Coley (Gerald), Franklyn Brown (on behalf of themselves and Others) v Maria Teresa Perea, Roberto Tellechea, Gerald Gomez (hereinafter called the Trustees), Gillette Caribbean Ltd Vivion Scully and Morven Richardson
| Jurisdiction | Jamaica |
| Judge | HARRISON, P. , K. HARRISON, J.A :, MARSH, J.A : |
| Judgment Date | 19 October 2007 |
| Neutral Citation | JM 2007 CA 53 |
| Judgment citation (vLex) | [2007] 10 JJC 1903 |
| Date | 19 October 2007 |
| Court | Court of Appeal (Jamaica) |
PENSION FUNDS - Surplus - Entitlement of past members to share
This is an appeal from the judgment of Brooks, J on 30 th December, 2004, in which he gave his interpretation of rule 12 of the Pension Plan for the employees of Gillette Caribbean Ltd. ("Gillette"). The learned trial judge held:
"1. There is no inconsistency between rule 12(b) and rule 12(c) of the Gillette Pension Fund Trust Deed.
2. The allocation of funds existing at the date of the discontinuance, 31 st December, 2000, of the Pension Plan is to be among:
i. All the employees of Gillette at that date, and
ii. All the former employees who were in receipt of, or entitled to receive benefits or payments from the Pension Plan based on contributions made by each of them. This does not include former employees who had elected to receive, and have received prior to 31 st December, 2000, a cash return under rule 6(b) of Gillette Pension Fund Rules.
3. All accretions of the fund since the 31 st December, 2000 are to be allocated in accordance with rule 12 (c).
4. The costs of all parties are to be met out of the Pension Fund before it is dealt with in accordance with the declarations above."
I have read the draft judgment of K. Harrison, J.A., I agree with his reasoning and conclusion. These however, are my comments.
A superannuation fund was established for the employees of Gillette and the Jamaica Razor Blade Co. Ltd. by means of a trust deed dated 1 st May 1976. The Rules for the Pension Plan ("the rules") were formulated and were in force. Both the trust deed and the rules together provide for: the eligibility of employees to be members of the pension plan, their retirement, termination of benefits, administration of and discontinuance of the plan.
In 1996, Gillette ceased its operations in Jamaica retaining two employees only, Vivion Scully and Mervin Richardson, the 1 st interveners/respondents. The other employees, including the second interveners/appellants, received "cash return[s] of contribution ...with interest" pursuant to rule 6(b) of the Pension Plan Rules.
The scheme was effectively discontinued, that is, it ceased "to be a continuing one", on 31 st December, 2000. This was then the last period for which the monthly contributions from the wages of the member Vivion Scully was sent to the administrator of the Trust, Life of Jamaica, on the 4 th January, 2001. The trustees did however, by letter dated 4 th January, 2001 notify Life of Jamaica in the following terms:
"...effective March 4 th Gillette will not continue making contributions to the pension plan described before, therefore the plan will be terminated. This notification is conducted in order to comply with the 60 days notification period required by law...".
The trust deed in its recital revealed the purpose of the fund, being,
"... securing pensions on retirement for their present and future employees as shall be eligible to participate in same (hereinafter referred to as the "Members") and other benefits for such Members and after their death for their widows and/or designated beneficiaries."
The deed provided further that the employer shall deduct monthly from the wages of the employee a designated sum, and contribute from its own monies a "further sum." Both sums would be payable to trustees under the trust. The trustees would in turn pay them over to the company managing the trust, namely, Life of Jamaica.
The trust deed included a Royal Lives clause, and further provided in paragraph 7:
"Upon determination of the said Trust the affairs thereof shall be wound up and subject to the payment of all costs, charges and expenses which may then be owing and to provision as the fund will admit being made for the payment of any benefits which are then payable the balance of the Fund, if any, shall be disbursed in accordance with the Rules."
