Case No: HQ0101154
 
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 24th May 2002

Before :

THE HONOURABLE MR JUSTICE COOKE
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Between :

	PATTI MARLOW	Claimant	
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	EAST THAMES HOUSING GROUP LIMITED	Defendant	

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Oliver Segal (instructed by Thompsons) for the Claimants
Daniel Tatton Brown (instructed by Trowers & Hamlin) for the Defendants

Hearing dates : 8th – 9th May 2002
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Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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Mr Justice Cooke

Mr Justice Cooke : 
Introduction
1.	This is the trial of agreed preliminary issues in an action for damages for breach of contract brought by the Claimant against the Defendant in respect of her employment with them as a Welfare Officer. The essential facts are as follows:
2.	
i.	The Claimant had been employed by the Defendant, East Thames Housing Group Limited (or its predecessors) as a Welfare Officer from about 20 September 1993.
ii.	On or around 25 April 1997 the Claimant was involved in a road traffic accident. The Claimant returned to work on 10 June 1997 but stopped working again on 13 July 1997. The Claimant has not returned to work since that date. The Claimant claims to be ‘permanently incapacitated from performing her job as a Welfare Officer’.
The Claimant makes two claims against East Thames. The first can be conveniently referred to as the ‘Pension Policy Claim’ and the second as the ‘Permanent Health Insurance Claim’.
3.	
i.	As to the first claim, the Claimant contends that the Defendant was under an express contractual obligation to admit her to the National Federation of Housing Associations/Housing Corporation Pension and Assurance Scheme (‘the Pension Scheme’) following the completion of her probationary period unless she informed the Defendant that she wished to opt for a personal pension or the SERPS Scheme. The Claimant did not at any time decline admittance, whether by opting for a personal pension or the SERPS Scheme or otherwise.
ii.	Further or alternatively the Defendant was obliged, pursuant to its implied duty of trust and confidence/good faith to inform her of what she needed to do if she wanted to be admitted to the Pension Scheme. The Claimant alleges that East Thames acted in breach of its obligations by failing to admit her to the pension scheme and/or by failing to tell her what she was required to do if she wanted to be admitted to the scheme.
iii.	The Claimant claims:-
1.	The loss of the value of deferred pension entitlement as would have accrued to her as a result of employer and employee contributions,
2.	More particularly or alternatively, the loss of value of such ill-health retirement pension as she contends she would have become entitled to in about July 1998.
iv.	The Defendant denies liability on the basis that:-
a.	It was not a term of the Claimant’s contract of employment that she would be admitted to the pension scheme, only that she was/would be eligible for admission to the Pension Scheme conditional upon her applying for membership. The Defendant was not in breach of that term because the Claimant never applied to be admitted to the Pension Scheme and always knew she was not a member.
b.    If (which the Defendant does not admit) it was under a duty to inform the Claimant about the scheme it complied with that obligation.  
c.	The contract of employment was terminated on 14 July 1998 and from that date onwards it had no obligation to advise the Claimant in relation to or make payments to the pension scheme. 
d.	The Claimant is not entitled to recover in respect of breaches occurring before 14 March 1995 by virtue of s.3 of the Limitation Act, and the alleged breaches if they occurred, occurred in December 1993 (the Claimant complains of continuing breaches in this regard, the majority of which occurred after the said date).
e.	The Claimant would not have been entitled to an ill-health retirement pension because she could not show that she was unlikely, by reason of her incapacity, to resume employment before retirement age.
4.	
i.	As to the second claim, the Claimant also alleges it was a term of her contract of employment that if she were to become incapacitated on a long-term basis from performing her job (unless she retired on an ill-health pension) she would be entitled to benefits under a Group Permanent Health Insurance Policy between the Defendant and Norwich Union Healthcare, the Part 20 Defendant (‘the PHI Policy’).
ii.	In addition, the Claimant says that there was an implied term of her contract that the Defendant would take all steps possible to secure payment under the PHI Policy and if appropriate take legal action against Norwich Union.
iii.	 The Defendant made a claim under the PHI Policy on or around 24 February 1998 stating that the Claimant believed she was totally disabled within the meaning of the policy since 28 July 1997. Norwich Union continued to make payments until 21 October 1999 at which point they said that the Claimant was no longer disabled within the meaning of the policy.
iv.	The Claimant claims that she is and, since 28 July 1997 has been totally disabled within the meaning of the policy and that the Defendant has acted in breach of its contract with her by failing to take steps to secure payment from the Part 20 Defendant.
v.	The Defendant denies liability on the basis that:-
a.	The Claimant was not entitled to any benefit in relation to the PHI Policy under her contract of employment. The PHI Policy was entered into by the Defendant to assist it in the management of long term sickness among its staff and as an ex gratia benefit to those staff.
b.	The Defendant was not under any obligation to secure payment from Norwich Union; their obligation was limited to paying over any payments received from Norwich Union.  
c.	If it had any contractual obligations it satisfied those obligations.
5.	On 4 August 1998 the Claimant signed a ‘Waiver Clause’ document, the exact terms of which are important, but by which she agreed broadly that she would make no further claim against the Defendant when her eligibility for the Permanent Health Insurance Scheme (PHI) and her employment ceased, which was apparently linked by the terms of this document to an assessment of her fitness to resume work.
