Ps Independent Trustees Ltd V. David Kershaw &c
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2007] CSOH 50 |
| Date | 09 March 2007 |
| Docket Number | A416/04 |
| Court | Court of Session |
| Published date | 09 March 2007 |
| OUTER HOUSE, COURT OF SESSION [2007] CSOH 50 | |
| A416/04 | OPINION OF LORD GLENNIE in the cause PS INDEPENDENT TRUSTEES LIMITED and OTHERS Pursuers; against DAVID KERSHAW and OTHERS Defenders: ________________ |
Pursuers: Clark; Biggart Baillie,
First & Second Defenders: Cunningham; CMS Cameron McKenna
Third Defenders: Munro; Brodies, W.S.
Fourth Defender: John MacLennan, Party
Fifth Defender: Thomson; Morton Fraser
9 March 2007
Introduction[1] The pursuers are the current trustees of the Blyth & Blyth Pension Scheme ("the Scheme"). The Scheme was constituted by Trust Deed dated 30 June 1965, as supplemented or amended by various Trust Deeds and Deeds of Covenant, certain Resolutions of Blyth & Blyth Holding Company Limited (now called Blyth & Blyth Limited and referred to in this Opinion as "the Company") and the Definitive Trust Deed ("the Deed") and Rules ("the Rules") dated on various dates in May 2000. As a result of the inability of the Scheme to meet its commitments to its members, the then trustees took the decision at a meeting of 1 November 2002 to wind up the Scheme. On 6 December 2002 the first pursuer was appointed a trustee of the Scheme. On 7 January 2003, the Company went into receivership. Since then the first pursuer has been an independent trustee in terms of section 23 of the Pensions Act 1995 ("the 1995 Act"). In this action, the pursuers sue to recover losses to the Scheme caused, so they contend, by certain acts and omissions of the defenders.
[2] The first defender was the Scheme Actuary appointed in terms of section 47(7) of the 1995 Act. He is sued for breach of a duty of care owed to the pursuers both at common law and by virtue of an implied term of the contract in terms of which he was appointed. He was employed by the second defenders. The pursuers seek to make them vicariously liable for the first defender's breach of duty. I shall refer to the first defender as "the actuary" and to the first and second defenders collectively as "the actuaries".
[3] The third, fourth and fifth defenders were, at various times, trustees of the Scheme. They were also directors (and, in the case of the third defender, chairman) of the Company. They are each sued for breach of trust. The periods during which they held office as trustees of the Scheme are important to the arguments addressed to me as are, to a lesser extent, the periods in which they served as directors. The details are as follows. The third defender was chairman of the Company until his resignation in May 2002, and chairman of the trustees until his resignation and removal as trustee on 26 April 2002. The fourth defender was a director of the Company until his resignation in May 2002, and was a trustee until his resignation in June 2003. The fifth defender was a director of the Company throughout the relevant period, and was a trustee from 26 April 2002 until his resignation in January 2003. The action was originally laid also against the sixth defender, a director of the Company, though not a trustee. Though his name still appears in the instance, it is right to note that he was assoilzied from the conclusions of the summons by decree dated 23 March 2005. I shall refer to the third, fourth and fifth defenders, when it is appropriate to refer to them collectively, as "the trustees". In some instances, however, it is necessary to differentiate between them.
[4] The case came before the court on the Procedure Roll at which certain pleas-in-law for the trustees were discussed. The trustees sought dismissal of the action in so far as directed against them; alternatively deletion of certain of the pursuers' averments. The first and second defenders, although represented at the hearing, did not seek to advance any argument in support of their own preliminary pleas.
