Low & Bonar Plc+low & Bonar Pension Trustees Limited V. Mercer Limited
| Jurisdiction | Scotland |
| Judge | Lord Drummond Young |
| Neutral Citation | [2010] CSOH 47 |
| Court | Court of Session |
| Published date | 01 April 2010 |
| Year | 2010 |
| Date | 01 April 2010 |
| Docket Number | CA55/09 |
| OUTER HOUSE, COURT OF SESSION [2010] CSOH 47 | |
| CA55/09 | OPINION OF LORD DRUMMOND YOUNG in the cause LOW & BONAR PLC & LOW & BONAR PENSION TRUSTEES LIMITED Pursuers; against MERCER LIMITED Defenders: ________________ |
Pursuers: Connall, QC, Solicitor; McGrigors
Defenders: Martin, QC; Barne; Tods Murray
1 April 2010
[1] The present opinion is concerned with the operation of a pension scheme, the Low & Bonar Group Retirement Benefits Scheme, hereinafter referred to as the GRB Scheme. The GRB Scheme was originally established in 1947, and is now governed by a Definitive Deed dated 24 June 1982 and a number of further amending deeds, in particular a Supplemental Definitive Deed of 1989. The first pursuers are the principal employer of the GRB Scheme and the second pursuers are the trustees of the Scheme; they are referred to hereafter as "the Company" and "the Trustees". The defenders are a company that provides a variety of professional services to their clients, including pensions consultancy and administration and actuarial services. For many years the defenders provided the Trustees and the Company with services of that nature. The pursuers aver that those services included advice as regards the law and practice relating to pensions and pension schemes, including scheme amendments and the mechanism for making such amendments. It is further averred that the defenders administered the GRB Scheme; prepared the rules and other scheme documentation for the GRB Scheme; reviewed the rules of the Scheme and provided advice on the relevance of legislation in respect of the rules; prepared documentation relating to the Scheme; and advised on its funding and on the benefits payable thereunder.
The Barber decision and its implications
[2] On 17 May 1990 the European Court of Justice issued its decision in Barber v Guardian Royal Exchange Group, [1990] ECR I-1889. The effect of that decision was that provisions in a pension scheme that laid down different retirement dates for male and female members were discriminatory and consequently in breach of article 119 (as it then was) of the EC Treaty. From that date onwards, article 119 had direct effect and automatically operated to amend all pension schemes in such a way as to eliminate any discriminatory provisions. The effect of Barber was explained in more detail in a subsequent case before the European Court of Justice, Coloroll Pension Trustees Ltd v Russell, [1994] ECR I-4389. The latter decision made it clear that, in order to achieve equalization of retirement dates, Barber required that disadvantaged employees should be granted the same advantages as those previously enjoyed by the advantaged employees, but that it was permissible for the future to achieve equal treatment by reducing the advantages that the advantaged employees formerly enjoyed. At that time the Rules of the GRB Scheme provided that the normal retirement date for female members was 60 and for male members 65. The immediate effect of Barber was accordingly to reduce the normal retirement date ("NRD") of male members to 60. This would have an adverse financial effect on the scheme, however, and it was possible for the future to increase the NRD of female members to 65, thus achieving equality. The history of these matters is conveniently summarized by Patten J in Foster Wheeler Ltd v Hanley and Others, [2008] EWHC 2926, at paragraphs [4]-[24].
