In Bridge Trustees Limited v Noel Penny, Judge Purle QC, sitting as an additional Judge of the High Court, held that the Court could use its inherent jurisdiction to permit an independent trustee to distribute surplus in a scheme that was winding-up. Under the Pensions Act 1995, an independent trustee is appointed to exercise powers otherwise conferred on the employer where an insolvency practitioner begins to act in relation to a company.
In this case, administrative receivers had been appointed but had ceased to act in 2001, so the employer powers under the pension scheme - including the power to distribute surplus on the scheme’s winding-up - had reverted to the employer. The scheme was now in winding-up and the company was still insolvent. The sole director of the employer was unwilling to exercise this power, perceiving himself to be in a position of conflict.
The judge was persuaded to appoint the independent trustee in place of the company for the purposes of exercising this power, commenting that the purpose of the statutory regime was to remove from an insolvent company the power to determine the destination of pension surplus.
The judge held that the Court had inherent jurisdiction to execute a trust in whatever way and by whatever means it thought fit. Here, he felt that the most appropriate course of action was to appoint the independent trustee because:
- it was a professional trustee that which had acted in relation to the fund for many years and had an intimate knowledge of the fund and membership;
- as independent trustee it was in an ideal position to exercise its own judgement on how to distribute the assets;
- the sole director of the employer supported the application order; and
- he was reluctant to add to costs.
The judge also commented that the employer’s power in relation to surplus could be seen as fiduciary (following the decision in the Mettoy case). This part of the judgment seems odd and needs to be treated with care.