Scottish Court of Session Decisions

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 Howat and Miss McLaren.  On that basis the continuing partners had failed to prove that they would have wound up the business, and the action failed.  The case is reported as Sim v Howat and McLaren, [2012] CSOH 171. 

[9]        In the proceedings in the Commercial Court no challenge was made to the validity of the amendments made to the Rules of the Fund.  It was accepted throughout that the 1990 version of the Rules was applicable.  In the course of the litigation the Trustees provided details of Pattison & Sim’s outstanding liability to the Fund.  The figures produced by the Trustees resulted in a reduction of Mr Sim’s claim, and the court’s final award in his favour reflected that reduction.

Amendments to the Rules

[10]      The original Rules made provision for their amendment in Rule XXV. This was in the following terms:

 “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 (sic) 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”.

 

It is apparent from this rule that amendment was subject to what counsel for the defenders described as a “triple-lock” mechanism: any amendment required to be approved by a two-thirds majority of three meetings, one of the whole of the assenting employers and members, one of the contributing members and one of the assenting employers. Such a mechanism was obviously designed to provide a degree of protection for both the members and the assenting employers. Of course, if there was no controversy about an amendment, with all employers and members agreeing that it was desirable, the need for the protection of the “triple-lock” mechanism would not arise.

[11]      The provisions governing the Fund were amended in 1980 and again in 1990 in order that the Fund might comply with current tax and pensions legislation.  The relevant deeds, which took the form of Supplemental Trust Deeds, were recorded in the Books of Council and Session. In each case the then existing Rules were repealed in their entirety and replaced by new Rules. In each case the recitals at the start of the Supplemental Trust Deed contained a declaration in the following terms:

“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 [”provided” in the 1990 Deed] which provisions and conditions have been duly observed and performed for the purpose of the amendments hereinafter stated or referred to”.

 

That forms recital (e) in the 1980 Deed and recital (f) in the 1990 Deed. The operative part of each Supplemental Trust Deed is at the following terms (clause 2 in each case):

“The parties hereto, in exercise of the powers of amendment conferred upon them by Clause IX of the Trust Deed and of any other powers them enabling [”enabling them to do so” in the 1990 Deed], hereby amend the Old Rules by cancelling them with effect from the Sixth day of April 1978 [”First Day of April 1988 notwithstanding the date or dates hereof” in the 1990 Deed] and substituting for them the Rules”.

 

Thus each of the Supplemental Trust Deeds bears to replace the then extant Rules with a new set of Rules, and narrates that the proper amendment procedure was followed. The new Rules introduced by each of those deeds contain a provision corresponding to Rule XXV of the original Rules, in each case numbered as Rule XXVIII. In each case the terms of Rule XXV were reproduced with minor variations of wording, although the 1980 version included a manuscript addition which is discussed below.

[12]      The Lord Ordinary notes in his opinion that the defenders had queried whether the “triple-lock” mechanism had been followed in relation to the various amendments purportedly made to the original Declaration of Trust and Rules. They had called on the Trustees to disclose documentation to vouch that the necessary notices had been published, general meetings held and the necessary two thirds’ majority secured in each case. The Trustees carried out extensive investigations, involving the examination of more than 80 boxes of documents, and former chairmen of the Trustees were asked about their recollection of events. The search for the relevant documentation was largely unsuccessful, and no minutes were discovered of the three classes of meeting specified in Rule XXV and its successors. Some documentation was found, however. First, a notice published in the Glasgow Herald of 15 September 1980 was found; this intimated that the “triple-lock” meetings for the 1980 amendments would be held on 16 October of that year.  Secondly, in relation to the 1990 amendments, minutes of meetings of the executive committee of the Fund held on 20 April, 26 October 1989 and 8 February 1990 were found. The first of these recorded that a draft Supplemental Trust Deed and Rules had been distributed, and that approval was awaited from the Inland Revenue regarding the Rules. The second minute stated that draft rule amendments had been approved by the committee for adoption at an extraordinary general meeting. At the same time a Supplemental Trust Deed would incorporate the rule amendments, and the meeting to adopt those amendments would be held immediately following the annual general meeting. The third minute recorded that the Supplemental Trust Deed had been read over at the meeting and the committee agreed that it would be signed at the ensuing Managers’ meeting. The Lord Ordinary observes that neither the newspaper advertisement nor the minute of 8 February 1990 takes matters much further; the 1980 notice tended to suggest that the prescribed procedure was followed and the 1990 minute that it was not. We agree that the newspaper advertisement does not add a great deal, although it is entirely consistent with the holding of the requisite meetings.

