Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH 47
CA55/09	OPINION OF LORD DRUMMOND YOUNG in the cause LOW & BONAR PLC & LOW & BONAR PENSION TRUSTEES LIMITED Pursuers; against MERCER LIMITED Defenders: ­­­­­­­­­­­­­­­­­________________

Pursuers: Connall, QC, Solicitor; McGrigors

Defenders: Martin, QC; Barne; Tods Murray

1 April 2010

[1] The present opinion is concerned with the operation of a pension scheme, the Low & Bonar Group Retirement Benefits Scheme, hereinafter referred to as the GRB Scheme. The GRB Scheme was originally established in 1947, and is now governed by a Definitive Deed dated 24 June 1982 and a number of further amending deeds, in particular a Supplemental Definitive Deed of 1989. The first pursuers are the principal employer of the GRB Scheme and the second pursuers are the trustees of the Scheme; they are referred to hereafter as "the Company" and "the Trustees". The defenders are a company that provides a variety of professional services to their clients, including pensions consultancy and administration and actuarial services. For many years the defenders provided the Trustees and the Company with services of that nature. The pursuers aver that those services included advice as regards the law and practice relating to pensions and pension schemes, including scheme amendments and the mechanism for making such amendments. It is further averred that the defenders administered the GRB Scheme; prepared the rules and other scheme documentation for the GRB Scheme; reviewed the rules of the Scheme and provided advice on the relevance of legislation in respect of the rules; prepared documentation relating to the Scheme; and advised on its funding and on the benefits payable thereunder.

The Barber decision and its implications

[2] On 17 May 1990 the European Court of Justice issued its decision in Barber v Guardian Royal Exchange Group, [1990] ECR I-1889. The effect of that decision was that provisions in a pension scheme that laid down different retirement dates for male and female members were discriminatory and consequently in breach of article 119 (as it then was) of the EC Treaty. From that date onwards, article 119 had direct effect and automatically operated to amend all pension schemes in such a way as to eliminate any discriminatory provisions. The effect of Barber was explained in more detail in a subsequent case before the European Court of Justice, Coloroll Pension Trustees Ltd v Russell, [1994] ECR I-4389. The latter decision made it clear that, in order to achieve equalization of retirement dates, Barber required that disadvantaged employees should be granted the same advantages as those previously enjoyed by the advantaged employees, but that it was permissible for the future to achieve equal treatment by reducing the advantages that the advantaged employees formerly enjoyed. At that time the Rules of the GRB Scheme provided that the normal retirement date for female members was 60 and for male members 65. The immediate effect of Barber was accordingly to reduce the normal retirement date ("NRD") of male members to 60. This would have an adverse financial effect on the scheme, however, and it was possible for the future to increase the NRD of female members to 65, thus achieving equality. The history of these matters is conveniently summarized by Patten J in Foster Wheeler Ltd v Hanley and Others, [2008] EWHC 2926, at paragraphs [4]-[24].

Action taken by the pursuers

[3] The pursuers aver that following the Barber decision the defenders advised that the GRB Scheme required to be amended. A meeting followed between representatives of the Company and the defenders, and it was agreed that there would be merit in increasing the normal retirement date for all new female members of the GRB Scheme to 65. Certain further advice was given by the defenders, in which the Company was advised it enter into a consultation with the GRB Scheme members in respect of the amendment of the scheme in the light of the Barber decision. Following that advice, the board of directors of the Company resolved at a meeting held on 5 March 1991 that the Rules of the GRB Scheme should be amended. (In the pleadings it is incorrectly stated that the meeting was "a meeting of the Company" and that the meeting was held on 18 February 1991; nevertheless it was a matter of agreement that the meeting was held on 5 March and was of the board only, although nothing turns on these points). At the board meeting a representative of the defenders, Mr BK Rigby, explained the implications of the Barber decision. He stated that as a result of the decision there needed to be equal treatment for men and women, at least for benefits accrued after 17 May 1990, the date of the judgment. As the GRB Scheme stood, after that date male members were accruing benefits which they could required to receive on the same terms as female members, and it was necessary for the Group to take action to deal with the problem. Mr Rigby stated that 90 per cent of the schemes that had taken action in response to Barber had equalized the pension age for men and women at 65. He recommended that the Group should do likewise, equalizing the normal pension age for male and female members at that age for all new entrants and calculating future service benefits on the basis of a normal retirement age of 65. The board of directors discussed those recommendations and reached agreement in the following terms, which were duly minuted:

"The normal retirement age for men and women in all of the Group's retirement benefit schemes should, with effect from 1 July, 1991, be 65 for all new entrants to those schemes and that the retirement benefits of all existing women members of those schemes in respect of service after that date should be calculated on the basis of a retirement age of 65".

