THE HIGH COURT
COMMERCIAL
[2025] IEHC 176
2022/200SP
IN THE MATTER OF AMCOR PENSION SCHEME (IRELAND)
BETWEEN
AMCOR PENSION TRUST (IRELAND) COMPANY LIMITED BY GUARANTEE
APPLICANT
AND
AMCOR HOLDING NO. 1 LIMITED
RESPONDENT
JUDGMENT of Mr. Justice Denis McDonald delivered on 28th March 2025
Contents
The initiation of proceedings by the applicant 14
Relevant Provisions of the 2008 Deed. 15
Principles applicable to the interpretation of a pension deed. 23
Construing the 2008 Deed in light of the applicable principles: the arguments of the parties. 31
Construing the 2008 Deed: discussion and analysis. 48
Conclusion in respect of the interpretation of the 2008 Deed. 65
The applicant's alternative case based on implication of a term.. 65
The principles which apply in relation to the implication of terms. 66
Discussion and analysis of the issue in relation to the implication of a term.. 94
Conclusion on the implication of a term.. 109
1. In these proceedings, the trustee of a pension scheme has asked the court to determine two questions relating to the interpretation of the relevant scheme documents. These questions [1] relate in particular to the interpretation of a provision of the relevant pension scheme deed which enables the employer to terminate its liability to pay contributions to the scheme. The trustee and the employer have adopted different interpretations of the relevant provision of the deed dealing with termination. The employer contends that the relevant provision, by its terms, expressly permits it to serve a notice of termination with immediate effect. The trustee disputes this interpretation and contends that a reasonable notice period must be given to enable the trustee to (among other things) make a demand on the employer for further contributions to the scheme in order to secure the benefits expressly contemplated by the scheme. The trustee advances its claim on two bases. In the first place, it alleges that the scheme documents, when properly interpreted, require the employer to give reasonable notice of its intention to terminate contributions [2]. In the alternative, the trustee maintains that a term should be implied into the scheme documents to that effect.
2. The pension scheme in issue is the Amcor Pension Scheme (Ireland) (which I shall refer to as "the Scheme") which was established to provide retirement and other benefits to employees of Amcor Flexibles Dublin Limited (which I shall refer to as "Amcor Dublin") and their families. The respondent has since become the principal employer of the Scheme and is the entity that is (or was) liable to contribute to it, subject to the terms of the Scheme, in order to make provision for the benefits of its members. The applicant is the sole trustee of the Scheme.
3. The Scheme is governed by a Definitive Trust Deed and Rules dated 20th February, 2008 (which I shall refer to as "the 2008 Deed"). The relevant provision of the 2008 Deed dealing with the right of the employer to terminate contributions to the Scheme by notice to the trustee is Clause 5(4) which provides as follows: -
"An Employer may at any time, by notice in writing to the Trustees, terminate its liability to pay contributions to the Fund. Any notice of termination is without prejudice to any obligation of the Employer to pay contributions to the Fund in respect of any period before the effective date of the notice."
4. In these proceedings, the applicant seeks the determination of the following questions:
(a) Is the respondent obliged to provide reasonable notice to the applicant prior to terminating its liability to pay contributions to the Fund pursuant to Clause 5(4) of the 2008 Deed?
(b) If the answer to (a) is yes, the applicant poses two further questions:
(i) what is the period of reasonable notice required; and
(ii) is a notice purporting to terminate the respondent's liability to pay contributions to the Fund which fails to provide reasonable notice to the applicant valid and effective. In this context, the respondent has conceded that, if the applicant succeeds on (a) and b(i) above, it follows that the notice of termination served by it in this case was ineffective to terminate its liability to contribute to the Scheme.
5. The Scheme was originally established on 26th March, 1991 by LMG (Ireland) Limited (which I shall refer to as "LMG") for its employees who worked, at that time, in its printing and packaging business. The principal employer under the Scheme at that time was LMG. At some subsequent point, the principal employer became Alcan Packaging Dublin Limited (which I shall refer to as "Alcan") which later changed its name and became Amcor Dublin. The Scheme is a defined benefit scheme and was funded by contributions paid by the principal employer and by members of the Scheme. For the first 8 months of its existence, the Scheme was governed by an Interim Trust Deed dated 26th March 1991 made between LMG and an earlier trustee namely Superior Packaging Pension Trustee Limited (which I shall refer to as "SPPL"). Clause 2(2) of the Interim Deed provided that, until a definitive trust deed was executed, the trustee was to hold the fund on trust in providing the retirement and other benefits set out in proposals annexed to the Deed. The proposals envisaged payment of pension at the rate of 1/47th of final pensionable salary for every year or part of year of service with increases in accordance with the Consumer Price Index ("CPI") subject to a maximum of 4% per annum.
6. On 25th November, 1991, SPPL was replaced as trustee by the applicant (then called Lawson Mardon Pension Trust (Ireland) Limited. At the same time, the provisions of the Interim Trust Deed were replaced by a Definitive Trust Deed and Rules. In February 2008, the 1991 Deed was, in turn, replaced by a second Definitive Trust Deed namely the 2008 Deed. This also coincided with the date on which Amcor Dublin replaced LMG as principal employer. Amcor Dublin operated a snacks and confectionery plant in Dublin and employed the members of the Scheme.
7. As of 31st December, 2008, the Scheme had a deficit of €10.2 million calculated by reference to the Minimum Funding Standard prescribed by Part IV of the Pensions Act 1990. It should be noted that the Minimum Funding Standard is a statutory requirement. It does not take into consideration the specific provisions of the Scheme such as the requirement under Clause 33(4) of the 2008 Deed (addressed below) which envisages that the benefits on termination for pensioners and deferred members are to be secured by the purchase of insurance policies or annuity contracts. The Minimum Funding Standard proceeds on the basis that buy-out annuities will be acquired to address liabilities to pensioners while deferred members will be addressed by means of transfer values. On 20th October 2009, Amcor Dublin (then known as Alcan Packaging Dublin Limited) entered into a ten year funding agreement (which I shall refer to as "the 2009 Funding Agreement") with the applicant to address the Funding Standard deficit that had been identified in respect of the Scheme as at 31st December 2008. The 2009 Funding Agreement was approved by the (then) Pensions Board.
8. Amcor Dublin began to wind down its operations and, with effect from 29th April 2010, the Scheme was closed to new entrants. Notwithstanding this, existing members continued to be able to make pension contributions and to accrue benefits under the Scheme. Ultimately, with effect on and from 30th June 2010, the Scheme was closed to future accrual of benefits and a contract based group personal retirement savings account arrangement was put in place for the accrual of future benefits from 1st July 2010. Thus, Amcor's employees became deferred members of the Scheme on 30th June 2010. Since that time, there have been no active members of the Scheme. On 25th February 2011, it was announced that Amcor Dublin's plant would close and the workforce was either re-deployed to other Amcor group entities or was made redundant with a severance package.
9. Following the closure of the Dublin plant, there was extensive correspondence between the applicant and the Amcor group in relation to the scheme. In the course of these proceedings, the respondent has emphasised that, at a number of points in the course of this correspondence, the applicant acknowledged that the principal employer had an ability to terminate its liability to contribute without notice. However, it is well-settled that the subjective understanding of a party to a contract as to the meaning of a contract is not a relevant consideration in seeking to interpret a written agreement. For that reason, I do not propose, at this point in the judgment, to refer to that correspondence. It is sufficient to note that it is argued by the respondent that, in accordance with the observations of Clarke J. (as he then was) in Law Society v Motor Insurers Bureau of Ireland [2023] 1 I.R. 479 at p. 582, the subjective view of a party can be of some relevance in considering the weight (if any) to be attached to a business efficacy argument. It may therefore be necessary to return to this correspondence in the event that it becomes necessary to consider the applicant's arguments in relation to implied terms.
10. It is sufficient to record that on 18th May, 2011, it was proposed by the respondent that it should replace Amcor Dublin as principal employer. In the written submissions of counsel on behalf of the respondent, it was emphasised that this was done on a voluntary basis by the respondent to replace Amcor Dublin which was ceasing to trade. It was also emphasised that the respondent had net assets of €393 million. On 31st December 2011, the respondent assumed the role of principal employer under the Scheme , and the respondent and the applicant executed a Funding Agreement on the same date. In line with the 2009 Funding Proposal, the Funding Agreement involved annual contributions by the respondent of €600,000 up to 31st December 2018 or such shorter period as might suffice to enable the Scheme to meet the statutory Funding Standard. Clause 2 of the Funding Agreement referred to the possibility that the respondent might terminate its liability to pay contributions to the Scheme during the currency of the Funding Agreement. Clause 2.1 provided that, if the respondent were to terminate its liability to pay contributions to the Scheme and the Scheme Actuary certified that the Scheme failed to meet the Funding Standard at that date, the respondent would pay to the applicant the amount of the deficit. Clause 2.2 went so far as to provide that the provisions of Clause 2 "shall be incorporated into the Scheme" but this incorporation seems to have been intended to be temporary because Clause 3 of the Funding Agreement provided that the agreement would terminate on 31st December 2018 or on any earlier date that the Scheme Actuary certifies that the Funding Standard was met. It appears that the Funding Agreement came to an end when an actuarial funding certificate was submitted to the Pensions Authority in September 2018 in which it was confirmed that the Scheme met the Funding Standard as at 31st December 2017.
11. On 26th May 2022, the respondent sent a letter by hand to the applicant purporting to terminate its liability to pay contributions to the Scheme with immediate effect on and from the time of delivery of the letter. The letter stated as follows: -
"As you know, the Scheme is currently governed by the provisions of a Definitive Trust Deed and Rules as scheduled to a Deed of Confirmation, Substitution and Amendment dated 20 February 2008 (as amended, the "Trust Deed" and the "Rules").
In accordance with Clause 5(4) of the Trust Deed the Company hereby terminates its liability to pay contributions to the Fund with immediate effect on and from the time of delivery of this letter.
This letter is issued for the purposes of notifying the Trustees of the termination of the Company's liability to pay contributions to the Fund in accordance with Clause 5(4) of the Trust Deed ..."
12. The applicant complains that it had no knowledge that the respondent intended to terminate its liability to contribute to the Scheme. The applicant also complains that the respondent did not provide any period of notice before the Notice was to become effective. This had the result that the applicant could not make a contribution request despite the fact that the applicant contends that the respondent had the funds necessary to secure member benefits on the basis envisaged by Clause 33(4) of the 2008 Deed.
13. The respondent also sent a second letter to the applicant on the same day in which it sought to explain its position. In that letter, it was stated that the respondent believed that the existing resources of the Scheme were sufficient to provide a "reasonable outcome" for members "in terms of the benefits they will receive from the Scheme on wind-up". The letter also pointed out that the Scheme "now comfortably meets the Funding Standard, with an estimated funding level of 114% at 31 December 2021...". The letter also referred to IORPS II requirements which would significantly add to the operating and governance costs in the event that the Scheme were to continue in being. The point was made in the letter that, while some larger defined benefit schemes may have economies of scale to respond to the new IORPS II requirements, the respondent was of the view that the costs would be disproportionate for a scheme of the size in issue here. I should explain that the reference to IORPS II relates to Directive EU 2016/2341 on the activities and supervision of institutions for occupational retirement provision (IORPS Recast) which was implemented in Ireland by the European Union (Occupational Pension Schemes) Regulations 2021 (S.I. No. 128 of 2021) which came into force on 22nd April 2021.
14. The letter also referred to advice which the respondent said it had received suggesting that the market for securing pensioner benefits though the purchase of annuities is "competitive at the current time". While the letter acknowledged that it is ultimately for the applicant, as trustee, to decide how the assets of the Scheme would be distributed, the respondent believed that it would be appropriate for the applicant to wind-up the Scheme and that it would support the assets being distributed in the following way: -
"1) Expenses associated with the wind-up of the Scheme and the ongoing management and administration of the Scheme in the meantime
2) Additional Voluntary Contributions (AVCs)
3) In respect of pensions currently in payment, for immediate annuities to be secured with an insurance company with Fixed Rate Substitution being applied
4) In respect of deferred pensioner members, for the residual assets to be distributed on a 'share of fund' type basis"
15. The respondent then explained its position in relation to Fixed Rate Substitution as follows: -
"The Company believes that if Fixed Rate Substitution is used in securing immediate annuities with an insurance company for current pensioners, the residual assets are likely to be sufficient to provide a very generous transfer value outcome for deferred members. The Company is willing to make a once-off contribution to the Scheme of €250,000. We anticipate that this should be more than adequate to meet the residual expenses expected to be incurred to the eventual winding up of the Scheme. In effect, the Company is directing the budget that would otherwise have to be put in place to address IORPS II requirements and Scheme operating costs for a period of time towards improving the outcome for members on wind-up. The payment of this €250,000 contribution amount is conditional on the Trustee using Fixed Rate Substitution for securing pensioner liabilities and the contribution will be made promptly after the Trustee confirming that they will adopt this Fixed Rate Substitution approach. For the avoidance of doubt, all expenses that are incurred following the notice of termination of liability being served today will fall to the trust to be addressed."
16. The applicant did not accept that the respondent was entitled to terminate its liability to pay contributions with immediate effect. On 17th June, 2022, it wrote to the respondent in the following terms: -
"The directors of the Trustee have met with their advisers to consider your letters. The directors are very disappointed both at the decision of the Company no longer to support the Scheme and at the approach the Company has adopted. The directors would have expected the Company to approach the Trustee in advance to discuss the termination of the Scheme and agree on settlement funding instead of purporting to give immediate notice under clause 5(4) of the Scheme's trust deed terminating its contributions and then to make an offer of a contribution that does not seem to be calculated at all by reference the actual funding level in the Scheme.
Validity of the Company's termination notice
Clause 5(4) of the Scheme's trust deed allows an employer to terminate its liability to pay contributions to the fund by notice in writing to the Trustee. The clause does not specify that such notice can have immediate effect.
The Trustee notes that the reason given for seeking to terminate the Scheme is not related to the Company's ability to pay and, in fact, that the Company is offering a material payment to the Scheme subject to certain conditions.
The Trustee's position is that it is likely that the Courts would imply a reasonable notice period into clause 5(4) and that during that reasonable period the Company in accordance with clause 5(1) would seek to agree with the Trustee (after consulting the actuary) on what final funding is required to make proper advance provision for the benefits under the Scheme. What the Company has attempted to do by purporting to give immediate notice is to frustrate the purpose of the contribution rule and the purpose of the Scheme, namely to provide the benefits promised by the Scheme (particularly core pensions plus index linked increases). Aside from this, the Trustee views the giving of immediate notice by the Company to be contrary to the duty of good faith it owes the Scheme's beneficiaries.
The Trustee does not accept that the Company's termination notice has immediate effect and, once it has taken the necessary actuarial advice to establish whether the funding in the Scheme is sufficient to enable the Trustee to secure benefits in full, it reserves the right to require the Company to reach an agreement with the Trustee on settlement funding as envisaged by clause 5(1).
The Trustee has instructed the actuary to prepare preliminary figures on the solvency of the Scheme, including obtaining indicative annuity quotations from insurance companies. The Trustee expects before the end of June to be in a position to furnish the Company with the amount (if any) which in its view is required to bring the Scheme to full solvency for wind-up purposes. The Trustee would of course provide actuarial analysis to support the amount (if any). Although precise figures are not available yet, the buy-out deficit in the Scheme has been roughly estimated at €8.9m and the deficit on a government bonds valuation basis is in the region of €5.2m.
To be clear, the Trustee accepts that the Company has paid deficit contributions to the Scheme and met Scheme expenses and that funding is now significantly better than it was when the Company became principal employer. The Trustee also accepts that IORP II requirements would impose significant additional compliance costs on the Scheme."
17. In a subsequent letter dated 1st July, 2022, the applicant suggested that, based on advice from the Scheme Actuary, an additional contribution in the region of €7 million would be required to enable the Scheme to secure benefits in full with an insurance company. In response, the respondent continued to maintain the position that the most it was prepared to contribute was €250,000 (as offered in its second letter of 26th May 2022). Subsequently, on 30th September, 2022, the applicant made a formal contribution demand upon the respondent on the basis that the termination notice was said to be invalid. The letter stated that the advice of the Scheme Actuary, as at 27th September 2022, was that there was a shortfall facing the Scheme of €4,750,000. The applicant demanded payment of that sum from the respondent and warned that, if this was not received by the applicant within 14 days, the applicant reserved the right to issue proceedings.
18. There is obviously a dispute between the parties as to the extent to which the Scheme needs to be funded in order to secure the benefits payable to the pensioners and deferred members of the Scheme. That dispute is not immediately relevant to the issues of interpretation that arise in these proceedings. It is sufficient to note that the approach taken by the respondent is based upon advice received from Willis Towers Watson (Ireland) Limited. In an affidavit of Brian Mulcair sworn on 23rd January 2023, the approach proposed by Willis Towers Watson Limited is explained in paragraphs 8 and 9. On Mr. Mulcair's analysis, there was sufficient funds within the Scheme as at 1st May 2022 to purchase immediate annuities for pensioners with an insurance company. However, these annuities were on the basis of the application of Fixed Rate Substitution rather than by reference to CPI-Linked pension increases as provided for under the Rules of the Scheme. As will be seen from the discussion below, the Rules of the Scheme envisage increases in pension in line with price inflation up to a maximum of 5% per annum (compounded), where inflation is measured as the increase in CPI. In contrast, Fixed Rate Substitution involves substitution of inflation linked post-retirement increase entitlements with a fixed rate of annual increase when securing pensioner's benefits through annuity purchase. The assumed level of such increases used in the Willis Towers Watson analysis was 2.86%. Mr. Mulcair also noted that utilising this methodology allowed for pensioner benefits to be "secured at a lower cost" and he maintained that the use of this methodology as a proxy for CPI-linked increases is permitted under the provisions of s. 48(3A) of the 1990Act where a scheme does not have sufficient resources to fully discharge all of its liabilities on wind-up. Insofar as deferred members are concerned, Mr. Mulcair explained that there would be sufficient funds to pay aggregate transfer values to deferred members equivalent to approximately 194% of the aggregate transfer values calculated on the Standard Transfer Value basis. However, he accepted, in para. 9(b) of his affidavit, that some degree of risk would necessarily be associated with securing benefits through the provision of transfer values in that it would involve deferred members assuming investment risk in order to have sufficient funds through the course of their retirement to replicate the benefits that would otherwise have been paid from the Scheme. He also acknowledged that the payment of transfer values means that deferred members would be subject to longevity risk (i.e. the risk that they might live longer than expected such that their retirement assets would be exhausted). In response, the Scheme Actuary, Mr. Aidan Kennedy, in his affidavit sworn on 16th February 2023, highlighted that Mr. Mulcair did not address the requirement to secure the benefits on termination by the purchase of insurance policies or annuity contracts as provided for under Clause 33(4) of the 2008 Deed. Mr. Kennedy's evidence is that, while there was no shortfall on the Minimum Funding Standard at the date of the notice to terminate, there were insufficient funds to fully secure the specific benefits identified in Clause 33(4). In those circumstances, he considered a number of valuation mechanisms that might be adopted. He concluded that it would be difficult, in the market, to purchase annuities in respect of obligations owed to deferred members. For that reason, Mr. Kennedy sought to use a proxy approach which he explained in paras. 36 and 37 of his affidavit as follows: -
"36. The approximate proxy buy out liability in respect of deferred members was assessed on the basis that buy out was likely to only be achieved on an aggregate basis in conjunction with the simultaneous buy out of pensioners with the same insurance company. In this regard, the liability was assessed at €10.84m by reference to similar bulk annuity rates (on a full replication basis i.e. without FRS) underpinning the pensioner calculation, discounted in line with an AAA rated government bond yield (reduced by 0.25% for expenses and prudence) and allowing for revaluation in the period to retirement of 2.5% per annum.
37. I advised that the proxy buy out basis was appropriate as it was designed to reasonably represent the cost of securing the Scheme benefits as a whole on the assumption that an insurer would only be willing to write deferred annuity policies on the basis of also securing the immediate annuity business and that the relevant members would not be in a position to choose individual transfer values in lieu. As such, the proxy buy out basis does not necessarily translate into the capital value required by an individual deferred member to secure their pension expectation on a least risk investment basis."
19. The applicant subsequently launched these proceedings on 11th November 2022 in which it seeks the determination of the questions identified in para. 4 above. As noted in para. 1 above, the applicant's case is that those questions should be resolved in its favour on one of two bases. In the first place, it is contended that the respondent is obliged under the express terms of the 2008 Deed, when properly construed, to give the applicant reasonable notice of termination. In the alternative, the applicant argues that the requirement to give reasonable notice should be implied. There has been an extensive exchange of affidavits between the parties in which they have explained, in detail, the rationale underlying their respective positions. The deponents on both sides have also sought to criticise the approach taken by the opposing side. For the most part, that evidence is not relevant in the context of the issues before the Court which fall to be addressed by reference to well-established legal principles governing (a) the interpretation of pension scheme documents and (b) the criteria by which terms will (or will not) be implied into written contracts. For that reason, I do not propose to summarise the evidence here.
20. The provisions of Clause 5(4) have already been set out in para. 3 above. Clause 5(1) was also referred to by both sides in the course of the debate before me. Clause 5(1) of the Second Deed provides for the respondent's obligation to pay contributions with a view to making advance provision for the benefits accruing under the Scheme. It provides as follows "Each of the Employers must pay to the Fund contributions at the rate (if any) which the Principal Employer agrees with the Trustees and after consulting the Actuary, with a view to making advance provision for the benefits accruing under the Scheme taking account of any benefit increases under clause 15 and benefits provided under clause 16..."