6.	The Defendant has brought a Part 20 claim against Norwich Union. Put simply, the Defendant claims that if the Claimant is entitled to payment under the Policy then the Defendant is entitled to recover that sum from the Part 20 Defendant. The Defendant makes no claim unless it is liable to the Claimant. The Part 20 Defendant denies that it has any liability to the Defendant on the basis that the Claimant did not qualify for benefit under the policy from 21 October 1999 in that she was not ‘disabled’ within the meaning of the policy.    
7.	The agreed preliminary issues are as follows:-
1.	Is the Claimant an employee of the first Defendant, and if not, when did her employment terminate? 
2.	Was the Defendant in breach of contract:
2.1	In failing to admit the Claimant into the Pension Scheme and pay the material contributions thereto? and/or
2.2	In failing to inform the Claimant of what steps she needed to take to join the Pension Scheme and/or to send her an application form?
3.	If the answer to 2.1 or 2.2 above is yes, then
3.1	Is the Claimant statute barred from claiming any remedy in respect thereof?
3.2	Is the Claimant disentitled to any remedy in respect thereof by failing to pursue admittance to the Pension Scheme on her own part?
4.	Was the Claimant contractually (as opposed to ex gratia) entitled as against   the Defendant to benefits under the terms of the Permanent Health Insurance Scheme (insofar as she qualified within the terms of this Scheme)?
5.	In any event, was the Defendant contractually obliged to the Claimant to pursue its entitlement against Norwich Union to payment of benefits under the policy on her behalf? And if so, did the contractual obligation extend to pursuing the said entitlement by legal action?
8.	It was common ground that the determination of the first issue was unlikely to be critical in this action and I leave this issue until later in the judgment where it more naturally appears in the context of other issues. I start therefore with the issues concerning the Pension Scheme.

The Pension Scheme
9.	The material upon which I have to decide issues 2(1) and (2), the issues concerning the admission to the Pension Scheme and the giving of information in relation thereto, consisted essentially of the documents sent to the Claimant prior to employment and the statements and oral evidence of the Claimant herself and of Davina Boayke and Rosemary Clements. 
10.	The contract of employment was pleaded by the Claimant to be partly in writing. There was a letter of 1 September 1993 offering the Claimant a job subject to satisfactory references. The letter set out her salary and enclosed ‘a draft copy of your Contract of Employment.’ No copy of that document was available but no one suggested it was any different from the longer document to which I refer below as being sent with a later letter of 9 September 1993. This letter of 1 September 1993 went on to say:- 
“I am enclosing a draft copy of your Contract of Employment. On your acceptance of the position two copies of a definitive Contract will be given of which we require one signed copy to be returned.
You will be asked to serve the customary three-month probationary period after which you will be eligible for admission into the National Federation of Housing Associations Pension Scheme.
Please confirm your acceptance of the position in writing.” 
11.	There is no record of any response from the Claimant and on the 9 September 1993 the Defendant wrote again in the following terms, so far as is relevant:- 
“Satisfactory references have now been received and I am writing to officially confirm your appointment with this Association as Welfare Officer.
I am enclosing two copies of your Contract of Employment and personal details sheets. Would you please sign and return one copy of the Contract together with the completed personal detail sheets.
On completion of your three month probationary period you will be eligible for admission into the National Federation of Housing Associations Pension Scheme. An application form and details of the scheme may be obtained from the Personnel Department. Alternatively you may wish to opt for a personal pension scheme or remain in the State Earnings Related Pension Scheme.”
Enclosed with this letter was a one page document headed ‘Outline of Conditions of Service’ and a six page Statement of Particulars given pursuant to Section 1 of the Employment Protection (Consolidation) Act 1978.
12.	The one page Outline of Conditions contained the following paragraph relating to pensions:- 
“Staff working 20 hours or more per week (or 17.5 hours for job sharers) are entitled to join our Pension Scheme operated through the Pensions Trust. The contribution rate varies depending on age on joining but is a maximum of 5% of salary.”
13.	The Statement of Particulars contained a number of provisions relating to other documents and setting out some of the terms of employment:- 
“Clause 3: Your terms and conditions of employment including your rate of remuneration, overtime and premium payments, standard hours of work, entitlement to holidays and holiday pay (including the basis for calculation of accrued holiday pay), sick leave and sick pay, and the periods of notice required to terminate your employment, will be in accordance with the agreement made by the National Joint Council for Local Authorities’ Administrative Professional, Technical and Clerical Services as supplemented by the Association’s rules and pay records and as amended from time to time. Copies of the relevant documents are available for reference in the offices of the Personnel Manager of Association.
Clause 4: The staff Handbook sets out in full other conditions relating to your employment  and a copy of this Handbook is issued to all members for their personal reference.
Clause 5: The Association undertakes to ensure that any further changes in terms of employment will be entered in these documents or otherwise recorded for you to refer to within one month of change.
Clause 15: Rights of Pregnant Workers - Members of staff who become pregnant have certain rights providing they have completed a minimum period of continuous service. These are set out in full in the ‘Scheme of Conditions of Service’ referred to in paragraph 3.”		 
