SPECIAL CASE BETWEEN BETT HOMES LIMITED AND RAYMOND WOOD AND OTHERS, AS TRUSTEES OF THE BETT LIMITED SUPERANNUATION AND LIFE ASSURANCE SCHEME
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2016] CSIH 26
XA51/15
Lady Paton
Lord Menzies
Lady Clark of Calton
OPINION OF THE COURT
delivered by LADY CLARK OF CALTON
in the
special case
between
BETT HOMES LIMITED
Party of the first part;
and
RAYMOND WOOD AND OTHERS, AS TRUSTEES OF THE BETT LIMITED SUPERANNUATION AND LIFE ASSURANCE SCHEME
Parties of the second part:
Act: McNeill, QC; Brodies LLP
Alt: Martin, QC; Shepherd & Wedderburn LLP
15 April 2016
Introduction
[1] Bett Homes Limited (“the Company”) is the principal employer in terms of a deed of trust and rules dating from 4 March 1959, as amended. This deed established a Scheme, now called the Bett Limited Superannuation and Life Assurance Scheme (“the Scheme”). Raymond Wood, Stephen Hirst and the Scottish Pension Trustees Limited presently hold office as Trustees of the Scheme (“the Trustees”).
[2] The Company and Trustees were agreed about the terms of the Scheme; the rules thereunder; and that the Scheme has been administered by the Trustees as if changes in respect of escalation of benefits had taken place with effect from 28 October 1992 and as if changes in respect of equalisation of a common pension age for male and female Members of the Scheme had taken place with effect from 1 January 1993.
[3] Difficulties in the administration of the Scheme have arisen. Despite extensive searches, parties were unable to discover sufficient evidence from company records or from other documentation to demonstrate that in 1992, decisions in respect of change to escalation of benefits and equalisation of pension date were made and recorded, in accordance with the requirements of clause eighteenth. Said clause makes provision for amendment of the rules of the Scheme. The parties agreed that they could not prove that the changes were made by amendment procedure in terms of clause eighteenth. The only other clause identified by the parties as a potential foundation for the changes is clause nineteenth (d).
[4] On the basis of the totality of the documentary material identified, the parties invited the court to consider and decide whether it can be inferred that in 1992 the Trustees exercised powers under clause nineteenth (d) to apply special terms, both in respect of escalation of benefits and equalisation of pension age, that the Company as principal employer consented thereto and intimation thereof was made to Members in accordance with said clause. The position adopted by the Company was that clause nineteenth (d) can be relied upon and the changes are therefore legally effective. The Trustees, on legal advice, were unable to make that concession. The Trustees were concerned as to whether the Scheme has been administered lawfully since 1992 by giving effect to the changes and wished guidance from the court about the administration of the Scheme. If the position adopted by the Company is wrong, the Company would be obliged to make a substantial further contribution into the funds of the Scheme and Members or certain Members would become entitled to additional benefits.
[5] In these circumstances the parties agreed to proceed by way of special case to try to resolve their difficulties and focussed the disputed issues in their questions for the court.
Questions in the special case
[6] There are two questions:
“1. On a proper construction of the documentary evidence, should the Scheme have been administered, and should it continue to be administered, on the basis that from 28 October 1992 benefits accruing in respect of service on or after that date were to increase at the rate of 5% per annum, or the increase in the retail price index if less, on the excess of the pension over the Guaranteed Minimum Pension?
2. On a proper construction of the documentary evidence, should the Scheme have been administered, and should it continue to be administered, on the basis that in respect of service on or after 1 January 1993 a common normal Pension Date of 65 years falls to be applied to all Members of the Scheme?”
Submissions by counsel for the Company
[7] Counsel adopted his written submission which he expanded in oral submission. In considering the two questions, the court should accept that there was a power available to the Trustees, under clause nineteenth (d). The court should consider the documentary evidence available and decide whether it can be inferred, from the documents and actings of the Trustees, that the Trustees did exercise the power to apply special terms with the consent of the Company both in respect of escalation of benefits and equalisation of pension age, as provided for in clause nineteenth (d). Counsel asked the court to adopt the approach approved by Lord Drummond Young in Low & Bonar Plc v Mercer Limited [2010] CSOH 47 and relied in particular on his observations in paragraphs 24 to 27. This was the foundation of the submission on behalf of the Company and led counsel in conclusion to identify a number of principles drawn from the decision in Low & Bonar Plc. He submitted that where a Scheme provides two separate routes to achieve some alteration in the Scheme, reliance on either may be possible (paragraphs 12 and 24). In considering an individual rule of a Scheme, regard must be paid to the specific requirements of said rule and the rule should not be construed with undue technicality (paragraph 9). The obverse is that the formal requirements required by one rule should not be read across to other rules where there is no such specification (paragraph 24). He accepted that even if the less formal requirements of a rule are complied with, it may be appropriate to consider whether any safeguards embedded in the formal rules are preserved (paragraph 26). It was on this basis that counsel conceded in the present case that rule nineteenth (d) could not be used to avoid the safeguards embedded in clause eighteenth which prevented prejudice to accrued rights or interests. He presented his submission on the basis that there was no such prejudice created by the two changes.