Action taken by the pursuers
[3] The pursuers aver that following the Barber decision the defenders advised that the GRB Scheme required to be amended. A meeting followed between representatives of the Company and the defenders, and it was agreed that there would be merit in increasing the normal retirement date for all new female members of the GRB Scheme to 65. Certain further advice was given by the defenders, in which the Company was advised it enter into a consultation with the GRB Scheme members in respect of the amendment of the scheme in the light of the Barber decision. Following that advice, the board of directors of the Company resolved at a meeting held on 5 March 1991 that the Rules of the GRB Scheme should be amended. (In the pleadings it is incorrectly stated that the meeting was "a meeting of the Company" and that the meeting was held on 18 February 1991; nevertheless it was a matter of agreement that the meeting was held on 5 March and was of the board only, although nothing turns on these points). At the board meeting a representative of the defenders, Mr BK Rigby, explained the implications of the Barber decision. He stated that as a result of the decision there needed to be equal treatment for men and women, at least for benefits accrued after 17 May 1990, the date of the judgment. As the GRB Scheme stood, after that date male members were accruing benefits which they could required to receive on the same terms as female members, and it was necessary for the Group to take action to deal with the problem. Mr Rigby stated that 90 per cent of the schemes that had taken action in response to Barber had equalized the pension age for men and women at 65. He recommended that the Group should do likewise, equalizing the normal pension age for male and female members at that age for all new entrants and calculating future service benefits on the basis of a normal retirement age of 65. The board of directors discussed those recommendations and reached agreement in the following terms, which were duly minuted:
"The normal retirement age for men and women in all of the Group's retirement benefit schemes should, with effect from 1 July, 1991, be 65 for all new entrants to those schemes and that the retirement benefits of all existing women members of those schemes in respect of service after that date should be calculated on the basis of a retirement age of 65".
Thereafter the chairman stated that it would be necessary to ensure that communication of the changes being made, particularly the equalization of retirement ages, was carried out in the best possible way. It was delegated to the executive committee of the board to oversee the communication and documentation of the changes.
[4] The board of directors of the Trustees met on 5 July 1991. The following entry appeared in the minute of that meeting:
"It was noted that the Board of Low & Bonar PLC had decided at a meeting on 18 February 1991 [actually held on 5 March 1991] to amend the Rules of The Low & Bonar Group Retirement Benefits Scheme... so that: --
(a) the Normal Retirement Date for female members would, with effect from 1 July, 1991, be the 65th birthday. For female members who were members of the Schemes on 30 June, 1991, and who subsequently retire before age 65, an Actuarial Reduction Factor would only be applied to that part of their pension in respect of service after 1 July, 1991.
...
It was RESOLVED that the changes be implemented and the Rules amended accordingly with effect from 1 July, 1991".
[5] The pursuers aver that following those meetings the defenders were responsible for ensuring that such documentation as was necessary was prepared to give effect to the necessary changes. A consultation document was prepared by the defenders and sent out to all staff. Thereafter an implementation announcement prepared by the defenders was circulated to all staff. This confirmed that retirement ages and pension entitlements for all service after 17 May 1990 would be based on age 65. A further general announcement was made to staff which referred to the equalization of benefits for men and women. The pursuers aver that the discussions that took place between the defenders and the pursuers resulting in the issue of these announcements constituted advice from the defenders to the pursuers and implied that the announcements were sufficient to effect equalization. No deed to effect the required amendment was made until 15 August 2002, when a Replacement Definitive Deed was executed. The pursuers aver that the defenders did not prepare such a deed, nor did they advise the pursuers to ensure that one was prepared and executed. That, it is said, was required in terms of the 1989 Supplemental Definitive Deed to effect a change in the rules to reflect the pursuers decision to equalize normal retirement dates for men and women. The pursuers further aver that after July 1991 they proceeded at all material times on the basis that equalization had been effected, and the defenders consistently advised on the funding of the scheme and other issues on the same basis.
The raising of the action and the defenders' arguments
[6] The pursuers have subsequently raised the present action against the defenders. Their first conclusion is for declarator that under the GMB Scheme the normal retirement date for all members of the scheme was first equalized at age 65 upon the execution of the Replacement Definitive Deed on 15 August 2002, and not at any earlier date; and that the Trustees (the second pursuers) are obliged to administer the Scheme on that basis. The second conclusion is for payment of damages by the defenders to the Trustees; and the third conclusion, an alternative to the second, is for payment of damages to the Company (the first pursuers). Damages are claimed on the basis that the defenders, in providing services to the pursuers in connection with the GRB Scheme, failed to exercise reasonable care and skill such as would be expected of a consulting actuary and pension adviser of ordinary skill and competence, and that that failure constituted both a breach of contract and negligence at common law. In summary, what is claimed is that during the period from 1991, when the Barber judgment was issued, until 2002 the pursuers administered the Scheme on an incorrect basis because the definition of the NRD had not been properly altered. As a result, it is said, the NRD remained at 60 for both men and women, and the pursuers will be required to compensate members of the Scheme to...
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