The rule relevant to the determination of the trust is rule 12 of the Pension Plan which reads:
"12. CHANGE OR DISCONTINUANCE OF THE PLAN
(a) The Employer hopes and expects to continue the Plan indefinitely but reserves the right to change, modify or discontinue the Plan at any time. Any change, or modification in the Plan shall not affect the amount of pension benefits being paid to the retired Members and shall not result in a dimunition or reduction of benefits already earned by Members up to the date of change.
(b) If the Plan is discontinued, no further contributions shall be required. No part of the assets of the Plan shall revert to the Employer until the Plan has made full provision for the payment of pension benefits, other benefits and rights of refund in respect of the service of the Members up to the date of discontinuance.
(c) In respect of the benefits accrued and funds accumulated, the total of such funds existing at the date of discontinuance of the Plan under the funding contract issued by the Company to the Employer, shall be allocated by the Company, subject to the approval of the Employer, among the then Members of the Plan in the following manner, in order, to the extent of the sufficiency of such assets:
(i) First, in the event of the Members having contributed to the Plan, there shall be an allocation to each member of an amount equal to 100% of his own contributions with Credited Interest thereon to the beginning of the month in which the Plan is terminated.
(ii) Second, there shall be an allocation to each Member who has qualified for normal or later retirement, but has not yet retired, for the amount required to purchase in full the pension benefit payable to him under the Plan on the assumption that his retirement occurs on the date of termination of the Plan.
(iii) Third, there shall be an allocation to each Member who has become eligible for early retirement but has not yet retired, of the amount required to purchase in full the pension benefit payable to him in accordance with the Plan on the assumption that his retirement occurs on the date of termination of the Plan.
(iv) Fourth, there shall be an allocation to each Member, other than those Members defined in paragraphs(ii) and (iii) above, of an amount equal to the actuarial value of the then accrued pension benefit payable at normal retirement date in respect or service after the commencement of the Plan.
Each allocation to a Member in accordance with paragraphs (ii), (iii) and (iv) shall make allowance for any amount allocated to such Member in accordance with paragraph, (i) above.
If the balance of the Fund is insufficient to provide a full allocation for all persons within any of the classes defined in paragraphs (i), (ii), (iii) and (iv) above, the allocation to each person within the class shall be reduced in the same proportion.
If the amount in the Fund is more than sufficient to provide a full allocation for all persons within any of the classes defined in paragraphs (i), (ii) (iii) and (iv) above, the allocation to each person within the class shall be increased in the same proportion."
It is the interpretation of this rule which the trustees sought before Brooks J, in order to determine the distribution of the assets remaining in the trust fund, namely, $42,000,000.00, after the discontinuance of the fund.
The true nature and purpose of an occupational pension scheme in which both the employees and the employer contribute in creating a fund, is essentially for the benefit of the employees. The employer recognizes that the payment of a pension to the employee at his retirement, is a reward for his services. In Hoover Ltd v. Hetherington et al [2002] All E.R. (D) 418, Pumfrey J, in paragraph 21 said:
"...a pension represents deferred remuneration of the employee."
The rules of the pension scheme contained in the relevant documents, must be construed in a manner reflective of the purpose of the scheme. In Mettoy Pension Trustees Limited v Evans and Others [1991] 2 All ER 513, relied on by Lord Gifford for the appellants, Warner J at page 537D accepted that:
"... the court's approach to the construction of documents relating to a pension scheme should be practical and purposive, rather than detached and literal."
Continuing, he said, at page 537:
"...although there are no special rules governing the construction of pension scheme documents, the background facts or surrounding circumstances in the light of which those documents have to be construed - 'their matrix of fact' (to use the modern phrase coined by Lord Wilberforce) include four special factors. The first is that, as the Court of Appeal pointed out in two unreported cases, namely Kerr v British Leyland (Staff) Trustees Ltd. [1986] CA Transcript 286 and Mihlenstedt v Barclays Bank International Ltd . [1989] 1RLR 522, the beneficiaries under a pension scheme such as this are not volunteers. Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their...
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