[13]      The second and third of the minutes relating to the 1990 Supplemental Trust Deed, however, appear to us to indicate that the deed in question was put to an extraordinary general meeting. Clearly that does not of itself mean that the three meetings required under the “triple-lock” mechanism were held, but that would only be material if there were any dissent. In this connection we think it significant that the amendments made in 1990 were submitted to the Inland Revenue for approval. That indicates that they were required to enable the Fund to comply with current tax legislation. Amendments of that nature are scarcely likely to be the subject of dissension, as without them the Fund is liable to lose its preferential tax status. We are accordingly of opinion that if anything the minute of 26 October 1989 suggests that proper procedures were followed, with approval being obtained from all of those concerned with the Fund. In the circumstances it was probably immaterial whether one meeting was held or three. In relation to the minute of 8 February 1990, which the Lord Ordinary thought suggested that proper procedures were not followed, we note that it relates only to the signature of the Supplemental Trust Deed, not to its approval. The deed was unquestionably signed by the Managers; that is clear from its terms, and such signature is the proper way of authenticating the deed. In these circumstances we consider that the latter minute is in no way inconsistent with observance of the specified procedures. Finally, in relation to the 1990 amendments, a further meeting of the executive committee appears to have been held on 10 May 1990, and in the relative minute it is recorded that a member asked if a new prospectus was being prepared “now that the Fund’s Rules had been approved”. That does seem to indicate that at the time members thought that approval had been granted.

[14]      Further amending deeds and committee minutes were produced.  In particular, although the relevant minute was not available, it seems clear that in 1991 the Managers were granted power to amend the Rules by a majority vote at their annual meeting. This appears from two sources. First, in a Deed of Amendment dated 24 December 1998, which made some detailed amendments to the Rules, it is narrated in recital (C) that

“In an Extraordinary Meeting of the Assenting Employers and Members on 27^th of November 1991 a majority of two-thirds of the assenting employers and members personally present or represented by proxy voted to amend the power of alteration by allowing alterations to the Trust Deed and Rules to be made by a majority of the Managers at the Managers (sic) annual meeting”.

 

Secondly, in the version of the 1990 Rules that was available to the court, the amendment Rule, Rule XXVIII, contained a manuscript addition at the end setting out an additional means of amendment, in the following terms:

“or (d) a majority of the Managers at the Managers (sic) General Meeting. Any changes made to the Rules shall be intimated to the Assenting Employers and to the members of the Fund… in such manner as the Managers shall determine”.

 

It appears that that manuscript narration represents the amendment of the rules made in November 1991 according to the Deed of Amendment of 24 December 1998. On that basis, thereafter the Managers would have power to amend the Rules of their own volition. We observe that we do not find this surprising; the regulation of pension funds had become increasingly complicated during the lifetime of the Fund, and it is understandable that those in charge might wish to provide a more straightforward means of amendment to enable the fund to be kept in line with current tax and regulatory requirements. Finally, in relation to events in 1991, we note that a meeting of the executive committee appears to have been held on 24 September of that year, at which it was stated that the Rules would be amended further, and that those changes would ensure that future changes to the Rules would be undertaken at the annual Managers’ meeting. That is fully consistent with the terms of the amendment recorded in the 1998 deed and in the manuscript addition to the 1990 Rules.

[15]      As we have noted, the Rules have been amended on a substantial number of occasions since 1991. It is unnecessary to consider most of these amendments in detail. They were generally effected by the alternative procedure that appears to have been adopted in 1991. On a number of occasions deeds appear to have been prepared in advance of the meetings, but this is hardly surprising, as approval from the Inland Revenue would be required in almost every case. After about 2000 a number of pension schemes encountered financial difficulties, through poorly performing investments and especially through a more adverse tax regime. The Fund appears to have encountered such difficulties, and in 2003 important amendments were effected to permit winding up or operation as a closed fund. The latter proposal was put to an extraordinary general meeting of assenting employers, which passed it, and the power to operate as a closed fund was thereafter exercised, again following approval at an extraordinary general meeting of assenting employers. The defenders would obviously have received notice of these meetings, although they were not represented. The relevant documentation indicates that the fund had fallen into deficit and that measures were taken to make this good by contributions from assenting employers, apportioned among those employers on the basis of their existing and potential liabilities. Intimation of that was given to the senior partner of the defenders, who at the time would have been Mr Sim. While the present individual defenders would not have received the letter, the fact is that due notice was given to the firm, and no objection appears to have been taken.

