United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR B McCLUGGAGE (Of Counsel) Instructed by: Messrs Specter & Grant Solicitors Ground Floor, Rosebrae Court Woodwise Ferry Approach Birkenhead Merseyside CH41 6DU
For the Respondent	MR RICHARD BRADLEY (Of Counsel) Instructed by: Messrs Ian Gallaway & Company Solicitors 33 Hoghton Street Southport Merseyside PR9 ONS


 


JUDGE PETER CLARK

1. The Applicant, Richard Forshaw, joined the family farm business, the Respondent M A Forshaw Ltd, at the age of 16 in September 1979. Following termination of his employment with the Respondent he presented a complaint of unfair dismissal to the Liverpool Employment Tribunal. The claim was resisted, the Respondent contending that he was not dismissed. The issue of liability came on before the Employment Tribunal chaired by Mr E T Connolly on 29 September 2002. Following deliberations in Chambers that Employment Tribunal promulgated its reserved liability decision on 3 January 2003. The Employment Tribunal found that the Applicant had been dismissed on 16 January 2002 and dismissed unfairly. The question of remedy was adjourned to a hearing fixed for 14 February.
2. Following that remedies hearing the Employment Tribunal promulgated their remedies decision with extended reasons on 10 April 2003. They awarded the Applicant compensation for unfair dismissal totalling £28,291 including the basic award. The main findings by the Employment Tribunal on remedy were these:

(1) Had the Applicant not been dismissed in January 2002 he would have remained in the Respondent's employment, notwithstanding various redundancies made by the Respondent during 2002.

(2) Prior to dismissal the Applicant had embarked on an electrician's course at a local Technical College, expected to last for 3 years. The Respondent had paid the first annual fee for the course of £350.

(3) On 7 May 2002 he had obtained part-time employment with a local electrical contractor.

(4) He would continue to suffer a partial loss of earnings until he became a fully qualified electrician on 30 May 2004. He would then achieve his previous level of earnings with the Respondent.

(5) Apart from his lost earnings up to the end of May 2004 he was entitled to sums in respect of life insurance, paid by the Respondent; his College fees up to May 2004; loss of free fruit and vegetables to that date and a conventional award for loss of statutory employment rights.

(6) He had suffered no loss of pension rights. The Employment Tribunal dealt with that claimed head of loss at paragraph 4(x) of their remedies reasons in this way:

"(x) Having considered the evidence given with regard to the Pension Scheme of which he was a member, at the time of his dismissal we found there was no legal obligation upon the respondents to make contributions to this Pension Scheme in respect of the applicant and no contributions had been made in respect of the applicant by the respondents for some considerable time prior to his dismissal. The benefits which he has obtained in the Scheme at the date of his dismissal will remain in the Scheme until such time as he draws a pension under the Scheme. The Scheme is not an Occupational Pension Scheme as that expression is normally used, and in the circumstances we made no award for the loss of pension rights."

3. It is against that last finding, no pension loss, that the Applicant brings this appeal.
4. The evidence before the Employment Tribunal, on which that finding was made, came from the oral evidence of the Applicant and for the Respondents, the evidence of their managing director John Forshaw and from an actuarial report prepared by Michael J Field, Consulting Actuaries and presented to Mr P J Shutt, a director of the Respondent, on 23 February 2001. That report stated the position as at 31 March 2000.
5. The relevant scheme was a small self-administered pension scheme (SSAS) according to Inland Revenue classification. It was registered with the Occupational Pensions Regulatory Authority.
6. The report details the main features of the scheme, including a pension for members from age 60 of an estimated 66.6% of final remuneration. Pensions in payment increasing in line with RPI increases. All contributions paid by the employer. Benefits are calculated on a money purchase basis.
7. Pausing there, it follows that this was not a true final-salary scheme, where benefits were directly linked to years of service and final salary; the target was ? of salary on retirement at age 60, but in fact each employed member ( as opposed to retired members) had his then benefit valued as at 31 March 2000. There were 4 retired members on pension and 3 serving members, the Applicant, John Forshaw and M Forshaw. As at 31 March 2000 the Applicant's then capital value of benefits was calculated at £208,400; his capital value of assets at £55,700. In order to finance the shortfall of £152,700 a maximum annual contribution of £9,500 was said by the actuaries to be acceptable to the PSO (Pension Schemes Office of the Inland Revenue).
8. In fact, no contributions were made by the Respondent to the scheme after 1 April 2000 and prior to the Employment Tribunal remedies hearing in February 2003, save for a sum of £1,000 to establish a new joiner, Matthew Shutt, in the scheme. There was no obligation on the Respondent to make contributions.
9. As the Employment Tribunal found the Applicant's benefits remain under the scheme until such time as he draws a pension under the Scheme. There is no finding as to provisions for transferring the fund to a new pension provider.
10. In this appeal Mr McCluggage raises 4 grounds; it is convenient to deal first with the last of those grounds, the adequacy of the Employment Tribunal's reasoning on the claim for loss of pension rights. We have earlier set out that reasoning contained in paragraph 4(x) of the Extended Reasons.
11. As to those reasons, first, it is common ground between Counsel, we think correctly, that this SSAS was an Occupational Pension Scheme. Thus the Employment Tribunal's observation that the Scheme is not an Occupational Pension Scheme as that expression is normally used is either wrong, or at best unclear. We accept, of course, as earlier observed, that this was not a final salary scheme properly so called, that is a scheme with defined benefits. If that is all that the Employment Tribunal intended to convey it would have been helpful had they said so.
12. Secondly, it is clear to us that the Employment Tribunal approached this head of loss simply on the basis that no relevant contributions had been made to the Scheme since 1 April 2000; the remedies hearing was held on 14 February 2003; the Employment Tribunal took as the 'cut off date' for all heads of loss 30 May 2004; we infer, as Mr Bradley asks us to do, that the Employment Tribunal found on the balance of probabilities that no further relevant contributions will be made into the scheme between 13 February 2003 and 30 May 2004, accordingly the Employment Tribunal found that the Applicant had suffered no pension loss.
13. However, that approach overlooks, in our judgment, a submission made by Mr McCluggage on behalf of the Applicant below, that the Applicant had lost notional contributions to the scheme on his behalf. That submission is simply not dealt with at all in the Employment Tribunal's reasons.
14. We accept that the concept of notional contributions arises normally in the context of properly described final-salary schemes. See for example the comment by the editors of Harvey on Industrial Relations and Employment Law Volume 5 Paragraphs T 2610-2620 and the approach of Morison P to the question of pension lost in the final-salary scheme of D'Souza v London Borough of Lambeth [1997] IRLR 677, albeit that decision was later overturned on appeal on a different point, see [1999] IRLR 240.
15. In our judgment the notional contributions argument did arise for consideration in this case, which is something of a hybrid. Although the scheme did not provide for defined benefits on leaving it did provide for a target pension of ? final-salary at age 60. The Employment Tribunal ought to have considered and ruled on the argument, providing reasons for its conclusion.
16. On this ground we have concluded that the decision cannot stand. The appeal is allowed and the case will be remitted to a fresh Employment Tribunal for consideration of the pension loss claim only. At that remitted hearing it will be open to the parties to advance all relevant arguments and evidence on the pension loss issue. In particular, what sort of pension scheme if any the Applicant could be expected to join in his new employment as an electrician following completion of his college course. As we read this Employment Tribunal's decision and reasons on remedy the Employment Tribunal found that as at 30 May 2004 the Applicant's wages would equate with those received from the Respondent (including the small benefit of free farm produce and life insurance); no finding is made as to any equivalent probable pension provision.