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Case No:CCRTI 1999/1295 B1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE SIMMONS
(Watford County Court).
Royal Courts of Justice
Strand, London, WC2A 2LL
Wednesday 19 April 2000
B e f o r e :
LORD JUSTICE PETER GIBSON
LORD JUSTICE CHADWICK
and
LORD JUSTICE TUCKEY
|
OUTRAM
|
Appellant
|
|
-
and -
|
|
|
ACADEMY
PLASTICS
|
Respondent
|
__________________________________
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
__________________________________
RAJEEV THACKER Esq (instructed by Simmons Solicitors for the
Appellant)
FENNER MOERAN Esq (instructed by Hodders Solicitors for the
Respondent)
__________________________________
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE TUCKEY:
Introduction.
1. Does an employer who is also the trustee of the employer's pension scheme
owe an employee a duty of care in tort to give advice in respect of his
membership of that scheme ?
2. This question arises on appeal from a judgment of Judge Simmons given on 19
October 1999 in the Watford County Court who decided on an application to
strike out the claim that there was no such duty.
3. On this appeal the Claimant contends that the Judge was wrong and should
not in any event have decided the point summarily.
The Facts.
4. The Claimant is the widow and personal representative of David Outram (the
Deceased). The Deceased was employed by the Respondents (the Company) in about
1974 and became a member of their pension scheme (the Scheme). The Company is
trustee and administrator of the Scheme. On 1 March 1994 the Deceased
resigned. This meant that he ceased to be a member of the Scheme. However, he
was re-employed from 27 April to 6 December 1995 when he resigned due to ill
health. He could have rejoined the Scheme when he was re-employed with the
consent of the Company, but did not apply to do so. He died aged 36 on 13
February 1996.
5. The rules of the Scheme run to 33 pages and are complicated but they do not
need to be considered in detail for the purpose of this appeal. On his
resignation from the Scheme in March 1994 the Deceased became entitled to a
deferred pension. As he died before the date on which this pension was due to
start, his estate was only entitled to the return of contributions. They have
been repaid.
6. The allegation is that the Company should have advised the Deceased to
rejoin the Scheme when he was re-employed in April 1995. If he had rejoined he
could have opted for an immediate pension when he resigned at the end of that
year because he resigned on account of incapacity. If he had done so, on his
death his estate would have been entitled to a cash sum to be applied for the
purchase of an annuity for his dependants.
7. In the Particulars of Claim considered by the Judge the Claimant alleged
undue influence. This claim is no longer pursued.
8. We have considered the matter on the basis of a third version of a proposed
amended Particulars of Claim. The alleged duty of care upon which the claim is
based is now pleaded as follows :
10. The Deceased and the Defendant were in a fiduciary relationship by virtue
of the Deceased's membership of the Scheme.
11. By reason of this fiduciary relationship between the Deceased and the
Defendant and/or all the matters set out below the Defendant owed the Deceased
a duty of care to provide him with such information and advice as was
reasonable in all the circumstances to enable him to make an informed choice
about his membership of the Scheme.
Particulars
a) The Deceased was employed with the Defendant for all of his working life
and as such trusted the Defendant implicitly;
b) The Deceased had known Terry Caswell, a director of the Company, for
approximately twenty two years;
c) The Deceased had a close relationship with Mr. Caswell and placed trust and
confidence in him.
12. In breach of this duty and/or negligently, the Defendant, when it knew or
should have known, by its employees or agents, that the Defendant was entitled
to make an application to rejoin the Scheme, failed to advise him
accordingly.
9. The pleading then goes on to make other allegations about what happened
when the Deceased resigned in December 1995. But, as I understand it, these
allegations only relate to causation. The pleading contains no free-standing
allegation of negligent misrepresentation and, more importantly, no allegation
of breach of contract. Nor does it allege that the Deceased was unaware of the
terms of the Scheme or ever asked the Company for advice about his pension.
The Judge's Decision.
10. The Judge accepted the submissions of counsel for the Company that there
was no general duty upon an employer to provide information and/or advice to an
employee in order to prevent economic loss or any such duty on trustees of a
pension scheme. His conclusion that the claim should be struck out was
supported, he held, by Scally -v- S.H.S.S Board [1992] 1 AC 294 and a
number of first instance cases involving the Pensions Ombudsman.
