Scottish Pension Fund Trs v Marshall et Al
| Jurisdiction | Scotland |
| Judge | Lady Wolffe |
| Judgment Date | 08 June 2018 |
| Neutral Citation | [2018] CSIH 39 |
| Date | 08 June 2018 |
| Court | Court of Session (Inner House) |
| Docket Number | No 29 |
[2018] CSIH 39
First Division
Lady Wolffe
Balmer v HM Advocate [2008] HCJAC 44; 2008 SLT 799; 2008 SCCR 765; 2008 SCL 1070
Ben Line Steamers Ltd (Liquidator of), Noter [2010] CSOH 174; 2011 SLT 535
Heather Capital Ltd v Levy and McRae [2015] CSOH 115; 2015 GWD 28–475
Heddle's Exrx v Marwick and Hourston's Trs (1888) 15 R 698
Henderson v Stubbs Ltd (1894) 22 R 51; 2 SLT 288
Hoey v MacEwan and Auld (1867) 5 M 814
Kaur v Singh 1999 SC 180; 1999 SLT 412; 1998 SCLR 849
McKeand v Laird (1861) 23 D 846
Marine and Offshore (Scotland) Ltd v Hill and anr [2018] CSIH 9; 2018 SLT 239
Miller v MacLeod 1973 SC 172; 1974 SLT 99
Miller v Thorburn (1861) 23 D 359
Nelmes & Co v Montgomery & Co and Loudon (1883) 10 R 974
Ocra (Isle of Man) Ltd v Anite Scotland Ltd 2003 SLT 1232
Ridgway and Bridson v Brock (1831) 10 S 105
Sim v Howat [2011] CSOH 115; 2011 GWD 24–550
Stephen's Tr v Macdougall & Co's Tr (1889) 16 R 779
Thomson and Balfour v Boag & Son 1936 SC 2; 1936 SLT 2
Bell, GJ, Commentaries on the Law of Scotland and on the Principles of Mercantile Jurisprudence (7th McLaren ed, Butterworths/Law Society of Scotland, Edinburgh, 1990), ii, 526
Johnston, D, Prescription and Limitation of Actions (2nd ed, W Green, Edinburgh, 2012), paras 22.08–22.15
Scottish Law Commission and Law Commission, Partnership Law: A joint consultation paper (Scot Law Com Discussion Paper no 111/Law Com Consultation Paper no 159, July 2000), paras 10.62–10.69 (Online: https://www.scotlawcom.gov.uk/files/4112/7892/7070/dp111_partnership_law.pdf (6 July 2018))
Scottish Law Commission and Law Commission, Partnership Law: Report on a reference under section 3(1)(e) of the Law Commissions Act 1965 (SE/2003/299 and Cm 6015) (Scot Law Com no 192/Law Com no 283, November 2003) (Online: https://www.scotlawcom.gov.uk/files/3812/7989/6640/rep192.pdf (6 July 2018))
Walker, AG, and Walker, NML, The Law of Evidence in Scotland (4th Ross and Chalmers ed, Bloomsbury Professional, Haywards Heath, 2015), paras 3.3, 3.4
Partnership — Dissolution — Liability of firm — Dissolution and creation of firms occasioned by departure and assumption of partners — Firms trading under the same name, in same place and in same type of business — Whether liability for partnership debts transmitted to successor firms on dissolution of partnership
Partnership — Pleadings — Relevancy — Dissolution and creation of firms occasioned by departure and assumption of partners — Firms trading under the same name, in same place and in same type of business — Whether pursuers had pled a relevant case that liability for partnership debts transmitted to new partnership
Scottish Pension Fund Trustees ltd raised an action in the commercial court against Marshall, Ross & Munro, a firm of solicitors, for recovery of deficits in the firm's pension fund. The cause called before the commercial judge (Lady Wolffe) for a debate. At advising, on 5 January 2018, the commercial judge dismissed the action ([2018] CSOH 1). The pursuers reclaimed.
The Scottish Solicitors' Staff Pension Fund provides pensions on retirement for employees of solicitors. The rules of the fund changed in 2003 to impose a liability on former contributing employers for deficits. The trustees of the fund raised an action against a solicitors' firm and its two partners for recovery of deficits in the fund. The firm was the seventeenth instance of a solicitors' firm with the same name and place of business, with the formation of new firms occasioned by the assumption or departure of a partner. The deficits had arisen, not in connection with persons employed by that firm, but by predecessor firms. After debate, the commercial judge dismissed the action on the basis that the pursuers had not averred a relevant case that the liability to the fund transmitted from the earlier firms to the successor firm. She also held that no contingent liability had arisen which was capable of being transmitted. The pursuers reclaimed.
