The Gleeds Retirement Benefit Scheme (the “Scheme”) was established in 1974 as a final salary scheme with Gleeds Group (“Gleeds”) as the principal employer. Gleeds was a partnership. However, all deeds executed by Gleeds failed to comply with the Law of Property (Miscellaneous Provisions) Act 1989 (the “LPMPA”) because none of the partners’ signatures were witnessed. The deeds that had been drafted did not provide for the partners’ signatures to be witnessed.

The Gleeds Retirement Benefit Scheme (the “Scheme”) was established in 1974 as a final salary scheme with Gleeds Group (“Gleeds”) as the principal employer. Gleeds was a partnership. However, all deeds executed by Gleeds failed to comply with the Law of Property (Miscellaneous Provisions) Act 1989 (the “LPMPA”) because none of the partners’ signatures were witnessed. The deeds that had been drafted did not provide for the partners’ signatures to be witnessed.

Over the life of the Scheme, many amendments were made in relation to equalisation, appointment and removal of trustees, benefit structure changes (including as to a reduction in accrual rate and changes to pension increases), adding two money purchase sections and closing the final salary section to future accrual. The Scheme's trustees discovered however, that a number of changes made to reduce costs in the scheme, as well as the appointment of those individuals as trustees, were not valid, given the LPMPA. This of course led to serious legal complications as to whether the terms of these deeds could be deemed to be valid and enforceable.

During the course of legal proceedings, Gleeds argued, amongst other things, that members could not deny that the deeds in question had been validly executed, based on the principle of estoppel. Gleeds suggested that the consultants had made a representation as to the law in supplying the deed without the need for attestation by a witness. As the consultants were acting on the trustees’ instructions, such a representation was argued to have come from the trustees. Gleeds claimed to have relied on such representations to its detriment giving rise to an estoppel argument preventing the trustees, and thereby the members, from challenging the execution of the deeds.

Decision

The judgement in this case looks at specific provisions in a number of deeds in the event that they were held to be valid by some other basis. In doing so, the judge in this case, Newey J, examined various aspects of the Scheme, the power of amendment and the amendments purportedly made under it. On Gleeds’ main point, the High Court ruled that the deeds had no effect and that members were not estopped from denying that the deeds were validly executed.

Newey J held that estoppel could not be used to circumvent the LPMPA and that the consultants could not be said to be acting on behalf of the trustees as they were instructed by Gleeds and the Trustees.
In reaching his decision, Newey J considered the following issues (amongst others):

HR Trustees Limited v Wembley

The Gleeds judgement comments specifically on the case of HR Trustees Limited v Wembley plc [2011] (“Wembley”) and the equitable maxim that “equity regards as done that which ought to be done.” The Wembley case had applied the maxim so as to hold an amendment validly executed despite certain formalities not being complied with, in that case it was the missing signature of one of 5 trustees. Newey J in Gleeds commented that, in his opinion, the Wembley decision would have been the same whether there had been a deed at all, let alone if there was one or two missing signatures. In his view the decision in Wembley had hinged on the question of whether the Trustees had come to a decision at all, and once it was established that a decision had been made the fact that they were obliged to record this by deed or declaration was a formality to which the equitable maxim was applied.

However Newey J disagreed with the application of the maxim. In his opinion it meant that a scheme’s properly executed documentation could not provide a reliable record as to the changes to a scheme over time. Instead it would be necessary to review documents such as meeting minutes to assess whether the trustees had made decisions which had not been documented.

Newey J held that the maxim could not be used to deem an amendment that was prejudicial to the scheme members to be have been validly made. This runs directly contrary to the decision in Wembley.

Closure to Accrual and the Final Salary Link

Newey J also commented specifically on the fetter to the amendment power which prevented amendments that “would prejudice or impair the benefits accrued in respect of membership up to that time”. The word ‘accrued’ had come under significant scrutiny from many pension professionals following the case of re Courage Group’s Pension Schemes [1987] and the comments of Millet J which appeared to use the words ‘secured’ and ‘accrued’ interchangeably despite their being used in different schemes run by the same employer. Newey J has now held that there is no compelling reason for taking ‘accrued’ to have a narrower meaning than ‘secured’ and so where Millet J held that ‘secured’ included a member’s prospective right to pensions based on final salary, ‘accrued’ should be read with the same meaning. Accordingly, even if the deed which purported to have broken the salary link could be held as effective, the final salary link was not capable of being broken.

The Amendment and Augmentation Powers

The rules of the Scheme required a deed and a declaration in order to make a valid amendment. The power stated that:

“The Principal Employer and the Trustees may… by deed alter or add to the terms and provisions of the Rules… The Principal Employer and the Trustees shall forthwith declare such alteration or addition in writing and the Deed and/or Rules shall stand amended accordingly.”

While it was accepted that the amendment power had not been complied with, given the absence of a witness to the execution of the deeds, Newey J also considered whether a number of the purported amendments could be made as a valid exercise of the augmentation power – which could be exercised without a deed. However this was rejected on the basis that the courts must be wary of deeming trustees to have exercised a power that they did not have in mind on the exercise of a power that required “examination of materially different considerations” to that which the trustees considered themselves to be exercising.

Conclusion

The court is minded to favour a more strict adherence to any amendment powers. The comments relating to a declaration not being needed to perfect an amendment suggest that if the fatal aspect had been a formality within the Scheme Rules (and not legislation) then a different outcome may have been possible. However Newey J’s criticism of the Wembley judgement, and his finding that the maxim could not be used to deem an otherwise defective amendment that was prejudicial to the scheme members to have been validly made, cannot be ignored.