R (on the application of Britannic Asset Management Limited & ors) v Pensions Ombudsman 2

Reference: (2001) OPLR 309, (2002) PLR 99

The former scheme trustees held policies of insurance with a Britannic group company (BULA) and the underlying policy assets were managed by another Britannic group company (BIM). However, the former trustees had never exercised the option under the policies for administration services to be provided. Between April and October 2000, the majority of assets invested in the policies were divested in response to requests made by or on behalf of the trustees. It subsequently appeared that the former trustees or their representatives had been acting fraudulently. The current trustees claimed that Britannic companies were guilty of maladministration. Britannic applied to the Court to determine whether they had been acting as administrator and if so, whether it was sufficient for a finding of maladministration against them that acts of maladministration had been committed by others.

The Court of Appeal upheld the High Court's decision and said that the notional allocation or cancellation of units could not properly be regarded as administration of the scheme. Although those activities were administrative in nature, an insurance company which did no more than administer its own assets and calculate from time to time the amount which it was liable to pay under a unit linked policy which it had issued was not "concerned with the administration of the scheme".
The Court held that: "It is clear that BULA (and BIM on its behalf) were not managing Scheme assets but their own assets. The legal relationship between BULA and the Trustees is a contractual one of insurer and assured. When the Trustees invest in the Policy, they are in law paying premiums to the insurer under a contract of insurance. The benefit of the Policy is an asset held by the Trustees on the trusts of the Scheme. Its value is determined by the value of the Units allocated under the Policy and such value in turn depends on the performance of the underlying assets; but the Trustees do not acquire any legal or beneficial interest in the underlying assets". The Court went on to say that ""administering the Scheme" means (in whole or in part) running the Scheme, e.g. inviting employees to join, keeping records of members, communicating with members, calculating benefits, providing benefit statements, paying benefits when due, keeping documentation up to date, dealing with governmental or regulatory agencies". The touchstone in determining whether someone is an administrator is whether he is engaged to act, or advise, in or about the trustees' affairs in running the Scheme. Processing the disinvestments was simply complying with contractual obligations under the policy which reserved to the trustees the right to disinvest. In addition, it is not possible to "decouple" the status of administrator as a subject of a complaint and the maladministration causing injustice and investigate a complaint against an administrator where the only maladministration was by someone else (in this case the former trustees). The Ombudsman appealed.