Independent Trustee Services Case

Legal Principles

An instrument that purports to amend the terms of a trust must comply with the conditions and restrictions imposed by the amending power, otherwise the purported instrument amending the terms of the trust will be void and invalid under the doctrine of an “excessive exercise” of the amending power (Power of Amendment).

 

The Case

Independent Trustee Services Ltd & Anor v Knell [2010] EWHC 650 (Ch)

A transcript of this case can be found here.

The Power of Amendment was provided by Rule 30. Rule 30 of the Rules provides that the Principal Company may, after consultation with the actuary and with the consent of the Trustees, “at any time by Deed alter or add to all or any of the provisions of the Rules”.

{Note: In this pension trust the legal person the “Principal Company” held the Power of Amendment and not the Directors as natural persons}

An announcement was made to employees in the “Pension News” as to a change in the retirement date for female staff however no amendment was made to the Rules of the scheme in accordance with the Power of AmendmentRule 30.

Mr Justice Norris stated at [30]:

The approach to the true construction of this Rule is exactly that outlined in paragraph 10 above. Of particular relevance in connection with the consideration identified in paragraph 10(h) is the observation of Neuberger J (as he then was) in Bestrustees v Stuart [2001] OPLR 341 at paragraph 34 that:-

“…A pension scheme is likely to continue for a substantial period of time and…those most affected by them and entitled to protection from the Trustees, the employer and indeed the court, will be people who are comparatively poor, who will not have easy access to expert legal advice, and who will not know what has been going on in relation to the management of the Scheme. In those circumstances, it seems to me that protection of the beneficiaries requires the Court to be very careful before it permits a departure from the plain wording and plain requirements of the Trust Deed”.

Mr Justice Norris concluded at [31]:

“The plain wording and the plain requirements of the Trust Deed are that alterations to the Rules are to be made by the principal company with the consent of the Trustees by Deed.”