Could Scotland's 'common-sense' attitude to equalisation come to English courts?

English courts are well-known for taking a strict approach to scheme amendment issues, particularly where there is doubt over whether equalisation of normal retirement ages was properly executed.

However, the Scottish courts have tended to take a less pedantic approach, as demonstrated in a judgement reached last month, which has been welcomed as a common-sense and reasoned approach towards past scheme amendment issues.

Johnston Press

In The Trustees of the Johnston Press Pension Plan and others v. Sedgwick Noble Lowndes and Mercer, the court found four schemes - which were merged into the Johnston Press plan - to have been validly equalised despite a lack of documentation.

The case concerned whether decisions to equalise had complied with the schemes' amendment provisions. A common scenario that happened in Johnston Press, is that many years after the 1990 Barber case that led to the requirement to equalise retirement ages between men and women, solicitors are asked to carry out scheme documentation reviews. They then note a gap between the date when equalisation was understood to have taken place, and the date of a formally amending deed when equalisation actually took effect.

The trustees and sponsors argued that consultancy Sedgwick Noble Lowndes - now a subsidiary of Mercer - was in breach of contract and negligent in providing adequate advice to ensure necessary protocol steps were taken. They tried to sue for a sum to pay benefits to which they claimed members were entitled for the period between the date when equalisation should have taken place, and a formal amendment to equalise.

There was little documentation to prove the technical requirement had been complied with, despite extensive searches.

The defenders denied the claims of breach of contract and negligence, and called on the court to apply a principle called the 'presumption of regularity' in all four cases.

Barbara Bolton, commercial litigation partner at Shepherd & Wedderburn, which acted for the defendants, explains: "Where the presumption of regularity principle is applied, the pursuers have to find evidence to prove the amendment provision wasn't complied with. In all four cases the challengers failed to bring any such evidence. The court said they needed to do more than just say 'there was no trust deed of amendment until 1994'."

After the court decided the four schemes were validly amended when intended, and that the pursuers had not sustained any loss, the defendants were granted a decree of absolvitor.

English vs Scottish law

Bolton says the Scottish courts take a much less pedantic approach to these issues: "Whereas the English courts have taken the approach of 'you must have strict compliance and if you don't then we'll have to find the amendment failed', the Scottish courts have taken a more pragmatic common-sense approach by looking at the overall process, and what you're trying to achieve.

Unlike English law, Scottish law does not have a technical definition of a deed of amendment. A Scottish court ruled in the 2010 Low & Bonar case that a signed board minute could constitute as a deed and therefore the scheme amendment was done correctly. Whereas, English courts have previously ruled that a deed is required to properly achieve equalisation.

"HR Trustees vs Wembley was one of the few cases south of the border that went against the tide, where there was a more common-sense approach. But then Briggs vs Gleeds 2013 seemed to wind back on that decision, and you can now again expect English courts to take a strict approach."

In Gleeds the court found a whole series of amendments were invalid because it could not be demonstrated there had been strict compliance with the amending provision.

In light of that judgement, which was a "big slap in the face", Pitmans director Julian Richards calls the Scottish decision a "sensible and reasoned" application of law, which "we don't always get over here".

So could the Johnston Press judgement cause the English courts to take a less strict approach in future?

Implications for England

As England and Wales also have the presumption of regularity principle applied in Johnston Press, it could be applied to cases outside Scotland. However, Bolton points out that "you need a judge who's prepared to apply it".

Most lawyers admit it is unlikely the Scottish judgement will have much impact south of the border.

As Linklaters pensions dispute resolution partner, Mark Blyth, says: "It appears the Scottish courts have been prepared to take a more robust approach than the English courts in this area, but I don't think it means the English courts will change their approach."

Burges Salmon disputes and litigation partner Justin Briggs believes three of the Johnston Press judgments are "pretty sensible" decisions and are not a stretch of the law. However, the decision on the Yorkshire Weekly Newspaper Group's scheme would "raise eyebrows" and be unlikely to go the same way in England:

"The judge bolted three or four things together to reach an outcome which, while common sense, is an outcome that I don't think would have been reached in the English courts.

"The power of amendment required a declaration of the company and trustees in writing 'under their hands, which has been interpreted in English courts to mean, 'signed by all trustees and properly executed by the company'."

In the Yorkshire scheme decision, the judge bolted together an unsigned announcement with a signed covering letter from the employer, and trustee meeting minutes which would have been signed by the trustee chairperson at the next meeting. The judge decided these in conjunction with the usual practice of signing trustee meeting minutes, validated the amendment.

Jurisdiction

Another interesting observation is the schemes would probably have had their cases heard in the English courts had their sponsors not been merged with the Scottish publisher.

Briggs says since this judgement "some English lawyers have been talking - perhaps partly in jest - about how to get a case heard in the Scottish courts on the basis that if you want to smooth over your problems then you want a Scottish judge."

He adds: "Where you have a holding company with operating companies throughout England and Scotland, it's not beyond the realms of possibility to try to manufacture a situation where, if all you need is an employer based in Scotland, you could just adhere an employer to a pension scheme and then put an application through the Scottish courts.

"If that's the basis on which the court accepted jurisdiction here, people will look into it. But you can't simply take off the shelf a Scottish company - the courts would see through that."

The Johnston Press decision is unlikely to lead English judges to be less pedantic about equalisation issues, but it does raise some thought-provoking questions.

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• Topics
• Law and Regulation
• Sedgwick Noble Lowndes
• Justin Briggs
• Low & Bonar
• Barbara Bolton
• Mercer
• Johnston Press
• Burges Salmon
• Julian Richards
• Yorkshire Weekly Newspaper Group
• Mark Blyth
• Pitmans