Mettoy Pension Trustees Ltd v Evans

JurisdictionEngland & Wales
Date1990
Year1990
CourtChancery Division
[CHANCERY DIVISION] METTOY PENSION TRUSTEES LTD. v. EVANS AND OTHERS [1986 M. No. 3769] 1989 Oct. 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 20, 23, 24, 25, 26, 27, 30, 31; Nov. 1, 2, 3, 6, 7, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 23, 24, 27; Dec. 12 Warner J.

Trusts - Pension scheme - Variation - Provisions for dissolving scheme on company going into liquidation - Deed varying provisions giving company discretion in applying trust funds on dissolution - Whether fiduciary power - Whether deed to be set aside - Appropriate date for liquidation of company

A large company with several subsidiaries decided in 1967 to replace its existing pension scheme for its employees with a new non-contributory pension scheme approved by the Inland Revenue under section 379 of the Income Tax Act 1952. The scheme, which came into effect on 1 January 1968, was established by an interim deed of 1967 and a definitive deed dated 12 May 1969 with, in a schedule, the rules for regulating the pension fund. Two directors and the secretary of the company were made the first trustees of the fund. The powers of appointing and removing trustees were vested in the company. A majority of the trustees was to be “competent to execute and exercise all the trusts powers and discretions” vested in them generally. The trustees were to hold the pension fund on irrevocable trusts to pay therefrom the pensions and other benefits which might become payable under the terms of the pension fund. Clause 6 provided that the company and the trustees might jointly from time to time and without the consent of the members “alter cancel modify or add to” any of the provisions of the deed and rules but without changing the purpose of the fund to provide retirement pensions or prejudice the provision of benefits qualifying as benefits for the purposes of the National Insurance Act 1965.

By rule 3 of the 1969 rules, the annual amounts of pension payable at the normal retirement date were not to exceed the limits then imposed by section 379 of the Income Tax Act 1952. Rule 11(b) provided that in the event of companies participating in the pension fund ceasing to pay contributions or on the company itself going into voluntary or compulsory liquidation the pension fund was to be dissolved and wound up, the trusts were to determine absolutely and the assets and liabilities of the fund were to be valued with a view to apportioning so much of the balance, if any, as was necessary amongst the members in the purchase of annuities for beneficiaries entitled to a pension and for members who would have become entitled on retirement had the pension fund not been terminated, or such larger amount as the trustees might determine within the limit imposed by rule 3. Any remainder of the balance was to be paid to the company and any participating companies in cash.

The introduction of a new code for Inland Revenue approval of occupational pension schemes by the Finance Act 1970 caused the revision of the scheme in 1973, but further modifications were needed to take account of subsequent statutory provisions. In addition, the company wanted to improve the retirement benefits of its employees.

By a deed made between the company and the trustees in September 1979, alterations were made to the 1969 deed, in exercise of the power in clause 6, giving wider powers to the trustees, and the existing system of investing by insurance premiums paid under a group pension policy was changed to that of a managed fund. In September 1980 a newly incorporated trustee company was purportedly appointed by deed as sole trustee, but, since it was not a trust corporation, the deed was ineffective to discharge the individual trustees. At the same time, the company and the trustee company, in purported exercise of clause 6 of the 1969 deed, brought in new rules expressed to replace entirely the clauses and rules of the 1969 deed. Rule 13(5) of those 1980 rules differed from the winding up provisions in rule 11(b) of the 1969 rules in providing that any surplus of the trust fund after securing various classes of liabilities in full was to be applied “at the absolute discretion” of the company to secure further benefits for pensioners within the limits stated in the rules and any further balance remaining was to be paid to the company and any participating company in cash. In March 1983 a deed was executed to rectify the error in appointing the trustee company sole trustee but otherwise it was executed by the company and the trustees on the basis that it was essentially the same as the 1980 deed.

By March 1983 the company's financial state was precarious and in October the company's bankers appointed two receivers of its assets and undertaking. On 15 November a petition for the winding up of the company was presented and on 16 January 1984 a compulsory winding up order was made. On 28 February the one remaining subsidiary company was sold and in April all the company's remaining employees were dismissed. There was a surplus in the pension fund and the trustee company issued a summons for the court to determine, inter alia, how the property and moneys held by it ought to be applied in consequence of the winding up of the pension scheme.

On the questions (1) whether the reference to the company going into liquidation in rule 11(b) of the 1969 rules should be construed as the date of presentation of the petition or the date on which the order on that petition was made; (2) whether the discretion given to the company as the employer by rule 13(5) of the 1983 rules to apply surplus funds for pensioners was in the nature of a fiduciary power and whether in the circumstances of a winding up it was exercisable by the receivers or liquidator; (3) whether the 1983 deed and rules were (a) wholly valid or (b) valid except for rule 13 or (c) valid except in so far as they purported to divest the trustees of the discretion to augment benefits given by rule 11(b) of the 1969 rules:—

Held, (1) that the phrase “going into liquidation” in rule 11(b) of the 1969 rules indicated the actual beginning of the winding up, as a result of the making of the winding up order, not its “deemed” statutory beginning, and should be so construed (post, p. 1613C).