[8] Counsel set out the current terms of the Scheme. He explained that the original Scheme was set up under a deed of trust dated 4 March 1959 and appended rules. This deed cannot be traced but was amended by deletion and substitution of a supplemental deed and rules on 14 February 1980. A further deed which narrated that it was signed on 9 August 1982 was produced to the court as a certified copy. Said deed changed the name of the Scheme to Bett Brothers Plc Superannuation and Life Assurance Scheme and introduced clause nineteenth (d).
[9] In considering the terms of clause eighteenth and nineteenth (d), counsel noted and contrasted the essential provisions of said clauses. He submitted that clause nineteenth (d), unlike clause eighteenth, did not result in amendment to the Scheme or the rules but resulted in the creation of special terms. The administration of the Scheme required to be done in accordance with the rules and taking into account any special terms which applied to individuals affected by the special terms. Both clauses eighteenth and nineteenth required notification in writing to each Member affected but clause eighteenth, unlike clause nineteenth (d), required specified formalities to be completed to amend the Trust Deed or the rules. No formalities were specified in clause nineteenth (d). To exercise the supplementary power, all that was required was that:
“The Trustees may with the consent of the principal employer determine in relation to any Member that his Membership shall be on such special terms as are intimated to him provided ...”
The proviso to clause nineteenth (d) was not relevant as it related to taxation matters which are not in dispute.
[10] The approach approved in Low & Bonar Plc paragraphs 25 to 27 was similar to that adopted by Lord President Hope in Trustees of the J & A Ferguson Limited Pension Fund v Readman (Minuter) 31 December 1992 (GWD 1993 4ā275). Counsel prayed in aid the proper test identified by the Lord President at page 16:
“The proper test of whether the previous documentation had been superseded by the new draft documentation is whether the inferences can be drawn from the actings of the Trustees, known to and not objected to by the Participating Companies, that all these parties were agreed that the Trustee should operate the Scheme in all respects as if the Deed of Variation and the New Rules had been formally executed…”
In support of a general approach to the interpretation of pension schemes which is not unduly restrictive or technical, counsel relied on Scottish Solicitors Staff Pension Fund v Pattison & Sim & others [2014] CSOH 119 at paragraph 29 and on appeal [2015] CSIH 96, paragraph 18. Counsel also made reference to Vaitkus and Others v Dresser-Rand UK Limited and another 2014 Pens LR 153. He accepted that he could not draw much assistance from Vaitkus and Others but pointed out that there was no criticism made in that case of the approach adopted in Low & Bonar Plc.
[11] Counsel invited the court to consider the terms of clause nineteenth (d), identify the essential requirements and apply the Low & Bonar Plc approach to such evidence as is available. Having considered the only documentary material which the parties agreed was available, counsel accepted that there were deficiencies in the material. He submitted, nevertheless, that in respect of both escalation of benefits and equalisation of pension age, “there is just enough” to entitle the court to conclude that the requirements of clause nineteenth (d) were satisfied. The two questions in the special case therefore should be answered in the affirmative.
Submissions by counsel for the Trustees
[12] Counsel adopted his written submission. In oral submission, counsel explained that the Trustees were concerned to ensure that the Scheme should be administered lawfully in the interest of its Members. He noted that the Members of the Scheme are not represented and accepted that there was an obligation on the Trustees to put before the court competing submissions, albeit the Trustees are essentially neutral as to the result.
