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You are here: BAILII >> Databases >> Irish Court of Appeal >> Holloway & Ors -v- Damianus BV & Ors [2015] IECA 19 (10 February 2015)
URL: http://www.bailii.org/ie/cases/IECA/2015/CA19.html
Cite as: [2015] IECA 19
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Judgment
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THE COURT OF APPEAL Neutral Citation Number: [2015] IECA 19 Kelly J. Hogan J. Mahon J. No. 1376/2014 Paul Holloway, Timothy Crowley And Griet Vandenheede Plaintiffs/Respondents and Damianus BV, Omega Teknika Ltd. And Chefaro Ireland Ltd. Defendants/Appellants Judgment of the Court delivered on the 10th day of February 2015 1. These are our reasons for dismissing the Defendants/Appellants appeal. 2. This is an appeal from an order of the High Court (Moriarty J) made on 31st July 2014 granting judgement against the Defendants/Appellants in the sum of €2,439,193.56 (inclusive of interest): See [2014] IEHC 383. 3. The Plaintiffs are the Trustees of the Omega Pharma Ireland (the second named Defendants/Appellants) Pension and Death Benefits Scheme (the “Scheme”). The first named Defendant/Appellant is a company registered in the Netherlands and is the principal employer under the Scheme. The second and third Defendants/Appellants are companies registered in Ireland, and are the associated employers in respect of the Scheme. 4. The Scheme is governed by Definitive Deed Rules dated 24th November 2004, made between the (then) trustees and the (then) principal employer. 5. On the 1st October 2012 the first Defendant/Appellant served notice on the Plaintiffs/Respondents in their capacities as Trustees of the Scheme, of its intention to discontinue contributions to it, and nominated 31st December 2012 as the winding up date, it sought agreement on that date. The Notice stated:
We request that the Trustees agree that the date of the winding up of the scheme be 31 December 2012. There is no Associated Employer (as defined in the Definitive Deed) that will take on the role of Principal Employer. Accordingly, there is no basis for the Trustees to defer the winding up of the scheme.” 6. Reference is made to clause 8.1 of the Trust Deed as the provision requiring the calculation of the funding shortfall and the basis for calculating the amount involved. The letter of 26th October 2012 sought to establish consultation with the first Defendant/Appellant in relation to these matters, and to commence such consultation on 26th November 2012, and requested that it contact the Trustees on or before 23rd November 2012 in that regard. There was no response to this letter. 7. A reminder letter was sent by the Trustees on 22nd November 2012, in which it was clearly stated that the final contribution amount would be determined after the 30th November 2012 if no response was received by then. In the event, no response was received, and the Trustees actuaries duly assessed the contribution amount at €3,010,000 by letter dated 7th December 2012, the trustees demanded payment of that sum. This sum was subsequently adjusted downwards to €2,250,000.00. 8. The first Defendant/Appellant did not respond to the letter of 7th December 2012 until 29th January 2013, following a further letter from the Plaintiffs/Respondents of 28th January 2013 in which reference was made to the possible institution of legal proceedings to recover the amount claimed. On 25th April 2013, the first Defendant/Appellant informed the Plaintiffs by telephone that, effectively, it did not intend to pay the amount. A formal demand letter seeking payment of €2,250,000 within seven days was despatched on 17th May 2013, following which legal proceedings were instituted on 19th June 2013. In due course the Defendants/Appellants delivered a full defence thereto. 9. Clause 8.1. of the Trust Deed provides as follows:
11. Clause 18.1 provides as follows:
The “Discontinuance Date”: (a) Immediately on ceasing to carry on business or where the Employer is an Associated Employer on such later date as that Employer agrees with the Trustees being not later than the Review Date next but one following the date the Employer ceases to carry on business; Or (b) The date specified in the notice or agreed with the Trustees.” 11. Clause 19.1 provides as follows:
