Trustees Of The Scottish Solicitors Staff Pension Fund Against Pattison And Sim And Others
| Jurisdiction | Scotland |
| Judge | Lord Woolman |
| Neutral Citation | [2014] CSOH 119 |
| Court | Court of Session |
| Published date | 01 August 2014 |
| Year | 2014 |
| Docket Number | CA63/13 |
| Date | 01 August 2014 |
OUTER HOUSE, COURT OF SESSION
[2014] CSOH 119
CA63/13
OPINION OF LORD WOOLMAN
In the cause
TRUSTEES OF THE SCOTTISH SOLICITORS STAFF PENSION FUND
Pursuer;
against
PATTISON & SIM & OTHERS
Defender:
Pursuer: Connal QC, solicitor advocate; Pinsent Masons LLP
Defender: G MacColl; Pattison & Sim
1 August 2014
Introduction
[1] In this action for payment, the trustees of the Scottish Solicitors Staff Pension Fund seek to recover £50,224 from the firm of Pattison & Sim and its two partners. The trustees maintain that the original trust documents have been amended several times, and that rules adopted in 1990 now govern the Fund.
[2] The defenders deny liability. They question whether the formal amendment procedure set out in the original trust documents was followed. They contend that the trustees do not offer to prove that the various amending deeds are valid. Accordingly, the action is so fundamentally lacking in specification that it is irrelevant and should be dismissed.
[3] The matter came before me for debate. There are two issues for determination. First, are the amending documents valid? If the answer to that question is yes, then the trustees are entitled to decree. If, however, the answer is no then a second question arises. Are the defenders prevented from making the present challenge because of the principles of (a) approbate and reprobate (b) personal bar, or (c) abuse of process?
Background
The Fund
[4] The Fund provides pensions for employees of solicitors’ firms and their dependants. It was established in 1947 by a declaration of trust. The rules annexed to the trust deed contained detailed provisions for the operation of the scheme. They stipulated that (a) the Fund would be administered by twelve managers, six elected by the members (the employees) and six by the employers (who were known as ‘assenting employers’); (b) the employers and employees would make equal contributions; and (c) an employer’s liability to the Fund ceased when the employee retired.
[5] In 1980 and again in 1990 the trustees executed deeds of variation to comply with new tax and pension legislation. The trustees recorded the deeds in the Books of Council and Session. On each occasion the amending deeds cancelled the existing rules and replaced them with new rules.
[6] The 1980 rules provided a more elaborate scheme for the calculation of contributions. The employers had to make higher contributions, subject to a cap of twice the contributions made by the employee. They remained liable to contribute to the Fund only until the employee retired.
[7] The 1990 rules changed matters in an important way. They required the employers to undertake to the trustees that they will pay the contributions as they fall due. Rule V (b) provides that
“each assenting employer shall be liable to pay contributions to the Fund at such rate [as] the Managers, after obtaining the advice of the Actuary, determine are necessary to maintain the benefits of the Fund …”
[8] In the early years of this century, the Fund encountered financial difficulties. The problems stemmed from a fall in the value of the stock market. Like many other final salary pension schemes, the Fund had a deficit. The trustees took advice about how to address the contingent liabilities of existing members. At a meeting on 27 May 2003, it was decided to wind up the Fund, or alternatively to operate it as a closed-door paid-up arrangement. At an extraordinary general meeting held on 14 August 2003, the employers agreed to lift the cap on their contributions.
[9] Since 2003 the deficit has increased. The pursuers, who are the current trustees of the Fund, now seek to recover the employers’ contributions. They maintain that under the 1990 rules, the firm of Pattison & Sim and its two partners are among those liable to meet the deficit.
The Firm
[10] Pattison & Sim was founded as a solicitors’ practice in 1905. Since then various partnerships have traded under that name. I shall refer to them collectively as ‘the Firm’. William Sim became a partner in 1972 and in due course became the senior partner of the Firm. He decided to retire in 2005. At that stage he had two fellow partners: David Howat, who became a partner in 1991; and Bridget McLaren, who was assumed as a salaried partner in 1999 and became an equity partner in 2002. The three individuals negotiated a retirement settlement, in terms of which Mr Howat and Miss McLaren undertook to pay Mr Sim £175,000 by way of instalments of just under £3,000 per month.