21. In the course of her submissions, counsel for the applicant highlighted the use of the imperative "must pay" in Clause 5(1). However, there is a significant dispute between the parties as to the meaning and effect of Clause 5(1) which I am not asked to resolve in these proceedings. It is sufficient to note that the respondent maintained in the first affidavit of Ms. Clare Smith, sworn on its behalf on 23rd January 2023, that, under the terms of clause 5(1), it is a matter exclusively for it to decide on the amount (if any) of any contributions to be made to the Scheme. That position was contested by the applicant in its solicitors' letter of 24th March 2023 in which it was contended that the position adopted by the respondent is contrary to its implied obligation of good faith. It should be noted, in this context, that, in certain circumstances, the employer owes a duty of good faith in exercising powers under a pension scheme and this has been explained in case law such as Imperial Group Pension Trust Ltd v Imperial Tobacco [1991] 1 W.L.R. 589. In the letter of 24th March 2023, it was suggested that it would be necessary to add a further question for determination in these proceedings as to whether the respondent was entitled under clause 5(1) to refuse to agree with the applicant to pay contributions to the Scheme. That led to a chain of correspondence between the parties' solicitors which is unnecessary to replicate in detail here. In the course of that correspondence, the respondent's solicitors, in a letter of 6th April 2023, observed that:
"What has been consistently stated on behalf of the company, in both the first and second affidavits of Clare Smith, is that the company's agreement is a prerequisite to any employer contribution to the fund under Clause 5(1) of the Second Deed as a matter of law. That is a correct statement of the legal position. It has never been suggested on behalf of the company that in the counterfactual scenario where termination has not yet occurred and the company was deciding whether to agree to pay contributions to the fund under Clause 5.1 of the Second Deed the company would be entitled to act otherwise than in good faith. In such a scenario the company would take a decision whether to make such a contribution with the benefit of professional advice and would be required to do so in good faith, as it has done throughout the history of its involvement in the scheme."
22. In a subsequent letter of 5th May 2023, the solicitors for the respondent made the case that questions as to the nature and extent of the respondent's obligation under clause 5(1) would only arise, if at all, in the event that the questions raised in these proceedings (as set out in para. 4 above) are resolved in the applicant's favour. In turn, this was acknowledged in the applicant's solicitors' response of 12th May 2023 who then stated that, in those circumstances, they would not pursue any attempt to include a further question for determination in these proceedings. That effectively means that the parties have agreed to park any issue as to the proper interpretation of clause 5(1).To some extent that creates a lacuna in relation to the exercise which the Court must carry out in these proceedings in circumstances where, as explained in more detail below, Clause 5(4) must be interpreted in light of the 2008 Deed as a whole. The position reached between the parties in relation to Clause 5(1) means that the Court cannot reach any definite conclusion in these proceedings as to the correct meaning and effect of Clause 5(1). That may mean that the interpretive exercise will be incomplete as the Court will be constrained in the extent to which it can assess the true impact (if any) of Clause 5(1) on the meaning to be given to Clause 5(4).
23. There is one other aspect of Clause 5(1) that should be noted for completeness. Although both Clauses 15 and 16 are mentioned in Clause 5(1), I do not believe that either of them are relevant for present purposes. Clause 15 deals with the review of pensions and requires the Trustee and the principal employer to meet regularly with a view to reviewing the level of pensions payable under the Scheme. Clause 16 deals with discretionary pensions and special benefits. It is triggered by a request from the principal employer. I can see nothing in Clause 16 which is of any relevance to the interpretation of Clause 5.
24. Likewise, I do not believe that Clause 5(2) or Clause 5(3) are relevant but I should refer to the terms of Clause 5(5). It deals with the employer's ability to suspend its liability to pay contributions as follows: -
"(5) An Employer may at any time, by notice in writing to the Trustees, suspend its liability to pay contributions to the Fund or resume that liability following a suspension. Any notice of suspension or resumption may specify, by category, name or otherwise, the persons to whom and the benefits to which the notice relates but otherwise applies generally. The amount of any benefit which becomes payable during or after a period of suspension in respect of any person to whom the notice applies is decided by the Trustees after consulting the Actuary."
25. Both sides also placed some emphasis upon the terms of Clause 32 of the Deed which addresses the consequences of a termination of liability to pay contributions on the part of the principal employer. Clause 32(1) provides that the Scheme must terminate in those circumstances. Clause 32(1) states: -
"(1) The Scheme must terminate if the Principal Employer (a) terminates its liability to pay contributions to the Fund; or (b) has an order made against it, or passes an effective resolution for its winding up and a new Principal Employer has not succeeded within three months ..."
26. Counsel for the applicant placed some emphasis on the way in which Clause 32(1)(b) envisages that a period of three months will be allowed after an order is made for the winding up of the principal employer or an effective resolution is passed for its liquidation. She submitted that this recognises that there "may in fact be some form of hiatus where an event occurs that requires a termination of the Scheme but there is a period or a pause or an interim period." She also emphasised the distinction that is made in Clause 32(1)(a) between the termination of the principal employer's liability to pay contributions to the Fund, on the one hand, and termination of the Scheme, on the other. She submitted that this envisages that there will be two stages: first, the termination of the contribution obligation and, second, the termination of the Scheme itself. She submitted that this suggests that these events are not simultaneous.
27. Clause 32(2) deals with what the trustee must do on termination of the Scheme. It provides that, on termination of the Scheme, the trustee must realise the Fund and pay all costs, expenses and liabilities which have been incurred in connection with the termination. It also provides for a fairly standard "waterfall" of payments to be made by the trustee out of the remainder of the Fund in a specified order of priority. It expressly envisages that there may be insufficient funds available for members or certain classes of members in which case, the benefits are to be reduced. It thus provides as follows:
"(2) On termination of the Scheme, the Trustees must realise the Fund and pay all costs, expenses and liabilities which have been incurred in connection with the termination.
The Trustees must apply the remainder of the Fund, after payment (or making a reserve pending payment) of the items above, in the order set out below so that (i) the benefits in each category are fully secured before any benefit in a subsequent category is secured, (ii) if the benefits in a category cannot be fully secured all benefits in that category must be reduced proportionately as decided by the Trustees having consulted the Actuary and (iii) any benefit secured in one category is automatically excluded from any subsequent category." (emphasis added).
28. Clause 33 contains a number of supplementary provisions in respect of termination. Clause 33(2) provides that, on termination, the trustee may (but need not) consult the actuary on the question of whether any benefit increase or discretionary pension awarded under Clauses 15 or 16 which has not yet come into payment has been fully funded. Clause 33(3) provides that, in securing the payment of annuities on termination, the trustee is entitled to assume that no person will become married or divorced or be born after the date of termination. Of more relevance for present purposes is Clause 33(4) which featured strongly in the submissions made on behalf of both parties. Clause 33(4) provides for securing the benefits of members on the termination of the Scheme as follows: -
"The benefits on termination (except an immediate lump sum) must, subject to sub-clause (1) and clause 35 and section 48 of the Pensions Act, be secured by the purchase of insurance policies or annuity contacts (for which no consent of any Beneficiary is required) meeting the requirements referred to in Rule 14(4). The Trustees must try to purchase policies or annuities securing payments of the amounts set out in clause 32 and on the same terms (including, but without limitation, as to increases, early or late payment, commutation and surrender in favour of a dependent) as under this deed and the Rules. However, the Trustees may, if they decided that it would be more expedient, secure payments on different terms or of different amounts. The cost of securing those terms ranks for priority in the same category as the annuity to which they relate."
29. Counsel for the applicant drew attention to the requirement imposed in imperative terms on the trustee to secure the benefits on termination by the purchase of insurance policies or annuity contracts. She submitted that the second sentence of the clause was of crucial importance. As will be seen from the extract quoted above, it provides that the trustee "must try" to purchase policies or annuities securing payments of the amounts set out in Clause 32 and on the same terms, as to increases (among other matters) as provided for under the Deed itself or the Rules. In this context, counsel for the applicant drew attention to the provisions of Rule 23(1) which deals with pension increases. It specifically provides that a pension under the Scheme is to increase, after it has started to be paid, on 1st April each year. The Rule provides that the rate of increase each year is the percentage increase in the CPI published by the Central Statistics Office during the year ending on the previous 31st December subject to a maximum of 5% per annum compound interest (or any other rate decided upon by the principal employer with the agreement of the Trustee). Counsel emphasised that this envisages an entitlement to an annual increase. It is not a matter of discretion. Counsel for the applicant noted that, while there is a discretion given to the Trustees by the words "if they decide that it would be more expedient", to secure payment on different terms or of different amounts, this was a discretion vested solely in the trustee. She maintained that the employer is given no role in relation to its exercise. Counsel also drew attention to the provisions of Clause 2(2) of the 2008 Deed which states that the trustee holds the Fund on the irrevocable trusts set out in the Deed and "shall administer and manage the Scheme in accordance with, this deed and the Rules". Counsel urged that the applicant is therefore under an obligation to seek to secure the benefits on termination in accordance with the provisions of Clause 33(4). Counsel submitted that Clause 33(4) contains an essential "benefit promise" which must be kept in mind in interpreting the provisions of the Deed as a whole.
30. Clause 33(5) is also potentially relevant. It provides that the duties of the trustee "on termination of the Scheme 'must be carried out within a time after termination which they think is appropriate having regard to the interests of the persons with an interest in the Fund.'"
31. I do not believe that it is necessary, at this point, to refer to any other provisions of the Deed or the Rules. The provisions of Clause 5 and clauses 32 and 33 are the most relevant provisions for present purposes.
The issues to be resolved
32. The specific questions on which the determination of the court is sought have already been identified in para. 4 above. In considering these issues, it is important to recall that the case made on behalf of the applicant is advanced on two different bases: -
(a) In the first place, it is contended that, by the terms of Clause 5(4) a period of reasonable notice is required whenever the employer gives notice to terminate its obligation to make contributions to the Fund; and
(b) in the event that the Court considers that Clause 5(4), when properly interpreted, does not provide for a period of reasonable notice before the termination notice becomes effective, the applicant argues that such a term should be implied to ensure that the Scheme is workable. The applicant contends that a term requiring reasonable notice is necessary for the purposes of the "practical coherence in a pension scheme".
33. It will therefore be necessary to approach the issues for determination by reference to both of these alternative contentions.
34. Logically, it makes sense to address the interpretation of Clause 5(4) in the first instance. The question of the implication of a term will only arise if I am against the applicant on the interpretation of Clause 5(4). I will therefore deal with that aspect of the case first and leave over the issue of implication of terms until I have reached a view on the meaning and effect to be given to Clause 5(4). As Lord Hodge observed in the UK Supreme Court in Trump International Golf Club Scotland Ltd v Scottish Ministers [2016] 1 WLR 85 at p. 98: -
"35. Interpretation is not the same as the implication of terms. Interpretation of the words of a document is the precursor of implication. It forms the context in which the law may have to imply terms into a document, where the court concludes from its interpretation of the words used in the document that it must have been intended that the document would have a certain effect, although the words to give it that effect are absent." (emphasis added).
35. Similar observations were made by Lord Neuberger in Marks & Spencer plc v BNP Paribas Securities Services [2016] AC 742 at p. 454 - 455 where he said: -
"27. Of course, it is fair to say that the factors to be taken into account on an issue of construction, namely the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, commercial common sense, and the reasonable reader or reasonable parties, are also taken into account on an issue of implication. However, that does not mean that the exercise of implication should be properly classified as part of the exercise of interpretation, let alone that it should be carried out at the same time as interpretation. When one is implying a term or a phrase, one is not construing words, as the words to be implied are ex hypothesi not there to be construed; and to speak of construing the contract as a whole, including the implied terms, is not helpful, not least because it begs the question as to what construction actually means in this context.
28. In most, possibly all, disputes about whether a term should be implied into the contract ,it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered. Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term. This appeal is just such a case. Further, given that it is a cardinal rule that no term can be implied into a contract if it contradicts an express term, it would seem logically to follow that, until the express terms of a contract have been construed, it is, at least normally, not sensibly possible to decide whether a further term should be implied. Having said that, I accept Lord Carnwath JSC's point in para 71 to the extent that in some cases it could conceivably be appropriate to reconsider the interpretation of the express terms of a contract once one has decided whether to imply a term, but even if that is right, it does not alter the fact that the express terms of a contract must be interpreted before one can consider any question of implication."
36. I have been referred to a plethora of authorities on the question of the interpretation of a pension deed. While the principles of interpretation are very similar to those which govern other forms of contractual documents, there are some additional principles that apply as a consequence of the nature of pension arrangements. In Greene v Coady [2015] 1 I.R. 385 at p. 410, Charleton J. adopted the following summary of the principles of construction as restated by Morritt V.C. in Armitage v Staveley Industries plc [2005] EWCA Civ 792 at p. 29 where the latter said: -
"(1) the words of the [document] must be interpreted in the light of the background;
(2) the background includes the rules of [the pension scheme] and the fiscal limitations on pensions that can be paid without jeopardising the status of [the pension scheme] as an exempt approved scheme;
(3) the interpretation must be one that is practical and purposive, rather than detached and literal;
(4) if more than one interpretation is possible, the correct choice may depend on the practical consequences of choosing one interpretation rather than another;
(5) if one would conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention that they plainly could not have had;
(6) if detailed semantic and syntactical analysis of words in a contract leads to a conclusion that flouts business commonsense, it must be made to yield to business commonsense;
(7) the ultimate question is what meaning would be conveyed to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the date of the contract.
(8) the court must not construct from the background alone a contract that the parties did not make.
(9) there are strict fetters on the ability of the court to imply further terms.
(10) whether a term is to be implied is to be determined as at the date of the contract."
37. In addition to the principles outlined by Morritt V.C. in that case, there are two further principles that need to be kept in mind. In the first place, as O'Donnell J. (as he then was) made clear in Law Society v Motor Insurer's Bureau of Ireland, the Court should not seek to interpret a written agreement through the lens of the dispute which has arisen between the parties. Instead, the Court must always consider the meaning of a contractual provision by reference to the meaning which that provision would convey to a reasonable person in the position of the parties (armed with the knowledge that was reasonably available to the parties) at the time the contract was put in place. Secondly, as will be seen from what is said in para. 45 below, no provision of a contractual document should be construed in isolation. The contractual document must always be read as a whole.
38. While the principles outlined in paras. 36 and 37 above encapsulate the approach which a Court should adopt when construing the terms of a pension scheme deed, it may be helpful to refer to a number of other authorities. One of the reasons why a practical and purposive interpretation should be given to the terms of a pension scheme document is that, as Millett J. (as he then was) explained in Re. Courage Pension Schemes [1987] 1 W.L.R. 495 at p. 505, a pension scheme has to be "operated against a constantly changing commercial background". A further reason was identified by Arden L.J. (as she then was) in British Airways Pension Trustees Ltd. v British Airways plc [2002] Pens LR 247 at para. 28 where she highlighted that the administration of a pension fund is a "complex matter and it seems to me that it would be crying for the moon to expect the draftsman to have legislated exhaustively for every eventuality". Having cited what was said by Millett J. in Re. Courage Group's Pension Schemes, she continued as follows: -
"In other words, it is necessary to test competing permissible constructions of a pension scheme against the consequences they produce in practice. Technicality is to be avoided. If the consequences are impractical or over-restrictive or technical in practice, that is an indication that some other interpretation is the appropriate one. Thus, in the National Grid case, to which I refer below, where there was a choice of possible constructions, Lord Hoffmann held that the correct choice depended 'upon the language of the scheme and the practical consequences of choosing one construction rather than the other'".
39. The need to construe pension scheme documents in a practical and purposive way has also been emphasised in Ireland. For example, in Boliden Tara Mines Ltd. v Cosgrave [2007] IEHC 60, Finlay Geoghegan J. observed at para. 28 of her judgment that: -
"[t]here are no special rules of construction which apply to Pension Scheme Documents. Nevertheless where possible they should be construed so as to give reasonable and practical effect to the Pension Scheme. This is particularly so where the documents are ones intended to have legal effect but couched in very general terms. The construction should be practical and purposive rather than detached and literal. In construing the documents the court should take into account the factual background and surrounding circumstances (i.e. 'the factual matrix')."
40. In construing pension scheme documents, an important element of the relevant factual matrix against which they are put in place is that the beneficiaries under a pension scheme are not volunteers. As Warner J. explained in Re. Mettoy Pension Trustees v Evans [1990] 1 W.L.R. 1587 at p. 1610 (and this judgment was subsequently cited with approval by Kelly J. (as he then was) in Irish Pensions Trust Limited v Central Remedial Clinic [2006] 2 IR 126 at p. 156) the rights of beneficiaries under a pension scheme have contractual and commercial origins. They are derived from the contracts of employment of the members and the benefits under the Scheme have been earned by the service of the members under their contracts of employment. In the British Airways case, Arden L.J. observed, in this context, that the relationship of members to the employer "must be seen as running in parallel with their employment relationship. This factor too can in appropriate circumstances have an effect on the interpretation of the scheme".
41. Although this has yet to be decided in Ireland, the U.K. Supreme Court has taken the view that, in considering the meaning of pension scheme documents, it may be appropriate to put less weight to the factual background than might be the case in certain commercial contexts. This is largely for the reason that pension scheme documents are drawn up as formal legal documents. They are not usually prepared in a hurry. Against that background, it can be expected that some degree of care has been given to the language included in the formal legal documents. This emerges from the judgment of Lord Hodge in Barnardo's v Buckinghamshire [2019] 2 All ER 175. At p. 181, Lord Hodge said: -
"[14] A pension scheme, such as the one in issue on this appeal, has several distinctive characteristics which are relevant to the court's selection of the appropriate interpretative tools. First, it is a formal legal document which has been prepared by skilled and specialist legal draftsmen. Secondly, unlike many commercial contracts, it is not the product of commercial negotiation between parties who may have conflicting interests and who may conclude their agreement under considerable pressure of time, leaving loose ends to be sorted out in future. Thirdly, it is an instrument which is designed to operate in the long term, defining people's rights long after the economic and other circumstances, which existed at the time when it was signed, may have ceased to exist. Fourthly, the scheme confers important rights on parties, the members of the pension scheme, who were not parties to the instrument and who may have joined the scheme many years after it was initiated. Fifthly, members of a pension scheme may not have easy access to expert legal advice or be able readily to ascertain the circumstances which existed when the scheme was established.
[15] Judges have recognised that these characteristics make it appropriate for the court to give weight to textual analysis, by concentrating on the words which the draftsman has chosen to use and by attaching less weight to the background factual matrix than might be appropriate in certain commercial contracts: Safeway Ltd v Newton [2017] EWCA Civ 1482, [2018] Pens LR 116, [2017] All ER (D) 31 (Oct), Lord Briggs of Westbourne, giving the judgment of the Court of Appeal, at paras [21]–[23]. In Safeway, Lord Briggs stated (para [22]):
'the Deed exists primarily for the benefit of non-parties, that is the employees upon whom pension rights are conferred whether as members or potential members of the Scheme, and upon members of their families (for example in the event of their death). It is therefore a context which is inherently antipathetic to the recognition, by way of departure from plain language, of some common understanding between the principal employer and the trustee, or common dictionary which they may have employed, or even some widespread practice within the pension industry which might illuminate, or give some strained meaning to, the words used.' ..."
42. That said, there was no disagreement between the parties that antecedent agreements relating to the same subject matter can form part of the relevant factual matrix. This was recognised by Rix L.J. in HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co. [2001] 2 Lloyd's Rep 161 albeit that he suggested that their usefulness as an aid to construction is likely to be limited in most cases. I must also bear in mind that the Supreme Court has recognised, albeit in an insurance context, that a court is entitled to have regard to market practice as part of the factual matrix against which a contract is to be construed. In Analog Devices B.V. v. Zurich Insurance Company [2005] 1 IR 274, an issue arose as to whether an all risks insurance policy excluding cover for faulty workmanship should be interpreted as excluding cover for losses which arose as a consequence of an error made by a maintenance operative in the course of routine maintenance work carried out during a closedown of the plant. At pp. 287-288, Geoghegan J. upheld the approach taken by Kelly J. (as he then was) at first instance where, in interpreting the policy, he had regard to evidence of the existence of a separate species of exclusion clause found in many all risks policies in the market which specifically excluded liability for maintenance work. Geoghegan J., having earlier endorsed the principles explained by Lord Hoffmann in Investor Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896, referred to the well-known observation of Keane J. (as he then was) in Kramer v. Arnold [1997] 3 I.R. 43, at p. 55, where the latter said: "... where the parties are in disagreement as to what a particular provision of a contract means, the task of the court is to decide what the intention of the parties was, having regard to the language used in the contract itself and the surrounding circumstances". Geoghegan J. held that, by having regard to the existence, in the all risks insurance market, of specific exclusions in respect of maintenance, Kelly J. was doing no more than carrying out the task of interpretation in light of the surrounding circumstances as explained in Kramer v. Arnold.
43. It is also important to note that, in Barnardos, Lord Hodge did not go so far as to suggest that the textual analysis should override the need to avoid undue technicality and to consider the practical consequences of any construction. Instead, at p. 182, he said: -
"[16] The emphasis on textual analysis as an interpretative tool does not derogate from the need both to avoid undue technicality and to have regard to the practical consequences of any construction. Such an analysis does not involve literalism but includes a purposive construction when that is appropriate. As Millett J stated in Re Courage Group's Pension Schemes ... [1987] 1 WLR 495 at 505 there are no special rules of construction applicable to a pension scheme but 'its provisions should wherever possible be construed to give reasonable and practical effect to the scheme'. Instead, the focus on textual analysis operates as a constraint on the contribution which background factual circumstances, which existed at the time when the scheme was entered into but which would not readily be accessible to its members as time passed, can make to the construction of the scheme."
