Scottish Court of Session Decisions

 

OUTER HOUSE, COURT OF SESSION   [2007] CSOH 122
A416/04	OPINION OF LORD GLENNIE   in the cause   PS INDEPENDENT TRUSTEES LIMITED and OTHERS   Pursuers;   against   DAVID KERSHAW and OTHERS   Defenders     ­­­­­­­­­­­­­­­­­________________

Pursuers: Clark; Biggart Baillie,

First & Second Defenders: Cunningham; CMS Cameron McKenna

Third Defenders: Munro; Morton Fraser

Fourth Defender: John MacLennan, Party

Fifth Defender: MacKenzie; Brodies W.S.

 

10 July 2007

Introduction

[1] This action came before me on the Procedure Roll, as a result of which I issued an Opinion ([2007] CSOH 50) in March of this year. The details of the action are set out in that Opinion. In short, the pursuers, as current trustees of the Blyth & Blyth Pension Scheme ("the Scheme"), sue to recover losses to the Scheme caused, so they contend, by certain acts and omissions of the defenders. The first defender was the Scheme Actuary. He was employed by the second defenders. The first and second defenders are referred to as "the actuaries". The third, fourth and fifth defenders (the "trustees") were, at the times set out in para.[3] of my earlier Opinion, trustees of the Scheme; and they were also directors of the Company, though they are not sued in that capacity. The trustees are each sued for breach of trust on the basis of gross negligence, which the pursuers characterise as a reckless disregard by them of the consequences of their acts or omissions.

[2] The pursuers advance four distinct claims in the action, namely: the contributions claim; the investments claim; the early retirements claim; and the expenses claim. At the Procedure Roll discussion, the trustees sought dismissal of the action in so far as directed against them, which failing they asked me to refuse probation to certain of the pursuers' averments. The actuaries, although represented, did not seek to advance any arguments in support of their own preliminary pleas. I held that both the contributions claim and the early retirements claim as pled against all three trustees were irrelevant; but that the expenses claim (directed against the fourth and fifth defenders, though not against the third defender, he having resigned before the occurrence of the events giving rise to this claim) was relevant. I indicated that, subject to two points, I would in principle have been minded to allow the investments claim to go to a proof before answer, but that, as the pleadings stood, I was unwilling to do so. Those two points were identified in paras. [101] and [102] of my Opinion as: (a) the "temporal" question, namely how liability could attach to the third and fifth defenders, given that the third defender ceased to be a trustee on 26 April 2002 and the fifth defenders only became a trustee on (or as from) that date; and (b) clarification of the averments of loss so as to tie them into the allegations of breach of duty. In my interlocutor, I put the case out By Order as requested.

[3] At the By Order hearing the pursuers stated that they did not intend to reclaim. However, they sought an opportunity to amend, in particular to deal with the criticisms levelled at the investments claim. I gave them that opportunity. In the event, the amendments proposed by the pursuers were limited, in substance, to the investments claim, though there were a number of alterations elsewhere to take account of certain claims having fallen away. When the case called before me on the pursuers' motion for the Minute of Amendment to be received, Mr Clark, for the pursuers, made it clear that the contributions claim and the early retirements claim were no longer pressed against any of the trustees. Nor did he seek to press the investments claim against the third defender. In those circumstances, all claims against the third defender fell away; and it was agreed that a joint minute would be forthcoming dealing with this. Discussion then focused on the pursuers' proposed amendments to the investments claim as against the remaining trustees.

 

The proposed amendment

[4] In the version of the summons as it stood at the time of the Procedure Roll discussion, the pursuers had made averments about a number of occasions on which the trustees were given advice which, it was alleged, they ought to have followed. Those averments included but were not limited to a reference to a Supplementary Investment Report by Buck Investments Consultants Limited dated 31 March 2002 and a meeting of the trustees on 22 April 2002, at which meeting the trustees agreed in principle to reduce the percentage holding of the Scheme's investments in equities. The averments of duty related to duties arising on a number of dates and loss said to have been incurred as a result of the trustees having failed to switch investments on a variety of dates. In the proposed amendment the pursuers now seek to narrow the focus of the complaint by relying only upon the trustees' failure to implement the decision they took at the meeting of 22 April 2002; and their new averments of loss proceed on the basis that, had the trustees implemented that decision promptly, the switch of investments would have occurred within six weeks of that meeting. They calculate loss by comparing the value of the fund as at 1 October 2002 with the value it would have had as at that date had the switch from equities to bonds been made at the end of May 2002. The effect of these amendments, if allowed, would be to tie in the averments of loss with those of breach of duty and thereby present a more coherent case against the trustees.

 

Opposition to receipt of the Minute of Amendment

[5] The remaining defenders all opposed receipt of the Minute of Amendment of the ground that it was very late and that the pursuers had already had ample opportunity to plead a relevant case.

