Reclaiming motion fails in law firm pension rules challenge

The presumption that necessary procedures have been properly followed should be applied to amendments to a pension scheme made in 1990, which had been relied on in subsequent dealings and transactions, the Inner House has ruled in a case affirming the liability of a firm of solicitors to make payments under the scheme.

Three judges refused a reclaiming motion by Paisley practice Pattison & Sim and its two partners, which was defending a claim by the trustees of the Scottish Solicitors Staff Pension Fund for contributions due towards a deficit in the fund. The defenders contested whether amending scheme rules of 1980 and 1990, on which the claim was based, had been validly adopted. Lord Woolman in the Outer House rejected the challenge (click here for report). 

The scheme trustees were unable to produce documents establishing that the three-way approval process required for amendments had been followed, and it appeared that a certain deed referred to in the narrative of subsequent amending documents could not be found. The defenders argued that the pursuers were under an onus to demonstrate that the alterations made to the original declaration of trust and rules had been validly effected, and they had failed to discharge that onus.

Delivering the opinion of the court, Lord Drummond Young, who sat with Lady Paton and Lady Smith, ruled that the general approach to the interpretation of pension scheme documents "should in our opinion reflect the fact that pension schemes and the trusts under which they operate are designed to exist for long periods and are likely to affect a substantial number of beneficiaries". Schemes had to be able to adapt to changes in legislation, in relation to both general administration and taxation, so as to secure the benefits due to members, as well as to changes in investment conditions.

If a power of amendment imposed conditions for its valid exercise, these obviously had to be satisfied, he continued. "In considering such conditions, however, we are of opinion that the primary aim is that the exercise of the power should be clear and certain and should be put into some sort of permanent form. Provided that that is done, we do not think that the court should be unduly technical or restrictive in considering the niceties of its manner of exercise."

In considering transactions that had taken place a significant time in the past, "there is a general presumption that all the necessary procedures have been properly followed, the result being that the burden of proving otherwise rests on any party who challenges the transaction". This was of great practical importance, as it would be intolerable if all transactions that had taken place over a long period of time were to be potentially open to challenge. "No pension fund could seriously carry on its administration under such a threat", Lord Drummond Young commented.

In the present case such documentation as was available suggested that the required procedures had been gone through, even though in one case the evidence was "manifestly incomplete". Any irregularities were not such as to displace the presumption.

The judges reserved their position on the Lord Ordinary's alternative ground of decision, that the defenders had conducted and settled earlier litigation on the basis that the rules applied, but refused the reclaiming motion and remitted the case back to the Lord Ordinary to determine the amount now due.

Click here to view the opinion.