Briggs & Ors v Gleeds (Head Office) & Ors

This case concerns a pension scheme (“the Scheme”) for employees of partnerships and companies within the Gleeds group. For convenience, I shall refer to the employers simply as “Gleeds” in this judgment.

The issues in the case principally arise from the fact that numerous documents that were described as deeds and meant to be such were not in fact executed in accordance with the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”), which came into force on 1 August 1990. Section 1(3) of that Act states:

“An instrument is validly executed as a deed by an individual if, and only if—

(a)

it is signed—

(i)

by him in the presence of a witness who attests the signature; or

(ii)

at his direction and in his presence and the presence of two witnesses who each attest the signature ….”

Where, therefore, a document that was intended to take effect as a deed needed to be executed by partners in Gleeds, each partner’s signature should have been attested by a witness. In the case of some 30 documents relating to the Scheme, that did not happen. Were that to mean that the documents are all ineffective, the Scheme’s deficit on an ongoing basis could be increased by some £45 million.

The Gleeds group provides management and construction consultancy services in both the United Kingdom and elsewhere in the world. Until quite recently, the group traded with clients through three partnerships known as Gleeds (Bristol), Gleeds (London) and Gleeds (Nottingham). Since 2010, these partnerships have been succeeded by another partnership, Gleeds (UK). The most senior partners are also partners in Gleeds (Head Office), a partnership formed in 1970 which sits at the head of the group. Gleeds (Head Office) and Gleeds (UK) are the first and second defendants to the proceedings before me.

The Scheme was established by an interim trust deed dated 8 March 1974 (“the Interim Trust Deed”). A definitive deed (“the 1979 Definitive Deed”) was eventually executed on 11 April 1979.

The 1979 Definitive Deed incorporated rules (including supplementary rules). The rules (“the 1979 Rules”) provided for members to receive benefits linked to their final salaries without having to make any contributions to the Scheme. At that stage, all whole-time permanent employees within certain age limits were eligible for membership, but in 1987 membership was restricted to whole-time permanent chartered quantity surveyors.

The first document to fall foul of the 1989 Act dates from 6 March 1991. A supplemental trust deed of that date was designed to address issues arising from the decision of the European Court of Justice in Barber v Guardian Royal Exchange [1991] QB 344. The document was stated to be signed, sealed and delivered by each of the then partners of Gleeds, but none of these signatures was witnessed. In contrast, the signatures of the trustees of the Scheme were duly attested.

I refer in this judgment to the document mentioned in the previous paragraph and the various other instruments that did not comply with the 1989 Act as “deeds”. That is not, of course, to say that they were true deeds. On the contrary, it is common ground that they were not validly executed as such.

All the documents that failed to satisfy the requirements of the 1989 Act appear to have been prepared by entities in the Aon group (or companies that have been acquired by that group) that provided pension administration and other services. For simplicity, I shall speak in this judgment just of “Aon”. It seems fair to infer that the relevant individuals within Aon failed to appreciate that, where a deed was to be executed by partners, their signatures needed to be attested. At all events, the draft documents supplied by Aon made provision for trustees’ signatures, but not those of Gleeds’ partners, to be witnessed. Thus, the words “in the presence of” were added below the line on which a trustee was to sign, but there was nothing comparable in relation to partners in Gleeds.

On at least a few occasions, Aon seems to have provided a document giving instructions on how deeds were to be completed. One such, which was found in the deeds packet also containing the supplemental trust deed of 6 March 1991, explained that there “should be a witness to each trustee’s signature”, but did not specifically mention partners. It instead stated, “Two company directors or a director and the secretary should sign along the lines beside the seal”. A later version advised, “Two directors or a director and the secretary should sign on behalf of the employer(s) along the lines provided”. Such advice was obviously inapposite in the case of a partnership such as Gleeds.

The second defective instrument that I should specifically mention at this stage is a definitive trust deed dated 24 November 1993 (“the 1993 Definitive Deed”). This purported to cancel and replace the 1979 Definitive Deed and Rules in their entirety, subject only to a saving as regards members who had already retired or left Gleeds. I shall address later in this judgment some particular points that arise from the terms of the 1993 Definitive Deed and the rules it sought to introduce (“the 1993 Rules”).

Between May 1994 and October 1997, several deeds were “executed” with a view to replacing trustees of the Scheme. None of these, however, satisfied the requirements of the 1989 Act.

A supplemental trust deed dated 20 October 1997 (“the 1997 Supplemental Trust Deed”), which again was not validly executed, was intended to change the Scheme more radically. It provided for the Scheme to have a money purchase section (“the 1997 money purchase section”). Some of the existing members of the Scheme opted to join this and transfer their final salary benefits into it. New members, who were to include employees who were not chartered quantity surveyors, were all allocated to the money purchase section. The 1993 Rules were re-named “Schedule A”, while rules for the money purchase section were added as “Schedule B”.

Deeds of 31 December 1998 and 11 December 2002 were intended to replace trustees of the Scheme. Neither document, however, complied with the 1989 Act.

Further steps to contain the cost of the Scheme were taken in 2003-2004. On 26 June 2003, the trustees (or those then believed to be the trustees) subscribed to a written resolution (“the 2003 Resolution”) that the Scheme was, with the agreement of Gleeds, to be amended with effect from 1 July so as (a) to introduce contributions, at the rate of 5% of annual pensionable salary, for final salary members of the Scheme, (b) to cut the annual accrual rate for final salary members from 1/70^th to 1/80^th of final pensionable salary and (c) to remove “the minimum annual increase to pensions in payment of 4% per annum (subject to Revenue limits) regardless of inflation”. The document concluded:

“IT IS CONFIRMED THAT all members have been given written notification of the change a copy of which is attached, the Rules of the Scheme shall be amended accordingly as soon as practicable and this resolution will be noted at the next Trustees’ Meeting.”

The changes to the Scheme were later reflected in a deed of amendment dated 30 December 2004, but the deed was not executed in accordance with the 1989 Act.

The Scheme’s “Principal Employer” was also purportedly changed at this stage. A deed of amendment and novation dated 29 December 2004 provided for Gleeds (Head Office) to become the “Principal Employer” in place of the members of the “local” partnerships (i.e. Gleeds (Bristol), Gleeds (London) and Gleeds (Nottingham)). The deed’s execution did not, however, comply with the 1989 Act.

In 2005-2006, again for financial reasons, steps were taken to create a new money purchase section (“the 2005 money purchase section”) and to close the Scheme’s final salary section to further accrual. The plan was evidently for new members to join the 2005 money purchase section from June 2005. In practice, the establishment of the 2005 money purchase section was documented in a deed of amendment dated 31 May 2006 (“the 2006 Deed of Amendment”). The 2006 Deed of Amendment, which was not executed in accordance with the 1989 Act, also provided for the final salary section to be closed to further accrual. Active members of this section were to be treated as having left the service of Gleeds on 1 June 2006. They were, however, offered the chance to join the 2005 money purchase section, and 100 did so.

In 2008, new rules for the Scheme were purportedly introduced. The rules were not intended to make changes of substance, but as an exercise in consolidation. The deed providing for them did not, however, comply with the 1989 Act.

The problems with the Scheme’s documentation came to light after the trustees (or those believing themselves to be the trustees) instructed Addleshaw Goddard LLP in 2010. In December of that year, a deed complying with the requirements of the 1989 Act was executed with a view to, among other things, confirming in office the individuals who had hitherto been understood to be the Scheme’s trustees. On 30 April 2012, a further deed was executed to ensure that the Scheme was closed to both new entrants and further accrual even if the defectively-executed deeds were all ineffective.

The trustees now comprise three partners in Gleeds, two employees in Gleeds and a professional trustee. Since the trustees who are also partners have an obvious conflict of interest, the present proceedings are being conducted on behalf of the trustees by a sub-committee made up of the employee-trustees and the professional trustee.

The proceedings are brought by the trustees by way of part 8 claim form. As already mentioned, the defendants include Gleeds (Head Office) and Gleeds (UK). The other defendants are two representative beneficiaries: Mrs Ann Bytheway-Thomas and Mr James Perry. Mrs Bytheway-Thomas became a member of the Scheme in 1985, and Mr Perry joined it in 2003.

The claim form asks for the determination of issues listed in an annexe (“the List of Issues”). The parties have, however, succeeded in narrowing somewhat by agreement the points that call for decision. In the circumstances, I can, I think, address the matters that require discussion under the following headings:

For practical purposes, the most important question in this case is whether, as Gleeds contend, the members of the Scheme are estopped from denying that the defective deeds were validly executed.

Gleeds’ case on this issue developed somewhat in the course of argument. In its final form, it was along the following lines. By supplying the draft deeds and, perhaps, instructions as to how they should be executed, Aon impliedly represented to Gleeds that the law was such that execution in the manner indicated in the drafts would suffice, and Gleeds relied on the representations to their detriment. Aon were acting on instructions from the trustees at the relevant times and so the representations should be attributed to them (the trustees). In the circumstances, an estoppel by representation has arisen precluding both the trustees and the members of the Scheme from challenging the way in which the deeds were executed. Alternatively, estoppel by convention produces the same result.

Given the way in which argument proceeded, the key questions to which this issue gives rise are, I think, these:

I shall consider these points in turn.

The traditional view is that an estoppel by representation has to be founded on a representation as to existing fact and that one of pure law cannot suffice. Authority to that effect is to be found in, for example, Re a Bankruptcy Notice [1924] 2 Ch 76, Territorial and Auxiliary Forces Association of the County of London v Nichols [1949] 1 KB 35, Kai Nam v Ma Kam Chan [1956] AC 358 and Lyle-Meller v A Lewis & Co (Westminster) Ltd [1956] 1 WLR 29. Part at least of the justification for the principle has been thought to lie in the fact that “each party is in as good a position as the other to satisfy himself on what the law is” (see the Lyle-Meller case, at 41).

Mr Paul Newman QC, who appeared with Mr James McCreath for Gleeds, argued that the law must now be reassessed in the light of the decision of the House of Lords in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349. That case was concerned with whether money paid under a mistake of law could be recovered. There was a long-standing rule barring such a claim. The rule could be traced back to Bilbie v Lumley (1802) 2 East 469, where Lord Ellenborough CJ said:

“Every man must be taken to be cognisant of the law; otherwise there is no saying to what extent the excuse of ignorance might not be carried.”

The House of Lords, however, concluded that the rule lacked a sound basis and, by a majority, that it should be overruled. Lord Goff, with whom Lords Hoffmann and Hope expressed agreement, said (at 375):

“the mistake of law rule should no longer be maintained as part of English law, and … English law should now recognise that there is a general right to recover money paid under a mistake, whether of fact or law, subject to defences available in the law of restitution.”

Kleinwort Benson Ltd v Lincoln City Council has subsequently been held to mean that a statement as to the law can give rise to liability for misrepresentation. In R v Restormel, ex p Parkyn (2001) 82 P&CR 18, which was decided a couple of years after the Kleinwort Benson case, Mr George Bartlett QC, sitting as a Deputy High Court Judge, proceeded on the basis that, in relation to estoppel by representation, “neither a statement of a person’s understanding about a legal position nor a statement about what a person intends to do or does not intend to do can found an estoppel” (see at 236). However, the Kleinwort Benson case was not cited, and Mr Rex Tedd QC, sitting as a Deputy High Court Judge, took a different view in Pankhania v Hackney LBC [2002] EWHC 2441 (Ch), following a detailed review of Kleinwort Benson and other authorities. Mr Tedd said this in paragraph 57 of his judgment:

“I have concluded that the ‘misrepresentation of law’ rule has not survived the decision in Kleinwort Benson Ltd -v- Lincoln City Council …. Its historical origin is as an off-shoot of the ‘mistake of law’ rule, created by analogy with it, and the two are logically inter-dependent . Both are grounded in the maxim ‘ignorantia juris non excusat’, a tag whose dubious utility would have been enhanced, had it gone on to explain who was not excused, and from what. As it stands, it means no more than that ignorance of the general law does not excuse anyone from compliance with it, a proposition with which criminal lawyers are familiar. In translation, it has become distorted and amplified in meaning, in such expressions as ‘everyone is taken to know the law’, from which follow two further propositions, (underpinning the ‘mistake of law’ and ‘misrepresentation of law’ rules respectively) (i) ‘as you are taken to know the law, it is your own fault if you are mistaken as to it, and because of that you should have no relief’ and (ii) ‘as you are taken to know the law, it is your own fault if you are mistaken as to it, even if I have misrepresented it to you, and because of that you should have no relief’. Those two propositions bear little relation to, and do not follow logically from, the maxim ‘ignorantia juris non excusat’, but save for its Latin roots, no basis for the ‘misrepresentation of law’ rule is to be found …. The distinction between fact and law in the context of relief from misrepresentation has no more underlying principle to it than it does in the context of relief from mistake. Indeed, when the principles of mistake and misrepresentation are set side by side, there is a stronger case for granting relief against a party who has induced a mistaken belief as to law in another, than against one who has merely made the same mistake himself. The rules of the common law should, so far as possible, be congruent with one another, and based on coherent principle. The survival of the ‘misrepresentation of law’ rule following the demise of the ‘mistake of law’ rule would be no more than a quixotic anachronism. Its demise rids this area of the law of a series of distinctions, such as the ‘private rights’ exception, whose principal function has been to distinguish the ‘mistake of law’ rule, and confine it to a very narrow compass, albeit not to extinguish it completely.”

Mr Tedd’s judgment was quoted with approval in Brennan v Bolt Burdon [2005] QB 303. In that case, the Court of Appeal concluded that it is in principle possible for a contract to be vitiated by a common mistake of law. Maurice Kay LJ said (in paragraph 10):

“Although the Kleinwort Benson case concerned a restitutionary claim rather than a contractual one, it cannot be doubted that its effect now permeates the law of contract.”

Chitty on Contracts, 31^st ed., considers that the present position as regards misrepresentation is that “even a statement as to the law may be a misrepresentation if it was reasonable, in all the circumstances, for the representee to rely upon it” (see paragraph 6-016).

So far as I know, no Court has hitherto had to consider whether the Kleinwort Benson case has also altered the law relating to estoppel by representation. The point is, however, the subject of comment in Spencer Bower, “The Law Relating to Estoppel by Representation”, 4^th ed.. The editors state (at paragraph II.8.1):

“the recent change in the law made by the House of Lords to allow recovery of money paid under a mistake of law suggests that an estoppel by representation of law may now be raised.”

