Last Updated on January 2, 2021 by LawEuro
Appeal No: A3/2016/3050
Claim No. HC-2015-002634
Neutral Citation Number: [2018] EWCA Civ 681
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Timothy Fancourt QC, as Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 28/03/2018
Before :
LORD JUSTICE GROSS
LORD JUSTICE DAVID RICHARDS
and
LADY JUSTICE ASPLIN DBE
– – – – – – – – – – – – – – – – – – – – –
Between:
IAN SHANNAN
ERIC ROGER HALL
WILLIAM KIM QUILLIN (as Trustees of the
Wandel & Goltermann Retirement Benefits Scheme)
Claim/C
Claimants/
Respondents
– and –
VIAVI SOLUTIONS UK LIMITED
MALCOLM FROUDE
BOND PEARCE
BOND PEARCE LLP
AON CONSULTING LIMITED
Defendant/
Appellant
Defendants/
Respondents
– – – – – – – – – – – – – – – – – – – – –
– – – – – – – – – – – – – – – – – – – – –
(Paul Newman QC and Bobby Friedman instructed by Boyes Turner LLP) for the Defendant/Appellant
(Nicolas Stallworthy QC and Simon Oakes instructed by Stephenson Harwood LLP) for the 2nd Defendant/Respondent
(James McCreath instructed by TLT Solicitors LLP) for the 1st, 2nd and 3rd Claimants/Respondents
Hearing dates: 27th and 28th February and 1st March 2018
– – – – – – – – – – – – – – – – – – – – –
Judgment
Lady Justice Asplin:
1. This is an appeal by Viavi Solutions UK Limited (“Viavi”) against paragraph 2(a) of the Schedule to the Order dated 8 July 2016 of Mr Timothy Fancourt QC (then sitting as a Deputy High Court Judge in the Chancery Division) following his judgment dated 27 June 2016. The central issue with which the appeal is concerned is whether the definitive deed and rules of the Wandel and Goltermann Retirement Benefits Scheme (the “Scheme”), dated 15 September 1999 (the “1999 Deed”), was validly executed so as to amend the governing provisions of the Scheme. The dispute centres around whether Wandel and Goltermann Management Limited (“Management”) was the appropriate company to execute the 1999 Deed.
2. The parties to the 1999 Deed were Management, purportedly in the capacity of Principal Employer in respect of the Scheme and the then Trustees of the Scheme, Mr Robert Shaw, Ms Frances Ball, Mr Richard Taylor, Mrs Margaret Street, Mr Timothy East and Ms Jennifer Bennett (the “then Trustees”). Management had become the parent company of Viavi following a corporate reorganisation in September 1994. It is accepted, however, that Viavi was the Principal Employer until at least 1997. The 1999 Deed can only have been validly executed if Management replaced Viavi as Principal Employer of the Scheme as a result of the exercise of the relevant substitution power, either before or by means of the execution of the 1999 Deed itself. If the 1999 Deed is invalid, various increases in pension benefits effected by it would be of no effect because the power to amend the Scheme was vested in the Principal Employer and the then Trustees.
3. The Judge decided that the requirements for substituting the Principal Employer of the Scheme were met by the execution of the 1999 Deed and, therefore, Management became the Principal Employer as a result, and accordingly, the 1999 Deed was effective. He rejected the argument that the requisite agreements and consent necessary for a valid exercise of the substitution power had been concluded and given in mid 1999, before the execution of the 1999 Deed.
4. Whilst accepting that Viavi was the Principal Employer in respect of the Scheme from 1983 to 1997 and after 2003, Mr Newman QC on Viavi’s behalf contends that the 1999 Deed is invalid because all the relevant parties were under the misapprehension that Management had been Principal Employer of the Scheme since 1994. Therefore, it is said that the execution of the 1999 Deed itself could not have constituted or evidenced the requisite agreements and consent necessary for the substitution of Management for Viavi as Principal Employer, nor could those agreements and consents have been arrived at in the summer of 1999, before the 1999 Deed was executed.
5. Mr Stallworthy QC on behalf of Mr Malcolm Froude, submits that the Judge was right to conclude as he did and, if not, the requisite agreements and/or consent were arrived at and given in the summer of 1999 before the 1999 Deed was executed. Accordingly, he submits that the 1999 Deed and the amendments to benefits that it purported to effect are valid.
6. Mr Froude is the Second Defendant Respondent to this appeal. He is a member of the Scheme, was a trustee of the Scheme from 27 June 2003 until 15 May 2013 and was a director of Viavi from 5 May 1995 until 31 March 2003. The Judge made a representation order pursuant to CPR Part 19 rule 7 under which Mr Froude was appointed to represent all those employers, members and other beneficiaries of the Scheme whose interests coincide with the position which he has taken in these proceedings which is opposed to that of Viavi. Viavi was also the subject of a representation order under which it was appointed to represent all those employers, members and other beneficiaries of the Scheme whose interests coincide with its own.
7. Mr Ian Shannan, Mr Eric Roger Hall and Mr William Kim Quillin were until very recently the present trustees of Scheme. Since the proceedings were commenced Mr Quillin has been replaced as a trustee by Fan Zou, who together with Messrs Shannan and Hall will be referred to as “the Present Trustees”. They were represented before us by Mr McCreath. They were Claimants in the proceedings before the Judge, having brought the matter before the Court in order to obtain directions in relation to the uncertainties that had arisen in the administration of the Scheme. They are the First, Second and Third Respondents to this appeal, in which they take a neutral stance, as they did below.
8. Bond Pearce, Bond Pearce LLP and Aon Consulting Limited were the third to fifth Defendants in the proceedings below and are also Respondents to this appeal. Bond Pearce provided legal services to the Trustees of the Scheme and Bond Pearce LLP is the successor to the business previously carried on by Bond Pearce. I shall refer to both Bond Pearce and Bond Pearce LLP together as “Bond Pearce”. Aon Consulting Limited (“Aon”) is the provider of administrative and actuarial services to the Scheme and has been since 1997. Both Bond Pearce and Aon were joined to the proceedings in order that they would be bound by the outcome. They were not represented in the proceedings below and were not represented in the appeal before us.
Relevant background
9. The Scheme was established in 1967 and closed to further pension accrual in 2003. Viavi was admitted to participation in the Scheme in 1978 and in 1983 it became the Principal Employer pursuant to a Deed dated 7 January 1983 which purportedly backdated the appointment to 1981. Viavi was called W&G Instruments Limited at that stage. Management was incorporated on 27 July 1994, having been acquired “off the shelf”. It became the holding company of Viavi on 30 September 1994. It had no employees.
10. By a deed dated 7 November 1995 (the “1995 Deed”) made between Viavi, as Principal Employer, and the then Trustees, the rules of the Scheme were replaced. It is common ground that Viavi was the Principal Employer when the 1995 Deed was executed, and accordingly, that that deed and the changes to benefits effected by it were valid. The provision in relation to the substitution of the Principal Employer was contained in Rule 10.10 of the 1995 Rules. It is in the following form:
“The Trustees may agree with an employer or holding company that it may become the Principal Employer unless this would prejudice Approval. The consent of the existing Principal Employer shall be necessary unless it has been dissolved.”
(‘Rule 10.10”)
It is accepted that Rule 10.10 was the relevant provision in relation to any change in Principal Employer at the relevant time or times in 1999. The Judge decided that for the purposes of Rule 10.10 no formality was necessary; either for the purposes of an agreement between the Trustees and an employer or holding company, or for the giving of consent by the existing Principal Employer. However, he concluded that save possibly where the Principal Employer had been dissolved, a substitution of Principal Employer under Rule 10.10 could not take effect retrospectively. Neither of these conclusions are the subject of an appeal.
11. The 1999 Deed was dated 15 September 1999 but was executed by the then Trustees on 12 January 2000 and by Management, purportedly as Principal Employer on 3 February 2000. Viavi was not a party to it. Furthermore, there is no written record of Viavi having consented to Management becoming the Principal Employer in its place. Although Management is named as the Principal Employer in the 1999 Deed, the Deed also contains seemingly inconsistent provisions to which I will turn in detail below.
12. Aon subsequently sought to obtain a contracting-out certificate from the National Insurance Contributions Office in the name of Management. The Inland Revenue requested copies of the document by which the Principal Employer had been substituted and were not satisfied by a copy of the 1999 Deed. Thereafter, a Deed of Novation was executed on 13 March 2002 by Viavi, Management and the then Trustees of the Scheme (the “Deed of Novation”). In summary, it declared that since 30 September 1994, Management had assumed the duties and obligations of the Principal Employer under the Scheme in place of Viavi and that as a consequence, with effect from that date, Management was the Principal Employer in respect of the Scheme. It was further declared that the parties ratified all actions and decisions made by Management between 30 September 1994 and the date of the Deed of Novation. There was a dispute before the Judge about the true effect of the Deed of Novation and whether it could have retrospective effect. However, having found that the 1999 Deed was effective, the Judge did not need to determine those points. If this appeal is allowed they will need to be remitted to the Judge.