Held that: (1) a person who continues to trade in the same business under the same name may well be presumed to have undertaken former liabilities in the absence of an outward demonstration of a change of ownership behind the façade (paras 44, 48, 50, 77); (2) the pursuers' averments that the firms had traded from the same premises under the same name, that they had held themselves out to be the same business or firm, and had paid some of the contributions called for by the pursuers, were sufficient to entitle a court to infer that the various successor firms undertook to pay the debts of their predecessors (paras 49, 77); (3) ex hypothesi the firm and its predecessors were to be treated as one single continuous entity throughout, the firm came under a contingent liability from the change of rules in 2003 (paras 38, 59, 77); and reclaiming motion allowed.
Observed (per Lord Drummond Young) that the presumption of transmission between partnerships applied where three conditions were satisfied: (i) the business entity remained essentially the same despite changes in the individual members of the partnership; (ii) the business of the partnership was continued without interruption; and (iii) the original partnership ceased to exist or sustained a significant diminution in its assets (para 65).
Sim v Howat 2011 GWD 24–550 applied.
The cause called before the First Division, comprising the Lord President (Carloway), Lord Drummond Young and Lord Malcolm, for a hearing on the summar roll, on 28 and 29 March 2018.
At advising, on 8 June 2018—
Lord President (Carloway)—
[1] This is a reclaiming motion against an interlocutor of the commercial judge, dated 1 February 2018, dismissing the action following a debate on the relevancy of the pursuers' written pleadings ([2018] CSOH 1). The issues for determination are ones of principle. The first is whether a contingent liability in the defenders to make contributions to remedy a deficit in a pension fund arose in respect of three employees; the last of whom retired in 1994. This turns upon the construction of the documents setting up and regulating the fund and the interaction of the defenders, or predecessor firms, with the fund. The second is whether, if such a contingency did arise, it transmitted to successor partnerships under the name of Marshall, Ross & Munro (‘MRM’), which continued the business of the partnership which had undertaken the liability.
[2] The Scottish Solicitors' Staff Pension Fund provides pensions on retirement for employees of solicitors and/or for the widows, children or dependents of such employees. It was set up by declaration of trust, with rules appended, dated 17, 19, 22 and 27 December 1947. The 1947 Rules were replaced, with effect from 6 April 1978, in terms of a trust deed dated 4 August and registered on 15 August 1980, which adopted new 1980 Rules. The Fund is currently governed by the terms of a trust deed dated 8 February 1990, which replaced the 1980 Rules, with effect from 6 April 1988, by rules and by-laws of the Fund referred to in cl 1A of the 1990 trust deed. The 1990 trust deed and Rules have been amended on a number of occasions, most recently in 2015.
[3] The Fund as originally established in 1947 was a defined contribution scheme. Fixed contributions were payable by the employee and employer. The benefits payable on retirement depended on the value of the portion of the Fund attributable to the particular employee/employer's contributions. The 1980 Rules changed the scheme to a final salary one. The amount payable upon retirement was thereafter to be calculated by reference to the employee's years of service and his/her final salary. By 2003, a funding deficit had arisen. The Fund was closed to new members and to future accruals of benefit to existing employees, with effect from 30 September 2003.
[4] The first defenders were a partnership of solicitors, trading under the name ‘Marshall, Ross & Munro’. They were engaged in the provision of legal services, primarily in conveyancing and private client work. They were dissolved with effect from 31 March 2015. The second and third defenders are the former partners of the first defenders. The first defenders were the successors of a number of partnerships, commencing with the formation of the original firm of Wm Marshall, Ross & Munro, later Marshall, Ross and Munro, on 30 December 1949 (‘MRM 1’). Since then various partners have either joined or left the firm. There have been 16 subsequent partnerships under the same name, ending with the first defenders (‘MRM 17’), which was formed in August 2006 and was dissolved when the third defender retired in 2015.
[5] It is not disputed that, as a matter of law, whenever a partner joined or departed, the existing partnership was dissolved and a new one formed. However, the first defenders' website stated that they had been established for over 100 years. The second defender became an employee of the firm in 1977. He was assumed as a partner in 1979. He was a partner in each successive firm trading as MRM from that time. He continues in practice as a sole practitioner, but still under the name MRM. The third defender was assumed as a partner in 2001, along with JS, to form MRM 16 with the second defender. A demerger agreement was entered into in December 2005. This led to the departure of JS with the second and third defenders ‘continuing’ the existing firm.
[6] The pursuers seek to recover deficit contributions in respect of three former employees of MRM, all of whom were members of the Fund. Between 1 April 1955 and 7 February 1994, MRM employed IW, RM and GH. GH was an active member who accrued benefits between 1 April 1955 and 1 October 1989. RM did so from 1 January 1989 to 7 February 1994 and IW from 1 March 1960 to 30 September 1986. The various partnerships trading as...
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