Wild v Smith 2

United Kingdom

Reference: (1996) OPLR 129

Mr Wild was one of the trustees of an occupational pension scheme. Mr Smith, the complainant, was the son of a member of that scheme. The member died in 1992 whereupon a death benefit of GBP 140,000 was payable under the scheme rules. Those rules gave the trustees the discretion to pay the benefit "to or for the benefit of the dependants, relatives or legal personal representatives of the member.....or any one or more of them to the exclusion of the others". Where this discretion was not exercised within two years of the member's death, the benefit was to be paid to the member's estate.

The member had named his son and daughter in a nomination form in 1985. However, subsequent to that form, the member had been living with a woman called Mrs Slack in a house which she owned. The trustees considered Mrs Slack to be a dependant and paid GBP 80,000 of the lump sum benefit direct to her and placed the balance on trust under which Mrs Slack would receive the income for life with the capital going to the member's children on her death. Mr Smith complained to the Ombudsman in relation to this decision claiming that it was invalid. He alleged that the trustees had failed to make proper enquiries and that Mrs Slack was not a dependant as defined in the scheme rules.

The Ombudsman upheld the complaint against the trustees deciding that Mrs Slack was not dependent on the member. He further determined that the trustees had exercised their discretion wholly unreasonably. The fact that Mrs Slack had been living with the member for some time did not in itself suggest that she was financially dependent on him; neither did the fact that the member was paying the household bills.

The Ombudsman directed the trustees to recover the payments made to Mrs Slack and to pay them to the member's estate. He also directed that each trustee pay GBP 500 to the complainant and his sister to compensate them for the injustice. This direction was also made against the appellant, who responded on behalf of the trustees although he had ceased to be a trustee by the time the complaint was made.

The appellant alleged that the Ombudsman had failed to properly distinguish between decisions on points of fact or law and complaints of maladministration. Carnwath J held that, whilst the Ombudsman had not specifically given separate consideration to these issues, the reasoning in the determination was clear enough to show that he had properly considered the matter. The Ombudsman was entitled to conclude that the trustees had failed to adequately investigate this matter and that this amounted to maladministration. The judge therefore upheld the Ombudsman's determination that Mrs Slack was not a dependant under the scheme rules.

Carnwath J also held that, whilst the Ombudsman clearly has jurisdiction to hear complaints against former trustees, he must, before awarding compensation against them, give consideration to who would bear the cost of that order. The legislation did not justify imposing any personal liability on a trustee where the trust deed (on the basis of which they undertook their trust) held clear contrary wording. Thus the order for Mr Wild to pay GBP 500 to each of the complainant and his sister was overturned.