(2) That the “absolute discretion” to augment benefits given to the company by rule 13(5) of the 1983 rules was a fiduciary power in the full sense and could not be released; and that, accordingly, it was not part of assets of which the company was beneficial owner, nor could it be the subject of a charge created by a debenture or become exercisable by a receiver appointed under such a debenture or by a liquidator of the company, and that, in those circumstances, it would be a matter for the court to decide on the appropriate methods of its exercise (post, pp. 1615E–G, 1616E–F, 1618A–B).

In re Courage Group's Pension Schemes [1987] 1 W.L.R. 495, El Awadi v. Bank of Credit and Commerce International S.A. Ltd. and In re Baden's Deed Trusts [1971] A.C. 424 considered.

(3) That on the true construction of clause 6 of the 1969 trust deed, the property and moneys of the pension scheme held by the trustees should be applied in accordance with rule 13 of the 1983 rules on the footing that the 1983 deed was wholly valid (post, p. 1632B).

(4) That the court would have set aside the 1983 trust deed if it was clear that the trustees would not have exercised their discretion to execute the deed as they had done if they had fully taken into account the changes made by rule 13 in the 1983 rules relating to the winding up of the scheme at a time when the company's insolvency was imminent; that it had not been shown that they had no proper understanding of rule 13(5) or that, if advised that it was a fiduciary power, the effect of which was to transfer to the company an unfettered discretion over surplus, they would not have executed the deed of 1983 as they did; that, therefore, the deed remained valid and could not be set aside (post, pp. 1624A–D, 1629C–D, G–1630A).

In re Baron Vestey's Settlement [1951] Ch. 209, C.A,. considered.

In re Hastings-Bass, decd. [1975] Ch. 25, C.A. and Turner v. Turner [1984] Ch. 100 distinguished.

The following cases are referred to in the judgment:

Abrahams' Will Trusts, In re [1969] 1 Ch. 463; [1967] 3 W.L.R. 1198; [1967] 2 All E.R. 1175

Allen-Meyrick's Will Trusts, In re [1966] 1 W.L.R. 499; [1966] 1 All E.R. 740

Baden's Deed Trusts, In re [1971] A.C. 424; [1970] 2 W.L.R. 1110; [1970] 2 All E.R. 228, H.L.(E.)

Blausten v. Inland Revenue Commissioners [1972] Ch. 256; [1972] 2 W.L.R. 376; [1972] 1 All E.R. 41; C.A.

Bonhote v. Henderson [1895] 1 Ch. 742

Courage Group's Pension Schemes, In re [1987] 1 W.L.R. 495; [1987] 1 All E.R. 528

D'Angibau, In re (1879) 15 Ch. D. 228

Dundee General Hospitals Board of Management v. Walker [1952] 1 All E.R. 896; [1952] W.N. 180, H.L.(Sc.)

Dutton v. Thompson (1883) 23 Ch. D. 278

El Awadi v. Bank of Credit and Commerce International S.A. Ltd. [1990] 1 Q.B. 606; [1989] 3 W.L.R. 220; [1989] 1 All E.R. 242

General Share and Trust Co. v. Wetley Brick and Pottery Co. (1882) 20 Ch. D. 260, C.A.

Gisborne v. Gisborne (1877) 2 App.Cas. 300, H.L.(E.)

Greaves, In re; Public Trustee v. Ash [1954] Ch. 434; [1954] 2 W.L.R. 557; [1954] 1 All E.R. 771, C.A.

Gulbenkian's Settlements, In re [1970] A.C. 508; [1968] 3 W.L.R. 1127; [1968] 3 All E.R. 785; H.L.(E.)

Hastings-Bass, decd. In re [1975] Ch. 25; [1974] 2 W.L.R. 904; [1974] 2 All E.R. 193, C.A.

Hay's Settlement Trusts, In re [1982] 1 W.L.R. 202; [1981] 3 All E.R. 786

Hodges, In re; Dovey v. Ward (1878) 7 Ch. D. 754

Hood of Avalon (Lady) v. Mackinnon [1909] 1 Ch. 476

Imperial Foods Ltd. Pension Scheme, In re [1986] 1 W.L.R. 717; [1986] 2 All E.R. 802

James v. Couchman (1885) 29 Ch. D. 212

Kerr v. British Leyland (Staff) Trustees Ltd. (unreported), 26 March 1986; Court of Appeal (Civil Division) Transcript No. 286 of 1986, C.A.

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