Reference: (1998) OPLR 21
The trustees paid almost the entire scheme surplus to the
principal employer. No provision was made for providing limited
price indexation on pension entitlements as required by the Social
Security Act 1990 (the pertinent section of which had come into
force a few days after the trustee decision). The trustees had also
failed to exercise their discretion under the scheme rules to apply
any part of the scheme surplus to enhance members' benefits.
The independent trustee (appointed on the receivership of the
principal employer some time after the relevant decision by the
trustees) was directed to exercise the discretion of the trustees
to allocate the scheme surplus to enhance members' benefits. Once
this discretion had been exercised, the independent trustee was
ordered to direct the employer, acting by its receivers, to repay
to the scheme such amount as was needed to provide limited price
indexation and such other benefit enhancements as determined by the
independent trustee in accordance with the scheme rules. The
Ombudsman directed that if the employer failed to make the required
payments within 28 days of the demand, the trustees at the time of
the decision to repay surplus must pay the required sum plus
interest, to the independent trustees. The Ombudsman stated that
those trustees were to be deprived of protection under the scheme
rules and were personally liable.
Blackburne J concluded that it was not possible to ascertain from
the Ombudsman's determination what the Ombudsman had decided on the
critical issue of the appellants' knowledge and intention at the
time of the payment of the surplus to the company. Being unable to
determine this point, the judge held that the matter should be
referred back to the Ombudsman to be re- heard. This was to
determine whether the appellant trustees acted in bad faith or
dishonestly and were thus incapable of benefiting from the
exoneration clause in the trust deed. The judge held that a further
reason for referring the case back to the Ombudsman was that the
Ombudsman had rejected the appellant's request for an oral hearing.
Given the seriousness of the allegations against the trustees and
the extent of the personal liability which they could face, the
judge thought that the Ombudsman had an obligation to concede to
the appellants' requests for such a hearing.
31 October 1997
A separate judgment was given on the issue of costs. It was noted
that the Ombudsman only appeared at the appeal to assist the court.
Given that the appeal was against his determination, he had no
power to settle the matter out of court and avoid the costs of the
appeal. The judge therefore held that where an appeal was allowed,
the Ombudsman would be directed to pay the appellants' costs only
to the extent that those costs had been increased as a result of
the Ombudsman's participation in the appeal.