11. The application to strike out was made under the pre - CPR Rules. The
Judge dealt with it as an application under CPR Part 3.4 that the claim
disclosed no reasonable cause of action. He rejected the submission that he
should not deal with it summarily in this way. Relying on a passage from the
judgment of Lord Bingham M.R. in E -v- Dorset CC [1995] 2 AC 633 at page
693 he concluded that the claim was bound to fail no matter what (within the
reasonable grounds of the pleading) the actual facts were. As the case did not
involve the duties of a public authority he did not think that the ECHR had any
impact.
Submissions.
12. Mr. Thacker on behalf of the Claimant contends that the Judge was not bound
by authority to reach the conclusion he did. Applying the threefold test of
foreseeability, proximity and fair, just and reasonable, it was arguable that
the Company owed the Deceased a duty of care. It was plainly foreseeable that
he or his dependants would suffer loss if proper advice about the scheme was
not given. There was sufficient proximity arising out of the relationship of
employer and employee, trustee and beneficiary and the close relationship with
Mr. Caswell. Although there were no cases in which such a duty had been
imposed, it was fair, just and reasonable to do so within properly defined
limits so as to ensure that employers would give advice in certain
circumstances or, at the very least, tell their employees that they should
obtain such advice elsewhere.
13. In any event Mr. Thacker submits that this was not a plain and obvious case
and so it should not have been struck out. The law is in a state of
development and the outcome of this case is fact sensitive. It raises the
question as to whether it is fair, just and reasonable to impose the duty
contended for. Osman -v- UK [1999] FLR 193 indicates that such a
question should not be decided on an application to strike out.
The Law.
14. In Scally the House held that junior doctors' contracts of
employment contained an implied term that they would be informed of changes to
their statutory superannuation scheme which they could not be expected to be
aware of. The claim against the employers had also been framed in tort. Lord
Bridge, with whom the others agreed, said at page 303 :
"If a duty of the kind in question was not inherent in the contractual
relationship I do not see how it could possibly be derived from the tort of
negligence."
15. This statement was cited with approval by Lord Woolf in Spring -v-
Guardian Assurance PLC [1995] 2AC 296. In that case the House held that an
employer who gave a reference for a former employee owed that employee a duty
to take reasonable care in its preparation and would be liable in negligence if
he failed to do so. But they also held that a term to similar effect would be
implied into the employee's contract of employment. In dealing with the
contractual claim Lord Woolf said at page 353 that he had obtained "singular
assistance" from Lord Bridge's judgment in Scally. Earlier in his
judgment he referred to the fact that in the employment field there had always
been a considerable overlap between claims based upon breach of duty in
contract and in tort.
16. In Spring the House had to consider whether there was a duty of care
in tort because there was considerable doubt about the precise relationship
between the Plaintiff and the four Defendants whom he sued. But there is
nothing in Spring to suggest that in a case where there is no such
complication the court will need to look beyond the terms of the contract of
employment, express or implied, in order to determine whether a duty of the
kind alleged in this case exists. As Lord Bridge said if it is not inherent in
the contractual relationship, it is not possible to see how it could be derived
from the tort of negligence.
17. The latest of the cases involving the Pensions Ombudsman, University
of Nottingham -v- Eyett [1999] PLR 17, is instructive. In that case
the Ombudsman held that the University as employers had a contractual duty to
alert the complainant to the fact that if he elected to retire a month later he
would be entitled to an enhanced pension. The employers appealed. Counsel for
the Ombudsman attempted to support his decision on the basis that the
contractual duty stemmed from the employer's implied obligation duty of trust
and confidence. Hart J. decided that there was no such duty. He said that the
furthest the courts had gone in the specific area of giving advice to employees
in connection with their pension rights was in Scally itself which
provided no support for the complainant's case. Scally is not relied on
by and does not support the claimant in our case either.
18. The cases I have so far considered have concerned the employer's duties as
employer. Other cases show clearly I think that, in their capacity as trustee
of a settlement, employers owe no duty of the kind alleged. Thus in
Hawkesley -v- May [1956] 1 QB 304 it was held that a trustee had no duty
to give the plaintiff beneficiary advice about his rights under the trust.