44. Notwithstanding his suggestion that the factual matrix may be of less importance in the context of the interpretation of a pension scheme than it is in the case of other commercial contracts, Lord Hodge accepted (again at p. 182) that pension schemes must be construed "against their fiscal background" i.e. bearing in mind the fact that they are drafted to comply with tax rules so as to preserve the benefits which the regime confers on such schemes. In addition, he accepted that the focus on textual analysis should not prevent the court from being alive to the possibility that the draftsman has made a mistake in the use of language or grammar which can be corrected by construction, as occurred in Chartbrook Ltd. v Persimmon Homes Ltd. [2009] AC 1101, albeit that this is only possible where the Court can clearly identify both the mistake and the nature of the correction to be made to the language used in the relevant document. As noted in footnote 2 above, no case was made by the applicant here that a mistake of that kind has occurred with the language of the 2008 Deed.
45. In addition, Lord Hodge noted, at p. 183, that any provision of a pension scheme should always be considered in the context of the document as a whole. While that principle is not identified in the principles summarised by Morritt VC., it is a well-recognised principle which applies in the context of the construction of any contractual document including pension schemes. As Simons J. observed in Molyneaux v Financial Services and Pensions Ombudsman [2021] IEHC 668 at p. 21, it is necessary to interpret a pension scheme in a "holistic" manner. Similar observations were made more generally in relation to the interpretation of contractual documents by Griffin J. in the Supreme Court in Rohan Construction Ltd. v Insurance Corporation of Ireland plc [1988] I.L.R.M. 373 where he made clear that the whole of the contract must be looked at rather than "merely a particular clause".
46. There was a dispute between the parties as to the extent to which the court can have regard to evidence of custom and market practice as part of the factual matrix against which pension scheme documents are to be construed. The respondent argued that such evidence is admissible and referred to the decision of the Supreme Court in Analog Devices (discussed in para. 42 above). In addition, the respondent relied on the decision in Hyper Trust Ltd v FBD Insurance plc (No. 1) [2021] IEHC 78 at para. 25 where the Court accepted that the evidence of an insurance expert was admissible in relation to the existence of certain insurance products on the market. The Court took the view in that case that the evidence in question formed part of the background reasonably available to the parties at the time the insurance policies in issue were put in place.
47. In contrast, while the applicant accepted that expert evidence of that kind might be relevant in a purely commercial context, it argued that it did not apply in the context of the interpretation of pension scheme documents. In support of its position, the applicant referred to the observations of Lord Hodge in Barnardo's quoted in para. 41 above. In circumstances where the parties reached an accommodation in relation to the calling of expert evidence, it seems to me that this issue has become academic. As explained in para. 63 below, the parties agreed that the language used in Clause 5(4) is commonplace and not unusual in pension scheme deeds in use in Ireland.
48. Having outlined the applicable principles in respect of the interpretation of pension scheme documents, I now turn to consider the arguments of the parties as to how they say the 2008 Deed should be construed. Both sides drew my attention to the Interim Trust Deed which was put in place on 26th March 1991. As noted in para. 42 above, antecedent agreements form part of the relevant factual matrix and can be taken into account albeit that they may be of no more than limited assistance. As counsel for the respondent submitted, the Interim Deed was clearly intended to be in place for a relatively short period. Clause 3(1) provided that the principal employer and the trustee "must" execute a Definitive Trust Deed within a period of 24 months. The same clause stated that the Rules to be adopted "must give detailed effect to the Proposals" which, as noted in para. 5 above, were annexed to the Interim Deed. Counsel for the respondent also drew attention to the provisions of Clause 3(2) which provided that the Definitive Trust Deed to be put in place should contain all powers, authorities and discretions in relation to the Scheme and its management and administration as the principal employer considers expedient and the trustee approves. As counsel for the respondent observed, this identified that the process by which the Definitive Trust Deed was to be brought into being was not a unilateral exercise. The trustee was required to approve the documents to be put in place. In addition, Clause 3(2) provided that, without prejudice to the general words used at the beginning of the subclause, the Definitive Trust Deed and Rules "may contain a power of alteration... and power for an Employer to terminate or suspend its liability to contribute to the Scheme". Counsel for the respondent submitted that this shows that the termination power was "foreshadowed" from the outset and he argued that this reinforces the fact that the Definitive Deed was not prepared in a rush but was put in place carefully to reflect what was intended and agreed at the outset. Pending the putting in place of the first Definitive Deed (which was put in place in 1991) the Interim Deed contained a power to the employers to terminate or suspend liability to make contribution to the Fund. This was provided for in Clause 2(8) which was in the following terms:
"Any of the Employers is entitled at any time and from time to time, by written notice to the Trustees, to terminate or suspend its liability to make contributions to the Fund or resume that liability following a suspension. Any notice of suspension or resumption may specify, by category, name or otherwise, the persons to whom and the benefits to which the notice relates but otherwise applies generally. The amount of any benefit which becomes payable during or after a period of suspension in respect of any person to whom the notice applies is decided by the Trustees after consulting the Actuary."
49. This is, to some extent, an amalgamation of what became Clauses 5(4) and 5(5) of the Definitive Deed of November 1991 and which are later replicated in the 2008 Deed. However, counsel for the applicant emphasised that, in contrast to the 1991 and 2008 Deeds, the Interim Deed did not contain the second sentence in Clause 5(4) namely the sentence which states: -
"Any notice of termination is without prejudice to any obligation of the Employer to pay contributions to the Fund in respect of any period before the effective date of the notice."
50. There is thus no reference to "the effective date of the notice" in the Interim Deed. Nor is there any reference to the notice of termination being without prejudice to any obligation of the employer to pay contributions to the Fund. The fact that there is no reference to the effective date was highlighted by counsel for the applicant. She submitted that it was significant that this was added when the first definitive deed of November 1991 was put in place.
51. It is unnecessary, at this point, to spend time on the first Definitive Trust Deed of 25th November 1991. It is substantially the same terms as the 2008 Deed. My attention was, nonetheless, drawn to one small difference between both Deeds. Clause 33(4) of the 1991 Deed makes no reference to the Pensions Act, 1990. In contrast, Clause 33(4) of the 2008 Deed refers to s. 48 of the 1990 Act. Counsel for the respondent submitted that this shows that careful consideration was given to the terms of the 2008 Deed at the time it was put in place and that caution needs to be exercised in construing the Deed. Counsel for the respondent noted that no case is made by the applicant that anything went wrong with the language that was used in the 2008 Deed. Counsel for the respondent also submitted that the Court should be careful to observe the boundary between construing the bargain the parties have actually made and making a bargain that the Court thinks might be reasonable or sensible but which the parties have not, in fact, made.
52. Insofar as the 2008 Deed is concerned, counsel for the applicant noted that in Clause 1(3), it is made clear that the headings are not to affect the meaning of the Deed. As noted in para. 29 above, counsel for the applicant placed some emphasis on Clause 2(2) which provides that the applicant holds the trust fund on the irrevocable trust set out in the Deed and Rules and that the applicant is required to "administer and manage the Scheme in accordance with, this deed and the Rules".
53. I have already set out the terms of Clause 5.1 in para. 20 above. As noted in para. 21 above, the respondent contends that Clause 5.1 has the effect that the applicant, as trustee, has no power to insist upon any particular contribution by the respondent. In making this submission, the respondent relied on the use of the words "each of the Employers must pay to the Fund contributions at the rate (if any) which the Principal Employer agrees with the trustees..." (emphasis added). As further noted in para. 21, this is disputed by the applicant. As explained in para. 22 above, the parties have effectively agreed to park the dispute between them in relation to the interpretation of Clause 5(1) which means that it would be wrong for me to attempt to reach a definitive concluded view on the interpretation of that clause in these proceedings. In turn, that means that I am limited in the extent to which I can address the impact, if any, that Clause 5(1) may have on the meaning to be given to Clause 5(4).
54. Clause 5(4) is of critical importance. Counsel for the applicant noted that the first element of that clause is the phrase "An Employer may at any time ...". She submitted that this relates to the timing of the giving of the notice. In other words, the employer does not have to wait for some particular moment or some crystallising event; the employer can give notice at any time. She submitted that this is to be distinguished from the issue as to whether a period of notice is required. She also submitted that there is no tension or conflict where the ability to serve notice at any time and the requirement to give a certain period of notice to the Trustee both reside together in the same clause. As an example of this, counsel referred to Clause 15 of the Element Six pension scheme considered in Greene v Coady which was to the following effect: -
"The Principal Employer or any of the Employers may at any time terminate its liability to contribute to the Fund by giving no less than one month's notice in writing to the trustees but without prejudice to its liability to pay any contributions or expenses which have become payable prior to the expiry of such notice ..."
55. Counsel for the applicant submitted that there was a similarity in the structure of Clause 15 of the pension scheme considered in Greene v Coady and Clause 5(4) in this case. Like Clause 5(4), Clause 15 of the Element Six Deed speaks about notice being given at any time. While Clause 15 of that scheme explicitly provides for a notice period, counsel submitted that the balance of the clause was very similar to Clause 5(4) here in that it provided that the notice to be given by the employer under the clause to terminate its liability was "without prejudice to its liability to pay any contributions ... which have become payable prior to the expiry of such notice...". While a different formula of words is used in Clause 5(4), counsel submitted that the words "without prejudice to any obligation of the Employer to pay contributions to the Fund in respect of any period before the effective date of the notice" was very similar in substance and in effect as the parallel provision found in Clause 15 of the Element Six Scheme. I would, however, observe that the words "the effective date of the notice" used in Clause 5(4) are not synonymous with the words "prior to the expiry of such notice".
56. Counsel for the applicant then turned to the next phrase within Clause 5(4) namely the words "... by notice in writing to the Trustees...". Counsel submitted that this should be construed as the mechanism by which the employer terminates its liability to make contributions. She maintained that the words clearly indicated that written notice is required. Counsel for the applicant also noted the difference in language between those words in Clause 5(4) and the words used in the clause considered by the Court of Appeal in ADM Londis plc v Ranzett Ltd [2016] IECA 290 (on which the respondent relied). That case was concerned with the termination of a franchise agreement by the plaintiff which was effected summarily. In the High Court, the view was taken that the clause should be interpreted as including a reasonable notice period. However, the Court of Appeal disagreed. Ryan P. explained the rationale for the Court of Appeal's decision, as follows, at para. 77 of his judgment: -
"77. Clause 9 of the Franchise Agreement and Clause 8 of the Product Purchase Agreement are in similar terms, providing that ADM Londis may terminate forthwith by giving notice in writing to the Franchisee in the event of failure of compliance by the Franchisee or the Principal with any of the terms of the agreement or of any other ADM agreement. The wording of these clauses and the context in which they appear in the different agreements makes it clear that they give ADM Londis the power of immediate termination. They do this by using the word 'forthwith'. The provision for notice in writing does not create an obligation on the party terminating the contract to give a period of notice before the decision takes effect. It does specify that termination is to be done by giving written notification; that is the meaning of notice. To read the clauses otherwise appears to me to be contrary to the sense of the agreements and to contradict the meaning of the word 'forthwith'. The trial judge treated the provision as to notice in the two agreements as being a requirement to allow a period of moratorium prior to the coming into effect of the termination of the agreement. I take the view that notice in writing meant a communication in writing of the fact of immediate termination. When the contracts in each provision speak of forthwith giving notice in writing that means that ADM Londis was able to decide immediately to terminate the contract, but it was obliged under those terms to give written notice or information to the other party. Therefore, there is a requirement to communicate the decision as to termination in writing, but that does not mean that there has to be some waiting time during which the supplier gives notice to the retailer that it is going to terminate the contract." (emphasis added).
57. Part of that paragraph was replicated in the respondent's written submissions. Remarkably, however, the sentences underlined in the passage quoted above were not included. In my view, those sentences clearly show that the use of the word "forthwith" in the relevant clause in the contract in issue was fundamental to the rationale of the Court. Counsel for the applicant, in the course of her submissions, drew attention to the fact that, in contradistinction to the clause at issue in the ADM Londis case, the word "forthwith" is absent from Clause 5(4). She submitted that there is no language of "immediacy" in Clause 5(4) and she submitted that no similar language is used to suggest that the contribution obligation which she submitted is clearly preserved by the second sentence of Clause 5(4) comes to an end "as a guillotine" on the service of the termination notice.
58. Counsel for the applicant then turned her attention to the second sentence in Clause 5(4). She submitted that the opening words of the second sentence are very broad. She submitted that the last phrase within the sentence is crucially important. It speaks of the obligation of the employer to pay contributions to the Fund in respect of "any period before the effective date of the notice". She argued that this makes clear that, while Clause 5(4) permits the employer to serve a notice of termination at any time, this is always without prejudice to the employer's obligation to make any contributions payable before the effective date of the notice. She stressed that Clause 5(4) does not give the employer a power to elect whether or not to provide a notice period. She suggested that, if the Clause was not interpreted in this way, and if notice of withdrawal could be given with immediate effect, an employer "with funds could leave the Scheme in the lurch"(in the words of Smith L.J. in the Court of Appeal of England and Wales in Capital Cranfield Trustees Ltd v Pinsent Curtis [2005] ICR 1767). Counsel for the applicant submitted that it was very important that Clause 5(4) did not say that the employer will be liable for contributions payable up to the date of delivery of the termination notice. Instead, Clause 5(4) speaks about contributions payable before the "effective date" of the notice. She also submitted that, when Clause 5(4) is considered in the context of the Trust Deed as a whole (and in particular Clause 33) the obligation to make a payment in respect of any period before the effective date of the notice must capture the employer's obligation under Clause 33.
59. Counsel for the applicant submitted that the respondent is incorrect in suggesting that the second sentence of Clause 5(4) operates to ensure that the termination by the employer of its liability to pay contributions to the Fund does not excuse the employer of any liability that has already arisen prior to the date of the notice. Counsel for the applicant submitted that this argument on the part of the respondent ignores the reference to "effective date". She argued that this is to be distinguished from the date of delivery of the notice to terminate. She also stressed that the interpretation of Clause 5(4) advanced by the respondent would have the effect of preventing the trustee from calculating the amount of and serving a final contribution demand sufficient to secure the purchase of the benefits secured by Clause 33(4). Counsel submitted that the reference to an effective date recognises that there must be time to make that calculation in circumstances where the Scheme will move from a going concern basis to a winding up basis. She argued that the applicant will be required in those circumstances to make a calculation as to whether there are sufficient assets (when realised) to pay the expenses and to provide for the benefits that have been promised to the members under the terms of the Scheme. She emphasised that this is not a case of an insolvent employer and she suggested that any termination by the employer must respect the bargain made with the beneficiaries.
60. Counsel for the applicant also addressed the provisions of Clause 32 and Clause 33 of the Deed. As noted earlier, Clause 32 provides for a "waterfall" of payments with additional voluntary contributions ranking first, pensioners ranking second and deferred members ranking subsequently. Counsel for the applicant emphasised that the latter will lose out if the respondent is found to be entitled to terminate its liability to make contributions to the Fund in the manner in which it did. Turning to Clause 33, counsel for the applicant stressed the imperative language in Clause 33(4) requiring the trustees on termination to secure the benefits by the purchase of insurance policies or annuities which meet the requirements referred to in Rule 14(4) (under which any policy taken out by the trustee must satisfy the requirements of the Revenue Commissioners). Counsel for the applicant submitted that the second sentence of Clause 33(4) is critical. As noted previously, it provides that the trustee "must try to purchase policies or annuities securing payments of the amounts set out in Clause 32 and on the same terms... as under this Deed and the Rules." (Counsel's emphasis). This sentence must obviously be read with the Rules attached to the 2008 Deed. As noted previously, Rule 23(1) provides for increases in pensions payable by reference to the percentage increase in the CPI during the year ending on the previous 31st December subject to a maximum of 5% per annum compound (or any other rate decided on by the principal employer with the agreement of the trustee). Counsel for the applicant argued that, while the third sentence of Clause 33(4) permits the trustee to secure payments on different terms or of different amounts, that was a power which, by the terms of that sentence, was solely exercisable by the trustee where it believes that it would be more expedient to do so. According to the affidavit evidence before the Court it is very difficult to get an annuity contract in respect of deferred members to allow them to have index-linked inflationary protection and, for that reason, Mr. Aidan Kennedy, the Scheme Actuary, devised a "buy-out proxy" basis of valuing the cost of securing the benefits due to members under the Scheme. As he explained in his affidavit, this is Mr. Kennedy's attempt to replicate, insofar as it can be done, the result that would be achieved by purchasing annuities.
61. Counsel for the applicant condemned the approach taken by the respondent in its written submissions where the case was made that Clause 32(4) contemplates that it may not be possible or practical to secure all benefits through immediate and deferred annuities with CPI linked increases provided post-retirement and that the trustee may apply a different approach where the trustee is of the view that it is expedient to do so. The respondent argued that the clause therefore permitted the trustee to decide to (a) secure the benefits of the deferred members by means of transfer payments rather than deferred annuities and (b) secure post-retirement increase entitlements on the basis of fixed rate substitution rather than CPI-linked increases. Counsel for the applicant submitted that this approach was entirely wrong in circumstances where (so she argued) the reason why it is not possible or practical to secure the benefits to members on terms which replicate (insofar as feasible) the annuities specified in Clause 33(4) is the unilateral act of the respondent, as employer, in serving a peremptory notice of termination stated to take effect immediately. She stressed that fixed rate substitution does not replicate the benefit promise provided for in the 2008 Deed but is a mechanism that is permitted under s. 48(3A) of the 1990 Act where a pension scheme does not have sufficient resources to fully discharge all of its liabilities on a winding-up of the scheme. She also maintained that, insofar as deferred members are concerned, the "enhanced transfer values" suggested by the respondent would expose them to significant investment risk and she highlighted that Mr. Mulcair had accepted, in his first affidavit sworn on behalf of the respondent that the deferred members would be exposed to a level of risk.
62. When he came to make his submissions on the construction of the 2008 Deed, counsel for the respondent stressed the references in much of the case law to the need to carefully consider the language which the parties have themselves chosen to use in their contract. He also emphasised that the 2008 Deed was obviously prepared by professional advisors and that both the trustees and the employer must have taken legal advice from time to time in relation to the preparation of the Deed. This was especially so in circumstances where there was a previous definitive Deed executed in 1991 and, before that, an interim Deed. There were accordingly a number of occasions when the attention of the parties and their legal advisors had to be given to the content and language of the documents governing the Scheme. He submitted that the plain meaning of the words used in Clause 5(4) is to confer a power on the employer at any time to determinate its liabilities to pay contributions to the Fund. He submitted that the first sentence means exactly what it says. He rejected the suggestion made by counsel for the applicant that the words "at any time" mean that the employer does not have to wait for some particular moment or some crystallising event. While those words might have that meaning if they stood on their own, he submitted that, when the sentence is read as a whole, the words "by notice in writing to the Trustees" makes clear that this is simply a description of the mechanism for terminating liability and he argued that, if this is the mechanism for terminating liability, then the employer is empowered under this sentence to terminate its liability to pay contributions to the Fund. Any other interpretation would render the words "at any time" redundant. He submitted that those words "at any time" do not merely indicate the absence of a necessity for a crystallising event; instead, they make clear that there is no conditionality and no bar to the employer terminating its liability to pay.
63. Counsel for the respondent also rejected the analogy made by counsel for the applicant between the provisions of Clause 5(4) of the Scheme and the language used in the equivalent clause in issue in Greene v Coady. He submitted that any comparison with the clause considered in Greene v Coady will demonstrate that there are only two features to the first sentence of Clause 5(4) here, namely (a) an ability to terminate and (b) a requirement to do so by notice. In contrast, in Greene v Coady there were three features: (a) an ability to terminate; (b) a requirement to do so by notice; and (c) a stipulation that the termination would not be effective unless one month's notice was given. He strongly argued that the absence of any reference to a notice period is of critical importance and is to be contrasted with the clause considered by the High Court and the Court of Appeal in Holloway v Damianus [2014] IEHC 383 (High Court) [2015] IECA 19 (Court of Appeal) where a three month notice period was specified, Greene v Coady where a one month notice period was specified and McClelland v Unisys New Zealand Ltd [2002] Pens LR 87 where a one month period was also specified. He also highlighted that, in this case, the parties agreed that the inclusion of the type of language used in Clause 5(4) of the 2008 Deed in a defined pension scheme is commonplace and not unusual. This was expressly agreed between the parties in order to avoid calling expert evidence.
64. In the course of his submissions, counsel for the respondent acknowledged that Clause 5(4) does not, in contrast to the position in ADM Londis use the word "forthwith". However, he argued that the absence of that word does not confer a meaning on the clause other than what it actually says namely that the employer "may at any time terminate its liability". He suggested that this is how a reasonable reader of the clause would construe it. He submitted that the words "at any time" operate in the same way as the word "forthwith" in the ADM Londis clause.
65. Counsel for the respondent submitted that a reasonable reader of clause 5(4) would not construe the second sentence of the clause in the manner suggested by the applicant. In particular, counsel refuted the suggestion that the use of the words "the effective date of the notice" must mean that two separate points in time were necessarily involved, namely (a) the time when notice is given (on the one hand) and (b) the time the notice becomes effective (on the other hand). Instead, he maintained that, reading the second sentence as a whole and, in particular, in the context of the clause as a whole, this is not a conclusion that the reasonable reader would reach. He argued that, if the second sentence had not been included within Clause 5(4) it might have been thought that the termination achieved by the employer by virtue of the first sentence would come down as a "guillotine" not just prospectively but also retrospectively. He submitted that the second sentence is designed to make it clear that this is not what the first sentence is intended to do. He suggested that the respondent could have (as the employer did in the Capital Cranfield case) chosen to give a different effective date for its notice. However, he contended that the terms of Clause 5(4) did not oblige the respondent to do so.
