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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Burley v Joseph W Burley Partners Ltd & Anor [2002] EWCA Civ 1163 (2 July 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1163.html Cite as: [2002] EWCA Civ 1163

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF HIS HONOUR JUDGE BEHRENS

		Royal Courts of Justice Strand London WC2 Tuesday, 2nd July 2002

1. LORD JUSTICE RIX: This is a case where summary judgment has been given against the claimant on the application of the defendants. Since, on this appeal, we are of the view that there has to be a trial and the matter cannot be dealt with in the summary way in which it was dealt with by the judge below, it is unnecessary to set out the facts and law to any extent greater than is needed to dispose of the issue before the court.
2. This appeal arises out of the claim of Mr Kenneth Burley to a pension premised on entitlement to two-thirds of his final salary. The claim is brought against his former employers, Joseph Burley & Partners Ltd, and against his nephew, Mr Alan Burley, as a trustee of the company's pension scheme. Kenneth Burley and the late Joseph Burley were brothers. In 1966 Kenneth, as I shall call him, was working for the Automobile Association ("AA"). He was happy in that employment, he says in his evidence, and, in particular, was secure in the prospect that he would there earn a pension at two-thirds of his final salary. In recording these and further facts, I will take the material from the witness statements of Kenneth. Joseph having died some time ago and he has been unable to provide evidence. The matter has not yet gone to trial. His Honour Judge Behrens therefore dealt with the matter below on the basis of the claimant's evidence and there has been no suggestion that that was not an entirely appropriate thing to do.
3. In 1966, then, Kenneth was comfortable in his employment with the AA. But his brother Joseph wanted to attract him into the family firm of insurance brokers, then a partnership, but now a limited company. One of the inducements offered to Kenneth to come into the family firm was that he would receive there a two-thirds final salary. Indeed, his brother pointed out to him that as his salary would probably be greater in the family firm than in the AA he would do better in the long run. I will read from Kenneth's first witness statement the relevant parts of his evidence that set out the essential basis of his claim. Having referred to his original discussions with his brother at which the promise of a two-thirds final salary pension was first made, and a later discussion in the presence of his wife, he says this (I read from paragraph 7 of his first statement):

"This was certainly the most specific promise that Joe made and it was the promise that induced me to take his offer seriously. As a result of this discussion a few days later, at his request, I attended a meeting at his office at Clarkson Street. The assistant manager of the Norwich Union was present as well as, I think, a local Norwich Union inspector, Mr Fred Fielder. At that meeting I produced the AA Pension Booklet and in my presence Joe instructed the Norwich Union man to set up a policy that would provide me with a pension of two-thirds of final salary together with all the additional Benefits as were detailed in the AA Scheme."

4. After Kenneth began work at the family firm Kenneth says that he was again assured by his brother - at a time when proposals and quotations were being put forward by the Norwich Union and policies were being taken out to fund his pension - that these policies would be funded by the company sufficiently to ensure that he received the pension that had been promised in those earlier discussions.
5. There came a time when quotations and proposals of the Norwich Union, in preparation for the taking up of formal policies, were encapsulated in a letter written to Kenneth by the firm setting out the terms on which his pension would be funded by a Norwich Union policy. The letter was addressed to Kenneth and began:

"We have pleasure in informing you that it has been decided to make some provision for your superannuation in accordance with the undernoted regulations."

6. There followed 16 clauses or paragraphs and a definition of final remuneration. The letter ended:

"I agree to be bound in all respects by the regulations set out in the foregoing letter."

7. Space was then provided for Kenneth's signature. He signed. The clauses or so called regulations contained in the letter begin with a first clause which says that the arrangement will start on 1st August 1966, the date on which Kenneth joined the firm. The second clause stated:

"The benefits will be provided by a With Profit Security Benefit on your life effected by us with the Norwich Union Life Assurance Society. We will pay the whole of the monthly premium ..... "

8. The critical clause was clause 3 which reads as follows:

"You will be entitled to a pension on retirement on your 65th birthday (your normal retirement date) of ten per cent of the Sum Insured plus accrued bonuses payable in monthly instalments the first instalment being payable on the 1st day of July 1990 and thereafter for the remainder of your life without a proportionate payment to the date of your death ..... "

