puzzle pieces in woman hands isolated on white

The mildest UK December in memory seems to have been reflected in two pension cases on either side of Hadrian’s Wall which together suggest the courts might just be nudging towards pragmatism in interpreting pensions documentation. In this post we consider a recent Scottish case; in part two we move south to the English High Court.

Substance over form

The Court of Session in Edinburgh (equivalent to the Court of Appeal) gave pension trustees cause for a little pre-Hogmanay cheer on its last sitting day of 2015.

The case[1] concerned a claim by the trustees of an industry-wide pension scheme for law firms to recover contributions arrears from a participating firm.

Partners in the firm argued that they were not required to pay the arrears, as amendments to the scheme’s rules made since 1980 (including a requirement on the scheme’s participant employers to pay contributions) did not comply with the formalities set out in the scheme’s governing rules and were therefore invalid.

These formalities, which applied prior to 1991, included a ‘triple-lock’, whereby a two-thirds majority from each of three ‘constituencies’ within the scheme was required, to make a valid amendment to the scheme.

The trustees were unable to produce evidence relating to amendments made in 1980 and 1990 to show that the triple lock procedure had been followed.

A surprising decision

The Court considered that substance was more important than form: deeds amending the scheme had been entered into, but it could not be conclusively proved that the triple lock procedure had been followed. This absence of proof that the formalities were complied with was not fatal to the trustees’ case, however.

A significant time (two or three decades) had passed since the making of the amendments in question, during which no complaint had been received, and the scheme had been administered during that time on the basis of the rules as they were amended in 1980 and 1990. The Court suggested that it would be intolerable if the validity of amendments in such circumstances could be questioned.

It held that the partners of the firm had to prove that the triple lock procedure had not been followed, rather than the trustees having to prove that it was. As the partners were unable to prove the negative, the trustees won the case.

This decision could be of comfort to pension scheme trustees who are struggling to find historical documents. This Scottish judgment does not set a binding precedent in England, although it is persuasive here.

An English case[2] due to be heard in the Court of Appeal in July will, we hope, clarify the law on pension scheme formalities in England. In this case, the correct formalities for making amendments had not been adhered to over the course of twenty years, and the High Court held that as a result, the amendments made during that time were not valid. The employer in that case, whose pension bill increased significantly as a result of the decision, will be hoping that the Court of Appeal is sympathetic to the conclusions of the Court of Session.

This post was contributed by James Gulliford. For more information, email blogs@gateleyplc.com.

[1] Scottish Solicitors Staff Pension Fund v Pattinson and Sim and others [2015]

[2] Briggs and others v Gleeds and others [2014]

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.