14.	The Particulars also stated that the Claimant’s entitlement to sickness allowance during her third year of service was 4 months full pay and four  months half pay and her allowance during her fourth and fifth years of service was 5 months full pay and 5 months half pay.
15.	In addition clause 10 read as follows:- 
“Clause 10: on completion of your probationary period with the Association you will be admitted into the National Federation of Housing Associations/Housing Corporation Pension and Assurance Scheme, unless you inform us that you wish to opt for a personal pension or the SERPS Scheme. An explanatory booklet on the NFHA Scheme will be given to you on joining the scheme. Although you will not normally be admitted to the scheme until you have completed your probationary period with the Association, it is possible on application to join the scheme earlier. Application for this should be made to the Personnel Manager.
A contracting out certificate is in force in respect of the Association’s Pension Scheme. This means that the Association’s Scheme has been approved by the Occupational Pension Board. It therefore applies in place of the State additional pension scheme. 
Benefits of the Scheme will only apply as from the date your contributions to the scheme becomes payable.
There is no pension scheme in operation for employees working less than twenty hours per week.
The Association will make no contributions to your own Personal Pension Plan.”
 
16.	The last page of the Statement of Particulars included the following form of words “I acknowledge receipt from you of written particulars of employment, dated the day of  in accordance with Section 1 of the Employment Protection (Consolidated) Act 1978” and was signed by the Claimant dated 13 September 1993. This was apparently returned to the Defendant without any covering letter.
17.	In my judgment these documents must be read together to ascertain the contractual terms upon which the Claimant was employed together with the other documents to which they referred. Although the letter of 1 September 1993 referred to a ‘definitive contract’ of which two copies were to be provided, one of which was to be signed and returned, and the letter of 9 September 1993 referred to ‘two copies of your contract of employment’, what was actually sent with the letter of 9 September 1993 was a Statement of Particulars rather than a formal contract. The letters themselves also refer to salary and the scale of pay, to the probationary period and to pension. These matters were also dealt with in the Statement of Particulars but there was no conflict between them save for the apparent conflict in the provisions relating to pensions.
18.	The two letters and the Outline of Conditions of Service did not suggest that joining the Pension Scheme was in any way automatic. They referred to ‘eligibility’ to join after the probationary period of 3 months and ‘entitlement’ to join. The letter of 9 September was clear in stating eligibility for admission at the end of the 3 month probationary period and referred to the availability of both an application and details of the scheme from the Personnel Department and to the scope for choice by the Claimant of investing in a personal pension scheme or remaining in SERPS. The provision of clause 10 of the Statement of Particulars falls to be read in this light. Clause 10a states that ‘on completion of your probationary period’, without qualification, ‘you will be admitted’ into the Pension Scheme ‘unless you inform us you wish to opt out,’ which was contradicted by the two letters and the specific reference to an application form in the 9 September letter.
19.	I do not consider that anyone reading these documents, even before joining the staff of the Defendant, could reasonably have thought that nothing had to be done in order to join the Pension Scheme. Such a person could not have considered that the employer had agreed to put him or her into the scheme without action on his or her own part. At the very least, the conflict between the documents raised a question which anyone wanting to participate in the scheme would be bound to ask, either before accepting the offer of employment or on commencing employment, or at the end of the probationary period, namely ‘How do I join?’ Even if Clause 10a was part of a definitive contract and fell to be read on its own, it would fall to be considered against the background of the letters and other documents and applying the principles set out by Lord Hoffman in ICS v West Bromwich Building Society [1998] 1 WLR 896 at pages 912-3, I conclude that what it would mean to a person with knowledge of those documents is not that there would be automatic admission.
20.	On commencing employment and at the end of the probationary period, the position would become even more clear to any person applying their mind to the subject. Even in the absence of enquiry, an employee would realise that he or she had not completed an application form as referred to in the 9 September letter, that he or she had not received the explanatory booklet on the scheme referred to in Clause 10a of the Statement of Particulars and that he or she had not been asked to make and had not made, any contributions to the scheme as referred to in Clause 10c and the Outline of Conditions of Service.
21.	The Claimant maintained in her evidence that at all times after the end of her probationary period until about 1997, she thought she had become a member of the scheme automatically because this is what the Statement of Particulars said. I do not accept her evidence on this. At no time did she make any pension contributions at all, a fact which would have been obvious to her from her payslips which included no deduction from her gross pay for this, and of course she made no separate remittances. The idea that she only looked at the net figure on her payslip and never noticed the deductions for tax, NI and union dues defies belief. She could not but be aware that she was making no pension contributions when she knew that a member of the scheme would have to do so.  She accepted in evidence that she knew there was an application form for the scheme but said that her mind was caught up with her Mother’s death on the expiry of the probationary period. I do not accept however that this meant that she thought she was in the scheme. Whatever the position at that particular stage, when she was able to focus on other things she must have appreciated that she had never completed such a form. She said that she knew she had never received the Explanatory Booklet on the Scheme but she said that she assumed this was an error. She never asked for it, unlike the Staff Handbook which she said she also did not receive.       
22.	In my judgement, the Claimant was fully aware of the fact that she was not a member of the scheme from the earliest days after the expiry of the probationary period. Equally, in my judgment, it is clear that she had no interest in being a member. If she had been interested she would have made enquiries of the Personnel Department to which the letter of 9 September directed her attention.