[13] The Trustees did not dispute the law as set out by counsel for the Company. Counsel pointed out that the equivalent clause (rule 16(B)) in Low & Bonar Plc was in different terms to clause nineteenth (d) and the observations of Lord Drummond Young, relied on by the Company, in relation to said rule 16 were obiter. He accepted that the test identified by the Lord President in Trustees of the J & A Ferguson Limited Pension Fund at page 16 was the proper test to be applied. In respect of both escalation of benefits and equalisation of pension age, the court should consider whether the available documentation is sufficient to draw the inference that the essentials of clause nineteenth (d) were satisfied. In relation to clause nineteenth (d) there was no formality required, that was in contrast to clause eighteenth. Clause nineteenth (d) encompassed certain essential requirements: determination by the Trustees; consent of the principal employer (the Company); and intimation to any Member that the Membership is on special terms. In relation to intimation to Members, counsel referred to Betafence Limited v Veys and others [2006] EWHC 999 (Ch) paragraph 66 to 67. Lightman J in considering the legal effects of a requirement of the rules for notification to Members which was not complied with stated:
“In my judgment there is no basis for holding that the breach of duty by the Trustees in failing to notify in any way invalidated the 1993 amendment. Neither the language of rule 23 nor any rule of law lends any support to any argument in favour of invalidation. There may be a failure to notify Members (or some of them) for any of a variety of reasons. The amendment may be for the Member’s advantage or disadvantage. The accident of a failure of notification cannot prejudice the legal effect of the amendment. What it might do is afford to Members who are able to show that they are prejudiced by the failure to communicate, the possible basis for a claim for compensation against the Trustees.”
Counsel also drew attention to Vaitkus and others v Dresser-Rand UK Limited and another which referred to a similarly worded clause to that of clause 16(B) in Low & Bonar Plc. The approach adopted therein did not differ from the general approach approved by Lord Drummond Young.
[14] Counsel drew attention to various examples in the documentation whereby amendment was made and recorded, including examples of changes to the rules by resolution of the Trustees. This documentation included an example of the use of clause nineteenth (d) powers in which by resolution the Trustees permitted one named employee to accrue benefits in the Scheme after the applicable pension date. No specific reference was made in said resolution to the use of the power in clause nineteenth (d), but the use of that power could easily be inferred. There was documentary evidence that the Trustees, by resolution, appropriately recorded and exercised powers referable to both clauses eighteenth and nineteenth (d). The difficulty in the present case is that the available documentation is not clear in relation to both escalation of benefits and equalisation of pension age.
[15] Counsel examined in chronological order the agreed documents. He accepted that there was no evidence of any formal resolution by the Trustees in relation to escalation or equalisation and that the only evidence of intimation to Members was to be found in the documents dated 10 November 1992 and 24 November 1992. There were plainly gaps in the documents and the uncertainty about the administration of the Scheme had been created because of the lack of formalities and lack of documentation. It is in these circumstances that the Trustees sought to obtain a specific answer to the questions in the special case to enable the Trustees to be satisfied about the lawful administration of the Scheme.
Relevant provisions of the Scheme and Rules
[16] We now consider the main provisions of the Scheme and rules operative in 1992 which we consider may be relevant to the issues in the special case. Clause eighth states:
“The Trustees may meet together for the conduct of business and regulate their meetings as they may decide. All the business brought before a meeting of the Trustees shall be decided by a majority of the votes of the Trustees present and voting thereon and in the event of any equality of votes the chairman of the meeting shall have a second or casting vote… a Resolution in writing signed as approved by all the Trustees shall be as effective as if it had been passed at a meeting of the Trustees and may consist of separate documents in similar form each signed by one or more of the Trustees.”
Clause ninth states that the Trustees with the approval of the principal employer shall be entitled to appoint a secretary with various powers. Clause fourteenth states that consent or approval of any action of the Trustees shall be given by the principal employer on behalf of the employers. Clause eighteenth states:
“The Trustees may at any time and from time to time with the consent of the Principal Employer on behalf of the Employers amend by deed any of the trusts, powers or provisions of this Trust Deed and by deed or by resolution in writing passed and signed by a majority of them amend any of the provisions of the Rules PROVIDED ALWAYS that no such alteration, modification or addition shall operate so as –
(a) to prejudice the rights or interests of any person already a Member or any person receiving benefit by virtue of the Membership of any deceased Member, being rights or interests relating to such benefits as the Actuary shall decide would then be secured on the immediate winding-up of the Scheme in respect of service with the Employers before the date of such alteration, modification or addition and by contributions paid to the Scheme before such date, except with the written consent of the person whose rights or interests are so prejudiced ....
…. The Trustees shall notify in writing each Member affected by any such alteration, modification or addition”.