[16]      Further important changes were effected in 2009.  By Deed of Amendment dated 26 and 30 March and 6 April 2009 the then Managers amended Rule V, dealing with the payment of contributions by employers. The new Rule V notes that the Fund closed to future accrual with effect from 30 September 2003, and that since then members had not been required to pay contributions to the Fund. Paragraph (b) of the Rule provided that each assenting employer should be liable to pay contributions to the Fund at such rate as the Managers, after obtaining advice from the Actuary, should determine to be necessary to maintain the benefits of the Fund and to ensure that the requirements of the Pensions Act 2004 would continue to be met. It is that provision that is primarily relied on as justifying the claim that is now made against the defenders. In the 2009 Deed of Amendment recital C narrates that, in terms of article IX of the Trust Deed and Rule XXVIII of the Rules, the provisions of those documents “may be altered, repealed or added to with the approval of a majority of the Managers at the Managers (sic) General Meeting”. That is in accordance with the amendment procedure provided in the 1991 amendments. Recital C further records that any changes made to the Rules should be intimated to assenting employers and members who were in service at the time. Recital D records that at the Managers’ general meeting held on 26 March 2009 the provisions of the 2009 Deed of Amendment amending the Trust Deed and Rules were approved by a majority of the Managers, and recital E states that the Managers now wished to give effect to such provisions by executing that deed. These provisions suggest that the procedures approved in 1991 were properly followed.

 

Validity of the amendment procedure

[17]      The critical question raised by the present proceedings is whether the amendment procedures carried out in 1990 and subsequently were valid. The Lord Ordinary held that they were, and we agree with that conclusion.

 

General approach to the interpretation of pension scheme documents

[18]      The general approach to the interpretation of pension scheme documents should in our opinion reflect the fact that pension schemes and the trusts under which they operate are designed to exist for long periods and are likely to affect a substantial number of beneficiaries: Low & Bonar PLC v Mercer Ltd, [2010] CSOH 47, at paragraphs [8]-[9]. Consequently such schemes invariably include powers of amendment and modification, which enable the scheme to adapt to changing circumstances. In particular, changes in the legislation that regulates pension schemes, in relation to both general administration and taxation, are relatively frequent, and all schemes must be able to respond to such changes in such a way as to secure the benefits due to members. The same is true of changes in investment conditions; schemes must be able to adapt. Subject to these considerations, if a power of amendment imposes conditions for its valid exercise, these must obviously be satisfied. In considering such conditions, however, we are of opinion that the primary aim is that the exercise of the power should be clear and certain and should be put into some sort of permanent form. Provided that that is done, we do not think that the court should be unduly technical or restrictive in considering the niceties of its manner of exercise.

 

Omnia praesumuntur rite esse acta.

[19]      In considering transactions that have taken place a significant time in the past, there is a general presumption that all the necessary procedures have been properly followed, the result being that the burden of proving otherwise rests on any party who challenges the transaction. The presumption is generally referred to by the Latin maxim omnia praesumuntur rite esse acta, or in the full version found in Trayner’s Latin Maxims and Phrases, omnia praesumuntur rite et solemniter acta esse: all things are presumed to have been done duly and in the usual manner. The principle is of wide application, and has been applied to commercial transactions: examples are found in Bain v Assets Co, 1905, 7 F (HL) 104, and Guthrie v Stewart, 1926 SC 743.  A recent example is Cumbernauld Housing Partnership Ltd v Davies [2015] CSIH 22, where the title to sue of a property factor was challenged on the ground that no document supporting the factor had been produced to the court.  The maxim was invoked to establish the proper appointment of the factor who had been acting as such for ten years:  see paragraph [12].  The reasons for the presumption are essentially practical. An explanation is found in Bain v Assets Co, supra. In that case it was asserted that a disclosure of assets made in 1879 by a contributory to the liquidators of the City of Glasgow Bank should be open to challenge in proceedings raised by the Bank’s successor company in 1901 on the ground that two promissory notes had been excluded from the disclosure. The claim was rejected, and Lord Halsbury stated (at 106):

“It appears to me that the matter rests, not upon any question of technical law, but upon broad common sense, and especially upon these two principles – that at this distance of time every intent should be made in favour of what has been done as being lawfully and properly done, and that the persons who are now insisting upon these rights have lain asleep upon the rights so long that as a matter of fact we know that witnesses have perished, and the opportunities which might have been had if the question had been earlier raised have passed away”.

