Bridge Trustees Ltd v Noel Penny (Turbines) Ltd.

A fiduciary and imperative power vested in an employer to direct the destination of a pension scheme surplus is not itself trust property, and its donee is not a trustee for the purposes of section 41 of the Trustee Act 1925 unless trust property is vested in that donee. The court may nevertheless use its inherent jurisdiction to execute the trust by appointing a fit and proper person to exercise the power in place of an unwilling, unsuitable or unavailable donee. This is especially appropriate where an insolvent company remains dormant and the statutory protection afforded during an insolvency practitioner’s appointment has otherwise ceased. The court should appoint a professional trustee where that is more efficient and better suited to assessing the interests of scheme beneficiaries than a one-off judicial determination.

The claimant was the sole trustee of a pension scheme whose assets exceeded its liabilities. The defendant, the principal employer, held the power under Rule 9 of Part VI of the scheme rules to direct whether the surplus should augment benefits or be returned to participating employers. The defendant’s sole director, who was also a scheme beneficiary, declined to exercise the power because of the company’s continuing insolvency and the potential conflict between creditors’ interests and the scheme’s objects.

The claimant sought an order substituting it for the defendant in exercising the power. The central issues were whether the power was fiduciary, whether section 41 of the Trustee Act 1925 authorised the substitution, and, if not, whether the court’s inherent jurisdiction to execute a trust permitted that course.

1. The application was granted. The claimant was appointed in place of the defendant to exercise the power under Rule 9 of Part VI concerning the destination of the pension surplus.
2. Rule 9 imposed a mandatory obligation to make a selection between specified objects. The power was therefore fiduciary and imperative. The reasoning in Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 applied. The power was not an incident of the defendant’s absolute property and could not be distributed for the benefit of creditors.
3. Section 41 of the Trustee Act 1925 did not apply. That provision concerned a trustee properly so called, namely a person in whom trust property was vested. The defendant was merely the donee of a fiduciary power. The expressions fiduciary power and trust power described the imperative character of the power but did not make the donee a trustee in the statutory sense. McPhail v Doulton [1971] A.C. 424 did not establish otherwise.
4. The court nevertheless possessed an inherent jurisdiction to execute the trust. It could direct how an imperative power should be exercised or, in a proper case, appoint a fit and proper person to exercise a fiduciary power in place of the donee. Such a case could arise where the donee refused to act, had died, had been dissolved, had disappeared or was otherwise unsuitable.
5. The defendant’s continuing insolvency, dormancy and lack of effective direction created a real conflict risk. The statutory regime protecting pension schemes during an insolvency practitioner’s appointment reinforced the need for independent exercise of the power, although the statutory provisions no longer directly applied after the receivers ceased to act.
6. The court could itself determine the distribution, but that would require fuller evidence about members, benefits and funding history and would increase costs. The professional trustee was better placed to exercise the judgment required, including determining whether different members should receive different benefit increases and giving appropriate weight to potential claims through the defendant.

First-instance decision. No appellate history was stated in the judgment.