Clause nineteenth, in its original form, gives additional powers to the Trustees which include augmenting benefits, commutation of pension and termination of contributions. Clause nineteenth (d) was added by said deed of trust which narrated that it was signed on 9 August 1982 and states:
“The Trustees may with the consent of the principal employer determine in relation to any Member that his Membership shall be on such special terms as are intimated to him…”
The clause is subject to some provisos which are not relevant for present purposes. Clause twentieth makes detailed provision about various benefits payable to Members and in subsection (e) gives specific powers in respect of cost of living increases. In the definition section,” Employer” means any one of the Employers and in relation to a Member means the Employer by which the Member is for the time being employed ...”; “pension date” is defined as “the 65th birthday of a male Member and the 60th birthday of a female Member”, “statutory pensionable age” is given a similar definition.
Rule 22 states:
“Members shall address all communications and requests in connection with the Scheme in writing to the Secretary to the Trustees at the head office of the Principal Employer.”
Rule 23 states:
“The Trustees shall provide each Member with a summary of such of the terms of the Scheme as concern him and shall if required arrange for the text of the Trust Deed and rules to be available for inspection by any Member…”
Rule 24 states:
“If the Trustees with the consent of the Principal Employer shall exercise the power conferred upon them by the Trust Deed to alter, modify or add to all or any of the provisions of the Rules, the Trustees shall notify in writing each Member affected by such alteration, modification or addition.”
In the schedule to the rules, provision 8 provides for escalation of benefits by three per centum of the annual rate subject to certain restrictions. By resolution this was varied with effect from 1 July 1990 when five per centum was substituted for three per centum.
[17] We note that there were resolutions on 5 March 1991 and 19 December 1991 which amended the rules in relation to the “pension date”. In particular, in respect of some members the “pension date” was defined as the 63rd birthday. An amendment which affected all new members is dated 12 August 1991. The Trustees, with the consent of the principal company, resolved:
“that with effect from 22nd March 1991, the Rules are amended as follows:-
(1) the definition of ‘Pension Date’ is deleted and replaced by the following:-
‘Pension Date’ means, in respect of a Member who joined the Company prior to 22nd March 1991, the 65th birthday of a male Member and the 60th birthday of a female member and, in respect of all new Members joining the Company on or after 22nd March 1991, it means the 65th birthday. If a Member is also a Member of the Bett Brothers PLC Supplementary Superannuation and Life Assurance Scheme, Pension Date means the 63rd birthday.”
[18] It was not disputed that although the Scheme and the rules made reference to retirement ages of 65 for men and 60 for women, this was not the legal position following the decision of the European Court of Justice on 17 May 1990 in Barber v Guardian Royal Exchange Group [1990] ECR Iā1889. Parties agreed that the effect of Barber was that provisions in the Scheme which specified different retirement dates for male and female Members were discriminatory and consequently in breach of article 119 (as it then was) of the EC treaty. From 17 May 1990, article 119 had direct effect and automatically operated to amend the Scheme in such a way as to eliminate any discriminatory provisions. In effect therefore from 17 May 1990, the pension date for men and women who were Members of the Scheme were equalised at 60, albeit there had been no amendment to the rules of the Scheme to that effect. No such amendment was necessary because of the direct effect of the decision in Barber. The rules were amended in 1991 to introduce for all new members a pension date which did not discriminate between male and female Members.
[19] We accept that in 1992 there was some uncertainty about the full implications of the decision in Barber and this caused problems. In the Scheme operated by the Trustees, there are restrictions in clause eighteenth which prevent retrospective prejudice to the rights or interests of existing Members or persons receiving benefits except with the written consent of the Member. We note that the provisions of the Scheme, however, do not prevent prejudice to the rights or interests of Members prospectively and no consent of a Member is required.
[20] We consider that it is clear from the supplemental deed of trust and replacement rules dated 14 February 1980 that the Trustees and Company have, as one would expect, separate functions and duties under the Scheme. We note that some, but not all, of the Trustees were at the same time directors of the Company. The Scheme envisaged that subsidiary companies or other employers might become party to the Scheme, albeit the Company alone, as the principal employer, is given functions under the Scheme in particular in clauses eighteenth and nineteenth. Therefore it is not only Company employees who are Members of the Scheme or who have interests under the Scheme. We also note from the agreed documentation that there are examples of the Trustees acting before 1992, in accordance with the Scheme provisions, to amend the rules and that appropriate documentation was preserved to record this.
Is clause nineteenth (d) capable of providing a legal basis for administration of the Scheme in terms of the changes?
