Scots law firm fails in appeal against solicitors’ pension fund’s £50,000 claim over liability for outstanding contributions

A firm of solicitors which challenged a claim by the trustees of a fund set up to provide pensions for employees of legal practices and their dependants has failed in an appeal against a judge’s decision to grant decree against the firm to pay its share of a deficit on the fund.

Pattison & Sim denied liability to pay the £50,224 sued for by the Trustees of the Scottish Solicitors Staff Pension Fund, which went into deficit following the stock market collapse in the early years of this century.

But judges in the Inner House of the Court of Session upheld a decision of the Lord Ordinary and refused the firm’s reclaiming motion.

Lady Paton, Lady Smith and Lord Drummond Young heard that the pursuers raised the proceedings to recover contributions to the fund that were alleged to be due from the defenders Pattison & Sim and its two partners David Howat and Bridget McLaren, in respect of former employee Ronald Barr.

The trustees of the fund claimed that under amendments to the scheme rules the defenders were among those liable to meet the deficit.

The Paisley firm and its two partners denied any liability and questioned whether the formal “triple-lock” procedure set out in the original trust documents was followed when amendments to the rules for calculation and payment of contributions were made.

Following a debate in the Commercial Court, the Lord Ordinary rejected the defenders’ arguments and granted decree against them for the sum of £62,558, that being the revised amount of the contributions held to be due with interest to the date of decree.

However, the defenders appealed, arguing that Lord Woolman was in error in holding that the various documents founded upon by the pursuers were ex facie valid.

The pursuers were under an onus to demonstrate that the alterations made to the original Declaration of Trust and Rules in 1947 had been validly effected, but they “failed to discharge that onus”.

In particular, the original Declaration of Trust had provided a specific mechanism for amendments to the trust deed and rules, involving separate meetings of the employers, the members, and the employers and members taken together, but it had not been demonstrated that those had been held.

Consequently the purported variations were “ineffective and ultra vires”, it was submitted.

However, the pursuers argued that on a proper interpretation of the documents, the amendments that authorised the provisions on which the claim is based were “validly effected”.

In a written opinion, Lord Woolman held that the amendment procedures carried out in 1990 and subsequently were valid and the appeal judges agreed with that conclusion.

Delivering the opinion of the court, Lord Drummond Young said: “In considering transactions that have 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.

“The presumption is generally referred to by the Latin maxim omnia praesumuntur rite esse acta, or in the full version found in Trayner’s Latin Maxims and Phrases, omnia praesumuntur rite et solemniter acta esse: all things are presumed to have been done duly and in the usual manner.

“In our opinion four main reasons may be said to justify the application of the maxim. First, in practice those who carry out transactions generally ensure that at least the substance of the transaction is properly decided and recorded. Consequently any defect in procedure tends to be a matter of form rather than substance. The maxim thus reflects the underlying principle that substance is more important than form.

“Secondly, if there is a substantial objection to the transaction, it is likely that there will be an immediate challenge, at least on an informal basis. The result is that any defects in procedure that are serious and material, in the sense that they affect the end result, are likely to be addressed at the time.

“Thirdly, when a considerable time is allowed to pass after a transaction has been carried out, evidence will frequently be lost. If the onus fell on those who carried out a transaction to prove, possibly many years after the event, that it had been carried through according to proper form, the practical difficulties might be enormous.

“Fourthly, and perhaps most importantly, transactions do not stand alone. The parties to them, and third parties affected by them, rely on the existence and validity of a transaction in their future dealings.

“If a transaction were open to challenge, possibly long after it was carried out, on the ground that it was impossible to prove that proper procedures had been used, all subsequent dealings that proceeded on the faith of that transaction would also be potentially open to challenge. That would be an intolerable situation, both in the commercial world and elsewhere. This is well illustrated by the facts of the present case.

“To take the adoption of the 1990 Rules as an example, if that transaction were now open to challenge because it could not be proved that the ‘triple-lock’ procedures had been followed, all of the subsequent transactions of the Fund, involving employers, members and others, would also be potentially open to challenge. No pension fund could seriously carry on its administration under such a threat.”

The judges held that both the 1991 amendment and the Deed of Amendment of 2009 were “quite sufficiently vouched” by the documentation available and that in relation to the 1991 and 2009 amendments, the maxim “omnia praesumuntur rite esse acta” applied.

Lord Drummond Young added: “For the foregoing reasons we are of opinion that the argument for the defenders, to the effect that it had not been established that the 1990 Supplemental Trust Deed, the 1991 amendment and the Deed of Amendment of 2009 were validly effected, must be rejected.

“As we have indicated, is not for the Trustees to establish that the amendments to the deeds governing the Fund had been properly effected; it is rather for those who challenge the regularity of past procedures to establish that proper procedures were not followed. Without such a rule the sensible administration of pension funds, and indeed other long-term contracts and trusts, would be rendered unacceptably difficult.”

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