Scottish Court of Session Decisions

This application relates to the Ellis & McHardy Limited Retirement Benefits Scheme ("the scheme"). The petitioner avers that he is the sole trustee presently acting under and in terms of the scheme. One of the questions which we have to consider relates to the petitioner's appointment as trustee. This in itself exemplifies what counsel for the petitioner candidly described as "an unfortunate history", some of which we set out below. The petitioner avers that the scheme was established by Ellis & McHardy Limited, a company incorporated under the Companies Acts and having its registered office at 18 Regent Quay, Aberdeen (therein called "the Principal Company") by a deed of trust dated 17 December 1971 ("the interim deed"). Following on from the interim deed, a further deed of trust was entered into between Ellis & McHardy Limited and the trustees named therein dated 5 November 1973 ("the definitive trust deed") which was amended by a memorandum dated 21 November 1974 and by a deed of amendment dated 7 June 1991. This requires to be considered in light of the subsequent averment that, so far as the petitioner has been able to ascertain, the only deeds presently available bearing to show the purposes of the scheme are: a copy of the interim deed which indicates that it was executed on 17 December 1971, signed and sealed on behalf of Ellis & McHardy Limited and signed by the trustees therein mentioned and duly witnessed; a copy of the definitive trust deed which indicates that it may have been executed on 5 November 1973 but does not indicate actual execution; a copy of a memorandum which indicates that it was signed on 21 November 1974 for and on behalf of Ellis & McHardy Limited and by three trustees and which refers to a definitive trust deed dated 5 November 1973; and a copy of a deed of amendment indicating that it was executed on 7 June 1991 on behalf of a company therein referred to as "the Principal Company" and by certain trustees and which refers to a definitive trust deed dated 5 November 1973. Despite exhaustive searches, the petitioner is not aware of the existence of any other deeds or copies of deeds or any memoranda under hand signed on behalf of the Principal Company from time to time and the trustees, in accordance with clause 5 of the definitive trust deed, bearing to set forth the trust provisions and rules for the scheme. From time to time booklets purporting to describe the provisions of the scheme were produced for the purpose of being issued to those entitled to benefit under the scheme. It is apparent from these booklets that they record changes to the provisions governing the scheme that are not set out in the documents referred to above. The scheme is and has been professionally administered upon the basis that the rules applicable to members, deferred members and pensioners are as provided in the definitive trust deed, as amended by the 1974 memorandum and by the 1991 deed of amendment and as if the rules had been amended by such provisions in the booklets as are inconsistent with provisions in the deeds.

The company referred to as the Principal Company in the 1991 deed of amendment is North Eastern Farmers Limited, incorporated as an agricultural co-operative under the Industrial and Provident Societies Act 1965 and having a place of business at Rosehall, Turriff, Aberdeenshire ("NE Farmers"). The petitioner avers that NE Farmers is the Principal Company for the purposes of the scheme. The petition was served on NE Farmers and it has lodged answers. During the course of subsequent procedure the petitioner was directed to consider the interests of the various parties affected by the proposals and issues set forth in the petition and thereafter to present to the court a note or notes of argument addressing the interests of each class of members and identifying any conflict of interest between any such classes. Thereafter Mrs. Margaret Cowie, 126 Lee Crescent, Bridge of Don was identified as a suitable representative of the members of the scheme, the petition was served on her and she lodged answers. In due course the present initial hearing was arranged, for the purpose of considering the issue of the competency of the present application and issues of trust administration. The petition submits five questions for the direction of the court, and the effect of this procedure is that, in addition to considering the issue of competency, we require to answer only the first three of these five questions. They are in the following terms:

We require at this stage to consider the issue of competency. Power to provide for procedure by way of petition for directions was instituted by section 17(vi) of the Administration of Justice (Scotland) Act 1933. The present statutory authority is section 6(vi) of the Court of Session Act 1988 which is in identical terms and allows for the provision of procedure

