In Seton House Group Ltd and Britax Pensions Trust v Mercer Ltd, the High Court dismissed an appeal against summary judgment with the effect that a claim for negligent pensions advice against Mercer remained time barred.
The way that retirement ages for men and women were equalised in pension schemes following theBarber and Coloroll cases in the European Court of Justice in 1991 and 1994 led to a number of claims against professional advisors (including against solicitors, as well as against actuarial and investment advisers like Mercer). Given the date of these judgments, the 15 year longstop limitation period has been particularly important. This decision reviewed the provisions of Section 14A(10) of the Limitation Act 1980 and highlights some important points for pensions advisors, lawyers and other professional advisors in relation to the deemed knowledge required under the Act.
The claim concerned an alleged failure properly to advise on an amendment to the Britax Pension Fund, a defined benefit pension scheme, to “equalise” pension ages between men and women that risked an additional funding liability for the scheme in the region of £5.4m. The Claimants (a company who had acquired the principal employer contributing to the Britax Scheme and the Scheme Trustee) issued a claim on 22 December 2011 (which was deemed issued on 30 September 2010 pursuant to standstill agreements that were in place).
The key events were as follows:
- in 1990, Mercer recommended raising the pension age for all future employees to 65 (prior to that, it was 60 for women and 65 for men) – an addendum to the explanatory booklet for the scheme was issued in October 1990 and an announcement made in February 1991 giving notice of the change with effect from 1 April 1991 but no amendment was made under the scheme Deed and Rules;
- on 21 December 1995, a new Trust Deed and Rules was executed retaining the retirement age of 60 for women;
- on 10 March 2000, a further new Trust Deed and Rules was executed providing for equalisation at age 65 for both men and women (but this did not have retrospective effect);
- Ernst & Young prepared a financial due diligence report dated 28 April 2000 prior to the sale of a subsidiary company that participated in the scheme (the report was prepared for the purchaser but was disclosed by them to the Claimants during the price negotiations) – E&Y referred in 1 of the 12 appendices to the 237-page report to a non-compliant method of equalisation from April 1991 and recommended that legal advice be sought.
At the heart of this matter was the evidence as to who exactly from the Claimants, their solicitors and Mercer had seen the E&Y report and on what data.
Mercer was granted summary judgment in January 2014 dismissing the claim on limitation grounds.
Mercer had asserted that the requisite knowledge was acquired in or around 2000 or, at the very least, by 1 October 2007 (i.e. more than 3 years prior to the deemed issue date). In contrast, the Claimants had:
- asserted that the Scheme Trustee only acquired “knowledge” for the purposes of Section 14A in 2010 when the Trustee’s solicitors reviewed the scheme documents;
- denied that the passage in the E&Y due diligence report ought reasonably to have been seen or read by any director/senior employee of the parent company and principal employer contributing to the scheme or the Scheme Trustee and, if they had, that it would not have sufficiently alerted them to an issue in any event; and
- they took expert advice in 2000 from their solicitors and from Mercer prior to the sale but nothing put them on enquiry at the time. There was no evidence that the solicitors saw the E&Y report or that they had been asked for any advice on the passage in question.
The Claimants appealed against the summary judgment.
The High Court found that:
- for the purposes of Section 14A(10)(a), the Court must establish what the Claimant could himself have observed or ascertained and whether in light of that it would have been reasonable for him to make further enquiry that would have led to additional knowledge; and
- in sub-section (b), the enquiry extends to whether in the circumstances it would have been reasonable to seek expert advice, and if so, what knowledge would have been ascertainable with that advice.
The Judge held that both Claimants had received the E&Y report and had constructive knowledge of the key passage flagging up the equalisation issue. He also found that it would be reasonable to expect that (i) a suitably senior employee would read the report including the relevant passage and that, (ii) having read it, it would have been reasonable to make a further enquiry (including by taking expert advice); and (iii) that enquiry/advice would have revealed the equalisation issue. He therefore dismissed the Claimants’ appeal.
The Judge made no criticism of the Claimants’ solicitors involvement in 2000. He agreed with the Master that, even if the solicitors had seen the report, a general retainer in relation to a transaction would not bring with it an obligation to advise on pensions compliance issues such as the E&Y report highlighted; that would not, however, prevent the firm being under an obligation by virtue of a suitably general retainer to have read the E&Y report (had they received it) and drawn their clients’ attention to the relevant passage so that instructions could be given as to whether to follow it up.
This case is a useful reminder to solicitors and other professional advisors to include express limitations in retainer letters where appropriate, so as to seek to avoid an obligation to highlight issues in, and/or advise on, specialist areas outside of their remit. Even when a retainer is expressly limited, potential issues can still arise, such as failure to warn where a potential issue does in fact come to the adviser’s attention, but express limits can help to reduce the obligation to review in detail everything received as part of a transaction.
Further reading: (1) Seton House Group Ltd (2) Britax Pensions Limited v Mercer Limited  EWHC 4234 (Ch)