are expressly included in the definitions of “fluctuating emoluments” and thereby imported into the definitions of “remuneration” and “final remuneration”. But the opening note to Part II makes it clear that nothing in Part II affects the amounts of the contributions or benefits provided for in Part III.
46. Third, there is the remarkable fact that once again there is no express provision for the valuation or apportionment of benefits in kind. It is true that the reference to Schedule E imports at least some of the machinery of valuation but that does not deal with the problems associated with, for example, car benefits the amount of which can only be quantified after the end of the relevant tax year. As in the case of the 1989 Deed I do not think that this omission can be supplied by either clause 15 or an implied term.
47. For all these reasons I conclude that benefits in kind are not included in the yardstick by which contributions and benefits are to be computed pursuant to Part III of the Schedule to the 1995 Rules. It follows that at all times since it was set up in April 1984 the yardstick for calculating both benefits and contributions has remained the same in this respect. It is on that basis that I approach the subsidiary issues.
Subsidiary Issues
48. Four such issues were raised in argument before me, namely:

(a) whether the 1995 Deed applies to those who were members of the Scheme and not in receipt of benefit on 23rd March 1995; and if so

(b) whether they are entitled to the, possibly, enhanced benefits for which Part III provides; but if not

(c) how are the contributions and benefits of such members to be ascertained; and in any event

(d) how are benefits in kind to be valued.

In the light of my decision on the basic issue the question of valuation, ie paragraph (d), does not arise. The issues summarised in (a) to (c) were raised and argued on the assumption that the 1995 Deed did but the 1989 Deed did not require benefits in kind to be taken into account. In the light of my decision on the basic issue the assumption is wrong but it appears to me that these issues may arise anyway and should be decided.

49. To explain these issues it is necessary to refer to further provisions of the 1995 Deed. I have already set out, in paragraph 34 above, the provision in the 1995 Deed by which the Rules are brought into operation. Rule 2, to which reference is made, provides for eligibility for membership by reference to categories of membership set out in paragraph 1 of Part III. There are two such categories of member, restricted and full. The qualifications for eligibility for full membership are similar to, but not the same as, those required under the 1989 Deed. The most noticeable difference is that directors who held a salaried office with Redrow were eligible under the 1989 Deed but are not eligible under the 1995 Deed.
50. Rule 1(c) provides that

“Subject to the provisions of the Rules and, in particular subject always to Rule 16, there shall be provided for and in respect of a Member such one or more of the Relevant Benefits permitted by the Rules. Such Relevant Benefits shall be of such amount or at such rate as the Employer with the Trustees consent in its absolute discretion decides and shall be notified to the Member in accordance with Rule 1(b) above. Except where the Member is notified otherwise, in the case of a Specified Member the amount or rate of any such benefit shall be as set out in Parts III and IV of the Schedule.”

51. In Part I of the Schedule there are the following definitions:

““Full Member” means a Member who is not a Restricted Member”

““Members” means people admitted to membership of the Scheme so long as (and only so long as) they remain entitled or prospectively entitled to any benefit under the Scheme”

““Specified Member” means a member who at the date of his admission to the Scheme or, if he has been admitted to membership more than once, the date of his last such admission, was within the membership categories set out in Part III of the Schedule”

52. Redrow contends that the provisions of Part III apply only to those who fall within the description of Specified Member. Reliance is placed on the heading of Part III “Membership, Contributions and Benefits of Specified Members who join the Scheme on or after 1st January 1995”. Redrow contends that existing members at that date, or at 23rd March 1995 when the 1995 Deed became operative, do not fall within the description of Specified Member.
53. Counsel for the Employees disagrees. He contends that an existing member is within the categories set out in Para 1 of Part III. In any event, as he submits, the existing member is entitled to benefits under the 1995 Rules by force of Clause 1(b) of the 1995 Deed.
54. In my view this issue can be simply resolved. It is clear from clause 1(b)(2) of the 1995 Deed that a pre-existing member is deemed to be a member of the Scheme as reconstituted by the 1995 Rules in respect of all the benefits to which he is prospectively entitled at the time the 1995 Deed took effect. As such he is to be treated as a member for the purposes of the definition of member in Part I. As such a person does not fall within the definition of restricted member he must be a full member within the definition of that term in Part I and therefore within the category of full membership set out in Paragraph 1(2)(b) of Part III. In that event such member is within the membership category required to satisfy the definition of specified member contained in Part I of the Schedule.
55. It is true that the heading to Part III suggests that only those who join after 1st January 1995 can be specified members. In my view this cannot be sufficient to require a contrary construction. First, 1st January 1995 preceded the time when the 1995 Deed became effective. Second, no such condition is contained in any of the definitions of member, full member, restricted member or specified member contained in Part I of the Schedule. Third, it would be absurd if such a heading were to give rise to a hiatus between the 1989 Rules and the 1995 Rules when clause 1(b)(2) so clearly shows a contrary intention.
56. For all these reasons I would resolve the issue set out in paragraph 48(a) above in an affirmative sense. This conclusion largely disposes of issue (b) as well. It is not suggested that the 1995 Deed is retrospective in the full sense of that word. But the obvious intention behind clause 1(b)(2) is that the prospective entitlement to benefits under the 1989 Deed should be carried forward so as to merge with entitlement in respect of similar benefits under the 1995 Deed. The phrase “despite Rule 2” appears to me to confirm that such was the intention whether or not the existing member would have been eligible for membership under the 1995 Rules. For these reasons I would determine the issue set out in paragraph 48(b) in an affirmative sense too.
57. It follows from my decisions so far that neither issue (c) or (d) arise. In those circumstances I say not more about them.
Estoppel by Convention
58. In the light of my conclusions this question does not arise either. But, in case this matter goes further it may be of assistance if I briefly indicate my views.
59. The principle on which Redrow relies is that formulated by Lord Denning MR in Amalgamated Investment & Property Co.Ltd v Texas-Commerce International Bank Ltd.[1982] 1 QB 84, 121, namely

