Seton House Group Ltd and Britax Pension Trust Ltd v Mercer Ltd

A line buried in a due diligence report was held to have informed the claimants of the issue, resulting in them being out of time for bringing the claim

Limitation - the time limit for bringing a claim - is often an issue in pensions cases because it can take several years for problems to come to light. All too often, by the time the trustees of a pension scheme are alerted to a problem, it is too late for them to bring a claim against advisers or service providers who may have acted negligently or breached the terms of the contract appointing them. A recent case involving the Britax Pension Fund (the "Britax Scheme"1) addresses the question of when the clock starts ticking where there is "latent damage" that is not immediately apparent.


The facts will, regrettably, sound familiar to many. In 2010, nearly twenty years after the Barber2; judgment held that pension benefits had to be equalised between men and women, it was discovered that normal pension ages under the Britax Scheme were not properly equalised. Equalisation of normal pension ages had been treated as having taken place from 1 April 1991. Unfortunately, there had been no rule amendment to achieve this until 2000, when a new trust deed and rules was entered into which – ineffectively - purported to equalise with retrospective effect from 1 April 1991. Mercer had been the main adviser in relation to the Britax Scheme throughout the period, often it seems taking on the role of legal adviser, and had been instructed to take the steps necessary to equalise.

The trustee and a successor to the employer brought a claim against Mercer, alleging that Mercer had been negligent in the advice it had provided following Barber. The loss to the Britax Scheme for the failure to equalise between April 1991 and the execution of the 2000 deed and rules was claimed as being £5.4m, plus the additional cost of investigating the issue.

Master Marsh considered whether the claimants were out of time to bring the claim. The key question was whether the claimants had had access to information that should have caused them to seek expert advice, thereby alerting them to the issue, more than three years before the claim form was deemed to have been issued.

Limitation – a reminder

The usual time limits for bringing a claim are as follows3:

  • Breach of contract  
    • for a simple contract, six years from the date of the breach  
    • if the contract is made by deed, 12 years from the date of the breach


  • six years from the date that damage has been suffered as a result of the negligent act or omission, which may be extended where there is "latent damage".  

For negligence claims, where there is "latent damage" (broadly, damage that the claimants did not know about – and could not reasonably have been expected to have discovered), the limitation period can extend beyond the usual six years. In such cases, the time limit for bringing a claim is the later of:

  • the usual limitation period of six years from the date of the damage; and  
  • three years from the date on which the claimant first knew, or ought to have known, the relevant facts, up to a "longstop date" of 15 years from the date of the damage.

Parties may enter into a "standstill agreement", being a contract under which the parties agree that the claim form will be deemed to have been issued at an earlier date and the defendant will not seek to enforce the statutory time limits. The defendant may agree to this to avoid the claimant issuing a claim form immediately, giving more time for negotiation before court proceedings are started. This method can keep alive the chance to bring a claim beyond the statutory time limit, and was used in the Britax case.

What counts as "knowledge" to start the clock for latent damage?

As outlined above, where the usual six year limitation period for negligence has passed, it is necessary to consider whether the claimants have had knowledge of the relevant facts within the past three years. If so, they will be out of time to bring a claim.

To start the clock for this three year limitation period, it is not necessary for the claimant to have actual knowledge of all the relevant facts. Instead, all that is needed is that the claimant "might reasonably have been expected" to obtain the necessary knowledge, either directly from facts available to him, or from facts ascertainable with the help of expert advice that it would be reasonable for him to seek. Importantly, if a claimant seeks appropriate expert advice but the expert fails to detect the issue, the law protects the claimant's position and the clock will not start ticking just because the expert should have uncovered the issue.4

Britax - a strict approach

The Britax claim against Mercer was dismissed on the grounds that it was out of time. This was on the basis that a recommendation buried in a due diligence report commissioned by a purchaser gave the trustee and employer the requisite knowledge to start the limitation clock ticking. The relevant paragraph in the due diligence report is as follows:

"It appears that the normal retirement ages were equalised at age 65 for males and females on 1st April 1991. Previously, the normal retirement ages were 65 for men and 60 for women. The method of equalising the benefits as set out in the Fund's rules appears to comply with legislative requirements. However, a different method and non-compliant method of equalising the benefits is set out in communications to members. We recommend that legal advice is sought on this inconsistency in the fund's documentation." [emphasis added]

Master Marsh considered that senior people within both the trustee and the employer ought reasonably to have read the pensions sections of the report, and so ought to have seen the concerns expressed about equalisation. Further, he found that the recommendation in the appendix regarding equalisation should have been seen as a "red light", with the result that the trustee "was plainly informed that something serious might be wrong with the method of equalisation" and should have obtained legal advice, which he considered would have revealed the problem. Master Marsh further commented that it was not sufficient for the trustee to rely on Mercer to alert it to any issues. This was on the grounds that:

  • Mercer, as a firm of actuaries, would not be the appropriate party to provide legal advice when both claimants had access to lawyers;  
  • Mercer, as the main advisor, was likely to have been responsible for any equalisation issue arising in the first place and so a separate advisor should have been instructed to review the position; and  
  • the existence of the retainer did not constitute taking "all reasonable steps" to obtain advice, which is the standard required to protect a claimant's position with regards to limitation where an expert fails to identify an issue.

Master Marsh's approach in deciding what the claimants ought to have known or investigated seems rather harsh, particularly taking into account the following:

  • the due diligence report was 237 pages long, not including the 12 appendices;  
  • it was not addressed to the trustees or the employer, and was only disclosed to the employer for the purposes of price negotiation;  
  • both claimants denied that any of their directors or senior employees had read it (although both must have had it in their possession as they each disclosed the document to the court); and  
  • the reference to the potential failure to equalise was not in the main body of the report but was in an appendix, and even then not referred to in the executive summary to the appendix.

Points to take away

  • Trustees and employers should be aware that documents which come into their possession – even when addressed to another party – might contain information which would start the clock for limitation where there is latent damage.  
  • Master Marsh considered that the Britax Scheme trustee's fiduciary duties meant it was obliged to consider the relevant sections of the report provided to it.  
  • Where information comes to light which suggests that there may be a problem that could give rise to a claim, if the parties take all reasonable steps to obtain advice from an appropriate expert, the clock will not start if the expert fails to identify the issue.  
  • If the incumbent advisor may be at fault, that adviser should not be relied on to advise on the issue.