England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18 May 2015

Mr Justice Warren :

Introduction

1. This judgment is written to deal with two further outstanding matters (leaving the issues concerning the change of ER policy to be dealt with separately):

i) The first is the problem recorded at the end of the Remedies Judgment arising out of the fact that the relevant members of the Plans were employed by IBM United Kingdom Ltd ("UKL") and not by Holdings. I was clearly in error in saying in the Breach Judgment that Holdings was in breach of contract and wrong in the way in which I reached and stated some conclusions in the Remedies Judgment as a result of that error. It is unfortunate that I made this mistake, especially given that I recognised the true position at [3] of the Breach Judgment. It is unfortunate too that none of the many lawyers involved in this case picked up the error at any stage until Mr Simmonds and his team did so after I sent out the draft of the Remedies Judgment for correction in the usual way.

ii) The second, which is connected with the first, relates to the Separation Programmes.

The Holdings/UKL issue

2. The extent of my powers to revise the Breach Judgment and the Remedies Judgment is not in dispute. The law is set out sufficiently for present purposes in the decision of the Supreme Court in Re L (Children) (Preliminary Finding: Power to Reverse) [2013] UKSC 8, [2013] 1 WLR 634. It is common ground that I have jurisdiction on the facts of the present case to amend the Judgments to correct the error and that the matter is one for the exercise of my discretion. Although the RBs' primary position is that I should not exercise that discretion, Mr Stallworthy recognises that it would be unsatisfactory for the Court of Appeal to have to address the Judgments based on a clear error of fact. The RBs' secondary position is that, if the correction is to be made, it should only be on the basis that the RBs should be allowed to rely on an alternative argument. This is to the effect that UKL was in breach of its duty of trust and confidence not only in relation to the breaches of contract already identified in respect of the NPAs and the consultation, but also in respect of the Exclusion Notices, the ER Window and the change in ER Policy.
3. I have found it helpful to ask myself how the Breach Judgment would have been different if I had not made the error. The answer is that I would have drawn the distinction, where relevant, between Holdings and UKL and in many places where I have referred to Holdings I would instead have referred to IBM UK, that is to say Holdings and UKL together.
4. That I did not do so may be explained albeit not excused. It will be remembered that the focus of the argument throughout much of the Breach Hearing was on the distinction between CHQ (ie the US entity) and IBM UK (ie the UK entities) without much attention being paid to the different legal personalities of Holdings and UKL. It is true, as Mr Simmonds submits (and contrary to Mr Stallworthy's suggestion), that IBM UK did not at any stage accept that Holdings and UKL were to be treated as one for the purposes of establishing their respective legal liabilities. But it is also true that it was the face of IBM UK which was presented to members throughout Project Waltz without a clear distinction being drawn between the roles of Holdings and UKL. It is also the case that the relevant individuals who comprised management were involved with both Holdings and UKL. Mr Stallworthy has produced a large number of examples where IBM UK itself did not draw any distinction, referring only to "IBM". Further, it is to be remembered that UKL was a subsidiary of Holdings so that when I spoke of Holdings making agreements or taking actions which were really agreements or actions of UKL, I can be seen as reflecting the element of control which Holdings had over the UK group.
5. Mr Stallworthy also notes that, in the many cases currently before the Employment Tribunal, UKL has represented itself as being able to exercise powers under the Plans which are in fact exercisable by Holdings. Mr Simmonds says that that is an error. No doubt it is an error in the sense that, like my Judgments, it is wrong; but, right or wrong, it displays a continuing attitude by management which draws no real distinction between Holdings and UKL.
6. Be all of that as it may, I am quite sure that I would not have gone on to consider any further breaches of duty on the part of UKL other than those actually discussed (albeit by reference, mistakenly, to Holdings) in the Breach Judgment if I had drawn a rigorous distinction between Holdings and UKL at all stages. It is true that I held in the Breach Judgment (see [1515]) that it was unrealistic to separate the NPAs from the other elements of Project Waltz. And so it can be said too that it would have been unrealistic to have separated out any other element (such as the Exclusion Notices) and to have viewed it only in isolation. Project Waltz was conceived as a whole by management and the five elements identified in [19] of the Breach Judgment went hand-in-hand. Each of Holdings and UKL knew that they were participating in a single project designed to achieve a change to the conditions of service of active members in relation to their pension provision.
