DuCasse (Jean) and Others v National Commercial Bank Jamaica Ltd and Others

• Jurisdiction: Jamaica
• Judge: BROOKS, J.
• Judgment Date: 26 October 2008
• Judgment citation (vLex): [2008] 6 JJC 2001
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. C.L. D-108 OF 1999
• Date: 26 October 2008

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

CLAIM NO. C.L. D-108 OF 1999

BETWEEN

JEAN DuCASSE

PRINCE MOSIAH MYERS

ALLAN ANTHONY GEORGE HOLMES (Suing on behalf of themselves and members of the National Commercial Bank Staff Association)

CLAIMANTS

AND

NATIONAL COMMERCIAL BANK JAMAICA LIMITED

1 ^ST DEFENDANT

AND

PROFESSOR TERRENCE EVERTON ST. GEORGE FORRESTER

2 ^ND DEFENDANT

AND

MARIE THERESA AUGUSTA PAYNE

3 ^RD DEFENDANT

AND

THE HONOURABLE OLIVER FREDRICK CLARKE

4 ^TH DEFENDANT

AND

SHEILA MAY GREEN

5 ^TH DEFENDANT

AND

THERENCE ANTHONY BUCKLEY

6 ^TH DEFENDANT

AND

PAULINE ELIZABETH BONNICK

7 ^TH DEFENDANT

AND

NATIONAL COMMERCIAL BANK JAMAICA LIMITED (Transferee of the assets and liabilities of the National Commercial Bank Trust and Merchant Bank Ltd.)

8th DEFENDANT

Pension - Occupational Pension Scheme - Employer substituting one pension scheme for others - Whether substitution in breach of trust deeds establishing the originals - Whether terms of new scheme a breach of members' contracts of employment - Whether loss caused to members of the original scheme - Whether approval by the trustees of the substitution constituted negligence

PENSION SCHEMES - Substitution of scheme - Whether substitution in breach of trust deeds establishing the originals - Whether terms of new scheme a breach of members contract of employment - Whether loss caused to members of the original scheme - Whether approval of the substitution by the trustees constituted negligence

BROOKS, J

1 In 1999, National Commercial Bank Jamaica Limited (NCB), as part of its corporate re-organization, sought to reduce its financial contribution to the pension schemes established for its employees. In pursuance of this aim, it merged four pension schemes then existing and closed the single merged scheme to new entrants. These steps became effective September 30, 1999. NCB also established, effective October 1, 1999, a single new scheme for the benefit of all its then employees and those employees to join NCB in the future. The 2 ^nd to 8 ^th Defendants ("the trustees") are trustees of one or other of the original pension schemes. They agreed to the steps taken by NCB.

2 The abovementioned steps have been condemned by some of the employees who were members of the previous schemes. Those employees are all the members of NCB's Staff Association. Ms. Jean DuCasse, Mr. Prince Myers and Mr. Allan Holmes ("the claimants") have brought this claim on behalf of themselves and those employees, to have the steps declared to be in breach of their respective contracts of employment with the bank.

3 The claimants complain that the merger and new scheme are to their detriment in a number of ways; firstly, the actions require some employees to make financial contributions to the new scheme, whilst their old scheme had no such requirement, secondly, the new scheme seeks to restrict the bank's financial contribution, whereas there was no such restriction in any of the previous schemes, and thirdly, the new scheme shifts the investment risk to the employees (a "defined contributions" scheme), whereas it previously rested with the bank (a "defined benefits" scheme). The cumulative result, they say, will be a reduction in the benefit that the employees will each obtain at the time of their respective retirement.

4 The claimants have also criticized the trustees for having agreed to NCB's actions. This agreement to terms which are detrimental to the beneficiaries of the trust, the claimants say, amounts to the respective trustees having acted in breach of the fiduciary duty imposed upon them by the trust deed, which established each of the previous pension schemes.

5 For its part, NCB argues that although the pension rights of its employees are derived from their respective contracts of employment, it is the rules of the pension scheme which determine what those rights are. In the case of the original pension schemes, says NCB, the terms of the respective trust deeds creating them were subject to change and that the changes it made were done in accordance with the terms of each trust deed. Insofar as those employees, who are now required to contribute to their pensions, whereas they previously did not, are concerned, NCB says that the accrued rights of those employees have been protected up to the date of the merger. NCB maintains, however, that those employees had no legal entitlement to have that arrangement maintained throughout the duration of their contract of employment.