Thereafter the chairman stated that it would be necessary to ensure that communication of the changes being made, particularly the equalization of retirement ages, was carried out in the best possible way. It was delegated to the executive committee of the board to oversee the communication and documentation of the changes.

[4] The board of directors of the Trustees met on 5 July 1991. The following entry appeared in the minute of that meeting:

"It was noted that the Board of Low & Bonar PLC had decided at a meeting on 18 February 1991 [actually held on 5 March 1991] to amend the Rules of The Low & Bonar Group Retirement Benefits Scheme... so that: --

(a) the Normal Retirement Date for female members would, with effect from 1 July, 1991, be the 65th birthday. For female members who were members of the Schemes on 30 June, 1991, and who subsequently retire before age 65, an Actuarial Reduction Factor would only be applied to that part of their pension in respect of service after 1 July, 1991.

...

It was RESOLVED that the changes be implemented and the Rules amended accordingly with effect from 1 July, 1991".

[5] The pursuers aver that following those meetings the defenders were responsible for ensuring that such documentation as was necessary was prepared to give effect to the necessary changes. A consultation document was prepared by the defenders and sent out to all staff. Thereafter an implementation announcement prepared by the defenders was circulated to all staff. This confirmed that retirement ages and pension entitlements for all service after 17 May 1990 would be based on age 65. A further general announcement was made to staff which referred to the equalization of benefits for men and women. The pursuers aver that the discussions that took place between the defenders and the pursuers resulting in the issue of these announcements constituted advice from the defenders to the pursuers and implied that the announcements were sufficient to effect equalization. No deed to effect the required amendment was made until 15 August 2002, when a Replacement Definitive Deed was executed. The pursuers aver that the defenders did not prepare such a deed, nor did they advise the pursuers to ensure that one was prepared and executed. That, it is said, was required in terms of the 1989 Supplemental Definitive Deed to effect a change in the rules to reflect the pursuers decision to equalize normal retirement dates for men and women. The pursuers further aver that after July 1991 they proceeded at all material times on the basis that equalization had been effected, and the defenders consistently advised on the funding of the scheme and other issues on the same basis.

The raising of the action and the defenders' arguments

[6] The pursuers have subsequently raised the present action against the defenders. Their first conclusion is for declarator that under the GMB Scheme the normal retirement date for all members of the scheme was first equalized at age 65 upon the execution of the Replacement Definitive Deed on 15 August 2002, and not at any earlier date; and that the Trustees (the second pursuers) are obliged to administer the Scheme on that basis. The second conclusion is for payment of damages by the defenders to the Trustees; and the third conclusion, an alternative to the second, is for payment of damages to the Company (the first pursuers). Damages are claimed on the basis that the defenders, in providing services to the pursuers in connection with the GRB Scheme, failed to exercise reasonable care and skill such as would be expected of a consulting actuary and pension adviser of ordinary skill and competence, and that that failure constituted both a breach of contract and negligence at common law. In summary, what is claimed is that during the period from 1991, when the Barber judgment was issued, until 2002 the pursuers administered the Scheme on an incorrect basis because the definition of the NRD had not been properly altered. As a result, it is said, the NRD remained at 60 for both men and women, and the pursuers will be required to compensate members of the Scheme to ensure that they receive benefits calculated on that basis. The defenders have tabled a plea to the relevancy of the pursuers' averments. After sundry procedure the action was appointed to debate on the question of whether prior to 2002 the Scheme was effectively equalized on the basis that the NRD for all members was 65. That question is critical, because the pursuers can only have a claim against the defenders for negligent advice causing loss if the scheme was not effectively equalized at age 65 prior to 2002.