9. There were standard provisions dealing with death in service, optional cash sums, various options to be provided with the agreement of the firm, provisions protecting the firm in the case of dismissal for fraud or misconduct and provisions for alteration of the entitlement in the case that Kenneth left the service before retirement of his own freewill, a provision concerning the rights to discontinue the payment of premiums, provisions relating to retirement after Kenneth's 65th birthday (his normal retirement date), special provisions for retirement during the ten-year period immediately preceding normal retirement date or in the event of ill health, and provisions for review at certain periods. No doubt these were more or less standard provisions for a policy of this kind of that date. Paragraph 16 reads as follows:

"The position will be reviewed 10 years and 5 years before your normal retirement date and if the benefits then secured by the policy or policies, including the reversionary bonuses attaching thereto and future bonuses estimated at the current rate of interim bonus, would secure an aggregate pension at your normal retirement date exceeding two thirds of estimated final remuneration less the pension equivalent at your normal retirement date of the early retirement pension to which you are already entitled from the Automobile Association the benefits secured will be reduced to ensure that this limit is not exceeded."

10. That was a cap of two-thirds of final salary required, I believe, by pension and tax legislation of the period. There was a further letter making "some provision for your dependants" in briefer terms. Two years later in 1968 there was another letter making "some further provision for your superannuation".
11. In due course in 1972 the firm entered into a pension scheme and Kenneth's existing pension rights were commuted into that scheme in a manner intended to preserve those rights. The scheme itself operated on the basis that over a period of, I think, 40 years a member of the scheme would build up a full two-thirds final salary pension right, but it would take that length of time.
12. Going back to the events of 1966, Kenneth's evidence about the letters presented to him in that year was as follows:

"These letters were sent to inform me of what arrangements had been made for the appropriate insurance policies to give me benefits at least as good as those I had with the AA, namely in order to comply with Joe's promise and assurance to me. Whilst the letters did not specially state that my pension would be at least two-thirds of my final salary less my AA pension Joe told me that this provision was what was intended to ensure that I received the pension that he had promised. I relied on Joe's expertise, and that of the Norwich Union, in my assumption that the provision made by the insurance policies would produce the pension that Joe had promised."

13. When, in 1972, the pension scheme came along Kenneth said this about that time:

"I was concerned about the effect of this change on my situation. I spoke to Joe about it and told him of my concerns. I told him that I appreciated that this was a general circular to all employees but that I was concerned about my specific situation. Joe assured me that the appropriate provision was being made and would continue to be made to ensure that I received two-thirds of my final salary less the AA pension in order to ensure that his promise to me was complied with."

14. Joe died in January 1975. In 1988, some 18 months before Kenneth was planning to retire, he was worried to learn from the Norwich Union that a projected benefit statement indicated that his pension policies or his rights under the scheme, as they now were, would generate less than two-thirds of his likely final salary. He said that he went to see his brother's son Alan, his nephew, to tell him of his concerns and to remind him of what had been promised by his brother. His evidence is that Alan made no attempt to deny the matter:

"He told me not to worry and indicated that he would consider making me a director thereby boosting my salary and pension ..... "

15. Alan gave him permission to speak to the Norwich Union. Kenneth's statement continues:

"I did speak to Norwich Union and asked them to supply me with some projections as to what would have happened had I stayed in the Old Scheme (namely the one set up in 1966 with the two policies from Norwich Union) if that had run through the full 24 years until 1990. They said they would look into it. However Norwich Union did tell me that the Company Pension Scheme [that of 1972] was flexible and that if directed to do so they could pay me a pension based on two-thirds of my final salary but that would be a decision for the Trustee of the Scheme who was Alan Burley. Obviously however Norwich Union said that this would depend on there being sufficient funds in the Scheme."

16. There is a lot more in his two statements but that is the essence of it.
17. On their application for summary judgment the defendants' essential submission, accepted by the judge, was that the parol evidence rule made all evidence as to the alleged oral agreement between Kenneth and Joseph entirely inadmissible. This was on the basis that the 1966 letter could only be read as an exclusive all-embracing contract relating to the subject matter of Kenneth's pension rights and that it was intended by the parties to it, that is to say by Kenneth and the firm, to supersede all previous oral agreements. The judge accepted that was so and also accepted the defendants' submission that the concept or doctrine of a collateral contract could not be relied upon in such a case as this since it was limited to rather narrow categories. The judge obviously regarded those categories to be exclusive and closed.
18. On this appeal we have only called upon Mr Paul Newman, who represents the respondents, to address the court. His essential submission is that, as held by the judge, the letter of 1966 - and likewise the letter of 1968, but the matter can be tested on the letter of 1966 - was intended by the parties to be an exclusive provision on the subject matter of Kenneth's pension. It was intended to contain the entirety of terms relevant to their subject matter and was thus intended to supersede all previous arrangements. In those circumstances he submitted that the parol evidence rule would not admit any further evidence which was intended to be relied upon to vary or contradict the written contract.
19. For the purposes of the parol evidence rule he was content to rely, as his sole authority, on the statement of the Law Commission in its report on the Law of Contract, the Parol Evidence Rule, Law Com 154 of January 1986, Cmd 9700. Paragraph 2.7 of that report, which is the essence of Mr Newman's case, reads as follows:

