Shannan v Viavi Solutions UK Ltd & Ors

In determining whether a pension scheme’s governing deed validly substituted a principal employer, agreement between the trustees and incoming employer, together with consent from the existing employer, may be inferred from surrounding documents and conduct. Those elements may exist before execution of the deed, or be evidenced by the deed itself. An inaccurate recital or drafting inconsistency does not control construction where the deed, read in its factual matrix, shows an intended substitution. The Duomatic principle cannot supply corporate consent merely because a parent company agreed in another capacity. The shareholder must assent as shareholder to a matter capable of approval at a general meeting. A presumption of regularity assists formalities, not proof of intention.

The trustees of a pension scheme sought directions concerning the validity of a 1999 definitive deed and rules. Viavi had been the principal employer, while its holding company, Management, was named as principal employer in the deed. The High Court held that the requirements of Rule 10.10 had been satisfied by execution of the deed and that the amendments to pension benefits were effective. Viavi appealed, arguing that the parties mistakenly believed Management had already become principal employer in 1994, and that the deed could not evidence Viavi’s consent because Viavi was not a party. The central issues were whether agreement and consent had been reached before execution, whether the deed itself was effective, and whether the Duomatic principle could supply the missing consent.

Appeal dismissed. Lady Justice Asplin gave the leading judgment, with Lord Justice David Richards and Lord Justice Gross agreeing.

1. Because the first ground challenged primary facts and inferences drawn from documentary evidence, the Court of Appeal was entitled to form its own view. It should not interfere with evaluative conclusions based on unchallenged primary findings unless they fell outside the bounds within which reasonable disagreement was possible. That approach was stated by reference to Datec Electronics Holdings v UPS [2007] UKHL 23, approving Assicurazioni Generali SpA v Arab Insurance Group [2002] EWCA Civ 1642.
2. The evidence showed that the trustees and Management had agreed to the substitution and that Viavi had consented by 15 September 1999 at the latest. The 25 May 1999 letter, the surrounding drafting discussions, the trustees’ annual report and the conduct of the relevant officers and trustees supported that conclusion. The later correspondence about contracting-out documentation did not undermine it.
3. The 1999 deed, construed as a whole against the relevant factual matrix, manifested an intention that Management should become principal employer, with retrospective effect so far as possible and certainly for the future. The inaccurate recital that Management had become principal employer in 1994, and the inconsistent reference to Viavi in Rule 32.2, were drafting errors or inaccuracies which did not defeat the deed’s effect. Alternatively, the deed itself supplied Management’s and the trustees’ agreement, while Viavi’s consent had already been given.
4. The Court rejected the wider application of the Duomatic principle. The principle, as stated in Re Duomatic [1969] 2 Ch 365 and explained in EIC Services Ltd v Phipps [2003] EWHC 1507 (Ch), requires assent by the relevant shareholders, acting with knowledge of the material facts, to a matter which a general meeting could approve. Management had not assented as shareholder to Viavi’s consent and had not applied its mind in that capacity.
5. It was unnecessary to decide the presumption of regularity point. If necessary, the Court would have held that the presumption is a rebuttable inference founded on common sense and directed to formalities rather than intention, following Entrust Pension Limited v Prospect Hospice Limited & Anr [2013] PLR 73. It could not establish Viavi’s consent.

• Court of Appeal (Civil Division) — Viavi’s appeal against paragraph 2(a) of the order was dismissed: [2018] EWCA Civ 681.
• High Court of Justice, Chancery Division — Mr Timothy Fancourt QC held that the substitution requirements had been satisfied by execution of the 1999 deed and that the deed was effective. The appeal was from the resulting order dated 8 July 2016, following judgment dated 27 June 2016.