[21] Detailed provision is set out in clause eighteenth to ensure that amendment of any of the Trusts, powers or provisions of the Trust Deed or amendment of any of the rules should be done by way of the specified formalities set out in said clause. We accept that an obvious way of making changes in this case in relation to escalation of benefits and equalisation of pension age would be by way of amendment in terms of clause eighteenth by complying with the necessary formalities, that is, by deed or resolution as specified therein. Clause nineteenth, as amended, gives the Trustees useful powers to augment benefits, commute pension, terminate contributions and determine special terms in relation to “any Member” without the necessity of going through the formalities required in clause eighteenth. We have no doubt that under clause nineteenth (d) the Trustees have power in relation to “any Member” to grant special terms, in relation to escalation of benefits or pension age, which are not in accordance with the terms of the Scheme and rules. To achieve that, all that is required is a determination of the Trustees, consent of the principal employer (the Company) and intimation to the Member. Clause eighth which refers to the conduct of business by the Trustees does not specify any formalities. The Trustees may meet together and may regulate their business as they may decide. Decision making is by majority voting. No documentation is specified. A written resolution signed by all the Trustees is effective as an alternative to a meeting of the Trustees, but such a written resolution is not mandatory. We accept that there is a marked contrast in the formality specified in clause eighteenth and clause nineteenth. We consider that clause nineteenth provides a way for the Trustees to operate outwith the terms of the Scheme and the rules in determining various arrangements devised in relation to the circumstances of “any Member”. There are obvious advantages, when the Trustees are dealing with the special circumstances relating to individual Members, of permitting the Trustees to act without requiring the Trustees to use the formal amendment provisions of clause eighteenth.
[22] Counsel for both parties submitted that clause nineteenth should not be given a restricted meaning and that, in particular, clause nineteenth (d) should be read as giving power to the Trustees to apply special terms, not merely in relation to any individual Member but to a very large class or classes of Members which may affect most, if not all, Members of the Scheme. We consider that the terms of clause nineteenth (d) are drafted in the widest possible terms. There is no restriction relating to: the circumstances in which the Trustees may operate said clause; the nature of “such special terms”; and the power refers to “any Member”. Even interpreting the clause strictly, we do not consider that any restriction is implied about the number of Members, or the type of Member (for example, existing or future), to which special terms might apply. In our opinion, it is for the Trustees, with the consent of the Company, to make the determination and there is nothing in clause nineteenth to define or restrict that determination. We note that rule 16(B), considered in Low & Bonnar Plc is framed in terms different from those to clause nineteenth (d) and we therefore do not draw assistance from the observations of the Lord Ordinary about the ambit of rule 16(B). We consider that the terms of clause nineteenth (d) are more general than the terms of rule 16(B). We conclude that although clause nineteenth (d) may have been designed to give powers to the Trustees to deal with the circumstances of individual Members without requiring any formal change to the rules, the generality of the language used in said clause gives Trustees extensive powers of decision making, with no restrictions relevant to the present case. However the determination of the Trustees alone is not sufficient: there must be consent of the principal employer (the Company). We also consider that intimation to the member or members of the Scheme is essential to give effect to the words … “that his membership shall be on such special terms as are intimated to him…”. There are no requirements about the form or source of intimation. As clause nineteenth (d) does not amend the rules of the Scheme, the only way in which a member is to be made aware of the special terms is by intimation to the member. The language of clause nineteenth (d) in our opinion leads to the conclusion that there are three essential elements (and not only two) required by this clause. In contrast, the wording of clause eighteenth implies that amendment is completed by following the specified formalities for amendment procedure and that the amendment does not fail because of a lack of intimation. Clause eighteenth, in our opinion, is akin to the provisions considered by Lightman J in Betafence Ltd and referred to by counsel for the Trustees. In addition, under the Scheme, provision is made for a Member to obtain a copy of the applicable rules which would include any amendment made to the rules.
[23] We accept that clause nineteenth (d) is capable of providing a legal foundation for the administration of the Scheme provided that the three essential elements of the clause were fulfilled before the two changes were made to the administration of the Scheme in respect of escalation of benefits and equalisation of pension age.
Agreed documentation and facts
[24] The parties accepted that the minute of 9 September 1992 and the agreed facts in paragraphs 14 to 19 of the special case are the totality of the documentary evidence available; that the documents are what they bear to be; and that the presumption of regularity should be applied to documents. Thus it should be assumed, for example, that a document which bears to be intimation to members was issued to members. The parties also agreed that since 1992 the Scheme has been administered on the basis that the changes to escalation of benefits and equalisations of pensions were made lawfully. Counsel for the parties in oral submission accepted that the changes to escalation of benefits, and equalisation of pension age, did not have retrospective effect such as would amount to a breach of the protection built into clause eighteenth.
