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Gillette case expected to set precedent for pension trials - Headed to Privy Council for final resolution
published: Friday | January 18, 2008

Elpert Fitzwarren, Business Writer


The Supreme Court in Kingston, where Jamaica's Court of Appeal is also situated. - File

Jamaica's Appeal Court's ruling that scores of former workers of Gillette Caribbean are entitled to a share of a $42 million surplus in the company's pension scheme is heading for the Privy Council for final resolution.

Initially, the funds were earmarked for sharing between the firm and the two employees still on the payroll when the scheme was discontinued in 2001.

Appeal judges on Monday gave conditional leave for lawyers representing Vivion Scully and Morven Richardson, who argue that they should be the only beneficiaries, apart from Gillette, to proceed to London with the case, whose outcome, lawyers say, could be influential on other pending pension cases here.

Changing interpretation

"There are a number of pension cases in the pipeline, turning on the interpretation of the rules governing the scheme," one senior lawyer explained on Monday after the appeal judges gave attorney Wentworth Charles the green light for the final appeal.

"Among those cases is one relating to a claim by some former workers of Desnoes & Geddes." The Gillette case turns on the interpretation of who is/was a member of the scheme in accordance to its governing rules - an issue that was triggered by the company's 1996 decision to close its operation in Jamaica and do its production elsewhere in the Caribbean.

At the time, most of Gillette's employees were made redundant and accepted cash payments of their contributions to the scheme, plus accrued interest. However, Gillette maintained the employment of Scully and Richardson, who, with the company, continued to make contributions to the scheme.

Million in surplus

In January 2001, Gillette informed Life of Jamaica, the administrators, that it would be making payments to the scheme, which would come to an end that March. Scully and Richardson held that they were then the only remaining members of the pension scheme and, therefore, the only ones entitled to share, with Gillette, the $42 million surplus.

That sum would have grown significantly since then, given accrued interest over the past seven years. However, two former employees, Gerald Coley and Franklyn Brown, acting on behalf of themselves and others, challenged this view. Coley and Brown, through their lawyers Lord Gifford and John Graham, insisted that the surplus should be divided among everyone who had contributed to the scheme in proportion to their contribution. However, Justice Brooks, in a ruling in December 2004, interpreted the rules of the fund differently, relying primarily on the wording of segments of rules six and 12, dealing, respectively, with termination benefits and discontinuation of the plan. Under rule six, if a person was no longer employed to Gillette for reasons other than death or early retirement, that person could leave his contribution on deposit to accumulate with credited interest and opt for a pension at normal retirement age the member could elect to take "a cash return of his own contribution together with credited interest to the date of his termination". Rule 12 outlines how contributors surpluses ought to be allocated in the event of a discontinuance of the scheme, but part "c" speaks of distribution "among the then members of the plan". Justice Brooks interpreted the "then members" to mean all Gillette employees at the December, 31 2000 discontinuation of the plan and "all former employees who were in receipt or were entitled to receive benefits or payments under the plan". "... This does not include former employees who had elected to receive, and have received prior to 31 December 2000, a cash return under rule 6(b) of the Gillette Pension Fund Rules," Justice Brooks held. However, in its ruling late last year, the Appeal Court overturned Justice Brooks' findings. Justice Harrison, who wrote the court's primary ruling, agreed with Lord Gifford that the benefits granted under that clause were "not exhaustive of the rights" of persons whose employment ended before normal retirement.

The judge held too that the term "member" was not limited to existing employees "but covers anyone who has contributed to the fund". Under Justice Brooks' ruling, while this group of employees received their own contributions plus interest, they did not benefit from the employer's contribution to the scheme. Argued Justice Harrison: "It is abundantly clear from the authorities that (the) employer's contributions to the pension fund, as well as the employee's contributions, ought properly to be regarded as part of the employee's total wages in the broad sense.

Such contributions are, in principle, part of the employee's total earnings or remuneration. They are really part of what the employer is prepared to pay for his services. "It seems to me therefore, that when the employer's contribution is retained in the fund after the employee takes a cash return of his own contribution, that employee nevertheless remains a member of the fund by virtue of the retention of the employer's contribution. That member would therefore be entitled as of right to certain future pension benefits and a share in any surplus which arises at the discontinuation of the fund." The court's president, Justice Harrison, agreed. Having reviewed authorities in similar cases, Harrison said: "It would not ... be untrue to say that an employee who contributes to the pension fund from his wages is investing in the right to share in the pension benefits, which may arise on retirement or disablement. He has a vested interest and therein probable right." He also noted other sections of the rules rules of the Gillette scheme that embraced a more comprehensive meaning of the word member and argued that Justice Brooks erred in applying a dictionary meaning of the word "then" in relation to rule 6(b), which translated to at the time of the discontinuance of the scheme. "But that means he was restricting the interpretation of member as being different from that intended, namely, at the time when the trust deed and rules were created," Harrison said. "This led the learned judge to further conclude, erroneously, that the person who had exercised his option under 6(b) and accepted a cash return of his contribution was no longer a member in the context of the pension scheme document and that it was a withdrawal from the plan," he concluded.

business@gleanerjm.com

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