[7] At debate counsel for the defenders invited me to sustain the defenders' plea to the relevancy of the action. He presented two distinct arguments in support of that motion, each based on a separate provision of the Supplemental Definitive Deed of 1989, which was the trust deed that governed the operation of the scheme in 1991. In the first place, the defenders submitted that under clause 4(1) of the Supplemental Definitive Deed the Rules of the Scheme had been altered by the decision of the board of directors at the board meeting held on 5 March 1991 as recorded in the signed minute of that meeting. It was further submitted that, also in accordance with clause 4(1), the Trustees consented in writing to that alteration in terms of the signed minute of their meeting of 5 July 1991. If that argument were upheld, I was invited to dismiss the action. In the second place, counsel for the defenders submitted that, even if he was wrong on the first argument and the Rules were not altered under clause 4, the defenders might rely upon rule 16(B) of the Rules of the Scheme to the effect that the normal retirement date in respect of women was altered to 65 years in accordance with the minute of the board meeting of the Company and as notified to members in accordance with rule 16(B)(2). If that argument were sustained, I was invited to repel the pursuers' averments that there had been no lawful exercise of the power of amendment, and to order a restricted proof on the question of whether notification had been given to the members of the scheme in accordance with rule 16(B), such notification being necessary under that rule. I will deal with these arguments in turn. Before doing so, however, I should say something about the approach to be taken in the interpretation of pension scheme documents.

Interpretation of pension scheme documents

[8] Pension schemes are almost invariably set up using the medium of a trust. Nevertheless such trusts are different in a number of important respects from ordinary private trusts. They are essentially commercial in nature, and the benefits provided form an important part of employees' remuneration. Because such trusts are designed to exist for long periods and are likely to affect a substantial number of beneficiaries, they invariably include powers of amendment and modification, both general and particular. Such powers enable the pension scheme to adapt to changing circumstances, which is perhaps the most serious problem that confronts long-term trusts. They also permit a scheme to deal with the requirements of individual employees or groups of employees. The present case is concerned with the construction of powers of that nature.

[9] Because of the essentially contractual nature of pension schemes, I am of opinion that the correct approach to interpretation is that applicable to contracts rather than the approach used for private trusts. Thus the scheme documentation and any other documents prepared for the purposes of administering the scheme must be construed objectively. The words used must be given their natural meaning in the context of the scheme documentation and in the light of the underlying commercial purposes of the scheme. A commercially sensible construction will be preferred because that accords with the intention that a reasonable person involved with the scheme, whether as member, employer or trustee, is likely to have had. The court must in particular attempt to give practical effect to the scheme. In this connection, the administration of pension schemes is frequently conducted without elaborate legal advice, and in my opinion it is inappropriate that an over-legalistic approach should be taken to the niceties of the wording that is used: the practical effect of what is done is important. In construing a provision of the scheme, it is legitimate to consider the general factual and background at the time when the provision was introduced. Apart from the foregoing considerations, if the power of amendment or alteration imposes particular conditions for its valid exercise, these must obviously be satisfied. In considering such conditions, however, I am of opinion that the paramount consideration is that the exercise of the power should be clear and certain and that it should be put into some sort of permanent form; pension scheme trusts typically have a long life, and changes in the scheme and rules must be properly recorded. If, accordingly, a purported exercise of the power is clear and certain, looked at objectively, and it is put into written form, I do not think that there is any need for the court to be unduly technical or restrictive in considering the niceties of its manner of exercise.

[10] In argument extensive reference was made to English cases dealing with the construction of pension schemes. Most of these turned on the construction of the provisions of the particular scheme under consideration by the court and on the manner in which the principal employer or trustees had gone about amending the scheme in question. For that reason they were ultimately of relatively little assistance in construing the Low & Bonar Scheme. Nevertheless some of the English cases do provide a degree of guidance as to the general approach to be taken to construction. In Stevens v Bell, [2002] EWCA Civ 672, Arden LJ, at paragraphs 26 onwards, set out a number of characteristics of pension schemes that should guide their interpretation. In particular, she pointed out that a pension scheme should be construed so as to give a reasonable and practical effect of the scheme and that a provision of a scheme trust deed must be interpreted in the light of the factual situation at the time when it was created; in this respect the general approach to the construction of contracts in the light of surrounding circumstances was relevant. In my view these are important considerations, and I have taken into account in the discussion of the relevant principles in the preceding paragraph. In Bestrustees v Stuart, [2001] Pensions LR 283, Neuberger J drew attention at paragraph 33 to certain important features of pension schemes. A pension scheme is likely to continue for a substantial period of time, and the members are likely not to have easy access to expert legal advice and to be unaware of what has been going on in relation to the management of the scheme. In these circumstances the protection of the beneficiaries required the court to be careful before it permitted a departure from the plain requirements of the trust deed. The court should be particularly careful before effectively overriding a requirement that there should be some sort of written record which could be said to amount to authority to alter the trust deed or rules. Once again I consider that these are all important considerations, and the need for a written record of alterations for amendments is clearly important in the interests of clarity and certainty.