[25] In this special case, the court has not heard evidence and we have considered the case on the basis as agreed by the parties. The facts set out by the parties and agreed are:-
“14. On 28 October 1992 there was a meeting of the board of directors of the Company. In the Minutes of that meeting, it is stated that Mr Bett was in the chair and that Mr Hanna, Mr Gibson and Mr Mason were present. It is recorded that there was discussion in connection with the Scheme which related to issues concerning inflation and the desire to maintain the value of Members’ pensions. The directors decided to accept a proposal which would:
‘maintain the level of total retirement income in real terms by limiting benefits accruing from future service to increases at the rate of 5% per annum, or the increase in the RPI if less, on the excess of the pension over the GMP’
The reference to ‘GMP’ relates to the ‘Guaranteed Minimum Pension’ which is defined in Rule 1. There is no record of any discussion by the directors at the meeting about retirement dates or the consequences of the decision in Barber.
15. On 29 October 1992, Mr Sneddon of Mercer (under their then title of Mercer Fraser) wrote to Mr Hanna at his address at the Company. The letter was headed ‘Strictly private and confidential’ and, subject to a number of detailed considerations which are not immediately relevant, it stated:
‘Dear Ronnie
EQUAL PENSION AGES
We discussed at the Trustees’ meeting the position with regard to the equalisation of pension ages following the judgement in the Barber v GRE case. To recap, equal pension ages so far only apply to Members who joined the Scheme on or after 22 March 1991. For these employees the normal pension age is 65. For all other Members normal pension age is 65 for males and 60 for females.
There is still uncertainty over whether the Barber judgement requires benefits to be equalised for service before the date of the judgement i.e. 17 May 1990. However, there is no doubt that the judgement does require the equalisation of benefits for service after that date…
… What we recommend therefore is that you equalise normal pension age at 65 for all future service, e.g. with effect from 1 January 1993. I have enclosed with this letter a draft of an announcement you might wish to use to announce this change, together with a statement which illustrates the effect of the change on the benefits for a female Member…
I should point out that it is intended that the announcement would be issued to both male and female Members of the Scheme…
Perhaps you could let me know if you have any comments on the draft announcement and statement
Yours sincerely
Alan C. Sneddon’
The parties have not found any copy of the draft announcement and illustrative statement which are referred to in the letter.
16. On 10 November 1992, a memorandum (or ‘Memo’) was apparently sent from the Trustees to all Members, conveying the effect of the decision of the directors of the Company made at their meeting on 28 October regarding escalation of benefits. The Memo stated in part:
‘From: THE TRUSTEES To: ALL MEMBERS
Bett Brothers PLC Superannuation and Life Assurance Scheme
At the Board Meeting held on 28th October, 1992, it was agreed that the Company will change the rules of the Scheme so that benefits accruing from future service would receive increases at the rate of 5% per annum, or the increase in the retail price index if less, on the excess of the pension over the guaranteed minimum pension.’
There is no document explaining how the Trustees were made aware of the decision of the directors, nor of any formalities of the Trustees in respect of their apparent approval of the directors’ decision.
17. On 24 November 1992 a document in the form of an announcement was sent on the notepaper of the Company. It bore to be sent to all members of staff and to be copied to the Trustees and was in the form of a letter from the company secretary. It stated:
‘To: All Members of Staff
BETT BROTHERS PLC
SUPERANNUATION AND LIFE ASSURANCE SCHEME
EQUAL BENEFITS
As a result of a judgement by the European Court it has become necessary to introduce common terms and conditions for men and women under the Superannuation and Life Assurance Scheme. Accordingly, after discussion between Bett Brothers PLC and the trustees, a common Normal Pension Age of 65 will apply to all Members of the Scheme. This change will apply with effect from 1st January 1993
In general, for benefits accruing after 1st January 1993, female Members will be entitled to the same conditions as currently apply to male Members.
…
Benefits for service completed up to 1st January 1993 will be unaffected, i.e. they can be paid without reduction on retirement at age 60 for female Members. An example of how these changes will apply is attached to this announcement.
…
If you have any questions please contact Ewen Blair or myself.
Yours sincerely
E R Mason
cc Trustees’
The parties have a copy of that letter which includes the signature of Mr Mason. As at that date, Mr. Mason was not one of the Trustees nor their secretary. However, recipients of the announcement were directed either to Mr. Mason or to Mr. Blair who was, at that time, one of the Trustees.
18. On 25 November 1992 there was a meeting of the board of directors of the Company. The Minutes of that meeting record that the Minutes of the previous meeting held on 28 October 1992 were approved. Under the heading of ‘Matters arising’ it was stated:
‘Pension Scheme – the change to the Pension Scheme rules as agreed at the last Board Meeting had been implemented.’