7. However, although the action of each of Holdings and UKL were to be judged in the context of Project Waltz as a whole, their responsibility was for their own actions not for the actions of the other. It was not argued – and it is now far too late to argue and Mr Stallworthy does not seek to argue – that there was an actionable conspiracy between Holdings and UKL or indeed between either of them and CHQ or that Holdings and UKL were somehow procuring each other to breach their contracts and/or duties in a way which gave rise to a cause of action.
8. It was important, in the context of establishing UKL's own breach of contract in procuring the NPAs and in assessing the remedies flowing in respect of that breach, to appreciate that the NPAs arose in the context of a wider set of arrangements (ie Project Waltz). Thus I explained more fully in the Remedies Judgment that the NPAs were capable of giving rise to a breach of contract when viewed in that context even if, viewed in isolation they did not do so. It does not follow from that appreciation that UKL's own involvement in certain elements of Project Waltz means that it was itself in breach of contract when Holdings implemented other elements of those arrangements. However, that is not an end of the story because UKL clearly knew that it was involved in a wider set of arrangements than merely procuring the NPAs: it clearly knew of Project Waltz and was instrumental in obtaining the overall objective of that project by implementing the elements which were in its control to implement.
9. It can therefore be argued that UKL was in breach of its implied duty of trust and confidence not simply because it actually procured or attempted to procure NPAs but because it was engaged in a wider plan to procure pension changes giving rise to a breach of duty not only of its own but also of Holdings.
10. The RBs problem is that they did not argue the case in that way at the Breach Hearing; and it is not obvious from the pleadings or the List of Issues that this was an argument which was intended to be run at all.
11. I am not convinced, in any case, that it adds anything to the RBs' case. Even if Mr Stallworthy's argument is a good one, it does not follow that UKL is to be treated as if Holdings breach of its Imperial duty were to be treated as UKL's breach of contract. Any financial remedy against UKL would be an award of damages to put the RBs in the same position, so far as money can do so, as if UKL itself had not been in breach of contract, which is a different consequence from putting the RBs in the same position as if Holdings' breach of duty had not been committed. In this context, it might be argued (although it has not been) that, had UKL refused to engage in Project Waltz and in particular had it not acted in breach of contract in procuring the NPAs, Project Waltz would not have proceeded at all so that Holdings would not have exercised the Exclusion Powers, or changed its ER policy. That raises questions of causation and remoteness which have not even been raised let alone debated.
12. And so, to repeat, I am quite sure that I would not have gone on to consider any further breaches of duty on the part of UKL other than those actually discussed in the Breach Judgment.
13. The upshot of all of this is that, subject to one caveat, I consider that I should, in principle, correct the Breach Judgment by making it clear (i) that the breaches of duty which I attributed to Holdings as breaches of the employment contract should be attributed to UKL and (ii) that it is not established that the breaches of its Imperial duty by Holdings in relation to the Exclusion Notices, the ER Window and the change in ER Policy did not give rise to any breach of contract by UKL.
14. The caveat is this. Had the error not appeared in the Breach Judgment, the RBs might have approached the Remedies Hearing in a different way. Putting to one side for the moment issues concerning the Separation Programmes (which I deal with separately), it is fair to say that the RBs might have sought to raise the argument which they now seek to raise. I would not have allowed it to be raised, just as I would have refused to re-visit the draft Breach Judgment had Mr Stallworthy identified the argument between receipt of the draft and hand-down. The argument should have been raised explicitly and addressed at the Breach Hearing.
15. With that caveat out of the way, there is no reason why, in principle, the Remedies Judgment should not also be corrected to make clear that the contractual breaches of duty and the remedies appropriate, are to be attributed to UKL rather than Holdings and that it is not established that UKL is contractually liable in relation to the breaches by Holdings of its Imperial duty. I add that it is common ground that it nonetheless remains the case that Holdings is unable to enforce the NPAs notwithstanding that the contractual breach was committed by UKL.  I do not need to go into the alternative routes by which that conclusion can be reached.
16. I say "in principle" because a full textual rewriting of the Judgments would be onerous and I would not be capable of completing it within any sensible time-scale. The consequences of my decision are, I hope, clear, namely that UKL is to be substituted for Holdings as the party contractually liable save in relation to the Exclusion Notices, the ER Window and the change in ER policy where the only breach is by Holdings of its Imperial duty. I hope that nothing more is needed in relation to the Breach Judgment. So far as the Remedies Judgment is concerned, IBM UK intends to seek permission to appeal only limited aspects of the Remedies Judgment. I think that it is only in relation to the Consultation Issue and the Separation Programmes that any other amendment of the judgment might be necessary.