[11] I was also referred to Trustee Solutions Ltd v Dubery, where Lewison J had to construe a provision that permitted amendment "by any writing effected under hand by the trustees and the principal company". Those words were construed by reference to among other authorities Waterson's Trs v St Giles Boys' Club, 1943 SC 369, and it was held that the absence of a signature was fatal to a purported exercise of the power of amendment. A signature might be required for a number of possible reasons, including as a means of definitively authenticating documents, as a means of preserving evidence of amendments long after trustees have ceased to hold office, as a means of reminding signatories of the importance of what they are doing, and as a means of protecting the beneficiaries. These considerations emphasise the need for clarity and certainty in the decisions of pension scheme trustees, and also the need for preserving a definitive record of any alteration to the rules. Nevertheless, these are practical considerations, and provided that what the principal employer and trustees do is clear and certain and properly recorded, I do not think that the court requires to be unduly restrictive in relation to the categories of document that amount to a valid exercise of power of amendment.

[12] A further decision that has a bearing on the approach taken by courts to pension schemes is National Grid Co PLC v Mayes, [2001] 1 WLR 864, a case dealing with the validity of arrangements made to deal with a surplus in a pension fund. Lord Hoffmann, who delivered the principal speech in the House of Lords, made certain observations on the general approach to pension scheme documents. He pointed out (at paragraph 35) that a general power permitting the employer to deal with a surplus should not be construed as giving the employer power, without amendment, to do something which would contradict the express provisions of the scheme. More general guidance on the application of powers of amendment is found at paragraph 57:

"More important than these linguistic points, as it seems to me, are the consequences of insisting that the arrangements to be made by amendment. The operation of the pension scheme should not be encumbered by unnecessary technicalities. On the other hand, if the amendment procedure provides some important safeguards for the members or the trustees, that might be a good reason to construe the scheme as requiring the employer to adopt it".

On the facts of the particular case, it was held (at paragraphs 61-63) that, so far as the members were concerned, it did not matter whether an application of surplus by an employer was made by amendment or by the use of another power. So far as the trustees were concerned, the need was for clear directions as to the administration of the fund, but that was essentially a practical question. If the arrangements were to endure for any length of time, an amendment would be the most convenient and accessible way of recording them, but it was not essential. Thus in considering whether a power of amendment has been used the existence of safeguards for both the members and the trustees is important, but so far as the trustees are concerned their main concern will usually be with the practical details of administering the scheme. In the same case of Lord Clyde (at paragraph 72) indicated that if a particular arrangement involves an alteration to the provisions of the scheme an amendment will be required, but if it does not then it may be made without amendment.

[13] Finally, I should record that I was also referred by the pursuers to cases where, because the formal requirements of the scheme documents had not been met, the court had recourse to personal bar or estoppel or to the provisions of announcements and explanatory booklets: Redrow PLC v Pedley, [2002] Pensions LR 339; ITN v Ward, [1997] Pensions LR 131. I did not find these cases to be of assistance in construing the present deed and rules; these are cases where the deed has been construed in a manner adverse to whatever step the principal employer or trustees may have taken. I was also referred to Walker Morris Trustees Ltd v Masterson, [2009] EWHC 1955 (Ch), where Peter Smith J held that an amendment was invalid because, contrary to the wording of the amendment clause, the trustees had not obtained an actuarial opinion as to the proposed exercise of power. In my opinion that case is clearly distinguishable from the present.

Clause 4

[14] Clause 4(1) of the 1989 Supplemental Definitive Deed provides as follows:

"The Principal Employer [the Company] may at any time and from time to time with the consent of the Trustees by deed alter any of the trusts, powers or provisions of this Deed or the Rules and any such alteration shall have effect from such time as may be specified in the deed whereby the same is effected and so that the time so specified may be the date of such deed or any reasonable time previous or subsequent thereto so as to give the alteration retrospective or future effect".

Clause 4(2)(d) of the 1989 Deed provides that any alteration of the Deed or Rules under clause 4 must be approved in writing by the Trustees. The power in clause 4 is a general power of alteration of any provisions of the Deed or Rules. It is exercisable by the Company, but only with the consent of the Trustees, which must be in written form. Moreover, it must be exercised "by deed", and the meaning and significance of those words formed the central part of the parties' arguments.