66. It was also submitted by counsel for the respondent that the reasonable reader would continue to understand Clause 5(4) in the manner suggested by him when the clause is read together with Clause 33(4). He highlighted that, in the written submissions furnished on behalf of the applicant in advance of the hearing, an argument was made that an interpretation of Clause 5(4) which permitted the giving of notice of termination with immediate effect would conflict with the process contemplated by Clause 33(4) and would make the Scheme "virtually unworkable". It had also been argued that Clause 33(4) identifies the practical steps which the applicant must take on termination but before the termination notice becomes effective. He submitted that this encapsulates one of the principal mistakes made by the applicant in its approach to the interpretation of Clause 5(4). In support of this submission, counsel for the respondent first referred to Clause 32(1) which provides that the Scheme must terminate (inter alia) if the principal employer terminates its liability to pay contributions to the Fund. In the context of such a termination, he stressed that this means that termination of the Scheme can only occur where the employer has terminated its liability to make contribution. The Scheme does not terminate in the event that the only step taken by the employer was to give notice of its intention to terminate its obligations at the conclusion of a reasonable notice period. Counsel stressed that those words "on termination" are used repeatedly throughout Clause 32 and, even more importantly, throughout Clause 33. He highlighted that the Deed envisages that the duties of the trustee under Clauses 33(2) and 33 arise on termination and, under Clause 33(5) must be carried out within a time after termination which the trustee thinks is appropriate having regard to the interests of the members. Counsel for the respondent submitted that the 2008 Deed plainly does not envisage this process occurring before the termination notice becomes effective. He maintained that the Deed does not embrace such a concept at all. If a notice had been served which stated that it would not become effective until a particular date, there would be no "termination" within the meaning of Clauses 32 and 33 until the occurrence of the effective date specified in the notice. Counsel submitted that there is a "real disconnect" between the contention that reasonable notice is required so that the Trustees can carry out the exercise contemplated by Clause 33 and the provisions of that clause and the surrounding clauses which make it clear that the exercise is only to be carried out after termination. Counsel submitted that what the applicant asks the Court to do is to rewrite the terms of the Deed to include a notice period even though no such notice period is specified in the Deed and even though the provisions of Clauses 32 and 33 would not be triggered by a notice giving the applicant a period of time in advance of termination occurring.
67. With regard to Clause 33(4), counsel for the respondent argued that it provides for a number of different approaches that might be taken on termination. While the first sentence appears to impose a "hard obligation" to secure the benefits due to the members by the purchase of insurance policies or annuity contracts, that apparent requirement must be read with the second sentence of the clause which states that the trustee must try to purchase policies or annuities securing payments "of the amounts set out in Clause 32...". Counsel submitted that the reference back to Clause 32 "necessarily embraces the abatement requirements" in that clause which apply where the trustee is unable to secure all of the benefits within a particular category under the Scheme. In other words, the reference to in Clause 33(4) to Clause 32 embraces not just a full buy-out but also the abatement or proportionate reduction provision envisaged under Clause 32.
68. Counsel for the respondent also submitted that the third sentence of Clause 33(4) is critically important and that it is "unusually broad in terms of the discretion it confers on the Trustees". It will be recalled that the third sentence states that the trustees may, if it decides "that it would be more expedient", secure payments on different terms or of different amounts. Counsel submitted that this is consistent with the employer having a power to terminate without notice. According to him, it reflects the bargain as a whole as carefully prepared between March 1991 and November 1991, in the first instance, and amended subsequently in 2008. The "quid pro quo" of the employer having the right to terminate without notice is that the trustees could accommodate that by means of the discretion which is conferred upon them by this clause. He submitted that there is "A significant amount of flexibility" included within the last sentence of Clause 33(4) because it addresses not just the method of securing the benefits but it also contemplates that the trustee can vary the amounts of benefit payable to the beneficiaries under the Scheme.
69. Counsel for the respondent submitted that there is a parallel to be drawn between the approach adopted under Clause 33(4) and the approach which was adopted in respect of the construction of Rule 9.1 in Alitalia v Rotunno [2008] EWHC 185 (Ch). In that case, an issue arose as to the meaning to be attached to the words "to secure the benefits under the Scheme" in Rule 9.1 of the Alitalia Airlines pension scheme which provided as follows: -
"Each of the Employers shall make contributions to the Fund at a rate determined from time to time by the Trustees acting on the advice of the Actuary after consultation with the Principal Employer to secure the benefits under the Scheme in respect of Members in or formerly in its Service. The Employer's contributions shall be paid to the Trustees (or as they direct) at whatever intervals they stipulate."
70. Notwithstanding that this was a contribution rule rather than a rule dealing with the calculation of benefits, counsel, nonetheless, submitted that a parallel could be drawn with it and he relied on the observations of Henderson J. (as he then was) at para. 88 (which I set out in full in para. 92 below) the effect of which is that (a) the funding objective is not to guarantee the members' benefits in all circumstances and (b) that the funding method may vary from time to time.
71. Counsel for the respondent acknowledged that, in the case of the Scheme in issue here, Clause 33(4) specifically identifies a buy-out basis and the purchase of annuities. He nevertheless argued that the observations of Henderson J. are relevant to Clause 33(4) which confers a discretion on the Trustees, if they decide it is expedient to do so, to secure the amounts by different methods or in different amounts. He submitted that this reflects the idea that the applicant has to be pragmatic based on the circumstances in which it finds itself. For that reason, he submitted that there is no inconsistency between Clause 5(4) and Clause 33(4). Instead, there is a coherent structure to the Deed as a whole that makes sense when one reads its provisions together. He sought to contrast the respondent's approach to that adopted on behalf of the applicant. He maintained that the applicant's approach involves at least two additional elements that are not provided for under the language of the Scheme namely (a) the requirement that a notice period be given by the employer when terminating its obligation to make contributions and (b) suggesting that this notice period is required to enable the trustee to formulate a contribution demand which he suggested was not foreshadowed in any way by Clause 32 or 33.
72. Counsel for the respondent then turned to the issue of purpose. He acknowledged that it is possible to frame a pension scheme in a way which requires notice by the employer before termination and which, therefore, allows a final contribution demand to be made to best secure the benefits of members. Such a scheme may well be more favourable from a member's perspective but not every pension deed is structured in that way. It may not be structured in that way for a number of reasons. He submitted that it is not open to the Court to identify that a better scheme could have been put together in this case to protect the members' interests and he argued that it is no function of the Court to superimpose such a result on the terms of the Scheme that is before the Court. It is not for the Court to make a new contract that the parties themselves chose not to make. Had it been the intention, in this case, to require that a notice period be given by the employer before a termination notice takes effect, it would have been very simple and straightforward to so provide in express terms.
73. In reply, counsel for the applicant made a number of points. In the first place, she addressed the terms of Clause 32 of the Deed. She submitted that, in fact, Clause 32 contemplates that termination of the Scheme will not necessarily coincide with termination of the employer's liability to pay contributions to the Fund. This is evident from Clause 32(1)(b) which addresses circumstances where a winding up order has been made or a winding up resolution has been passed for the liquidation of the principal employer and a new principal employer "has not succeeded within three months". She also submitted that, in circumstances where the respondent accepts that the second sentence of Clause 5(4) allows the respondent to give notice of intention to terminate, there is therefore the possibility under the Scheme for the employer to serve a termination notice which is not immediately effective and which will not therefore trigger immediate termination of the Scheme under Clause 32(1).
74. With regard to Clause 33(4), counsel for the applicant submitted that, before the trustee could seek to go out and secure the insurance policies or annuities contemplated by Clause 33(4) it would be necessary to inform itself as to the value of the assets available and as to the cost of securing the benefits. In the context of a pension scheme, the trustee will need to obtain actuarial advice in relation to these issues and will also need advice from an actuary to ascertain whether any additional contribution needs to be made to secure the benefits in accordance with Clause 33(4). In the course of Day 2 of the hearing, counsel for the applicant handed in a list of steps which she suggested would have to be taken by or on behalf of the applicant following receipt of a notice of termination. Not all of those steps are addressed in the affidavit evidence before the court but it is clear from the affidavit evidence that actuarial advice would be necessary. This is clear, for example, from para. 17 of Mr. Kennedy's first affidavit. It is also clear from para. 18 of the same affidavit that, as part of the steps that require to be taken in such a scenario, the Scheme assets must be moved to appropriate funds in order to minimise volatility in their value. It is also clear from para. 19 of the same affidavit that annuity quotations must be sought to enable the actuary to advise on the cost of securing scheme benefits and on whether there are sufficient funds available to secure the benefits in full or whether there is a shortfall. It also appears from para. 28 of Mr. Kennedy's first affidavit that alternative methods of securing benefits would ordinarily be considered. This ties in with the ability of the trustee under Clause 33(4) to consider alternative methods of securing benefits where it is expedient to do so. Counsel for the applicant submitted that these are among the steps which the applicant would have to take in preparation for giving effect to Clause 33(4).
75. Counsel for the applicant also submitted that the respondent's suggestion that the discretion given to the trustee under Clause 33(4) is the "quid pro quo" for the absence of a notice period involves a very strained reading of the third sentence of Clause 33(4). She suggested that there is nothing in the language of these clauses to suggest a connection in this way.
76. I start my analysis of the 2008 Deed by looking at the language of Clause 5(4). The first sentence plainly empowers the respondent to terminate its liability to pay contributions to the Fund by notice in writing to the applicant. The sentence does not dictate what needs to be said in the notice; nor does it prescribe the method by which it is to be sent to the applicant. But what it does require is written notice of termination. I believe it is important to pause there and consider what a reasonable person in the position of the parties would understand by the words "notice in writing" in the specific context of the 2008 Deed. Those are, self-evidently, simple and straightforward words; they do not have any special or technical meaning. What does the giving of notice in writing require? It obviously requires that the employer should bring to the attention of the trustee in writing that the employer is terminating its liability to contribute to the Fund. But is that all that needs to be said? If the employer sent a letter to the trustee merely saying: "I am terminating my liability to contribute to the Fund", would that be enough for the purposes of Clause 5(4)? In my view, it clearly would not be enough. Were the trustee to be sent a letter in such terms, the trustee would be left in a state of ignorance as to when the termination is to take effect. I do not believe that the hypothetical reasonable person in the position of the parties would understand that the "notice" envisaged in the first sentence of Clause 5(4) was intended to be entirely unspecific as to the date when the termination is to take effect. On the contrary, it seems to me that such a person would understand that any notice of termination to be given under Clause 5(4) would identify (or provide the means of identifying) the date when the notice is intended to take effect. For a notice to fulfil its purpose, it would thus be necessary that it should state whether it is to take effect immediately [3] or at some other specified time. If the notice does not do so, it would not be possible to identify the date of termination of the Scheme which Clause 32(1)(a) dictates is to occur where the employer terminates its liability to contribute to the Fund. Likewise, the trustee would be unable to give effect to its obligation under Clause 32(2) to realise the Fund, such obligation being stated to arise "on termination". Certainty as to when the termination is to take effect is therefore required in order that the other provisions of the 2008 Deed can be operated.
77. In the course of the written submissions delivered on behalf of the applicant, a number of English authorities are cited which address the legal requirements of a valid notice of a claim under a sale and purchase agreement of a business. Such agreements invariably include warranties by the vendor and often impose obligations on the purchaser to give notice of a warranty claim within the warranty period, failing which the ability to pursue the claim will be lost. While those cases may appear to be far removed from the world of pensions and the interpretation of pension deeds, a common theme which emerges from the case law is the need for certainty in the terms of such notices. The position was put in stark terms by Stuart Smith L.J. in Senate Electrical Wholesalers v. Alcatel Submarine Networks [1999] 2 Lloyd's Rep 423 at p. 442 where he said:
"Certainty is a crucial foundation for commercial activity. Certainty is only achieved when the vendor is left in no doubt ... The clause contemplates that the notice will be couched in terms which are sufficiently clear and unambiguous as to leave no such doubt and to leave no room for argument about the particulars of the complaint. Notice in writing is required in order to constitute the record which dispels the need for further argument and creates the certainty"
78. Similar observations were also made in two other cases on which the applicant relied namely Laminates Acquisition Co. v. BTR Australia [2003] EWHC 2540 (Comm) and Teoco Ltd. v. Aircom Jersey 4 Ltd. [2016] EWHC 1074 (Ch). While the facts of those cases are quite different from the present case, the requirement for certainty resonates strongly here. Unless the employer's notice under Clause 5(4) specifies the date it is to take effect (or provides the means of identifying that date), the trustee would not know when it is intended to take effect and, as a consequence, the trustee would not be in a position to know when to give effect to the specific obligations imposed on it by Clauses 32 and 33. One does not need to be a pedantic lawyer to realise that it must be clear from any notice under Clause 5(4) when it is intended to take effect. Anyone with any knowledge of the terms of the 2008 Deed could readily work that out. In those circumstances, it seems to me that a reasonable person in the position of the parties at the time the 2008 Deed was put in place would understand that the notice contemplated under the first sentence of Clause 5(4) would have to set out the date it is intended to take effect - or, at minimum, would have to provide the means of identifying that date.
79. Read on its own, there is nothing in the terms of the first sentence of Clause 5(4) to suggest that the employer would not be entitled to serve notice with immediate effect. While the clause does not contain the forceful word "forthwith" used in the ADM Londis case, there is nothing in the language used that suggests that a period of advance notice is required. This is unlike the clauses seen in some other pension scheme documents considered by the courts in other cases. For example, in Holloway v. Damianus, clause 18 of the deed required the employer to give three months' notice of "its intention to discontinue contributions (or such lesser period as the Employer shall agree with the Trustees)". In Greene v. Coady, the relevant clause required the employer to give "no less than one month's notice in writing ... but without prejudice to its liability to pay any contributions or expenses which have become payable prior to the expiry of such notice". In McClelland, the New Zealand case, the scheme documents permitted the employer to terminate payments "on giving one month's notice of its intention to do so". More importantly, the need for certainty (discussed in paras. 77 and 78 above) would not be undermined in any way by the employer giving notice in writing of termination of contributions and stating that the termination is to take place immediately on receipt of the notice. The effective date of termination would be perfectly clear from the terms of such a notice. There would be no doubt in such circumstances as to when termination of the Scheme would take place thus triggering all of the other obligations and machinery envisaged under Clauses 32 and 33. In this context, it is clear that the basic machinery of both Clauses 32 and 33 is intended to be operated on termination of the employer's contributions whether or not there are sufficient funds to allow insurance policies or annuities to be purchased of the kind envisaged in the first sentence of Clause 33(4). This is clear from the language of Clause 32(2) (quoted in para. 27 above). As highlighted in that paragraph, Clause 32(2) specifically envisages that it may not be possible to secure benefits in one or more of the categories set out in the hierarchy there described, in which case all benefits in the affected categories must be reduced proportionately.
80. It is next necessary to read the first sentence of Clause 5(4) in conjunction with the second sentence in order to form a view as to how the clause should be construed as a whole. As noted in para. 58 above, counsel for the applicant submitted that the last phrase within the sentence is crucially important. It speaks of the obligation of the employer to pay contributions to the Fund in respect of "any period before the effective date of the notice". She argued that this makes clear that, while Clause 5(4) permits the employer to serve a notice of termination at any time, this is always without prejudice to the employer's obligation to make any contributions that may become payable before the effective date of the notice. I have no difficulty in accepting that element of her argument. It follows from the plain and simple words used in the second sentence. She also submitted that the reference to "the effective date" of the notice points to a different date from the date of delivery of the notice and she argued that the reference to that date recognises that there must be time to make that calculation in circumstances where the Scheme will, as a consequence of the service of the notice, move from a going concern basis to a winding up basis. She also strongly urged that the clause must be read in conjunction with Clause 33(4). I will address the last element of that submission presently. At this point, I want to keep the focus on the words of Clause 5(4) itself. The clause must, of course, be read as a whole. The reference to the effective date of the notice is plainly important but, reading the clause on its own, I do not think the reference would be understood by the hypothetical reasonable person in the position of the parties as necessarily suggesting that the effective date of the notice must always be a different date from the date of the notice itself. In my view, there is a simple and straightforward explanation for the reference to an effective date namely the need for the trustee to know when termination of the contributions is to take effect thus triggering the machinery provided for under Clauses 32 and 33. As explained in para. 79 above, the need for certainty would not be undermined in any way by the employer giving notice in writing of termination of contributions and stating that the termination is to take place immediately on receipt of the notice. The effective date of termination would be clear not only for the purposes of Clause 5(4) but also for the purpose of Clauses 32 and 33.
81. It therefore makes sense that there is a reference to the effective date in the second sentence. The date of the notice and the effective date of termination will not always coincide. It would clearly be open to an employer to specify in the notice that termination is to take effect at a future date. There may even be circumstances where an employer would be in breach of its duty of good faith if it did not provide a period of notice. It is therefore unsurprising that the effective date of the notice may be different to the date on which the notice is given. The second sentence makes clear that it is the effective date that is key in terms of when two things happen namely (a) the date when the employer's obligation comes to an end and (b) the date when the termination machinery envisaged under the later provisions of the Deed is triggered. Again, it is unsurprising that the second sentence expressly provides that the giving of notice is without prejudice to any obligation to pay contributions in respect of any period before the effective date of the notice. Until the notice takes effect, the employer continues to be the employer for the purposes of the Scheme and continues to owe all the obligations imposed on the employer by the Deed and the Rules. If any obligation to pay contributions arose before the employer ceases to act as such for the purposes of the Scheme, the second sentence, in its ordinary and natural meaning, makes clear that those contributions remain payable and the obligation to make them cannot be retrospectively revoked.
82. Of course, as counsel for the applicant stressed, Clause 5(4) cannot be read in isolation. It must be construed in the context of the 2008 Deed, as a whole, and I must now consider it in that light. As outlined earlier, counsel for the applicant has urged that it is critically important to keep in mind the benefits which have been "promised" to the members under Clause 33(4). She has maintained that an interpretation of Clause 5(4) along the lines suggested in paras. 76 to 81 above would have the effect of preventing the trustee from serving a contribution demand even where the assets of the Fund are insufficient to satisfy those "promised" benefits. For that reason, she submitted that the reference to an effective date recognises that there must be time given to the trustee to calculate the amount of any shortfall in circumstances where the Scheme will move from a going concern basis to a winding up basis. In my view, the applicant's focus on Clause 33(4) represents an incomplete approach. Clause 33(4) cannot be read on its own. The "promise" to the members is not a commitment that, in all circumstances, they will be given the benefits described in that clause. The Deed must be read as a whole in order to understand the nature and limits of the "promise" made.
83. If Clause 33(4) were read on its own, it might give the impression that, subject to the discretion given to the trustee in the third sentence of the clause, the members have an unqualified expectation to the benefits on termination being secured by means of insurance policies or annuities which provide for pensions on the scale prescribed by the Rules (including the pension increases prescribed under Rule 23). However, there are a number of other provisions of the Deed that must be considered in the context of Clause 33(4). In the first place, it is clear that Clauses 32 and 33 require to be read together. Clause 32 addresses the consequences that flow either from a termination of contributions by the employer or the winding up of the employer. While the latter does not automatically trigger an immediate termination of the Scheme, the former plainly does have that effect. While there is a three month interval in the case of a winding up, there is no interval in the case of a termination of contributions. In the latter case, Clause 32(1)(a) expressly provides that the termination of the Scheme is immediate. As noted previously in para. 27 above, Clause 32(2) expressly envisages that there may be a shortfall on termination of the Scheme such that the benefits must be reduced proportionately. That eventuality is contemplated whether the termination arises by virtue of a decision by the employer to cease contributions or in the event of a winding up. It follows that the possibility of the existence of a shortfall arising is not necessarily confined to circumstances where the employer is insolvent and has to be wound up. The terms of Clause 32 clearly envisage that a shortfall may arise even where the termination flows from a termination of contributions.
84. The next aspect of the Deed to bear in mind is that, when Clause 33 speaks of "termination", it clearly has in mind, termination of the Scheme as provided for in Clause 32. While no regard can be had to the heading above clause 33, the term "on termination" appears several times within clause 33 and there is also a reference in clause 33(5) to "after termination". Given that these provisions follow immediately after Clause 32, the natural and obvious meaning to be given to the word "termination" within Clause 33 is termination of the Scheme under Clause 32. For that reason, the case made by the applicant in para. 47 of its written submissions is plainly wrong. There, the applicant had contended that Clause 33(4) "identifies the practical steps which the Applicant must take on termination but before the termination notice becomes effective" (emphasis added). That suggestion is inconsistent with the plain words of Clause 33(4) which require the steps to be taken on termination. As stressed by counsel for the respondent, there is no provision made in the clause which could be said to envisage the taking of any steps in a period between the date of the employer's notice and its effective date. Thus, I cannot accept the applicant's argument that termination of the employer's contributions with immediate effect would render Clause 33(4) unworkable. The steps envisaged under that clause are not triggered until termination occurs. It follows that the steps will always arise after termination takes place whether or not the employer gives advance notice of its intention to terminate.
