The directors of the Society had calculated the final bonuses to be allocated to policyholders in a manner which was found to be contrary to the terms of the policy. The language of the article conferring the power to declare such bonuses contained no relevant express restriction on the power to do so. The critical question was whether a relevant restriction was to be implied.
Held: Where a life assurance company had issued retirement policies which guaranteed certain returns, the policy holders had a proper and reasonable expectation that those promises would be met. The discretion given to the directors to set the levels of returns must be read to be subject to the prior expectation created, and must be exercised accordingly subject to those expectations.
Lord Steyn emphasised that the test for the implication of a term into a contract is one of strict necessity. The test was a stringent one and the term that the Court was there prepared to imply was ‘essential to give effect to the reasonable expectations of the parties.’ and ‘If a term is to be implied, it could only be a term implied from the language of [the instrument] read in its commercial setting.’ The approach of construction was to ascertain the intention to be imputed to the parties as a consequence of considering the agreement as a whole in that commercial setting.
Lord Steyn observed that the implication of a term was ‘not critically dependent on proof of an actual intention of the parties’ when negotiating the contract.
Judges:
Lord Slynn of Hadley Lord Steyn Lord Hoffmann Lord Cooke of Thorndon Lord Hobhouse of Woodborough
Citations:
Times 21-Jul-2000, Gazette 03-Aug-2000, [2000] UKHL 39, [2000] 3 All ER 961, [2000] 3 WLR 529, [2002] 1 AC 408, [2001] Lloyds Rep IR 99, [2000] Pens LR 249, [2000] OPLR 101
Links:
House of Lords, House of Lords, Bailii
Jurisdiction:
England and Wales
Citing:
At CA – Equitable Life Assurance Society v Hyman CA 21-Jan-2000
The life company had granted policies to members which had guaranteed certain standards of bonuses. The level of reward became unsupportable and the company imposed terms restricting returns on retirement policies where policy holders sought to . .
At ChD – The Equitable Life Assurance Society v Hyman ChD 9-Sep-1999
Where a mutual life assurance company had allowed some members to acquire reasonable expectations that they would receive certain benefits under their policies, such expectations fell short of a contractual right, and where necessary, the trustees . .
Cited by:
Cited – Equitable Life Assurance Society v Ernst and Young CA 25-Jul-2003
The claimant sought damages from its accountants, saying that had they been advised of the difficulties in their financial situation, they would have been able to avoid the loss of some 2.5 billion pounds, or to sell their assets at a time when . .
See also – Equitable Life Assurance Society v Bowley and others ComC 17-Oct-2003
The claimant sought damages against its former directors for negligence and breach of fiduciary duty. The defendants asked that the claims be struck out.
Held: It was no longer good law that directors might leave the conduct of the company’s . .
Cited – Donington Park Leisure Ltd v Wheatcroft and Son Ltd ChD 7-Apr-2006
Leave to apply was pursued under the provisions of a Tomlin order. The parties had disputed the extent to which parts of the order should be exhibited to the court.
Held: The Tomlin order should be amended to add terms necessary to give effect . .
Cited – Aitken v Standard Life Assurance Ltd SCS 3-Dec-2008
The pursuer averred that the defendant, his pension provider, had wrongfully reduced its final bonus by ten per cent without notifying him. He sought to imply a term into the contract to provide such an effect, saying that the contract promised an . .
Cited – Attorney General of Belize and others v Belize Telecom Ltd and Another PC 18-Mar-2009
(Belize) A company had been formed to manage telecommunications in Belize. The parties disputed the interpretation of its articles. Shares had been sold, but the company was structured so as to leave a degree of control with the government. It was . .
Cited – Equitable Members Action Group, Regina (On the Application of) v Her Majesty’s Treasury Admn 15-Oct-2009
The applicants sought judicial review of the defendant’s response to a report of the Parliamentary Ombudsman finding maladministration by the defendant in rejecting the recommendation for compensation.
Held: The respondent’s rejection of the . .
Cited – Pitt and Another v Holt and Others ChD 18-Jan-2010
The deceased had created a settlement in favour of his wife. He suffered serious injury and placed the damages in trust, but in a form which created an unnecessary liability to Inheritance Tax on his death. The wife’s mental health act receiver now . .
Cited – Pitt and Another v Holt and Another ChD 18-Jan-2010
The claimant sought to unravel a settlement she had made as receiver for her late husband, saying that it had been made without consideration of its Inheritance Tax implications. The Revenue said that there was no operative mistake so as to allow . .
Cited – Margerison v Bates and Another ChD 30-May-2008
The court considered the construction of a restrictive covenant after the disappearance of the covenantee. The covenant required no additional building without the consent of the covenantee, such consent not to be unreasonably withheld. The term . .
Cited – Scottish Widows Plc v Revenue and Customs SC 6-Jul-2011
The taxpayer insurance company had transferred sums from accounts designated as Capital Reserves. The Revenue said that these were properly part of the profit and loss accounts for the respective tax years, and chargeable receipts.
Held: The . .
Cited – Futter and Another v Revenue and Customs; Pitt v Same SC 9-May-2013
Application of Hastings-Bass Rule
F had created two settlements. Distributions were made, but overlooking the effect of section 2(4) of the 2002 Act, creating a large tax liability. P had taken advice on the investment of the proceeds of a damages claim and created a discretionary . .
Cited – British Telecommunications Plc v Telefonica O2 UK Ltd SC 9-Jul-2014
The parties disputed the termination charges which BT was entitled to charge to mobile network operators for putting calls from the latter’s networks through to BT fixed lines with associated 08 numbers. BT had introduced new tariff charges.
Cited – Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and Another CA 14-May-2014
The court considered the operation of a break clause within a lease, and in particular ‘ Can the court imply a term which enables the lessee to get back that part of the advance payment of rent which relates to a period (‘the broken period’) after . .
Cited – Mr H TV Ltd v ITV2 Ltd ComC 8-Oct-2015
The claimant had contracted with the defendant for the production of a series of reality TV shows featuring celebrities. After severe personal clashes between the people involved on the claimants side, the contract was terminated. The claim was that . .
Cited – Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and Another SC 2-Dec-2015
The Court considered whether, on exercising a break clause in a lease, the tenant was entitled to recover rent paid in advance.
Held: The appeal failed. The Court of Appeal had imposed what was established law. The test for whether a clause . .
Lists of cited by and citing cases may be incomplete.
Trusts, Financial Services, Contract
Updated: 31 May 2022; Ref: scu.159073
