Power v Trustees of the Open Text (UK) Ltd Group Life Assurance Scheme & Ors

A trustee’s power to amend the rules of a commercial life assurance scheme is ordinarily ancillary to its duty to administer and manage the scheme. It does not, without more, impose a duty to review the adequacy of the cover or propose amendments increasing the employer’s liability. A trustee’s duty to inform itself before making a decision extends only to matters within the trustee’s concern.

Even if a wider duty to consider amendments existed, breach must be assessed without hindsight. There is no breach where the trustee’s omissions and decisions were within the range reasonably open to it at the relevant time. Delay in payment will not constitute breach where payment was offered but not accepted, and subsequent investigation of entitlement was bona fide, reasonable and proportionate.

The claimant was the alleged beneficiary of a group life assurance scheme established for employees of Open Text. Following the death of an employee, she received £451,200, calculated under an earnings cap preserved by the transitional statutory regime. She claimed that the trustee should have amended the scheme rules after the repeal of the cap, which would have produced a benefit of £750,000.

She also claimed damages for delay in paying the £451,200. The issues were whether the trustee owed a duty to consider amending the rules to increase cover, whether that duty had been breached, and whether payment had been negligently or otherwise wrongfully delayed.

1. Construction of the scheme. The employer, rather than the trustee, determined the level of cover. The employer owed members an implied duty of good faith, but no higher duty and no duty to potential beneficiaries. The trustee’s power to amend the rules was ancillary to its primary obligation to administer and manage the scheme in accordance with its terms.
2. The trustee therefore had no duty to consider the adequacy of the cover, whether it should be increased, or whether amendments removing the earnings cap should be proposed. The duty to inform itself before making a decision, reflected in Scott v National Trust and [1988] 2 All ER 705, did not extend to matters outside the trustee’s concern.
3. Alternative breach finding. Even if the claimant’s wider duty existed, there was no breach. The court assessed the conduct at the relevant time and rejected hindsight, applying the approach in Nestle v National Westminster Bank, [1993] 1 WLR 1260. The delay in completing the benefits review, the decision to await professional advice, and the decision to restart the review after errors were discovered were reasonable. The standard stated in Cowan v Scargill, [1985] 2 Ch 270, was satisfied.
4. Delay in payment. The claimant had led the defendants reasonably to believe that she would not accept £451,200, and she did not respond to subsequent correspondence until March 2008. No actionable delay occurred before then. Thereafter, a genuine dispute existed about her entitlement, and the trustee acted reasonably and proportionately, including by obtaining leading counsel’s advice. The claim for negligence or breach of duty therefore also failed.
5. The claim was dismissed.