23.	On her own evidence, despite some confused answers on the point, she said that she became aware in November 1997, by reason of a letter of 7 November 1997 that she was not a member of the Pension Scheme. At that stage she made no complaint at all that she was not a member. This is not explained by her evidence that at that point she was being offered the possibility of a claim on the PHI. She made no comparison of the comparative benefits of the two schemes and never once suggested that she should have been on the Pension Scheme since December 1993. The reason for this, I find, is that she knew she had never been on that scheme at all. Moreover, her confusion as to when she did first appreciate that she was not a member of the PHI Scheme is strongly supportive of the Defendant’s suggestion that she always knew she was not on the scheme and never wanted to be in it.
24.	Furthermore, I have heard evidence from Miss Boayke and Miss Clements which I accept, that around the time of this letter and afterwards, both discussed with the Claimant the possibility of her joining the Pension Scheme, even at that late stage. This, they thought was possible, before making a claim on the PHI policy. The great advantage was thought to be that the PHI would, if the claim was accepted, not only pay 75% of gross salary to the Defendant but also the 11% employer’s contribution and the 5% employees contribution to the Pension Scheme. Miss Boayke’s evidence was that, following the letter of 7 November 1997, in a telephone conversation, the Claimant said that she had taken some advice about pensions and had been told that it was too late to make it worth her while to join a scheme. Miss Boayke encouraged her to join the scheme and explained that contribution would be made out of the PHI scheme if the claim was accepted. The Claimant mentioned her domestic circumstances and said that she wanted the totality of money to be available under the PHI scheme. Although this response was scarcely logical, Miss Boayke did not pursue the matter further. There was no discussion as to what the pension deductions might be. Miss Clements evidence was of a conversation in about February 1998 to similar effect. Her recollection was vague but she had some recall of the Claimant asking if the 16% figure for contributions could be paid direct to her and on being told it could not, she said she did not want to join the Pension Scheme.
25.	To the extent that the Claimant denied such conversations I do not accept her evidence. In part she said she had no recollection of them, but I am entirely satisfied that the evidence of Miss Boayke and Miss Clements is reliable and accurate on these points.
26.	The agreed evidence of Mr Coy of the Pensions Trust, showed that in order for an employee to be admitted to the Pension Scheme, an application form had to be completed, signed by the prospective member and a signed authority obtained from the employee authorising the Defendant employer to deduct pension contributions from the employee’s pay. There was therefore no possibility of completely automatic membership of the Pension Scheme, without the employee taking some steps. It would therefore have been an impossible obligation for the Defendant to undertake, to admit the Claimant to the Pension Scheme without at least some further consent and authority being obtained from her. Because, as I find, the Claimant was well aware that she was not a member or the Pension Scheme from the earliest days and was content with that the mutual intention of the contract of employment, whether as concluded initially or as varied by conduct, did not place upon the Defendant the obligation to admit her automatically.
27.	The conclusions I reach therefore in relation to issue 2.1 are:-
i.	The Defendant was not in breach of contract in failing to admit the Claimant into the Pension Scheme. It was not a term of the employment contract that she should be automatically admitted.
ii.	The Claimant was well aware that she never had become a member of the Pension Scheme and was never interested in becoming a member. If the Defendant had sought to admit her into membership of the scheme or if she had been expressly asked about joining in December 1993 on expiry of her probationary period, she would have declined to join.
28.	As to issue 2(2) the Claimant alleges that because of the terms of Clause 10a, there was an obligation on the Defendant to notify the Claimant at the end of her probationary period of the steps she needed to take to become a member of the Pension Scheme. Reliance was placed on the decision of the House of Lords in Scally v Southern Health and Social Services Board [1992] 1 AC 294 but the basis of this decision is explained by Elias J in Hagen v ICI [2002] IRLR 31 at paragraphs 64-71. Essentially, as explained there, the duty to give information concerning pensions depends upon the ignorance of the employee in the absence of its provisions. Here, the Claimant, as I have found, knew that she was not a member of the scheme and had been told in clear terms in the letter of 9 September of the need to approach the Personnel Department of the Defendant for an application form and details of the scheme. There was therefore no duty and no breach.
29.	The answer to issue 2(2) is therefore that the Defendant was not in breach in failing to inform the Defendant of the steps she needed to take in order to join the Pension Scheme at any stage.

Limitation – Issue 3.1        
30.	This question does not arise in circumstances where I have found no breach. If however the Defendant had been in breach, it would have been a breach of a continuing duty to admit the Claimant in to the scheme or to inform her of the steps necessary to join. Although the earliest point of breach would be the completion of the probationary period, it would not be a one–off breach limited to that point, but a continuing failure thereafter, because it would have been open to the Defendant to carry out the alleged obligations at all stages thereafter. The result would be that the Claimant could rely on any established breach from 14 March 1995 onwards.

Disentitlement to Remedy Because of Failure on Claimant’s Part – Issue 3.2 
31.	The Claimant did not want to join the Pension Scheme and never took any steps to obtain the necessary application form or to make any enquiry about joining the scheme. In November 1997 and February 1998 she refused the invitation to join, when it was extended to her. She thereby acquiesced in, or waived any breach on the part of the Defendant if there was, contrary to my findings, any such breach. Alternatively, she plainly suffered no loss at all because I find that she would have always declined to join the scheme from the outset right up to the express refusals in November 1997 and February 1998 and would not therefore in those circumstances have been entitled to benefits under its terms.