19. Under the heading of ‘Any other business’ the Minutes record:
‘Equalisation of pension benefits – a common normal pension age for both men and women had been agreed and would apply to all Member [sic] of the Scheme. They had been informed.’ ”
[26] Before we turn to consider in more detail the documents in relation to escalation of benefits and equalisation of pension age, we observe that there is an important document which provides some context to the matters which we require to consider. We refer to the minutes of the meeting of the Trustees and the Company with Mercer Fraser dated 9 September 1992. Mercer Fraser were then advisers who gave pension advice about the Scheme. The minutes (unsigned) record the attendance inter alia of all of the four Trustees who held office at the date of the meeting in 1992. Two of the Trustees were also at the same time directors of the Company. It is recorded that one of the Trustees reminded the meeting “that the first duty of the Trustees is to the Members and not the Company or any other body”. At this meeting it is recorded that both pension annual increments and equalisation of pension ages were raised and discussed. The minutes state:
“3. Pensions Annual Increments
MF suggested that the present flat rate of 5% was over-costly to the Scheme. RGH agreed to consider this suggestion and asked for further details in writing. JEB and D Robins reminded the meeting that pensioners had no redress when inflation was higher than 5% so that it was reasonable to pay them a little extra when inflation was under 5%.
4. Equalisation of Pension Ages
MF reminded the meeting of the position following the Barber case and advised that the problem should be dealt with sooner rather than later. They were asked to write with recommended options.”
Escalation of benefits
[27] Although the term escalation of benefits was used throughout the case, we observe that the proposed change was in effect a reduction in benefits. It is apparent from the minutes of the meeting dated 9 September 1992 that at the meeting of the Trustees and the Company with Mercer Fraser, concerns were expressed that the rate of escalation of benefits of 5%, specified in the Scheme, was considered by the Company as too expensive. Two of the Trustees expressed views that it was reasonable to pay pensioners at the Scheme rate, that is 5%. From the minutes of the meeting of the board of directors of the Company on 28 October 1992, it appears that the concerns of the directors were met by their decision to limit benefits accruing from future service to an increase at the rate of 5% per annum, or the increase in the RPI if less, on the excess of the pension over the guaranteed minimum pension as defined in rule 1 of the Scheme. There is no information relating to any decision making of the Trustees except the memorandum dated 10 November 1992. This document was apparently sent from the Trustees to all Members and conveyed the decision of the directors of the Company made at their meeting on 28 October regarding escalation of benefits. Thereafter the Trustees administered the Scheme on the basis set out in the memorandum.
[28] We consider that there is merit in the submissions by counsel for the Company that the proper approach to apply in considering whether reliance can be placed on clause nineteenth (d) is not to insist on a deed or proof of a resolution by the Trustees but to infer from the agreed facts and documents whether or not it can be concluded that special terms re escalation of benefits were created in accordance with clause nineteenth (d). We consider that the cases relied upon by counsel namely, Low & Bonar Plc and Trustees of the J & A Ferguson Limited Pension Fund, are of limited assistance when we come to consider the specific provisions of the Scheme in this case. We have accepted that clause nineteenth (d) does not require any formalities. It follows therefore that in deciding whether clause nineteenth (d) has been complied with, consideration may be given to what can be inferred from the agreed facts and documentation. That is the approach we have adopted.
[29] We accept that it is not necessary in terms of clause nineteenth (d), or any other provision in the Scheme, that any specific reference should be made to the use of or reliance on clause nineteenth (d). Although it is not possible from the documentation to determine a precise date when it could be said that the Trustees determined special terms in relation to escalation of benefits, it is plain that there was consent by the Company to a new formula for escalation of benefits as recorded in the minutes of 28 October 1992. The only document from the Trustees is the memorandum from the Trustees to all Members dated 10 November 1992. We consider that the only reasonable way to interpret this memorandum is to conclude, by implication, that the Trustees agreed to the new formula which they intimated to Members. We conclude therefore that on or by 10 November 1992, despite some reservations expressed before that date, the Trustees had made a decision in favour of the new rate of escalation of benefits and intimated the new rate to all Members. This interpretation would accord with their actions thereafter whereby the Trustees administered the Scheme in accordance with the new rate which they had intimated.
