The plaintiff, born in 1904, was appointed a co-director of the defendant savings bank. By a contract of 25 August 1936 he was appointed sole director until the end of July 1946. The contract provided that in certain circumstances (death, incapacity) he was to be entitled to a retirement pension without having served for any qualifying period. In 1945 he was dismissed on the ground that his national-socialist past excluded him from further employment.

The plaintiff claimed a pension on the basis of the contract of 1936.

The Court of Appeal of Hamburg denied that the plaintiff was entitled to a pension under the contract but held that he could not be denied all rights to a pension and awarded him one half of what he would have received as a pension had he become incapacitated. The Court of Appeal reached its decision by means of supplementing the contractual terms with the help of an interpretation which took account of good faith. It argued that plaintiff's past service merited an adequate provision. No facts had emerged which had shown any disgraceful behaviour. The defendant was without doubt able to pay an adequate, permanent pension. The defendant's plea that, by granting him a pension, the plaintiff would be in a better position than employees relying on collective agreements was rejected on the ground that the claim was based on an individual contract. Since the plaintiff was only a little over forty years old when he was dismissed and since his health and the capacity to work and to adapt himself corresponded to his age, a pension amounting only to one half of what he would have obtained had he been incapacitated was to be considered as adequate. It would be unfair to make an award which would only make provision for payments as his need arose. In the words of the Court of Appeal, the result was "a pension which is only modest, measured by his former position and potential increases after 1945 owing to age, but which runs since June 1953 irrespective of any other remuneration".

Upon a second appeal by the defendant the judgment of the court below was reversed and the claim dismissed for the following

Reasons

...

A supplementation of the contract by way of interpretation is only possible if the contract is incomplete [references]. In the present case it is doubtful whether a lacuna existed in the contract or whether the latter contained an intentional restriction of the contractual pension rights which is therefore incapable of an extension. In any event, a contract can only be supplemented by way of interpretation in accordance with the principles of good faith [references]. The plaintiff has argued that the legal ethos at the time when the contract was concluded must be decisive. This is incorrect [references]. In principle it must be ascertained what the parties would have stipulated had they foreseen the subsequent chain of events [references]; moreover, any supplementation of the contract by way of interpretation must not result in a modification, or limitation of the contractual intention or in an addition to it, nor in a change of the contract, but only in a supplementation of the substance of the contract [references]. However, if accordingly the intention of the parties must be taken into account, as it is expressed in the contract, i.e. as it existed at the time of the conclusion of the contract, nevertheless in cases were the lacuna in the contract to be supplemented, did not exist from the beginning but arose only afterwards in consequence of further developments, any subsequent event must be disregarded [references]. If the event is one which is affected by a change in the political situation or if it occurred after a change in the legal ethos then either the contract cannot be supplemented by interpretation, because the event cannot be interpreted according to the intention of the parties which was based on a situation and or legal ethos which were entirely different, or the application of good faith, which para. 157 BGB requires to be observed also when a contract is to be supplemented by interpretation, must bring about that the change in the legal ethos is taken into account. In the present case only the first possibility must be considered ... Because of his political past the defendant could not employ him and, as subsequent events have shown, the plaintiff was precluded for years from providing his services. The defendant had to replace the plaintiff by another full time employee. In normal circumstances it seems out of the question that the plaintiff would have been conceded a pension in similar circumstances, unless he is in distress ... The payment of a pension to a healthy person, capable of work, aged forty one cannot be expected from a savings bank - leaving aside, perhaps, the case of an extraordinary wasting away of his powers - if the right to a pension is connected with the premature dismissal caused by a disability to work in the person of a servant and necessitates the appointment of another full time employee to fill the vacant position. If the plaintiff had been promised a pension for this contingency, he would claim for himself advantages beyond the reign of National Socialism, which he would never have obtained, had he not been connected with National Socialism. Any such agreement would be void according to para. 138 s. 1 BGB.

Until now and at present the plaintiff cannot either claim a pension on grounds of fairness. The plaintiff receives in his present employment a net annual income of 25-30,000 DM. If he were to receive a pension in addition he would be better off than if he had remained in the defendant's employment. The fall of National Socialism would therefore have yielded him an advantage in addition to the advantages he obtained through National Socialism. It is not equitable to grant him such an advantage, while the defendant must fill the position by a salaried replacement and the plaintiff is not in want.

It is irrelevant that the defendant can afford pension judgments to the plaintiff, but it is relevant that equity does not support a solution whereby, having been dismissed for personal reasons, he would receive a pension in addition to any salary for services to another after his obligations towards the plaintiff had ceased, although in normal circumstances he would never have received a pension in the event that happened ...

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