“If parties to a contract, by their course of dealing, put a particular interpretation on the terms of it – on the faith of which each of them – to the knowledge of the other – acts and conducts their mutual affairs – they are bound by that interpretation just as much as if they had written it down as being a variation of the contract. There is no need to inquire whether their particular interpretation is correct or not – or whether they were mistaken or not – or whether they had in mind the original terms or not. Suffice it that they have, by their course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it.”

60. Eveleigh and Brandon LJJ adopted the statement of principle contained in Spencer Bower and Turner, Estoppel by Representation 3rd Ed.p.157 that

“When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped against the other from questioning the truth of the statement of facts so assumed.”

61. These principles have been considered in the context of a pension scheme by Aldous J in Icarus (Hertford) Ltd v Driscoll [1990] PLR 1, Laddie J in ITN v Ward [1997] PLR 131 and Rimer J in Lansing Linde v Alber [2000] PLR 15. I do not doubt that the principle is capable of applying to dealings between the trustees of a pension scheme and a member in relation to the contract between them. But, I suggest, the principle must be applied with caution when seeking to establish an estoppel between the trustees and the general body of members so as to bind them all to an interpretation of the trust deed which it does not bear.
62. First, the pension scheme embodies not only the terms of a contract between individual members and the trustees but also a trust applicable to the fund comprising the contributions of members and surpluses derived from the past in which present and future members may be interested. Such trusts cannot be altered by estoppel because there can be no such estoppel binding future members.
63. Second, it is necessary to show that the principle is applicable to all existing members. I agree with Laddie J in ITN v Ward [1997] PLR 131 that it is not necessary for that purpose to call evidence relating to each and every member’s intention. But that will not absolve a claimant from adducing evidence to show that the principle must be applicable to the general body of members as such.
64. Third, as the formulation of the principle shows, what must be proved is that each and every member has by his “course of dealing put a particular interpretation on the terms of” the Rules or “acted upon the agreed assumption that a given state of facts is to be accepted between them as true”. This involves more than merely passive acceptance. The administration of a pension scheme on a particular assumption as to the yardstick by which contributions or benefits are to be calculated may well give rise to a relevant assumption on the part of the trustees. I suggest that it requires clear evidence of intention or positive conduct to bind the general body of members to such an assumption. I doubt whether receipt of the benefit or payment of the contribution, without more, can be enough. It must not be overlooked that if the principle is applicable it may be used to increase the liability or reduce the benefit of a member as well as, in this case, the opposite.
65. The extra ingredients in this case relied on by Redrow are the explanatory booklets and the form of payslip. Had it been necessary to decide the issue I would not have considered that either ingredient was enough. None of the booklets was clear enough and each of them contained passages clearly indicating that nothing contained therein could override the meaning and effect of the deeds and rules. With regard to the payslips it could be deduced from those for a pay period in which the member had enjoyed a benefit in kind that it was not taken into account in computing the amount of that employee’s contribution. The employee paid that contribution by deduction from his gross pay. But a member not receiving a benefit in kind would be none the wiser and there is nothing comparable in relation to the computation of benefits.
66. For all these reasons I would have concluded that, although it is clear enough that Redrow assumed that benefits in kind were not included in the yardstick by which benefits and contributions were to be measured, the evidence was insufficient to establish that the general body of members adhered to the same assumption.
Conclusions
67. For all these reasons I conclude that

(a) benefits in kind are not to be taken into account in the determination of either benefits or contributions under either the 1989 Deed or the 1995 Deed;

(b) a member of the Scheme within clause 1(b)(2) of the 1995 Deed is a specified member for the purposes of Part III of the Schedule to the 1995 Rules; and

(c) such a member is entitled under the 1995 Rules to the benefits to which he had become prospectively entitled under the 1989 Rules prior to 23rd March 1995.

I will invite counsel for the parties to prepare a minute of order to give effect to those conclusions and consequential matters, such as representation orders.