13. By a further Deed of Novation, dated 21 March 2003, (the “Second Deed of Novation”) Viavi was substituted once again for Management as Principal Employer, purportedly with retrospective effect from 2 January 2003. A decision was made to close the Scheme, and this was effected by a Deed executed on 27 June 2003.
The Judgment
14. In summary, the Judge held that:
(i) there was no implied term in Rule 10.10 requiring any formality and so it was not necessary to have a written agreement to substitute the Principal Employer: [61];
(ii) Rule 10.10 did not allow for retrospective substitution of the Principal Employer save possibly where the Principal Employer had been dissolved: [73] and [77];
(iii) in 1999 it was well known by Mr Taylor, Mrs Bartlett, Mr Bourton and those closely involved with the Scheme for some time that Viavi was the Principal Employer and Management was a holding company: [81];
(iv) it is a clear inference that the position of Management was discussed by Ms Bartlett and Mr Clarkson of Bond Pearce on 21 April 1999 at a meeting to consider the new draft booklet and deed and that there was an understanding on someone’s part that because Management was the holding company it should have become the Principal Employer and that that view was endorsed by Mr Taylor in a letter of 25 May 1999: [82];
(v) it was more likely than not that the then Trustees were told about this at the Trustees’ meeting on 16 June 1999 and that it was explained that Management should be the Principal Employer with retrospective effect from the time it became the holding company of Viavi. The identification of Management as the Principal Employer in the 1999 Trustee’s Report reflected their understanding and acceptance of the change: [83];
(vi) there was insufficient evidence to support Mr Froude’s case that prior to the execution of the 1999 Deed, the Trustees, Management and Viavi all agreed to appoint Management as Principal Employer: [86];
(vii) there was insufficient evidence that Management itself agreed to the substitution before the execution of the 1999 Deed: [87];
(viii) the argument that all the relevant parties mistakenly believed that Management had been appointed Principal Employer in 1994, meaning that in 1999 there was no intention or agreement for Management to become Principal Employer, should be rejected: [88];
(ix) what happened in 1999 was that Mr Taylor, then one of the Trustees, and director and company secretary of Viavi, and a director of Management, and Ms Bartlett, the in house pensions manager of the Scheme, came to understand that Management should have become the Principal Employer in 1994, when it became Viavi’s holding company, and decided to treat Management as if it had become Principal Employer in 1994 and remained so; they knew that Viavi was, in fact, the Principal Employer in 1999, but wanted Management to become the Principal Employer, if possible, with retrospective effect from 1994; and therefore, “ . . . all relevant parties understood that Management was not already the principal employer but was to become the principal employer, with retrospective effect to 1994”: [89];
(x) the agreement of Management to become Principal Employer was also Viavi’s agreement or consent to cease to be so: [93] – [96];
(xi) although Viavi was not a party to the 1999 Deed, as it was a wholly owned subsidiary of Management, under the principle in Re Duomatic [1969] 2 Ch 365, Management could take decisions within the corporate powers of Viavi informally on its behalf with no need for Viavi to make a board resolution or pass a special resolution in a general meeting to that effect and therefore “Management’s agreement to its becoming principal employer is also Viavi’s agreement”: [93]. Accordingly, the terms of Rule 10.10 were complied with on the execution of the 1999 Deed and the 1999 Deed was therefore valid; and
(xii) pursuant to the principle in Davis v Richards and Wallington Industries Ltd [1990] 1 WLR 1511, the intention to substitute Management for Viavi as Principal Employer immediately prior to the 1999 Deed could be imputed to the Trustees and Management: [101]; and that, whilst in theory they did not have the power to achieve this as the agreement of Viavi was needed, in practice they did, because Viavi was a wholly owned subsidiary of Management: [100].
15. In the light of his conclusions, the Judge did not need to decide whether the principle of estoppel by deed applied to the 1999 Deed, although he expressed doubts about it at [103] of his judgment. In relation to the 2002 Deed of Novation, the Judge held that, in view of his findings on the effect of the 1999 Deed, in so far as it purported to substitute the Principal Employer it was of no effect, as Management was already the Principal Employer: [124]. The Judge’s decisions as to the validity of a number of subsequent deeds are not appealed and therefore, there is no need to mention them.
Grounds of Appeal and Respondent’s Notice
16. The Appellant appeals on three grounds:
(i) The documentary evidence does not support the factual basis for the Judge’s decision that the 1999 Deed was validly executed, and instead supports a finding that the Trustees, Management and Viavi did not intend Management to be appointed as Principal Employer by the terms of the 1999 Deed, as they thought that Management had already been appointed as Principal Employer in September 1994. Accordingly, Management was not validly appointed as Principal Employer by the 1999 Deed, and Viavi remained Principal Employer at the date of its execution;
(ii) The above finding means that there is no scope for the imputation of an intention by the Trustees and Management to appoint Management as Principal Employer in place of Viavi in order to make the amendments to the Scheme pursuant to the 1999 Deed; and in the alternative
(iii) if the 1999 Deed evidenced the agreement of the parties to the 1999 Deed to Management being appointed as Principal Employer, it did not constitute the consent of Viavi, which was not a party to the 1999 Deed and the “Duomatic principle” does not apply to enable the agreement of Management to its appointment as Principal Employer to be treated as the consent of Viavi to such appointment.
17. Mr Froude seeks to uphold the Judge’s decision for the reasons he gave and insofar as is necessary, seeks to uphold it on two additional grounds namely that:
(i) the documentary evidence establishes that even before the execution of the 1999 Deed the Trustees had in fact agreed with Management, with Viavi’s consent, that Management become the Scheme’s Principal Employer in accordance with Rule 10.10 (a conclusion reinforced by the presumption of regularity); and
(ii) the 1999 Deed represented that Management was the Scheme’s Principal Employer, giving rise to an estoppel by deed binding Management and the Trustees and their respective privies, in circumstances in which, in relation to any exercise of powers by the 1999 Deed, Viavi was a privy to Management; and the Scheme’s beneficiaries were privies to the Trustees.
At trial, Mr Froude’s primary case had been that the necessary agreement and consent had been reached before the 1999 Deed was executed and his secondary position was that the 1999 Deed itself should be taken as the agreement.
Factual Findings
18. The Judge’s factual findings, the inferences which he drew and the evaluation of those facts, were based almost entirely upon the documentary evidence before him. The documents were supplemented by witness statements but it is accepted that in this case, in part, no doubt, as a result of the passage of time, those who were directly involved in the execution of the relevant documents and the decision making processes had no relevant recollections. The Judge did not hear any oral evidence. Viavi’s first ground of appeal proceeds on the basis that some of the Judge’s findings of fact and the inferences which he drew were wrong. In the circumstances, therefore, it is for us to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that Viavi and Mr Froude challenge, bearing in mind that in so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, we ought not to interfere unless we are satisfied that the Judge’s conclusions lie outside the bounds within which reasonable disagreement is possible: Datec Electronics Holdings v UPS [2007] UKHL 23; [2007] 1 WLR 1325 per Lord Mance at [46] approving Clarke LJ in Assicurazioni Generali SpA v Arab Insurance Group [2002] EWCA Civ 1642; [2003] 1 WLR 577.
The relevant documentation in more detail
19. In order to decide whether the Judge was right in relation to his factual finding in respect of the 1999 Deed, it is necessary to consider the documentation, which was before him, in some detail. It is important to appreciate that it seems likely that many of the relevant documents are missing and that as result of the passage of time, none of the protagonists had any relevant recollections about the identity of the Principal Employer in 1999 and the thinking behind the execution of the 1999 Deed by Management.
The Protagonists
20. Before turning to the documents themselves and the detailed submissions made, it is important to appreciate the roles of each of the protagonists and the level of their involvement. Prior to the appointment of Aon, the Scheme had been fully insured and had been administered by Sun Life which also provided all necessary documentation services. Godwins Ltd provided actuarial services. Linda Bartlett, (née Turbin) was a benefit consultant employed by Godwins who was responsible for the Scheme from at least May 1995 and attended trustee meetings in that capacity. She moved in house and was employed as a pensions administrator by Viavi from some time in the summer of 1998 until she left in November 2000.
21. Aon took over as provider of administrative and actuarial services to the Scheme in 1997. David Higgs, an Aon employee, became the Scheme actuary around 1 June 1997, having attended his first trustee meeting on 14 May of that year. Bond Pearce were instructed in 1998. They were subsequently appointed as Scheme adviser.
22. Michael Bourton became a director and company secretary of Management in July 1995. He also became company secretary of Viavi at around the same time and had been appointed as a director of Viavi in May that year. He also became a trustee of the Scheme in June 1995. He was replaced as company secretary of both Viavi and Management by Richard Taylor in early 1996 and ceased to be a director of both companies and a trustee on 30 August 1999. Richard Taylor became a trustee of the Scheme on 20 November 1995 and in addition to being company secretary of both Viavi and Management, became a director of Viavi on 28 April 1997 and of Management on 15 January 1999. He ceased to hold any relevant office on or around 31 July 2002.