A statement on a legal matter will often involve no more than a statement of opinion. It is, I think, clear law that a statement of opinion can give rise to an estoppel, but proving such an estoppel may not help the representee much: the representor would, on the face of it, be estopped from denying that he had held the opinion, not that the law was as he had understood it to be. Moreover, where a statement as to the law is made by someone without legal expertise, it may be an objection to any estoppel that it was not reasonable for the person to whom the statement was made to act on it or to infer that the representor intended him to do so (compare e.g. Spencer Bower, “The Law Relating to Estoppel by Representation”, at paragraph V.4.4). There is an echo here of Bowen LJ’s observation in West London Commercial Bank Ltd v Kitson (1883) 13 QBD 360 (at 362) that “[w]here there is a representation made as to a mere matter of law, it is, in nineteen cases out of twenty, made by a person who does not know the law better than the person to whom it is made, and at whose risk it is taken and acted upon”. Similar issues could also arise in relation to representations made by someone else’s lawyer: potentially, the circumstances could, for instance, be such that it would not be reasonable for a representee to act on the strength of a statement as to the law made by a solicitor acting for an opposing party.

On the other hand, a statement as to the law will not always be just a statement of opinion. If, for example, a lawyer said that there is no requirement for a deed to be signed, he would surely be misstating the law rather than just voicing an erroneous opinion. Further, it is not difficult to think of circumstances in which it might be reasonable for a representee to rely on such a statement. That could be the case if, say, the lawyer made his remark in unequivocal terms to an unrepresented lay person whose interests were aligned with those of the lawyer’s client. In such a case, moreover, it could not be said that “each party is in as good a position as the other to satisfy himself on what the law is” (to quote from the Lyle-Meller case): the lawyer would clearly be better placed than the representee to know the law.

To my mind, it is hard to see why the mere fact that a statement purely concerns law should invariably mean that it cannot give rise to an estoppel by representation. If, as appears to be the case, an estoppel by convention can relate to a legal assumption (see e.g. Republic of India v India Steamship Co Ltd [1998] AC 878, at 913, and PW & Co v Milton Gate Investments Ltd [2004] Ch 142, at paragraphs 171-173), there can be no rule of public policy to the effect that a person can never be estopped from asserting the true legal position. Further, there is force in Deane J’s comment in Foran v Wight (1989) 168 CLR 385 (at paragraph 5 of his judgment) that “the distinction between a representation of fact and a representation of law is, in the context of the principles constituting the doctrine of estoppel by conduct, essentially illusory unless one subscribes … to the view that the law has no factual existence at all”.

The key question, of course, is whether the rule that an estoppel by representation has to be founded on a statement of fact has survived the decision of the House of Lords in Kleinwort Benson Ltd v Lincoln City Council and the effects that case has already been recognised as having in contexts other than payment under mistake. I have concluded that the rule can no longer represent the law. In the past, commentary on whether a statement of law could give rise to an estoppel drew on cases dealing with misrepresentation: see e.g. the authorities cited in paragraph 42 of Spencer Bower and Turner, “The Law Relating to Estoppel by Representation”, 3^rd ed. If the law now considers that a statement as to the law can constitute a representation for the purposes of the law relating to misrepresentation, such a statement must surely also be capable of constituting a representation in the context of estoppel by representation. Further, now that the Courts have retreated from the proposition that everybody should be taken to know the law, they must also, I think, recognise that it is not always the case that “each party is in as good a position as the other to satisfy himself on what the law is”.

In short, I agree with Mr Newman that it is now possible for an estoppel by representation to be based on a representation of law. It will very often be the case that a statement about law will not be capable of giving rise to a relevant estoppel (because, say, it amounted to no more than an expression of opinion, the circumstances were such that the representee could not reasonably rely on it or allowing an estoppel would conflict with a statute), but I do not think there is an absolute rule to that effect any more.

Mr Jonathan Evans QC, who appeared for Mrs Bytheway-Thomas and deservedly took silk yesterday, and Mr James Clifford, appearing for Mr Perry, both argued that it is not legally possible to invoke estoppel as an answer to the failures to comply with section 1 of the 1989 Act seen in the present case. Mr Newman, in contrast, submitted that estoppel is in principle available to overcome such defects. That, he said, followed from the decision of the Court of Appeal in Shah v Shah [2001] EWCA Civ 527, [2002] QB 35.

Shah v Shah concerned the enforceability of a document under the terms of which the defendants were to make a payment of £1.5 million to the claimant. The document was described as a deed and provided for each defendant to sign in the presence of a witness. In the event, although the “witness” signed shortly after the defendants, he did so without having been present when they signed. When, therefore, the claimant brought proceedings against them, the defendants disputed the claim on the basis that the “deed” had not been validly executed. The Court of Appeal, however, concluded that the defendants were estopped from denying that they had signed the document in the witness’s presence. Pill LJ, with whom the other members of the Court agreed, said (at paragraph 33) that “the delivery of the document … involved a clear representation that it had been signed by the … defendants in the presence of the witness and had, accordingly, been validly executed by them as a deed”. Earlier in his judgment (at paragraph 13), Pill LJ had said:

“The delivery of the document constituted an unambiguous representation of fact that it was a deed. [The claimant] acted reasonably in relying upon that representation, as in fact he did.”

In Shah v Shah, it was argued on behalf of the defendants that estoppel could not be used to prevent them from asserting that the “deed” did not meet the requirements Parliament had laid down in section 1 of the 1989 Act. That submission was, however, rejected. Pill LJ stated (at paragraph 21):

“The court is entitled to consider the particular statutory provision, its purpose and the social policy behind it when deciding whether an estoppel is to be allowed.”

Having considered “the wording of section 1 [of the 1989 Act] in the context of its purpose and the policy considerations which apply to deeds”, Pill LJ was “unable to detect a statutory intention totally to exclude the operation of an estoppel in relation to the application of the section or to exclude it in present circumstances” (see paragraph 33).

Pill LJ’s reasoning can be seen from the preceding paragraphs of his judgment:

“29

I bear in mind the clarity of the language of section 1(2) and (3) and also that the requirement for attestation is integral to the requirement for signature in that the validity of the signature is stipulated to depend on the presence of the attesting witness. I also accept that attestation has a purpose in that it limits the scope for disputes as to whether the document was signed and the circumstances in which it was signed. The beneficial effect of the requirement for attestation of the signature in the manner specified in the statute is not in question. It gives some, but not complete, protection to other parties to the deed who can have more confidence in the genuineness of the signature by reason of the attestation. It gives some, but not complete, protection to a potential signatory who may be under a disability, either permanent or temporary. A person may aver in opposition to his own deed that he was induced to execute it by fraud, misrepresentation or, as was unsuccessfully alleged in the present case, duress and the attestation requirement is a safeguard.

30

I have, however, come to the conclusion that there was no statutory intention to exclude the operation of an estoppel in all circumstances or in circumstances such as the present. The perceived need for formality in the case of a deed requires a signature and a document cannot be a deed in the absence of a signature. I can detect no social policy which requires the person attesting the signature to be present when the document is signed. The attestation is at one stage removed from the imperative out of which the need for formality arises. It is not fundamental to the public interest, which is in the requirement for a signature. Failure to comply with the additional formality of attestation should not in itself prevent a party into whose possession an apparently valid deed has come from alleging that the signatory should not be permitted to rely on the absence of attestation in his presence. It should not permit a person to escape the consequences of an apparently valid deed he has signed, representing that he has done so in the presence of an attesting witness, merely by claiming that in fact the attesting witness was not present at the time of signature. The fact that the requirements are partly for the protection of the signatory makes it less likely that Parliament intended that the need for them could in all circumstances be used to defeat the claim of another party.

31

Having regard to the purposes for which deeds are used and indeed in some cases required, and the long-term obligations which deeds will often create, there are policy reasons for not permitting a party to escape his obligations under the deed by reason of a defect, however minor, in the way his signature was attested. The possible adverse consequences if a signatory could, months or years later, disclaim liability upon a purported deed, which he had signed and delivered, on the mere ground that his signature had not been attested in his presence, are obvious. The lack of proper attestation will be peculiarly within the knowledge of the signatory and, as Sir Christopher Slade observed in the course of argument, will often not be within the knowledge of the other parties.

32

In this case the document was described as a deed and was signed. A witness, to whom the third and fourth defendants were well known, provided a form of attestation shortly afterwards and the only failure was that he did so without being in the presence of the third and fourth defendants when they signed.”

It is evident from Shah v Shah that there are circumstances in which a person can be estopped from denying that a document was executed in accordance with the requirements of section 1 of the 1989 Act. It is also apparent from Pill LJ’s judgment that attestation is less crucial than signature. On the other hand, Pill LJ did not decide that estoppel can be used in response to every sort of failure to comply with the 1989 Act. To the contrary, he expressed his conclusion narrowly: he was unable to detect a statutory intention “totally” to exclude the operation of an estoppel in relation to the application of section 1 or to exclude it “in present circumstances”. It seems fair, moreover, to infer that Pill LJ would not have considered estoppel applicable if the defendants had not even signed the “deed”. In Pill LJ’s view, “a document cannot be a deed in the absence of a signature” and the public interest lies in the requirement for a signature.

Another authority to which I was referred on this aspect of the case was Actionstrength Ltd v International Glass Engineering Spa [2003] 2 AC 541. In that case, a defendant sought to have proceedings struck out on the basis that the agreement alleged by the claimant would, even if proved, be unenforceable by reason of section 4 of the Statute of Frauds 1677, which requires contracts of guarantee to be evidenced in writing. The claimant invoked estoppel, but its case on this was founded on the very agreement that would otherwise be rendered unenforceable by the Statute. The House of Lords held that this could not suffice. Lord Walker observed (at paragraph 53):

“To treat the very same facts as an unenforceable oral contract and as amounting to a representation (enforceable as soon as relied on) that the contract would be enforceable, despite section 4 – and to do so while disavowing any reliance on the doctrine of part performance – would be to subvert the whole force of the section as it remains in operation, by Parliament’s considered choice, in relation to contracts of guarantee.”

No similar point arises in the present case. Unlike the claimant in Actionstrength Ltd v International Glass Engineering Spa, Gleeds are not relying merely on the otherwise ineffective transaction. Their case is founded on the supply of the draft deeds and instructions for their execution. In the circumstances, I do not think the Actionstrength case is of any real help to me.

In the end, I have concluded that estoppel cannot be invoked where a document does not even appear to comply with the 1989 Act on its face or, at any rate, cannot be so invoked in the circumstances of the present case. My reasons include these:

This conclusion is sufficient to dispose of this aspect of the case. If I am right on the point, the members of the Scheme cannot be estopped from denying that the defective deeds were validly executed. In case, however, I am wrong, I shall go on to consider whether the representations impliedly made by Aon are to be attributed to the trustees.

It is Gleeds’ case that the trustees took responsibility for the preparation of the deeds and that representations Aon impliedly made in connection with the documents are therefore properly to be attributed to the trustees. Mr Evans and Mr Clifford, however, maintained that Aon was acting for both the trustees and Gleeds and, hence, that it could not be said to have made representations to Gleeds on the trustees’ behalf.

Evidence that Aon was acting for the trustees is to be found in witness statements filed on behalf of Gleeds. Thus, Mr John Gregory, a former partner in Gleeds (Nottingham) and Gleeds (Head Office) who was a trustee of the Scheme between 1994 and 2002, referred to documents having been “drafted by the professional advisers to the Scheme” and observed that in his time “the Gleeds Partnerships rarely considered it necessary to appoint their own pension scheme advisers or pension lawyers and relied on the information and advice provided by the trustees’ advisers”. Similarly, Mr Geoffrey Carrington, who worked for Gleeds from 1982 until 1997 and was involved in the administration of the Scheme, said that he thought that “the instruction to the professional advisers to prepare amending deeds would have come from the trustees”; Mr Richard Steer, a partner in Gleeds who was appointed as a trustee of the Scheme in 1997, said that “the advisers would have been instructed by the trustees to prepare the necessary documents to implement” agreed changes; and Mr Kenneth Reid, a Gleeds partner who was appointed as a trustee of the Scheme in 2006, said that he was “aware that the trustees were involved in working with the advisers”.

On the other hand, the witness statements also provide evidence of Aon advising Gleeds. Mr Gregory referred to advice that Aon gave to Gleeds in relation to what became the 1997 Supplemental Trust Deed and said that he did not “recall whether the professional advisers would have been preparing [the relevant] documents in their capacity as advisers to the trustees or to the Gleeds Partners”. Mr Steer spoke of the professional advisers “advising both the trustees and the Partnership” and explained that he was sure that, if they had been aware of any doubt as to the effectiveness of various documents, the Gleeds partners “would have requested a [document or change] from the professional advisers” which achieved the intended result. Mr Steer also thought that a letter he sent on behalf of Gleeds to members of the Scheme in 2003 “would have largely been drafted by Aon”. For his part, Mr Reid said:

“I understood that, as a Local Partner, I would be required to sign documents and the extent to which I would become involved in reviewing them would depend on what they related to and the roles of the partners and the advisers that we had appointed.”

The word “we” appears to refer to the appointment of professional advisers by Gleeds.

The contemporary documents also show that Aon acted for Gleeds as well as the trustees. Aon can be seen to have been appointed in 1987 by both the trustees and Gleeds to provide actuarial services. In 1996, Aon prepared a report for Gleeds on the introduction of a defined contribution category, and in the following year it prepared a summary sheet for use at presentations that were to be given to members in connection with Gleeds’ proposals. That same year, Aon was formally appointed, in compliance with the Pensions Act 1995, to provide actuarial and benefits advice to the trustees, but the agreement recorded that Aon “also provides advice to employers associated with the Scheme”. In both 2000 and 2001, Aon gave presentations on possible changes to the Scheme to partners in Gleeds, and it prepared a report on the subject that was “addressed to the partnership and the Trustees”. In 2003, Aon played a part in presentations to members that were made in conjunction with Gleeds, and it also sent Mr Steer an email in which it gave advice on how changes could be made to the Scheme and asked that Mr Steer arrange for a draft document to be signed on behalf of Gleeds and then circulated to the trustees for signature. In 2004, Aon advised a partner in Gleeds on the reason for a deed. In 2006, Gleeds appear to have used Aon to explain proposed changes to the member-nominated trustees, and Aon can be seen advising both the trustees and Gleeds in March of that year. In March 2007, Aon put forward fee proposals which drew no clear dividing line between work for the trustees and work for Gleeds. At the end of the year, Aon presented its proposal for “the renewal of the continued provision of services to the Scheme & Partnership from 1^st June 2008”.