The PHI Scheme
32.	Issue 4 raises the question whether the Claimant was contractually entitled as against the Defendant to the benefits under the PHI scheme. The starting point here is once again the contract of employment between the Claimant and the Defendant.
33.	There is nothing in any of the documents, alleged by either party to be contractual documents, which makes reference to the PHI Scheme. There is no allegation by the Claimant of any oral agreement made with her that she should be entitled to benefits under this scheme. The evidence is that there was no publication of this scheme to employees at all and Miss Boayke’s evidence was that:-    
i.	This was a ‘management tool’ used by the Defendant on an ex gratia basis to assist employees who would otherwise be dismissed on medical grounds, because they were otherwise unable to carry out the requirements of their jobs, and who would otherwise suffer hardship because they had no obvious sources of income to meet their living expenditure.
ii.	The Defendant had a discretion whether or not to make a claim on the PHI policy with Norwich Union. There was one occasion when it had not been done, although the circumstances of that, as she recalled, were that the person concerned had not enough length of service to qualify for the PHI scheme in any event and wanted to be allowed to remain on the Defendant’s books in order to qualify for it.
iii.	She would recommend to the Management Team whether or not a claim should be made under the PHI policy in respect of any individual employee’s incapacity, based upon the view taken as to the genuineness of that incapacity and the potential hardship to the individual concerned. Her recommendation had always been followed. There were about 8 people benefiting from the Norwich Union scheme in operation then and about 6 persons benefiting from a different scheme.
iv.	There is no such scheme in operation at present because the cost of the PHI scheme with Norwich Union had risen and had been brought to an end for that reason. If someone became incapacitated now, procedures would be followed to terminate employment on medical grounds.
v.	If a claim was made and accepted by Norwich Union under the scheme, Norwich Union would pay the Defendant 75% of the gross salary of the incapacitated person and the pension contribution relating to that person, if the person belonged to the pension scheme. The Defendant would then pay the incapacitated person that amount, less any pension contribution if he or she was in the pension scheme and less tax and National Insurance. In other words, the employee received effectively 75% of net salary.
vi.	So far as she was concerned, the decisions concerning payment rested entirely with Norwich Union. There were no obligations owed to employees by the Defendant in relation to the PHI scheme because this was outside the contract of employment and because it was an ex gratia piece of generosity on the part of the Defendant to make payments under the policy available to an employee who would otherwise be dismissed on medical grounds.
34.	The policy itself provided for the payment of benefit to the Defendant in respect of accidents to or sickness of employees of the Defendant, such employees being advised to the Norwich Union in schedules supplied by the Defendant and as accepted by the Norwich Union. The benefit to be paid was 75% of the annual salary last advised to and accepted by the company, less single persons invalidity pension (i.e. state benefits) plus 16% in respect of Pension premium, if applicable. The PHI premium payable by the Defendant appears to have referable to the total of the salaries of the listed employees.
35.	The employees themselves had no rights under this PHI policy. The Contract (Rights of Third Parties) Act came into force too late to be of any application. Equally, one of the requirements of a trust of a promise is the promisee’s intention to create a trust, of which there is no evidence here and which would run counter to the Defendant’s case that this was simply an insurance policy which they had procured, so that if they wished to do so they could pay incapacitated employees on an ex gratia basis.
36.	The Claimant’s witness statement at paragraph 53 contained the following:-
“I was aware of its application when a colleague of mine, Anne Lawrence (a resettlement officer) suffered from long term effects of ME in about 1994/1995; there was no suggestion that there was any discretionary or gratuitous element to the scheme, she was told that she was entitled to her benefits under the scheme, provided she met the definition of disablement. Nor was I told, when I became entitled (or so I thought) to benefits under the scheme that such benefits were gratuitous.”
This is the only evidence of employees’ knowledge of the scheme. The Claimant had no knowledge of its terms – only knowledge that Miss Lawrence had received benefits and hearsay evidence of her so called ‘entitlement’ to benefits under the scheme. Yet there was no evidence of any agreed scheme at all as between Claimant and Defendant, because it was not communicated to the Claimant or to other employees as any kind of a benefit to which they were entitled.
37.	The existence of the PHI policy between the Defendant and Norwich Union is not enough, of itself, to create any contractual obligations between the Claimant and the Defendant that the Defendant should provide benefits, whether in accordance with the Norwich Union policy or otherwise. Without a contractual obligation to provide benefits or to maintain a PHI policy, as an obligation between Claimant and Defendant, there could be no obligation on the Defendant to pursue a claim under the policy in order to pay any part of the proceeds to the Claimant.
38.	The Claimant’s accident occurred on 25 April 1997. The Claimant was off work until 10 June 1997 but stopped work again on 13 July 1997. On 16 October 1997 she was seen by the Occupational Health Adviser consulted by the Defendant and on the following day the adviser sent a letter to the Defendant stating that the Claimant was unlikely to be able to return to work at all in the foreseeable future and that it was doubtful whether she would ever return to work.
