Wakelin v Read 2

Reference: (1998) OPLR 147, (2000) OPLR 277

The pension scheme had purchased an office building from the employer company which had turned out to be a bad investment. The chief executive of the employer company was also a director of the trustee company. The employer group of companies became insolvent in 1995 and the trustee company was replaced. When the chief executive retired in 1995 the new trustee withheld his pension on the basis that he was liable as constructive trustee for all the monies that the scheme had lost as a result of his role in the misuse of scheme money to purchase the office building.

The former chief executive complained. The new trustee argued there had been a breach of trust by the trustee company and the former chief director had been dishonest, but not the other directors. The Ombudsman held the trustee company was in breach of trust but the complainant could not be liable as a constructive trustee as the new trustee had conceded that the other trustee company directors had not been dishonest. It had not established that his conduct was in any way worse than that of the other directors. However, the Ombudsman decided that he could not find in favour of the complainant because he did not have "clean hands".

It was held the findings of law by the High Court had been correct but the case should be remitted to the Ombudsman for him to reconsider whether or not the director acted dishonestly as that was a finding of fact to be determined by the Ombudsman. The Court should not substitute its own view.

The High Court found that the Ombudsman was wrong and he did not have a discretion to refuse relief on the basis that the complainant did not have "clean hands". In addition, the absence of any allegation of dishonesty against the trustee co-directors did not preclude a finding of dishonesty against the complainant.