85. Furthermore, the steps envisaged under Clause 33(4) must be taken whether or not the fund available is sufficient to secure the benefits contemplated in the first sentence of the clause. When Clause 33(4) opens with the words "The benefits on termination", it is quite clear that it is referring back to the benefits on termination as provided for in Clause 32. This is strongly reinforced by the reference in the second sentence of Clause 33(4) to "payments of the amounts set out in Clause 32...". As counsel for the respondent observed, these references back to Clause 32 embrace not just payments on a full buy-out basis but also the abatement or proportionate reduction provisions envisaged under Clause 32 where there is a shortfall. The third sentence in Clause 33(4) is also relevant in this context. It will be recalled that it provides that, if the trustee decides that it would be more expedient to do so, they can secure payment of benefits on different terms or of different amounts. I fully accept that, as stressed by counsel for the applicant, this is a power that is vested in the trustee. I also accept that it is by no means confined to circumstances where there is a shortfall facing the Fund. That said, it is a very useful power in circumstances where there is a shortfall and it neatly dovetails with the provisions of Clause 32(2) dealing with a shortfall and allows the trustee in such circumstances to adopt a more pragmatic approach than attempting to secure the benefits (or a proportionate part of the benefits) by the purchase of insurance policies or annuities.
86. There is also one other provision of the 2008 Deed that must be kept in mind when construing the Deed as a whole. While I am mindful that there is a dispute between the parties in relation to the meaning and effect of Clause 5(1) and that this dispute is not currently before the Court, I believe that it is important (as part of the holistic interpretative exercise) to make some reference to it. Without in any way making any final determination as to its meaning, I believe that it is fair to say that any obligation which it might be said to impose on the employer in relation to the making of contributions is imposed in significantly less definite terms than is the case in many other pension scheme deeds. The text of Clause 5(1) has been set out in para. 20 above. It envisages that the rate of contribution which the employer "must" make to the Fund, is to be agreed between the employer and the trustee. In contrast, the contribution clause in Greene v. Coady required the employer to "pay to the trustees upon the written demand of the trustees such contributions as are payable under the rules subject to the provisions of clause 15 hereof". Clause 15 allowed the employer to terminate contributions by giving one month's notice and its ability to terminate was expressly without prejudice to its liability to pay any contributions due before the expiry of such notice. One can see immediately that a clause in those terms was more heavily weighted against the employer than Clause 5(1) of the 2008 Deed.
87. In Holloway v. Damianus, the clause was also weighted more heavily against the employer. It required the employer to "pay to the Trustees the moneys which the Trustees determine, after consulting the Actuary and the Principal Employer, to be necessary ... in order to provide the benefits under the Scheme". While that clause required consultation with the employer, it did not require the employer's agreement. The contribution clause in the Alitalia case was in very similar terms requiring the employer to make contributions to the fund "at a rate determined from time to time by the Trustees acting on the advice of the Actuary after consultation with the Principal Employer to secure the benefits under the Scheme ...". [4] The clause in the Capital Cranfield case was also somewhat similar. It provided that the employer "shall ... pay such contributions to the Scheme as are determined by the Trustees, having taken advice from the Actuary, to be appropriate ...".
88. Thus, while it would not be appropriate to reach a final view on the meaning and effect of clause 5(1), the way in which it is framed (requiring agreement to be reached with the employer) suggests that the employer under the 2008 Deed has a more significant voice in relation to the payment of contributions than is the case in many other schemes.
89. When all of these provisions of the 2008 Deed are taken into account, I believe that it is clear that the "promise" made in Clause 33(4) is not an unqualified one. The clause must be read in the context of the other provisions of the 2008 Deed which I have identified. When Clause 33(4) is read in context in this way, I believe that there is considerable force in the submission made by counsel for the respondent that the balance of power under the Deed is not as strongly tilted in the members' favour as a reading of 33(4) on its own might suggest. On the contrary, the Deed envisages that the employer can terminate its liability to contribute to the Scheme even if there is likely to be insufficient funds as a consequence to buy insurance contracts or annuities for all the members.
90. I am very conscious that the 2008 Deed should not be read in a purely literal and detached way. All of the case law emphasises that the process of interpreting a pension deed should be practical and purposive. But that process does not allow a Court to construct a contract that produces a more favourable result for the members than the parties to the Deed have provided for. To do so would involve the Court in constructing a contract that the parties themselves have not made. As Morritt V.C. observed in Armitage v. Stavely Industries plc [5], the ultimate question is what meaning would be conveyed by the terms of the Deed to a reasonable person having all of the background knowledge reasonably available to the parties in the situation in which they were at the time the contract was made. That is the approach which I have sought to adopt in approaching the interpretation of the 2008 Deed. That process inevitably requires a reasonably careful consideration of the language which the parties chose to use. This was reflected in the way in which both parties made their submissions in relation to how the Deed should be interpreted. Both teams of counsel meticulously reviewed the language of the 2008 Deed for the purposes of their arguments as to how it should be construed.
91. I have not lost sight of the applicant's case that the relevant provisions of the 2008 Deed must be read in light of the practical consideration that, once termination of the Scheme is in sight, the Scheme would be required to move from a going concern basis to a winding up basis and that this potential eventuality would be part of the background knowledge that the hypothetical reasonable person would have had at the time the 2008 Deed was agreed. Counsel for the applicant stressed that the trustee will be required in such circumstances to make a calculation as to whether there are sufficient assets (when realised) to pay the expenses and to provide for the benefits that have been promised to the members under the terms of the Scheme. As noted above, she submitted that this strongly suggests that there would have to be a gap in time between the date of the notice and the date it takes effect in order to give the trustee an opportunity to calculate the amount that would be required to fund a winding up and make a demand on the employer.
92. I have considerable sympathy for this submission on the part of counsel for the applicant. In this context, I am conscious that, in light of the approach taken by Henderson J. (as he then was) in the Alitalia case, it would probably have been difficult for the trustee to successfully make the case that the Scheme should be funded on a full buy-out basis while the Scheme was ongoing. This is so even though Clause 33(4) envisages that the benefits should be secured in that way on a winding up. In the Alitalia case, the relevant contribution rule required the employer to pay contributions to "secure the benefits under the Scheme". The trustee in that case argued that this meant that the liabilities of the Scheme had to be valued for the purposes of the contribution rule on a buy-out basis. This was rejected by Henderson J. notwithstanding that he accepted that the word "secure" should be construed as "make safe", "safeguard", "protect" or "make dependable". In paras. 87 to 88 of his judgment, Henderson J explained why he rejected the trustee's argument as follows:
"87. ... I agree with Mr Green that the appropriate construction of Rule 9.1 to adopt, if the language permits it, is one which makes good commercial sense both when the Scheme is operating on an ongoing basis, with no financial worries, and when a winding up is either in prospect or imminent. This consideration suggests that the Trustees should be given as much flexibility as possible, consistently with the stated objective of securing (in the sense of making safe or protecting) the benefits under the scheme. I also see considerable force in Mr Green's submissions ... that to require the Trustees to request contributions from Alitalia by reference to the buy-out basis, even when the Scheme is operating on an ongoing basis and there are no doubts about the employer's solvency, would make no commercial sense, and would also be methodologically unsound.
88. Taking all these considerations into account, as well as the submissions ably advanced on both sides, I am left in little doubt that Alitalia's construction of Rule 9.1 is to be preferred .... The funding objective is not to guarantee the members' benefits in all circumstances, and still less to do so on the assumption (which may be wholly unrealistic) that a winding up is always imminent, or even that it is likely to occur in the foreseeable future. The objective is rather to safeguard or protect the members' benefits by adopting whatever funding method is best suited to the changing circumstances of the scheme. It is impossible to be dogmatic in advance about what this method will be, and no particular method is prescribed, either expressly or implicitly, by the rule. The appropriate method will be that which the Trustees, in the light of the Actuary's advice and their consultation with Alitalia, consider best suited to achieve the stated objective."
93. While the structure and terms of the Alitalia Scheme are not identical to the Scheme here, there is an obvious parallel in so far as Clause 33(4), by its terms, imposes an obligation to secure the members' benefits on termination by the purchase of insurance policies or annuities. Although not binding in Ireland, I am aware from my time in practice that the Alitalia decision was often cited by pension practitioners as representing the correct legal position in this jurisdiction. The effect of the decision is that, absent some legitimate concern about an employer's financial or trading situation, it can be difficult, in practice, for pension scheme trustees (even where the relevant scheme gives them a strong power to demand contributions) to insist on an employer making contributions to fund the scheme on a buy-out basis. Although Amcor Dublin ceased operations here, the substitution of the well-resourced respondent as employer for the purposes of the Scheme suggested that the scheme should be treated as ongoing for the purposes of the Alitalia test. I can therefore well understand the argument advanced on behalf of the applicant that a period of time is required after service of the notice of termination in order to make a demand for payment of additional contributions. Given that the applicant had no advance inkling that the notice was to be served, I can see that, in reality, it may have been difficult for the applicant to successfully demand that the respondent should make a contribution on a buy-out basis prior to the service of the notice. I can understand why, in those circumstances, it may seem unjust that the respondent could terminate its liability without notice. I also appreciate that the facility to make a post-notice demand for contributions would be of great benefit to the members in the context of the benefits envisaged under the first and second sentences of Clause 33(4).
94. However, I cannot, through a purely interpretive process, re-make the Deed in order to better protect the interests of the members. I have already explained why, when one considers the relevant provisions of the Deed as a whole, the Deed itself envisages that there may be insufficient funds available to fund the benefits secured by Clause 33(4) even where termination of the Scheme is triggered by a termination of contributions by the employer. That is not very different from the position in the Alitalia case where Henderson J. expressly envisaged that a termination of the employer's contributions could lead to a reduction in members' benefits contemplated under the Alitalia scheme. In that case, the scheme permitted the employer to "give notice at any time ... to suspend, reduce ... or terminate contributions" without prejudice to any contributions that might be due "before the date of expiry of the notice." Notwithstanding the latter reference, the rule in question did not specifically require that any period of notice should be given. At para. 80 of his judgment, Henderson J. said:
"It is in my judgment impossible to extract from the single word 'secure' in Rule 9.1, even giving it the meaning for which the Trustees contend, the consequence that the Scheme must always be funded by reference to the buy-out basis. That is to confuse a funding objective, which necessarily looks to the expected future lifespan of the Scheme, with the manner in which that objective is best to be promoted in the immediate or short-term circumstances as they exist from time to time. Furthermore, such rigidity would in my view be wholly at odds with all the other elements of flexibility which the draftsman has carefully built into Rule 9.1, and with the freedom given to Alitalia in Rule 9.3.1 to suspend or reduce its contributions, even if that leads to a reduction in members' benefits." (emphasis added).
95. That observation can be applied equally here. As noted previously, the 2008 Deed expressly envisages (a) that there might be an insufficiency of funds to purchase the policies or annuities envisaged under Clause 33(4) and (b) that this might arise even where termination occurs as a consequence of the choice made by the employer rather than the insolvency of the employer. The interpretation advanced by the applicant involves a rebalancing of the positions of the parties under the Deed such as to prefer the position of the members over that of the employer. Moreover, if the intention of the parties to the 2008 Deed had really been to require that reasonable notice of termination should be given by the employer, it would have been a very simple matter to make that clear in Clause 5(4) in a similar way to the clauses seen in Holloway v. Damianus, Greene v. Coady and McClelland. [6] As noted in footnote 2 above, the applicant has not made the case that something has gone wrong with the language of Clause 5(4) such as to attract the principles discussed in Chartbrook Ltd. v. Persimmon Homes Ltd. [2009] 1 AC 1101 and Moorview Developments Ltd. v. First Active plc [2010] IEHC 275 which allow the Court, in certain very limited circumstances to correct mistakes in written agreements "by construction" [7]
96. I am mindful of the observation of Morritt V.C. in Armitage v. Staveley Industries that, if more than one interpretation is possible, the correct choice may depend on the practical consequences of choosing one interpretation rather than the other. As noted in para. 38 above, similar observations were made by Arden L.J. in the British Airways case to the effect that it is necessary to test competing permissible constructions of a pension scheme against the consequences they produce in practice. I am conscious that the interpretation I have arrived at could have significant adverse consequences for other pension scheme deeds in the same terms as the 2008 Deed. To take an extreme example: suppose that a well-resourced employer with a very healthy surplus on its profit and loss account resisted making any substantial contributions over a long period of time such as to leave the pension fund very seriously underfunded; suppose also that the trustee was in the course of preparing court proceedings seeking to compel the employer to make a more substantial contribution but that, before the proceedings were launched, the employer served a notice of termination effective immediately. What would happen in that situation? Would the trustees be left without a remedy? I have to say that, in writing this judgment, I was troubled by that scenario. But, it seems to me that I could only have regard to such a scenario if, in truth, more than one interpretation were open. I have come to the conclusion that only one interpretation is open when the 2008 Deed is read as a whole. Besides, I am not convinced that a trustee in those circumstances would be left without a remedy. It seems to me to be likely, in such circumstances, that the trustees could rely on an implied duty of good faith of the kind identified by Browne-Wilkinson V.C. in Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [1991] 1 W.L.R. 589, at p. 597 where he said:
"Pension scheme trusts are of quite a different nature to traditional trusts. The traditional trust is one under which the settlor, by way of bounty, transfers property to trustees to be administered for the beneficiaries as objects of his bounty. Normally, there is no legal relationship between the parties apart from the trust. The beneficiaries have given no consideration for what they receive. The settlor, as donor, can impose such limits on his bounty as he chooses, including imposing a requirement that the consent of himself or some other person shall be required to the exercise of the powers. As the Court of Appeal have pointed out in Mihlenstedt v. Barclays Bank International Ltd. [1989] I.R.L.R. 522 a pension scheme is quite different. Pension benefits are part of the consideration which an employee receives in return for the rendering of his services. In many cases, including the present, membership of the pension scheme is a requirement of employment. In contributory schemes, such as this, the employee is himself bound to pay his or her contributions. Beneficiaries of the scheme, the members, far from being volunteers have given valuable consideration. The company employer is not conferring a bounty. In my judgment, the scheme is established against the background of such employment and falls to be interpreted against that background.
In every contract of employment there is an implied term: 'that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee' (Woods v. W.M. Car Services (Peter borough) Ltd. [1981] I.C.R. 666, 670, approved by the Court of Appeal in Lewis v. Motorworld Garages Ltd. [1986] I.C.R. 157.) I will call this implied term "the implied obligation of good faith." In my judgment, that obligation of an employer applies as much to the exercise of his rights and powers under a pension scheme as they do to the other rights and powers of an employer."
97. I should make very clear that there is no suggestion, in this case that, in serving the termination notice, the respondent acted in breach of any duty of good faith. However, it seems to me that the duty of good faith might well be invoked in the context of the scenario which I painted in para. 96 above with reference to a hypothetical employer under a similarly worded scheme.
98. In light of the considerations, discussed above, I do not believe that Clause 5(4) can be construed as requiring the employer to give reasonable notice of its intention to terminate the payment of contributions. The clause does not contain language to the effect that such advance notice is required. In my view, that also remains the case when the clause is read in light of the provisions of the 2008 Deed as a whole and in light of the relevant factual matrix. When read in that way, I can see no scope to interpret Clause 5(4) in the manner advocated by the applicant. On the contrary, the applicant's approach involves a rewriting of the terms of the 2008 Deed and a decisive shifting of the balance of power in favour of the members in a manner that cannot be justified by the words of the 2008 Deed read in context. It is not open to the Court, on an exercise of this kind, to rewrite the Deed.
99. I now turn to consider the alternative case made by the applicant on the basis that a term should be implied into the 2008 Deed requiring the employer to give reasonable notice of its intention to terminate contributions under the Scheme.
100. To paraphrase Lord Hoffmann in Attorney General of Belize v. Belize Telecom Ltd. [2009] 1 WLR 1988 at para. 17, the question of implication of terms arises where a contract does not expressly provide for what is to happen when some event occurs. As he explained, in many cases, the Court will conclude that nothing is to happen and that, if the parties had intended something to happen, the contract would have said so.
101. In Sweeney v Duggan [1997] 2 I.R. 511 Murphy J., in the Supreme Court, explained that there are at least two situations where the courts will, independently of a statutory requirement, imply a term in a contract. At p. 538 he identified these two situations as follows:
"The first of these situations was identified in the well-known case, The Moorcock (1889) 14 PD 64 where a term not expressly agreed upon by the parties was inferred on the basis of the presumed intention of the parties. The basis for such a presumption was explained by MacKinnon L.J. in Shirlaw v Southern Foundries (1926) Ltd. [1939] 2 K.B. 206 at p. 227 in an expression, equally memorable, in the following terms:-
'Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common "oh, of course"'
In addition there are a variety of cases in which a contractual term has been implied on the basis, not of the intention of the parties to the contract but deriving from the nature of the contract itself. Indeed in analysing the different types of case in which a term will be implied Lord Wilberforce in Liverpool C.C. v Irwin [1977] AC 239 preferred to describe the different categories which he identified as no more than shades on a continuous spectrum. . Whether a term is implied pursuant to the presumed intention of the parties or as a legal incident of a definable category of contract it must be not merely reasonable but also necessary. Clearly it cannot be implied if it is inconsistent with the express wording of the contract and furthermore it may be difficult to infer a term where it cannot be formulated with reasonable precision."
102. The case made by the applicant here is based on the former of the two categories identified by Murphy J. in Sweeney v. Duggan. In other words, the applicant seeks to make a case for the implication of a term based on the presumed intention of the parties. As Lord Neuberger explained in Marks & Spencer plc v BNP Paribas Securities Services Trust Company [2016] AC 742, at para. 21, this category of implied term is not dependent on proof of an actual intention of the parties when negotiating the contract. Instead, it is necessary to consider the position of "notional reasonable people in the position of the parties at the time at which they were contracting". Thus, te applicant seeks to establish that, if the 2008 Deed does not expressly provide for a notice period, there is a gap in the express architecture of the Deed such that, to make the Deed workable, this gap requires to be filled with an implied term requiring reasonable notice of termination to be given by the respondent, as employer.
103. A court will not lightly imply terms. This is clear from the observations of Fennelly J., in the Supreme Court, in Dakota Packaging v Wyeth Medica Ireland [2005] 2 IR 54 where he said at p. 106: "The courts do not have 'a broad discretion' to imply terms. It is not enough that a term to be implied is 'fair and reasonable'". Similar observations were made by O'Higgins C.J. in Tradax (Ireland) Ltd. v Irish Grain Board Ltd. [1984] I.R. 1 at p. 14 when he cautioned that the power of the Court to imply a term "must be exercised with care" and that the courts have "no role in acting as contract makers ... to ... direct what agreement ought to have been made by two people, whether businessmen or not, who chose to enter into contractual relations with each other".
104. The applicable principles were considered more recently by the Court of Appeal in Flynn v Breccia [2017] IECA 74. In that case, the High Court had implied a term into a detailed shareholders agreement that a promoter could not take steps against another promoter otherwise than in accordance with certain steps which were set out in the text of the shareholders agreement. Reflecting the language of MacKinnon L.J. in the Shirlaw case (quoted by Murphy J. in Sweeney v. Duggan), the High Court took the view that "... an officious bystander understanding the necessity for such an implied term would recognise a compelling case for it and the answer to this question must be that the parties would have agreed that it was obvious." The Court of Appeal disagreed. At p. 38, Finlay Geoghegan J. observed that a compelling case is not sufficient to warrant the implication of a term. She accepted the submission made by the appellant that the Court would have to be satisfied, first, that reasonable people in the position of the parties would all have agreed to make provision for the contingency in question and, second, that they would "without doubt" or with something approaching certainty have accepted the term proposed by MacKinnon L.J.'s officious bystander. In her view, that submission was justified on the authorities.
105. At para. 77 of her judgment, Finlay Geoghegan J followed the approach taken by Lord Simon in B.P. Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at pp. 282- 283 where he identified a number of conditions which must be satisfied before a term can be implied into a contract. Finlay Geoghegan J. said:
"The conditions identified by Lord Simon (which may overlap) ... are:
'(1) it must be reasonable and equitable;
(2) it must be necessary to give business efficacy to the contract, so that no
term will be implied if the contract is effective without it;
(3) it must be so obvious that "it goes without saying";
(4) it must be capable of clear expression;
(5) it must not contradict any express term of the contract...'
The parties are in agreement that the possibility that (2) and (3) may be alternatives (and not necessarily cumulative) accords with the law in this jurisdiction as set out in Sweeney v Duggan."
106. As outlined in para. 107 below, counsel for the respondent also emphasised a passage in the judgment of Lord Neuberger in Marks & Spencer at p. 755. I should explain that, in para. 21 of his judgment in that case, Lord Neuberger added six comments to the conditions identified by Lord Simon in the B.P. Refinery case. The first comment has already been identified in para. 102 above - namely that the implication of a term is not dependent on proof of actual intention of the parties when negotiating the contract. The second comment is that a term should not be implied into a detailed commercial contract "merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them." Lord Neuberger observed that, while those are necessary grounds for implying a term, they are not sufficient on their own to do so. The other elements of the test must also be met. Lord Neuberger's third comment was to the effect that it is questionable whether Lord Simon's first requirement (namely reasonableness and equitableness) will usually add anything. If a term satisfies the other requirements, it is difficult to think that it would not also be reasonable and equitable. His fourth comment chimes with the observation made by Finlay Geoghegan J. in para. 77 of her judgment in Flynn v. Breccia that business necessity and obviousness (Lord Simon's second and third requirements) can be alternatives in the sense that only one of them needs to be satisfied (albeit that in practice it would be a rare case where only one of those two requirements would be satisfied but not the other). Lord Neuberger's fifth comment was that, if one approaches the issue by reference to the officious bystander test, it is essential to formulate the question to be posed by that bystander with the utmost care.
107. Counsel for the respondent highlighted Lord Neuberger's sixth comment which addresses the requirement to show that implication of the term is necessary in order to give business efficacy to the contract. In para. 21, Lord Neuberger said:
"Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of 'absolute necessity', not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon's second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence."
