Scottish court finds four pension schemes validly amended despite paucity of documentation

16 February 2017

Scottish court finds four pension schemes validly amended despite paucity of documentation

Shepherd & Wedderburn’s Commercial Litigation team has secured a favourable ruling for their clients in The Trustees of the Johnston Press Pension Plan and others [2017] CSOH 21, a decision that confirms the common-sense approach applied by the Scottish courts in reviewing pension scheme amendments and provides four examples of circumstances in which the Scottish courts will presume that what ought to have been done was done, in the absence of clear evidence either way.

The case concerned four separate pension schemes (later merged into the Johnston Press Pension Plan), and whether or not decisions to equalise the Normal Retirement Date of the Schemes, by the employer companies and trustees, had complied with the Scheme amendment provisions. Due to the passage of time there was an absence of documentation demonstrating that the technical requirements of the scheme amendment provisions had been complied with. In those circumstances Lord Tyre (sitting in the Commercial Court of the Court of Session) applied the 'presumption of regularity,' that is that: “all things are presumed to have been done duly and in the usual manner.” The presumption has long been recognised in Scots law and was recently applied by the Inner House in Trustees of the Scottish Solicitors Staff Pension Fund v Pattison & Sim 2016 SC 284, in which Lord Drummond Young noted: “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.”

In The Trustees of the Johnston Press Pension Plan, although there was an absence of evidence demonstrating that the technical requirements of the scheme amendment provisions had been complied with, application of the presumption meant the burden was on those challenging the amendment to bring evidence to demonstrate that those requirements had not been complied with.  They failed to rebut the presumption and therefore the four pension schemes were held to have been validly equalised when intended. Decree of absolvitor was therefore granted in favour of the defenders.   

Commercial Litigation Partner, Barbara Bolton (who sits on the Pension Litigation Committee of the Association of Pension Lawyers) noted that:

“This decision will be of considerable interest to pension scheme employers and trustees who may be concerned about past scheme amendments, as well as to solicitors in England & Wales, where the courts have tended to take a very strict approach. We were always conscious of the fact that the important aspect of the decision in Low & Bonar was Lord Drummond Young’s common-sense approach to pension scheme amendments, and not only his finding that signed Board Minutes could constitute a deed in Scotland.  In Scottish Solicitors and in Johnston Press we see the courts applying and extending that common-sense approach through application of the presumption. This will be very reassuring for scheme employers, trustees and professional advisors alike, given that many millions of pounds can be at stake in pension scheme amendment cases.

"It is also reassuring for us as commercial litigators. When we were first instructed in these 'failed amendment' cases back in 2008, it seemed to us to be clear from the overall documentation that everyone involved had intended to equalise at 65, and everyone thought it had been equalised at 65, including members who had no expectation of any additional benefits. In spite of all of that we were told that decades of scheme administration would have to be unwound, creating a liability of millions of pounds and delivering a windfall gain to members. Common sense told us there must be a legal solution and with Low & Bonar and now with Johnston Press, the Scottish courts have agreed that the law does provide that solution. Of course the presumption does not apply in every case, but review of available documentation and application of the principles set out in the previous cases could lead to a resolution of doubt in many cases.”

For more information regarding the decision or for legal advice regarding pension amendments (or other commercial disputes) contact Barbara Bolton on