Mr Evans submitted that, taken as a whole, the evidence is not such as to allow me to conclude that Aon was acting exclusively for the trustees in relation to the preparation of the deeds at issue in these proceedings. I agree. That does not mean that the evidence of Gleeds’ witnesses was wrong. In fact, Mr Evans did not attempt to take issue with, say, Mr Carrington’s evidence that “the instructions to the professional advisers to prepare amending deeds would have come from the trustees”. The fact that the instructions to Aon emanated from the trustees does not, however, mean that Aon was acting solely on behalf of the trustees when it carried out those instructions.

Mr Newman suggested that the focus should be on who was taking responsibility as between the trustees and Gleeds for procuring the documents, not on whether Aon should be treated as acting for the trustees alone as a matter of agency law. However, Spencer Bower, “The Law Relating to Estoppel by Representation”, 4^th ed., explains (at paragraph VI.3.2) that, for estoppel purposes, an estoppel is to be treated as made by “any person who personally made the representation, and also any person by whose express, implied or ostensible authority the representation was made”. That is the language of agency law. Further, Mr Newman did not take me to any authority indicating that - contrary to what I would have expected - agency law principles are not applicable in the context of estoppel.

In the circumstances, I have not been persuaded that Aon can be said to have made representations on the trustees’ behalf to Gleeds in relation to the execution of the defective deeds. The fact that Aon has not been shown to have been acting for the trustees alone must, I think, be fatal to both the estoppel by representation and estoppel by convention arguments.

In my view, the members of the Scheme are not estopped from denying that the defective deeds were validly executed since (a) estoppel cannot be invoked to circumvent the 1989 Act in circumstances such as these and (b) Aon cannot be said to have made representations on the trustees’ behalf to Gleeds in relation to the execution of the defective deeds.

The points discussed under this heading and the next two relate to specific provisions in the 1993 Definitive Deed. While some of them may not matter if that deed is wholly ineffective, I ought to address them in case the provisions prove to have force on one basis or another.

I turn, therefore, to clause 9(a) of the 1993 Definitive Deed. This read as follows:

“The statutory power of appointing and removing trustees of the Scheme by Deed shall be vested in the Principal Employer and upon any exercise of such power the number of Trustees may be increased or reduced as the Principal Employer shall think fit but not so that the number of Trustees shall be less than three.”

The relevant “statutory power” is to be found in section 36 of the Trustee Act 1925 (“the 1925 Act”). This empowers “the person or persons nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust” to appoint replacement trustees in certain circumstances. Whereas, however, clause 9(a) of the 1993 Definitive Deed spoke of the statutory power of appointing and removing trustees “by Deed”, section 36 of the 1925 Act allows for replacement trustees to be appointed “by writing”. A deed has the advantage of engaging section 40 of the 1925 Act (dealing with the vesting of trust property), but it is not a requirement of section 36.

Mr Clifford argued that the inclusion in clause 9(a) of the words “by Deed” served to modify the power conferred by section 36. The use of “by Deed” meant, Mr Clifford submitted, that mere writing would not be enough. Mr Clifford sought further support for his contention in section 69(2) of the 1925 Act, which is in these terms:

“The powers conferred by this Act on trustees are in addition to the powers conferred by the instrument, if any, creating the trust, but those powers, unless otherwise stated, apply if and so far only as a contrary intention is not expressed in the instrument, if any, creating the trust, and have effect subject to the terms of that instrument.”

Mr Newman argued section 69(2) of the 1925 Act could not be in point. That subsection, he said, is concerned with powers conferred by the Act on trustees, whereas the persons nominated to appoint new trustees under section 36 need not be trustees, and clause 9(a) of the 1993 Definitive Deed in fact provided for the power conferred by section 36 to be exercised by someone other than a trustee (viz. the “Principal Employer”). In LRT Pension Fund Trustee Co Ltd v Hatt [1993] PLR 227, however, Knox J took the view (at paragraph 145) that, if the power of appointment given to trustees is susceptible of exclusion or qualification, “the same power given to other persons is similarly susceptible”.

Even so, the better view, to my mind, is that clause 9(a) did not impose a requirement that appointments be made by deed. It seems to me that, had clause 9(a)’s draftsman been intending to impose a restriction on the section 36 power, he could have been expected to do so in much clearer terms. On the face of it, the first 20 words of clause 9(a) were concerned merely with whom the statutory power was to be vested in, not with modifying it in any way.

In the circumstances, I agree with Mr Newman that the draftsman is best understood as having misdescribed the statutory power rather than limited it.

The 1979 Definitive Deed conferred a power to amend by deed. The relevant provision, clause 5, was in these terms:

“The Principal Employer and the Trustees may jointly from time to time without the consent of the Members by Deed alter cancel modify or add to any of the Rules or provisions of this Deed, provided that no such alteration cancellation modification or addition shall be such as would prejudice or impair the benefits accrued in respect of membership up to that time.”

The power of amendment contained in the 1993 Definitive Deed differed significantly from clause 5 of the 1979 Definitive Deed. The provision in question, clause 12 of the 1993 Definitive Deed, read as follows:

“The Principal Employer and the Trustees may from time to time without the concurrence of the Members by deed alter or add to the terms and provisions of the Rules and the trusts, powers and provisions of this Deed whether retrospectively or otherwise. The Principal Employer and the Trustees shall forthwith declare such alteration or addition in writing and the Deed and/or Rules shall stand amended accordingly.

PROVIDED ALWAYS that no such alteration or addition shall operate so as to affect in any way prejudicially any pension already being paid in accordance with the Rules or this Deed at the date such alteration or addition takes effect.”

Issues arise as to the implications of the second sentence of clause 12. Mr Evans and Mr Clifford argued that the sentence imposed an extra requirement: an amendment was to need both a deed and a declaration. In contrast, Mr Newman maintained that the sentence introduced an alternative way to amend, by declaration alone. Mr Newman further contended that it was to remain possible to effect a valid amendment without a separate declaration: a deed was to be sufficient.

I shall consider (a) whether clause 12 (if valid) enabled an amendment to be made simply by a declaration before turning to (b) whether, where a deed was used, it was necessary for there to be a separate declaration and (c) if it was, what the consequences of a failure to declare an amendment were. In what follows, I make the assumption that clause 12 was effective.

Gleeds’ case is that the second sentence of clause 12 was designed to provide a less formal alternative to amendment by deed. Effecting amendments by deed could be a slow process. It therefore made sense to enable an amendment to be made more simply, by just a declaration. An amendment made in this way would be an interim measure, pending execution of a formal deed.

Explaining this approach to clause 12, Mr Newman argued that it was impossible to see what was to be gained from requiring a declaration as well as a deed. Mr Newman submitted that the “forthwith” in clause 12 meant “forthwith after the decision to make the change” and that the words “such alteration or addition” related to the proposed alteration or addition “to the terms and provisions of the Rules and the trusts, powers and provisions of this Deed” (as mentioned in the previous sentence). The word “shall” (in the second sentence) was used to indicate that, once the trustees and principal employer had decided to amend informally, they were bound to document the change through a written declaration. The first sentence allowed a deed to operate retrospectively in order, Mr Newman suggested, to cater for the fact that the amendment in question may already have been the subject of a declaration.

The argument is ingenious, but I do not find it convincing. I agree with Mr Evans and Mr Clifford that the second sentence of clause 12 imposed an additional requirement rather than creating an alternative to a deed. My reasons include these:

If, as I have concluded, the trustees and principal employer were supposed to declare any amendment for which a deed provided, did there have to be a separate declaration? Or could the deed serve as the declaration?

Mr Newman submitted that the deed could itself be an adequate declaration. He pointed out that any deed would necessarily be in writing and made by the trustees and principal employer and detail the amendments being made. That being so, it was suggested, the deed was apt to constitute any requisite declaration.

A key problem with this contention lies in the “forthwith” in the second sentence of clause 12. As I have said, the better view is that the word indicates that a declaration had to be made forthwith after the deed had been executed. In the circumstances, I do not think the mere execution of the deed could satisfy the requirements of the second sentence of clause 12.

What is the position if the trustees and principal employer failed to declare an amendment for which a deed provided? According to Mr Evans and Mr Clifford, there can have been no valid amendment: the deed and/or rules were to “stand amended” only if and when an appropriate declaration had been made. Mr Newman, on the other hand, submitted that the absence of a declaration would be of no practical significance.

The authorities to which I was referred in this context included Betafence Ltd v Veys [2006] EWHC 999 (Ch), [2006] PLR 137. That case concerned a power of amendment (in rule 23) which, so far as relevant, was in these terms:

“The [Trustees] may, with the consent of the Principal Employer, from time to time amend all or any of the provisions of the Rules…. The Administrator shall notify in writing each Member of any amendment which affects the benefit entitlement in respect of him under the Scheme.”

Lightman J concluded that a failure to notify members of amendments to their benefit entitlements did not invalidate the changes. He said (in paragraph 67):

“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 have been prejudiced by the failure to communicate, the possible basis for a claim for compensation against the Trustees.”

Betafence Ltd v Veys was cited in another of the cases to which I was taken: HR Trustees Ltd v Wembley plc [2011] EWHC 2974 (Ch), [2011] 097 PBLR. The power of amendment at issue there provided for the trustees of a pension scheme to “declare” an amendment to the rules “in writing under their hands” and an amendment to the deed by deed. The power went on to state:

“This Deed and/or the Rules shall stand amended accordingly with effect from the date of such declaration or from such other date … as is stated in such declaration.”

On the facts, the trustees had agreed to alter the scheme rules to impose a 5% cap on the rate of annual increase to pensions in payment and revaluation in deferment. Amending documentation was subsequently signed by four trustees, but the need for the fifth trustee to sign was overlooked. Betafence was invoked in support of an argument that the absence of a declaration signed by all the trustees was not fatal. Vos J took the view that that argument ran “entirely contrary to the whole thrust of the clause, which makes it clear that the amendments are only to take effect from the date of such declaration” (paragraph 36). He nonetheless concluded that the amendment was valid, on the strength of the maxim that equity looks on that as done which ought to be done. He said this in paragraph 66:

“Here it seems clear to me that the trustees exercised their discretion to amend the rule in the way contained in the amendment. They were obliged, having done so under clause 16, to make an appropriate declaration in a particular form. They could have been compelled on behalf of the members, who are not volunteers, to specifically perform their exercise of the power. Not to make a valid declaration was a breach of the terms of the definitive deed. Thus, in my judgment, this is a classic case in which the maxim of equity can and should properly be applied. [Counsel representing the members] is wrong, in my judgment, to submit that this is an extension of the doctrine. It may be that there has never been before a case on all fours with the present, but law and equity would be made to look ridiculous if it were powerless to correct what has been an obvious administrative error like the one made in this case. Moreover, none of the members of the scheme in any category have any reason to feel aggrieved. The members, apart from those in former scheme B, were told about the change at the time in July 2000. They never expected to continue to accrue rights on the previous basis. If they did so, they would be receiving a windfall which they had no right to expect. They cannot have known until much later that the amendment had been defectively executed.”

As can be seen from Vos J’s judgment, the equitable maxim had already been applied in two pension cases: Davis v Richards & Wallington Industries Ltd [1990] 1 WLR 1511 and Harwood-Smart v Caws [2000] PLR 101. In the former case, a definitive deed in respect of a pension scheme had been executed by the parent company of the group whose employees were members, but the deed had not been executed by subsidiary companies. Scott J concluded that the subsidiaries had had an obligation to execute the deed that could have been enforced by the employees and, in consequence, agreed with counsel for the employee members of the scheme that the subsidiaries’ failure to execute the deed did not matter. Scott J explained (at 1535):

“Each of the associated companies that was still in the group and still contributing to the scheme was, immediately before 31 July 1981, under an enforceable obligation to execute the deed in order to bring into effect the rules. Want of execution by these companies does not, in my judgment, detract from the efficacy of the rules. Equity looks on that as done which ought to be done.”

In Harwood-Smart v Caws, an interim deed had stipulated that the definitive deed in respect of a pension scheme should “provide that no transfer or payment of any part of the Pension Fund shall in any circumstances be made to the Company [i.e. the employer]”, but the proviso had not in the event been expressly incorporated into the definitive deed. Rimer J concluded (at paragraph 48) that this made no difference, accepting an argument on behalf of a member that “the scheme members were entitled to compel [the proviso’s] inclusion into the definitive deed, or … to compel the amendment of the definitive deed so as to include the provision, and that such right gave rise to a specifically enforceable obligation which justifies equity regarding that which ought to have been done as having in fact been done”.

The approach Vos J adopted in HR Trustees Ltd v Wembley plc has the obvious merit of having brought the legal position in that case into line with the parties’ expectations. As Vos J pointed out, members of the pension scheme had been told at the time about the change that the defective documentation had been intended to effect and they did not expect to continue to accrue rights on the previous basis. It is also noteworthy that Vos J’s reasoning depended on the fact that the trustees had become obliged to make a declaration. Had they merely had a discretion to do so, Vos J would, as I understand it, have considered that there was no question of the equitable maxim applying.

Even so, the implications of Vos J’s approach are potentially far-reaching. In the case before him, four of the five trustees who had made the relevant decision had signed documentation reflecting it. Vos J’s reasoning does not, however, depend on that fact. As I see it, it would have made no difference to Vos J if no trustee had signed or, indeed, if the documentation had never been prepared. What mattered was that the trustees had decided to make an amendment. The fact that the power provided for an amendment to be declared either in writing or, where it was to the governing deed, by deed was unimportant. The formalities were, for practical purposes, of no significance.