This decision was followed by Collins J. in Hamar -v- The Pensions
Ombudsman [1996] PLR 1 who held that it was not the duty of the trustees of
a pension fund to point a beneficiary in the right direction or to tell him of
his errors. A similar conclusion was reached by Lightman J. in NHS Pension
Agency -v- Beechinor and The Pensions Ombudsman [1997] PLR 99 where the
Ombudsman had criticised trustees of a pension fund for failing to warn the
complainant of the risks of joining a new scheme. In allowing the appeal
Lightman J. said that the Ombudsman's decision depended upon whether the
administrators owed the complainant a duty of care in tort. Of this he said
:
"One matter is absolutely clear and the Ombudsman now concedes this, that the
administrators had no duty to advise or warn."
19. Looking more generally at the nature of the duty alleged it is, of course,
a duty to avoid causing economic loss. Secondly, if there is a duty, breach of
it will result in liability for an omission (failure to advise) in
circumstances where it is not alleged that the Company were asked or expressly
or impliedly assumed any contractual responsibility to give such advice. As a
general rule the common law does not impose liability in tort for what are
called "pure omissions". In this respect it should be noted that in all the
"advice" cases some advice had been given. The courts have had to decide
whether it was given in circumstances which required the adviser to take care
or whether a duty to do so, which was admittedly owed to some, was also owed to
others. When advice has been given and a duty is owed the duty may be breached
by omission but our case is one where no advice was given so it is one of pure
omission.
20. In what circumstances may a duty to avoid causing economic loss arise ?
There is much recent authority dealing with this question. It is most
helpfully summarised in the judgment of Sir Brian Neill in BCCI -v-
Price Waterhouse [No.2] [1998] PNLR 564 at pages 581-588. He
points out that the search for a principle or test has followed three separate
but parallel paths each of which should reach the same destination. These are
:
1. The threefold test of foreseeability, proximity and fair, just and
reasonable.
2. The assumption of responsibility.
3. The incremental approach.
Conclusion.
21. The complaint is that at the time the Deceased was re-employed by the
Company in April 1995 he should have been advised that he could apply to rejoin
the Scheme. It is by no means certain that if he had done so the Company would
have consented. But it is not alleged that the Deceased was unaware of the
terms of the Scheme or that he asked at this (or at any other) time for advice
about his membership of it. The simple answer to this case is that as the
Claimant does not say the duty to give advice is contractual arising expressly
or impliedly out of the Deceased's contract of employment the claim is bound to
fail following Scally. Taking the matter at its highest from the
Claimant's point of view if there is a duty of care in tort it is only
coextensive with the contractual duty and, since no contractual duty is, or I
think could be, relied on in this case, there is no duty of care in tort
either.
22. I think the answer is the same if one looks at the matter more generally.
Taking the first of the three paths identified by Sir Brian Neill one can
assume foreseeability and proximity, but was it fair, just and reasonable to
expect the Company to give pensions advice to the Deceased ? I think not.
This is a specialist subject and any advice given would probably have to take
account of his entire financial situation. The Company, which manufactures
plastics, has not held itself out as being able to offer such advice and was
not asked to do so and yet the duty contended for would require it to tender
advice of its own volition. I cannot see that it had any duty to do so.
23. If one considers the second path the answer is, I think, obvious. There
was no assumption of responsibility by the Company to provide pension advice.
Mr. Thacker submits that arguably the Company assumed responsibility when they
re-employed the Deceased. I do not agree. The assumption of responsibility
must be an assumption to give advice of the kind alleged. By re-employing the
Deceased the Company reassumed its duties as employer but that begs the
question as to whether those duties included the duty to give pension
advice.
24. The third path also confirms this conclusion. There is no case, as far as
I am aware, in which a duty has been held to exist in circumstances analogous
to this. The incremental approach does not therefore justify a conclusion that
there should be a duty of care in this case.
25. Quite apart from these general considerations, there are considerable
difficulties of definition with the duty now contended for. What are the "all
the circumstances" which trigger the obligation to give the advice or
information? Is the obligation continuous and if not when and in what
circumstances does it arise? Would the company have to consider the position
of the Deceased's dependants if, as might well be the case, some option
favoured him but not them?