The Consultation Issue

17. I consider that what I said in relation to consultation in the Breach Judgment and the Remedies Judgment can stand, substituting UKL for Holdings. This is subject to two caveats:

i) The first is that this change does not mean that it is not open to the RBs to argue on an appeal (subject to obtaining permission to appeal) that Holdings was also in breach of duty in relation to its own conduct in the consultation. At the Breach Hearing, no real distinction was drawn between Holdings and UKL in relation to consultation. The consultation which actually took place related to the various elements of Project Waltz some of which were to be implemented by Holdings and some by UKL. It was a consultation not just by UKL but also by Holdings – at least, no relevant distinction was ever drawn by IBM UK during the course of the exercise any more than it was at the Breach Hearing. Having decided to consult at all, it can be argued strongly that Holdings, as much as UKL, should have consulted properly and that the members should have some sort of remedy for its failure to do so.

ii) The second, which is perhaps only a particular aspect of the first, is that what I said in relation to the need for a fresh consultation before new Exclusion Notices are served holds good. This is not, in practice, a matter on which time needs to be spent because IBM UK has given an undertaking to consult before serving such notices, a consultation which is in any case required by the relevant Regulations.

18. If the parties consider that I need to go further than this, I will consider the extent to which further clarification can be given, even including redrafting parts of the Judgments if that turns out to be necessary.

The Separation Programmes

19. Mr Newman has dealt with this aspect on behalf of IBM. He does not ask me, at this stage, to make any changes to the Judgments to reflect the point which IBM UK now wishes to take. His position is that this is now a matter for appeal and not for amendment of the Remedies Judgment. But he wished to draw attention to the argument since it will feature at the forthcoming hearing to deal with permission to appeal.
20. The point can be put briefly for present purposes. The Separation Programmes did not feature in the Breach Judgment; they became relevant only in relation to remedies. Given the (incorrect) premise that Holdings was the contracting party with the employees, IBM UK's analysis in relation to voluntary and compulsory redundancy proceeded at the Remedies Hearing on the basis that the consent required under the Rules from Holdings was the consent of the employer of the affected members. Although IBM UK does not consider that my conclusion was correct even on the (incorrect) premise that Holdings was the employer, it now wishes to argue that the reasoning by which I reached my conclusion is wholly inapposite when it is realised that Holdings was not the employer. On its case, Holdings had no role in relation to the implementation of the Separation Programmes so that its consent cannot be inferred from the actions taken by UKL in relation to that implementation. It says that the Court cannot, therefore, make a decision which applies across the whole of the affected membership, although it will be open to members, on an individual basis, to establish that they actually had consent or that it is, in their particular cases, to be inferred from all of the circumstances relevant to those cases.
21. When Mr Newman raised this point, my immediate reaction was that I should decide it before any question of an appeal arose. If the error in the Breach Judgment was to be corrected, it seemed to me that the Court of Appeal would want to know the view of the trial judge on this new issue.
22. However, to put myself in a position to make a decision on this issue, further consideration of the facts would be necessary. In particular, the full circumstances surrounding the formulation of the Separation Programmes were not investigated at the Breach Hearing (since they were not relevant at that stage, not themselves forming part of Project Waltz). It is not accepted by the RBs that Holdings was not, as IBM UK asserts, involved at all in those programmes. As to that it must surely be the case – although I accept that I speculate – that Holdings knew and either expressly or implicitly approved of these voluntary and compulsory redundancy programmes. At least on the "alternative approach" to the focus of the consent requirements, it can then be argued that Holdings is to be treated as having given consent to the retirements to which those programmes gave rise (assuming that my decision on the meaning of "retirement" is correct). Indeed, the whole point of the waivers found in the various compromise agreements (for instance in Schedule 4 of the Phoenix agreements) with individual employees giving effect to each of the Separation Programmes was to ensure that "the Company" (not defined in the agreements but clearly a reference to Holdings) was not to be treated as giving its consent. It is not easy to imagine that Holdings was not fully aware of the steps being taken to ensure that it was not to be so treated.
23. On the common ground approach, what I said in relation to voluntary redundancies in [581] to [585] of the Remedies Judgment did not depend on Holdings being the employer of the relevant members. Accordingly, if the common ground approach is correct, my decision on Issue 24 does not need correction in order to reflect the fact that UKL rather than Holdings was the employer. What is more, even if the alternative approach is correct and even if IBM UK is correct in its criticisms of the reasons I gave for concluding that consent was given under that approach, the reasoning leading to my conclusion in [585] under the common ground approach applies equally under the alternative approach and provides a different route to the same conclusion. In other words, Holdings having been in breach of its Imperial duty in abrogating the Old ER policy, the Trustee should give effect to that policy by treating consent to retirement as having been given by Holdings.
24. Returning to the circumstances of the Separation Programmes to which I have just referred in paragraph 20 above, I am reluctant, to say the least, to have another hearing causing further delay before this matter can sensibly go to the Court of Appeal especially if there are to be any arguments about what, if any, fresh evidence might be received.
25. I am also reluctant, for the following reasons, to pre-empt an argument to the effect that the point cannot be taken at all. Although the Breach Judgment reached the (incorrect) conclusion that Holdings was in breach of contract, I did not say in terms that Holdings was the employer of any of the members. On one view, the most that I can be said to have determined was that Holdings was to be treated for the purposes of Project Waltz as the employer of the relevant members. On that footing, the new point which Mr Newman now raises was open for IBM UK to take at the Remedies Hearing, namely that Holdings' consent to retirement was required and had never been given because it was not the employer and was not involved in the Separation Programmes. It did not take the point. Given the stage which these proceedings are now at, and the need to get a final resolution as soon as possible, it might be thought that it is now too late for IBM UK to take the point in which case I ought, at the forthcoming June hearing, to refuse permission to appeal on the point.
26. Since IBM UK does not ask me to amend the Remedies Judgment in the light of its new argument, I do not propose to say any more about this aspect of the case at the present time. No doubt what I have said in this judgment will be reflected in the submissions from all parties in the context of permission to appeal. I will review what, if any, change I should make to the Breach Judgment and the Remedies Judgment in the light of those submissions (in particular in relation to the immediately preceding paragraph of this judgment).