One snag with that sort of approach is that it means that a scheme’s formally-executed documents may not provide a reliable guide to the terms of the scheme. Someone wishing to establish the terms should also check the minutes of trustees’ meetings to see whether the trustees have made decisions that have not been, or were not fully, implemented. Timing issues could potentially arise. Suppose, for example, that trustees decided to make a change, but took some time to execute the relevant paperwork. Could it be suggested that the change had in fact happened at an earlier date (on the basis that the trustees had by then had a reasonable period to sort out the documentation) and that the executed documents were thus irrelevant? What would the position be if the trustees resolved to make a change with effect from one date but, because of some delay, ultimately executed documentation providing for the change to happen from a later date?

A more important point for present purposes is that I have trouble with the idea that trustees are to be taken to have amended a pension scheme to the prejudice of its members because those members could themselves have compelled them to make the change. Plainly, the members would never have wanted to force the trustees to proceed with the amendment at issue in the HR Trustees case (it would not have been in their interests), and unsurprisingly counsel representing the members before Vos J argued for the invalidity of the amendment, not that the failure to comply with the formalities could be overlooked. If an amendment to the disadvantage of members is to be treated as effective because the members earned their rights, and so “are not volunteers”, the position is still odder. Why should they be worse off than volunteers?

In re Anstis (1886) LR 31 Ch D 596 is noteworthy in this context. That case concerned a marriage settlement containing a covenant by the husband and wife for after-acquired property to be added to the settlement. It was suggested that property was, as a result, to be treated as having become subject to the trusts of the settlement. The Court of Appeal, however, decided otherwise. In the course of his judgment, Lindley LJ (with whom the other members of the Court agreed) explained (at 605-606):

“[I]f that property is to be treated as actually subject to those trusts, it must be so because the covenant in the deed of 1853 rendered that property so subject. The covenant, however, could not have that effect except in favour of some person entitled to enforce its performance. Equity, no doubt, looks on that as done which ought to be done; but this rule, although usually expressed in general terms, is by no means universally true. Where the obligation to do what ought to be done is not an absolute duty, but only an obligation arising from contract, that which ought to be done is only treated as done in favour of some person entitled to enforce the contract as against the person liable to perform it.”

A contractual obligation is thus to be treated as having been performed only “in favour of some person entitled to enforce the contract”. My own view is that a trustee should similarly be treated as having done what he ought to have done only in favour of someone who would have been in a position to enforce the obligation. It follows, as it seems to me, that pension trustees should not be taken to have made amendments against the interests of the scheme’s members merely on the (unrealistic) basis that the members could have compelled them to do so.

In the course of argument, there was brief reference to the possibility of an employer being entitled to insist on an amendment being perfected. However, Mr Newman did not advance any argument to the effect that the trustees should be taken to have made any necessary declarations because Gleeds could have forced them to make the declarations. In my view, he was right not to do so: an argument along those lines could have had no prospect of success on the facts of this case. Apart from anything else, it was for the trustees and the “Principal Employer” to declare amendments. If Gleeds did not themselves attempt to make a declaration, they cannot rely on the trustees’ failure to do so.

In all the circumstances, it appears to me that the maxim “equity looks on that as done which ought to be done” would not justify me in deeming an amendment prejudicial to the Scheme’s members to have been made.

The other question in this context is whether the Betafence decision helps Gleeds. Mr Evans maintained that it is of no assistance to Gleeds. He focused on, among other things, the wording of the second sentence of clause 12 of the 1993 Definitive Deed. It is apparent from that sentence, he submitted, that the deed and/or rules were to stand amended “accordingly” only after the amendment had been duly declared.

There is obviously force in this submission. The construction of clause 12 for which Mr Evans contended would, however, be apt to create uncertainty. As Mr Evans recognised, there could have been a good deal of scope for argument as to whether an amendment had been sufficiently declared. How much detail had to be given? Was it good enough to post information on a website? Was it adequate to say something in a newsletter? What would the position have been if letters sent to some members had gone astray? Would an amendment have taken effect when letters were posted or on some later date?

In the circumstances, I have concluded, albeit with some hesitation, that a failure to declare should no more invalidate an amendment than the failure to notify members did so in the Betafence case. The second sentence of clause 12 is, I think, best read as making, in effect, two distinct points: that an amendment effected by a deed was to be declared forthwith, and that the deed and/or rules would stand amended in accordance with the deed of amendment. After all, the first sentence of the clause appears to have contemplated that amendments could be made “by deed”, and it is appropriate to have regard to the practical implications of the rival interpretations of the clause. In Stevens v Bell [2002] EWCA Civ 672, [2002] PLR 247, Arden LJ explained (in paragraph 28) that “a pension scheme should be construed so to give a reasonable and practical effect to the scheme” and that “it is necessary to test competing permissible constructions of a pension scheme against the consequences they produce in practice”.

In short, it seems to me that the requirement to “declare” an amendment was not a pre-condition of an effective amendment or, in other words, that a failure to make a declaration could not of itself invalidate the amendment.

The rules that were to be introduced by the 1993 Definitive Deed provided, by special rule 20(v), for pensions in payment to be increased by 4% a year on a compound basis. If the deed was generally ineffective, were members nevertheless entitled to such increases? Or were the increases dependent on the validity of the deed?

Mr Evans argued that members acquired a right to 4% pension increases even if the 1993 Definitive Deed was not effective as a whole. He based his contentions on the power of augmentation conferred by rule 4.5 of the 1979 Rules. That rule provided as follows:

“The Employer and the Trustees may at their discretion arrange for a pension being paid to a Member to be increased up to the limits set out in section 3 or 4 (as the case may be) and further increased by such amount as they may determine but not exceeding the same percentage as the percentage increase in the Index since payment commenced, provided that increases not exceeding three per cent. per annum compound may be paid whether or not the Index has risen by an equal amount.”

The “Index” was the retail prices index.

By 1983, pensioners were evidently having their pensions increased by 4% a year. An April 1983 insert into the then current members’ booklet explained that such increases would be “granted”, and a 1990 version of the booklet stated that the Scheme included provision for pensions “to be increased each year by 4% compound”. The Scheme’s present administrators have, moreover, confirmed that its records show that pensioners received 4% increases (on a compound basis) after April 1983.

Against this background, Mr Evans advanced two submissions. One was to the effect that Gleeds and the trustees must have exercised the power of augmentation by 1983 and that, if the 1993 Definitive Deed was nugatory, nothing will have happened to bring the increases to an end. In the alternative, Mr Evans argued that the execution of the 1993 Definitive Deed, while defective, will have constituted a valid exercise of the power of augmentation conferred by the 1979 Rules. In this context, Mr Evans pointed out that rule 4.5 of the 1979 Rules, unlike the power of amendment in the 1979 Definitive Deed, could be exercised without a deed.

In support of the second of these arguments, Mr Evans relied on Davis v Richards & Wallington Industries Ltd and LRT Pension Fund Trustee Co Ltd v Hatt. The definitive deed at issue in Davis v Richards & Wallington Industries Ltd had been executed by trustees and the principal employer (referred to as “Industries”), but not by a Mr Parsons, who had been a trustee but had purported to resign. As originally drawn, the deed had named Mr Parsons as one of the trustees, but his name had been struck out. Scott J decided that Mr Parsons was no longer a trustee by the time the definitive deed was executed, but he also considered what the position would have been if Mr Parsons had still been a trustee. Scott J concluded that Industries would have been treated as exercising a power it had to remove trustees.

Having referred to a number of authorities (including a passage from Sugden on Powers, 7^th ed., to the effect that a donee of a power “may execute it without referring to it, or taking the slightest notice of it, provided that the intention to execute it appears”), Scott J said this (at 1530-1531):

“A disponor (A) purports to make a disposition of property. The disposition cannot be effective unless associated with the exercise of a power vested in A and that A could properly have exercised in order to make the disposition. The disposition makes no mention of the power and does not purport to be an exercise of it. The effect of the principle and cases to which I have referred is that A’s intention to make the disposition justifies imputing to him an intention to exercise the power, provided always that an intention not to exercise the power cannot be inferred. If the requisite intention can be imputed, the court will treat the disposition as an exercise of the power. In the present case, Industries purported, in conjunction with Mr. Davis and Mr. Wardle, to bring into effect valid rules for the pension scheme. It was objected that Mr Parsons was a trustee whose concurrence was necessary. But Industries had power to remove Mr. Parsons as a trustee and could properly have exercised that power in order to bring the rules into effect. I can see no difference in principle between the position of A in my example and the position of Industries, nor any reason why the courts should be prepared to apply an ameliorating principle of equity only to dispositions of property. In my judgment, the principle is applicable in the present case, unless an intention on Industries’ part not to exercise its power of removal can be inferred.”

A little later, Scott J said (at 1531):

“The facts of the present case leave no real doubt but that (i) Mr. Parson’s name was included in the deed at a time when he was a trustee, (ii) his name was removed from the deed because everyone thought that on his resignation he had ceased to be a trustee and, (iii) Industries neither intended to remove him as a trustee nor intended not to remove him as a trustee; his removal was simply not in anyone’s mind. In these circumstances, in my judgment, the principle prayed in aid by [counsel for the members] applies. Industries intended to bring the rules into effect. If, contrary to my view, Mr. Parsons was still a trustee, equity will support that intention by imputing to Industries an intention to exercise its power of removal and by treating that power as exercised by Industries’ execution of the definitive deed.”

In LRT Pension Fund Trustee Co Ltd v Hatt, the trustees of a pension scheme and the employer had executed a deed purporting to appoint a company that was not a trust corporation in the place of the existing trustees. It was objected that the relevant power of appointment did not permit this. Knox J, however, decided that the deed should be treated as an exercise of the power of amendment. He said (in paragraph 139):

“The power of amendment reserved to the Trustees of the Interim Deed and LRT by clause 7 of that deed … is very wide and none of the four limitations in the proviso to the clause has any bearing on this issue. It is therefore in my view permissible to treat as an exercise of that power any deed executed by the Trustees of the Interim Deed and LRT which evinces a clear intention to achieve a result achievable by an exercise of that power so long as there is not shown to have been an intention not to exercise the power of amendment. In my view the Deed of Appointment satisfies those requirements. It is plain beyond argument that the intention of the Original Trustees and LRT was to substitute the LRT Trustee Company for the Original Trustees as the Trustees of the Interim Deed. Clause 2 of the Interim Deed reads

‘LRT hereby appoint the Trustees’

(defined as the Original Trustees)

‘to be the Trustees hereof.’

That is a provision of the Interim Deed susceptible of amendment under clause 7…. Moreover I see no difficulty in treating the Deed of Appointment as a direct exercise of the power of amendment. This obviates the difficulties correctly identified on behalf of Defendants other than LRT in a notional two stage exercise of the power of amendment, first, by creating a power to make the relevant appointment and then secondly by exercising that newly and notionally created power…. [T]hese mental gymnastics can in my view be avoided by treating the Power of Appointment as an exercise of the power of amendment in clause 7 of the Interim Deed. True it is that the parties to the Deed of Appointment had no such exercise of the power of amendment in mind but Davis v Richards & Wallington …, shows that is not conclusive.”

The Davis and LRT cases can be contrasted with Kain v Hutton [2008] NZSC 61, [2008] 3 NZLR 589, a decision of the Supreme Court of New Zealand. That case concerned a trust for, among others, a Mrs Coupar. The trustees purported to resettle the property on Mrs Coupar and others in exercise of a power of advancement. The objection was raised that the power of advancement could be exercised only in favour of a person with at least a contingent interest whereas Mrs Coupar had been no more than a discretionary beneficiary. The New Zealand Court of Appeal concluded that, if the resettlement failed as an exercise of the power of advancement, it could nevertheless be upheld as an exercise of a power of appointment in favour of Mrs Coupar. The Supreme Court rejected that approach. Blanchard J, giving judgment on behalf of himself and three other members of the Court, said (at paragraph 35):

“Where trustees have attempted to use a power they did not in fact enjoy, the courts will not come to their rescue by treating their action as if they had been engaged in exercising a quite different power that they did actually possess.”

Blanchard J acknowledged (in paragraph 35) that “an incorrect or incomplete description of the power exercised is not fatal if the intention to exercise the power is otherwise clear”, but he considered that “the position is quite different where trustees mistakenly try to use a power which is materially different from the power which they actually have, and which they later seek to rely upon to justify what they have done”. Blanchard J also observed (in paragraph 33):

“The decision to be made on an advancement is … of a different character from a decision on an appointment: not whether the selected object is to benefit at all, but whether that person should receive his or her entitlement at an earlier time and possibly in a different manner and perhaps to the disadvantage of someone else who already has an interest in the fund.”

The other member of the Court, Tipping J, who delivered a concurring judgment, said (at paragraph 60):

“A misdescription of a power which has otherwise been validly exercised is capable of remedy, if necessary, by an ordinary rectification suit. But in this case the trustees … purported to exercise a power which they did not possess. There is no basis upon which that ineffective act can be validated by means of the Court ascribing to the trustees an intention to exercise a materially different power which, with the Ponui precedent [which involved the exercise of a power of appointment] in front of them, they demonstrably did not exercise. Indeed, even if the contrast provided by the Ponui transaction had not been present, I do not consider the trustees could properly be treated as having exercised a power of a materially different kind requiring examination of materially different considerations.”

The reasoning in Kain v Hutton is not wholly consistent with that in the Davis and LRT cases, which I think I should follow. Even so, the Courts must, as it seems to me, beware of deeming trustees to have exercised a power that they did not in fact have in mind if the exercise of that power required “examination of materially different considerations” from those relevant to the power that the trustees saw themselves as exercising. The decision of the Supreme Court in Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108 shows that trustees can be guilty of breach of duty if they fail to take account of material considerations when making a decision and that a decision made without adequate deliberation on relevant matters can potentially be set aside. If trustees were treated as having unknowingly exercised a power which they might not have exercised had they had regard to considerations relevant to its exercise, they could presumably be considered to have acted in breach of trust and the exercise of the power could be vulnerable on a Pitt v Holt basis. The trustees would thus be deemed to have failed in their duties in connection with something that they had never actually intended to do in the first place, which could hardly be right. In the circumstances, it seems to me that the approach adopted in the Davis and LRT cases cannot be applied if there is doubt as to whether trustees would have chosen to exercise the power in question had they taken into account matters relevant to its exercise which were not also relevant to the power they believed themselves to be exercising.