"We have now concluded that although a proposition of law can be stated which can be described as the `parol evidence rule' it is not a rule of law which, correctly applied, could lead to evidence being unjustly excluded. Rather, it is a proposition of law which is no more than a circular statement: when it is proved or admitted that the parties to a contract intended that all the express terms of their agreement should be as recorded in a particular document or documents, evidence will be inadmissible (because irrelevant) if it is tendered only for the purpose of adding to, varying, subtracting from or contradicting the express terms of that contract. We have considerable doubts whether such a proposition should properly be characterized as a `rule' at all, but several leading textbook writers and judges have referred to it as a `rule' and we are content to adopt their terminology for the purposes of this report."

20. I will refer also to paragraphs 2.14 and 2.19 of the report on which Mr Newman also relied:

"The issue whether parties intended that the whole of their agreement should be as recorded in a particular document or documents is to be judged objectively. The court is not concerned with whether both parties, in their minds, intended the writing to contain the whole of the agreement between them but whether, having regard to what was said or done, and to what documents were signed and exchanged, and when, a reasonable person would have understood the writing to contain the whole of the agreement. A party is not permitted to give evidence of his private but uncommunicated intention as to what was to be agreed, or as to what the written agreement was to mean."

21. Paragraph 2.19:

"So far, we have discussed only the situation in which it is proved or admitted that the whole of the parties' contract is intended to be as recorded in a particular document. However, similar principles will apply where only a part of the contract is so recorded. In that situation, once it is proved or admitted that the parties intended the document to be conclusive as to the matters mentioned in it, then further evidence as to their agreement on those matters will be irrelevant."

22. In the present case Mr Newman asserts that it is proved - certainly it has not been admitted - that the parties to these proceedings intended that all the express terms of their agreement should be recorded in what I refer to as the 1966 letter. I cannot say that is admitted or proved by evidence. He seeks to shut out all the evidence of Kenneth to which I have referred. He says that simply from the four corners of the 1966 letter he can prove that on any reasonable objective construction of that letter the parties must have intended that letter to record the whole of their agreement on the subject of Kenneth's pension. His first difficulty is that the letter begins with a reference to only "some" provision. His first submission was that "some" meant "all". He withdrew from that submission and was content to accept that the expression was neutral; "some provision" meant "provision". He submitted that various terms relating to the right of the firm to stop paying premiums or to refuse the pension in case of fraud or misconduct and so forth were inconsistent with the promise of a two-thirds final salary pension. But he was not able to submit that the essential clause (clause 3) of the letter was inconsistent with a two-thirds final pension because he had to accept that, dependent upon the accrued profits of the pension policy, it might turn out that the policy would - though not designed expressly to be being a two-thirds final salary policy - yield sufficient funds to provide a two-thirds final salary pension. In this connection he also accepted that the express provision to a cap of two-thirds final salary was again not inconsistent with making provision for a two-thirds final salary pension; that is clearly correct.
23. However whether or not there are provisions in the letter which are inconsistent with the promise of two-thirds final salary pension - and I am inclined to think there is nothing inconsistent with such a promise, but that does not matter for present purposes - his essential submission had to be that that letter by itself was plain proof that the parties intended that the letter made full exclusive and total provision on the subject matter of Kenneth's pension.
24. However in a case like this it seems to me that it is not possible to assert the conclusive effect of a parol evidence exclusion principle without taking into account all the alleged facts and evidence in the case. In this connection it seems to me that paragraph 12-095 in Chitty on Contracts 28th Edn 1999 sets the matter out sufficiently for present purposes. It reads as follows:

"However, the parol evidence rule is and has long been subject to a number of exceptions. In particular, since the nineteenth century, the courts have been prepared to admit extrinsic evidence of terms additional to those contained in the written document if it is shown that the document was not intended to express the entire agreement between the parties. So, for example, if the parties intend their contract to be partly oral and partly in writing, extrinsic evidence is admissible to prove the oral part of the agreement. In Gillespie Bros. & Co. v Cheney, Eggar & Co., [[1986] 2 QB 59, 62] Lord Russell CJ stated

`although when the parties arrive at a definite written contract the implication or presumption is very strong that such contract is intended to contain all the terms of their bargain, it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreement.'

