contract terms contracts of employment pensions time limits

beware of rash promises

BT logoRegular readers will no doubt recall the pickle that Dresdner Bank found itself in when making extravagant promises to city bankers in London. In July 2012 I reported that Dresdner Bank was facing a payout of up to £42 million when the High Court decided that a promise made by the CEO at a meeting was sufficient to create a binding contractual obligation. Unsurprisingly the bank appealed the decision to the Court of Appeal but to no avail, as I reported a year later.

Back to the present and British Telecommunications plc v Luck is an interesting case as it addresses the tortious liability of an employer in relation to negligent or fraudulent misrepresentation. Unlike Dresdner, the question in this case was not one of whether the employer should be held to something it didn’t want to but whether the employer should be held to a promise which turned out to be wrong. The essence of this case was that as part of the process of a TUPE transfer, staff at BT were assured that their participation in the BT pension scheme would be unaffected by the transfer. What in fact happened was that BT sold its shareholding in the transferee company in which had entered into a joint venture and the transferred staff’s membership of the scheme ceased. The alternative scheme offered less generous benefits and the employees brought a claim for misrepresentation.

Faced with the claim BT argued that the representations they had made were true; alternatively that they had an honest and reasonable belief that they were true. As for losses it was argued that the joint venture was inevitable and there was nothing the employees could have done to negotiate the opportunity to remain within the BT pension scheme.

In addition to Dresdner this case has echoes of Minter v Julius Baer[2004] EWHC 2472 (Ch) , decided some ten years earlier, wherein Mr Minter attempted, unsuccessfully, to argue that Julius Baer had made promises as to the level of his future pension to tempt him from his then employer, the doomed Barings.

The case, which will now be heard in full following an unsuccessful time limit challenge, is a reminder to take care with issuing rash assurances about benefits that may accrue many years hence. Whilst Mr Minter failed in his challenge to establish that a contractual promise had been made in relation to the level of pension benefits, each case will of course be fact sensitive. Here, the employees argued that the misrepresentations were false since BT knew it would withdraw from the joint venture, with the consequences that they would be removed from the BT pension scheme. They argue that if those representations had not been made they would not have entered into employment with the joint venture partner.

In this case, the employees have chosen not to pursue an action in contract since their loss in that instance would have been limited to the notice period. However the claims based on misrepresentation will now proceed to a full trial

Martin Malone

By Martin Malone

I'm a solicitor and the chief operating officer at Canter Levin & Berg. I was formerly head of the employment department.
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Outside work my interests include national hunt horse racing, France and French wine and current affairs. I also design and maintain websites.