Wakelin & Ors v Read & Anor

A Pensions Ombudsman must determine disputes according to law and within the case presented by the parties. Dishonest assistance must be assessed by considering all evidence relevant to the alleged accessory’s conduct; the position of co-directors is not legally determinative. An appellate court hearing an appeal on a point of law must not substitute its own factual findings where the first-instance investigation was incomplete. The Ombudsman’s remedial discretion does not permit refusal of pension benefits on equitable grounds, such as lack of clean hands, where the alleged dishonesty has not been established. In such circumstances, the appropriate course may be to remit the dispute for a lawful and procedurally fair re-determination.

Mr Read, a former director of Lassen Trustees Ltd, claimed pension benefits under the LEP (UK) Pension Plan. The replacement trustees withheld payment, alleging that he had dishonestly assisted Lassen in a breach of trust arising from its purchase of property from a company in the same group.

The Pensions Ombudsman, determining the dispute on paper, found no dishonest assistance but declined to direct payment because Mr Read lacked clean hands. On appeal, Hart J held that Mr Read was dishonest and upheld the withholding of benefits: [1998] Pensions Law Reports 337. Mr Read appealed. The central issues were whether the Ombudsman had erred in law, whether Hart J could substitute a finding of dishonesty, and whether the dispute should be remitted.

The appeal was allowed in part. Hart J’s declaration that the trustees were entitled to withhold Mr Read’s benefits was set aside, and the dispute was remitted to the Pensions Ombudsman for re-determination.

1. Dishonest assistance. Under Royal Brunei Airlines v Tan, a trustee’s breach of trust and an accessory’s dishonest assistance are distinct issues. The Ombudsman was entitled to consider them separately, but erred by treating the trustees’ position that Mr East and Mr Percival were not dishonest as legally preventing a finding that Mr Read was dishonest. The question required consideration of all evidence concerning Mr Read’s conduct and his role in the transaction.
2. Incomplete investigation. The Ombudsman had not investigated whether Lassen’s breach of trust was dishonest or how Mr Read’s role affected that issue. His own theory of a plot and sham leaseback introduced matters that had not been alleged by the trustees and to which Mr Read had no proper opportunity to respond. The investigation was therefore incomplete.
3. Appellate limits. The High Court and Court of Appeal could correct errors of law, but should not determine disputed facts. The case could not safely be decided on the existing findings because the relevant issues had not been investigated. Remittal was therefore unavoidable.
4. Remedial discretion. The Ombudsman’s powers under section 151(2) of the Pension Schemes Act 1993 were wide but subject to legal limits. If the allegation of dishonesty failed, he could not refuse payment of contractual pension benefits merely because the member lacked clean hands.
5. The Ombudsman was directed to reconsider whether the breach of trust was dishonest and whether Mr Read dishonestly assisted it, considering all relevant evidence and the parties’ submissions.

Lord Justice Pill agreed with the setting aside of Hart J’s declaration and with the clean-hands conclusion, but dissented on remittal. He considered the Ombudsman’s finding that dishonesty was not proved to be a permissible finding of fact and would have ordered payment of the pension.

• Court of Appeal (Civil Division): Appeal from Hart J’s decision, reported at [1998] Pensions Law Reports 337. The court set aside the declaration that the trustees could withhold benefits and remitted the dishonesty dispute to the Pensions Ombudsman.
• High Court, Chancery Division: Allowed the trustees’ appeal from the Ombudsman and dismissed Mr Read’s appeal, holding that he had dishonestly assisted a breach of trust.
• Pensions Ombudsman: Determined that no dishonest assistance had been established but declined to direct payment because Mr Read did not come with clean hands.