Solicitors pension fund claim against legal firm and former partners dismissed

A judge in the Court of Session ruled that the trustees failed to plead a relevant case in law.

Lady Wolffe heard that the pursuers sued the first defender Marshall Ross & Munro (MRM) as the successor of a number of partnerships commencing in 1949, while the second defender Charles Bow and third defender Patricia Grzybek were called as former partners and cautioners of the firm, which was dissolved in 2015 when Ms Grzybek retired.

‘Inherited liabilities’

The sum claimed, amounting to just under £90,000, was said to represent that part of the deficit in the fund arising in respect of three individual members who were formerly employees of one or more of the previous 16 iterations of the firm.

On behalf of the pursuer, solicitor advocate Craig Connal QC submitted that the first defender “inherited” the liabilities of the predecessors.

The pursuers sought to rely on the proposition that liability “transmitted” from one iteration of the firm to another, on the broad basis that it appeared to the outside world that the business of the firm appeared to be carried on by its successor.

However, the pursuers did not seek to hold liable any prior iterations of the first defenders nor any partners of any prior iterations - their case was periled on the effective transmission of the total liabilities as accrued from time to time by all prior iterations having been transmitted to MRM17.

The pursuers also had an alternative case against Mr Bow, to the effect that esto liability did not transfer from one iteration of MRM to the next, the second defender employed and made contributions to the fund in respect of each member from his assumption as partner in 1979.

It was said that he was an “assenting employer” in respect of each member and was therefore liable to the pursuers in respect of the sum sued for of each member.

The pursuers’ case was that the first defenders, being the last firm called Marshall Ross & Munro, were responsible for the accrued and contingent liabilities of all predecessor firms; that the liability of the present defenders on the foregoing basis was to be assessed as though the present defenders had themselves been assenting employers, and on the current version of the scheme rules; and that their had not been extinguished to any extent by prescription.

‘Extravagant’ argument

However, the defenders challenged the relevancy of the pursuers’ case on several grounds.

In relation to issues of relevancy, Mr Brown made submissions in respect of the proper analysis of the original obligation, the issue of transmission of liability and the parameters of that doctrine, the presumption of regularity founded upon by the pursuers and prescription.

He noted that there was no averment whatsoever of any obligation said to be “prestable” against any of the dissolved partnerships in question.

If there was no obligation prestable against any such partnership, there was “no liability” which could transmit to any successor.

It was submitted that the case for the pursuers depended entirely upon the “extravagant proposition” that the present defender (MRM17), which never employed any of the members, which had never been an assenting employer, and which never been a member of the scheme, was to be treated as though it had employed them all, and had done so throughout the period in question, and that it is still an assenting employer subject to the current rules of the scheme.

The case was fundamentally irrelevant on that ground alone and should be dismissed, Mr Brown said.

In respect of the pursuers’ alternative case, the defenders argued that all parties necessary for the effective determination of the cause had not been called as defenders.

It was submitted that a partnership had its own separate legal personality and therefore it was the “primary obligant” in respect of any obligation or contract it entered into, meaning any debt of the firm must be constituted against the partnership.

In the case of a dissolved partnership, it was not possible to reconstitute the partnership but the established rule was that all surviving partners within the jurisdiction required to be called.

On the issue of prescription, it was submitted that any liability arising from employment of the members had been extinguished when they retired and that the liability of all predecessor firms dissolved more than 20 years before the service of the action had also been extinguished.

Pursuers’ case ‘irrelevant’

The judge dismissed the action after ruling that the pursuers’ averments were “inadequate”.

In a written opinion, Lady Wolffe said: “The pursuers do not aver that the whole business of each iteration was transferred to its immediate successor; they do not aver that these transfers were gratuitous; they do not aver that the successors (or the partners thereof) did not make any capital contribution fundamentally, given that the rationale underpinning the presumption is the need to prove that the successor agreed expressly or by implication to assume the liabilities of its predecessor, the pursuers do not plead this at all, much less do circumstances from which this could be inferred pursuers’ case. The fact that the pursuers rely on multiple transmissions over many years, and which is nowhere found in the case-law, makes it aver this with sufficient particularity. Their general, omnibus averments are inadequate. This conclusion suffices to dispose of the case.”