[5] The case was first appointed to the Procedure Roll by interlocutor of August 2005. The trustees lodged Notes of Argument in good time. Soon afterwards the hearing was fixed for 31 October 2006. On 24 October, only one week before the date fixed for the hearing, the pursuers moved a substantial Minute of Amendment. However, rather than move the court to allow the Minute of Amendment to be received, with a much abbreviated time for Answers and Adjustment thereafter, Mr. Clark, for the pursuers, invited me to allow the Record to be opened up and amended in terms of the Minute of Amendment. On that basis, he submitted, there would be no need to discharge the diet. There was no unfairness to the defenders, since the Procedure Roll discussion would, in any case, be about the pursuers' case, not that of the defenders. The defenders could deal later with his amendments by a separate amendment procedure and they could be protected in expenses. I adopted this course, despite opposition from all of the defenders, who wanted first to answer the Minute of Amendment even at the cost of a discharge. Mr. Clark's suggested course of action seemed to me to be entirely sensible. It avoided the need to discharge the diet. Although the defenders submitted that were I to follow that course I would be "innovating", as though that were reason in itself not to do it, subsequent enquiries have shown that such a course is by no means uncommon. There is no reason why amendment by a pursuer should automatically lead to a discharge. The discussion at Procedure Roll proceeded upon the basis of the pursuers' amended case on Record, and the third, fourth and fifth defenders helpfully produced revised Notes of Argument before the hearing. At the same time, I pronounced an interlocutor allowing the defenders to answer such part (if any) of the pursuers' amended case as survived debate by their own amendment procedure later, the expenses of which would be treated as though expenses in an amendment procedure initiated by the pursuer's Minute of Amendment.
The pursuers' case on Record against the trustees[6] In Article 3 of Condescendence, the pursuers refer to Clause 18 of the Deed, in terms of which no trustee of the Scheme is personally responsible or liable as a trustee for anything whatever except breach of trust knowingly and intentionally committed by him. However, they aver that, this notwithstanding, the trustees are liable for loss or damage caused by their gross negligence, which they characterise as a reckless disregard by the trustees of the consequences of their acts or omissions
[7] The pursuers make four separate claims against the trustees. Using the terminology deployed in argument, these are: the contributions claim; the investments claim; the early retirements claim; and the expenses claim. These claims are set out in detail in Articles 5 to 24. The averments of loss are contained in Article 25. The pursuers claim that the Scheme has suffered a loss of £6,005,168 as a result of the trustees' breaches of trust as well as the actuary's breaches of contract and/or duty. The conclusions to the summons are directed against the trustees and the actuaries jointly and severally. Each head of claim was the subject of attack by the trustees in their submissions, as also were the averments of loss and the joint and several conclusions. Because of the detailed scrutiny given to the pursuers' case, it is necessary to set out at some length their averments on Record relating to each claim.
The contributions claim
[8] In Articles 5-8 and 21, the pursuers claim against the trustees for contributions which, it is alleged, should have been paid by the Company to the Scheme between April 2001 and November 2002, but which were not paid.
[9] The relevant statutory background is laid out in Article 5. In terms of s. 56(1) of the 1995 Act, every occupational pension Scheme to which the section applies - and this is such a Scheme - is subject to a requirement (referred to as "the minimum funding requirement" or "MFR") that the value of the assets of the Scheme is not less than the amount of its liabilities. S.57(1) requires the trustees: (a) to obtain, within a prescribed period, an actuarial valuation, and afterwards obtain such a valuation before the end of prescribed intervals; and (b) on prescribed occasions or within prescribed periods, to obtain a certificate prepared by the actuary of the Scheme (i) stating whether or not in his opinion the contributions payable towards the Scheme are adequate for the purpose of securing that the minimum funding requirement will continue to be met throughout the prescribed period or, if it appears to him that it is not met, will be met by the end of that period, and (ii) indicating any relevant changes that have occurred since the last actuarial valuation was prepared. By s.59(3), if, at the end of the prescribed period, it appears to the trustees that the minimum funding requirement is not met, they must, within such further period as may be prescribed, prepare a report giving the prescribed information about the failure to meet that requirement. Where an actuarial valuation shows that, on the effective date of valuation, the value of the Scheme assets is less than 90% of the amount of the Scheme liabilities, the employer is required, in terms of s.60(1) and (2), to secure an increase in the value of the Scheme assets which, taken along with any contributions paid, is not less than the shortfall. If the employer fails to secure the required increase in value before the end of the relevant period, then the trustees are required by s.60(4), except in prescribed circumstances, within a certain period, to give written notice of that fact to Occupational Pensions Regulatory Authority ("OPRA") and to the members of the Scheme. The pursuers also refer to Clause 28(1)(a) of the Deed, which requires the trustees, at intervals not exceeding three years, to take Actuarial Advice (i) to determine the actuarial position of the Scheme and the rate of contribution which should be made to the Fund, and (ii), with effect from no later than the third anniversary...
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