A linked point is that the Davis and LRT approach cannot normally, I think, be used unless it allows the whole of what the relevant decision-maker was trying to do to be achieved. Where a decision-maker seeks to do more than one thing in a single document, it would not generally, to my mind, be appropriate to invoke Davis and LRT to validate a particular element of the document if the remainder could not be saved. The Courts should not readily infer from the fact that a decision-maker had decided on a set of changes that he wanted to make each of them individually. In this context, it is significant that the approach adopted in Davis and LRT allowed the deeds at issue to have full effect. As Mr Newman pointed out, in each case the implied exercise of the relevant power enabled the holders of the power to do precisely what they wanted to do.

The same cannot be said in the present case. Special rule 20(v) of the 1993 Rules was just one part of the revised regime that the 1993 Definitive Deed sought to introduce: Gleeds and the trustees were intending to replace the governing provisions of the Scheme in their entirety. Application of the principle seen in Davis and LRT could, at best, validate only special rule 20(v), not the rest of the 1993 Definitive Deed and the rules it was to bring in. It is possible that Gleeds and the trustees would have wished to provide for mandatory 4% pension increases in isolation from the other matters in the 1993 Definitive Deed and Rules, but that cannot by any means be assumed. Apart from anything else, it may very well be that Gleeds and the trustees would have been content to leave things as they were. Further, it is relevant in this context to note that the 1993 Definitive Deed, reflecting a supplemental trust deed purportedly executed the previous day, provided for membership of the Scheme to be limited to chartered quantity surveyors. It is not inconceivable that Gleeds and the trustees would not have decided in favour of the 4% increases if they had thought that employees other than chartered quantity surveyors could be eligible for membership.

That leaves Mr Evans’ alternative argument: that Gleeds and the trustees must have exercised the power of augmentation by 1983 and that, if the 1993 Definitive Deed was nugatory, nothing will have happened to bring the increases to an end. I understood Mr Newman to suggest that this point was not one raised by the claim form before me. However, issue 2.6 on the List of Issues relates to whether members “are entitled to increases in pensions in payment at the rate of not less than 4% per annum by contractual agreement, estoppel or otherwise”. This formulation seems to me to encompass the question of whether members are entitled to have 4% pension increases because (as is suggested by Mr Evans) the power of augmentation conferred by rule 4.5 of the 1979 Rules had been exercised by 1983 to give them such increases.

Is it then to be inferred that the power of augmentation had been exercised so as to give pensioners 4% increases? On balance, I think it is. As Mr Newman argued, the evidence is rather limited. Such evidence as there is, however, seems to me to indicate that by 1983 Gleeds and the trustees must have decided that pensions in payment should be increased by 4% a year (compounded) on an ongoing basis. If the 1993 Definitive Deed was ineffective, I cannot see why that arrangement should have come to an end.

Mr Newman countered by referring to the terms of rule 4.5 of the 1979 Rules. While this rule provided for pensions to be increased by up to 3% regardless of inflation (see paragraph 88 above), 4% increases, Mr Newman submitted, would not necessarily be permissible. Rule 4.5 could not, therefore, be used to introduce 4% increases.

The answer to this point lies, I think, in the fact that there is no reason to believe that there has ever in fact been a year in which a 4% increase would not have been allowed under the terms of rule 4.5. I can see that any decision in favour of 4% increases might have been invalid if and to the extent that it purported to sanction a 4% increase in a year when that was not permissible under rule 4.5. I do not think, however, that the mere possibility that there would be such a year will have wholly invalidated a decision to pay 4% increases on an ongoing basis.

In short, it seems to me that members became entitled to have pensions increased by at least 4% a year regardless of whether the 1993 Definitive Deed was invalid.

Rule 2.1 of the 1979 Rules provided for all employees satisfying the provisions of the supplementary rules to become members of the Scheme. In its original form, rule S1 of the supplementary rules read as follows:

“Each whole-time permanent Employee who

(a)

is resident in the United Kingdom, and

(b)

has attained age 24 years but not 60 years if a male or age 55 years if a female,

shall become a Member at … the 1st May coinciding with or next following the date on which he first satisfied the said conditions ….”

A new rule S1 was, however, substituted by a supplemental trust deed dated 26 November 1987. This replaced the words “whole-time permanent Employee” with “whole-time permanent Chartered Quantity Surveyor”. Only chartered quantity surveyors were thus to become members of the Scheme unless rule 2.2 of the 1979 Rules was exercised. Rule 2.2 stated as follows:

“Any Employee who does not fulfil all, or any, of the conditions in Rule S1 may be included on application subject to the agreement of the Employer and the Trustees on such date as the Trustees decide. Such Employee may be included either for benefits under Rule 6.1 or Rule 7.1 or both only or for such other benefits as the Trustees shall determine.”

A supplemental trust deed dated 6 March 1991 provided for rule S1 to be altered in such a way as to remove the requirement for members to be chartered quantity surveyors. The change may have been a mistake, and (as mentioned in paragraph 97 above) steps were taken to narrow eligibility again in November 1993. Employees generally were, however, to be able to join the money purchase section of the Scheme for which the 1997 Supplemental Trust Deed provided. Thereafter, the Scheme was administered on the basis that employees who were not chartered quantity surveyors could be members of the money purchase section of the Scheme.

If the deeds referred to in the previous paragraph (i.e. the supplemental trust deed dated 6 March 1991, the supplemental trust deed dated 23 November 1993, the 1993 Definitive Deed and the 1997 Supplemental Trust Deed) were ineffective, what is the position as regards “members” of the Scheme who are not chartered quantity surveyors? Are they, as was at one stage argued, to be treated as accruing final salary benefits? Or should they be deemed to have been admitted to the Scheme on a money purchase basis? Or is the truth that they are not members of the Scheme at all?

Mr Evans and Mr Clifford argued that, where someone who was not a chartered quantity surveyor was a “member” of the Scheme’s money purchase section, he was to be treated as having been admitted to the Scheme under rule 2.2 of the 1979 Rules. In contrast, Mr Newman, while expressing no enthusiasm for the result, submitted that such persons never actually became members of the Scheme.

Mr Clifford took me to evidence indicating that a number of people who were not chartered quantity surveyors were allowed to join the Scheme before the 1997 money purchase section was introduced. Mr Clifford suggested that this evidence indicates that employees who were purportedly admitted to a money purchase section would have been permitted to join the Scheme even if there had been no money purchase section and all members had been accruing rights on a final salary basis. In my view, however, the evidence is not of any real assistance. I cannot infer from the fact that particular individuals were admitted to the Scheme without being chartered quantity surveyors that Gleeds and the trustees would have been content for all employees who became “members” of a money purchase section to have final salary rights, let alone that Gleeds and the trustees so decided.

To my mind, there is more than one reason for concluding that Gleeds and the trustees did not exercise the power conferred by rule 2.2 of the 1979 Rules in relation to the “members” who joined a money purchase section. In the first place, Gleeds and the trustees will not have understood that any real decision on admission needed to be made. Any permanent employee of the requisite age could, on the face of it, apply to become a member, and completed application forms were to be “delivered … to the Employer for recording and passing to the Trustees or to anyone acting on their behalf”. The chances are that new members were dealt with administratively, without any significant involvement on the part of the trustees themselves.

Secondly, what was in contemplation when a person applied for membership of the Scheme after 1997 was membership of a money purchase section. As Mr Newman stressed, the incidents of that – had it been valid – would have been very different from those of the final salary scheme for which the 1979 Definitive Deed provided. In the circumstances, I do not think any decision to admit a person to one of the Scheme’s money purchase sections can be taken as amounting to a decision to exercise the rule 2.2 power. Davis v Richards & Wallington Industries Ltd and LRT Pension Fund Trustee Co Ltd v Hatt cannot be applicable since (a) there is doubt (and more) as to whether Gleeds and the trustees would have chosen to exercise the rule 2.2 power had they taken into account matters relevant to its exercise which were not also relevant to the task they believed themselves to be undertaking (compare paragraph 95 above) and (b) treating Gleeds and the trustees as having exercised the rule 2.2 power would not achieve the intended result (viz. membership of one of the money purchase sections that the 1997 Supplemental Trust Deed and 2006 Deed of Amendment were meant to introduce).

In the circumstances, it seems to me that persons other than chartered quantity surveyors who purportedly joined a money purchase section cannot in fact have become members of the Scheme. That is by no means to say that they will have nothing to show for the contributions to the Scheme that they made and that Gleeds made for their benefit. The nature and extent of the rights that they will have do not, however, fall within the scope of this judgment.

The 2006 Deed of Amendment provided for members of the Scheme’s final salary section to be treated as having left the service of Gleeds on 1 June 2006. The pension that would be payable to such a member by reason of his service to that date was therefore to be calculated by reference to his earnings up to that point rather than whatever his salary might be in the years prior to his actually leaving the Scheme (including in the event of all accrual under the Scheme ceasing), as had been the case for final salary members.

The parties differ, of course, as to whether the 2006 Deed of Amendment was of any effect. Mr Evans, however, argued that, even if it was, there will have remained a link between a final salary member’s pension and his earnings in the period prior to his leaving the Scheme, which might be many years in the future. According to Mr Evans, it was not possible to amend the Scheme in such a way as to reduce the pension attributable to a final salary member’s service up to 1 June 2006 below what it would have been on the terms of the final salary section.

Mr Evans advanced two arguments in support of this conclusion. One was based on clause 5 of the 1979 Definitive Deed, the other on clause 1(b) of the Interim Trust Deed.

Although I have quoted clause 5 of the 1979 Definitive Deed above, it is convenient to set it out again:

“The Principal Employer and the Trustees may jointly from time to time without the consent of the Members by Deed alter cancel modify or add to any of the Rules or provisions of this Deed, provided that no such alteration cancellation modification or addition shall be such as would prejudice or impair the benefits accrued in respect of membership up to that time.”

Mr Evans submitted that the benefits that had accrued to each final salary member by the date of the 2006 Deed of Amendment included the right for the pension derived from his past work for Gleeds to be no less than the pension attributable to that work would have been if the final salary section had not been closed. Mr Newman, on the other hand, contended that there was no bar on breaking the link between the calculation of a member’s benefits and whatever salary the member might enjoy when he left the Scheme at some time in the future.

The most helpful English case on this issue is In re Courage Group’s Pension Schemes [1987] 1 WLR 495, [1987] 1 All ER 528, a decision of Millett J that has been followed in the relevant respect more than once (see e.g. HR Trustees Ltd v German [2009] EWHC 2785, [2010] PLR 23, especially at paragraph 135). The Courage case was in part concerned with whether amendments to three pension schemes for the benefit of employees within the Courage group of companies could be made pursuant to powers of amendment that the governing documents contained. As reported in the All England Law Reports, Millett J said this about the question (at 543):

“In my judgment, there can be no objection in principle to the validity of such amendments provided that they do not infringe the third proviso to the rule-amending power. In the case of the Courage Retail Managers’ Scheme they must not ‘vary or affect any benefits already secured by past contributions in respect of any Member without his consent in writing’; and in the case of the other two schemes they must not ‘reduce … the accrued pension of any employed member’ except in the circumstances specified. ‘Accrued pensions’ is defined in the rules to mean pensions based on salary at the relevant date. There was some dispute whether ‘benefits already secured by past contributions’ means the same thing, or includes the prospective entitlement to pensions based on final salary. In the absence of express definition, I see no reason to exclude any benefit to which a member is prospectively entitled if he continues in the same employment and which has been acquired by past contributions, and no reason to assume that he has retired from such employment on the date of the employer's secession when he has not. The contrary argument places a meaning on ‘secured’ which is not justified.”

In the Weekly Law Reports version of the judgment, the last sentence from this passage reads:

“The contrary argument places a meaning on ‘secured’ and ‘accrued’ which is not justified.”

In other words, it includes the words “and ‘accrued’” which do not appear in the All England Law Reports. It seems, however, that it is the report in the All England Law Reports that is correct. Materials provided by Mr Hugh Arthur of Macfarlanes indicate that, although the judgment originally featured the words “and ‘accrued’”, Millett J later excised the words, presumably because “accrued” pensions were specifically defined in the rules with which he was concerned. At all events, the upshot is that the case provides authority for the proposition that, where a power of amendment speaks of benefits “secured” by past contributions, the benefits in question extend to:

“any benefit to which a member is prospectively entitled if he continues in the same employment and which has been acquired by past contributions”.

On the other hand, Millett J cannot be said to have expressed a view on the meaning of “accrued”, the word used in clause 5 of the 1979 Definitive Deed.

As first enacted, section 67 of the Pensions Act 1995 used the word “accrued”, and section 67A of the Act does so now. Since, however, the Act goes on to spell out what is being referred to, I do not think it provides any real guidance as to what “accrued” means in the context of clause 5 of the 1979 Definitive Deed. Nor, as it seems to me, are Lloyds Bank Pension Trust Corporation Ltd v Lloyds Bank plc [1996] PLR 264 and Sovereign Trustees Ltd v Glover [2007] EWHC 1750 (Ch), [2007] PLR 277, to which I was also referred, of any significant assistance.

There are Canadian cases of more interest. The earliest of those to which I was taken was Hockin v Bank of British Columbia (1993) 83 BCLR (2d), decided by Paris J in the Supreme Court of British Columbia. In that case, a defined benefit plan had been converted into a money purchase one. It was necessary to determine the amount of the “benefits which [had] accrued” at the time of the conversion in order to resolve issues relating to a surplus that existed. Paris J said (at 350):

“on the evidence it seems clear that what is meant by the phrase ‘benefits which have accrued’ in the plan documents in this case does not include the amounts paid into the fund towards salary projections up to the time of the plan conversion.”

In the next case, CASAW v Alcan Smelters and Chemicals Ltd (2001) 198 DLR (4^th) 504, the British Columbia Court of Appeal was concerned with whether an amendment to a pension plan adversely affected “any right with respect to benefits which have accrued”. Overtime pay had hitherto been taken into account when determining a member’s “pensionable earnings”. The amendment, however, deleted overtime pay from the calculation. Levine JA, giving the judgment of the Court, said (in paragraph 26):

“In my view, a plain reading of the words ‘right to benefits which had accrued’ prior to January 1, 1990, is that the appellants had a right to have their pension benefit calculated taking into account their highest average earnings, including overtime earned prior to January 1, 1990. They had no right to any benefits resulting from anything that occurred after that date, whether those things were additional earnings, service, contributions or anything else that had not yet occurred.”

