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Low & Bonar PLC and Low & Bonar Pension Trustees Limited v Mercer Limited (Scottish Court of Session) - 2010

This Scottish case centred on whether a scheme had been effectively equalised, prior to the execution of a Deed in 2002, by a board resolution in 1991. The case highlights the fact that pension scheme amendment formalities may be less restrictively interpreted in Scottish law.

Background

Prior to the Barber judgment on 17 May 1990, it was permissible and normal practice for UK occupational pension schemes to have unequal retirement ages between male and female members, usually at 65 for men and 60 for women. This reflected state pension ages. After the date of the judgment, 17 May 1990, all UK occupational pension schemes were required to equalise pension ages for men and women.

Like many schemes, the Low & Bonar Group Retirement Benefits Scheme (the Scheme) had a normal retirement age (NRA) of 65 for men and 60 for women. Mercer advised that the NRAs should be equalised at 65.

Facts

The case centred on the question of whether the Scheme had been effectively equalised, and if so, from what date.

Low & Bonar plc (the Company) argued that the Scheme had been equalised by a resolution at meeting of the board of directors on 5 March 1991. This resolution was approved by the Trustees in the minutes of their meeting on 5 July 1991. The resolution stated the change was to come into force on 1 July 1991.

But Clause 4 of the Trust Deed and Rules provided that amendments needed to be made by deed by the Company, with the consent of the Trustees. The Scheme’s Trust Deed and Rules were not formally amended until 15 August 2002. The question therefore arose whether the Board resolution in 1991 was effective to equalise NRAs for men and women, or whether equalisation was not effective until the deed was entered into in 2002.

The Scheme was administered from 1991 as if the NRA for service was 65 for both men and women.

Decision

The Scottish Court of Session held that the board minute of 5 March 1991 amounted to a deed for the purposes of clause 4 and the scheme was therefore equalised with effect from 1 July 1991.

Under Scottish law the word ‘deed’ does not have a technical meaning in the same way as it does under English law.  The characteristics of a deed in Scottish law are simply that it should have some degree of formality and it must demonstrate an intention to create legal relations. These were met in the following way:

• The judge decided that the board minute was a formal document.  Part of the reasoning for this conclusion was that, under the Companies Act 1985 (which was in force at the time), a board minute signed by the chairman was said to be evidence of the proceedings (s385(2)).
• It was further held that the fact that the minutes referred to certain matters, including the equalisation changes, being “agreed” was sufficient to demonstrate an intention to create a legal relation.
• Finally, as the minutes of the Trustees meeting on 5 July 1991 show that they intended to implement these changes this was held to constitute the necessary consent.

Comment

This decision turns on the particular meaning of the word ‘deed’ under Scottish law.  The Scottish court has taken a very practical and commercial approach to deciding whether the requirements for a ‘deed’ have been met.

By contrast, several recent cases in the English courts have held that schemes have not been equalised where formalities were not adhered to properly, for example see the 2009 cases of Walker Morris v Masterson and Harland v Woolf.