39.	On 7 November 1997 Miss Boayke wrote to the Claimant referring to this report and a further report from her GP which also stated that she would remain unfit for work for the foreseeable future. The letter went on:-
“Under these circumstances it would be normal Group practice to proceed to early retirement on ill-health grounds. However, it is my understanding that you are not in the Group Pension Scheme. I therefore wish to suggest that an application is made on your behalf for Permanent Health Insurance (PHI).
The PHI scheme is an insurance scheme, which if you are accepted, you will give you 75% of your salary (less DSS benefits), until retirement age, should you remain permanently unfit until that time. In order to get the process started, and assuming this is an option you wish to consider, I have attached a PHI form for completion. Please fill in the areas marked with an asterix.
If you wish to discuss the details of the scheme, I would be happy to do so, and you may call me on 0181 522 2026.
As you are not in the Pension Scheme, the options are limited, and if we do not proceed with PHI the only other alternative would be some form of medical dismissal.
I am sorry that I have to be bearer of such news, however. I hope you will see that the Group is committed to achieving the best resolution in your case, though PHI cannot be guaranteed.”     
40.	It will be seen that in this mention of the PHI, the Defendant did not suggest that there was any guarantee of acceptance or guarantee of payment under the policy. It referred to the PHI scheme as an insurance, into which she had to be accepted. She must already have been a listed employee on the insurance and the only sense that can be made of the word ‘acceptance’ into the insurance scheme is that it refers to the position as between the Claimant and the Defendant, rather than the position as between either of them and the Norwich Union. Effectively what was taking place here, albeit expressed in layman’s terms, was an offer to the Claimant of the possibility of obtaining benefits which were obtainable under the PHI scheme, where there had been no prior obligation to provide them. If the Claimant agreed  to the terms proposed, she could be accepted by the Defendant into their PHI scheme, which meant she would benefit from amounts payable to the Defendant from their PHI policy with Norwich Union.
41.	It seems that the Claimant failed to complete the enclosed PHI form so the Defendant wrote again on 28 January 1998 in the following terms:-
 “I note from your file that we have still not received the completed form from you in respect of your retirement on the grounds of permanent ill health. I understand that you have spoken to Adrian Shaw and explained to him that you do not wish to pursue this option.
However, I do feel that we need to meet to discuss the options open to you at present, which are extremely limited given your extended period of absence and the reason for this. It will also be useful to discuss your current state of fitness, the medical assistance you are receiving etc.
Therefore I have arranged a meeting for Wednesday 4th February 1998. If you are able to come into work we will hold the meeting at Tramway Avenue, if you are unable to travel I am happy to visit you at home. I will be accompanied by Rosemary Clements, Senior Personnel Assistant. I would be grateful if you could contact me on the above extension to let me know whether you are coming into the Office or whether you would prefer a home visit. If I do not hear from you by Tuesday 3rd February I will presume you will be attending the meeting at Tramway.”
The reference in the first paragraph must be to the PHI form sent with the letter of 7 November 1997. 
42.	The Claimant attended a meeting on 4 February with Tina Cull and Miss Clements when it was agreed she would nominally return to work on 13 February on a part-time basis. She would however take 13 February to lunchtime on 18 February as annual leave, she would work Wednesday afternoon and take Thursday and Friday morning as annual leave before working Friday afternoon. The idea was that she would gradually work more days each week until she got back to full time work by about the beginning of April. The letter continued:-
 “As we discussed at the meeting, I must emphasise again that your return to work really is a trial for you to decide whether you can continue to work for the Group. If you find that, due to ill health, you are unable to continue working there are limited options open to us. As I explained it is likely that the Permanent Ill-Health Retirement Scheme will be reviewed, this could mean that this option is no longer available for you. Therefore, if you did find you were unable to carry out the full duties of your job due to ill-health, we would need to consider medical dismissal without the attached monetary benefits.”
This part of the letter again shows the Defendant offering the possibility of PHI but without recognising any obligation to do so.
43.	This staged return to work never materialised. The Claimant continued to provide medical certificates from her GP, saying she was unfit to work, and never returned to work at all. Throughout all this period, the Defendant continued to pay the Claimant her full salary.
44.	   A further meeting then took place on 24 February 1998 with Tina Cull, which is referred to in a letter of 25 February 1998. This letter included the following paragraph:-
 “Further to our meeting yesterday, and my subsequent message on your ansaphone, please find enclosed a waiver clause I need you to complete and return before you can be placed on the Permanent Ill-Health Insurance Scheme. The waiver clause basically means that you are no longer an employee of East Thames.”
This again refers to the Claimant having to sign a document before being ‘placed’ on the PHI scheme by the Defendant. It is an offer of the scheme benefits as between the Claimant and Defendant on condition that the waiver clause is signed.

The Waiver Clause Letter
45.	The waiver clause document was signed by the Claimant and dated 10 March 1998 and returned to the Defendant without, it appears, any covering letter. This apparently got lost so that a further document in the same form was subsequently signed by the Claimant with the result that there are now two copies of this document. The terms of the document are important and I set them out in full:-
“PERMANENT HEALTH INSURANCE ACCEPTANCE
I, the undersigned agree to abide by the waiver clause below under which the Permanent Health Insurance Scheme complies.