Later in the judgment (at paragraph 48), Levine JA said:

“In order to know whether an amendment can be made, the employer has to have some method of determining what the accrued benefits are, so that it can determine if they are adversely affected. The interpretation of the appellants … postpones the determination of the amount of the accrued benefits to some unknown future date. While many aspects of the administration of pension plans involve dealing with unknown future events, ‘the word “accrued” according to well recognised usage has, as applied to rights or liabilities the meaning simply of completely constituted’ (see Hydro-Electric Power Commission of Ontario and Ontario Power Co. of Niagara Falls v. Albright (1922), 64 S.C.R. 306 at 312, [1923] 2 D.L.R. 578 … ).”

In Dinney v Great-West Life Assurance Co (2005) 252 DLR (4^th) 660, a pension plan had provided for pension indexing by reference to the investment performance of the fund, but amendments sought to break the link to the fund’s investment performance. The Manitoba Court of Appeal had to consider whether the amendments were contrary to a bar on reducing “any benefits accrued to the credit of an employee, to the date of such … amendment …”. It decided that they were. Scott CJM, delivering the judgment of the Court, said (in paragraph 70):

“In my opinion, having regard to the provisions of secs. 29 and 30 of the plan, the trial judge was right in concluding that employees of Great-West who were members of the plan acquired on their retirement a vested or accrued right to their entitlements under the then existing plan, including annual pension increments.”

Earlier in the judgment (at paragraphs 30-32), Scott CJM had said that counsel had been right to use the words “accrued right” and “vested right” interchangeably. Scott CJM saw the CASAW case as “simply confirm[ing] that the terms and conditions of the plan itself are paramount in determining exactly what ‘right’ vested in a retiree” (see paragraph 68).

Lloyd v Imperial Oil Ltd (2008) 93 Alta. LR (4^th) 321 is a decision of the Alberta Court of Queen’s Bench. In that case, a pension plan had provided for a member who had been with the employer for at least 10 years and whose employment was terminated to be able to claim a pension pursuant to section 4.3 of the plan. Shortly before dismissing a number of employees, the employer amended section 4.3 so that, to be able to claim a pension under it, an employee had to be eligible to retire within five years of the date of termination as well as having served for 10 years or more. N. Wittmann ACJQB held that the amendment did not operate to reduce the benefits that had “accrued” prior to the date of the amendment (as barred by section 11.1 of the plan). The judge appears to have accepted evidence to the effect that “an accrued benefit is one that can at any given time be calculated precisely because it depends upon the years of service already rendered and the earnings already received”. The judge concluded (in paragraph 78):

“The ancillary benefit provided by s.4.3 was contingent upon eligibility requirements and did not begin to accrue until a plan member met those requirements. The eligibility requirements at the time of the Amendment were (a) a minimum of ten years service and; (b) termination by Imperial for efficiency purposes. None of the Plaintiffs had been terminated at the time of the Amendment. As such, the Amendment did not reduce benefits which had accrued to the Plaintiffs and was therefore not in violation of s.11.1.”

The last of the Canadian cases is Halliburton Group Canada Inc. v Alberta (2010) ABCA 254, decided by the Court of Appeal of Alberta. There, a defined benefits plan was converted to a defined contributions plan on the basis that salary and service were frozen as at a specified date for the purpose of calculating a final defined benefit amount. The Court held, however, that this contravened a provision preventing an amendment from reducing the value of benefits “vested” in members. Berger J identified the real question as “whether the formula for calculating the pension is a vested right, or a Plan element that can be reduced by amendment” (see paragraph 32). He decided (in paragraph 41) that affected members should have their post-amendment earnings included in the calculation of their final pension benefits. He also said (in paragraph 40):

“I cannot accept the Appellant’s submission that ‘prospective rights’ in this case must be distinguished from ‘vested rights’. After all, a vested right is capable of measurement and … is properly measured in the case at bar, given the language of the Plan, on the basis of ‘prospective calculations’.”

Basing himself in part on CASAW v Alcan Smelters and Chemicals Ltd and Lloyd v Imperial Oil Ltd, Mr Newman argued in the present case that an “accrued” right is one that has already completely crystallised. A right some part of which remains prospective and dependent on future events has not, Mr Newman submitted, “accrued”. Mr Newman further contended that, in this context, “accrued” has to be distinguished from “secured”. It makes sense, he said, to talk of securing a prospective entitlement to larger benefits in the future, but not of accruing such rights.

Mr Newman looked elsewhere in the 1979 Definitive Deed for support for his construction of clause 5. He referred to rules S3 and S4. The latter provided for the pension of a member who remained in employment with Gleeds until the normal retirement date to be “one-seventieth part of his Final Pensionable Salary for each complete year of Service as a Member up to the Retirement Age”. “Final Pensionable Salary” was defined in rule S3 by reference to salaries in the years “immediately before the 1^st May preceding the Retirement Age, or, if earlier, the date the Member’s pensionable employment ceases”. Mr Newman pointed to the draftsman’s use of both “Service” (defined in rule 1 to mean “the length of the period of continuous employment of the Member by the Employer since the latest date of entry into such employment”) and “pensionable employment”. This, he submitted, indicated that a member could cease to be in “pensionable employment” even though he remained in “Service”. A construction of clause 5 that protected a prospective entitlement to have a pension calculated on the basis of the member’s salary at the date of leaving service would thus conflict with the terms of the deed, which envisaged that a pension could fall to be calculated on the basis of salary at the date of leaving pensionable employment, which could be earlier.

For his part, Mr Evans maintained that “accrued” simply means “acquired” or “got” and that there is no reason why the amount of the right cannot depend on whether future events (such as pay rises) occur. All that is necessary, Mr Evans said, is a formula allowing you to calculate the benefit in due course. Mr Evans sought support in Dinney v Great-West Life Assurance Co and Halliburton Group Canada Inc. v Alberta as well as the analogy with the Courage case. A right to have a pension calculated by reference to salary at the date of leaving service is, on Mr Evans’ case, appropriately seen as both a “vested” right and an “accrued” one: as the Canadian authorities show, the words can be used interchangeably. The right will be vested, so to speak, “in interest” even if not “in possession”.

With regard to the argument Mr Newman founded on the use of “Service” and “pensionable employment” in the 1979 Definitive Deed, Mr Evans submitted the distinction was not intended to allow “pensionable employment” to be brought to an end while “Service” continued. “Pensionable employment” meant, Mr Evans suggested, nothing more than employment while participating in the Scheme.

On balance, I accept that clause 5 of the 1979 Definitive Deed is to be interpreted in the manner for which Mr Evans contended. My reasons include these:

In the circumstances, I do not need to consider the alternative argument Mr Evans put forward by reference to clause 1(b) of the Interim Trust Deed.

It is well-established that, in principle, it is possible for a member of a pension scheme to become contractually bound to accept benefits less than those to which he would be entitled under the rules of the scheme. Mr Newman argued for the application of this principle in the present case. He maintained that, even if the 1997 Supplemental Trust Deed, the 2003 Resolution and the 2006 Deed of Amendment are not otherwise effective, members of the Scheme bound themselves to accept pension benefits on the basis of those documents and are not, accordingly, entitled to more.

The leading case on extrinsic contracts such as Mr Newman alleges is South West Trains Ltd v Wightman [1998] PLR 113. That case arose out of the privatisation of British Rail. One of the new train operators, South West Trains Limited (“SWT”), entered into negotiations with ASLEF, the trade union to which most train drivers belonged. A large part of drivers’ remuneration had previously come from allowances. It was agreed as between SWT and ASLEF that in future (a) drivers should each receive an annual salary of £25,000 with no significant allowances and (b) drivers’ pension entitlement should be calculated by reference to a notional salary of £18,000 rather than the full £25,000. Proposals to this effect were endorsed in a ballot, and Neuberger J concluded (at paragraph 93) that a binding contract had come into being between SWT and each driver.

Neuberger J went on to consider the contract’s enforceability. He held (at paragraph 98) that it “must be implicit in the contract between SWT and the drivers that the drivers would not seek from the Trustee [of the pension scheme] the payment of a pension on a more generous basis than that agreed with SWT”. On this basis, Neuberger J took the view (at paragraph 109) that SWT “can, would and probably should enforce the binding pensions agreement made with the drivers by restraining any driver claiming a pension on a more generous basis than that agreed under that binding pensions agreement”. Neuberger J also said (at paragraph 103):

“even without the intervention of SWT, it may well be that the Trustee could refuse to pay the drivers a pension at a higher rate than that agreed with SWT.”

The SWT case was considered in some detail in HR Trustees Ltd v German (“the IMG case”). The case arose out of an attempt to convert the IMG pension plan from a defined benefit scheme to a defined contribution scheme. The relevant power of amendment stated that no amendment was to “have the effect of reducing the value of benefits secured by contributions already made”.

One of the arguments that the judge, Arnold J, had to address was whether members of the scheme were prevented by contract from claiming final salary benefits with effect from the date of the purported conversion. Arnold J decided otherwise on the basis that (a) the employer and members had not intended to create contractual relations and (b) the members had not given informed consent to the conversion. With regard to the first of these points, Arnold J said (at paragraph 163):

“in the circumstances of the present case, I consider that the Employers must establish not merely that there was an intention to create legal relations, but specifically an intention to create contractual relations. The reason why I say this is that the parties may have intended to create legal relations to be regulated by the applicable trust documents. What the Employers must establish is an intent to create contractual relations, so that the contract is binding even if its terms differ from those of the applicable trust documents.”

In relation to the second point, Arnold J explained (in paragraph 173):

“In support of this argument, the Existing Members contend that there was no informed consent on the part of the Existing Members which would preclude the Existing Members from asserting a breach of trust applying the principles laid down by Wilberforce J in Re Pauling's Settlement Trusts [1962] 1 WLR 86 at 108:

‘the court has to consider all the circumstances in which the concurrence of the cestui que trust was given with a view to seeing whether it is fair and equitable that, having given his concurrence, he should afterwards turn round and sue the trustees: that, subject to this, it is not necessary that he should know that what he is concurring in is a breach of trust, provided that he fully understands what he is concurring in, and that it is not necessary that he should himself have directly benefited by the breach of trust.’”

Arnold J went on (in paragraph 174):

“I accept these arguments. It is one thing to hold that an extrinsic contract may be enforced to supplement a trust deed where the deed does not contain any contrary provisions. It is quite another to say that an extrinsic contract may override contrary provisions in a trust deed unless the extrinsic contract amounts to consent on the part of the beneficiaries. In the present case I am not satisfied that the beneficiaries did consent for the following reasons: (i) they were unaware of the terms of clause 7(i) of the 1977 Deed [i.e. the power of amendment]; (ii) they received no advice in relation to it; (iii) it was not clearly explained to them what was happening to their final salary benefits; in particular (iv) they were not told how Mr Wolanski [an actuary] was going to calculate the transfer value and additional special contributions, and in particular the assumptions he would employ; (v) they were not given any real choice as to whether or not to consent; and (vi) at least in the case of some Existing Members, they received the impression that they would not be adversely affected by the change.”

In Bradbury v BBC [2012] EWHC 1369 (Ch), [2012] PLR 283, Warren J said this about the second and third sentences of the passage quoted in the previous paragraph:

“Those comments were directed at a case where the extrinsic contract did not amount to consent on the part of the beneficiaries, although it is not entirely clear what a contract without consent could be. Perhaps it means a contract where there is no vitiating element rendering it voidable. The Judge said nothing about a case where there was informed consent, whether or not the deed contains a contrary provision.”

A member of the Scheme who wished to transfer into the 1997 money purchase section had to complete an application form. The form was headed “Gleeds Retirement Benefits Scheme”, followed by “Money Purchase Section Application Form”. The member signed under the words, “I hereby apply for membership of the Scheme” and “I agree to abide by the rules and I authorise the deduction of appropriate contributions from my salary”. On another page, addressed to “the Trustees of the Gleeds Retirement Benefits Scheme”, the member requested the trustees “to transfer the value of my preserved pension at 5 April 1997 into the Money Purchase section” and gave instructions as to how the transfer should be invested. The member was told that the form “should be completed and returned to [his] accounts department”.

New entrants also completed application forms. These were more or less identical to the forms used by existing members, except that they did not include the page dealing with transfer.

Mr Newman argued that the application forms constituted offers to be bound by the terms of the 1997 money purchase section and that Gleeds and the trustees accepted the offers by permitting the applicants to join the section and accrue benefits under it. Mr Clifford, on the other hand, denied that these matters gave rise to any contract between Gleeds and a member.

Mr Clifford stressed the context in which the application forms were completed. As he pointed out, draft forms were sent to existing members of the Scheme in February 1997 with a document signed by a trustee detailing “Changes effective from 6^th April 1997”. The document began:

“In light of recent developments in the pensions industry, the Partnership have decided to restructure the Scheme. With effect from 6th April 1997, the Trustees are introducing a Money Purchase (or Defined Contribution) category for all new members. However, members of the existing Final Salary (or Defined Benefit) Category will have the option to continue to accrue benefits on the existing basis or to transfer to the new category.”

While the evidence is mixed, the likelihood, I think, is that this document was sent, not only to existing members of the Scheme, but to other employees. Mr Geoffrey Daniel, who did not join the Scheme until April 1997, believes that he read it at the time. Further, part of the document starts, “If you are a member of the existing Final Salary category”, suggesting that the recipients will not have been limited to such members.

As was explained in the document, staff presentations were held to explain the changes to the Scheme. Slides prepared for these explained that “the Trustees are introducing a Money Purchase (or Defined Contribution) Category for all new members” and that members of the existing final salary category would “have the option to transfer to the new category or continue to accrue benefits on the existing basis”.

The presentations were probably attended by all staff or at any rate all those who did not have compelling reasons to be absent. A memorandum addressed to “All Partners & Staff” in December 1996 stated that attendance would be mandatory, and Ms Fiona Taylor remembers attending a presentation even though she did not join the Scheme until May 1997.

In March 1997, a trustee sent a number of documents to members of the Scheme. These included one headed, “Questions arising from the presentations on the Gleeds Retirement Benefits Scheme”. In answer to the question “Who actually controls the pension scheme?”, it was stated:

“Most of the responsibility falls on the Trustees. The Partnership controls whether or not we have a pension scheme but the Trustees look after it.”

