The Deputy Pensions Ombudsman has found a set of trustees (including MNTs) personally jointly and severably liable for losses to the scheme of £130,000 as a result of an unlawful loan made to the employer (case Q00623).
The trustees (acting on the advice of a "consultant" appointed by the employer) made an unlawful loan to the employer. The employer became insolvent and the trustees were unable to recover the value of the loan. The trustees argued that they had acted prudently in making the loan (as it was intended to be short term and the difficulties subsequently encountered by the business could not reasonably have been foreseen). They also argued that they had taken professional advice.
The DPO found that the trustees could not rely on the fact that they had allegedly relied on the advice of the consultant as he was neither a lawyer appointed by the trustees under s47 nor someone giving "proper advice" for the purposes of s36 Pensions Act 1995. Therefore they had failed to exercise care and skill in their investment functions and under s33 they could not rely on the exoneration clause under the scheme rules.
This case is a very useful reminder to trustees about the danger of s33 - the trust deed contained an exoneration clause on which they would almost certainly have been able to rely had the breach not been in relation to their investment functions.