Member Article

The High Court considered whether amendments were valid despite the fact that the deeds of amendment had not been effectively executed.  

Background 

The Gleeds Retirement Benefits Scheme was established as a final salary scheme by a partnership in the Gleeds group in 1974.  Over the years many amendments were made to the scheme, including amendments relating to equalisation, the introduction of two money purchase sections and closure to final salary benefit accrual.  The amendment power of the scheme required that any amendments be made by deed. 

Since 1 August 1990, English law has required that for a document to be validly executed as a deed by partners of a partnership, each partner’s signature must be attested by a witness.  The signatures of the partners were not witnessed in any of the documents until new legal advisers were appointed in 2010.  Accordingly for a period of 20 years none of the amendments were made by validly executed deed as required by the scheme rules.

Decision    

The principal argument considered by the High Court was whether members were estopped from denying that the defective deeds were validly executed.  The employer maintained that the advising consultants had represented that the signatures did not need to be witnessed and it had relied on these representations to its detriment, giving rise to an estoppel by representation which precluded the members from challenging the validity of the amendments.

The court held that although an estoppel by representation could in principle be based on a representation of law, it held that an estoppel did not apply in this case as it was clear on the face of the documents that they did not comply with the legislative requirements.  The relevant legislation was designed to achieve certainty and the availability of estoppel could cast doubt on a document’s validity.  Furthermore, to hold otherwise could give a party to a deed the option to reject the document if it was not in his interests or invoke estoppel if it was.  

Comment

This decision has serious implications for the employer and the pension scheme involved, with it anticipated that the on-going scheme deficit could increase by around £45 million.  Some of the members may benefit, for example final salary members would be entitled to continued accrual, however others could lose out, such as the individuals who believed they had joined a money purchase section that never in fact existed.  The court did indicate that these members will have acquired rights as a result of contributions made in respect of them but it did not elaborate on what these would be.     

This decision could be regarded as unusually harsh, particularly in light of other recent case law which has tended to support the view that formalities can be ignored if the parties’ intentions are clear.

It is not yet known whether this decision will be appealed.