108. While the Court of Appeal in Flynn v. Breccia did not address this element of the judgment of Lord Neuberger in Marks & Spencer, it was mentioned briefly in the course of the judgment of Collins J. in Betty Martin Financial Services Ltd v EBS [2019] IECA 327 where he said (in the context of concluding that there was an arguable case for the purposes of the grant of an interlocutory injunction) at paras. 71-72:
"71. In any event, looking at these issues through the prism of the Supreme Court's decision in Sweeney v Duggan, I consider that it is at least arguable that the second (and narrower) term contended for by the Agent ought to be implied into clause 15.1. of the Tied Agency Agreements. In other words, I consider that it is arguable that the clause 15.1(b) termination power cannot properly be exercised where the basis for its exercise is the performance by the Agent of its express contractual obligations under the Agreements not to engage in mis-selling and its refusal to succumb to pressure to do so exerted on it by the EBS. That is, of course, sufficient to establish a serious issue to be tried.
72. I will briefly explain why I have come to that conclusion, emphasising the provisional and qualified nature of what follows. As for the need for such an implied term to be necessary (and not merely reasonable), it is I think important to avoid any exaggerated understanding of what this requires. Rarely can a party demonstrate that, absent a particular implied term, a contract simply cannot operate. That point is made by Lord Neuberger in his judgment in Marks & Spencer plc v BNP Paribas Securities Services ... in which, in a passage cited by Haughton J in Wingview, he suggested that it may be more helpful to express that aspect of the test in terms of a term being implied only if, without that term, 'the contract would lack commercial or practical coherence.'"
109. While Betty Martin was concerned solely with the question whether an interlocutory injunction should be granted, the observations of Collins J. are, nonetheless, helpful in understanding that the test of necessity does not require necessity in an absolute sense. That is not to suggest that it is not a significant hurdle but it does explain why Lord Neuberger indicated that a more helpful way of putting it is that a term will only be implied if, without it, the contract would lack commercial or practical coherence.
110. Before leaving the applicable principles, in light of the emphasis placed on it by counsel for the respondent, it is necessary to consider the decision in Marks & Spencer in more detail. It is also necessary to address the decision of the Court of Appeal of England & Wales in the Capital Cranfield case on which the applicant has sought to rely.
111. The facts of the Marks & Spencer case are quite involved. The case was concerned with whether a term should be implied into a lease. The lease required that the basic rent be paid yearly and proportionately for any part of a year by equal quarterly instalments in advance on 25th March, 25th June, 25th September and 25th December during the term of the lease. The lease contained a break clause allowing the tenant to terminate the lease on 24th January, 2012 by giving the landlord six months prior written notice provided that, on the break date, there were no arrears of rent and the tenant had paid a break premium equivalent to one year's rent. In early July 2011, the tenant served a break notice on the landlord. Under the lease, payment of the first quarter's rent for 2012 was due to be paid on 25th December 2011 and the tenant made that payment a few days afterwards but did not pay the break premium until 18th January 2012. Nonetheless, the fact that both rent and premium were paid in full as of the break date on 24th January 2012 meant that the break notice was effective and the lease determined on 24th January 2012 but the payments also had the effect that the tenant had paid rent for the whole of the first quarter of 2012. Subsequently, the tenant claimed repayment of rent which it had paid for the period after termination of the lease on 24th January 2012 on the basis that a term entitling it to such repayment should be implied into the lease.
112. The tenant made a number of arguments in support of its case for implication of the term. In the first place, it contended that rent was payable in respect of the use and enjoyment of leased property and Lord Neuberger acknowledged in para. 33 of his judgment that there was "real force" in the tenant's contention that, if the landlord could retain the rent payable in respect of the period between 25th January 2012 and 24th March 2012, this would be prejudicial to the tenant and a pure windfall for the landlord. Lord Neuberger accepted, on that basis, that a term that the landlord would reimburse the tenant was reasonable and equitable.
113. Next, the tenant relied on the fact that the basic rent under the lease was expressed to be paid "yearly and proportionally for any part of a year by equal quarterly instalments in advance" (emphasis added). It was common ground in that case that the effect of this requirement was that, if the lease had run its full course to 2nd February, 2018, the tenant would only have had to pay an apportioned part of the basic rent due on 25th December, 2017 because, as at that date, the parties would have known that the lease would definitely expire before the next quarter day (namely 29th March 2018). In contrast, the difficulty for the tenant in relation to the break in the lease was that, because the tenant had not paid the basic rent due and the break premium before 25th December, 2011, it was not known, as at that date when the rent for the next quarter fell due for payment, whether the lease would definitely come to an end before the expiry of that quarter period on 25th March, 2012. As a consequence, the tenant therefore had to pay that quarter's rent in full on 25th December 2011. It only became clear that the lease would determine on 24th January, 2012 when the final payment of the break premium was made on 18th January, 2012. The anomaly was that, if the tenant had paid the rent and premium before 25th December, 2011, then it would have been clear on that date that the lease would end on 24th January, 2012 such that it would, in turn, also have been clear that only an appropriate proportion of the basic rent would be payable up to 24th January 2012. In other words, the position would have been very similar to the situation at the end of the term in 2018 (had the break clause not been exercised) as explained above.
114. Against that backdrop the tenant contended that commercial common sense mandated that it should be in the same financial position whether it paid the rent and premium before 25th December, 2011 or chose to wait until after that date to pay that sum. In para. 38 of his judgment, Lord Neuberger acknowledged that there was considerable force in the case made by the tenant that it was necessary for business efficacy that the term contended for by it should be implied into the lease. However, he added that it was important to consider the countervailing arguments. The landlord relied on the fact that the lease was a very detailed document which had been entered into between two substantial and experienced parties and had been negotiated and drafted by expert solicitors. Lord Neuberger then referred to a number of provisions of the lease which expressly addressed the sums that were to be paid by the tenant in the event that the break option was exercised by it. Counsel for the respondent relied in particular on what was said by Lord Neuberger at para. 51 of his judgment where he said: -
"I accept that refusing to accede to the proposed implied term in this case can lead to the operation of clause 8 having the somewhat curious effect discussed .... However, while the difference in result between the tenant paying the £919,800 plus VAT before or after 25 December 2011 can fairly be said to be capricious or anomalous, it does not begin to justify a suggestion that the contract is unworkable. Indeed, the result cannot be said to be commercially or otherwise absurd, particularly as it is entirely up to the tenant as to when that sum is paid. Further, the fact that rent payable in advance is not apportionable can always lead to potential unfairness. For instance, a landlord with a right to forfeit on 23 March for a continuing breach of covenant could wait for three days to re-enter, in order to be able to receive the whole of the rent due in respect of the quarter to 24 June."
115. Counsel for the respondent submitted that this passage shows that the concept of unworkability (or its alter ego, lack of commercial or practical coherence) is a very high bar. He argued that it is not enough to show that the application of the express terms of the contract brings about an unjust or capricious result and he added that: "It is certainly not enough that one might be able to identify that the contract might be more favourable to one side or the other ... The question is, can the contract operate without the proposed implied term." I would not quibble with the last observation but I would not go so far as to suggest that it does not matter that the express terms of a contract are liable to produce an unjust or anomalous result. In this context, it must be kept in mind that, as an alternative to business efficacy, a term can also be implied (assuming it meets the other conditions of the B P Refinery test approved in Flynn v. Breccia) where it is so obvious that it goes without saying. In other words, it would be a proper basis to imply a term if, applying MacKinnon L.J.'s officious bystander test, the hypothetical objective observer were to suggest to the parties, while they were making their bargain, that the term should be expressly included in their agreement, they would "testily suppress him with a common 'oh, of course'". It seems to me that it would potentially be relevant to the application of that test if it were the case that the application of the express terms of the contract led, on the basis of an objective analysis, to a manifest injustice or to a capricious or anomalous result. In my view, such an eventuality is something that might well have to be weighed when a court comes to consider the parties' presumed intention.
116. Moreover, it is important to recall that, as noted in para. 114 above, Lord Neuberger essentially held that the countervailing factors he identified outweighed the points made by the tenant which he acknowledged had considerable force. I do not believe that the judgment can be read as suggesting that issues such as injustice or an anomalous or capricious outcome are never relevant. There were specific reasons why the countervailing factors outweighed the factors identified by the tenant. One of the principal reasons why Lord Neuberger came to the conclusion which he did was that there was a consistent line of English authority to the effect that, where a lease provides for payment of rent in advance on the usual quarter days and the landlord forfeits the lease during the currency of a quarter, the landlord is entitled to retain the whole of the rent due on the quarter day immediately before the forfeiture if it has been paid and, if it has not been paid, the landlord is entitled to recover and retain the whole of that rent. In reaching that conclusion, Lord Neuberger referred to the decision of the Court of Appeal of England and Wales in Ellis v Rowbotham [1900] 1 QB 740. It is clear from para. 50 of his judgment that this line of authority was a crucial factor in his conclusion that a term should not be implied. In paragraph 50, he said: -
"There is little point in resolving the hypothetical question whether, in the absence of the points discussed in paras 43-49 above, I would have concluded that a term should be implied as the claimant contends. Even if I would have reached that conclusion, I consider that it could not have stood once one faced up to the clear and consistent line of judicial decisions which formed the backcloth against which the terms of the lease, and in particular the provisions of clause 8, were agreed. Save in a very clear case indeed, it would be wrong to attribute to a landlord and a tenant, particularly when they have entered into a full and professionally drafted lease, an intention that the tenant should receive an apportioned part of the rent payable and paid in advance, when the non-apportionability of such rent has been so long and clearly established. Given that it is so clear that the effect of the case law is that rent payable and paid in advance can be retained by the landlord, save in very exceptional circumstances (e g where the contract could not work or would lead to an absurdity) express words would be needed before it would be right to imply a term to the contrary."
117. This is also clear from paragraphs 52 and 53 of Lord Neuberger's judgment where he addressed the reasons why the High Court, in that case, came to the conclusion that a term should be implied. Lord Neuberger referred to the fact that the High Court judge had come to the conclusion that the reasoning in Ellis was applicable only to cases of forfeiture and did not apply in the context of a break clause. In paragraph 53 of his judgment Lord Neuberger pointed out that the reasoning in Ellis applies equally to a case where a lease determines by forfeiture as it does to a case where it determines by exercise of a break clause. These considerations seem to me to have been of central importance in the approach taken by Lord Neuberger in this case. It is clear from the opening words of para. 50 of the judgment (quoted in para. 116 above) that the UK Supreme Court did not address the question whether, in the absence of the Ellis line of authority, the Court would have concluded that a term should be implied. For all of these reasons, I reject the respondent's argument that Marks & Spencer is authority for the proposition that, in the context of the implication of terms, it does not matter that the express terms of a contract are liable to produce an unjust or anomalous result. I therefore would not exclude the possibility that this is a factor that might, in the particular circumstances of an individual case, have the potential to be relevant.
118. I turn, now, to the decision of the Court of Appeal of England & Wales in the Capital Cranfield case. As noted previously, the applicant placed some emphasis upon the approach taken by Smith L.J. in that case where she suggested that it might be necessary to imply a term that a period of notice be given by an employer who seeks to terminate its liability to fund a pension scheme. In that case, the defendants (a firm of solicitors) were sued by the trustees of a pension scheme for damages by reason of their failure to advise the trustees that they were entitled to make a contribution demand on the employer to make good an alleged deficit in the scheme following service of a notice of termination. In that case, notice was given by the employer in October 1997 to take effect at the end of March 1998. A preliminary issue was directed to be tried as to whether, under the scheme rules, the trustees had power, before the termination date, to demand payment of a contribution to make good the alleged deficiency. Obviously, if a determination had been made on that preliminary issue that the trustees had no such power, the case for negligence against the solicitors would fall away. Both the High Court and the Court of Appeal took the view that the trustees were in fact entitled to make a contribution demand in the period between the date of service of the termination notice by the employer and the date of expiry of the six month notice period. In that case, the contribution provision was contained in Rule L.1.1 which provided as follows:
"L.1.1 Each employer shall, subject to the following provisions of this clause L.I, pay such contributions to the scheme as are determined by the trustees, having taken advice from the actuary, to be appropriate but in any event not less than those set out in the schedule of contributions in force from time to time in accordance with section 58 of the [Pensions Act 1995]"
119. The rules in that case also entitled the employer to give to the trustees notice in writing that it wished to terminate the scheme and to cease making contributions to it. The rules did not require any period of notice. Nonetheless, the employer gave six months' advance notice of its intention to terminate contributions. The main judgment in the case was given by Mummery L.J. I will come back to that judgment presently. Aldous L.J. agreed with that judgment. Smith L.J. also agreed with the judgment but added a number of observations of her own which are clearly obiter but, nonetheless, the applicant seeks to rely on her judgment in support of its proposition that a notice period should be implied into the provisions of Clause 5(4). In her judgment, Smith L.J. referred to the argument made by counsel for the defendant firm of solicitors that, because it was open to the employer to give notice to withdraw from the scheme with immediate effect (there being no express requirement for any particular period of notice to be given), it was not sensible or workable to suggest that the trustee should be able to make a demand for a contribution assessed on a "buy-out" basis. Smith L.J. rejected that argument. At pp. 1774 - 1775, she said: -
"32. I would reject this submission. First, although it is true that the scheme does not contain an express requirement for any particular period of notice to be given prior to the company's withdrawal, in my view a term should be implied that reasonable notice should be given. The scheme would be virtually unworkable if the company could withdraw with immediate effect. If that were permitted and were to occur, it would not be possible for any demand to be made for a contribution once notice had been given, not even for an amount appropriate on an ongoing basis, which Mr. Seinfeld conceded should be possible. If notice of withdrawal could be given with immediate effect, a company with funds could leave the scheme in the lurch. In my view, reasonable notice is required. It is not necessary to decide what would be reasonable, as six months' notice was given in this case.
33. I would also reject Mr. Steinfeld's contention that it will not be possible for the trustees to calculate an appropriate sum on a 'buy-out' basis during a notice period. It is true that the decision as to how the fund is to be managed cannot be put into effect until after the date of withdrawal. However, there is nothing to prevent the trustees from deciding, during the notice period, how they intend to deal with the fund after expiry of the notice. Indeed, it seems to me that prudent trustees will wish to do so. The trustees will wish to safeguard the accrued rights of the beneficiaries in the most effective way. To do that, they will wish to consider all the available options, including the possibility of a transfer or 'buy-out'. Although it was agreed that a full actuarial assessment of the state of the fund may take as much as nine months, it was also said that advice as to the approximate sum required to secure a 'buy-out' can be obtained quite quickly, certainly in a matter of a few weeks. It does not appear to me that rule L. I.I requires the trustees to make a previse calculation as to the amount to be demanded. An assessment or estimate of what is appropriate is all that is required. In any event, if the sum demanded turned out to be more than was required for the proper purposes of securing the accrued rights of the beneficiaries, the excess could always be repaid to the company.
34. For these additional reasons, I would agree with Mummery LJ that rule L. I.I is wide enough to permit the trustees to demand a sum appropriate to secure a 'buy-out'. There is nothing illogical or impractical about such a provision. Indeed, to restrict the ambit of the rule in the way contended for by the solicitors would be to deprive the trustees of any opportunity to consider the transfer option that the scheme expressly provides for at rule J.3."
120. In the course of his submissions, counsel for the respondent identified that there were, in fact, two termination provisions in the rules of the scheme in issue in that case. The first was rule J.1.1 which provided in very simple and terse terms that the scheme would terminate where all the employers gave to the trustees notice in writing that they wished the scheme to terminate. There was no express provision in that clause for any period of notice to be given and no reference was made to an effective date of the notice. However, rule L.1.3 also permitted an individual employer to terminate its liability to make contributions. Echoing, to some extent, the language of Clause 5(4), it provided as follows: -
"An Employer may, by giving written notice to the Trustees, terminate its liability to make contributions to the Scheme for benefits accruing after the effective date of the notice in respect of any or all of the Members who are or were its employees..."
121. The notice served by the employers in that case specifically invoked both rule J.1.1. and rule L.1.3. Counsel for the respondent stressed that rule L.1.3 could not be read on its own. It also had to be read in light of rule L.1.5 which was in the following terms: -
"If an Employer gives notice under clause L.1.2 the. Trustees may, and if it gives notice under clause L.1.3 the Trustees shall revise the schedule of contributions before the expiry of the notice to reflect, in the case of a notice under clause L.1.2, any reduction in benefits and, in the case of a notice under clause L.1.3, the cessation of benefit accrued for those Members who are in its employ." (emphasis added).
122. Counsel for the respondent argued that, when one reads those two provisions together, they plainly suggest that there should be a period after termination to allow rule L.1.5 to operate properly. He submitted that this was a major point of distinction between the rules in issue in the Capital Cranfield case and this case. On that basis, he said that, while rule L.1.3 might appear to resonate with the language used in Clause 5(4) of the 2008 Deed, it is necessary to supplement the analysis by reference to the provisions of rule L.1.5 which he submitted made very clear that the rule required the trustees in Capital Cranfield to take a number of steps prior to the expiry of a notice period and he highlighted that this requirement was entirely missing from the Amcor Scheme. That seems to me to be a very important point of distinction.
123. Counsel for the respondent also highlighted that, in the High Court, Lindsay J. expressed the view that, if he had been required to decide whether some notice period had to be specified in the case of a notice served under rule J.1.1, he would hold that "no notice period being expressed to be required ... and with there being no compelling need to imply one, none, in my view, is required". I do not believe that any significant reliance can be placed on this observation by Lindsay J. He was plainly not deciding the issue in any real sense. More importantly, there are obvious differences between rule J.1.1 and Clause 5(4) in the present case in that, unlike rule L.1.3 in the Cranfield Capital case, there is no reference in rule J.1.1 to "the effective date of the notice".
124. On the other hand, counsel for the respondent was correct in submitting that the main debate in the judgment of Lindsay J. insofar as the case against the solicitors was concerned, revolved around the contribution rule (the equivalent of Clause 5(1) of the Amcor Deed) and not about the termination power. That said, as counsel for the respondent noted, Lindsay J. did suggest that the language of clauses L.1.3 and L.1.5 made clear that a notice period was required under those rules.
125. A further point made by counsel for the respondent was that, notwithstanding the approach taken by Smith L.J. in the Court of Appeal, there is nothing to suggest that there was any argument in that case as to whether a term should be implied. Instead, the deciding factor for both Lindsay J. in the High Court and Mummery L.J. in the Court of Appeal was that there was nothing in the contribution rule which prevented the trustees from making a demand on the employer during the notice period. The termination provisions were therefore not the focus of the appeal. That said, it is clear from the judgment of Mummery L.J. that counsel for the defendant solicitors relied, to some extent, for the purposes of his argument, on the contention that there was no express requirement that any notice of intention to terminate the scheme should be given by the employer. This is clear from para. 18 of the Judgment of Mummery L.J. where he records counsel's argument that there was no express requirement to give reasonable notice or any notice and that this had the consequence that the notice given by the employer might not give the trustees enough time in which to obtain the advice of the actuary and calculate the exact amount of a contribution demand before expiry of the notice.
126. Ultimately, notwithstanding the debate between the parties in relation to the Capital Cranfield case, I have come to the conclusion that the decision in that case is not of assistance in relation to the implication of terms into a pension scheme. Crucially, the judgment of Smith L.J. does not address the principles that govern the approach of the court to the implication of terms into a written contract. Nor is there any detailed analysis in the judgment of the specific terms of the pension scheme in issue in that case. The only potentially relevant element of the judgment of Smith L.J. is her observation that the scheme "would be virtually unworkable if the company could withdraw with immediate effect" such that "a company with funds could leave the scheme in the lurch". Those observations may be of some relevance when I come to consider the approach approved by the Court of Appeal in Flynn v. Breccia. I must also bear in mind that the terms of the scheme in Capital Cranfield are not identical to the terms of the Amcor Scheme. In particular, the latter does not contain a provision in the terms of rule 5(4) of the Capital Cranfield Scheme. For all of these reasons, I do not believe that Capital Cranfield can be relied upon as a relevant authority for present purposes. It does not provide some form of short cut that allows the applicant to bypass the B P Refinery principles approved by the Court of Appeal in Flynn v. Breccia. It will accordingly be necessary to assess the applicant's case in relation to the implication of a term by reference to the ordinary principles laid down in Flynn v. Breccia.
127. For completeness, I should add that the issue raised in Capital Cranfield became largely academic in the United Kingdom as a consequence of amendments enacted in 2004 to the U.K. Pensions Act, 1995. By section 75 of the 1995 Act (as amended in 2004), any shortfall facing a defined benefit pension scheme is deemed to be a statutory debt. Thus, irrespective of the existence of any notice period that may (or may not) be prescribed by a pension trust deed, the trustee can sue the employer (assuming the employer is solvent) to recover the amount of a shortfall. For that reason, as counsel for the applicant observed in the course of the hearing, one does not see the Capital Cranfield issue raised again in any of the UK case law.
128. The applicant submitted that, applying the test in Flynn v. Breccia, the first issue to be addressed is whether the term to be implied is reasonable and equitable. Counsel for the applicant noted that Lord Neuberger had suggested in para. 21 of his judgment in Marks & Spencer that, if all of the other criteria were satisfied, it would be difficult to suggest that the implied term was not also reasonable and equitable. Counsel for the applicant nonetheless submitted that, if this criterion has to be established, it would be entirely reasonable and equitable for the court to imply a period of notice into the clause. She suggested that this could be done by the introduction of two words after the word "by" in the first sentence of Clause 5(4). In other words, that clause would, for example, read: "An employer may at any time, by [one month's] notice in writing..." but she said that the period to be inserted could be six months or three months or whatever period the Court considers to be reasonable [8]. She argued that this would allow effect to be given to the bargain, both in terms of the contribution rule and the treatment of the members pursuant to Clause 33(4). She maintained that, to secure the benefits identified by the Trust Deed and Rules, the applicant would need to engage with the scheme actuary, obtain quotations and ascertain the sum necessary to address the obligations to the members under Clause 33(4). On that basis, counsel submitted that, implying a term requiring a period of notice is reasonable to achieve the practical purpose envisaged by the Scheme and it is also equitable because it would assist in ensuring the members get the benefits promised to them.
