MCP Pensions Trustees Ltd v AON Pension Trustees Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Elias,Lord Justice Dyson,Lady Justice Arden |
| Judgment Date | 08 March 2010 |
| Neutral Citation | [2010] EWCA Civ 377 |
| Docket Number | Case No: A3/2009/1582 |
| Court | Court of Appeal (Civil Division) |
| Date | 08 March 2010 |
[2010] EWCA Civ 377
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(mr Jeremy Cousins Qc)
Before: Lady Justice Arden
Lord Justice Dysonand
and
Lord Justice Elias
Case No: A3/2009/1582
Mr David Grant (instructed by Cameron McKenna LLP) appeared on behalf of the Appellant.
Sarah Asplin QC and Mr Fenner Moeran ( instructed by Browne Jacobson LLP) appeared on behalf of the Respondent.
(As Approved)
Lord Justice Elias:
The respondents in this case are the trustees of Maxwell Communication Works Pension Scheme (“the works scheme”). This is a final salary occupational pension scheme. The claimant provided administration services to the works scheme from around 1992 to late 1997. Between 1988 and January 1996 the works scheme took a transfer of lenders and assets from another Maxwell group occupational pension scheme, namely the Deimer & Reynolds Limited Retirement and Death Benefit Plan (“the D & R scheme”). In particular there was a transfer of 32 members from the D & R scheme (“the D & R transferees”) together with the relevant assets. By an error which the respondent contends was due to the negligence of the appellants, the transferees were wrongly recorded as being members of the staff scheme rather than the works scheme. The trustee of the works scheme bought out the members' benefits between 1997 and 2003. There was an apparent surplus of some £2.67 million after meeting the liabilities and these were used to provide bonuses to the members. However, none of these 32 members were considered in the course of the buyout and they did not have benefits secured by the works scheme. It is accepted that the trustees had genuinely forgotten of the existence of these members.
During the wind-up of the scheme the trustees undertook an extensive advertising campaign calling for former members of the works scheme to notify the claims in accordance with the requirements of section 27 of the Trustee Act 1925. The outcome of this was that three individuals were identified but none of the D & R transferees responded. In the course of the wind-up of the works scheme, the trustees obtained two insurance policies. One was an overlooked beneficiary insurance policy and the other was a run-off liquidated funds insurance policy. These policies were used to pay out benefits to the D & R transferees, who were found on investigation to be entitled to payment. In total there have been, we are told, some 19 persons now who have received benefits from the insurance, and the amount paid out exceeds £1 million.
The trustees acting at the behest of the insurers are suing the appellant administrators of the scheme for negligence. It is said that they mis-recorded the allocation of the D & R transferees and failed to identify them as members of the works scheme. The appellants deny liability. They say that the transferees were never members of the works scheme and, further, they deny any negligence. These matters have not been determined because it was agreed that there should be a preliminary issue of three questions. Two of them were not pursued before the judge below. He had to consider one preliminary issue only, which was this:
“Whether on the true construction of Section 27 of the Trustee Act 1925 the claimant is not liable to D & R Works Transferees”.
If the trustees were not liable, then of course there was no obligation to make any payments to the transferees and the appellant could not be liable for the monies paid out by the insurance company. Paradoxically, therefore, the trustees are admitting their liability and the administration company are saying that they were wrong to do so. The judge held that section 27 did not relieve the trustees from liability. The administration company now appeals that decision.
Section 27 is as follows:
“27 Protection by means of advertisements
(1)With a view to the conveyance to or distribution among the persons entitled to any real or personal property, the trustees of a settlement [, trustees of land, trustees for sale of personal property] or personal representatives, may give notice by advertisement in the Gazette, and [in a newspaper circulating in the district in which the land is situated] and such other like notices, including notices elsewhere than in England and Wales, as would, in any special case, have been directed by a court of competent jurisdiction in an action for administration, of their intention to make such conveyance or distribution as aforesaid, and requiring any person interested to send to the trustees or personal representatives within the time, not being less than two months, fixed in the notice or, where more than one notice is given, in the last of the notices, particulars of his claim in respect of the property or any part thereof to which the notice relates.
(2)At the expiration of the time fixed by the notice the trustees or personal representatives may convey or distribute the property or any part thereof to which the notice relates, to or among the persons entitled thereto, having regard only to the claims, whether formal or not, of which the trustees or personal representatives then had notice and shall not, as respects the property so conveyed or distributed, be liable to any person of whose claim the trustees or personal representatives have not had notice at the time of conveyance or distribution; but nothing in this section—
(a)prejudices the right of any person to follow the property, or any property representing the same, into the hands of any person, other than a purchaser, who may have received it; or
(b)frees the trustees or personal representatives from any obligation to make searches or obtain official certificates of search similar to those which an intending purchaser would be advised to make or obtain.
(3)This section applies notwithstanding anything to the contrary in the will or other instrument, if any, creating the trust.”
A preliminary question is whether section 27 applies to trustees and pension funds at all. Both parties accepted before the judge that it did. Nonetheless the judge was asked to express a view on the issue and he did so, agreeing with counsel that it did apply. He gave a series of reasons for reaching that conclusion whilst noting that he had not had the benefit of any contrary argument on the point: see [2010] 2 WLR 268 paras 12 to 21. We have heard no argument at all on this point. Suffice it to say that I find the reasoning of the judge highly persuasive. Of particular significance is the fact that section 27 was amended by the Trusts of Land and Appointment of Trustees Act 1996 to include for the first time trustees of trusts for the sale of personal property. Until that time section 27 was applicable only to trustees of a disposition on a trust for sale and trustees of a settlement. These trusts were defined by reference to land and not personalty: see sections 68(19) and 68(15) of the Trustee Act 1925 respectively. Accordingly there was a cogent argument that they would not include trusts of personalty, which would cover most pension funds: see the discussion by Peter Docking: “Pension schemes and Section 27 notices: do they work?” in 1995 Trusts Law International, Volume 9 Number 4. Whatever doubts there may have been about the application of the section to pension funds before that amendment, they seem to have been laid to rest by that changed wording which ensures that the section covers trusts for sale of personal property. However, since we have not heard contested argument on the point I make no formal ruling about it.
I turn to consider the section. The purpose is clear. If there was the possibility that beneficiaries or potential beneficiaries may emerge from the woodwork and make claims on the funds of a trust after the distribution, trustees would be unwilling to distribute because of the risk of personal liability to such claimants. This section therefore sets out a procedure which, if properly followed, relieves trustees of that risk.
There are three points to note about the drafting of the section and they are not in dispute. First, the section relieves the trustees from liability only with respect to claims of which they did not have notice at the time of distribution. If...
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