(a) On the Principal Employer being wound up, ceasing to carry on business or giving or being deemed by the Trustees to have given notice under Clause 18.1 or 18.2 as applicable of its intention to discontinue contributions to the Scheme, unless …” (b) On the expiry of notice by all the Employers under Clause 18.1 of their intention to discontinue contributions”
14. The shortfall claim of €3,010,000 (and which was subsequently reduced to €2,250,000.00) was actuarially calculated and notified by the Actuary to the Plaintiffs/Appellants on 26th October 2012, and subsequently notified to the Defendants/Appellants. That figure represented the “Estimated Value of Accrued Liabilities at 31st December 2012”. It was calculated on the basis that, as of that date, such a contribution was required in order to enable the Pension Fund “provide the Benefits under the Scheme” (Clause 8.1.), and not merely to its MFS level. The accuracy of the figure calculated (and as subsequently reduced) as being the amount necessary to meet the Scheme’s liability to pay the benefits as provided for by the Scheme as of 31st December 2012, was not disputed by the Defendants/Appellants. 15. The Defendants/Appellants submissions can be summarised as follows:
• The Termination Notice issued by the first Defendant/Appellant requested that the Trustees agree that the date of the winding up of the Scheme be 31st December 2012. It is submitted that irrespective of the date suggested by the Employers for the commencement of the winding up, the Trustees were still obliged to commence the winding up with effect from 1st October 2011. • The learned trial judge misconstrued the Trust Deed in holding that Trustees were entitled to make a contribution demand notwithstanding the fact that the Termination Notice had been served by the first Defendant/Appellant as Principal Employer (on 1st October 2012), with the second and third Defendants/Appellants simultaneously confirming that neither of them intended to take over as Principal Employer. • In relation to the date on which the Scheme is to be wound up, it is provided in Clause 19.1 that: “The Scheme shall be wound up on the day on which the first of the following events occurs:
(b) On the expiry of notice by all the Employers under Clause 18.1 of their intention to discontinue contributions.” (emphasis added in Defendants/Appellants written submissions). • This is in contrast to the position that pertains under Clause 19.1 (b) where all of the Employers give notice of their intention to discontinue contributions. In that situation it is clear that the winding up date is the date of the expiry of the Notice of Termination, namely 31st December 2012. • While it may appear odd that there are to be different winding up dates depending on whether the Notice of Termination is given by the Principal Employer alone rather than being given by all Employers, it is nevertheless the case that Clause 19 clearly provides for this. It is submitted that there is no ambiguity or uncertainly in relation to the words used and thus, it was not open to the learned trial judge to interpret them otherwise than in accordance with their clear and plain meaning. • In this regard it is significant that Clause 20 goes on to deal with the manner in which the Funds of the Scheme are to be applied in a winding up, setting out the order of priority in which benefits are to be purchased for pensioners and members. In this regard it is to be noted that Clause 20.1 specifically states inter alia that
• Clause 20 states that once the winding up commences, the Employers only have a liability for contributions “which have accrued due but are unpaid at the winding up date”. • Thus the termination provisions of the Trust Deed operates so that if the Principal Employer gives Notice of Intention to seek contributions under Clause 18.1 and if no other Associated Employer is wiling to take on the role of Principal Employer, the Trustees are obliged to wind up the Scheme as of the date on which the Clause 18.1 Notice is given and that the only contributions that the Employers shall continue to be liable for following that date are contributions which have accrued due but are unpaid at the “winding up date” (as for example, where the Trustees have, at the start of the year made a demand for a contribution of x Euros payable by twelve equal monthly instalments and some of those instalments have not yet been paid because, the Termination Notice was served in the middle of that year).