26. Whatever way one looks at this case I think the answer is so clear that the
Judge was right to strike it out. I do not think it is fact sensitive. On a
strike out of this kind the court must consider the case on the assumption that
all the facts pleaded by the Claimant are true. The Claimant relies on the
Deceased's close personal relationship with Mr. Caswell. But the duty is
alleged against the Company and not Mr. Caswell and it is not anyway alleged
that he assumed any responsibility to give pension advice unasked. So I do not
think that what is said about Mr. Caswell advances the Claimant's case.
27. On the broader question of whether striking out the claim in this case
offends against Article 6 of the European Convention on Human Rights and what
was said in Osman I adopt what Lord Woolf, MR said in Kent -v-
Griffiths (CA 3 February 2000) :
"........ it would be wrong for the Osman decision to be taken as a signal
that, even when the legal position is clear and an investigation of the facts
would provide no assistance, the courts should be reluctant to dismiss cases
which have no real prospect of success. Courts are now encouraged, where an
issue or issues can be identified which will resolve or help to resolve
litigation, to take that issue or those issues at an early stage of the
proceedings so as to achieve expedition and save expense. There is no question
of any contravention of article 6 of the E.C.H.R. in doing so. Defendants as
well as claimants are entitled to a fair trial and it is an important part of
the case management function to bring proceedings to an end as expeditiously as
possible. Although a strike out may appear to be a summary remedy, it is in
fact indistinguishable from deciding a case on a preliminary point of law."
28. For these reasons I would dismiss this appeal.
LORD JUSTICE CHADWICK:
29. I agree that this appeal should be dismissed.
30. In order to succeed in this action the appellant would need to establish
that the respondent company owed to her late husband, Mr David Outram, a duty
to advise him, on becoming re-employed by the company in April 1995, that he
should apply to rejoin the company's pension scheme. That would not, of course,
be a sufficient condition for success in the action - it would remain necessary
for the appellant to show that, if so advised, the deceased would have applied
to rejoin the scheme and that the company would have agreed to admit him to the
scheme - but it is a necessary condition. The question on this appeal is
whether it is so plain, on the facts alleged, that the appellant would fail to
establish that that duty was owed that the judge was correct to strike out the
action.
31. The company was, itself, the trustee of the pension scheme. The deceased
was a member of the pension scheme, in that he was entitled to accrued, but
deferred, rights in respect of his former employment. But the cases to which
Lord Justice Tuckey has referred make it clear that, as trustee, the company
owed no duty to the deceased, as beneficiary, to advise him as to his accrued
rights under the scheme. Still less, as it seems to me could it be argued
successfully that the company, as trustee, owed a duty to the deceased, as a
potential applicant for renewed membership, to advise him whether or not he
should apply to rejoin.
32. I was attracted, at one stage in the argument on this appeal, by the
proposition that, in the light of Scally v S.H.S.S. Board [1992]
1 AC 294, Spring v Guardian Assurance Plc [1995] 2 AC 296 and
Malik v BCCI, Mahmud v BCCI [1998] AC 20, it could be said that the
duties owed by an employer, or former employer, in relation to its employees
were in a state of development, particularly in the field of economic loss
suffered by an employee as a result of action or omission by the employer
ancillary to the performance of the contract of employment itself, so that it
would be wrong to strike out the claim in the present action. It would be
better, in a developing area of the law, to let the matter go to trial so that
the question of law could be decided in the light of actual facts. But it was
made clear by counsel for the appellant that he did not rely on any duty in
contract. He expressly rejected the suggestion that the claim could be put on a
contractual basis.
33. I am satisfied that, if there is no basis for the claim inherent in the
contractual relationship between the deceased and the company as his employer
or former employer, then there can be no independent basis for a claim in tort
in the present case - see the observations of Lord Bridge of Harwich in
Scally, at page 303 and of Lord Woolf in Spring, at page 353, to
which Lord Justice Tuckey has referred. In view of counsel's rejection (which I
must assume was soundly based) of any suggestion that the claim could be put on
a contractual basis, I am persuaded that this court has no choice other than to
dismiss the appeal on the ground that the claim is bound to fail.
LORD JUSTICE PETER GIBSON:
34. For the reasons given in both judgments I agree that this appeal should be
dismissed.
Order: Appeal dismissed with costs subject to section 18 order.
Legal Aid Taxation permission to appeal to House of Lords refused.
(Order does not form part of the approved judgment)
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