 

The presumption is of great practical importance. In Morris v Kanssen, [1946] AC 459, Lord Simonds referred to the maxim, which he described as one of the fundamental maxims of the law, and its many applications, and continued

“The wheels of business will not go smoothly round unless it may be assumed that that is in order which appears to be in order”.

 

That appears to us to be very clear.

[20]      In our opinion four main reasons may be said to justify the application of the maxim. First, in practice those who carry out transactions generally ensure that at least the substance of the transaction is properly decided and recorded. Consequently any defect in procedure tends to be a matter of form rather than substance. The maxim thus reflects the underlying principle that substance is more important than form.  Secondly, if there is a substantial objection to the transaction, it is likely that there will be an immediate challenge, at least on an informal basis.  The result is that any defects in procedure that are serious and material, in the sense that they affect the end result, are likely to be addressed at the time.  Thirdly, when a considerable time is allowed to pass after a transaction has been carried out, evidence will frequently be lost. If the onus fell on those who carried out a transaction to prove, possibly many years after the event, that it had been carried through according to proper form, the practical difficulties might be enormous. This is well illustrated by the facts of Bain where, as Lord Halsbury indicates, potential evidence had been lost in the period between the winding up of the bank and the raising of that action. It is also illustrated by the facts of the present case, where the Trustees of the Fund found it impossible to recover comprehensive documentation relating to the changes in the Rules. 

[21]      Fourthly, and perhaps most importantly, transactions do not stand alone. The parties to them, and third parties affected by them, rely on the existence and validity of a transaction in their future dealings. If a transaction were open to challenge, possibly long after it was carried out, on the ground that it was impossible to prove that proper procedures had been used, all subsequent dealings that proceeded on the faith of that transaction would also be potentially open to challenge. That would be an intolerable situation, both in the commercial world and elsewhere. This is well illustrated by the facts of the present case. To take the adoption of the 1990 Rules as an example, if that transaction were now open to challenge because it could not be proved that the “triple-lock” procedures had been followed, all of the subsequent transactions of the Fund, involving employers, members and others, would also be potentially open to challenge. No pension fund could seriously carry on its administration under such a threat.  As Lord Halsbury states, the matter is common sense.

 

Application to the Fund

[22]      The first important amendments relied on by the Trustees of the Fund are the adoption of new Rules by the 1980 and 1990 Supplemental Trust Deeds. Those deeds, as we have noted, record in the recitals ((e) and (f)) that the amendment provisions of the Trust Deed “have been duly observed and performed for the purpose of the amendments hereinafter stated or referred to”. That declaration is clear in its terms. Furthermore, the principle omnia praesumuntur rite esse acta is applicable: the general presumption is that all necessary procedures have been properly followed. That presumption is strengthened by the declaration in the recital. Consequently if the 1980 Deed or the 1990 Deed is to be challenged, the onus is on the defenders, as the challengers, to establish that proper procedures were not followed. In our opinion it is plain that they are unable to do so. As we have noted, such documentation as is available in relation to the 1990 Deed suggests that an extraordinary general meeting was held for the purpose of approving the deed. Whether that would in reality consist of the three meetings that were technically required to satisfy the “triple-lock” mechanism is not apparent, and the use of the singular might suggest the contrary. Nevertheless, the agreed chronology suggests that the amendment was required for tax purposes, and against that background it is unlikely that it would be controversial.  There is no evidence of dissent or controversy, which is not surprising.  In the case of the 1980 Deed, the newspaper advertisement indicates that three meetings were summoned, which suggests that proper procedures were followed. Consequently we are unable to infer from the available documentation that proper procedures were not followed in respect of either Deed, especially in the light of the maxim omnia praesumuntur rite esse acta and the general approach to the interpretation of pension scheme documents.  Finally, in relation to both the 1980 and 1990 Deeds, we note that the amendments are incorporated in a formal deed. To permit such a document to be challenged merely because supporting documentation can no longer be found would subvert the very purpose of executing a formal deed.