Where staff are accepted on the Scheme, and are subsequently assessed as being fit, their entitlement to the Scheme benefits will cease at that point. In addition, their employment with the Group will end effective from the time that their eligibility to the Scheme ceases.
At the point that the member of staff’s eligibility to the Scheme and employment ceases, the member of staff accepts that she/he will not make any further claim against the Group, accepting that the latter will have fully discharged its duty with respect to the member of staff.”
46.	Both parties agreed that this document constituted an agreement between the Claimant and the Defendant linking a waiver of claims against the Defendant with the obtaining of benefits from the PHI scheme. The Claimant was, by signing the document, agreeing to waive any rights she might have to claim against the Defendant at the point where her eligibility to the scheme and her employment ceased, as set out in the last paragraph. The title of the document shows that the subject matter is either the acceptance of a claim by Norwich Union on the PHI policy or alternatively the acceptance by the Claimant or the Defendant of the application of the PHI scheme to her. Because this is an agreement between the Claimant and the Defendant, because there is a ‘waiver clause’ under which she gives up rights and because, as I have found, she previously had no entitlement to any PHI benefit under any scheme, in my judgment the title refers to acceptance by the Defendant of the Claimant’s entitlement to benefit from the PHI scheme put in place by the Defendant. The first sentence of the document then sets out her agreement to waive any rights as a quid pro quo for obtaining those PHI benefits.
47.	At this point therefore, the Claimant and the Defendant entered into a variation of the terms of the employment contract concluded between them. This is shown by the title and first sentence, which, however ineptly expressed, show the Claimant’s agreement to waiver of any rights as consideration for the application of the PHI scheme to her.
48.	The language used here as elsewhere in the correspondence, as I previously mentioned, refers to members of staff being accepted on the scheme. There was, I think, some tentative agreement between counsel that the words ‘where staff are accepted on the scheme’ meant ‘where a claim in respect of a member of staff is accepted by the Norwich Union’, which could fit with the later half of the first sentence, but in my judgment those words relate to acceptance by the Defendant of a members’ entitlement to benefit from the Defendant’s PHI scheme, when this had previously not been a term of the contract of employment. Thus, the member of staff is only accepted by the Defendant on the PHI scheme as an extra benefit when unfit for work and the Defendant is not bound to do so. Once the staff member is accepted on the scheme however, the rest of the terms of this document then apply.
49.	The rest of the document then makes sense. Where a member of staff becomes entitled to benefit from the scheme (on acceptance by the Defendant of the staff members’ entitlement) the sole rights of the staff member centre on that PHI benefit and in the event of the staff member becoming fit to resume work, his or her entitlement to the benefits of the scheme, vis a vis the Defendant, ceases. At that point, the member of staff is no longer eligible under the scheme because he or she is fit for work and his or her employment then, by agreement, ends. Likewise, at that point, the staff member agrees that he or she will have no further claim on the Defendant in respect of employment, wages or benefit, accepting that the Defendant has fully discharged its duties to him or her.
50.	Instead therefore of proceeding to a medical dismissal without pay, the Defendant agrees to provide the Claimant with PHI benefits and the Claimant agrees to a consensual termination of employment without recourse against the Defendant at the point where she is ‘ assessed as being fit.’ The issue then is as to this assessment - whose assessment is referred to and to what standard? Does it refer to any assessment of a particular entity or not? If so, is it the Defendant’s assessment or that of Norwich Union? If it does refer to such an assessment, does that assessment have to be objectively correct, or reasonable, or merely bona fide?
51.	There was much debate on this issue but as this document is one which operates between the Claimant and the Defendant and makes no express reference to the insurers’ assessment there is no clear reason for reading the word ‘assessment’ as meaning that of the insurer. As this is a document operating between the Claimant and the Defendant, if the wording does refer to an assessment by a particular body, it might be thought more likely that it referred to the assessment of the Defendant. The Claimant’s right to benefit as now given her under this PHI scheme operating between herself and the Defendant and backed by the insurance with Norwich Union, is self-evidently dependent on her incapacity. Whilst the document could easily have read ‘and subsequently becomes fit’ rather than ‘and are subsequently assessed as being fit’, there is nothing in the document which suggests that the insurers’ assessment or the Defendant’s assessment, as the case may be, is to be final and binding and determinative of the Claimant’s fitness. The courts have historically shown a reluctance to construe clauses of this kind in documents of this type as giving the insurer a right to determine subjectively, once and for all, the entitlement of the staff member to benefits, whether that judgment is bona fide and formed on reasonable grounds or not see e.g. Napier v Unum Ltd [1996] 2 Lloyds Rep 550, Brompton v AOC International Ltd [1997] IRLR 639 and Earl v Cantor Fitzgerald (unreported) 25/5/00 a decision of Moore Bick J.
52.	In those cases the identity of the entity whose opinion, acceptance or assessment was involved was clear. Here it is not. The assessment could be that of the Defendant or that of the insurer, but either way there is no indication that this is to be final and conclusive. That assessment is therefore capable of challenge in the courts. In circumstances where, as here, there appears to be a dispute as to the ‘assessment of fitness’ with some medical opinion going in each direction, the assessment must be tested and fitness must be objectively ascertained on the whole of the evidence unless the document clearly provides otherwise, which it does not. 