129. Counsel for the applicant then turned to the second and third requirements which, as Finlay Geoghegan J. observed in Flynn v. Breccia, are regarded as alternatives. As outlined earlier, the second requirement is that it is necessary to imply the term to give business efficacy to the contract and the third is that the term sought to be implied must be so obvious that it "goes without saying". As noted by Finlay Geoghegan J. in para. 86 of her judgment in Flynn v. Breccia, the criterion of obviousness requires the court to be satisfied that (a) reasonable people in the position of the parties would all have agreed to make provision for the contingency in question and (b) that they would "without doubt" or with something approaching certainty have accepted the term if it had been proposed to them by the so-called officious bystander.
130. Insofar as the business efficacy criterion is concerned, counsel for the applicant submitted that this needs to be seen in the context that the 2008 Deed is not a commercial contract in the ordinary sense; it is a trust deed put in place in order to provide specified benefits to the members of the Scheme on their retirement or in the other circumstances specified in the Deed. Counsel submitted that a period of notice is undoubtedly required in order for Clause 33(4) to be given full effect. Unless a period of notice is given, she maintained that the applicant would be unable to undertake the kind of enquiries necessary to establish the value of the fund, and whether there is any shortfall in meeting the requirements of Clause 33(4) such that the Trustee would have an opportunity to make a contribution demand prior to expiry of the notice period. In this context, she rejected the suggestion made on behalf of the respondent that regard can be had to the applicant's correspondence to show that they themselves never understood that a notice period was required. While Clarke J. in the Motor Insurers case suggested that it was possible to have regard to material of this kind in the context of arguments about business efficacy, counsel suggested that the factual circumstances here are quite different. With that in mind, counsel sought to explain what was said in the letter of 1st April, 2011 written by the applicant to Amcor Dublin following the closure of the plant in which the applicant proposed at para. 2.3 as follows: -
"In light of the company's ability to terminate its liability to contribute without notice, the Trustee would like to explore amending the Trust Deed to incorporate a notice period of, say, 6 months. This would give the Trustee additional time to consider how best to act in the unlikely event that the company were to terminate its liability to contribute."
131. Counsel stressed that this letter was written by lay persons, not by lawyers. While it refers to the fact that the applicant has had an opportunity to consider matters in conjunction with its professional advisors, it does not say that it was written with the benefit of legal advice. She also maintained that the trustee was doing no more than raising a concern in relation to the way the Deed might operate and that it should not be construed as an admission as to the legal effect of the 2008 Deed in its current form. In addition, counsel drew attention to the fact that there are more parties with an interest in the Deed than the two parties who executed it. But that point could equally be made in relation to the M.I.B.I. agreement which is not, in any real sense, an ordinary contract between two commercial parties. The M.I.B.I. agreement affects the interests of many people not party to it, in particular those who suffer injury as a consequence of the negligence of uninsured drivers.
132. Counsel for the applicant also suggested that it was important that the applicant was not the trustee at the time the 1991 Interim Deed was put in place. It will be recalled that Clause 2(8) of the Interim Deed referred to the employer's entitlement "at any time ... by written notice to the Trustees, to terminate ... its liability to contribute to the Fund ..." which is similar to the language of the first sentence of Clause 5(4) of the 2008 Deed but, importantly, it did not contain the second sentence which now appears in Clause 5(4) which refers to the "effective date of the notice". Counsel sought to argue that this was a significant distinguishing factor in circumstances where Clarke J. in para. 11.30 of his judgment in the Motor Insurers case placed some emphasis on the fact that the Motor Insurers' Bureau was "the very party whom it might be said would not have entered into an agreement of a particular type can be shown to have believed that it had entered into an agreement of that very type". Counsel submitted that the trustee only came to be a party to the 1991 Definitive Deed on the same day as it was appointed as trustee in place of Superior Packaging Pension Trustee Ltd., the original trustee under the Interim Deed. However, I do not accept that such an argument is open to the applicant here in circumstances where it was a party to the 1991 Definitive Deed which incorporated the terms of Clause 5(4) (including the second sentence on which the applicant relies) in the very same language as in the current 2008 Deed. I cannot accept that the applicant can somehow divorce itself from its position as a signatory to the 1991 Definitive Deed which was put in place and which recites in Recital B that the rules annexed to that Deed "are approved by Lawson Mardon Pension Trust (Ireland) Limited" which was the name of the applicant at that time. While Recital B does not refer to the applicant's approval of the Deed (as opposed to the Rules), it is unthinkable that a pension trustee would sign up to a Deed of such importance without carefully considering its terms to which it was binding both itself and the members of the Scheme. Moreover, the 1991 Definitive Deed also recites that it is supplemental to the Interim Deed which, in turn, provided in Clause 3(2) that the definitive deed and rules will "contain all powers authorities and discretions in relation to the Scheme and its management and administration ... as the Principal Employer considers expedient and the Trustees approve" (emphasis added). While there is no evidence of what was involved in that approval process, I believe that I am entitled to proceed on the basis that the applicant, as trustee, must have approved of the 1991 Deed which it executed itself and, later, executed the 2008 Deed in substantially the same terms.
133. In the circumstances outlined in para. 132 above, I am of opinion that, if the subjective intention of the applicant is a relevant consideration in the context of the implication of terms, the applicant cannot say that it is not (to paraphrase Clarke J.) the very party who would not have entered into the 1991 Definitive Deed if the Deed did not require the employer to give reasonable notice of its intention to terminate its liability to contribute.
134. Turning to the penultimate criterion in the Flynn v. Breccia test, counsel for the applicant submitted that her proposed implied term is well capable of clear expression. She reiterated that all that is required is the insertion of "one month" or "two months" or whatever period the court considers to be reasonable between the word "by" and the word "notice" in the first sentence of Clause 5(4).
135. Finally, counsel for the applicant addressed the last of the Flynn v. Breccia requirements. She submitted that there was no conflict between the implied term suggested by the applicant and the express terms of the 2008 Deed. She maintained that such a term does not contradict any express term of the contract. On the contrary, she argued that, if anything, the reference in the second sentence of Clause 5(4) to the "effective date" of the notice suggests that the Deed contemplates two points in time i.e. (a) the date of giving of the notice and (b) the date when the notice takes effect.
136. When he came to make his submissions on this issue, counsel for the respondent also addressed the application of the principles in Flynn v Breccia. With regard to the obviousness criterion, he submitted that there is no basis on which the court could conclude that, if the issue had been raised at the outset when the 1991 Definitive Deed was put in place, both parties would have agreed, without doubt, that a notice period was required. He also submitted that, insofar as the business efficacy criterion (i.e. the alternative to obviousness) is concerned, there is nothing to suggest that the Deed would be unworkable or would lack coherence just because it did not contain a provision requiring the employer to give advance notice of its intention to terminate contributions under the Deed.
137. Counsel for the respondent also highlighted the process envisaged under the Interim Deed that a definitive deed would be drawn up which would require to be approved by the trustee. He referred, in this context, to Clause 3(1) of the Interim Deed which required a definitive deed to be put in place by the "Principal Employer and the Trustees" (emphasis added) within a period of 24 months which would confirm the establishment of the Scheme and would adopt rules "to be made by the Principal Employer and approved by the Trustees" (emphasis added). He also referred to Clause 3(2) of the Interim Deed which, as noted in para. 132 above, provided that the definitive trust deed and rules should contain all the powers, authorities and discretions in relation to the Scheme and its management and administration "(exercisable by the Trustees and/or any of the Employers) as the Principal Employer considers expedient and the Trustees approve" (emphasis added). Counsel also stressed that Clause 3(2) expressly provided that, in particular, the definitive trust deed and rules might contain a number of specific things, including a "power for an Employer to terminate or suspend its liability to contribute to the Scheme". Counsel submitted that the terms of the Interim Deed clearly set out a bilateral process that was to be followed by the employer and the trustee in relation to the finalisation of the definitive deed. This was not to be a unilateral exercise in which the trustee had no say. On the contrary, the process explicitly required that the terms of the Deed and the Rules were to be approved by the trustee. He also emphasised that, from the outset, it was envisaged that the employer would have power to terminate its liability to contribute to the Scheme.
138. In the course of his submissions, counsel for the respondent also placed considerable emphasis on the dicta in many of the authorities that a court should be slow to imply a term into a lengthy and carefully drafted agreement on the basis of what the parties must have intended. As noted in para. 106 above, counsel for the respondent drew attention to the observation of Lord Neuberger in Marks & Spencer, at p. 754, to the effect that a term should not be implied into a detailed commercial contract "merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them."
139. It was also submitted by counsel for the respondent that the applicant's correspondence was very relevant to the issue of business efficacy. Counsel emphasised that the respondent does not rely solely on the letter of 1st April, 2011 (to which counsel for the applicant had referred in the course of her submissions). He stressed that there are a number of letters to similar effect. He drew attention not only to para. 2.3 of the letter of 1st April, 2011 (quoted in para. 130 above) but also to para. 2.5 where the applicant noted that the contribution rate from the respondent is "currently set by agreement between the company and the Trustee" and expressed the wish that, in tandem with para. 2.3, the applicant would like to be given ultimate control over the company contribution rate as this would best serve the interests of the members. Counsel for the respondent submitted that paras. 2.3 and 2.5 of that letter contain a significant expression of recognition by the applicant that, as a consequence of the powers conferred on the employer by the 2008 Deed, the architecture of the Deed creates a balance in favour of the employer and it is this balance that the applicant, as trustee, now wishes to change. He submitted that this supports the respondent's case that what the applicant is seeking to do is to impose, through the mechanism of implication or construction of terms, a new bargain which would shift the balance of power in favour of the Trustee.
140. In similar vein, counsel for the respondent also referred to a letter of 1st July, 2011 from the applicant to Amcor Dublin in which reference was made to advice from the applicant's legal advisers to the effect that, before the applicant could agree to the proposal to replace the principal employer, the Revenue Commissioners would need to confirm that the proposed substitution would not prejudice the tax approved status of the Scheme. He also highlighted a reference in the same letter to the effect that a draft funding agreement had been prepared by the applicant's legal advisors which set out in more detail what the applicant was looking for. Counsel drew attention to the following paragraph in the letter:
"The trustee notes what you say about Amcor Limited's global principles on pensions and not giving legal guarantees in relation to pension funding. It also acknowledges that, assuming that the Revenue does not object to the substitution, having Amcor Holding No. 1 Limited as principal employer may strengthen the employer covenant behind the scheme. However, the trustee would emphasise that a funding covenant is more than simply an ability to fund a scheme. The covenant also encompasses the obligation to fund a scheme. Amcor's proposal does not change the fact that the funding obligations owed by the principal employer under the scheme and, as you acknowledge, under Irish legislation are weak and, were the principal employer to decide to stop paying contributions at any time or refuse to agree a contribution rate with the trustee, there would be little legal recourse open to the trustee to compel the principal employer to continue to contribute or to fully fund the scheme. The trustee's view is that whatever Amcor's current intentions are the fact is that under the proposal the scheme will become e frozen legacy scheme inherited by an overseas entity which may in time prove to have very little interest continuing the scheme." (emphasis added)
141. Counsel submitted that this again constitutes a clear recognition by the applicant that the balance of power in the Scheme is held by the employer. In addition, counsel for the respondent referred to a letter of the 7th December, 2018 from the applicant to the respondent. This letter was sent in response to a request from the respondent to consider facilitating early payment of deferred pensions under the Scheme. The letter stated that the applicant had met with its legal and actuarial advisors to consider the request. It then addressed the request and indicated that it would either need additional funding or additional security of funding measures to be put in place if it were to take this course. On page 2 of the letter, it suggested that possible security of funding measures could include an amendment to the Scheme's contribution setting and termination powers or alternatively: "a binding agreement with the Company not to terminate its contributions to the Scheme for a specified period with the proviso that if the Company terminated its contributions before the end of that period it would (if applicable) pay whatever contribution was necessary at that time to bring coverage for deferred pensioners on the minimum funding standard basis up to the level of coverage applicable as at 31 December 2018." Counsel submitted that it is particularly striking that what was being sought by the applicant at that point in time by way of an amendment to the Scheme coincides very closely with the applicant's current contention as to what already exists within the Scheme by implication.
142. Counsel submitted that this has a strong resonance with what Clarke J. said in the Motor Insurers case. In that case, an issue arose as to whether the claims in relation to policyholders of insolvent motor insurers should be met by the Motor Insurers' Bureau or be paid out of the Insurance Compensation Fund. The Motor Insurers' Bureau argued that under the terms of the MIBI Agreement, it had no such liability. However, in notes to its financial statements, the Bureau had stated that, in the event of the insolvency of one of its members, it must cover claims "to the extent that its insolvent member is unable to do so". At p. 582, Clarke J. dealt with the inconsistency in the Bureau's position as follows:
"[258] Before leaving the business efficacy argument it is also appropriate, in my view, to touch on the question of the notes to the financial statements of the MIBI to which reference has already been made. I will deal with the specific arguments raised under that heading later in this judgment. However, it seems to me that those notes are of particular relevance in the context of the business efficacy argument. It is true, of course, that the unilateral view of one party is not relevant to the construction of an agreement. Agreements are to be construed objectively. However, it seems to me that the established view of a party can be of some relevance in considering the weight, if any, to be attached to a business efficacy argument. The whole point of such an argument is that it is said that a particular construction should not be favoured because it should be assumed that a reasonable business person would not have entered into an agreement which was contrary to business sense. Such an argument is normally made by a party who asserts that, from its perspective, an agreement construed in a particular way would not have made sense and that it should be implied that the party would not have entered into such an agreement unless the text is clearly to the contrary. But if the very party whom it might be said would not have entered into an agreement of a particular type can be shown to have believed that it had entered into an agreement of that very type, then such an argument is, in my view, significantly undermined. I say that notwithstanding the fact that events occurring after a contract has been concluded cannot ordinarily be used to construe the meaning of the contract at the time it was entered into for that exercise again has to be conducted on an objective basis and in the light of the circumstances prevailing at the time in question. However, if it truly is to be said that it would not have made business sense for the MIBI (and the insurers who are members of it) to have agreed to cover the liabilities of an insolvent insurer then it is surely highly surprising that it appears to have believed, for a significant number of years leading up to the Setanta collapse, that it had done just that. If it would have been so contrary to business sense to have entered into such an agreement then it is surprising in the extreme that the MIBI actually thought that it had done so."
143. Counsel for the respondent stressed that, if it were truly the case that the present Scheme could not be said to be workable without a notice provision of the kind now contended for by the applicant, it is remarkable that the applicant has, for many years up to 2018 at least, proceeded on the basis that the employer was not required to give a period of advance notice of termination. He submitted that this is particularly so in circumstances where the applicant would always have had the interests of the members in mind with a view to achieving the best outcome for the members. He urged that the acknowledgements made by the applicant in the correspondence is consistent with the terms of the Scheme, when properly construed and with the carefully constructed architecture of the Scheme which he said is both coherent and workable. He accepted that this may not be a scheme that is balanced as favourably as it might be in favour of the members. He also accepted that one could envisage language that was more favourable to the members but he submitted that language of that kind would make the Scheme a different contract.
144. Counsel for the respondent further submitted that it was impossible, on the basis of the materials before the court, to say with precision what should be implied into the 2008 Deed. Counsel suggested that the Court has not been armed with the material that would be necessary for the Court to determine what period of notice should be implied. He acknowledged that there were cases (largely revolving around termination of exclusive distribution agreements and similar contracts) where the court has held that a period of six months' notice should be given before an agreement of that kind should be terminated. He submitted that the exercise here is quite different. What the court is being asked to engage in here is to create or to fashion an implied term (including a period of time which is said to be necessary to give the Deed business efficacy) but (so he argued) there is no material to identify what that period of notice should be.
145. In this context, counsel for the respondent objected to an attempt by the applicant to rely on a document produced on behalf of the applicant on the second day of the hearing in which the applicant listed a number of steps which it contended would have to be taken by it on receipt of a termination notice before it would be in a position to make a contribution demand. The applicant sought to rely on the material contained in this document for the purposes of an argument as to the length of the notice period that should be implied into the 2008 Deed. The applicant's document is addressed in more detail in paras. 149 to 152 below. As noted in footnote 8 above, at the conclusion of the hearing, I directed the parties to deliver further written submissions on the issue of the length of any implied notice period. These submissions were then provided to the Court subsequent to the hearing. This was necessary in circumstances where the period of notice had not been addressed at all in the submissions of the parties in advance of the hearing. The post hearing submissions are addressed in the context of my assessment of the applicant's document which I consider in paras. 149 to 152 below.
146. As noted in para. 105 above, the relevant test, for the purposes of this case [9], to be applied in determining whether a term should be implied into a contract is that originally summarised by Lord Simon in the B.P. Refinery case which was approved and applied by the Court of Appeal in Flynn v. Breccia. There are five parts to that test, albeit that it is only necessary to satisfy four of them (the second and third elements being alternatives). The first part of the test is that the term contended for should be reasonable and equitable. This element of the test is readily satisfied here. A requirement that an employer should give advance notice of its intention to terminate contributions is a relatively common feature of pension schemes. I have already noted that such a requirement was found in each of the pension schemes considered in Holloway v. Damianus, Greene v. Coady and McClelland. Such a requirement is obviously of considerable benefit to a pension scheme since it allows for the possibility (depending on the other terms of the scheme) that the trustees may make a contribution demand in the period between the date of service of a notice of termination and the date of expiry of the relevant notice period.
147. However, it is well settled that the fact that a term may appear to be reasonable or equitable is insufficient. As Lord Neuberger observed in Marks & Spencer, at p. 754, "a term should not be implied into a detailed commercial contract merely because it appears fair ...". The next element of the test requires that the applicant must demonstrate that the term contended for is either (a) necessary to give business efficacy to the contract (such that [10] the contract would not be effective without it) or (b) so obvious that it goes without saying.
148. Before addressing these two alternative requirements, it is necessary to consider the material on which the applicant seeks to rely in support of this part of its case. As noted earlier, the applicant produced a document on Day 2 of the hearing which identified a number of steps which the applicant contends would have to occur following receipt by the trustee of a termination notice from the employer. Without prejudice to all of the other points argued by it, the respondent trenchantly argued that the document was not sufficiently grounded in the evidence before the Court. Furthermore, in its post hearing submissions, the respondent also argued that the evidence before the Court falls far short of what would be required to objectively establish (a) what steps the trustee would be required to take and (b) what period of time would be required to allow those steps to be taken. In so far as there is any evidence before the Court arguably relevant to these issues, the respondent maintained that all it did was to describe the steps that were, in fact, taken. The respondent submitted that what would be required is objective evidence as to the steps that could be said to be essential and as to the period of time that would reasonably be required to allow those essential steps to be completed.
149. The matters listed in the applicant's document can be summarised as follows:
(a) First, the applicant contended that there was a need for a trustee to take actuarial advice. The evidential basis for this was said to rest on para. 17 of Mr. Kennedy's first affidavit where he deposed to the fact that he had been given a copy of the termination notice by the applicant and had been asked to advise as to whether any additional contributions were required from the respondent to secure the benefits envisaged by Clause 33(4). I agree with the respondent's argument that, strictly speaking, this is merely evidence that this step was, in fact, taken. There is no evidence from an independent expert to say that this is an essential step that a trustee needs to take following receipt of a termination notice. That said, it seems to me to be an obvious step which any trustee would need to take on receipt of such a notice and I am prepared to accept that this is a necessary step. However, there is no evidence as to the length of time it would take to obtain such advice;
(b) Second, the applicant said a trustee would need to take legal advice on its powers and obligations following the service of the termination notice. This step was not grounded on any evidence but, based on my own experience as a lawyer, I would accept that legal advice would ordinarily be taken by pension trustees in such circumstances. As with (a) above, there is no evidence as to how long it would take to obtain such advice;
(c) Third, the applicant maintained that a trustee would need to take investment advice in the context of the fact that the Scheme was moving to a winding up and that it would be necessary to move scheme assets to minimise volatility. This was said to be based on para. 18 of Mr. Kennedy's first affidavit where he recorded the fact that the applicant had sought advice from AON in relation to investment strategy in the wake of the termination notice. He also says in the same paragraph that a trustee meeting took place on 21st June 2022 (which was almost one month after the service of the termination notice) and that an advice note issued on the following day on foot of which the applicant decided to move the Scheme assets to protect their value and that the switch to cash assets was implemented on 24th June 2022 while the switch to an annuity objective fund took place on 1st July 2022. As in the case of (a) above, this evidence merely deals with the steps actually taken. The evidence does not address why these steps need to be taken or how long would be required to allow them to be carried out. Nonetheless, I would be prepared to accept that, given that the Scheme was moving from an ongoing basis to a winding up basis, it would be likely that a trustee would require to take investment advice as to how the funds should be held in that scenario. But, again, there is no evidence as to the length of time required to allow this step to be taken;
(d) Fourth, the applicant suggested that it would be necessary for annuity quotations to be sought to enable the actuary to advise on the cost of securing scheme benefits and on the extent of any shortfall. The evidential basis for this contention was said to be found in para. 19 of Mr. Kennedy's first affidavit where he gave evidence that, on 9th June 2022, AON sought annuity quotations in respect of the existing pensions in payment from three insurers and where he exhibited a response that suggests that these were received on 21st June 2022. The applicant also referred in this context to a Willis Towers Watson [11] presentation which accepted that this step would arise and which (so the applicant contended) also recognised that, for this purpose, the membership data would require "data cleansing". Again, while I acknowledge that the respondent is correct in characterising this as doing no more than describing the steps taken here, I am prepared to accept that steps of this kind are likely to be required. Given the terms of Clause 33(4) of the 2008 Deed (which envisages that insurance policies or annuities would be put in place), it would be surprising if these steps would not need to be taken. Yet, again, there is no evidence as to the length of time that would reasonably be required to allow this step to be completed. While Mr. Kennedy described the time actually taken here, I have been given no evidence as to whether that time period is (or is not) in line with normal expectations;
(e) Fifth, the applicant contended that there would also be a need for the actuary to calculate the cost of securing the liabilities after the assets have been moved to stable funds and to assess whether a contribution demand needs to be made. The applicant frankly acknowledged that this was nowhere addressed in the evidence before the Court but I am prepared to accept that this step would appear to follow logically from the steps at (a), (c) and (d) above. In this case also, there is no evidence as to the length of time it would take for this step to be undertaken;
(f) Sixth, the applicant maintained that, at the conclusion of the steps outlined above, it would then be necessary to initiate the process contemplated by Clause 5(1) for determining the amount of any final contribution to be demanded. It was suggested that this would clearly require engagement between the employer, the trustee and the actuary. While this process was not addressed in the evidence, I am prepared to accept that, having regard to its provisions, this is what Clause 5.1 is likely to require. That clause plainly requires involvement of all three named entities but, obviously, that clause would only be applicable if it is an implied term of the 2008 Deed that advance notice of termination is required under Clause 5(4) .