[23]      The same is true of the subsequent deeds amending the Rules. The amendment of 1991, which permitted the Managers to amend the Rules by themselves, is referred to in clear terms in other scheme documentation, notably the Deed of Amendment of 24 December 1998. Moreover, as we have noted, there were good reasons for simplifying the amendment procedure as the regulation of pension schemes became increasingly complex. Furthermore, it appears that the Managers themselves effected further changes to the Rules, which of itself suggests that the necessary amendment had been made. Finally, the Deed of Amendment dated 26 and 30 March and 6 April 2009 is important to the present proceedings because it authorized the contributions that are now claimed by the Trustees. We have already discussed this deed; in our opinion it is clear from its terms that the procedures adopted in 1991 were properly followed. We consider that both the 1991 amendment and the Deed of Amendment of 2009 are quite sufficiently vouched by the documentation that is available.

[24]      In relation to the 1991 and 2009 amendments, the maxim omnia praesumuntur rite esse acta applies. That is so even where, as with the 1991 amendment, the available evidence is manifestly incomplete. Evidence of the change in the Rules effected by that deed does exist, and the change is confirmed by the practice consistently followed by the Managers of the Fund thereafter. In such a situation the policy considerations that underlie the maxim are just as applicable in our opinion as in a case where a formal deed is available. The same is true of the general approach to pension scheme documents; in this case the fact that pension schemes exist for long periods and the need to enable amendment to meet changes in regulation appear to us to be particularly important. That is obviously why the power of amendment was simplified to allow the Managers to proceed on their own; in the changed conditions of the 1990s amendments to the Rules, rather than being a matter of negotiation between employers and members, would rather involve negotiation with the Inland Revenue or the pensions regulator, and there would be little option but to observe the requirements of tax and financial legislation.

[25]      For the foregoing reasons we are of opinion that the argument for the defenders, to the effect that it had not been established that the 1990 Supplemental Trust Deed, the 1991 amendment and the Deed of Amendment of 2009 were validly effected, must be rejected.  As we have indicated, is not for the Trustees to establish that the amendments to the deeds governing the Fund had been properly effected; it is rather for those who challenge the regularity of past procedures to establish that proper procedures were not followed. Without such a rule the sensible administration of pension funds, and indeed other long-term contracts and trusts, would be rendered unacceptably difficult.  Counsel for the defenders submitted that on the face of the available documents irregularities in the present case were very substantial, and that this meant that the amended provisions founded on by the pursuers, including the 1990 version of the Rules and the 2009 amendments, could not be given effect.  We cannot accept this argument.  In our opinion the available documents, properly construed, make it reasonably clear how the various amendments were to be made.  Moreover, the maxim omnia praesumuntur rite esse acta applies, generally with the result that all of the amendments are presumed to have been made properly.

[26]      Counsel for the defenders further drew our attention to a passage in National Grid Co PLC v Mayes, (2001] 1 WLR 864, at paragraph 35, where Lord Hoffmann states that the operation of a pension scheme should not be encumbered by unnecessary technicalities, but that if the amendment procedure provided important safeguards for the members or the trustees, that might be a good reason to construe the scheme as requiring the employer to adopt it. Counsel submitted that the “triple-lock” mechanism in the original 1947 Rules served to protect the interests of employers and separately members, and that it must therefore be adhered to strictly. We do not doubt the proposition of law stated by Lord Hoffmann, although, like him, we agree that the operation of a pension scheme should not be encumbered by technicalities but that an essentially substantive approach must be taken as to whether the proper procedure has been followed.  In the present case, however, the issue is where the onus of establishing compliance with the necessary formalities lies, in a situation where owing to the passage of time incomplete information is available about what actually happened. In such a case we are of opinion that Lord Hoffmann’s statement is not directly relevant. The legal analysis is rather governed by the maxim omnia praesumuntur rite esse acta and the general principle that documents regulating a pension scheme must be interpreted in such a way as to give the scheme practical effect.

 

Approbate and reprobate

[27]      In the event that they failed in their principal argument, the Trustees presented an argument based on the principle of approbate and reprobate. This was accepted by the Lord Ordinary, on the ground that Mr Howat and Miss McLaren had in the litigation in the Commercial Court approbated the various amendments that had been made to the Rules of the Fund over the years. We do not find it necessary to express a view on this aspect of the case. We note, however, that the litigation in the Commercial Court appears to have proceeded without a full analysis of the changes made to the Rules in the successive amending deeds or any challenge to the validity of those deeds. Consequently it may be that the principle of approbate and reprobate should not apply.

 

Conclusion

[28]      For the foregoing reasons we are of opinion that the reclaiming motion should be refused. There remains a dispute between the parties as to the amount that is presently due. For that reason we will remit the action to the Lord Ordinary to proceed as accords.