Scottish Solicitors Staff Pension Fund: not the final instalment?

On 5 January 2018, after debate, Lady Wolffe dismissed the action by the Trustees of the Scottish Solicitors Staff Pension Fund (the “Fund”) against Marshall Ross & Munro, its former partners and Charles J Bow as an individual, holding that the pursuers’ averments were inadequate and that they had failed to plead a relevant case in law: [2018] CSOH 1.

Lady Wolffe confirmed that the presumption of regularity in the operation of pension schemes, favoured by Lord Drummond Young in Pattison & Sim [2015] CSIH 96, then challenged in Bett Homes v Wood [2016] CSIH 26 before being refined in Trustees of Johnston Press Pension Plan v Sedgwick Noble Lowndes [2017] CSOH 21, would have been left to proof before answer. So, further exploration of that presumption will have to wait.

Why, then, did the trustees fail at the debate stage?

The original firm was established in 1949. Some members of the Fund had been employed by one or more of the many former iterations of the dissolved firm (Marshall Ross & Munro). These members are entitled to benefits from the Fund. The Fund is an occupational defined benefit scheme with various unrelated legal firms as assenting or sponsoring employers. The trustees sought to establish liability of the dissolved 17th iteration (Marshall Ross & Munro) to the Fund, in respect of those members.

The employees had not been employed by that 17th iteration. It was held that Marshall Ross & Munro was not an assenting employer in the Fund, nor had it been averred that the liabilities of former iterations had transmitted to it. The second and third defenders were partners in that dissolved firm. 

It was also held that the trustees’ alternative case against Mr Bow in a personal capacity failed too, as he had not personally employed any of the members.

Predecessor liabilities

Lady Wolffe’s lengthy judgment is an interesting exploration of contingent liabilities, the identification and establishment of assenting employers and the presumption of transmission of liabilities to a successor firm from its predecessor.

The liabilities of defined benefit occupational pension schemes are calculated periodically, with the rules of each scheme, as amended from time to time, overlaid by the statutory funding regime. So liabilities are not fixed until termination of liability in accordance with the rules of the Fund or by operation of law. Lady Wolffe did note that “in order for a contingent liability to be capable of materialising, there must be some pre-existing legal relationship or nexus between the parties that provides for and defines the scope of that obligation”.

Further, “An assenting employer joins the scheme and thereby becomes bound by its rules, including any valid amendment, much in the way that a person subscribing to the articles of association of a limited company is bound by those articles.”

She did accept that “Payment by the immediate successor may be a relevant factor from which the court could infer the requisite agreement by it to meet the liabilities of its predecessor”. However, she confirmed that the chain of transmission from iteration to iteration would have to be supported by relevant averments. She held that had not happened in this case.

The former firm was held to be in a very different position from that in Pattison & Sim, with no identification of any part of the deficit in the Fund attributable to any prior iteration of the firm Marshall Ross & Munro. 

Unresolved questions

As this action was dismissed, further consideration of establishment of assenting employers and transmission of contingent liabilities will have to wait. 

There was also consideration of the plea of prescription. Whilst noting that any relationship is a contractual one, and giving some examination on contingent liabilities, Lady Wolffe concluded that there were no relevant averments by the pursuers on the issue of prescription. The absence of averments, argument and determination leaves this important point in the “pending” box of issues.

So, it looks like this may not be the end of the story on this Fund. The position of each firm or former firm in respect of which there are still members will be different and will be determined by its particular evolution. This in turn will impact on whether liabilities in the Fund transferred to each new iteration or when that transmission stopped. Success for the trustees in the future will mean sharing of liabilities. Failure will mean more “orphan” members whose liabilities will have to be met by the remaining assenting employers.