In this case, following Mr Curran's death, the Trustee of the scheme elected to split his lump sum death benefit amongst his five children, all of whom had been adopted or fostered by other families. Mrs Curran (the deceased's widow) made a complaint that the Trustee should have allocated her a share of the lump sum death benefit, in addition to allocating shares amongst the couple's children.
The key facts surrounding this case were:
- Mr Curran died in July 2007, reportedly due to suicide;
- The employer's occupational health specialist, Mr Curran's manager and the shop steward visited Mrs Curran a few days after Mr Curran's death – notably they visited her at the home of her new partner;
- The occupational health representative subsequently emailed two of the trustee board to inform them that:- Mrs Curran was the only beneficiary of Mr Curran's will; Mr Curran had not completed a death-in-service benefit expression of wish form; the children who were fostered received no maintenance from the couple; and the remaining children who had been adopted at a young age were not financially dependent on the couple;
- The occupational health representative also visited Mr Curran's parents and following this visit emailed the same two members of the trustee board to inform them that Mr Curran had little contact with his parents but, in his parents' opinion, prior to Mr Curran's death, Mrs Curran was living with her new partner (but they were visiting Mr Curran regularly);
- In September 2007, the Trustee met to consider this case and the Minutes recorded that on the basis of an oral presentation by the occupational health representative and "all relevant matters", the Trustee decided to split the lump sum death benefit between Mr and Mrs Curran's five children – no other documentation was referred to in the Minutes;
- Mrs Curran unsuccessfully invoked the scheme's Internal Dispute Resolution Procedure arguing that she should have been allocated a share of the lump sum death benefit because she had not left Mr Curran prior to his death and had been left with mortgage arrears on the couple's home meaning the home would need to be sold, rather than being able to become a home for her and the children.
Mrs Curran's complaint was referred to the Ombudsman who upheld her complaint against the Trustee. The Ombudsman took the view that there was inadequate evidence that the Trustee had gathered and considered sufficient information before making the decision and held that the informal way in which the board made its decision amounted to maladministration. The Ombudsman further held that the fact that the Trustee had recorded its decision without giving reasons meant there was no evidence to show that the decision was rational and not perverse.
Commentary – should trustees give reasons?
When trustees are required to exercise their discretion in a situation such as this one, the traditional view (backed by case law in the courts) has been that, in order to protect the trustee decision-making process, trustees are not obliged to give reasons for their decisions. The general presumption was thought to have been that, in the absence of evidence to the contrary, trustees are considered to have exercised their discretion correctly. Indeed, the perceived risk for trustees in giving reasons is that these reasons may subsequently be criticised and court action raised against trustees. The Curran case is, however, not the first time that the Ombudsman has taken a conflicting view to the courts with regard to the need for trustees to give reasons for their decisions.
Recent Ombudsman decisions such as this one mean that trustees are now faced with a dilemma - should trustees: a) "tow the line" as far as the Ombudsman is concerned by giving full reasons for their decision but risk potentially very costly court action being raised against them disputing their reasons, particularly in complex cases; or b) decide not to give reasons but risk an Ombudsman finding of maladministration.
If trustees decide they would rather not risk court action by giving reasons for their decisions, there are still ways in which they can potentially reduce the risk of an Ombudsman finding of maladministration. We would suggest the following best practice procedures are followed when exercising trustee discretion:
- Scheme documentation should be complied with and trustees should ensure they have a firm grasp of any legal issues;
- All relevant factors should be considered;
- A full paper trail should be maintained - including keeping factual notes of pre-meetings or interviews with family members;
- Background reports/results of fact finding investigations should be collated in writing and distributed to all trustees in advance of a meeting;
- Each case should be viewed on its own merits;
- Trustees should reach a reasonable decision which they believe can be justified;
- Minutes should record the decision made, facts discussed, documents considered and pertinent points made during any oral presentation – N.B. this can demonstrate a thorough approach has been taken without actually noting reasons for the decision.
Given that each case will be decided on its merits, there is unlikely to be a one size fits all approach. Managers or Trustees who are concerned about any particular case can contact us for tailored advice.
ALSO: Legislative alert - Trivial Commutation/Authorised Payments
Legislation in force from 1st June has eased the current restrictions relating to trivial commutation and the list of authorised payments has been extended to include payment of certain benefits in error. We will cover this in more detail in our July Bulletin, but if you need any advice in the meantime, please let us know.