[15] For the defenders it was submitted that the word "deed" was not defined in the 1989 Supplemental Definitive Deed, and there was no indication in that document that a deed must have any particular form or must be executed in any particular way. In Scots law, unlike English law, the word "deed" did not have any technical meaning: see paragraph [16] below. Consequently the board minute signed by the chairman of the meeting was sufficient to constitute a deed and thereby to fulfil the requirements of clause 4(1). Moreover, under the law relating to the requirements of writing as it existed in 1991 (before the Requirements of Writing (Scotland) Act 1995), an amendment to the 1989 Deed or Rules would not have been classified as an obligatio literis and would accordingly not have required to be in formal writing. It was accepted that a deed would have to be in writing and would require some formality, but counsel submitted that the minute of a board meeting, duly signed by the chairman, was a sufficiently formal document. In this connection, section 382(2) of the Companies Act 1985 provided that any minute of a meeting of directors signed by the chairman was "evidence of the proceedings" For the pursuers, it was submitted that the board minute was not of sufficient formality to constitute a "deed" for the purposes of the 1989 Supplemental Definitive Deed. The expression "deed" as used in that document was intended to refer only to a formal document formally executed which would of itself constitute an effective amendment of the Scheme. The minutes of the board meeting were no more than a record of what had been discussed orally at the meeting, and did not indicate any intention by the members of the board to change the Rules of the Scheme or to effect equalization as at 5 March 1991. Reference is made to certain definitions of the word "deed" which, it was submitted, indicated that a deed must be a formal legal document created for a purpose. A minute, by contrast, was a mere written summary of oral discussion, and nothing more. Moreover, to the extent that a pension scheme document imposed formal requirements, these must be strictly complied with; such requirements were important because the indicated clearly what was or was not a part of the scheme.

[16] In my opinion the board minute of 5 March 1991 amounted to a "deed" for the purposes of clause 4(1) of the 1989 Supplemental Definitive Deed. On that basis, I consider that the Rules were validly altered on that date in such a way as to equalize NRDs for both men and women at 65 with effect from 1 July in the same year. I reach this conclusion for the following reasons. First, it is clear that the word "deed" has no technical meaning in Scots law. In Henderson's Trs v IRC, 1913 SC 987, a case dealing with the question of whether a minute of acceptance of office by trustees engrossed upon a trust disposition and settlement was a deed for the purposes of the Stamp Act 1891, LP Dunedin stated (at 989):

"Now the Stamp Act does not define what a deed is, and I think it unnecessary to consider whether the word 'deed' is there used as a term of art, because in any case it is only in England that it is so used. I am quite content to take 'deed' is being used in the popular sense. The statute has not defined what a deed is, nor am I tempted to give a definition, but I am certainly clearly of opinion that, whatever is a deed, this acceptance of trust is not".

Lord Kinnear stated (at 990):

"I am entirely of the same opinion, and I agree with your Lordship that for the purpose of this case the word 'deed' is a word of ordinary language, because it is not in our system a term of art. I agree also that it is unnecessary to attempt any exact definition of what the word 'deed' means; but I take the definition which was suggested in the ingenious argument for the Inland Revenue, in which it was said that a deed was any formal instrument which creates a legal relation".

In Lennie v Lennie's Trs, 1914 1 SLT 258, Lord Dewar quoted from the last case and continued (at 260):

"In the absence of any definition of what a deed is, the question just comes to be whether it is reasonable to suppose that a business man would regard a pencil jotting on the back of an envelope as a 'deed'. I do not think that he would. He would never think of calling it a deed in ordinary conversation or speak of it as he would of his title 'deeds' or trust 'deed' or 'deed' of co-partnery. The word 'deed' would, I think, suggest to his mind some document his solicitors prepared, or at all events something of a much more formal character that we have here".

It is unnecessary for present purposes to attempt any definition of the word "deed". Nevertheless, I take from these cases that the significant characteristics of a deed are first that it should have some degree of formality and secondly that it must demonstrate an intention to create a legal relation. These are the two features highlighted by Lord Kinnear, and it seems to me that they convey the essence of the expression.

