The trustees and principal employer of a scheme to which four separate schemes had been transferred started proceedings against the defendants for negligence in relation to an alleged failure to advise on amendments to the schemes that would have achieved the equalisation of retirement ages required by the Barber decision. The Outer House of the Court of Session (equivalent to the High Court in England) in Knight v Sedgwick Noble Lowndes Ltd had to decide as a preliminary issue whether in fact the schemes had been effectively equalised, in which case there would be no loss to the trustees/employer and the negligence case would fall away.
Under post-Barber case law, the benefits of men had to be levelled up to those of women for the period from the date of the decision (17 May 1990) to the date of the effective rule amendment. The defendants argued that in each of the four schemes the retirement age had been raised to 65 for men and women in December 1993 – thereby closing the "Barber window". The claimants argued that the window was not closed until formal rule amendments were made in August 1994.
The four schemes all had similar requirements for rule amendments – typically trustees' consent and an employer board resolution. However, despite exhaustive searches, full compliance with these amendment formalities could not be found. Additionally, there was no reference to any board resolution from 1993 in the schedule of resolutions annexed to the schemes' governing deeds executed in 1994. Notwithstanding all that, however, the Court applied the maxim that "all things are presumed to have been done duly and in the usual manner" and ruled that normal retirement ages in the four schemes had been validly equalised at 65 in 1993. The "presumption of regularity" operates by putting the burden on those challenging amendments to show that the requirements have not been complied with. The claimants could not do this. So the assumption had to be that the schemes had been validly equalised.
The Court decided that in each case there was sufficient clear contemporary evidence of compliance through surrounding documents such as announcements to members and minutes of the board of directors of the employer. In one case the fact that the other schemes of companies under common control had equalised was accepted as supporting evidence. By contrast, there was no evidence of any challenges at the time to the validity of the amendments. It was clear that the decisions had been made – the only question was whether they had been formalised as required. "This is the kind of situation where the presumption works most effectively" the Court said.
As a result, no loss had arisen and the proceedings could be dismissed.
Comments & Actions
- It is important to note that the Court did not conclude that the collective evidence about intention in 1993 actually itself amounted to an amendment of the scheme (like some English cases which look at whether announcements or board minutes could themselves constitute an amendment). Rather, the Court accepted that an amendment would only have been validly made if the formalities had been complied with, and concluded that given the wider evidence it could be presumed that those formalities had been complied with.
- We find this case very surprising. In our view, the fact that there is no record of the resolution in the schedule to the 1994 deeds (which otherwise listed resolutions affecting the pension scheme) is clear evidence that the formalities were not in fact complied with (standards of governance being much less good historically than they are now). We would have expected an English court to have rejected the claim. However, the decision is potentially helpful in that it indicates an application of a historic principle in the pensions context in a manner which is unusual.
- It is worth emphasising that as it is a Scottish case it is persuasive in the English courts (meaning that you could refer to it and argue an English court should follow it), but it is not binding on an English court. We would still expect (given previous case law) that an English court would look at the matter differently, although having this case to refer to could be helpful. However, should any clients have a pension scheme governed by Scottish law (or otherwise connected in some way to Scotland), and have a similar problem, it might be worth trying to litigate the matter in Scotland rather than England, to take advantage of the different approach being taken north of the border.