53.	On this basis the Claimant is entitled to pursue the Defendant on the footing that, by the terms of the waiver clause letter, the Defendant agreed that the Claimant  would be entitled to the benefits of their PHI scheme in accordance with the PHI policy with Norwich Union, paying her the equivalent of 75% of her gross salary less statutory benefit. If there has been no objectively correct assessment of unfitness, then as between the Claimant and Defendant, she is entitled to continue to receive such benefits from the insurers. The Claimant conceded and accepted that there was no claim in debt against the Defendant and that the Defendant was only bound to pay to the Claimant those amounts which the Defendant received from the Norwich Union, less deductions, so that she received 75 % of wages on a net basis. They did not allege that the Defendant was bound to pay regardless of any recovery from Norwich Union.
54.	The question then arises as to whether or not the Defendant is bound to pursue the insurers, Norwich Union on behalf of the Claimant and pay over what they receive. It was common ground between the parties that any money received by the Defendant from Norwich Union would fall to be used to pay net benefits to the Claimant, whilst accounting to the revenue for tax and national insurance. The monies received from insurers, to the extent of the net figure, might be said to be monies had and received to the use of the Claimant but I form no concluded view upon that.
55.	On the authorities, if there is agreement as part of the terms of employment, for an employer to make available to an employee, the benefits of a PHI policy and the employee cannot sue the insurer direct because he or she is not a party to the insurance contract, and cannot sue the employer directly for PHI benefits because the employer is, by the terms of the contract between it and its employee, only obliged to pay over such sums as it receives from the insurer, then the employer has a duty as part of its general duty of trust and confidence, or good faith, to take all reasonable steps to secure that the insurance benefits are paid and the employee thus benefits from the payment. This includes perhaps, if necessary, the pursuit of litigation according to Earl at paragraph 29 and 30 and Briscoe v Lubrizal case no 42/2000/3508, a decision of the Court of Appeal at paragraph 135. The passages are however either obiter or unclear as to the extent of the obligation.
56.	In my judgment, if the employee has no other form of redress in respect of an incorrect assessment made by an insurer as to his/her medical incapacity to work, and the employer is contractually obliged to provide PHI benefits from an insurer, as part of a PHI scheme with the employee, it is a necessary incident of the contract between employer and employee, that the employer take all reasonable steps to obtain the benefit of the policy from the insurer. This may or may not involve litigation depending on all the circumstances, the apparent validity of the employee’s position and indeed the reasonable assessment by the employer of the prospects of success.
57.	The Claimant would have to require such action to be taken which it is clear she now does, although this was not made clear before the trial.
58.	It is not possible for me to form a view as to whether or not it would be reasonable for the Defendant to pursue Norwich Union in litigation to seek to procure the payment of benefits, because I have not seen evidence relating to the medical condition of the Claimant. If an indemnity against costs were offered by the Claimant or her Union, then it would be hard to see that the pursuit of litigation would not be a reasonable step to take, unless the prospects of success were very poor indeed. In circumstances where it seems that the Defendant considers that the Claimant’s position is correct, or may well be correct, an indemnity against costs would, it seems to me, make the refusal to pursue litigation against the Norwich Union unreasonable. In the absence of an indemnity however I am unable to form a view on this.
59.	In answer therefore to the questions raised in issues 4 and 5 I hold:-
Issue 4: As a result of the waiver clause letter, by which the Defendant agreed to procure the benefits of the PHI insurance for the Claimant, but not as a result of the original contract of employment, the Claimant was contractually entitled to the net benefits paid by the Norwich Union under the PHI policy with the Defendant.
Issue 5: the Defendant was bound as a result of the waiver clause letter to take all reasonable steps to procure those benefits from the Norwich Union. Such reasonable steps would include the pursuit of legal proceedings against Norwich Union if an indemnity against costs was provided by or on behalf of the Claimant, but without such indemnity the question is not capable of answer at this stage of the proceedings.
Issue 1: whether or not the Claimant is still an employee of the Defendant depends upon the correctness of the assessment that she is fit to resume work. It is clear from the waiver clause letter that her employment continues until her eligibility for the PHI scheme ceases and that in turn depends upon the question of her fitness which cannot be determined without full evidence and argument.

Costs
60.	The Claimant has failed in relation to her arguments on the pension scheme. The Claimant has also failed in relation to the arguments as to the contents of the original contract in relation to the PHI scheme. The Claimant has succeeded however on the waiver letter but this was not the focus of attention at all until the hearing. Moreover, the success on that document depended upon a request for legal action which was not previously made until trial and upon the provision of an indemnity which has not yet been given. Without forming any concluded view and subject to the submissions of the parties, my tentative conclusion would be that the Claimant has achieved overall success but has nonetheless succeeded on fewer issues than the Defendant. In circumstances where the courts now look at individual issues and the costs involved in determining those issues it would be just for the Claimant to receive 50 % of her costs and the Defendant to receive 50 % of its costs. In those circumstances it would seem to me that the most appropriate order for costs would be to make no order at all on the basis that the 50/50 split is effectively cancelled out by this means and thus avoids the necessity for any further dispute, argument or assessment. As I say this is only a provisional view and it maybe that the parties would wish to address me further on the point before I make an order.