The City Of Edinburgh Council V. Scottish Council For Research
| Jurisdiction | Scotland |
| Judge | Lord Menzies |
| Neutral Citation | [2011] CSOH 130 |
| Court | Court of Session |
| Published date | 11 August 2011 |
| Year | 2011 |
| Date | 11 August 2011 |
| Docket Number | CA137/10 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 130 | |
| CA137/10 | OPINION OF LORD MENZIES in the cause THE CITY OF EDINBURGH COUNCIL Pursuers; against (FIRST) SCOTTISH COUNCIL FOR RESEARCH IN EDUCATION and (SECOND) THE UNIVERSITY COURT OF THE UNIVERSITY OF GLASGOW Defenders: ___________ |
Pursuers: Sellar, Q.C., Cunningham; City of Edinburgh Council
Defenders: Munro; Dundas & Wilson CS (for the second defenders)
11 August 2011
Introduction
[1] This action concerns the proper construction of the Local Government Pension Scheme (Scotland) Regulations 1998 (S.I. 1998/366) ("the 1998 Regulations"). The pursuers are the administering authority of the Lothian Pension Fund ("the Fund"), which is one of the pension funds which form part of the Local Government Pension Scheme in Scotland. The Fund is regulated by the 1998 Regulations. The first defenders were a "scheme employer" of the Fund and paid contributions on behalf of those of their then employees who were active members of the Fund.
[2] On 31 July 2002 the first defenders were in effect taken over by the second defenders. The first defenders ceased to make contributions to the Fund; their eighteen employees as at that date became employees of the second defenders, and their pension entitlements were transferred to the Strathclyde Pension Fund. However, the pension entitlements of the first defenders' former employees were "left behind" in the Fund, and there is a deficit in the Fund so far as concerns these entitlements. The pursuers submit that there is a drafting error in the 1998 Regulations and that, properly construed, the 1998 Regulations enable the pursuers to rely on an actuarial valuation and revision of rates and adjustments certificate which would have the effect that the first defenders would be liable to make good this deficit. The second defenders accept that if any liability attached to the first defenders, the second defenders have inherited this liability, but they submit that on a proper construction of the Regulations no liability arose, and it cannot be retrospectively imposed.
The regulatory framework
[3] Although it appears that the original Admission Agreement (and any copies of it) cannot be found, it is not disputed that before reorganisation of local government in Scotland in 1975 the first defenders entered into such an agreement with the then Midlothian Council, which administered the "Midlothian Fund". Some reference was made in passing to the regulatory regime at and since that time; this included the Local Government Superannuation Acts of 1953 and 1972, the Local Government Superannuation (Scotland) Regulations 1974 (S.I. 1974/812), the Local Government Pension Scheme (Scotland) Regulations 1987 (S.I. 1987/1850) and the Local Government Pension Scheme (Transitional Provisions) (Scotland) Regulations 1998 (S.I. 1998/364). I was also referred to subsequent amendment to the regulatory regime in Scotland, namely the Local Government Pension Scheme (Scotland) Amendment Regulations 2000 (S.S.I. 2000/199) which came into force on 13 January 2000. Comparison was made with the English regime, and in particular the Local Government Pension Scheme Regulations 1997 (S.I. 1997/1612), the Local Government Pension Scheme (Miscellaneous Provisions) Regulations 1999 (S.I. 1999/1212) and the Local Government Pension Scheme (Amendment, Etc.) Regulations 1999 (S.I. 1999/3438). However, the central issue in this debate was the proper construction of the 1998 Regulations. The most important provisions of these Regulations for present purposes are as follows:
"Agreements to enable employees of non-Scheme employers to be members ('admission agreements')
4.-(1) An administering authority may make an admission agreement with any admission body.
(4) An admission agreement must terminate if the admission body ceases to be such a body.
(5) An admission agreement may make such other provision about its termination as the parties consider appropriate.
(8) These are admission bodies-
(a) a body which provides a public service in the United Kingdom otherwise than for the purposes of gain;
Admission agreement funds
74.-(1) An administering authority who have made an admission agreement may establish a further pension fund (an 'admission agreement fund') in addition to the fund maintained under regulation 73 ('the main fund').