It cannot therefore be asserted that, in modern times, the mere production of a written agreement, however complete it may look will as a matter of law render inadmissible evidence of other terms not included expressly or by reference in the document. `The court is entitled to look at and should look at all the evidence from start to finish in order to see what the bargain was that was struck between the parties.'"

25. That last sentence was a citation from the judgment of this court in J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078, 1083.
26. So in the present case I cannot see how, as a matter of law, the application of the parol evidence rule can be said - in the face of Kenneth's witness statements which have for present purposes at any rate to be accepted as correct - that all that evidence must be excluded. On the contrary, the most general rule is that the court should look at all the evidence to see what was the bargain that was struck between the parties in a case such as this where the evidence is that part of the agreement was expressed orally and, on the evidence given by Kenneth, that oral part of the parties' arrangements was intended to survive the making of the agreement contained in the 1966 letter.
27. Mr Newman accepted that the question for the court was this: bearing in mind the oral contract or promise alleged, can it be said for certain that the parties must have intended that oral contract or promise to have been superseded by a written contract intended to contain all of the parties' arrangements? For reasons which I have indicated I cannot see that that is a question which can be determined on the evidence currently before the court in the summary fashion in which the judge dealt with it.
28. There is also the question of collateral contract. Collateral contracts are a well-known exception to the parol evidence rule in any event. One comes back to the same question: was what is relied on as being a collateral contract intended to be superseded by the ultimate contract or intended to survive as a matter of contract collateral to the ultimate contract? Ultimately, it is the same question. However in the context of collateral contracts, Mr Newman went on to submit that the oral contract, the oral promise of a two-thirds final salary pension, was not a collateral contract at all in that it did not fit into two categories of cases identified by him, being in the first place cases where a statement is made which leads a party to believe an exemption clause will not be relied upon and, in the second place, cases where a promise is made that a particular provision of the written contract will not be relied upon.
29. I doubt myself that the question of collateral contract can be categorised in that way. It is not necessary, however, to come to any conclusion about it. It seems to me that one must not be misled in this connection by the mere names of things. It seems to me not to matter whether the alleged oral promise of a two-thirds final salary pension is regarded as part of the contract of employment or collateral to the contract of employment or collateral to the contract contained in the 1966 letter. It may be that it is only necessary to talk in terms of collateral contract in particular circumstances where the only consideration given for the antecedent promise is the entering into of the main contact. That perhaps is a typical case of a true collateral contract. It matters not, for one must not be misled by these terms, provided there is evidence of two contracts side by side. It hardly matters for these purposes whether the antecedent contract is oral or in writing. The question remains - is that antecedent contract intended to survive the making of the subsequent or main contract or is it intended to be swallowed up by and superseded by the later contract? Those are questions which it may be can only be resolved on a consideration of the complete evidence as to the parties' objective intentions and following an attempt to construe two contracts side by side.
30. Of course, when I speak of complete evidence relating to those contracts it should be understood as going without saying that I do not mean to embrace in such evidence evidence which, on different or narrower aspects of what is called the parol evidence rule, is in any event inadmissible. Thus it is not in dispute in this case that the subjective intentions of the parties are irrelevant and inadmissible. It is not in dispute in this case that mere negotiations in the sense discussed by the House of Lords in Prenn v Simmonds [1971] 1 WlR 1381 are not admissible. But this case is not concerned with an attempt to give evidence of mere subjective intention or an attempt to give in evidence mere negotiations leading to a written contract. The evidence which is in dispute in the witness statements of Kenneth is evidence regarding a completed oral agreement relating to the terms on which Kenneth was willing to give up his employment at the AA and join the family firm.
31. The question is, as I have said before, whether those contractual arrangements were intended to be wholly superseded and replaced by the 1966 letter or could continue to live side by side with that letter. That is not a question which this court or the court below could have decided without a trial. It therefore follows that this appeal against the summary dismissal of Kenneth's case should be allowed.
32. THE VICE-CHANCELLOR: I agree.
Order: Appeal allowed with the costs