[11] Between 1970 and 1998, the Firm employed Ronald Barr as a legal assistant. For most of that period it remitted the necessary pension contributions to the Fund. When Mr Barr retired, the Firm did not withdraw from the Fund.
[12] During the course of the negotiations leading up to his retirement settlement, Mr Sim knew that the Firm had a continuing liability to the Fund. As senior partner, he had received various communications about it. In December 2004 he sent the Fund a partnership cheque for £1,416 in response to a request from the trustees.
[13] Mr Howat and Miss McLaren were unaware of this matter. They assumed that any obligations to the Fund had terminated in 1998 upon Mr Barr’s retiral. When they learned of the true position in 2008, they were aggrieved with Mr Sim and ceased paying his monthly instalments. They believed that he had secured an unduly favourable retirement settlement. If they had known of the continuing liability to the Fund, they would have negotiated different terms.
[14] Mr Sim then raised an action to enforce his rights under the retirement agreement. The action came before Lord Hodge. He dealt with the matter in two stages. The first question was resolved following a debate. Mr Sim contended that the Firm had no liability to the Fund and he should therefore receive his full claim. He submitted that liability to the Fund had not transferred to the new partnership that came into being in 1999 when Miss McLaren was assumed as a partner. Lord Hodge rejected that argument. He held that liability had transferred, even though the Firm was no longer an assenting employer: Sim v Howat and McLaren [2011] CSOH 115.
[15] The second question concerned Mr Sim’s conduct during the course of the negotiations. After a proof Lord Hodge held (a) that his non-disclosure about the Fund did not amount to fraudulent misrepresentation; (b) that there was therefore no basis to reduce the retirement agreement, or to award damages; (c) that Mr Sim had, however, breached his fiduciary duty to his fellow partners; and (d) that did not afford Mr Howat and Miss McLaren a remedy, as they would not have wound up the Firm if they had known the true position at the time, because such a course would have been ‘financially catastrophic’: Sim v Howat and McLaren [2012] CSOH 171.
[16] Throughout the proceedings before Lord Hodge, neither party challenged the validity of the amendments to the rules. They accepted that the 1990 rules governed the Fund. Further, in the course of the litigation, the trustees supplied details of the Firm’s outstanding liability to the Fund at the request of the parties. That had important practical consequences. On the basis of those figures, Mr Sim reduced his claim to reflect his one third share of the liability to the Fund. The court pronounced its final interlocutor on that basis. No reclaiming motion was marked against either of Lord Hodge’s judgments.
The Amendment Procedure
[17] Article II of the 1947 trust deed stated that the Fund was to be “constituted and administered in terms of these presents and the Rules … as they may be amended from time to time”. Clause IX states:
“These presents, or any part of them (including the Rules) may be amended at any time, or from time to time in the same manner as is provided for amendment of the Rules …”
[18] That procedure is found in rule XXV, which states:
“Subject to the provisions of the Declaration of Trust constituting the Fund regarding amendment thereof, and of these Rules, these Rules or any of them may be altered, repealed, or added to with the approval of (a) a majority of two thirds of the votes cast by the assenting employers and members personally present and represented by proxy, at an Extraordinary General Meeting of the Fund called for the purpose of approving such alteration, repeal or addition; (b) a majority of two thirds of the contributing members personally present or represented by proxy at a separate General Meeting of such members called for the purpose of approving such alteration, repeal or addition; and (c) a majority of two thirds of votes cast by assenting employers personally present or represented by proxy at a separate General Meeting of such employers called for the purpose of approving such alteration, repeal or addition.”
[19] I agree with Mr MacColl’s characterisation of that procedure as a ‘triple-lock’ mechanism. It is designed to serve a protective purpose. Amendments can only be made by means of a formal procedure where each constituency has a voice.
The 1980 and 1990 Amendments
[20] The amending deeds of 1980 and 1990 both contain the following recital:
“It is provided in Clause IX of the Trust Deed that it or any part of it (including the Old Rules) may be amended in accordance with the provisions and conditions therein prescribed...
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