The present procedure is regulated by Rules 63.4 to 63.6 of the Rules of Court. Counsel for the petitioner, in an informative note of argument, has set out a summary of the cases in which the procedure has been used from 1933 onwards, but at the hearing he concentrated on one of these, Peel's Trustees v. Drummond 1936 S.C. 786. In delivering the opinion of the court, Lord President Normand summarised an argument about certain observations made in earlier cases about the appropriateness of proceeding by petition for directions. He then, at p. 794, said:

He concluded the opinion by stating that before it was delivered the judges of the Second Division were consulted, and they concurred in the view that the rules applicable to petitions for directions "should receive a liberal construction". We treat this as the correct formulation of the approach to be adopted to the competency of a petition for directions. We would only add that when Lord President Normand spoke of a question as "requiring an immediate decision by the trustees", in our view this means, not necessarily that some emergency should have arisen, but that there should be a live issue, rather than an academic or speculative question, which affects, or may be expected in the reasonably near future to affect, the investment, distribution, management or administration of the trust estate.

In the present case the court ex proprio motu required submissions on the competency of the petition. Counsel for the other parties concurred with the submission of counsel for the petitioner that the petition is competent. We agree with this submission. The questions set out above appear to us to relate to the management or administration of the trust estate and to require an immediate decision to enable these matters to be put on a proper footing. We have been particularly concerned to consider whether, in light of the opening words of section 6(vi) of the 1988 Act, it is competent in a petition for directions to ask a question whether the petitioner is a trustee. Provided that it is averred that the petitioner is a trustee (or that the petitioners are trustees) the statutory requirement appears to be satisfied, as in every case the management or administration of the trust estate requires that the identity of the trustee or trustees be established. In any event, in the present case no other party has sought to contradict that the petitioner is the trustee. We are accordingly satisfied that the petition is competent.

We turn now to the three questions which we have quoted. During the discussion of the first question we expressed reservations as to the somewhat ill-defined basis upon which we were invited to answer the question, so far as relating to the booklets, in the affirmative. Counsel for the petitioner indicated that consideration would be given to the possibility of putting the documentation relating to the scheme on a proper footing without the intervention of the court, subject to our answering questions 2 and 3 in the affirmative, and invited us to find it unnecessary to answer question 1 at present. We need therefore say no more about this question. For the purpose of answering questions 2 and 3 we do, however, require to proceed on the assumption that the definitive trust deed was executed on 5 November 1973 in the terms set out in the copy to which reference has been made.

Question 2 arises in this way. In both the interim deed and the definitive trust deed Ellis & McHardy Limited was called "the Principal Company" and that expression was defined as including "any company which shall hereafter carry on substantially the same business as that now carried on by Ellis & McHardy Limited and in succession thereto". At the dates of the interim deed and the definitive trust deed Ellis & McHardy Limited carried on the business of coal distributors. Its wholly owned subsidiary, Ellis & McHardy (Oils) Limited, carried on a fuel oils distribution business. While the interim deed and definitive trust deed contained provisions enabling other employers to participate in the scheme, the petitioner has found no evidence that Ellis & McHardy (Oils) Limited completed the necessary formalities for participation. It is not clear from the company records available to the petitioner which company employed the employees who worked in the business of Ellis & McHardy (Oils) Limited. On 21 August 1979 Mackan Group (U.K.) Limited (which subsequently changed its name to Ellis & McHardy Group Limited) acquired the entire issued share capital of Ellis & McHardy Limited and by a supplemental deed dated 28 December 1979 was admitted as an additional employer to participate in the scheme as from 1 January 1980. Between 1979 and 1983 Ellis & McHardy Limited widened its business interests by adding heating maintenance and the distribution of liquid petroleum gas. The petitioner understands that persons employed in those activities participated in the scheme. In 1983 the whole business and undertaking of Ellis & McHardy Limited were transferred to its then parent company Ellis & McHardy Group Limited. In about March 1985 Ellis & McHardy Group Limited sold to NE Farmers the bulk of the business which it had taken over from Ellis & McHardy Limited, apart from the coal distribution business which was then of only minor significance and which was sold to a different purchaser. At the same time Ellis & McHardy Limited sold the entire issued share capital of Ellis & McHardy (Oils) Limited to NE Farmers. Under the sale and purchase agreement NE Farmers agreed with Ellis & McHardy Limited and Ellis & McHardy Group Limited to perform all of the obligations of the Principal Company under the scheme and thenceforward NE Farmers was accepted by the trustees of the scheme as the Principal Company. Counsel referred to a minute of the trustees dated 7 May 1986 and also to a deed of succession dated 7 June 1991. Ellis & McHardy Limited was dissolved on 22 August 1989. In about 1990 NE Farmers sold its fuel distribution business and liquefied petroleum gas distribution business to British Petroleum plc. Since then it has no longer operated in the fuels distribution business. By deed of covenant also dated 7 June 1991 a newly incorporated company also called Ellis & McHardy (Oils) Limited, which was owned jointly by NE Farmers and British Petroleum plc, was admitted to participation in the scheme. Ellis & McHardy Group Limited went into receivership and was dissolved in 1994. Since NE Farmers was accepted as Principal Company no other company has contended that it is entitled to be recognised as Principal Company in respect of the scheme.