18. A second heading of Appeal by the Defendants/Appellants is that, irrespective of the operative date being either 1st October 2012 or 7th December 2012 (the date of the actuarial calculation of €3,010,000). There was, in fact, no shortfall as there was in place (as of both dates) 100% funding calculated on the MFS basis. It was acknowledged by counsel for the Defendants/Appellants that the MFS funding level was insufficient to “provide the benefits under the Scheme” as per Clause 8.1 of the Trust Deed. 19. The Plaintiffs/Respondents reject the arguments put forward by the Defendants/Appellants. In particular they reject the contention that the liability of the Defendants/Appellants to fund any shortfall in the Pension Fund existed after 1st October 2012 (other than such contributions that would be payable in the ordinary way during the three month notice period) or that the measure of any shortfall (as of 1st October 2012, or identified during the course of the three month notice period) was to be measured using the MFS standard. The Plaintiffs/Respondents submissions might be summarised as follows:
• It is clear from Clause 18 that where the Employer gives three months written notice of its intention to discontinue contributions, the discontinuance of the contribution obligation runs from the date of expiry of that three month notice period (unless some other date is agreed with the Trustees). In this case the Employers notice of 1st October 2012 is consistent with the wording of Clause 18. It gave notice of the employers “intention to discontinue contributions to the Scheme”. • The notice also stated: “The date of expiry of the three month notice is the date specified for the purpose of Clause 18.1.” • It is clear that the obligation to make contributions on the part of the Employer was to continue until the expiry of the relevant notice period (i.e. 31st December 2012), and that accordingly, during that notice period, the Trustees were entitled to make a contribution demand. It is argued that there is no suggestion in the terms of Clause 18 of the Trust Deed that the employers have an immediate entitlement to seek contributions (at least where the Employer continues in business). It is pointed out that the employers were obliged to continue to make contributions to the Scheme up to the winding up date specified in the notice, namely 31st December 2012, and this is consistent with the fact that the Members benefits continued to accrue up to the winding up date. • There is nothing in the language of Clause 20.1 of the Trust Deed which expresses overrides, or purports to override, the provision of Clause 18.1, which entitles a contribution demand to be made up to the date of the expiry of the notice, namely in this case, 31st December 2012. The Trustees submit that if the words of Clause 18.1 were to be overwritten, it would be expected that this would be expressly provided for in the Trust Deed. The argument which the Employers contend for would have the result that the obligation to pay contributions would cease immediately on service of the notice, notwithstanding the Clause 18.1 clearly envisages a period of notice being given prior to the “discontinuance” of the contribution obligation. It is submitted that this would make the Scheme unworkable. • The view of the relevant legal authorities suggest that Courts interpret pensions scheme provisions so as “to give a reasonable and practical effect to the Scheme” and so reflects a purposive approach. They referred to the judgment of Kelly J in Irish Pensions Trust Limited v. Central Remedial Clinic [2006] I.R126 and to Mettoy Pension Trustees Limited v. Evans [1990] 1WLR 1587, R.e Gulbenkian Settlements [1970] AC508, 522, and Boliden Tara Mines Limited v. Cosgroves and Others [2010] IESC62 amongst others. • In relation to the contention that the proper standard of funding is that of the MFS, it is contended that such ignores the fact that the statutory standard is no more than a minimum, and the fact that in this case the members are entitled to the benefits provided for under the Scheme, and which if they are to be met, would require a funding standard greater than MFS. • Reference was made by the Plaintiffs/Respondents to the PwC report prepared in September 2012, in the context of the proposed restructuring of the first named Defendant/Appellants Irish operations. In that report, it is stated as follows: “There is the potential for the Trustees to seek cash funding beyond the MFS liability such that the “buy out” cost of accrued liabilities would be funded by the Employer, thereby providing the members with the Fund which could be expected to replicate the benefits they were expecting in the DB Scheme.”
22. Indeed, it may be observed that the English courts have shown no subsequent real enthusiasm for the principle articulated in Forbes v. Git. Thus, for example, in Peabody Trust Governors v. Reeves [2008] EWHC1432 (Ch) Gabriel Moss Q.C. (sitting as a Deputy High Court judge) certainly applied the principle so to give effect to the earlier two irreconcilable clauses. He nonetheless added, however, that:
25. In that case a debenture was given by a company known as Central Garage (Cork) Ltd. to Bowmaker. Central Garage subsequently went into liquidation and the liquidator applied to the High Court pursuant to s. 280 of the Companies Act 1963 to determine which particular creditor should have priority in view of an apparent inconsistency in the provisions of the debenture itself. 26. Clause 3 of the debenture charged its property and assets, together with a charge over a particular premises specified in a schedule. While certain other properties belonging to the company were included in the schedule, a property known as Ivy Lawn was not. The particulars of the charge were then duly registered with the Registrar of Companies. 27. Approximately one month later Central Garage gave the Bank of Ireland an equitable mortgage over the property at Ivy Lawn by deposit of title deeds. As Henchy J. pointed out, if matters had stood at that point, there would have been no question of the Bank yielding priority to Bowmaker so far as the Ivy Lawn property was concerned. The complicating factor was that clause 1 of the debenture provided:
The relevant rule of interpretation is that encapsulated in the maxim generalia specialibus non derogant. In plain English, when you found a particular situation dealt with in special terms and later in the same document you find general words used which could be said to encompass and deal differently with that particular situation, the general words will not, in the absence of an indication of a definite intention to do so, be held to undermine or abrogate the special words which were used to deal with a particular situation. This is but a common sense way of giving effect to the true or primary intention or primary intention of the draughtsman, where the general words will usually have been used inadvertent of the fact that the particular situation has already been specially dealt with.”
The words and the condition referring to “the company’s land and premises for the time being” should be construed as if they read “the company’s land and premises for the time being as specified in the schedule herein”. In that way the charging provision and the condition are brought into harmony.” 32. Clause 18.1 in contrast expressly states that the obligation to discontinue payments contributions ceases with effect “from whichever of the following dates is applicable”, namely (a) the cesser of business by the employer or (b) the date specified in notice or agreed with the trustees. It is beyond question but that this latter provision was the one which was actually invoked by the employer, and agreed with the trustees, with a date of 31st December 2012 being agreed and fixed for this purpose. 33. It would make little practical sense to require the Defendants/Appellants (in their capacity as the Employer) to give three months written notice to the Plaintiffs/Respondents (in their capacity as the Trustees) of their intention to discontinue contributions to the scheme while at the same time providing (at Clause 19) that, in circumstances where such notice was given (as occurred in this case), the Scheme was to be deemed to have wound up on the first day of the giving of such notice. If Clause 19 was to create that result, it begs the question as to why a Scheme that was wound up should, (or indeed could), reasonably require three further months of contributions to be paid into it. It is likely therefore that the parties who drafted and executed the Trust Deed intended that a requirement, in particular circumstances, to provide three months notice in one of its Clauses would be rendered meaningless and inoperative by the immediately following numbered clause. 34. Yet, if the principles of interpretation articulated by Henchy J. in Welch are applied in the present case, it will be seen that in the context of the critical issue in this case - namely, the operative date on which the employer’s obligation to make contributions to the scheme is to cease - clause 18.1 of the trust deed must be regarded as a special clause in this sense. It is this provision which directly addresses the question of the notice period required in the case of the discontinuation of the employer’s contribution to the scheme. By contrast, clause 19.1 is in this context a general clause dealing with the winding-up of the scheme rather than with the more specific question of when the employer’s obligation to make contributions actually ceased. 35. It can therefore be observed, applying the expressive language of Henchy J. in Welch, that the “primary and dominant words and expressions” delineating the date on which the obligation to make contributions ceased are to be found in clause 18(1) rather than in what are in this context the more general words of clause 19(1). 36. Applying, therefore, the principle of generalia specialibus non derogant we consider that in the face of this apparent inconsistency, the words of clause 18(1) must be taken to prevail. 37. In relation to the Defendants/Appellants second ground of appeal, namely that any inability on their part to fund a shortfall in the Scheme’s fund was limited to the Minimal Funding Standard (MFS), and that as of 1st October 2012, or a later date in December 2012, the level of the fund satisfied this threshold, this court is satisfied that the threshold determining the Defendants/Appellants obligation is not so limited. 38. The threshold is as provided for in Clause 8.1. of the Trust Deed, that is a level of funding “necessary to support the Fund in order to provide the benefits under the Scheme”. The shortfall required to fund the Scheme sufficiently to meet that liability is €2,250,000.00, the amount claimed in these proceedings. 39. Accordingly, the Defendants/Appellants appeal is dismissed. |