[17] The minute of the board meeting of a company, duly signed by the chairman, is to my mind clearly a formal document. Section 382 of the Companies Act 1985 (the provision in force in 1991) provided in subsection (1) that every company shall cause minutes of all proceedings at meetings of its directors to be entered in books kept for that purpose. The reason for that provision is that the minutes serve an important purpose in recording the formal decisions of the board, which is of course the body that is responsible for managing the company. Thus board minutes are important documents. Subsection (2) then provides:

"Any such minute, if purporting to be signed by the chairman of the meeting at which the proceedings were had... is evidence of the proceedings".

That too indicates a degree of formality in the notion of board minutes; they may have to be relied on in future, and it is important to establish precisely what the directors decided on any particular matter. Apart from the provisions of the Companies Act, section 2 of the Trusts (Scotland) Act 1921 states that the expression "trust deed" shall mean and include "any... resolution of any corporation". That again suggests that formal resolutions taken by a company, whether in general meeting or through its board of directors, are to be regarded as documents that have the requisite degree of formality to constitute a deed. Finally, in relation to the formality of a board minute, in Jones v Victoria Graving Dock .Co, (1877) 11 QBD 314, it was held in the Queen's Bench Division, and affirmed by the Court of Appeal, that the minute of a board meeting was sufficient evidence for the purposes of the Statute of Frauds that the company had entered into a contract in the terms referred to in the minute. Lush J stated (at 324):

"It is not the less efficient as a signed admission of the contract, because it was made as a record of the proceedings of the company under the obligation of the Companies Act".

That tends to confirm the view that a board minute has a significant degree of formality.

[18] The second essential feature of a deed is that it should demonstrate an intention to create a legal relation. In my opinion that is satisfied by the terms of the Company's board minute of 5 March 1991. In the minute it is narrated that the board of directors "agreed" certain matters. The first of these was that "The normal retirement age for men and women in all of the Group's retirement benefit schemes should, with effect from 1 July, 1991, be 65 for all new entrants to those schemes and that the retirement benefits of all existing women members of those schemes in respect of service after that date should be calculated on the basis of a retirement age of 65". In my opinion that wording demonstrates a clear intention to effect equalization as at 1 July 1991; the decision is expressed in definite terms, and there is no indication that anything else will be required for it to be effective. In the last paragraph of this part of the minute the chairman is recorded as saying that it would be "necessary to ensure that communication of the changes being made, particularly the equalization of retirement ages, was carried out in the best possible way". That again indicates that a definite change is being made, but that, for obvious reasons, it was necessary to communicate it properly to members of the schemes concerned. The minute continues by narrating that it was delegated to the Executive Committee "to oversee the communication and implementation of the changes". "Communication" clearly assumes that a definite decision has been made; obviously the decision must be communicated to members. Likewise, "implementation" is a word that would normally apply to the way that a decision is put into force; it does not indicate that anything more needs to be done before a binding decision is made. For all these reasons I consider that the wording of the relevant section of the board minute indicates quite clearly that the board intended to achieve equalization by their decision, as recorded in that minute.

[19] Furthermore, the purpose of requiring any change in the Rules to be carried out by deed is clearly to ensure that the decision is clear and definite and is adequately recorded; that is essential to achieve certainty as to the rights of members and as a point of reference for the future conduct of the Scheme, which may well subsist for many years in the future. These considerations are fully satisfied by recording the alteration in a board minute which, as I have already remarked, is an important document. The solicitor acting for the pursuers submitted that holding that a minute could amount to a deed could have undesirable consequences. There was good reason to have formal procedures to amend a pension scheme; in particular, that would avoid the necessity of hunting through the minute books of the Company to discover what had happened. While I agree that some degree of formality is clearly contemplated, I do not think that the difficulty of searching the Company's minute books is a serious problem; the obvious procedure would be to lodge a copy of the relevant portion of the board minute as part of the Scheme documentation. That should fully protect the interests of the Trustees in ensuring proper administration in the future, and it should make the rights of the members of the Scheme quite clear.

[20] Finally, clause 4(1) requires the consent of the Trustees for any alteration of the Deed or Rules. In the present case I am of opinion that such consent was given at the meeting of 5 July 1991. The minute of that meeting records that the board of the Company had decided to amend the rules to achieve equalization, in terms that repeat those of the company's board minute of 5 March 1991. The Trustees' minute continues "It was RESOLVED that these changes be implemented and the Rules amended accordingly with effect from 1 July, 1991". That wording appears quite clearly to indicate the Trustees' consent to the change in the rules. Moreover, the last part of the minute is to the effect that the Rules should be amended to equalize NRDs with effect from 1 July; that indicates that the Trustees considered that the board of the Company had done what was necessary to effect that amendment. The result is that the procedure in clause 4(1) was followed, and the Rules were duly amended.

