High Court: Irish Life loses application to dismiss former employee’s claim for damages

About this case:

• Citation:
  [2018] IEHC 483
• Judgment:
  External link
• Court:
  High Court
• Judge:
  Ms Justice Aileen Donnelly

The claim is based on the fact that the old pension scheme, of which the employee was a member, was approved by the HMRC and was therefore excluded from UK bankruptcy proceedings – whereas the new scheme to which the former employer was transferred in 1990 did not have approval from the HMRC.

Finding that the case necessitated statutory interpretation of whether the lack of approval was a less favourable term, Ms Justice Aileen Donnelly said that the case was not bound to fail and dismissed the orders sought by Irish Life.

Background

In November 1990, when Irish Life Assurance PLC (No. 2) became a publicly floated company, Mr John Healy had been transferred as a member of the original Irish Life staff pensions scheme to a new scheme sanctioned by the High Court. The old scheme was an approved scheme for the purposes of bankruptcy proceedings by the HMRC and therefore  excluded from consideration as an asset in UK bankruptcy proceedings; whereas the new scheme was not so approved by the HMRC.

Ms Justice Donnelly explained that Irish Life Assurance would have had to apply to the HMRC for the approval outlined above.

Mr Healy worked for Irish Life Assurance PLC (No. 2) up until 2011, at which point he went to the UK. He was adjudicated bankrupt there in 2013, and his pension was not excluded from the UK bankruptcy proceedings because the scheme was not an approved scheme.

Mr Healy submitted that in his contract of employment with Irish Life Assurance, it was ‘an express and/or implied term’ of the contract that he ‘would be entitled to a pension scheme on terms no less favourable than the benefits and entitlements under the old scheme’, and that Irish Life Assurance ‘would not reduce or in any way restrict’ his entitlements and benefits under the old scheme’

As such, Mr Healy said that Irish Life Assurance ‘negligently, in breach of contract, in breach of duty, and in breach of statutory duty’, failed to ensure that Mr Healy was entitled to the same benefits under the new scheme as he was under the old scheme – specifically by ensuring approval by the HMRC.

Application to dismiss the proceedings

In the present application to the High Court, Irish Life Staff Benefits Scheme and Irish Life Assurance sought orders dismissing the proceedings on the grounds that, inter alia, they were unsustainable, frivolous, vexatious, and bound to fail, and that the claims were statute barred.

It was submitted that Mr Healy’s case was that he had a contractual right to have the benefits under the old scheme replicated in the new scheme – and that therefore it had to be considered whether approval by the HMRC was actually a benefit. The defendants argued that approval was not a benefit under the pension or superannuation scheme within the meaning of the Insurance Act 1990. Section 6(2) of the Insurance Act 1990 provides:

“Every person who is a member of or entitled to benefit under a pension or superannuation scheme of the Original Company shall, with effect from the transfer date, become a member of or be entitled to the corresponding benefit under a corresponding pension or superannuation scheme established in respect of the New Company on terms not less favourable than those under the first mentioned scheme”.

Emphasising the phrase ‘on terms not less favourable’, Mr Healy said that the reality was that approval by the HMRC was a benefit enjoyed by members of the old scheme, and that if he had been declared bankrupt under that scheme he would have been entitled to approval. In these circumstances he said that lack of approval of the pension by the HMRC were terms less favourable

Focus on the concept of membership rather than benefit

Ms Justice Donnelly said that it was necessary to consider s.6(7) of the Insurance Act 1990 which defines ‘benefit’ as meaning ‘any pension, annuity, lump sum, gratuity or other like payment given on retirement or payable after retirement in respect of past service or on or in connection with death during service or after retirement’. Ms Justice Donnelly said that if the only matter for the court to consider whether approval by the HMRC was a benefit then the outcome would be clear, as approval by the HMRC cannot be a benefit.

However, Ms Justice Donnelly said that in interpreting s.6(2) of the Insurance Act 1990, it was important to focus on the concept of membership of schemes rather than focusing on the phrase ‘benefit under a pension or superannuation scheme’.

Ms Justice Donnelly said that by considering Mr Healy as a member of the old scheme who was entitled to become a member of the new scheme ‘on terms not less favourable’ than the old scheme – the issue for the Court to consider was whether Mr Healy was a member of the new scheme on terms less favourable than the old scheme.

Given the need for the Court to interpret ‘terms not less favourable’, which did not have a statutory definition – Ms Justice Donnelly said that the answer was not clear cut and therefore could not be adjudged as bound to fail.

Finding that a credible argument existed in interpreting the word ‘terms’ to mean all those entitlements which flowed as a result of membership of the old scheme, regardless of whether those had been set out expressly in the old scheme or not – Ms Justice Donnelly said that Mr Healy’s case could not be said to  be bound to fail due to the interpretation of the Insurance Act 1990 and the documentation setting up the old and new schemes.

Ms Justice Donnelly was also satisfied that Mr Healy had at least made an arguable case that his loss only occurred pursuant to the orders of the UK Courts starting in 2013 – as such his case was not bound to fail because of the application of the statute of limitations.

Dismissing the defendants submissions under, inter alia, O. 19 r. 28 of the Rules of the Superior Courts, Ms Justice Donnelly refused the relief sought by each of the defendants.

• by Seosamh Gráinséir for Irish Legal News