The Supreme Court building in Kingston, and seat of Jamaica's Court of Appeal. - File

Overturning a Court of Appeal ruling that all ex-employees have a right to share in the windfall, the Privy Council has ruled this week that only the two workers still contributing to Gillette Jamaica's pension scheme at the time of its closure eight years ago are entitled to the $42 million sur-plus in the fund at the time.

"It is true that to allow the appeal will give the appellants (Vivion Scully and Morven Richardson) a windfall," Lord Collins of Mapesbury said in decision delivered on Wednesday.

"But it will not be at the expense of the respondents and those whom they represent, since they had withdrawn from the Plan at a time when they would have no expectation of further payments."

In fact, Lord Collins argued that the rules of the Gillette scheme, when read together were clear in their intent and that the authorities' reliance on the Jamaican appeal justices "do not assist in the interpretation of the rules in the present case".

This decision is likely to be widely scrutinised here given, lawyers say, the significant number of pension-related cases in the local courts or simmering in Jamaican firms and the fact that most trust deeds and rules covering pension schemes are apparently similar to those of the Gillette plan.

Indeed, the case turned primarily on an interpretation of the rules over at what point a contributor ceased to be a member of the Gillette plan and what effect this had when the company, in the mid 1990s, decided to move its manufacturing operations from Jamaica to elsewhere in the Caribbean.

By the end of 1996, Gillette had made almost all its staff redundant, except for Scully and Richardson.

The rest of the staff accepted their pension contributions, plus interest, in keeping with Rule 6 (b) that on leaving Gillette's employment, except in the case of death or early retirement "the member may elect a cash return of his own contributions together with credited interest to his date of termination".

A member had the alternative option under Rule 6 (a) to leave their contributions on deposit "to accumulate the credited interest thereon to provide a pension commencing at his normal retirement date".

So, by the time Gillette decided to shut down the Life of Jamaica (now Sagicor Life Jamaica) managed scheme in early 2001, only Scully and Richardson were still making contributions and, from their view point, the only "then members of the plan" in accordance with the meaning of Rule 12(c).

However, two former Gillette employees, Gerald Coley and Franklyn Brown, had a different view of the rules and on behalf of 18 other former employees of the manufacturer of personal care products went to court seeking a declaration of their right to a share of the surplus.

Pension plan

They lost in the lower court. Justice Brooks, in his High Court ruling, held that having exercised the option offered by Rule 6 (b), Coley and Brown, from the date they were paid, had effectively withdrawn and ceased to be members of the pension plan for the purposes of 12(c).

That section that outlines how, on discontinuation, the pension fund's surplus should be allocated "among the then members of the plan".

Justice Brooks had held that the phrase "then members" meant people employed when the pension scheme was discontinued and others who were entitled to receive benefits from the fund.

"This does not include former employees who had elected to receive, and have received prior to December 31, 2000, a cash return under rule 6 (b) of the Gillette Pension Fund rules," Justice Brooks said in the December 2004 ruling.

Three years later, the Court of Appeal overturned Justice Brooks.

Justice Karl Harrison, who gave the appeal court's primary ruling, agreed that benefits under Rule 6(b) were "not exhaustive of the rights" of those workers whose employment with Gillette ended before normal retirement.

He held, too, that the term member could not be limited to existing employee, but "anyone who has contributed to the fund".

He suggested that such former employees had a residual right to the employer's contribution to the fund.

"It is abundantly clear from the authorities that the employer's contribution to the pension fund, as well as employee's contribution, ought properly to be regarded as part of the employee's total wages in the broad sense," he said.

However, in this week's judgement the Privy Council said that there were indeed circumstances and contexts when "a word descriptive of a person's status (such as "employee" or a "member" may apply to persons who once had, but no longer have that status".

"But on this appeal their lordships are satisfied that on this issue the Court of Appeal was wrong, and that Justice Brooks was right," Lord Collins said.

The judge, in explaining the logic, drew attention to the specific provision of Rule 6 (b) giving the right of an employee, on termination, to take his contribution and accrued interest, plus the fact that a worker, while still employed to Gillette was not permitted to "withdraw his contributions during periods of suspension, lay-off, temporary leave of absence without pay or temporary interruptions in his service, nor shall he be permitted to contribute during such periods".

In addition, he noted, there was Rule 12 (c) with its outline of the designated order of how funds in the plan should be allocated "among the then members" at its discontinuance.

Members withdrawn

Said Lord Collins: "If these provisions are read together there can be no doubt that what is contemplated by "the then members" in Rule 12 (c) cannot include former employees who have elected for a return under Rule 6 (b). Those members are treated expressly by Rule 6 as having withdrawn from the plan. The Court of Appeal's conclusion is contrary not only to the natural meaning of Rule 12 (c) but also the purpose of the scheme of the plan as a whole."

The Privy Council also held that a provision in the rule that required the administrator of the scheme to make allocations "subject to the approval of Gillette, was not material to the case, or the Justices to decide under what circumstances the company might have withheld approval of allocation under Rule 12 (c).

Lord Collins explained: "The reason is that their lordships are satisfied that the power to withhold approval could not be used to alter the allocation to the "then members" and thereby vary the rules. There is already an express power in Rule 12 (a) to change, modify, or discontinue the plan at anytime. Gillette has not done so, and their lordships consider it difficult to see how the plan could be lawfully amended once it has been discontinued."

In any event, Gillette had been kept informed about the intent of the administrator and trustee and was a party to the proceedings.

"Gillette's failure to withhold approval cannot be regarded as a refusal to exercise a trust power so as to give the court the power to vary the provisions for allocation," the Privy Council judge said.

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