[21] The solicitor for the pursuers referred me to certain definitions of the expression "deed" found in legal dictionaries. Thus in the Dictionary of Words and Phrases compiled by Dalrymple and Dewar Gibb, published in 1946, the word "deeds" is described as "a word of flexible import; it is not a word that has always the same meaning". Among the particular meanings that are given is "an instrument". I did not find this definition of any great assistance beyond indicating that the word "deed" is capable of a range of meanings. In the Scottish Contemporary Judicial Dictionary of Words and Phrases by W. J. Stewart, published in 1995, a number of examples are given, but these are confined to the law entails and do not appear to be to have any relevance to the construction of pension schemes. In Scottish and European Union Legal Terms and Latin Phrases by Styles and Whitty, published in 2003, "deed" is defined as "a formal document, executed and authenticated in accordance with prescribed formalities and incorporating the terms of an agreement, contract or obligation". So far as Scots law is concerned, I find the reference to "prescribed formalities", if it is intended as a general element in the definition, to be inconsistent with the decisions in Henderson's Trs v IRC and Lennie v Lennie's Trs, cited above. Of course in the case of deeds relating to heritable property, which is perhaps the commonest use of the word, prescribed formalities are required. Otherwise, however, I consider that the elements of a degree of formality and incorporating the terms of a legal act are the key features of the word.

Rule 16(B)(2)

[22] So far as material, Rule 16(B) is in the following terms:

(1) Upon payment of such additional contributions (if any) as may be required... and subject to the provisions of this Sub-rule, a person in the service of or who has completed a period of service with a Participating Employer may if the Principal Employer so determines be admitted to membership of the Scheme or where appropriate his membership thereof may be continued on special terms as to contributions, benefits or other relevant matters.

(2) In any case where the Principal Employer notifies the Trustees that special terms are to apply in respect of any such person the Trustees will upon receipt of all such information as they may require in relation thereto notify such person in writing of such special terms and the date upon which they are to have effect. As from such date the Rules shall have effect in relation to such person subject to any modifications set out or referred to in such notification and pending the issue thereof shall have effect subject to such modifications as the Trustees shall in their discretion determine to be appropriate in order to give effect to such special terms".

There follow certain provisos, but it was a matter of agreement that these were not of direct relevance to the present case. Proviso (a) does, however, deal with the possibility that the Rule might be used to alter members NRDs; in some cases that would require consent of the Inland Revenue. The purpose of Rule 16(B) is to permit special terms as to contributions, benefits or other relevant matters to apply to any employee or group of employees. It refers to "modifications" of the Rules. In Rule 2 the expression "Rules" is defined as including any alteration or modification thereof from time to time in force. Consequently any modification effected under Rule 16(B) will itself become part of the Rules, but applicable to a particular member or class of members only.

[23] For the defenders it was submitted that Rule 16(B) could be used to modify the Rules applicable to any group or class of members, or even all of the members of the Scheme. There was no formal requirement in the rule as to how modification should be made, and the board minute was a sufficient to amount to a "determination" under the Rule. It was essential, however, that the Trustees should notify the person or persons who were affected by any such modification, and whether the Trustees had done so was a matter for proof. Rule 16(B) was not restricted to providing additional benefits as a result of augmentation or additional contributions; the only requirement in the rule is that the terms introduced under it should be "special", which meant different. Moreover, proviso (a) contemplated changes in members' NRDs. Finally, Rule 16(B) contains no express restrictions on its application, and there was no basis for implying any restrictions beyond those that appeared in the express wording of the Rule. For the pursuers it was submitted that Rule 16(B) dealt with a particular member or category of members who might receive additional benefits as a result of augmentations or additional contributions; that put them on "special terms". It did not confer power upon the Company to alter unilaterally the Rules of the Scheme without adhering to the safeguards laid down in clause 4. In particular, it had been made clear in National Grid Co PLC v Mayes, supra, that the broad formalities that applied to amendment of pension schemes and their rules should not be circumvented by use of particular powers. Clause 16 should be read as a whole; this made it clear that the clause was concerned with augmentations, discretionary benefits and other special provisions. Finally, the Trustees' minute of 5 July 1991 clearly treated the resolution of the board as amending the Rules; that was inconsistent with the notion of special terms.

