MCP Pension Trustees, trustees of the Maxwell Communications pension scheme, sued AON Pension Trustees, the administrators of the scheme, for negligence in failing to record the transfer of 32 employees from one pension fund to another (thereby disentitling the 32 to a share of a ₤2.67 million surplus and triggering an insurance claim by MCP). MCP conceded that while it had known that the 32 employees should have been transferred, it had simply forgotten about them.

The trial judge found that MCP was liable because it had known about the 32; the negligence claim of MCP (and its insurer) against AON could therefore proceed. AON appealed, making the preliminary issue for the English CA whether MCP had had actual or constructive notice of the existence of the 32 beneficiaries: AON Pension Trustees Ltd v MCP Pension Trustees Ltd, [2011] 3 WLR 455 (CA). [Link available here].

In the Court of Appeal, Elias LJ referred to the fivefold classification of ‘knowledge’ set out in Baden v Société Générale [1993] 1 WLR 509 (Ch D): (i) actual knowledge, (ii) wilfully shutting one’s eyes to the obvious, (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make, (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable person and (v) knowledge of circumstances which would put an honest and reasonable person on inquiry. MCP argued that satisfying any of these criteria would establish that it had notice of the 32 claims; AON argued that only (i) to (iii) would do it. Lord Justice Elias didn’t think, in the end, that constructive notice and the unnecessarily complicated Baden framework were helpful, given that MCP clearly did have actual notice of the 32 claims. AON’s argument that notice ceases when knowledge ceases had to be rejected; it is ‘quite impossible to say that notice lapses with memory’. AON’s appeal failed and the case was remitted for trial on the issue of its alleged negligence.