The question which thus has to be considered is whether, after these events, NE Farmers can be described as carrying on "substantially the same business" as was carried on by Ellis & McHardy Limited at the time of the interim deed and the definitive trust deed and in succession thereto. Clearly, NE Farmers does not carry on the same trade as was carried on by Ellis & McHardy Limited. Counsel for the petitioner and counsel for NE Farmers submitted, however, that business is not synonymous with trade, and that what requires to be considered is the underlying undertaking as a matter of commercial reality. Reference was made to In re Courage Pension Schemes [1987] 1 W.L.R. 495. We accept that this is the correct approach, and that what requires to be considered is whether NE Farmers can properly be described as successor to the undertaking originally carried on by Ellis & McHardy Limited, albeit that the trade may not be the same. There is in our view sufficient, uncontradicted information before us to enable us to reach the conclusion that NE Farmers carries on substantially the same business as was carried on by Ellis & McHardy Limited and in succession thereto, and that accordingly it is now, and has been since 1985, the Principal Company within the meaning of the definitive trust deed.

Less requires to be said about question 3. The petitioner has provided a history of the appointment and resignation of trustees, so far as he has been able to establish it, from the date of the interim deed onwards. Clause 6 of the definitive trust deed provides inter alia that the power of appointing new trustees shall be vested in the Principal Company. It is therefore in our view sufficient to refer to events which have taken place since NE Farmers became the Principal Company. By a deed dated 2 March 1990 the two then surviving trustees retired and NE Farmers appointed David Morgan Milne, Ian Marr, Michael Stewart Horsfall and William Jamieson as trustees. Michael Stewart Horsfall resigned as trustee on 31 January 1994. By a deed dated 17 and 18 November 1984 Ian Marr and William Jamieson retired and the petitioner and Robert John Bruce Sangster were appointed as trustees. David Morgan Milne resigned on 18 June 1996 and Robert John Bruce Sangster resigned on 26 March 1997. In these circumstances we are satisfied that the petitioner was validly appointed as trustee by NE Farmers and is at present the sole trustee. There is a further provision in clause 6 of the definitive trust deed that upon the death or retirement from the trusts of any trustee the Principal Company shall as soon as possible appoint a new trustee or trustees in his place, it being the intention that, unless a trust corporation shall for the time being be acting as trustee, the number of trustees shall never be less than three. This provision does not have the effect of prohibiting a trustee who has become the sole trustee by reason of the resignation of the other trustees from acting as a trustee pending the appointment of new trustees and accordingly the petitioner may act as trustee although he is for the time being the sole trustee.

For the reasons we have given we find it unnecessary to answer question 1 at present and we answer each of questions 2 and 3 in the affirmative. There will require to be a further hearing in due course to dispose of the remaining questions in the petition.