150. For the reasons outlined in para. 149 above, I am prepared to accept that, following receipt of a termination notice from the employer, the trustee under the 2008 Deed would be required to take advice from the actuary, to consult lawyers, to take investment advice, to obtain annuity quotations and, after receipt of those quotations, to seek further advice from an actuary to calculate the cost of securing the liabilities. I also accept that, following receipt of that advice from the actuary, the process contemplated by Clause 5(1) would have to be initiated if it is still open to the applicant to make a contribution demand. As noted above, I have no evidence as to the length of time that would reasonably be required to allow all of these steps to be completed.
151. Before going further, it is essential to note that the first five of the steps outlined in para. 149 would require to be taken in any event even if no contribution demand were to be made. All of those steps seem to me to follow from the terms of Clause 33(4) the operation of which is triggered by the termination of the Scheme under Clause 32(1) as a consequence of the service of the employer's notice of termination. Clause 33(4) envisages that the trustee must "try" to purchase insurance policies or annuities albeit that this is subject to the third sentence which contemplates that the trustee may decide that it is more expedient to secure payment of benefits on different terms. In order to undertake the tasks contemplated by Clause 33(4), the trustee will inevitably require actuarial advice as to how far the available funds will stretch to enable benefits to be secured and as to the most expedient method of doing so. It will equally be inevitable that investment advice will have to be taken to address how best to hold the funds now that the Scheme is moving into winding up mode. Likewise, there will be a need to gather information as to the rates at which annuities or other relevant products could be purchased in order for the actuary to provide advice to the trustees as to the extent to which the available funds will cover the cost of purchase of such products and as to whether it would be more expedient to secure the benefits in some other way. In addition, to the extent necessary, actuarial advice might be needed as to how the waterfall contemplated by Clause 32 would work. Given the complexities of the exercise, it would also be prudent that legal advice should be obtained. In my view, no evidence is required to reach a conclusion that these steps require to be taken. The terms of the 2008 Deed themselves suggest that all of this would be required.
152. It also seems to me that a reasonable person, in the position of the parties, at the time the 2008 Deed was put in place, would be aware that all of these steps would have to be taken following service of a termination notice. The reasonable person would come to that conclusion by reference to the terms of the 2008 Deed itself and by thinking about how those terms would be operated in practice. One therefore does not need evidence to come to the conclusion that such steps would be necessary. However, as noted in para. 151 above, these steps cannot be said to be necessary solely for the purposes of making a contribution demand. They will inevitably arise under the terms of the 2008 Deed as a consequence of the termination of the Scheme. That seems to me to be a necessary consequence of the requirement in Clause 32(1) that the Scheme should terminate and as a consequence of the requirement in Clause 33(4) that the trustee should try to purchase insurance policies or annuities.
153. Keeping the material discussed in paras. 149 to 152 in mind, it is next necessary to consider whether the implied term canvassed by the applicant can be said to pass either the obviousness test or the business efficacy test. In both of these contexts, I believe that it is important to consider the position through the prism of the 2008 position rather than with the current dispute in mind. The need to do so is well encapsulated in the words of Bingham L.J. (as he then was) in Phillips Electronique Grand Public SA v. British Sky Broadcasting Ltd. [1995] EMLR 472. After referring to the B.P. Refinery test, Bingham L.J. said at p.482:
"The question of whether a term is to be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task with the benefit of hindsight, and it is tempting for the court to fashion a term which will reflect the merits of the situation as they then appear. Tempting but wrong."
154. Those words of caution chime very closely with what was said by O'Donnell J. (as he then was) in the Motor Insurers case, at p. 496, (albeit in the context of the interpretation of a contract rather than in the zone of the implication of terms) to the effect that it is wrong to approach the interpretation of a contract through the lens of the dispute that has arisen sometime after the execution of the contract and that it is necessary to put oneself in the position of the parties at the time the contract was made.
155. Taking obviousness first, the question arises as to what the parties' response would have been had the so-called officious bystander suggested to them, at the time the 2008 Deed was being put in place, that an express term should be included in the Deed requiring the employer to given advance notice of its intention to terminate contributions. Would their response, without doubt, have been to agree to its inclusion? I do not believe that one can go that far. While such a term would have significantly benefitted the members of the Scheme, can it be said that it is obvious that both parties (i.e. both the trustee and the employer) would have agreed to it? In this context, it is necessary to consider the issue by reference to the position of the hypothetical reasonable trustee and the hypothetical reasonable employer in the position of the parties at the time the 2008 Deed was put in place. Notwithstanding the way in which MacKinnon J. framed the test in Shirlaw v. Southern Foundries, the test is an objective one. One could well see that the reasonable trustee would readily wish to agree to such a term. But would the reasonable employer do so? It seems to me that the reasonable employer is one who is neither excessively selfish nor overly altruistic. The reasonable employer will be conscious of the obligations owed to employees (including the obligation to act in good faith) but, naturally, being in business, the reasonable employer will also be mindful of the objective to make a profit. In addition, the reasonable employer will be conscious of the other terms of the Deed including Clause 5(1) and will therefore be aware that, over the lifetime of the Scheme, it will be open to it to fund the Scheme by contributions to be agreed with the trustee after consultation with the actuary. It is by no means obvious that such a reasonable employer would, beyond doubt, consider that there should, in addition, be a requirement that advance notice should be given to the trustee of its intention to cease contributions. The reasonable employer could, quite legitimately, take the view that it intends, at all times to act in good faith and, as provided for in Clause 5(1), to make advance provision for the benefits accruing under the Scheme to an extent which it considers to be sufficient for that purpose, such that advance notice would not be required.
156. Nor, would the material in paras. 149 to 152 alter that position. As I have already explained, the steps outlined by the applicant (and summarised in para. 149(a) to (e) above) will fall to be performed on termination of the Scheme. The fact that such steps fall to be performed cannot, therefore, be attributed to the need to allow the trustee to make a contribution demand. They will arise in any event as a consequence of the termination and they will require to be taken irrespective of the funding position of the Scheme. In other words, they will have to be taken whether the Scheme is over-funded or under-funded albeit, in the latter case, the applicant may well be driven to apply the approach permitted by the third sentence of Clause 33(4). In those circumstances, it is not obvious that the taking of those steps points to a requirement that the trustee should be given an opportunity to make a contribution demand after a termination notice is served. They are steps which are contemplated by the 2008 Deed in its current form.
157. For the reasons outlined above, I do not believe that the applicant has shown that the implied term for which it contends is "obvious" in the Shirlaw v. Southern Foundries sense. I, therefore, turn to consider the alternative basis for the implication of such a term namely the applicant's case that the term is necessary to give business efficacy to the 2008 Deed. As outlined earlier, the applicant contends that the Scheme would be unworkable without such a term. In this context, it should be recalled that, as Collins J. observed in the Betty Martin Financial Services case, it is important to avoid any exaggerated understanding of what this requires. On the other hand, it is also important to keep in mind that, in the context of a detailed and lengthy contractual document such as the 2008 Deed, there are obvious difficulties in suggesting that the parties must have omitted a necessary term. As Bingham L.J. said in the Phillips Electronique case, at pp. 481- 482:
"It is much more difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter at issue. Given the rules which restrict evidence of the parties' intention when negotiating a contract, it may well be doubtful whether the omission was the result of the parties' oversight or of their deliberate intention ...".
158. There are a number of striking features of the arrangement between the parties here which are relevant in this context. First, the 2008 Deed is plainly a very detailed document consisting of the main Deed with the attached Rules. The provisions of the Deed and the Rules set out in a very comprehensive way how the Scheme is to be administered and governed and the roles which the employer, the trustee and the actuary are to play. Clearly, a lot of thought went into their drafting. It is also clear that there were lawyers involved. The name and address of Allen & Overy, solicitors, appear on the 1991 Definitive Deed while the name and address of A & L Goodbody (the current solicitors for the applicant) appear on the 2008 Deed. The manner in which the 2008 Deed was put in place is also important. As counsel for the respondent demonstrated, it was not put in place on a purely unilateral basis. The process envisaged by the Interim Deed expressly envisaged that the terms of the Definitive Deed would be approved by the trustee. I have earlier noted that the recitals to the 1991 Definitive Deed expressly refer to the trustee's agreement to the terms of the Rules and I have observed that it would be unthinkable that a pension trustee would sign up to a Deed of such importance without carefully considering its terms to which it was binding both itself and the members of the Scheme. It is also notable that the applicant signed up to these terms as trustee not once but twice, the first time in November 1991 and, again, in February 2008. While there is no evidence of the extent of the review undertaken in the period prior to the execution of the 1991 Definitive Deed, the Interim Deed contained no more than the bare bones of the intended scheme. It ran to 11 printed pages and a one-page appendix outlining the intended benefits to be granted to members. The 1991 Definitive Deed ran to 19 printed pages and the annexed Rules ran to 32 pages. It is reasonable to infer, in those circumstances, that some level of care and attention was paid to the drafting and approval of the terms of both the Deed and the Rules in the 8-month period that ran from the date of execution of the Interim Deed in March 1991 and the date of execution of the Definitive Deed in November 1991. I appreciate that the applicant's appointment as trustee coincided with the execution of the 1991 Definitive Deed but there was a trustee in place from the outset when the Interim Deed was first executed and it is reasonable to presume that the trustee performed its duties.
159. Furthermore, there was obviously some level of review of the Scheme documents undertaken in 2008 because a number of changes were made to the documents in that year. For example, in contrast to the Rules annexed to the 1991 Definitive Deed, the Rules annexed to the 2008 Deed contain an additional provision in Rule 5(5) dealing with temporary absences of a member from work where that is permitted under various statutory provisions (including the Maternity Protection Acts 1994 and 2004 and the Carer's Leave Act 2001).
160. It is also important to keep in mind that the employer's right to terminate its liability to contribute to the Scheme was signalled from the outset. As noted earlier, the right was identified in two places in the Interim Deed, first, in Clause 2(8) and, second, in Clause 3(2). Clause 2 was where the Interim Deed described the establishment of the Scheme and its basic elements while Clause 3 identified the key provisions that were to be incorporated in the definitive deed. Neither of those clauses made any provision for the giving of advance notice to the trustee. On the face of it, the terms of Clause 5(4) are consistent with the terms of the Interim Deed. There is accordingly no question that Clause 5(4) snuck into the 1991 Definitive Deed or, later, the 2008 Deed. It was flagged in express terms from the start. For that reason, Arden L.J.'s observation in the British Airways case that "it would be crying for the moon to expect the draftsman to have legislated exhaustively for every eventuality" [12] cannot be said to have any significant traction in this case. The employer's entitlement to terminate was always intended to be a term of this Scheme and the parties to the 1991 Definitive Deed were therefore on notice of it and of the need to spell out its terms in that Deed. In those circumstances, Bingham L.J.'s words of caution apply with particular force in this case. His words align closely with the observation of O'Higgins C.J. in Tradax (Ireland) Ltd. V. Irish Grain Board Ltd., quoted in para. 103 above, that the Court's power to imply a term must be exercised with caution and that the Court's role is not that of contract maker.
161. That said, if the applicant can show that, in order to give business efficacy to the 2008 Deed ,it is necessary (within the less absolute meaning of the that word as explained by Lord Neuberger in Marks & Spencer and by Collins J. in Betty Martin Financial Services), that reasonable notice must be given by the employer, then this element of the B.P. Refinery test would be satisfied. In support of this part of its case, the applicant is essentially making the argument that, without a requirement to give such notice, the employer can leave the Scheme "in the lurch" to borrow a phrase from Smith L.J. in the Capital Cranfield case. In making this argument, counsel for the applicant placed particular emphasis on the nature and extent of the benefits for members envisaged by Clause 33(4) of the Deed and on the extent of the steps (outlined in para. 149 above which she suggested would have to be taken in advance of making a contribution demand. She also strongly urged that the nature of the contractual arrangement here is critically important i.e. that this is not simply a commercial transaction between two parties in their respective selfish interests but is a Scheme put in place to provide pensions to employees and former employees of the employer which the employees have earned through their work for the employer.
162. I have considerable sympathy for the argument advanced on behalf of the applicant. If it is well founded, it would ensure that the trustee would, at least, be given the opportunity to press for payment, under Clause 5(1), of any additional sums that might be needed, over and above the fund currently held by the trustee, to fund the purchase of the annuities envisaged by the first and second sentences of Clause 33(4). That is clearly a desirable and meritorious outcome. However, can it truly be said that advance notice is necessary in order to give business efficacy to the 2008 Deed? I have already drawn attention to the fact that the first five of the six steps outlined in para. 149 above would have to be taken by the trustee on termination of the Scheme, in any event, whether or not the Scheme had sufficient funds to purchase annuities of the kind contemplated by the first and second sentences of Clause 33(4). As I have previously explained, the express terms of the 2008 Deed explicitly require those steps to be taken on termination of the Scheme. Accordingly, the fact that those steps have to be taken does not point to the need to imply a term requiring the employer to give advance notice in order to allow those steps to be taken.
163. Likewise, it seems to me that it cannot be said that, in order to give business efficacy to the 2008 Deed, it is necessary to imply a term this kind so that the trustee can pursue a claim under Clause 5(1) for payment of whatever funds might be needed in order to purchase annuities at the level contemplated by the first and second sentences of Clause 33(4). While I acknowledge that this would be an appealing and laudable outcome, I do not believe that it is an outcome that is open to the Court on the basis of the terms of the 2008 Deed. In my view, such an outcome could only be legitimately reached if it could be concluded that the promise made in the first and second sentences of Clause 33(4) is an unqualified one. In such circumstances, it might be possible to say that, in order to give effect to that promise, it would be necessary to imply a term into the 2008 Deed requiring the employer to give reasonable notice of the intention to cease contributions, so that the trustee could take the steps necessary to initiate and proceed with a claim for a final contribution under Clause 5(1). However, as I have sought to explain in para. 89 above, Clause 33(4) must be read in context and that, when read as a whole, the 2008 Deed envisages that the employer can terminate its liability to contribute to the Scheme even where there is likely to be insufficient funds available to buy insurance contracts or annuities of the kind envisaged in the first and second sentences of Clause 33(4). Thus, the Scheme constructed under the terms of the 2008 Deed does not require the unqualified outcome for which the applicant contends. It cannot therefore be said that it is necessary, in order to give the Scheme business efficacy, to imply a term of this kind. To insert such a term into the Scheme would involve creating a different contract to that which the parties first put in place in the 1991 Definitive Deed and which they repeated in the 2008 Deed. That is precisely what all of the authorities warn against. I am driven to the conclusion that, had the parties in 1991 or 2008 intended that the employer should be required to give advance notice of an intention to cease contributions, the Deed executed in both of those years would have said so. There were plenty of precedents available from other Schemes where such notice periods were expressly built into the relevant Scheme documents as evidenced by the clauses used in each of Holloway v. Damianus, Greene v. Coady and McClelland.
164. In reaching this conclusion, I have not had any regard to the correspondence between the parties on which the respondent has sought to rely. While the observations of Clarke J. in the Motor Insurers case carry considerable authority, I am conscious that he delivered a minority judgment in that case and, although the other members of the Supreme Court did not expressly disapprove of what he said on that issue, it is unclear whether his observations can be said to represent Irish law.
165. In reaching this conclusion, I have also borne in mind the concerns discussed in paras. 92 to 96 above but I am, again, of the view that the appropriate way to address the extreme scenario painted in para. 96 above would be through enforcement of the employer's duty of good faith. I do not believe that the remote possibility that such a scenario might eventuate justifies a conclusion that it is necessary to imply the term contended for in order to give business efficacy to the 2008 Deed.
166. In light of the conclusion which I have reached on the issues of obviousness and business efficacy, it is, strictly speaking, unnecessary to go further. Nonetheless, I will, for completeness, address the remaining two criteria. In so far as clear expression is concerned, I agree that, subject to putting a value on "[x]" in the example below, such a term would be capable of being clearly and simply expressed by inserting the words " [x] months" between the words "may at any time by" and "notice in writing to the Trustees" in the first line of Clause 5(1). There is, nonetheless, on the evidence before the Court (or, more properly, the lack of evidence) a major obstacle in seeking to do so. I have no evidence as to how long each of the individual steps outlined in para. 149(a) to (e) should take. It is therefore not possible on the evidence currently before the Court to reach a conclusion as to what period of notice would be reasonable in this case.
167. The final B. P. Refinery criterion is that the proposed implied term must not contradict any express term of the contract. Although I have found that, under the terms of the 2008 Deed, the Scheme is capable of being operated without the need to imply the proposed term, I would not go so far as to suggest that the proposed term is directly contradicted by the express terms of the 2008 Deed. In this context, there are many pension schemes in existence which can be operated successfully and which contain such a term. Thus, if all of the other criteria were satisfied in this case, it might be possible to satisfy this criterion. However, that is an entirely hypothetical issue in light of my conclusions above.
168. For all of the reasons discussed above, I am of the view that the proposed implied term does not satisfy the B. P. Refinery test approved in Flynn v. Breccia. It follows that this alternative basis for the applicant's case must be rejected.
169. The questions posed in the application before the Court have previously been set out in para. 4 above. In light of the conclusions reached in paras. 98 and 168 above, I am of opinion that the respondent is not obliged to provide reasonable notice to the applicant prior to terminating its liability to pay contributions to the Fund pursuant to Clause 5(4) of the 2008 Deed. In the circumstances, the subsidiary questions identified in para. 4(b) do not arise.
170. I am conscious that this conclusion is capable of having potentially significant consequences for other pension schemes on similar terms particularly for schemes that have been inadequately funded. One simple solution would be for the Oireachtas to enact a similar provision to s. 75 of the Pensions Act 1995 (U.K.) (as amended) deeming any deficiency in funding the purchase of buy-out annuities on a winding up of a defined benefit pension scheme to be a debt due by the relevant employer. That is, of course, entirely a matter for the Oireachtas which will be in a much better position than I am to assess whether such an intervention would be necessary or appropriate.
171. It seems to me that the only order that requires to be made is one in the terms outlined in para. 169 above. As I understand it, the parties have reached agreement on the issue of costs as between them, such that it is unnecessary for me to address that issue. Lest either or both of the parties wish to make any further submissions in relation to the order to be made, I will direct that the order on foot of this judgment should not be perfected for a period of 14 days from today. If either or both parties wish to address the Court on the form of the order, they should notify the Commercial Court Registrar by email to that effect within that 14-day period.
[1] The questions are set out in para. 4 below.
[2] It should be noted that the trustee does not go so far as to allege that something has gone wrong with the words of the scheme documents such that the Court is required to give them a corrective interpretation in accordance with the principles discussed in Chartbrook Ltd. v. Persimmon Homes Ltd. [2009] 1 AC 1101 and Moorview Developments Ltd. v. First Active plc [2010] IEHC 275
[3] I deal below with whether immediate notice is permitted under Clause 5(4).
[4] The full terms of the contribution clause is set out in para. 69 above.
[5] See para. 36 above.
[6] See para. 79 above.
[7] i.e. without invoking the usual principles that apply where a party seeks an order to rectify the terms of a written contract in order to correct a mistake.
[8] At the time this submission was made, the applicant had not addressed the issue as to what period of notice should be implied into the 2008 Deed. Because that issue had not been addressed in the course of the hearing, I directed the parties to deliver further written submissions on the issue which were then provided to the Court subsequent to the hearing.
[9] As outlined in paras. 101 to 102 above, this is not the test that applies in every case where it is sought to imply a terms into a contract. There is a further category of case derived from the nature of the contract itself i.e. the second of the two categories identified by Murphy J. in Sweeney v. Duggan.
[10] To paraphrase Lord Simon at para. (2) of his test.
[11] The actuarial experts advising the respondent.
[12] See para. 38 above for the full quotation.