23. The Trustees who executed the 1999 Deed were: Timothy East, Margaret Street, Robert Shaw, Frances Ball, Richard Taylor and Jennifer Bennett. Timothy East was a trustee of the Scheme from 3 July 1983 until 14 February 1994. He was re-appointed as a trustee on 3 June 1997 and continued in that role until 26 September 2001. Margaret Street was appointed as a trustee at the same time as Mr East in June 1997 and continued in that role until 25 July 2002. She was absent however from trustee meetings on 16 November 2000, 7 March 2001, 26 September 2001 and 12 December 2001. Robert Shaw was appointed a trustee from 1 January 1992 and remained so until 1 January 2002. Frances Ball was appointed as a trustee from the same date as Robert Shaw and remained a trustee until 20 June 2001. Mr Shaw and Ms Ball were both absent from the trustees’ meeting on 15 September 1999. Ms Ball was also absent on 12 January 2000 and the last meeting she attended was on 12 April 2000. As well as his company roles, Richard Taylor was a trustee of the Scheme from 20 November 1995 until around 31 July 2002. Accordingly, of the Trustees who executed the 1999 Deed, Robert Shaw and Frances Ball had also signed the 1995 Deed. Michael Bourton had also signed the 1995 Deed both as a trustee of the Scheme and in his capacity as a director and company secretary of Viavi.
24. Jennifer Bennett became a trustee on 3 February 2000 with effect from 15 September 1999, the date of the 1999 Deed. However, she had acted as an HR Adviser since May 1997 and had attended her first trustees’ meeting in that capacity on 23 March 1997.
1995-7
25. On 25 October 1995, shortly before the 1995 Deed was executed in November 1995 (and signed by both Mr Froude and Mr Bourton on behalf of Viavi), Linda Bartlett, then of Godwins Ltd, wrote to Sun Life stating that Wandel & Goltermann had changed its structure to include a holding company (Management), that its two subsidiaries Viavi and Wandel & Goltermann Limited (“Sales”) were “already involved in the pension scheme” and that as a result, the then Trustees wished to change the name of the Scheme to Wandel & Goltermann Management Limited and Subsidiaries from the next renewal date. In response on 9 November 1995, David Sachs of Sun Life asked Linda Bartlett to confirm whether Management was to replace Viavi as Principal Employer and if so, to complete an attached form and “confirm that they hold contracts of employment, remunerate and pay contributions in respect of members.” He went on to point out that if Viavi was intended to remain principal employer the name of the Scheme could not be changed. The 1995 Deed had been executed in the meantime on 7 November 1995 by Viavi as Principal Employer. Furthermore, Viavi was defined as Principal Employer in the 1995 Deed and it was recited that Viavi had been granted a contracting-out certificate by the Occupational Pension Board. As I have already mentioned, it is not disputed that the 1995 Deed is valid.
26. A subsequent internal memorandum in January 1996 records that the then Trustees still wanted to change the name of the Scheme but that Management was not to be Principal Employer. However, the minutes of the Trustee meeting of 16 January 1996, signed by Richard Taylor as Finance Manager of Viavi and who had become a trustee of the Scheme shortly beforehand, recorded a change of name merely to “the Wandel & Goltermann Retirement Benefits Scheme”. A Godwins’ internal memorandum of the same date records that the Principal Employer was to remain the same with “participating companies” Sales and Management. The change was effected by means of a memorandum of 6 March 1996 signed by Mr Bourton on behalf of Viavi and amongst others by Ms Ball, Mr Shaw, Mr Bourton and Mr Taylor as trustees.
27. Subsequently, an application relating to contracting out was made by Sun Life dated 6 June 1996 in which “change of Principal Employer” was struck out, and an election to vary the contracting out certificate was made in which Viavi was named as the “holding company” and Management was to be added. The election was signed by Mr Taylor on behalf of Viavi. At around the same time, he also signed a Sun Life form in which “further employer”, which it is accepted must have been a reference to Management, was described as the “holding company of the Principal Employer”.
28. On 10 November 1996, certain benefit changes were effected by means of a Memorandum which referred expressly to the power of amendment in the 1995 Deed and was signed as trustees by Mr Ball, Ms Shaw, Mr Bourton and Mr Taylor amongst others and by Mr Bourton on behalf of Viavi. Mr Taylor also signed a return to the Occupational Pension Board dated 1 May 1997 on behalf of Viavi in which Viavi was stated to be the Principal Employer of the Scheme on the basis that it was the holding company and that there had been no change in Principal Employer. The Occupational Pension Board’s records were stated to reveal that there were two subsidiary employers covered by the contracting out certificate, being Sales and Management.
29. Furthermore, on 3 June 1997, Mr Shaw, Ms Ball, Mr Bourton and Mr Taylor signed a deed of appointment appointing Mrs Street and Mr East as trustees, in which Viavi was named as the Principal Employer and both Mr Bourton and Mr Taylor signed on behalf of Viavi as well as in their capacity as trustees. On the same day, Mr Higgs was appointed scheme actuary, and his instructions required him to report to Mr Taylor.
30. Further, by a letter of 12 December 1997, Mr Higgs of Aon wrote to Mr Taylor in his capacity as Company Secretary of Viavi enclosing the completed forms necessary to ensure that Viavi re-elected to contract out from 6 April 1997. On 5 January 1998, Mr Taylor as a director of Viavi, responded stating that he was authorised by Viavi to give Mr Higgs permission on behalf of the company to sign the form. Furthermore, an annual return for the Scheme for the year ending 17 February 1998 showing Viavi as Principal Employer was signed off by Aon on 16 March 1998.
Preparation of the 1999 Deed
31. By a letter dated 15 October 1998, from Mr Taylor as Finance Director of Viavi to Mr Clarkson of Bond Pearce, Mr Taylor sought to instruct Bond Pearce to update the Scheme Trust Deed and Rules and Booklet and Bond Pearce was subsequently appointed as the Scheme’s legal adviser. The 1995 Deed, out of date Scheme Booklet and new draft booklet were subsequently forwarded to Bond Pearce by Mr Taylor enclosed with a letter of 18 November 1998 in which he stated that “participating employers within the Scheme” were Management, Sales and Viavi. No comment was made about the identity of the Principal Employer as it appeared on the face of the 1995 Deed.
32. The new booklet and draft definitive deed were enclosed with a letter of 29 March 1999 from Bond Pearce to Ms Bartlett at Viavi. Mr Clarkson of Bond Pearce stated that given that he was “unfamiliar with the operation of the Scheme” when Ms Bartlett and Mr Taylor had reviewed the drafts, they should meet to go over the drafting points. A month later, on 30 April 1999, Mr Clarkson wrote to Ms Bartlett at Management’s address stating that he was pleased that they had met to discuss the draft Definitive Deed and Rules on 21 April 1999. He referred to a number of points of detail and stated that he had “amended the Trust Deed to reflect our discussions”. A marked up draft was enclosed. In response, Ms Bartlett sent him a fax of 6 May 1999 in which she provided the addresses of the then Trustees, stated that the response to a few other outstanding issues were in the pipeline and that “W&G Management Ltd, the holding company, was incorporated on 30th September 1994.” However, the date given was the date on which it became Viavi’s holding company and not the date of its incorporation. Mr Clarkson acknowledged her fax by a letter of 10 May 1999 addressed to Ms Bartlett at Viavi stating amongst other things that he noted “the date of incorporation of the Management Company.”
33. A significant letter from Mr Taylor to Mr Clarkson followed on 25 May 1999, (“the 25 May Letter”). It was sent by Mr Taylor as Finance Director of Viavi. The relevant parts are as follows:
“Thank you for your revised draft rules. I have spoken with Linda and I understand you have been advised of . . . the date of incorporation of the management company. You will now be able to amend page 1 of your 2nd draft accordingly.
I also agree the following amendments: –
Front Cover – Principal Company name
. . . ”
The name on the front cover of the draft was that of Management. Thereafter, Mr Clarkson confirmed that he had taken into account the comments made in the 25 May Letter as well as those which had been raised by Linda Bartlett earlier.
34. Mrs Street, Mr Shaw, Mr East, Mr Taylor, Mr Bourton and Mr Ball, together with Mr Higgs, Mrs Bennett and Mrs Bartlett were present at the next Trustee’s meeting on 16 June 1999. Reference is made to the proposed new booklet and new rules under the “AOB” heading in the minutes of the meeting. That entry states:
“Mrs Bartlett advised that the new booklet was almost finalised, and that the revised Scheme rules were in a final draft. Mr East raised the question of the possible change of Employer name. It was AGREED that Mr Taylor and Mrs Bartlett would progress any action needed.”
35. Thereafter, on 6 July 1999, Mrs Bartlett sent a fax to Mr Clarkson at Bond Pearce. She drew attention to two typing errors, the first being that “situate” should have read “situated” at the beginning of the Definitive Deed and Rules. This was a reference to the way in which Management’s registered office is described where it is named as a party and defined as “Principal Employer” in the opening paragraph of the 1999 Deed. She stated that once the two typing errors had been corrected, the “final deed may be printed and signed by the trustees. . .” She also noted:
“Finally, there will be a change to the participating employer’s names. Wandel & Goltermann is to become Wavetek Wandel Goltermann Plymouth Ltd. Wandel & Goltermann Sales is to become Wavetek Wandel Goltermann UK Ltd. These changes are to take place with immediate effect, but the administration is still being attended to. Therefore, we will need an amending deed in the near future.”
