Court Of Appeal Overturns High Court Decision In Britvic On Pension Increase Provision

• Published date: 15 June 2021
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Trials & Appeals & Compensation
• Law Firm: Gowling WLG
• Author: Mr Ian Gordon, Charlotte Scholes and Richard Meers

In January 2020, His Honour Judge Hodge QC ("HHJ Hodge") was asked to construe the pension increase rule in the Britvic Pension Plan (the "Plan"), which gave Britvic plc ("Britvic") a power to choose "any other rate" than the default rate under the Plan's rules.

The Judge construed the words "any other rate" as meaning "any higher rate", the effect of which was that Britvic could only choose a rate of increase that was higher than the default rate.

Britvic appealed HHJ Hodge's judgment and on 10 June 2021, the Court of Appeal overturned the decision at first instance.

The decision, another in a line of cases in which the courts have had to construe a pension increase rule, throws light on how the courts will approach "corrective construction" cases where it is argued that something had clearly gone wrong with the drafting.

Gowling WLG (UK) LLP acted for the Trustee of the Plan, Britvic Pensions Limited, (the "Trustee"), which took a neutral position on the issue of construction. Our Pensions team provides more detail on the decision below.

BRITVIC PLC v (1) BRITVIC PENSIONS LIMITED (2) SIMON MOHUN [2021] EWCA CIV 867

Background to the issue

The Plan's rules contain a pension increase provision that on its face gives Britvic the power to decide the rate of increase to be applied to pensions in payment under the Plan.

The provision was first set out in Trust Deed and Rules dated 31 January 2003 that established the Plan (the "2003 Rules"), Rule C.10, which contains the following wording:

"(2) The part of a pension which exceeds any guaranteed minimum pension in payment is increased on 1 October in each year. The rate of increase is the percentage increase in the retail prices index during the year ending the previous 31 May but subject to a maximum of 5 per cent. [in relation to Pensionable Employment up to and including 30 June 2008 and a maximum of 2.5 per cent. in relation to Pensionable Employment on and from 1 July 2008] (or any other rate decided by the Principal Employer)." (emphasis added).

The Plan's rules were consolidated in 2007 (the "2007 Rules") and Rule C.10 remained as set out above. The words in square brackets were added by a deed dated 30 June 2008 (the "2008 Deed"). Increases in the revaluation of deferred pensions was addressed by Rule C2(2), which cross-refers to Rule C.10.

HHJ Hodge was asked to construe Rule C.10(2) in the 2003 Rules (and 2007 Rules) as amended by the 2008 Deed and, in particular, the meaning of the words we have...