[24] The validity of the Company's decision under the Rule 16(B) procedure is only relevant in the event that I am wrong in holding that an amendment under Clause 4 was duly made. Indeed, the two arguments are strictly contradictory: either the Company made use of its power to amend the Rules or it made use of its power under Rule 16(B) to admit classes of members (the existing female and male contributing membership, excluding members who had retired or whose benefits were deferred) to membership on special terms. On the whole I favour of the argument that the obvious intention of the Company was to amend the scheme, because the members whose retirement dates were equalized at 65 are likely to have constituted the bulk of the membership. Moreover, the alteration was general in terms. Nevertheless, if I am wrong in holding that the board minute of 5 March 1991 was sufficient to amount to a "deed", I am of opinion that the board's decision on that date was sufficient to amount to a valid exercise of the power under Rule 16(B) to admit members to special terms.

[25] In the first place, the critical qualification in Rule 16(B) is that a member or group or groups of members should be admitted to "special" terms. The word "special" does not impose a rigorous criterion, however; it can apply to groups of members, and even large groups of members. In the present case the whole of the existing contributing membership was included, the men because their NRD had been reduced to 60 immediately following the Barber decision. Nevertheless, the membership of the scheme would include retired members, enjoying their pensions, and probably also deferred members, who had contributed to the scheme and then gone to work for another employer, so that their benefits were preserved but not yet in payment. The latter two categories would have had benefits that were already defined, and consequently would not be affected by the equalization at 65. Thus equalization was not universal, and it can be said that groups of members were admitted to special terms.

[26] In the second place, the court must be careful to ensure that any safeguards for members in relation to amendment or alteration of the scheme are properly preserved; that is clear, for example, from the passage from Lord Hoffmann's beach in National Grid cited above a paragraph [12]. In the present case, under the amendment procedure in Rule 4 there is a requirement that the Trustees should consent to the determination of the Principal Employer, and there are certain protections designed to preserve the tax exempt status of the Scheme. The tax status of the scheme is not in issue. So far as the position of the Trustees is concerned, they expressly consented to the alterations determined by the Company. Thus the critical protection available under clause 4 was in fact satisfied in the present case. In the third place, the proviso to Rule 16(B) contemplates that modification of the Rules can be made under that Rule in such a way as to alter members' NRDs. That suggests that the Rule is intended to be fairly general in application. There are no express restrictions on the use of the Rule apart from the word "special" and in my opinion there is no objection to using the Rule to alter the NRDs of members, even large classes of members. I can see nothing in Rule 16 taken as a whole that is inconsistent with this view. In the fourth place, while the board resolution of the Company of 5 March 1991 does not refer to rule 16(B), that is not necessary. When trustees exercise a power it is not necessary that they should do so expressly; it is sufficient if the use of the power can be inferred from what the trustees have done: Davis v Richards & Wallington Industries Ltd, [1990] 1 WLR 1511, at 1530-1531 per Scott J. In the present case, what the Company intended to do is in my opinion quite clear from the terms of the board minute of 5 March 1991, and accordingly it is unnecessary that the Company should refer to the particular power that was being exercised.

[26] I was referred to cases on the application of powers to create special terms. In Capital Cranfield Trustees Ltd v Beck, [2008] EWHC 3181 (Ch), Morgan J held that NRDs could not be equalized generally under a power that permitted the alteration of NRDs in "any particular case". In my opinion that power is distinct from that in the present case. In any event, in Capital Cranfield the procedure used by the employer was defective in a number of other respects: see paragraphs 46-48. In Hodgson v Toray Textiles in Europe Ltd, [2006] Pensions LR 253, Lewison J held that the equalization of NRDs at 65 involved the alteration in the terms of the scheme for all members, because following Barber male members' NRDs had been automatically reduced to 60. That is clearly correct, and I have taken it into account in the above analysis.

Conclusion

[27] Nevertheless, on the view that I have taken on the application of Clause 4, the application of Rule 16(B) is immaterial. On the basis of my conclusion as to the application of Clause 4, I am of opinion that the question of whether prior to 2002 the Scheme was effectively equalized on the basis that the NRD for all members at 65 should be answered in the affirmative. On that basis the pursuers' claim is based on a false premise, and I will accordingly dismiss the action.