It is accepted that as a result of a recent merger, the names of all of the relevant companies were to change, but for that of Management which stayed the same. As Mrs Bartlett foresaw, the names of Sales and Viavi were changed in subsequent documentation but remained the same in the 1999 Deed.
Trustees’ Annual Report
36. The Trustees’ Report in respect of the Scheme, for the year ended 5 April 1999, was dated 23 July 1999. On the title page, the then Trustees were named as Mr Shaw, Ms Ball, Mr Bourton, Mr Taylor, Mrs Street and Mr East and the Principal Employer was named as Management. Under the heading “History and status of the scheme” it was stated that the Scheme provided benefits for the employers of Management. However, it was stated that further information about the Scheme could be obtained from Mr Taylor at Viavi’s address. At note 14 to the financial Statements under the heading “Related Party Transactions and Employer-Related Investments” it was stated that “During the prior year the scheme’s sponsoring employer Wandel & Goltermann Limited [Viavi] provided a short-term loan . . .”
The 1999 Deed
37. The 1999 Deed was dated 15 September 1999 despite it being common ground that it was not executed either by Management or by the Trustees on that date. It was signed by the then Trustees at the Trustee meeting on 12 January 2000 and by Management on 3 February 2000. Mr Taylor was authorised to seal and sign it on behalf of Management by a resolution in writing of the directors of Management of that date, to which he was also a signatory.
38. On 15 September 1999, a Trustees’ Meeting took place which was attended by Mrs Street, Mr East and Mr Taylor, Mr Higgs (the actuary), Mrs Bennett and Mrs Bartlett, amongst others. The minutes record that Mr Bourton had resigned from the company and was to be replaced as a trustee by Mrs Bennett. It is recorded in the minutes under the heading, “Pension Booklet and Trust Deed and Rules” that Mrs Bennett “advised that the new booklet has been finalised and the only outstanding matter is the date of the Trust Deed and Rules . . ”. The minute goes on: “Changes of company name certificates were provided for Mr Higgs. It was NOTED that there was no change to the name of the Principal Employer. . .”
39. The parties are set out on the title page of the 1999 Deed and the company named is Management. Management is also named as a party on the first page of the deed and having set out its name and registered office, the following appears: “(“the Principal Employer”)”. Recital (C) states expressly that the current provisions of the Scheme were contained in the 1995 Deed (which was executed by Viavi as Principal Employer) and recital (E) is as follows:
“(E) Wandel & Goltermann Limited [Viavi] ceased to be Principal Employer on 30 September 1994 when Wandel & Goltermann Management Limited [Management] became the Principal Employer.”
Recital (F) states that the “Employers” which participate in the Scheme at the date of the deed were listed in Schedule 4. They were Management, Viavi and another subsidiary of Management, being Sales. It is accepted that recital (D) which referred to amendment to the provisions of the Scheme taking effect under clause 5 of a 1968 Trust Deed was wrong. By clause 1 of the operative provisions, the “Principal Employer” purportedly amended the provisions of the Scheme by “deleting the provisions of the 1995 Deed . . .” and replacing them with rules in the schedules to the 1999 Deed and by clause 2 the then Trustees consented to the amendments. However, “Principal Employer” was defined for the purposes of the new Rules as “Wandel & Goltermann Limited” [Viavi] or any person who becomes Principal Employer under Rule 32.2.” The 1999 Deed was signed and delivered as a deed by Management acting by Mr Taylor described as “authorised signatory.” Each of the signatures of the then Trustees, Richard Taylor, Robert Shaw, Frances Ball, Margaret Street, Jennifer Bennett and Timothy East was witnessed by Mrs Bartlett who was described as “Pensions Co-ordinator.”
Subsequent correspondence and events
40. On 12 April 2000, a Trustees’ meeting took place which was attended by Mr Taylor, Mrs Street, Mr East, Mr Shaw, Ms Bennett and Ms Ball together with Mr Higgs and a colleague from Aon and Mrs Bartlett. The minutes of the meeting include a heading “Trust Deed and Rules’ under which there are references to various matters relating to benefits under the Scheme. Further, at the last substantive paragraph of the minute under the heading “Any other Business”, it is recorded that: “It was AGREED that Mr Higgs would be provided with a copy of the 1994 Deed which changed the Principal Employer in order for him to progress the contracting-out issues with the National Insurance Contributions Office.”
41. Mr Higgs of Aon wrote to Mr Taylor on 2 June 2000 about contracting out. He stated that he had been in correspondence with the Inland Revenue on the subject. He went on:
“The latest episode is that they have informed me that they have no documentation supporting the change in principal employer from Wandel and Goltermann Ltd to Wandel and Goltermann Management Limited. According to Bond Pearce this change took place in September 1994, and hence the new rules (signed earlier this year) have W&G Management as the Principal Employer.
I have been in contact with both Bond Pearce and Jen [Bennett] about this, and no-one seems able to furnish me with any documentation concerning this. I note in passing that the previous rules, which were signed in November 1995 had W&G Ltd [Viavi] as the Principal Employer. None of this therefore seems entirely consistent.
In order to resolve this unsatisfactory situation, I have taken it that W&G Management did become the principal employer with effect from 30/9/94. I therefore enclose form CA7311 for your perusal. . . .
Finally, I apologise for dragging you into this quite mind-numbingly tedious matter. I hope that this will enable us to get the records straight, though the Inland Revenue is more than capable of requiring yet more forms.”
At the next Trustees’ meeting on 20 July 2000, Mr Higgs confirmed that he had sent off the requisite information to the Inland Revenue but had heard nothing.
42. Thereafter, it was noted in an internal Aon memo between Sonia Mortimer of the Legal and Documents department to Mr Higgs, dated 4 October 2000, that the necessary documents to effect the change of Principal Employer on the contracting out certificate had been enclosed. Ms Mortimer noted the change from Viavi to Management and that “the change is to be effective from 30 September 1994.” She also noted that from a contracting out point of view the move was from two to three employers being covered by the certificate and that accordingly, a more rigorous procedure than simply using form CA7311 was necessary. She then set out the steps which were necessary including completion of a “surrender election” to be completed in the name of the “old” Principal Employer “effective from the end of 29 September 1994” to be signed by Viavi and an “issue election” to be completed by the “new” Principal Employer, Management, and the trustees, effective from 30 September 1994. Documentation in that form was forwarded to Mr Taylor by Mr Higgs under cover of a letter dated 9 October 2000. Mr Higgs used the terms “new” and “old” Principal Employer in the body of the letter. The letter also included a heading “Change of principal employer” in respect of one of the forms enclosed, under which it was stated that it was needed to change the Principal Employer.
43. One of the Inland Revenue requirements to which Ms Mortimer had referred was a Notice of Explanation addressed to all employees. Such a notice was produced dated October 2000. It was addressed to employees of Management, Sales and Viavi who were members of the Scheme on 30 September 1994. It stated that the employment of members of the Scheme before 30 September 1994 was contracted out under a certificate which showed Viavi as the Principal Employer. It went on:
“This Notice is to let you know that . . .[Viavi] is surrendering its Contracting-out Certificate and an election is being made for a new Contracting–out Certificate to be issued in the name of the new principal Employer: . . [Management] with . . .[Viavi] and . . .[Sales] also being covered by the new Certificate. Both these changes will be made with a retrospective date of 30 September 1994 to ensure continuity of your contracted-out employment under the Scheme. . .”
44. On 29 November 2000, Mrs Mortimer of Aon then wrote to the National Insurance Contributions Office enclosing the necessary documentation. She referred to correspondence which that office had had with colleagues in Aon’s Bristol office, (where Mr Higgs was based) “concerning the change of principal employer on 30 September 1994.” She wrote again to the Pension Schemes Office on 11 January 2001, copied to Mr Higgs. She noted that the Pension Schemes Office files had shown Viavi as Principal Employer and enclosed change of name certificates. She went on: “I would also advise that the principal employer changed to . . . [Management], effective from 30 September 1994. This change was recorded in the new Definitive Deed and Rules, drawn up by Bond Pearce . . .”.
45. In an internal memo of 31 October 2001, Ms Mortimer informed Mr Higgs that the Inland Revenue did not accept the 1999 Deed which changed the Principal Employer to Management “effective from 30 September 1994.” She went on: “Please could you ask Bond Pearce if there is a separate document which effected the change of principal employer. If there isn’t a deed will need to be done now to retrospectively confirm the change.”
46. As a result, the Deed of Novation was executed. It is described on its front cover as a “(Deed to change the Principal Employer to Wandel & Goltermann Management Limited)”. Viavi, under its new name, was a party named as the “Old Employer” and Management as “the New Employer”. By recital (E) it was stated that the 1999 Deed “now define the Scheme’s provisions” and at recital (F) it is stated that the parties being Viavi, Management and the then Trustees who included, Mr Taylor, Mr Shaw, Mrs Street and Ms Bennett, wanted to “confirm the substitution of the New Employer in place of the Old Employer as the principal employer under the Scheme since 30 September 1994.” Clauses 1 and 2 appear under the heading “DECLARATION” and are as follows:
“1. The Old Employer and the New Employer confirm that, since 30 September 1994, the New Employer has assumed the duties and obligations of the principal employer under the Scheme in place of the Old Employer. In consequence of this and in exercise of the power under rule 32 of the Definitive Deed and Rules, the parties to this Deed confirm that, with effect from 30 September 1994, the New Employer is the principal employer under the Scheme in place of the Old Employer for all the purposes of the Scheme.
2. The parties to this Deed ratify all actions and decisions made by the New Employer as the principal employer under the Scheme between 30 September 1994 and the date of this deed.”
47. As I have already mentioned, the effect of the Deed of Novation was aired before the Judge but in the light of his conclusion in relation to the 1999 Deed, he made no findings in relation to it. It is unnecessary to refer to the other subsequent deeds with which the Judge was concerned because they are not the subject of this appeal.
Submissions in outline
48. Mr Newman QC on behalf of Viavi places considerable emphasis upon Recital (E) to the 1999 Deed. He says that it is consistent with and records what all relevant parties mistakenly believed at the time that the 1999 Deed was executed, namely that Management had been appointed Principal Employer in September 1994, when it became Viavi’s holding company. As a result, he submits that there cannot have been an agreement in 1999 between Management and the Trustees with the consent of Viavi that Management should become the Principal Employer at that stage. He says that it is consistent with such a misunderstanding that Viavi was not a party to the 1999 Deed. In addition, he submits that given the express decision not to change the Principal Employer to Management in 1996, it would have been likely that a change of heart in 1999, had it actually occurred, would have been documented.
49. Mr Newman also places considerable reliance upon the documentation which post dates the 1999 Deed which he says is all consistent with the misapprehension that Management had been Principal Employer since 1994 and is relevant when determining what the intention of the parties was. In particular, he focused on the reference in the minutes of the 12 April 2000 Trustee Meeting to providing Mr Higgs with “a copy of the 1994 Deed which changed the Principal Employer.” He points out that Mr Higgs was at both the 16 June 1999 and the 15 September 1999 Trustee meetings and therefore, the reference is only consistent with the assumption that the change in Principal Employer had taken place back in 1994.
50. He takes a similar point in relation to the letter dated 2 June 2000 from Mr Higgs to Mr Taylor in his capacity as Company Secretary of Viavi, in which Mr Higgs mentions that Bond Pearce had stated that the change in Principal Employer took place in 1994 and also mentions that he had taken the matter up with Jennifer Bennett, who was also at the 16 June 1999 Trustee Meeting at which the Judge infers that Mr Taylor and Mrs Bartlett informed the then Trustees of the intended change of Principal Employer. Mr Newman notes that neither Mr Taylor nor Ms Bennett corrected Mr Higgs.
51. Mr Newman also relies upon the Aon internal memorandum from Ms Mortimer to Mr Higgs in which she queried the position in relation to the change of Principal Employer for the purposes of the change in the contracting out certificate and stated that the change was “to be effective from 30 September 1994.” Mr Newman points out that Mr Higgs did not correct her and nor did Mr Taylor correct Mr Higgs when he received the letter of 9 October 2000 in which the process of surrendering the contracting out certificate and the issue of a new one naming Management as Principal Employer is explained. Mr Newman also points to the fact that in her letter to the National Insurance Contributions Office of 29 November 2000, enclosing the relevant forms to effect the surrender and re-grant of the contracting out certificate, Ms Mortimer refers to the “change of principal employer on 30 September 1994” (emphasis added). He makes a similar point in relation to Ms Mortimer’s letter to the Inland Revenue Pension Schemes Office of 11 January 2001 which was also copied to Mr Higgs and Ms Mortimer’s memo to Mr Higgs of 31 October 2001 in which she asks Mr Higgs to ask Bond Pearce whether there was a separate document effecting the change of Principal Employer other than the 1999 Deed and if not, a new deed would have to be executed to confirm the change retrospectively.
52. Lastly, Mr Newman relies upon the Deed of Novation. He says that its content is entirely consistent with the change of Principal Employer having taken place in 1994. He also points to the fact that it was signed by Mr Shaw, Mr Taylor, Mrs Street and Ms Bennett amongst others, in their capacity as trustees, and submits that it is inconceivable that they would have done so unless they were under the misapprehension about Management.
53. Mr Stallworthy’s emphasis, on the other hand, is upon the documentation leading up to the 1999 Deed. He says that the subsequent documentation should not be taken into account when construing the 1999 Deed. I should say at this stage, that although that may be true were this purely an exercise of construction of the 1999 Deed, it seems to me that all of the documentation including that which post-dates the 1999 Deed may be relevant when determining the intention of the parties to the Deed. That task is different.
54. Mr Stallworthy submits that Management was substituted for Viavi as Principal Employer in the summer of 1999, before the 1999 Deed was executed and that the Judge was wrong to find that that was not the case. He says that the protagonists and in particular, Mr Taylor, Ms Bennett, Mrs Bartlett and Mr Bourton knew that Viavi had been Principal Employer until then and it is not credible that they had forgotten by the time the 1999 Deed was drafted and executed. He says that their conduct between 21 April 1999 and 15 September 1999 is only consistent with an agreement to substitute the Principal Employer and consent on the part of Viavi to do so. He submits that this conclusion is buttressed by the presumption of regularity to which I shall refer below.
55. As to knowledge that Viavi was Principal Employer in 1998, Mr Stallworthy referred us to:
(i) the fact that Viavi had been Principal Employer since 1983 and exercised its powers accordingly for more than a decade before Management was even incorporated, for example, by:
a. exercising the powers and being a party to the Deed appointing Mr Shaw and Ms Ball as trustees in January 1992, a Deed to which Mr East was also a party as a continuing trustee;
b. in its capacity as Principal Employer being a party to the Supplementary Deed of 1 March 1992 by which Sales adhered as a participating employer in the Scheme, a deed to which Mr East, Mr Shaw and Ms Ball were parties as trustees;
c. being a party to the Deed and exercising the powers necessary to appoint Mr Bourton as a trustee by a deed dated 5 June 1995, to which Ms Ball and Mr Shaw were also parties as trustees;
d. being a party to and exercising the powers as Principal Employer necessary for the purposes of the 1995 Deed, to which Ms Ball, Mr Shaw and Mr Bourton were also parties as trustees and in which reference was made to the grant of a contracting out certificate to Viavi as Principal Employer and “Participating Employer” was defined in the Rules expressly to except the Principal Employer;
e. the correspondence between Linda Bartlett and Mr Sachs of Sun Life about the possible change of name of the Scheme and the express decision in 1996 that Viavi remain Principal Employer rather being replaced by Management, referred to at [28] above, with which Mrs Bartlett, Ms Ball and Messrs Shaw, Bourton and Taylor were involved;
f. the appointment of Mr Taylor as a trustee in 1995 by Viavi as Principal Employer;
g. the draft deed in relation to the adherence of Management to the Scheme in which Viavi was named as Principal Employer and Messrs Taylor, Shaw and Bourton were amongst the trustees;
h. the deed of 3 June 1997 to which Viavi was a party and by which Mrs Street was appointed as a trustee and Mr East was re-appointed to that role, which was signed by Ms Ball and Messrs Shaw, Bourton and Taylor, being those who signed the 1999 Trustees’ Report and five of the six trustees who signed the 1999 Deed;
(ii) Mr Taylor’s involvement in the correspondence and necessary forms in relation to the change to the contracting out certificate as a result of the adherence of Management as a participating employer referred to at [27] and [28] above;
(iii) the correspondence between Mr Taylor and Mr Higgs in December 1997 and January 1998 concerning the new contracting out certificate in the name of Viavi referred to at [30] above.
56. In relation to conduct only consistent with an agreement to change Principal Employer, Mr Stallworthy relies upon:
(i) The sequence of events and correspondence in relation to the preparation of the 1999 Deed referred to at paragraphs [31] – [35] above, including in particular, the letter of 29 March 1999 from Bond Pearce to Mrs Bartlett at Viavi enclosing the draft of the 1999 Deed, the further letter of 30 April 1999, enclosing a revised draft after discussions had taken place between Ms Bartlett and Mr Clarkson of Bond Pearce and the 25 May Letter from Mr Taylor as Finance Director of Viavi in which he referred to further amendments to the second draft and expressly agreed the name of the Principal Employer on the cover (namely Management). Given Mr Taylor’s position as company secretary and director of both Viavi and Management and his status as a trustee, Mr Stallworthy submits that the 25 May Letter in particular, amounts to agreement between Management and the Trustees to substitute Management for Viavi and the consent of Viavi to such a change which once given, continued until to the 1999 Deed was executed. He says therefore, that the Judge was right to find: as he did at [82] that in the 25 May Letter, Mr Taylor had endorsed the draft deed with Management as Principal Employer; at [95] that “Viavi through Mr Taylor was well aware that the view had been taken on its behalf that Management should be the Principal Employer going forwards and should have been … from 1999”; that if there is agreement by Management to become Principal Employer, there was necessarily consent by Viavi to its doing so and that Management’s agreement to become Principal Employer was also Viavi’s agreement: [93]; and that by means of the 1999 Deed, Viavi knowingly ceded its role as Principal Employer to Management: [96];
(ii) The entry in the minutes of the 16 June 1999 Trustee meeting referred to at [34] above together with the changes in company names referred to at [34] which did not relate to Management and the reference by Ms Bartlett to an error in the way in which the registered office of Management was described in the draft deed;
(iii) The Trustees’ Report for the year ended 5 April 1999 which was dated 23 July 1999, referred to at [36] above, was signed by Mr Shaw, Ms Ball, Mr Bourton, Mr Taylor, Mrs Street and Mr East, two of whom were also officers of both Viavi and Management and named Management as Principal Employer. Mr Stallworthy submits that note 14 to the Financial Statements which refers to a short term loan by Viavi as “sponsoring employer” refers back to the previous year and therefore, is not inconsistent with a change being made. Mr Stallworthy points out that this is inconsistent with any misunderstanding or mis-remembering on the part of the protagonists that Management had been Principal Employer since 1994. He says therefore, that the Judge was wrong to treat the Report as equivocal as he did at [80] of his judgment;
(iv) The preparation of the 1999 Deed itself and its presentation as a finalised draft at the Trustees’ Meeting on 15 September 1999 but for a change in the identity of one trustee, it being accepted that the reference to there being no change to the name of the Principal Employer was a reference to Management;
(v) The change in trustees having been made, the 1999 Deed was signed and witnessed in the manner set out at paragraph 37 above.
57. Mr Stallworthy submits therefore, that the Judge was right to conclude at [89] of the judgment that Mr Taylor and Ms Bartlett came to understand that Management “should” have become Principal Employer in 1994, that it is entirely implausible that all the protagonists suffered from collective amnesia and thought that Management had been Principal Employer since 1994 and that all were agreed and had consented to the change in the summer of 1999.
58. If he is wrong about that, Mr Stallworthy relies upon the 1999 Deed itself and supports the Judge’s conclusion at [93] – [96] of his judgment that all the elements necessary for substitution under Rule 10.10 can be found within the 1999 Deed itself, the parties having intended to make the change. In particular, Mr Stallworthy points to recital (C) which refers to the 1995 Deed, executed by Viavi as Principal Employer and to the reference to that deed in the first substantive clause. In relation to recital (E), he says that in the light of the admissible background, the Judge was right to construe it as having retrospective effect. In any event, he says that the recital does not detract from the intention that Management “be” the Principal Employer and that the 1999 Deed should be effective and that the court should prefer a construction consistent with the validity of the deed. Alternatively, he says that recital (E) should be read down as an error. He also submits that the recital does not suggest that there was a 1994 Deed at all.
59. Lastly, Mr Stallworthy submits that even if the parties thought that Management had been Principal Employer since 1994, it was intended that Management “be” the Principal Employer for the purposes of the 1999 Deed and that the requisite agreements and consent can be imputed with the assistance of the principles in Davis v Richards & Wallington and Re Duomatic.
Conclusion:
60. I agree with Mr Stallworthy that the Judge was wrong to conclude at [86] and [87] of his judgment that there was not sufficient evidence prior to the execution of the 1999 Deed that the Trustees and Management agreed and Viavi consented to the appointment of Management as Principal Employer. It seems to me that the state of knowledge and the conduct of the protagonists to which Mr Stallworthy refers is sufficient to amount to and, where necessary, from which to infer that the requisite agreement and consent for the purposes of a substitution of Principal Employer under Rule 10.10 had, in fact, been given and reached by 15 September 1999 at the latest. This conclusion is not undermined by the subsequent conduct and correspondence from 2000 – 2002.
61. First, in my judgment, the Judge was right at [88] of his judgment to reject Viavi’s argument that in 1999 all the relevant parties, or the protagonists as I have called them, mistakenly believed that Management had already been appointed Principal Employer in 1994. As the Judge pointed out at [88], Mrs Bartlett had been the administrator of the Scheme since at least 1995. She had been in-house with Viavi since 1997 and since then, she had only the Scheme to deal with. She witnessed all of the signatures to the 1999 Deed; Mr Taylor had been a director of Viavi since 1995 and in that capacity had been involved in Viavi’s performance of its role as Principal Employer; he had been directly involved with the decision not to change Principal Employer in 1996 and the change to the contracting out certificates which preserved Viavi’s position as Principal Employer, as purported holding company when Management was added as a participating employer; and he together with Messrs Ball, Shaw and Bourton amongst others signed the Deed by which the name of the Scheme was changed, it having been appreciated that the desired change in name could not be effected because Management was not Principal Employer. Viavi was named as Principal Employer in that deed.
62. Mr Taylor also sent the 1995 Deed, in which Viavi was named as Principal Employer, to Bond Pearce when they were instructed in 1998, without any mention of inaccuracy in that regard. Furthermore, Mr Bourton who was involved until shortly before the 15 September 1999 meeting had also been company secretary of both Viavi and Management before Mr Taylor. He signed the 1995 Deed in which Viavi was named as Principal Employer along with Mr Shaw and Ms Ball who also signed the 1999 Deed. In addition, Messrs Bourton and Taylor attended the 16 June 1999 Trustees’ meeting in their capacity as officers of Viavi and Management as well as in their capacity as trustees (albeit that Mr Bourton was about to resign).
63. In the light of all those matters, it is just not credible that not only did they all suffer amnesia but that they all believed that Management had been Principal Employer from a date before it had even adhered to the Scheme, in March 1996. I consider that the Judge was right to come to this conclusion despite Recital (E) to the 1999 Deed. Given the relevant factual matrix I consider that Recital (E) should be read in the way that the Judge concluded it should. It seems to me that it must be inferred that the parties to the 1999 Deed were either aware that Recital (E) was not accurate if read literally or did not consider it in any detail. Such an inference is consistent with the inclusion of declarations in the Deed of Novation to which I shall refer and which were equally inaccurate.
64. I also reject Mr Newman’s submission that the whole issue was just too dull and that no one thought about the identity of the Principal Employer, the real emphasis being upon the nature of any changes or benefit improvements being made. Although there is a reference in the letter of 2 June 2000 from Mr Higgs to Mr Taylor to the “mind- numbingly tedious matter” this related to the procedures necessary for a change to the contracting out certificate. The degree of control over the extent of the obligations and liabilities in relation to a pension scheme afforded to a Principal Employer are always of interest, particularly to the Finance Director of the company concerned, as is the tax status of the scheme in question.
65. It seems to me, therefore, that the Judge was right to find as he did at [89] that for whatever reason, Mr Taylor and Mrs Bartlett came to understand that Management should have been the Principal Employer in 1994 when it became the holding company of Viavi, although it had been decided in 1996 that Viavi should remain principal employer and accordingly by way of the 1999 Deed, it was decided that Management become the principal employer with retrospective effect from 1994.
66. This is also consistent with the fact that none of the documentation which pre-dates the 1999 Deed makes any reference to Management as Principal Employer and that various steps had been taken on a retrospective basis in the past.
67. Secondly, I agree that the conduct of the protagonists between April and September 1999 is only consistent with a substitution of Management for Viavi at that stage, with retrospective effect and the agreement of Management and the Trustees to that substitution with the express consent of Viavi. I consider that it is significant that the matter was dealt with throughout by Mr Taylor who was the Finance Director of Viavi, as well as a director of Management, company secretary of both companies and a trustee. It was natural that he should deal with matters on behalf of both Viavi and Management and it was not seriously suggested that he did not have authority to do so.
68. Furthermore, he corresponded with Bond Pearce about the drafting of the new 1999 Deed and Rules and the new scheme booklet. In this regard, it seems to me that the Judge was correct to infer as he did at [82] of his judgment that the status of Management had been discussed at the meeting between Mrs Bartlett and Mr Clarkson of Bond Pearce on 21 April 1999 and that the provision by Mrs Bartlett to Mr Clarkson of incorrect details of the date of incorporation of Management and the subsequent use of that date as the date from which Management supposedly became principal employer reveals an understanding, on someone’s part, that because Management was the holding company, it should have been the principal employer.
69. In my judgment, the Judge was also correct to find that Mr Taylor endorsed this in the 25 May Letter to Bond Pearce. It was written in his capacity as Finance Director of Viavi, and it seems to me that by the 25 May Letter he expressly agreed to Management being named as Principal Employer in the 1999 Deed in place of Viavi (with retrospective effect) on behalf of both Viavi and Management. Prior discussions about the draft had taken place between Mrs Bartlett and Mr Clarkson, Mrs Bartlett having been involved with the administration of the Scheme since 1995. As a result, in my judgment, the 25 May Letter is evidence of consent on the part of Viavi to the substitution, for the purposes of Rule 10.10 and an intention on the part of Management to agree to be substituted. There is nothing to suggest that either the intention or the consent was retracted before the execution of the 1999 Deed.
70. Furthermore, it seems to me that the Judge was right to conclude at [83] of his judgment that following that exchange with Bond Pearce, Mrs Bartlett and/or Mr Taylor probably explained to the trustees at the 16 June 1999 Trustee meeting what was intended, namely that Management should be Principal Employer with retrospective effect from the time that it became the holding company of Viavi. That meeting was also attended by Mr Bourton who remained an officer of both Viavi and Management and a trustee at that stage. Despite the fact that such an explanation is not minuted, given the correspondence with Bond Pearce it would be surprising if that were not the case. The minute of the meeting does record Mr East’s question about a change of Employer name. In this regard, I agree with the Judge’s conclusion at [84] of his judgment that it is likely that the reference was to the changes to the names of Viavi and Sales as a result of a recent merger. Viavi accepts that this is the most likely interpretation. As the Judge pointed out, such a conclusion is consistent both with Mrs Bartlett’s fax to Mr Clarkson of Bond Pearce of 6 July 1999 in which the changes of name were addressed and the minutes of the next Trustee meeting on 15 September 1999, in which it was noted that there was no change in name of the principal employer. The name of Management had not changed. I agree therefore, that this is only consistent with it being agreed and understood that Management was to be the Principal Employer.
71. It follows that I reject Mr Newman’s submission that there would have been no “duty” to explain in the way the Judge describes at [83], if, in fact, it was not believed that a change was being made. I have already rejected his submissions in relation to amnesia. In addition, it seems to me that an explanation would have been required in the light of the inclusion in the draft 1999 Deed of recital (C) which referred to the 1995 Deed which had been signed by Mr Shaw, Ms Ball and Mr Bourton amongst others and was executed by Viavi as Principal Employer. The fact that the explanation is not set out in the minutes may on the face of it appear surprising. However, none of the minutes of any of the Trustee meetings which were before the court contain detailed explanations of any relevant changes. References to changes to the extent that they appear are brief in the extreme.
72. However, I consider that the Judge was wrong not to give more weight to the Trustees’ Annual Report and to consider the report as a whole to be “equivocal”: see the judgment at [80]. It seems to me that the Trustees’ Report is unequivocal and is signed by all of the then Trustees. It was an important document which the Trustees were under a statutory obligation to produce. It names Management as Principal Employer in relation to the Scheme. The reference at note 14 to the Financial Statement which refers to Viavi as sponsoring employer is clearly made in relation to the previous financial year. At [83] the Judge states that it reflects the understanding and acceptance of the Trustees that Management be the Principal Employer. In my judgment, given the importance of the document and its statutory significance, the Trustees must have agreed to the substitution of Principal Employer in order to enable them to sign it. That conclusion is consistent with the final draft of the 1999 Deed having been supplied by Bond Pearce on 7 July 1999. In my judgment, therefore, an agreement had been reached between Management and the then Trustees and the consent of Viavi had been given at that stage.
73. If I am wrong about that, it seems to me that Management and the Trustees gave their agreement to Management being substituted for Viavi as Principal Employer and Management gave its agreement to be substituted by the execution of the 1999 Deed itself in early 2000, Mr Taylor having been formally authorised by the directors of Management to sign and seal the 1999 Deed, consent having been given by Viavi to the substitution by Mr Taylor back on 25 May 1999 if not before.
74. I come to this conclusion despite Recital (E) to the 1999 Deed, the reference to Viavi as Principal Employer in Rule 32.2 and the subsequent correspondence. As to Recital (E), it will already be apparent that given the identity of the protagonists, the context and all that had taken place since the early 1990s and, in particular, since 1995, my conclusion in relation to amnesia and agreement and consent in the summer of 1999, that I reject Mr Newman’s submission that Recital (E) should be interpreted as manifesting a belief or understanding that Management had in fact been substituted as Principal Employer in place of Viavi back in 1994. Furthermore, it seems to me that the Judge was right at [96] of the judgment when he held that the language of the 1999 Deed would be understood by a reasonable person with all the relevant admissible background knowledge to mean that the parties meant to make Management Principal Employer so far as possible with retrospective effect and certainly for the future. It seems to me that the 1999 Deed as a whole, construed against the relevant matrix of fact, points irresistibly to such a conclusion. I come to this conclusion despite the reference to Viavi as Principal Employer in Rule 32.2 of the new Rules intended to be substituted pursuant to the 1999 Deed itself. It seems to me that the Judge was correct to infer, as he did at [91] of the judgment, that when changing the name of the Principal Employer, the draftsman merely forgot to do so in the rules and no one picked up the mistake.
75. I also consider the subsequent correspondence to be explicable on the basis of the need to satisfy the Pension Schemes Office/National Insurance Contributions Office as to the change of employer for the purposes of the contracting out certificate. It would have been of paramount importance that tax approval for the Scheme was retained and the Inland Revenue satisfied. There is only a single reference to the provision of a copy of a 1994 Deed in the minutes of the Trustee meeting of 12 April 2000 (only four months after the 1999 Deed had been signed by the Trustees), a meeting which was attended by Mr Taylor, Mrs Street, Mr East, Mr Shaw, Mrs Bennett and Miss Ball in their capacity as trustees and Mrs Bartlett, the in-house Pensions Co-Ordinator amongst others. The reference is made expressly in the context of Mr Higgs progressing the contracting-out issues with the National Insurance Contributions Office and in my judgment, is explicable on that basis. It is accepted by all that such a deed did not exist.
76. Further, in his letter of 2 June 2000, Mr Higgs displays some detachment from the actuality. It seems to me that he is focused upon the task of satisfying the Inland Revenue and is seeking to make sense of the documentation he has. He concludes that the situation is “unsatisfactory” but that he had “taken it” that Management “did become the principal employer with effect from 30/9/94.” Although he had already stated that “according to Bond Pearce . . . [the] change took place in September 1994. . .” it seems to me that his position was merely pragmatic and takes the matter no further.
77. The subsequent Aon internal memoranda are in the same vein. Ms Mortimer, who was employed in the Legal and Documents department at Aon is merely attempting to make sense of the documentation and in her memo to Mr Higgs of 4 October 2000, refers to the change in principal employer being “effective from 30 September 1994”. In her letter of 29 November 2000 to the National Insurance Contributions Office in which she enclosed the necessary forms for the purpose of the change in the contracting out certificate, she referred to the change of principal employer “on” 30 September 1994. It seems to me that no weight can be placed on her use of “on” in the context in which it appeared. First, she was presenting the necessary forms to the National Insurance Contributions Office in order to obtain a contracting certificate in respect of Management as Principal Employer, based upon Recital (E). Secondly, she had also used the more expansive phrase “effective from” in previous correspondence which is consistent with the intention that the change should have retrospective effect, and thirdly, it is clear that she had no knowledge of the relevant events.
78. The Notice of Explanation of October 2000, on the other hand, which was also drafted by Aon, is entirely consistent with the substitution having taken place in 1999 but with the intention that it have retrospective effect. It refers to Management as the “new” principal employer in relation to which a new contracting out certificate is to be issued, albeit that the change is to have retrospective effect. The same is true of the content of Ms Mortimer’s letter to the Pension Schemes Office of 11 January 2001. In it, she stated that “the principal employer changed to [Management] effective from 30 September 1994. This change was recorded in the new definitive Deed and Rules . . . which were signed on 15 September 1999 . . .”
79. It seems to me that it is in this context that Ms Mortimer sent a memo to Mr Higgs stating that the Pension Schemes Office were not satisfied with the 1999 Deed as the instrument substituting the principal employer effective from 30 September 1994, asking him to ask Bond Pearce whether there was a separate document and stating that, if not, a further deed “retrospectively confirming the change” would be necessary. Furthermore, it is in that context that the Deed of Novation was executed by Mr Taylor, Mr Shaw, Ms Bennett and Ms Street amongst others and was described by Mr Taylor in a hand-written note of 29 May 2002 to his fellow director as “bureaucracy only.” It had been described to him in a letter from Mr Higgs of 13 December 2001 as changing the Principal Employer to Management “with effect from 30 September 1994” and recording the continued participation of the “old Principal Employer.” In my judgment, therefore, most of the subsequent correspondence and documentation is consistent with an intention to make the change in 1999 with retrospective effect. Clause 1 of the Deed of Novation, however, is equivocal. It provides that since 30 September 1994, Management had assumed the duties and obligations of the principal employer. This is something for which there is no documentary evidence at all and which in my judgment, Mr Taylor and no doubt, many other of the signatories, must have known was inaccurate.
80. In the circumstances, it is unnecessary, therefore, to consider Mr Stallworthy’s additional reliance upon the presumption of regularity in relation to the consent of Viavi to the substitution of Management as Principal Employer. It is equally unnecessary to consider Mr Stallworthy’s further and alternative submissions that the requisite agreements and consent can be imputed as a result of the application of Davis v Richards & Wallington and Re Duomatic and lastly, that an estoppel by deed arose.
81. However, if necessary I would have agreed with Mr Newman that the presumption of regularity would have been of no assistance to Mr Stallworthy in relation to Viavi’s consent whether in relation to the period before the execution of the 1999 Deed or in relation to the Deed itself. If the presumption applies, in this case, it would entitle the Court to presume that Management’s substitution as Principal Employer was validly effected pursuant to Rule 10.10 unless Viavi proved the contrary. It seems to me that in relation to the agreement and consent prior to the 1999 Deed, the onus was clearly upon Mr Froude. The presumption therefore, would have been to no avail. In relation to the argument that the necessary agreement and consent can be found in the 1999 Deed itself, the presumption is equally unhelpful.
82. Mr Stallworthy referred us to a passage from the judgment of the Inner House in Trustees of the Scottish Solicitors Pension Fund v Pattison & Sim [2015] CSIH 96, 2016 S.C. 284 as follows:
“20 In our opinion four main reasons may be said to justify the application of the maxim. First, in practice those who carry out transactions generally ensure that at least the substance of the transaction is properly decided and recorded. … Secondly, if there is a substantial objection to the transaction, it is likely that there will be an immediate challenge, at least on an informal basis. The result is that any defects in procedure that are serious and material, in the sense that they affect the end result, are likely to be addressed at the time. Thirdly, when a considerable time is allowed to pass after a transaction has been carried out, evidence will frequently be lost. If the onus fell on those who carried out a transaction to prove, possibly many years after the event, that it had been carried through according to proper form, the practical difficulties might be enormous. … It is also illustrated by the facts of the present case, where the Trustees of the Fund found it impossible to recover comprehensive documentation relating to the changes in the Rules.
21 Fourthly, and perhaps most importantly, transactions do not stand alone. The parties to them, and third parties affected by them, rely on the existence and validity of a transaction in their future dealings. If a transaction were open to challenge, possibly long after it was carried out, on the ground that it was impossible to prove that proper procedures had been used, all subsequent dealings that proceeded on the faith of that transaction would also be potentially open to challenge. That would be an intolerable situation, both in the commercial world and elsewhere. This is well illustrated by the facts of the present case. To take the adoption of the 1990 Rules as an example, if that transaction were now open to challenge because it could not be proved that the “triple-lock” procedures had been followed, all of the subsequent transactions of the Fund, involving employers, members and others, would also be potentially open to challenge. No pension fund could seriously carry on its administration under such a threat. As Lord Halsbury states, the matter is common sense.”
83. Mr Newman took us to a passage from the judgment of Henderson J (as he then was) in Entrust Pension Limited v Prospect Hospice Limited & Anr [2013] PLR 73 at [38] – [40]. The case was concerned with whether the trustee of a pension scheme had exercised its discretion either at all or properly in relation to certain decisions made in relation to the benefit structure of the scheme. The relevant passage is as follows:
“38. I now turn to consider whether any assistance can be gained from the presumption of regularity, which is sometimes expressed in the Latin maxim ‘Omnia praesumuntur rite esse acta’. The principal circumstances in which the presumption has been applied appear to be cases where certain formal requirements have to be satisfied, or where due to the lapse of time it would be unreasonable to expect primary evidence to be adduced in order to establish the lawful origin of a proprietary right: see Halsbury’s Laws of England, 5th edition, volume 20, paragraph 1103 where several examples are given. The presumption is, at least normally, a presumption of fact, not law, and as such it is rebuttable by evidence to the contrary. So viewed, the term ‘presumption of fact’ is in my judgment something of a misnomer, because such a presumption does not shift the persuasive or evidential burden of proof on the relevant issue, but merely ‘describes the readiness of the court to draw certain repeated inferences as a result of common human experience’: see Phipson on Evidence, 17th edition (2010), paragraph 6-17, and also paragraph 1-17 where it is said that ‘Not only are [presumptions of fact] always rebuttable, but the trier of fact may refuse to make the usual or natural inference, notwithstanding that there is no rebutting evidence.’
39. Mr Moeran drew my attention, in this connection, to the judgment of Lindley LJ in Harris v Knight (1890) 15 PD 170 at 179-80, where in relation to the question whether a lost will had been duly executed and attested, he said this:
‘The maxim, ‘Omnia praesumuntur rite esse acte’, is an expression, in a short form, of a reasonable probability, and of the propriety in point of law of acting on such probability. The maxim expresses an inference which may reasonably be drawn when an intention to do some formal act is established; when the evidence is consistent with that intention having been carried into effect in a proper way; but when the actual observance of all due formalities can only be inferred as a matter of probability. The maxim is not wanted where such observance is proved, nor has it any place where such observance is disproved. The maxim only comes into operation where there is no proof one way or the other; but where it is more probably that what was intended to be done was done as it ought to have been done to render it valid; rather than that it was done in some other manner which would defeat the intention proved to exist, and would render what is proved to have been done of no effect.’
This passage appears to suggest that the maxim will be of assistance only where there would otherwise be no proof one way or the other; but since the maxim is also stated to be ‘an expression … of a reasonable probability’ and ‘an inference which may reasonably be drawn’, I would respectfully question whether it really adds anything to the power which the court anyway has to make a finding of fact on the balance of probabilities based on inferences drawn from circumstantial evidence. But if that is right, the so-called presumption is really no more than a rebuttable statement, founded on common sense and experience, of the inference that it will normally be appropriate to draw in a given situation where primary evidence is lacking.
40. No doubt with these uncertainties about the scope and nature of the presumption in mind, counsel were in general agreement that I would be likely to find it of only marginal assistance. I agree. The principal matter which the members have to establish is that the Previous Trustee did in fact exercise its discretion in their favour on leaving service. Resolution of that question depends on an examination of all the relevant secondary evidence, and is not assisted by any presumption of regularity based on common sense or common experience. If, however, I were to be satisfied that the Previous Trustee did indeed adopt such a policy, I think that there could then be modest scope for application of the presumption in relation to more formal issues such as whether a valid decision to adopt the policy had been taken, or whether those who made the necessary calculations and despatched the leaving service statements to members were duly authorised to do so. And even then, I would not regard the so-called presumption as adding anything, on analysis, to an inference which it would anyway be open to me to draw in the usual way on the balance of probabilities.
84. I agree with Henderson J (as he then was) that the presumption is no more than a rebuttable statement founded on common sense, of the inference it will normally be appropriate to draw in a given situation where primary evidence is lacking. However, I also agree that it is directed at formality rather than intention. In this case, therefore, even this weak presumption would take the matter in relation to consent no further forward.
85. I would also have rejected Mr Stallworthy’s submissions based on Re Duomatic [1969] 2 Ch 365 in relation to imputing the consent of Viavi to the change of principal employer despite the fact that it was not a party to the 1999 Deed. The way in which the Judge described the application of the Duomatic principle in this case was as follows:
“93. The first and obvious point to consider is that Viavi was not in fact a party to the 1999 Deed. It must be taken to have known of the intention to execute the 1999 Deed to achieve the desired effect since Mr Taylor and Mr Bourton were both directors of Viavi in 1999 and Viavi had initiated the process of revision. But without Viavi’s actual or deemed consent to a change of principal employer the change would not be effective. Viavi was, however, at all relevant times the wholly-owned subsidiary of Management, so that Management in law could take decisions within the corporate powers of Viavi informally on its behalf, without any need for Viavi to make a board resolution or pass a special resolution in general meeting to that effect: Re Duomatic [1969] 2 Ch 365 …
94. … Management could not have decided to become principal employer (if that is what it did) without also deciding that Viavi should cease to be principal employer. And it is inconceivable that, exercising its voting rights as shareholder of Viavi, Management would have voted differently on that question. If on its true interpretation the 1999 Deed appointed Management as principal employer, then by resolving to execute the 1999 Deed, Management effectively gave consent as sole shareholder of Viavi too. . .
95. … The particular circumstances of the 1999 Deed were that Viavi, through Mr Taylor, was well aware that the view had been taken on its behalf that Management should be the principal employer going forwards, and should have been principal employer from 1994; and Viavi’s conduct from 1999 onwards, acquiescing in Management’s performance of the principal employer role, evidences its understanding and agreement that Management was to act as principal employer going forwards.”
86. However, in the Duomatic case itself, Buckley J described the principle at 373, in the following terms:
“[W]here it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be.”
Further, in EIC Services Ltd v Phipps [2003] EWHC 1507 (Ch); [2003] BCC 931, Neuberger J explained the basis of the principle as follows (at [122]):
“The essence of the Duomatic principle, as I see it, is that, where the articles of a company require a course to be approved by a group of shareholders at a general meeting, that requirement can be avoided if all members of the group, being aware of the relevant facts, either give their approval to that course, or so conduct themselves as to make it inequitable for them to deny that they have given their approval. Whether the approval is given in advance or after the event, whether it is characterised as agreement, ratification, waiver, or estoppel, and whether members of the group give their consent in different ways at different times, does not matter.”
87. It seems to me that as Mr Newman submitted and Neuberger J (as he then was) decided, the Duomatic principle does not go as far as the Judge found that it did. There was no decision or assent on Management’s part, qua shareholder to Viavi’s consent to substitution, nor was there any evidence of its having applied its mind qua shareholder to the issue of Viavi’s consent for the purposes of Rule 10.10. It is true that the relevant steps in relation to the execution of the 1999 Deed were taken by Mr Taylor but he did not do so qua shareholder of Management with the intention of “ratifying” Viavi’s consent.
88. Accordingly, for all of the reasons set out above, I would dismiss the appeal.
Lord Justice David Richards:
89. I agree.
Lord Justice Gross:
90. I agree.
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