Walker Morris Trustees 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.

 

In the Sovereign Trustees Case the High Court of England and Wales ruled that a purported amendments to a pension  fund were invalid since the terms of the pension trust {Regulations of the Fund} had not been validly amended in accordance with the amending power provided in the Trust Deed which required an actuarial certificate to be obtained for each instrument purporting to amend the terms of the fund.

In several purported amendments no actuarial certificate was recited in the amending instrument and no actuarial certificate had been obtained.  

The Case

Walker Morris Trustees Ltd. v Masterson & Anor [2009] EWHC 1955 (Ch) was before Justice Peter Smith.

The Claimant Walker Morris Trustees Ltd (“WMTL”) is the trustee of the Yorkshire Chemicals Pension Scheme (“the Scheme”). The action is an application by WMTL for declarations and directions which will enable it either to transfer the Scheme’s assets and liabilities to the Pension Protection Fund (“PPF”) or to wind up the Scheme by securing the members’ benefits by annuity policies or transfer payments.

Peter Smith J stated at [3]:

“The task has apparently been complicated by the fact that the terms of the benefits to which the members are entitled are a matter of considerable uncertainty. This arises from the fact that the benefits in the Scheme have been altered on numerous occasions since the Scheme was established in 1974 but in most cases (as is shown by this judgment) the validity of the change is open to serious question. Neither a transfer to the PPF nor a winding up can be completed until it is known precisely what the benefits are.”

The Scheme Documents The Scheme was established by an Interim Deed dated 30th March 1974. This envisaged that a Definitive Deed would be executed in due course setting out the detailed provisions of the Scheme. I will refer to these documents in more detail further in this judgement. The Definitive Deed was executed in 1977 by which time it had been decided that the Scheme would be divided into 2 Schemes the A Scheme and the B Scheme for staff and works employees respectively. Accordingly 2 Definitive Deeds were executed on 1st November 1977 one for each Scheme. Save for differences in the benefits structure and a slight difference in the wording used by the A Scheme and the B Scheme in their respective versions of clause 12 the terms of the Deeds were identical. The Power of Amendment The power of amendment in the A Scheme Definitive Deed is as follows:
12. THE Trustees with the consent of the Employer may from time to time by deed alter or modify all or any of the trusts or provisions of this Deed or of the Rules by resolution or by deed provided that except to secure Inland Revenue approval or continuation thereof or to enable the Scheme to be treated as a contracted out Scheme conforming to Part III of the Social Security Pensions Act 1975 no such alteration or modification shall be made:-
(a) unless in the written opinion of the Actuary or other advisers employed by the Trustees the rights and interest of any Member or of the widow or legal personal representatives of a deceased Member would not thereby be prejudiced insofar as such rights and interests concern benefits secured in terms of the Scheme prior to the date on which the proposed alteration or modification would be made or if such rights and interests would in the opinion of the advisers concerned be so prejudiced then unless and until the alteration or modification shall be sanctioned by a resolution passed by a simple majority of the Members voting either in person or by proxy at a meeting specially convened for that purpose by the Trustees of which meeting not les than 30 days’ notice shall have been given or sent by post to each Member such period of 30 days been reckoned from but excluding the day of giving or posting such notice or
(b) by which the main purpose of the Scheme would cease to be that of providing pensions for Employees on retirement or
(c) which would result in the Scheme ceasing to conform with the Preservation requirements set out in the Act or
(d) which would result in the withdrawal of Inland Revenue approval because of the payment or transfer of any part of the Fund to any Employer or of the creation of any surplus of the Fund the liabilities of the Scheme
  However no such actuarial advice as contemplated by clause 12 was ever obtained save in respect of the 1986 Deed. Further there is no recital in any of the Deeds to the effect that such advice was obtained. Peter Smith J stated at [35]:

“The main argument centres on the wording of clause 12 of the Definitive Deeds. On its face it gives the power to the Trustees with the consent of the Employer to alter or modify all or any of the trusts or provisions of the Deed or of the Rules. However “no such alterations or modification shall be made” (except to secure Inland Revenue approval or continuation thereof or to enable the Scheme to be treated as a contracted out Scheme), unless in the written opinion of the Actuary or other advisers employed by the Trustees the rights and interests of any member or of the widow or legal personal representative of a deceased member would not thereby be prejudiced in so far as such rights and interests concerned benefits secured in terms of the Scheme prior to the date on which the proposed alteration or modification would be made or if such rights and interests would in the opinion of the advisers concerned be so prejudiced, for the implementation to be effective the alteration or modification is required to be sanctioned by resolution passed by a simple majority of the members. There are other restrictions none of which is relevant.”

Peter Smith J, making reference the ruling of Lewison J, ruled at [68]:

“Once again I am of the view that where the clause is clear one needs to apply the clause to the powers even though the consequence is that the proposed amendments are ineffective.”

Lewison J in Trustee Solutions v Dubery [2006] 36 P.L.R [2006] EWHC 1426 (Ch) at [20] stated:

“I do not regard these observations as suggesting that the court has power to sanction any departure from the requirements of the Deeds as properly construed. An avoidance of pedantry, and the need to protect beneficiaries may well be powerful factors in choosing between rival constructions; but once the requirements of a valid means of alteration of the rule has been determined as a matter of construction, either a document satisfies those requirements or it does not.”