6 The trustees, for their part, have also pointed to the trust deeds and have said that they were obliged to accept NCB's decision to amend each deed, to merge the previous schemes and to stop contributing to them. According to the trustees, they (the trustees) also took professional advice on the matter in advance of the merger and brought their concerns to NCB's attention. Nothing which has been done, say the trustees, exposes them to any liability to the beneficiaries of the pension schemes, or to any of them.

7 The issues to be determined are:

• 1. Whether the merger and the new scheme are in breach of the respective contracts of employment; or,

• 2. Whether they are in breach of the respective trust deeds, or any of them;

• 3. Even if there has been no breach, whether NCB has acted in good faith; and,

• 4. Whether the trustees were in breach of their fiduciary duty as imposed by the trusts.

8 The first two questions may be conveniently considered together.

9 In assessing the questions it will be necessary to examine the relevant terms of the respective contracts of employment and those of each of the trust deeds. It will be against that background that the steps taken by NCB and the trustees will be examined to determine their validity. It should perhaps be noted that these steps were taken by NCB before the enactment of the Pensions (Superannuation Funds and Retirement Schemes) Act. The provisions of that Act, do not, therefore, apply here.

10 Whether the merger and the new scheme are in breach of the respective contracts of employment or in breach of the respective trust deeds, or any of them

11 The Contracts of Employment

12 The four previous schemes are identified respectively, as (a) "the 1975 scheme", (b) "the MSB scheme", (c) "the CSP scheme" and (d) "the 1986 scheme". These were referred to in the respective contracts of employment which were put in evidence. I shall, in due course, identify the scheme to which each contract makes reference. In each case the term, "the Official", refers to the employee.

13 I shall first examine the relevant portions of the respective employment contracts which address the matter of pensions and variation.

14 A. 1980 Contract (referring to the 1975 scheme):

"6. Pension

The Official hereby agrees that if appointed to the pensionable staff of the Bank, he will become a member of the Bank's Pension Scheme."

"8. Variation

In the event of the Bank at any time desiring to vary the terms of this agreement or the rules and regulations of the Bank from time to time affecting the Bank's staff, the Bank shall give not less than one month's written notice of such variation to the Official, either by a notice to the staff generally or some section thereof or to the Official in particular. The terms of this agreement or the said rules and regulations, as the case may be, shall be varied as from the date specified in such notice and the acceptance of salary by the Official payable next after such date shall be deemed to be an acceptance of such variation by the Official."

15 B. Clerical Contract (referring, presumably, to the 1986 scheme)

"6. Pension

The Official hereby agrees that if appointed to the pensionable staff of the Bank, he will become a member of the Bank's Pension Scheme then in force."

16 There is also a section dealing with variation, which is identical to that in the 1980 contract, quoted above.

17 C. MSB Contract (referring to the MSB scheme)

18 Although the Claimant, Mr. Holmes was first employed to Mutual Security Bank Limited (MSB), his contract with MSB was terminated upon the merger of MSB and NCB and he entered into a new contract with NCB. The relevant portion of his letter of appointment, which is dated July 8, 1996, is outlined below. "

"6. Pension

You will remain a member of the MSB Pension Fund, and you will continue to contribute at the compulsory rate of 6% of your annual salary."

19 D. CSP Contract (referring to the CSP scheme)

20 From a letter of appointment, dated November 7, 1996 and addressed to a Mr. Alden McGibbon, (another employee), it is concluded that the former Computer Service and Programming Ltd. (CSP) employees were similarly required to contribute at the rate of 6% of their annual salary. The relevant portion of his letter of appointment is quoted below.

"6. Pension

You will remain a member of the CSP Pension Fund, and you will continue to contribute at the compulsory rate of 6% of your annual salary."

21 Neither of these letters of appointment mentions the possibility of variation of the terms of the contract of employment.

22 It will have been observed that each of the four contracts require the employee to become a member of the company's pension scheme.

23 Counsel for the claimants submit that pension benefits are a part of the consideration which employees receive in return for rendering their services. Those benefits, they say, are defined by the Trust Deed and the Rules of the particular pension scheme. Counsel go on to say, at paragraph 28 of their closing submissions that, "...any changes which would affect that status quo must be looked at against the background of the contract of employment with all its expressed and implied terms".

24 This submission is graphically demonstrated in the case of the members of the 1975 pension scheme. The claimants assert that it is...