Scottish ruling creates confusion for pensions lawyers
Pensions lawyers need guidance on how to treat antiquated or onerous scheme rules, experts have said, after Scotland’s highest appeal court ruled that a legal firm must pay more than £62,000 to the Scottish Solicitors Staff Pension Fund.
The trustees of the SSSPF sued law firm Pattison & Sim to recover contributions of £50,224. The firm denied liability on the grounds that amendments to the scheme rules since 1990 did not follow proper procedures and were therefore invalid.
Pensions lawyers are now at a loss as to how much formality is needed
The court ruled in favour of the SSSPF and ordered the firm to pay £62,558. The firm appealed, but the Inner House of the Court of Session ruled against it.
The amount due to the scheme is still in dispute.
In its 1947 declaration of trust, the SSSPF scheme had a requirement that in order to change the trust deed and rules, there had to be three meetings: one for the members, one for the employers and one for both, with the proposed change winning a two-thirds majority in each.
Although it had not been demonstrated that these meetings were held in relation to the amendments in question, this did not affect the ruling.
Craig Connal QC, partner at law firm Pinsent Masons, who acted on behalf of the SSSPF, said: “I think the court was trying to send out a message that the practice of getting involved in highly technical debate about what may have happened years ago wasn’t particularly constructive.”
He added that there had been “a number of decisions that have tended to find that the ‘i’ hasn’t been dotted, and so the whole process collapses in a heap”.
Briggs v Gleeds
One such decision came about in 2014 with the case of Briggs v Gleeds. It was found that deeds related to the scheme were not carried out in accordance with statutory requirements. As the sponsoring employer was a partnership, for documents to take effect each partner needed their signature attested by a witness, which was not done.
As a result a number of changes – including the introduction of the defined contribution sections, reduction of the defined benefit accrual rate and closure of the DB section to future accrual – were judged not to have taken place. Lawyers said at the time of the judgement that this could increase the scheme’s deficit by around £45m.
Duncan Buchanan, partner at law firm Hogan Lovells, said: “The Scottish case is in direct contrast to the Gleeds case… I think pensions lawyers are now at a loss as to how much formality is needed. We really need some guidance from the High Court.”
Jonathan Fenn, head of pensions and employment at law firm Slaughter and May, said although Scotland can have a slightly different legal approach to the rest of the UK, “it’s something English courts would take note of”.
He added that the best way to avoid such cases was rigorous diligence when carrying out work on the scheme.
“Lawyers would always say you really must make sure everything is done properly, otherwise you get yourself into this situation.”