The 1997 Supplemental Trust Deed was purportedly executed on 20 October 1997. I have referred above (paragraph 108) to how the 1979 Rules dealt with admission to the Scheme; the 1997 Rules contained comparable provisions. It is also noteworthy that the 1997 Rules provided for Gleeds to make contributions in respect of members of the money purchase section and for members to give Gleeds written authority to deduct members’ contributions from salary.

Against this background, Mr Clifford argued that, when they applied to join the Scheme’s money purchase section, members had no intention of entering into contractual relations. The applications are referable to the rights they had been led to believe that they had in respect of the Scheme. They were not making contractual offers to anyone, and certainly not Gleeds. They were (so Mr Clifford said) purporting to exercise rights under the Scheme.

Part of Mr Newman’s response to such submissions was that Arnold J was mistaken when he held that an intention to create contractual relations was required. All that is needed, Mr Newman contended, is an intention to create legal relations. Mr Newman maintained that it is irrelevant whether members thought they were merely exercising rights under the Scheme or that a reasonable observer would so perceive matters. What matters, Mr Newman argued, is that the members were intending their applications to have legal consequences as between themselves on the one hand and Gleeds and the trustees on the other.

I disagree. Like Arnold J, I take the view that the fact that a pension scheme exists has to be taken into account. A person who, viewed objectively, would be taken to be doing no more than exercise rights under a pension scheme should not be assumed to be making a contractual offer. Support for that conclusion is, as it seems to me, to be found not only in the IMG case, but in the authorities cited in paragraph 2-183 of Chitty on Contracts, 31^st ed. The cases in question show that, where parties’ behaviour can be explained by reference to pre-existing rights (or what were believed to be pre-existing rights), that may prevent a contract arising. For example, in Beesly v Hallwood Estates Ltd [1960] 1 WLR 549 (affirmed on other grounds in the Court of Appeal: see [1961] Ch 105), Buckley J decided that no contract had been concluded because the relevant letters “were written with the intention of carrying out what were thought to be existing obligations, not of creating any new obligation” (see 558). In “The Aramis” [1989] 1 Lloyd’s Rep 213, Stuart-Smith LJ said (at 229-230):

“What the Court has to determine is whether that is evidence of a new contract between shipowner and holder of the bill of lading. Since there is no evidence of any express agreement, it has to be inferred from the conduct of the parties. If their conduct is equally referable to and explicable by their existing rights and obligations, albeit such rights and obligations are not enforceable against each other, there is no material from which the Court can draw the inference.”

Bingham LJ, another member of the Court, said (at 224):

“it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more consistent with an intention to contract than with an intention not to contract.”

Somewhat more recently, in Flacker Shipping Ltd v Glencore Grain Ltd (“The Happy Day”) [2002] EWCA Civ 1068, [2003] 1 CLC 537, Potter LJ (with whom the other members of the court agreed) said of a proposed contractual analysis (in paragraph 63):

“The difficulty with such a formulation however is that the court is being asked to spell offer and acceptance out of conduct alone in a situation where the parties’ obligations were governed by a formal written contract pursuant to which the owners were at all times purporting to act. There was thus no apparent bilateral intention to vary or re-negotiate the express terms of the charter, as opposed to an apparent willingness on the part of the charterer to treat as valid a notice appropriate in form and purportedly served in compliance with the terms of the charter ….”

In the present case, I agree with Mr Clifford that the applications to join the 1997 money purchase section are explicable by reference to rights that the members in question believed themselves to have already and did not constitute contractual offers. It is still clearer, as I see it, that the members did not make contractual offers to Gleeds (as Mr Newman contended). The application forms authorised Gleeds to deduct members’ contributions from salary (in accordance with the terms of the 1997 Supplemental Trust Deed), but there was no question of Gleeds playing any more than an administrative part in admitting an applicant to membership. The applications were principally directed at the trustees.

In the circumstances, I do not accept that either existing members or new entrants contracted with Gleeds to accept benefits under the terms of the 1997 money purchase section and nothing else.

Very similar issues arise in relation to the 2003 Resolution. Here, too, Mr Newman submitted that contracts had been concluded between Gleeds and members. In this instance, he argued that members had agreed to be bound by the terms of the final salary section as those terms would be amended pursuant to the 2003 Resolution.

On 28 May 2003, Gleeds sent a letter to the members of the Scheme who were believed to belong to its final salary section. It was explained that the trustees had agreed to accept changes to the Scheme that Gleeds had proposed. The letter continued:

“The purpose of this letter is to confirm to members that the following changes will now take effect from 1 July 2003:-

1.

Employees who wish to retain final salary provision will be required to contribute 5% of their annual Pensionable Salary to the Scheme ….

2.

The annual accrual rate for pension benefits accruing from 1 July 2003 will change from 1/70^th to 1/80^th of Final Pensionable Salary.

3.

The Scheme Rules currently provide for annual increases to pensions in payment at the lower of 5% or the increase in the retail price index, subject to a minimum increase of 4% (subject to Revenue limits) regardless of the rate of inflation. The minimum increase of 4% will be removed for all pension benefits accruing from 1 July 2003 onwards.”

The letter proceeded to list “the options available to you as a member of the final salary section of the Scheme” “[f]ollowing the Trustees’ decision”. These were said to include (a) paying the 5% member contribution and continuing as a member of the final salary section and (b) deciding not to pay the 5% contribution and being treated as having left the final salary section. Members were informed that they would be issued with forms “to be completed to indicate your chosen option”.

Final salary members were sent a further letter, this time from an HR manager, on 16 June 2003. The letter enclosed a number of forms and contained this warning:

“If we do not receive any completed forms from you by 30 June 2003, you will be treated as having refused the offer to either remain in the final salary section or join the money purchase section and will be treated as having left the Scheme with effect from 1 July 2003.”

Among the forms was one headed “Authorisation form for the deduction of member contributions”. This included the following:

“I understand that if I wish to continue my membership of the Final Salary category of the Scheme after 1 July 2003, I will be obliged to pay contributions of 5% of my Pensionable Salary to the Scheme. I hereby confirm that I wish to continue my membership of the Final Salary category of the Scheme subject to the terms of the Trust Deed and Rules of the Scheme as amended from time to time.

In accordance with the Trust Deed and Rules of the Scheme as amended, I authorise and request Gleeds to deduct pension contributions direct from my salary or wage at the rate of 5% of Pensionable Salary … with effect from 1 July 2003 until further notice.”

All but four of the 145 active members of the final salary section signed and returned this form.

Mr Newman submitted that the forms constituted contractual offers by Gleeds which members accepted by signing and returning them. They thus, he said, became contractually bound to accept the terms of the 2003 Resolution.

Mr Evans argued to the contrary. As he demonstrated, the alterations to the Scheme that the 2003 Resolution was intended to effect had had a long gestation period. Possible changes had been under consideration since at least 2001. The minutes of a meeting of the trustees in November 2001 include a reference to “discussions regarding the final salary category” being “still on going with the Partnership with a number of options being considered”. In December of the following year, Gleeds told members in a letter of the “changes which it is proposed are made”. Enclosed with the letter was a question and answer document which included the question, “Do I have to pay the 5% member contribution?”. The answer given was:

“Yes if you want to continue as a member of the final salary pension scheme. If you choose not to pay, you will not earn any more pension benefit from 1 June 2003. You will be treated as having left service at that date and your benefit entitlement will be calculated accordingly. The death in service benefits will no longer be available.”

A further question and answer document was distributed following member presentations. This explained that the trustees had not yet approved the proposals and that “[t]he unanimous approval of the Trustees would be required for the proposals to be implemented since all the Trustees and the employer must approve any changes to the Scheme Rules”. As Mr Evans observed, the decision was (understandably) being presented as a matter for agreement between Gleeds and the trustees. A similar point can be made about a letter sent to members on 27 February 2003 (in which it was stated that the trustees had arranged to meet again “to decide whether to accept the changes proposed by the firm and the next stage of the consultation exercise will now take place”) and another of 9 April (which said that the trustees had agreed to meet again “to decide whether to accept the changes proposed by the Firm”).

The letter of 28 May 2003 informed members that the trustees had now made their decision and that the proposed changes would take effect from 1 July. Members were told what their choices were in consequence. They were not given the option of leaving the Scheme as it was.

The same picture emerges from the 16 June 2003 letter and the forms sent to members. Members were told that they had options, but those options all assumed that the changes agreed between the trustees and Gleeds were effective. There was no question of members having any decisions to take as regards whether those changes should be made.

In the circumstances, I agree with Mr Evans that no contract was concluded between Gleeds and members at this stage. Members were asked to exercise the rights that it was thought that they would have under the Scheme, not to agree to vary such rights. Viewed objectively, Gleeds’ letters to members, and the forms members were sent, are explicable by reference to the pension scheme rights and do not disclose any contractual offer. Further, in signing and returning the forms, members sought to exercise rights under the pension scheme, not either to accept or to make any contractual offer.

So far as the 2006 Deed of Amendment is concerned, on 30 March 2006 Gleeds wrote to those understood to belong to the final salary section about changes that it wished to make to the Scheme. The letter explained that Gleeds had concluded that they could “no longer afford to maintain the future accrual of final salary benefits and … should cease future accrual on 31^st May 2006 by amending the Scheme with trustee consent”. Under the proposals, final salary members would be offered membership of the 2005 money purchase section and could, if they wished, transfer their final salary benefits into either that section or a personal pension arrangement. Under the heading “One-Off Salary Increase”, the letter stated:

“Even though we have been advised that we are permitted to implement this change, we do recognise the effect it will have on your own personal circumstances. We therefore propose making a one-off salary increase to all final salary Scheme members with effect from 1^st June 2006, provided that you sign and return the enclosed extra copy of this letter by 10 May 2006.”

The letter ended as follows:

“What should you do next?

First, you should carefully consider the contents of this letter and keep it safe with any other literature you may have regarding the Scheme. We would urge you to attend one of the scheduled sessions if you have a question that has not already been answered by a previous session.

We would then ask you to sign and return the enclosed extra copy of this letter to confirm that you have received this letter and understand and accept the changes set out within it to Sheila Bell by no later than 30 May 2006.

If you have any further queries about the changes outlined in this letter you may wish to consult an Independent Financial Adviser.”

There followed a space in which a member could sign beneath the words:

“I confirm I have read and understood the contents of Gleeds’ letter dated 30 March 2006 and accept the changes contained within it, which I understand will take effect on 31 May 2006.”

In the event, 103 of the 106 active members of the final salary section signed and returned the letter. All of these received the one-off salary increase, as promised. In contrast, the three members who did not return a signed copy of the letter were not given a salary increase.

One of the 103 initially added after his signature:

“I am signing this letter based on information provided by Gleeds in this letter and responses issued by Gleeds following the Question and Answer sessions held in Bristol, Nottingham and London offices relating to this issue in April 2006.

I understand that my consent was not required as a pre-requisite to Gleeds closing the Final Salary Pension Scheme and I therefore reserve all rights should information issued by Gleeds prove to be incorrect.”

Gleeds, however, rejected the letter and asked the member to sign another copy without qualification, which the member did.

Once Gleeds had received a signed copy of the letter from a member, they wrote to confirm the member’s one-off salary increase and new pensionable salary. The letter was stated to be “[f]urther to Richard Steer’s letter dated 30 March 2006 and the receipt of your signed copy accepting the changes to the scheme”.

New entrants signed forms that were almost identical to those used for those joining the 1997 money purchase section. Whereas, however, the latter form had “Money Purchase Section” in the heading, the forms used in connection with the 2005 money purchase section referred specifically to that section.

Mr Newman contended that the 103 existing members who signed and returned the Gleeds letter and new entrants all bound themselves to accept the changes to the Scheme reflected in the 2006 Deed of Amendment. I have already, however, rejected the submission that those who applied to join the Scheme after the 1997 money purchase section had been introduced bound themselves to accept no more than the benefits for which that section provided. Essentially the same reasoning applies in relation to those entering the Scheme following the establishment of the 2005 money purchase section. I do not therefore accept that any relevant contracts came into being between Gleeds and new entrants.

Mr Evans argued that there were no contracts, either, between Gleeds and the 103 members who signed and returned the Gleeds letter. As on previous occasions, members were, Mr Evans said, presented with a fait accompli. Members can no more be said to have accepted the changes than turkeys accept that it is Christmas. The one-off salary increase represented an ex gratia payment to soften the blow to members. If any contract arose in relation to the salary increase, it was not (Mr Evans said) a term of that contract that the members would accept the changes to the Scheme.

Had, however, the salary increases been no more than ex gratia payments, Gleeds could simply have awarded them to all the members affected by the intended changes to the Scheme; they would not have needed to make the increases conditional on the members signing and returning their letters. Further, in this instance the parties’ behaviour is not wholly explicable by reference to pre-existing rights: no one can have thought that the relevant members were already entitled to the salary increases. Nor, here, can it be said that the members were dealing with the trustees and that Gleeds were at most performing an administrative role: the 30 March letter was plainly written on behalf of Gleeds rather than the trustees. Moreover, the documentation made specific reference to members accepting the changes to the Scheme: the 30 March letter asked the addressees to sign and return it to confirm both receipt and acceptance of the changes, the members signed beneath words referring to their acceptance of the changes, and the further letters from Gleeds spoke of “accepting the changes to the scheme”. In the circumstances, it seems to me that, subject to the points discussed in the next 10 paragraphs, the better view is that the 103 members who signed and returned the 30 March letter bound themselves to accept the changes to the Scheme.

Mr Evans, however, pointed out that these changes involved the pension attributable to past service being calculated by reference to the member’s salary in 2006 rather than his salary when he came to leave the Scheme. The contracts that are said to have arisen between Gleeds and the 103 members who signed and returned the 30 March letter would thus deny those concerned the benefit of the link to final salary which I concluded above (paragraphs 111-129) could not be removed by amendment to the Scheme. Mr Evans argued that this was not possible, either at all or at least without the fully informed consent of the relevant members.

Mr Evans supported his submissions by reference to the passages from the IMG case quoted in paragraph 135 above. Mr Newman, however, took issue with this part of the judgment. He contended that Arnold J had erroneously conflated principles of trust law and contract law.

