The Briggs v Gleeds (Head Office) Case

Legal Principles

An instrument that purports to amend the terms of a trust must comply with the conditions and restrictions imposed by the amending power and statutory law, otherwise the purported instrument amending the terms of the trust will be void and invalid under the doctrine of an “excessive exercise” of the amending power.

The Case

The case of Briggs v Gleeds (Head Office), is a salutary lesson on taking care to comply with the required formalities when executing deeds.

This was a case before the High Court of England and Wales {Chancery Division} –  Briggs v Gleeds (Head Office) [2014] EWCH 1178 (Ch) before Mr Justice Newey.

The case concerned purported amendments made to a pension scheme for the employees of a partnership, with the most senior partners being partners in Gleeds (Head Office).

The Definitive Trust Deed for the scheme was executed on 11 April 1979.

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

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

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

The “Principal Employer” in this case being a partnership and not a company.

The Power of Amendment had been provided jointly to both the  natural persons representing the partnership as well as to the natural person trustees.

On 1 August 1990 a new provision was introduced by Section 1(3) the Law of Law of Property (Miscellaneous Provisions) Act 1989 that requires the signatures of natural persons who execute a Deed to be witnessed at the time of signing the Deed.

The trustees took responsibility for the preparation of the deed and engaged advisers to prepare the Amending Deeds.

Subsequent Amending Deeds were prepared by a company that provided pension administration services (Aon Group).

Relevant individuals within Aon failed to appreciate that, where a deed was to be executed by partners, their signatures needed to be attested. At all events, the draft documents supplied by Aon made provision for trustees’ signatures, but not those of Gleeds’ partners, to be witnessed. Thus, the words “in the presence of” were added below the line on which a trustee was to sign, but there was nothing comparable in relation to partners in Gleeds.

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

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

 

Mr Justice Newey arrived at the following conclusions:

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

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

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

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