(2) Immediately after an authority establishes an admission agreement fund they must give the Secretary of State notice in writing that they have done so.
(3) The notice must specify the admission bodies whose employees are eligible for benefits from the admission agreement fund ('the transferred bodies').
(5) When valuations under regulation 76 of both the main fund and the admission fund are first obtained after the admission agreement fund is established, the administering authority must obtain a transfer statement from the actuary appointed by them.
Actuarial valuations and certificates
76.-(1) Each administering authority must obtain-
(a) an actuarial valuation of the assets and liabilities of each of their pension funds as at 31st March 1999 and in every third year afterwards;
(b) a report by an actuary; and
(c) a rates and adjustments certificate.
(2) Each of these documents must be obtained before the first anniversary of the date ('the valuation date') as at which the valuation is made or such later date as the Secretary of State may agree.
(3) A rates and adjustments certificate is a certificate specifying-
(a) the common rate of employer's contribution; and
(b) any individual adjustments,
for each year of the period of three years beginning with 1st April in the year following that in which the valuation date falls.
(4) The common rate of employer's contribution is the amount which in the actuary's opinion should be paid to the fund by all bodies whose employees contribute to it so as to secure its solvency, expressed as a percentage of the pay of their employees who are active members.
Special circumstances where revised actuarial valuations and certificates must be obtained
77-(1) When obtaining a transfer statement under regulation 74(5) an administering authority must also obtain from the actuary a rates and adjustments certificate for the admission agreement fund for each remaining year of the period covered by the most recent such certificate for their main fund.
(2) Where an admission agreement ceases to have effect, the administering authority who made it must obtain-
(a) an actuarial valuation as at the date it ceases of the liabilities of the admission body which is ceasing to be a transferred body; and
(b) a revision of any rates and adjustments certificate for any fund which is affected, showing the revised contributions due from that admission body and any other admission body in respect of which revised contributions are due.
Employers' liability to make payments
Employers' contributions
78-(1) An employing authority must contribute to the appropriate fund in each year covered by a rates and adjustments certificate under regulation 76 or 77 the amount appropriate for that authority as calculated in accordance with the certificate and paragraph (4).
(2) During each of those years an employing authority must make payments to the appropriate fund on account of the amount required for the whole year."
Submissions
[4] Counsel for the pursuers and for the second defenders each helpfully provided the court with a written note of argument. I have had regard to the whole contents of these notes, together with the submissions made for each party at the bar.
Submissions for the second defenders
[5] By reason of the transfer and management agreement between the first and second defenders (No.6/10 of process) those eighteen persons who were as at 31 July 2002 employed by the first defenders had their employment transferred to the second defenders, and their pension entitlement was transferred out of the Fund into the Strathclyde Pension Fund. However, the entitlement of former employees of the first defenders to payment of a pension remains in the Fund. The first question in the present action is whether, when the Admission Agreement was terminated and the first defenders ceased to participate in the Fund, they became liable to pay to the Fund the amount of deficit attributable to the entitlement to pension of those former employees.
[6] It is common ground that the first defenders participated in the Fund pursuant to an Admission Agreement under Regulation 4 of the 1998 Regulations (or its predecessor). At no time thereafter did the pursuers (or their predecessors as administrators of the Fund) avail themselves of the power contained in Regulation 74 to establish an Admission Agreement Fund. Accordingly, the first defenders never became a "transferred body" for the purposes of Regulation 74.
[7] Regulation 76 of the 1998 Regulations imposed the primary duty on the administering authority to obtain triennial actuarial valuations of the assets and liabilities of the Fund in order to secure the solvency of the Fund. It was envisaged that during the three year lifetime of such a valuation, circumstances might arise which would require the assumptions underlying the triennial valuation, and the rate of employer's contribution, to be revisited. The mechanism for this is to be found in Regulation 77. There are three special circumstances specified therein which require revised actuarial valuations and certificates to be obtained. The first of these is where the administering authority establishes an Admission Agreement Fund. In such a situation the administering authority must obtain a certificate for the Admission Agreement Fund for each remaining year of the existing triennial valuation for the main Fund. This does not arise in the present case because no Admission Agreement Fund was established. The second circumstance was concerned with the converse situation, i.e. where a transferred body comes...
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