[6] In addition, Mr MacKenzie, for the fifth defender, argued that the pursuers had still not grappled with the "temporal" question. The fifth defender had become a trustee with effect only from 26 April 2002, after the last meeting of the trustees relied on by the pursuers. The pursuers averred that the decision taken at the meeting of 22 April 2002 ought to have been implemented by the end of May. In those circumstances it was incumbent of the pursuers to make averments about what he should have done upon taking office. This affected not only liability but also quantum, since the six weeks for implementing the decision could not, in his case, run from 22 April. Further points also arose on quantum, such as: the basis upon which the pursuers had chosen the beginning and end dates for their calculation of loss; and why they had proceeded upon notional figures provided by experts rather than use actual figures for the value of the fund at the end date when this was available to them. The fourth defender associated himself with the remarks on quantum.

 

Discussion

[7] Amendments should generally be allowed, however late, if they help to focus the real issues between the parties unless they give rise to prejudice which cannot be alleviated by an award of expenses. I do not consider that the delay in this case is so great that I should adopt a different approach. A case such as this will inevitably hang heavily over individual defenders, but that is not a reason for depriving the pursuers of the opportunity of putting forward a relevant case. If the amendments focus the issues, that is to the advantage of both parties. It was not suggested that there was any other prejudice such as, for example, a difficulty in dealing with the new issues raised because relevant evidence had been lost. In any case, I am presently being asked to allow the Minute of Amendment to be received. If during the process of answering the Minute, and making any adjustments thereafter, the defenders find that they have been put in genuine difficulty by the lateness of the amendment, that is something which can be raised in the future in opposition to the pursuers' motion to have the Record amended in terms of the Minute of Amendment and Answers.

[8] It was agreed that in considering whether to grant the pursuers' motion for the Minute of Amendment to be received I was entitled to form a view as to the relevancy of the proposed amended claim. There will be little point in putting parties to the time and expense involved in the amendment procedure if the Minute of Amendment does not address valid criticisms in such a way as to suggest that a relevant case will emerge from the amendment process. However, receipt of a Minute of Amendment should only be refused if it is clear at that stage that it will not cure the defect. Once the Minute of Amendment is received and answered, there will be a period of adjustment in the course of which the pursuers will have the opportunity of adjusting the Minute. Only when the amendment is moved in its final form will it be possible to see whether points of relevancy or specification can properly be taken, either in opposition to the amendment being allowed or, subsequently, at a continued or further Procedure Roll discussion on the Amended Record. Before that stage is reached, so it seems to me, the court ought not to shut the pursuers out from attempting to improve an otherwise irrelevant case unless the proposed amendments fall far short of what would be required to make it relevant or do not even address the identified deficiencies.

[9] After the hearing I invited parties, if they so desired, to put in written notes dealing with a point of law that arose towards the end of the day. The notes went rather beyond what I had intended; and threw up problems which had not, I think, been canvassed during the hearing. The pursuers drew my attention to the minutes of a meeting which were not incorporated into the pleadings but obviously could be incorporated during the adjustment process. They said that those minutes assisted their case on the temporal issue as against the fifth defender. The fifth defender responded by referring to the advice received from Buck Investments Consultants Limited in their Supplementary Investment Report. He argued that the advice, which the pursuers aver was accepted by the trustees, did not support the pursuers' new case. Again, this advice is not specifically incorporated into the pleadings. It is difficult at this stage to see how the averments will settle down after completion of the adjustment period.

[10] In addition, it was pointed out by the fourth defender, in a note submitted by him after the hearing, that the proposed amendment significantly altered the case against him. If the pursuers' case were amended in the manner proposed, he would wish to argue that the investments claim as against him was irrelevant, essentially for the reason put forward by the fifth defender under reference to the Buck Investments Report. As against the fourth defender, this is not simply a question of whether the pursuers have, by their proposed amendment, taken steps to cure a previously identified irrelevancy in their case. For him, this would be his first opportunity to challenge the relevancy of the pursuers' case on these grounds. Such a challenge can only sensibly take place once the new case is pled in its final form.

[11] It seemed to me that these new arguments all raised matters which could not properly be dealt with at this stage. The defenders raise issues which can only be dealt with once the pleadings are finalised. Accordingly I shall allow the Minute of Amendment to be received. The pursuers and other parties should plead out their cases, incorporating such documents as they wished to rely on. The defenders will need, as part of this process, to answer certain substantial amendments already made by the pursuers before the Procedure Roll hearing, in so far as those amendments have not been superseded by the latest Minute of Amendment. Any remaining issues as to relevancy or otherwise should be argued later, either at the stage of the pursuers moving for the Record to be amended or at a further or continued Procedure Roll hearing thereafter. I shall continue to reserve all questions of expenses not already dealt with.

[12] I should note, for the record, that counsel for the actuaries indicated that, in light of my earlier Opinion, his clients would wish to debate the relevancy of certain parts of the pursuers' case against them. Mr Clark accepted that they could do this notwithstanding that they had decided to take no part in the earlier Procedure Roll hearing.