On this particular point, I take a different view from Arnold J. Re Pauling’s Settlement Trusts [1962] 1 WLR 86, which Arnold J cited, was concerned with the circumstances in which a beneficiary’s concurrence will prevent him from complaining of a trustee’s conduct. I do not myself see why the same criteria should govern whether a beneficiary can contract with a third party not to enforce rights he has under a trust. Contracts can, of course, sometimes be unenforceable for reasons of illegality or public policy, but, the IMG case apart, I was not referred to any authority for the proposition that a contract not to enforce rights under a trust can be impugned on such a basis.

Mr Evans put forward an alternative argument to the effect that any agreements made with the 103 members were rendered unenforceable by section 91 of the Pensions Act 1995. Subsection (1) of this provision states as follows:

“Subject to subsection (5), where a person is entitled to a pension under an occupational pension scheme or has a right to a future pension under such a scheme —

(a)

the entitlement or right cannot be assigned, commuted or surrendered,

(b)

the entitlement or right cannot be charged or a lien exercised in respect of it, and

(c)

no set-off can be exercised in respect of it,

and an agreement to effect any of those things is unenforceable.”

Subsection (5), however, explains that subsection (1) does not apply to, among other things, an agreement to effect “a surrender, at the option of the person in question, for the purpose of … acquiring for the person in question entitlement to further benefits under the scheme” (see section 91(5)(b)(ii)).

Mr Evans argued that the agreement that Gleeds is said to have made with each of the 103 members involved the surrender of a relevant “entitlement or right” and that section 91(5) of the 1995 Act is inapplicable. As regards section 91(5), he submitted that, for section 91(5)(b)(ii) to be in point, the right being surrendered must be no more valuable in actuarial terms than the “entitlement to further benefits under the scheme” that is being acquired. He further said that the salary increases that the members in question received were not benefits “under the scheme”, as section 91(5)(b)(ii) requires.

Mr Newman’s answer was essentially that the rights that the 103 members would have given up were not established or clear-cut and were not, therefore, within the scope of section 91(1) of the 1995 Act. He relied on the decision of the Court of Appeal in the IMG case (HR Trustees Ltd v German [2010] EWCA Civ 1349, [2011] ICR 329) and Bradbury v BBC. In the former, the Court of Appeal explained that an “established or accepted entitlement or right is clearly within the general language of [section 91(1)(a)]”, but that the Act does not preclude “the settlement of claims to a putative entitlement or right” (paragraphs 28 and 30, per Mummery LJ). As regards Bradbury v BBC, this case concerned proposals by the BBC under which any future pay awards to members of its pension scheme were to be limited to 1% for pension purposes. It was suggested that, had the relevant member (Mr Bradbury) accepted the BBC’s offer, section 91 would have been offended. It was argued on behalf of the BBC, however, that Mr Bradbury would not have given up an indisputable right and, hence, that section 91 would not have been engaged. Warren J said this about the submission in paragraph 79 of his judgment:

“[Counsel for the BBC] says that the BBC realises that Mr Bradbury does not accept its interpretation of the definition of Basic Salary as giving it power to determine that part of an increase in salary is not to be pensionable; but putting it at its very lowest, he says that it is an arguable point making Mr Bradbury’s right to an increased pension doubtful or disputed so as to fall squarely within the decision in IMG. It is merely a right that a member may have. I accept that it is an arguable point although, ultimately I think it is a bad point for the reasons which I have given, Not only is it an arguable point, but there is nothing to suggest that the BBC was acting other than in the belief that it had adopted the correct interpretation of the definition of Basic Salary in formulating its pay offer.”

Warren J accepted the argument. His reasoning can be seen from the following passage from his judgment:

“81 However, the fact that there was no compromise of an identified disputed issue does not, I consider, exclude the approach adopted by the Court of Appeal in IMG. Although that case involved a compromise, the reason why section 91 did not apply was not because there was a compromise (although that was the context of the analysis of section 91): rather, it was because there was no entitlement and no right which was alienated. It was the nature of the rights which the scheme member possessed which took the case outside section 91.

82 In the present case I consider that, whether the matter is viewed from the perspective of the BBC or from the perspective of members who accepted the offer of a pay increase subject to the 1% cap on pensionable pay, there would have been no alienation of any entitlement or right within section 91.

83 From the BBC's perspective, the definition of Basic Salary entitled it to do what it did. There would be no alienation of any entitlement or right at all. Further, it could not have been said by a member that the BBC's view of the meaning of Basic Salary was clearly wrong (albeit that I consider it is, in fact, wrong). There would have been, at the very least, a serious doubt about whether the BBC was wrong in the view it took. If a member had disputed the BBC's position, that dispute could then have been compromised by the member accepting the BBC's offer of a pay increase subject to the 1% cap and such a compromise would not have engaged section 91.

84 From the perspective of a member who accepted the offer and remained in his current Section of the Scheme, either he thought that the BBC had power to do what it did or he must have accepted that it was at least arguable that the BBC could do what it sought to do. He might have considered (if he thought about it at all) that it was arguable the BBC was entitled to do what it did in the light of the definition of Basic Salary; or he might have realised that he might not [be] entitled to any pay increase at all, and that by refusing the offer, he would end up with no salary increase and therefore no increase in Pensionable Salary either. In either case, his right to a future pension based on the full amount of an anticipated pay rise was no right at all; and by agreeing to a pay increase only part of which would be treated as pensionable, he did not alienate anything to which he was even prospectively entitled.”

Mr Newman contended that the present case is similar. Even, he said, if I ultimately concluded (as I in fact have) that the Scheme could not be validly amended so as to break the link to final salary, that would not mean that Gleeds had not had a respectable argument to the contrary. The members’ “rights” would not have been clear-cut by any means and so would not have represented an “entitlement or right” for the purposes of section 91 of the 1995 Act.

In my view, the analogy with Bradbury is compelling. It follows that I do not think section 91 of the 1995 Act affects the agreements that Mr Newman alleges arose between Gleeds and the 103 members who signed and returned the 30 March letter.

In all the circumstances, it seems to me that the 103 members in question bound themselves to accept benefits in accordance with the 2006 Deed of Amendment.

Mr Newman’s fallback position was that Gleeds could rely on estoppel by convention. In so far, he suggested, as I did not accept his extrinsic contract arguments, I should conclude that the relevant members of the Scheme are precluded by estoppel by convention from disputing that they accrued benefits on the basis of the 1997 Supplemental Trust Deed, the 2003 Resolution and the 2006 Deed of Amendment.

Since I have concluded that contracts did arise between Gleeds and the 103 members of the Scheme who signed and returned forms in 2006 in connection with the closure of the final salary section, I do not need to consider estoppel by convention so far as they are concerned. I do, however, have to address estoppel by convention in the context of (a) members of the Scheme who sought to transfer into the 1997 money purchase section, (b) new entrants allocated to the 1997 money purchase section, (c) members affected by the 2003 Resolution, (d) the three active members of the final salary section who did not sign and return forms in 2006 and (e) new entrants allocated to the 2005 money purchase section.

I referred to some of the authorities dealing with estoppel by convention in Prudential Staff Pensions Ltd v Prudential Assurance Co Ltd [2011] EWHC 960 (Ch), [2011] PLR 239. Rather than reinvent the wheel, I repeat what I said below:

“209.

Estoppel by convention came to the fore in Amalgamated Investment & Property Co Ltd v Texas-Commerce International Bank Ltd [1982] QB 84. Lord Denning MR there said (at 122):

‘When the parties to a transaction proceed on the basis of an underlying assumption - either of fact or of law - whether due to misrepresentation or mistake makes no difference - on which they have conducted the dealings between them - neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.’

The other members of the Court endorsed a passage from the then-current edition of Spencer Bower and Turner, ‘Estoppel by Representation’, which read:

‘When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped against the other from questioning the truth of the statement of facts so assumed.’

210.

Amalgamated Investment & Property Co Ltd v Texas-Commerce International Bank Ltd concerned a contract, but it is apparent from later authorities that estoppel by convention can arise in relation to transactions other than contracts: see Revenue and Customs Commissioners v Benchdollar Ltd [2009] EWHC 1310 (Ch), [2010] 1 All ER 174.

211.

In the Benchdollar case, Briggs J summarised ‘the principles applicable to the assertion of an estoppel by convention arising out of non-contractual dealings’ in the following terms (in paragraph 52):

‘(i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them. (ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it. (iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter. (iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties. (v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.’

212.

In Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustee Ltd [2010] EWHC 1805 (Ch), [2010] Pens. L.R. 411, Briggs J made an adjustment to paragraph (i) of this summary. He said (in paragraph 137) that ‘the crossing of the line between the parties may consist either of words, or conduct from which the necessary sharing can properly be inferred’.

213.

Mr Rowley stressed that Briggs J’s summary was of ‘the principles applicable to the assertion of an estoppel by convention arising out of non-contractual dealings’. However, the need for a ‘crossing of the line’ is apparent from other cases, notably The August Leonhardt [1985] 2 Lloyd’s Rep 28 (especially at paragraph 35) and Republic of India v India Steamship Co Ltd (No. 2) [1998] AC 878 (at 913). Further, that Briggs J’s (iii)-(v) are of general relevance, and not just in the context of non-contractual dealings, is indicated by the authorities cited in paragraphs 42-45 of his judgment.”

In Redrow plc v Pedley [2002] EWHC 983 (Ch), [2002] PLR 339, Morritt V-C observed that, in the context of a pension scheme, estoppel by convention has to be “applied with caution when seeking to establish an estoppel between the trustees and the general body of members so as to bind them all to an interpretation of the trust deed which it does not bear”. Morritt V-C explained his thinking as follows:

“62.

First, the pension scheme embodies not only the terms of a contract between individual members and the trustees but also a trust applicable to the fund comprising the contributions of members and surpluses derived from the past in which present and future members may be interested. Such trusts cannot be altered by estoppel because there can be no such estoppel binding future members.

63.

Second, it is necessary to show that the principle is applicable to all existing members. I agree with Laddie J in ITN v Ward [1997] PLR 131 that it is not necessary for that purpose to call evidence relating to each and every member’s intention. But that will not absolve a claimant from adducing evidence to show that the principle must be applicable to the general body of members as such.

64.

Third, as the formulation of the principle shows, what must be proved is that each and every member has by his ‘course of dealing put a particular interpretation on the terms of’ the Rules or ‘acted upon the agreed assumption that a given state of facts is to be accepted between them as true’. This involves more than merely passive acceptance. The administration of a pension scheme on a particular assumption as to the yardstick by which contributions or benefits are to be calculated may well give rise to a relevant assumption on the part of the trustees. I suggest that it requires clear evidence of intention or positive conduct to bind the general body of members to such an assumption. I doubt whether receipt of the benefit or payment of the contribution, without more, can be enough. It must not be overlooked that if the principle is applicable it may be used to increase the liability or reduce the benefit of a member as well as, in this case, the opposite.”

This passage has been cited and applied in, among others, the IMG case. It was there submitted that an estoppel by convention prevented members from claiming to have accrued final salary benefits with effect from a particular date, but Arnold J rejected the contention. He said (in paragraph 189):

“What I am unable to accept is that the Existing Members ‘put a particular interpretation on’ the Plan’s governing documents or ‘acted upon the agreed assumption that’ they had given up rights to which they were entitled under those documents. On the contrary, I consider that the Existing Members did no more than passively accept the fait accompli presented by IMG on the basis that the Trust Deed and Rules had been amended.”

In my view, no relevant estoppel by convention arose in the present case.

In the first place, it seems to me that in this case, as in IMG, there was no more than passive acceptance from the relevant members of the Scheme. Existing members were told that changes were taking place, not asked to agree to them. New entrants were simply enrolled in the Scheme in the form it was understood to have at the material time. Take, for example, Mr Perry, the fourth defendant, who joined the Scheme in 2003. Unsurprisingly, he thought that membership of the 1997 money purchase section was all that was open to him; had he understood that he could have joined the final salary section, he would have done so. He cannot, as it appears to me, be said to have done any more than accept what was made available to him.

Secondly, it has not been established that Gleeds relied on any assumption shared between themselves and the relevant members of the Scheme. Gleeds will have relied on their advisers rather than members of the Scheme. It is doubtless the case that - as Mr Newman submitted - Gleeds relied on the forms that members submitted, not least because some of those forms contained authority to deduct pension contributions from members’ salaries. That is not, however, the same as relying on the members as regards the terms of the Scheme or, more specifically, the effectiveness of the 1997 Supplemental Trust Deed, the 2003 Resolution or the 2006 Deed of Amendment. Gleeds will have acted on the basis of views they will have arrived at independently of members, on the strength of professional advice.

Neither Mr Evans nor Mr Clifford attempted to suggest that the major changes to the Scheme that some of the defective deeds were intended to achieve were at all unusual or unreasonable. In fact, in response to the rising cost of pension provision, numerous employers have taken steps in recent years to shift from final salary arrangements to money purchase ones and to close schemes to accrual.

The conclusions I have arrived at above will nonetheless mean that Gleeds’ attempts to contain the costs of the Scheme will have been largely ineffective. None of the deeds that were meant to establish money purchase sections, to require members to make contributions, to reduce the rate of accrual, to cut the rate of pension increases and to close the Scheme to further accrual will take effect as intended. For the reasons I have given, I do not consider that members of the Scheme are estopped from disputing that the defective deeds were validly executed, and the extrinsic contract arguments succeed only as regards the 103 members who signed and returned the letter of 30 March 2006 from Gleeds.

I am very conscious that this judgment has serious implications for the Scheme and Gleeds. Nor will it be advantageous to all of those who have in the past been regarded as members of the Scheme. In particular, as explained above, I take the view that employees who “joined” the Scheme following the introduction of the 1997 money purchase section without being chartered quantity surveyors did not in fact become members (although that is not to say that they will not have acquired any rights as a result of the contributions to the Scheme made by them and by Gleeds for their benefit). Other members of the Scheme stand to receive what could fairly be called a windfall. Unfortunate consequences are, I am afraid, unsurprising when so many documents have not been validly executed.

In the light of the conclusions I have reached above and the matters on which the parties are agreed, my answers to the specific questions posed in the List of Issues are as follows: