Susan Alexander, Simon Brown, Audrey Hendry, Robert Henderson And Brenda Scott As Trustees Of The Scottish Solicitors Staff Pension Fund Against Pattison & Sim And David John Howat And Bridget Mary Mclaren, The Partners Thereof, As Such Partners And As Individuals

JurisdictionScotland
JudgeLady Smith,Lady Paton,Lord Drummond Young
Judgment Date30 December 2015
Neutral Citation[2015] CSIH 96
Published date30 December 2015
Docket NumberCA63/13
CourtCourt of Session
Date30 December 2015

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

[2015] CSIH 96

CA63/13

Lady Paton

Lady Smith

Lord Drummond Young

OPINION OF THE COURT

delivered by LORD DRUMMOND YOUNG

in the cause

SUSAN ALEXANDER, SIMON BROWN, AUDREY HENDRY, ROBERT HENDERSON and BRENDA SCOTT as TRUSTEES OF THE SCOTTISH SOLICITORS STAFF PENSION FUND

Pursuers and Respondents;

against

PATTISON & SIM and DAVID JOHN HOWAT and BRIDGET MARY McLAREN, the partners thereof, as such partners and as individuals

Defenders and Reclaimers:

Pursuers and Respondents: Connal QC; Pinsent Masons LLP

Defenders and Reclaimers: Howie QC; Pattison & Sim

30 December 2015

[1] The pursuers are the Trustees of the Scottish Solicitors Staff Pension Fund. The Fund was established in 1947 to provide pensions for employees of solicitors’ firms and their dependents. The pursuers have raised the present proceedings to recover contributions to the Fund that are alleged to be due from the defenders, the firm of Pattison & Sim and its two partners, in respect of a former employee of that firm, Mr Ronald Barr; the sum sued for now stands at £50,224. The defenders deny liability to make payment.

[2] The Fund was originally established by a Declaration of Trust dated 17, 19, 22 and 27 December 1947. Rules appended to the Declaration of Trust governed the administration of the fund, including membership and the liability of employers to make contributions to the Fund. The Declaration of Trust and Rules also contained procedures for their amendment in the future. The pursuers assert that the Rules have been amended from time to time since 1947 and that those amendments were validly effected. Their claim for payment is based on provisions in the 1990 version of the Rules as subsequently amended; more specifically, it is based on Rules V(b) and XXII of that version of the Rules, Rule V having been promulgated by an amendment in 2009. The defenders claim that the 1990 Rules and all subsequent amendments are invalid, on the ground that the pursuers have failed to establish that the formal amendment procedure set out in the original trust documentation was followed. They further assert that, unless the Trustees can prove that the various deeds amending the original Rules are valid, the action is lacking in specification and should be dismissed. Those arguments were the subject of a debate before the Lord Ordinary in the Commercial Court, following which the Lord Ordinary rejected the defenders’ arguments and granted decree against them for the sum of £62,558.08, that being the revised amount of the contributions held to be due with interest to the date of decree.

[3] The defenders have reclaimed against the decision of the Lord Ordinary. In summary, they contend that the Lord Ordinary was in error in holding that the various documents founded upon by the pursuers were ex facie valid. The pursuers were under an onus to demonstrate that the alterations made to the original Declaration of Trust and Rules in 1947 had been validly effected. They had failed to discharge that onus. In particular, the original Declaration of Trust had provided a specific mechanism for amendments to the Trust Deed and Rules, involving separate meetings of the employers, the members, and the employers and members taken together, but it had not been demonstrated that those had been held. Consequently the purported variations were ineffective and ultra vires. The pursuers, by contrast, contend that on a proper interpretation of the documents the amendments that authorize the provisions on which the claim is based were validly effected. We propose first to explain the factual background to the Fund, and thereafter to set out the material Rules of the Fund and the amendments that bear to have been made to those Rules. Finally we will consider the validity of the amendments that the Trustees have purported to bring into effect, and the effect that has on their claim for arrears of contributions.

The factual background

Establishment of the Fund

[4] As already noted, the Fund was established by Declaration of Trust dated 17 December 1947 and subsequent dates and registered in the Books of Council and Session on 1 June 1948. The main object of the Fund, set out in clause I of the Declaration, was “to provide or assist in providing pensions on retirement for employees of Solicitors practising in Scotland and/or for the widows, children or dependents of such employees after their death”. Clause II provided that the Fund should be administered in accordance with the Declaration and the Rules annexed to it as they might be amended from time to time. Clause IX provided that the Declaration or any part of it, including the Rules, might be amended at any time from time to time in the same manner as is provided for amendment of the Rules. The Rules were appended to the Declaration. They set out the means whereby an employer might become a contributing member of the Fund, the contributions payable, and the benefits to be provided to employees. They also make provision for the administration of the fund. Rule XXI provided that the Fund should be managed by twelve Managers, of whom six would be elected by assenting employers and six by the contributing members of the Fund. Detailed provisions were made for their election. Rule XXV provided for alterations to the Rules; this is discussed subsequently.

[5] The Rules were comprehensively amended on two occasions in order to comply with new legislation governing pension schemes and their taxation; the first such amendment occurred in 1980 and the second in 1990. On each occasion the amendments were effected by a Supplemental Trust Deed executed by the Trustees which cancelled the existing Rules and substituted new Rules. The amendments that appear to have been effected by the second of those deeds form a crucial link in the processes that result in the authorization of the sums that the Trustees now seek to recover from the defenders. The Trustees further claim that the procedures for amending the Rules were themselves amended in 1991, by means of a deed that can no longer be found. Nevertheless the existence of such a deed is recorded in a subsequent Deed of Amendment dated December 1998. Finally, the amendments to the Rules that are now relied on by the Trustees in attempting to recover contributions from the defenders are found in a Deed of Amendment dated 26 and 30 March and 6 April 2009. The latter deed was, according to its terms, approved by the Managers using procedures that had been introduced by the 1991 amendment. It is, moreover, a formal deed.

Defenders’ membership of the Fund

[6] The defenders are the successors to a series of partnerships that have traded under the name Pattison & Sim since 1905. William Sim was a partner from 1972 to 2005, at which point he was senior partner of the firm. At that point two other persons were partners, David Howat, who had become a partner in 1991, and Bridget McLaren, who had become an equity partner in 2002. Those three individuals negotiated a retirement agreement under which Mr Howat and Miss McLaren agreed to pay Mr Sim £175,000 by instalments of slightly under £3,000 per month.

[7] Pattison & Sim employed Mr Ronald Barr as a legal assistant between 1970 and 1998. He became an active member of the Fund on 1 June 1974, and continued in such membership until January 1998, when he retired. Throughout that period the various partnerships that carried on practice under the name Pattison & Sim remitted the necessary pension contributions to the Fund. When Mr Barr retired the firm did not withdraw from the Fund, although it made no further payments in respect of Mr Barr until December 2004, when the present pursuers made a request for payment of a further sum of £1,416, an amount that was paid by Mr Sim using a cheque drawn on the partnership. The two other partners, Mr Howat and Miss McLaren, were unaware of that payment or of any other obligations to the Fund, and assumed that any such obligations had terminated when Mr Barr retired in 1998. Mr Sim, by contrast, was aware of the firm’s continuing obligations to the Fund.

[8] In 2008 Mr Howat and Miss McLaren learned the true position. They thereupon ceased paying the monthly instalments due to Mr Sim under his retirement agreement, on the ground that he had secured an unduly favourable retirement settlement because of their ignorance of the true position in relation to Mr Barr and the Fund. They asserted that if they had known of the continuing liability of the firm to the Fund, they would have insisted on different terms. Mr Sim then raised proceedings in the Commercial Court to enforce the retirement agreement. He contended that the firm had no liability to the Fund, as that liability had not been transferred to the new partnership that came into existence when Miss McLaren was assumed as a partner in 1999. On that basis, he contended, his right to payment under the retirement agreement was unaffected. Following a debate, Lord Hodge rejected that argument, holding that the liability to pay contributions to the Fund had been taken over in 1999 by the new partnership comprising Mr Sim, Mr Howat and Miss McLaren: Sim v Howat and McLaren, [2011] CSOH 115. The parties agreed to accept that finding, and the case then proceeded to proof. Lord Hodge held that Mr Sim’s failure to disclose the firm’s liability to the Fund did not amount to fraudulent misrepresentation, and that there was accordingly no basis for reduction of the retirement agreement, or for an award of damages for misrepresentation. The failure to disclose the liability did constitute a breach of the fiduciary duties owed by Mr Sim to his fellow partners. Mr Howat and Miss McLaren had averred that, if they had been aware of the true position, they would have wound up the firm on this ground. The evidence disclosed, however, that winding up the firm would have been financially catastrophic for both Mr...

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