[30] We are satisfied therefore that despite the lack of detailed relevant documentation, the compelling inference is that: there was a determination by the Trustees; the Principal Employer, (that is the Company), consented; and that there was intimation of the new rate by the Trustees to Members. Accordingly we conclude that the essentials of clause nineteenth (d) were complied with. We observe that the memorandum is evidence of intimation to Members as at the date of the memorandum which is dated 10 November 1992. Accordingly we answer the first question in the special case in the affirmative but with this reservation. There are no agreed facts and documentation in the special case about any intimation to new Members who joined the Scheme after said date and we express no opinion about the administration of the Scheme in relation to individuals who became Members after 10 November 1992.
Equalisation of pension age
[31] Applying the approach to construction which we set out in paragraph [28], we accept that the agreed documentation clearly vouches the decision-making of the Company in 1992 in favour of equalisation of the pension age for both male and female Members at the age of 65. Following the joint meeting of the Trustees and the Company with Mercer Fraser in which Mercer Fraser were asked to write with recommended options about equalisation of pension ages, a letter was sent by Mr Sneddon of Mercer Fraser to a director, Mr Hanna, at his address at the company. The “strictly private and confidential” letter made a recommendation to equalise normal pension age at 65 for all future service. Thereafter, on 24 November 1992, an announcement was sent to all members of staff of the Company. There is no information about intimation to any Members of the Scheme who were not members of staff of the Company or about intimation to members who were entitled to a pension date defined as the 63rd birthday in the amended rules. Said letter from the company secretary stated that “... a common Normal Pension Age of 65 will apply to all Members of the Scheme ... with effect from 1 January 1993” . Members of staff were invited to send any questions to Ewen Blair (a Trustee) or to the writer of the letter. On 25 November 1992 there was a meeting of the board of directors in which it was recorded “... the change to the pension scheme rules as agreed at the last board meeting had been implemented”.
[32] We are unable to identify any documentation from which it might be inferred that the Trustees (as distinct from the Company and its secretary and directors) made any determination in relation to the pension age.
[33] We accept that it is possible to infer from the minutes of the meeting of 9 September 1992 that the Trustees were aware of the pension position following the Barber case and were aware that options for a solution were being sought from Mercer Fraser. In our opinion, it cannot be inferred that the Trustees consented to any change in respect of pension age at the meeting dated 9 September 1992. There is reference in the letter from the Company dated 24 November 1992 that there had been discussion between the Company and the Trustees, but the nature and outcome of the discussion and any decision-making by the Trustees is not recorded. We accept there was discussion at the meeting of 9 September 1992. That may be the discussion to which reference is made in the letter from the Company dated 24 November 1992 or it may be there was some discussion on some other date. We are unable to draw any inference. From the documentation it appears that: the Company, not the Trustees, were informed about pension options by the pension advisor; the Company had a meeting of the board of directors on 28 October 1992 albeit there is no record of any discussion about retirement date and no record of any decision in respect thereof; the origins of the letter from the Company dated 29 October 1992 are unclear; at the meeting of the board of directors of the Company on 25 November 1992 there was reference to equalisation of pension benefits and that Members had been informed. We accept that it is possible to infer from the documents that the Company decided in favour of equalisation of pension age. We note that intimation by the Company was made to “all members of staff”, that is all Members who were employees of the Company (not all Members of the Scheme) and that intimation was copied to Trustees. There is nothing in the documents to indicate that there was any response by the Trustees to the intimation.
[34] In our opinion clause nineteenth (d) requires a decision by the Trustees and consensus between the Trustees and the Company about the special terms prior to intimation to Members. It is the special terms which are the subject of intimation. We are unable to infer from the agreed documentation and facts that there was any decision-making by the Trustees in 1992 about equalisation of pension age. The mere fact that the Trustees were copied in to the letter of intimation to members of staff of the Company does not, in our opinion, entitle any inference to be drawn that the essentials of clause nineteenth (d) were complied with. Counsel for the parties correctly, in our view, conceded that the mere fact that the Trustees administered the Scheme post 1992 on the basis of equalisation of pension age was not sufficient of itself to allow the inference to be drawn.
[35] We note that with effect from 22 March 1991, new members, both male and female, joining the Company on or after 22 March 1991, all have a pension date in terms of the Scheme defined as the 65th birthday, or 63rd birthday if the member is also a member of the Bett Brothers PLC Supplementary Superannuation and Life Assurance Scheme. The rules were amended by resolution to that effect. For the reasons given therefore we answer the second question in the negative except in relation to all new members joining the Company on or after 22 March 1991 (unless such a new member was also a member of the Bett Brothers said supplementary scheme, in which case the pension date means the 63rd birthday).
Disposal
[36] We have answered both questions in the special case as set out in paragraphs [30] and [35]. The parties have agreed to bear their own expenses in relation to the special case.