AON Pension Trustees Ltd v MCP Pension Trustees Ltd

Section 27 of the Trustee Act 1925 protects trustees against claims of which they had not had notice when property was distributed. It does not protect trustees who had actual notice of a beneficiary’s interest merely because they later forgot it or because the beneficiary did not answer the advertisement. Notice and knowledge are distinct, and actual notice generally persists until distribution. The court left the wider reach of constructive notice unresolved. Relief under section 61 is separate relief from liability, not an extinction of liability.

AON Pension Trustees Ltd administered the Maxwell Communication Works Pension Scheme. Thirty-two members transferred from another Maxwell group scheme, but were recorded in the wrong scheme. They were omitted from the buy-out and later paid through insurance. The respondent trustees sued the administrators in negligence; liability and negligence were not yet tried.

On a preliminary issue, the High Court held that section 27 of the Trustee Act 1925 did not relieve the trustees from liability, as reported at [2010] 2 WLR 268. The appeal concerned whether actual notice of the transferees’ interests ceased to be notice when the trustees genuinely forgot it before distribution. The Court of Appeal dismissed the appeal and remitted the outstanding issues.

Appeal dismissed. The case was remitted for trial on the outstanding issues.

1. Purpose and operation of section 27. Section 27 of the Trustee Act 1925 protects trustees from liability for claims of which they had not had notice when property was distributed. It does not protect against claims already known to the trustees. That conclusion was consistent with Markwell’s Case (1872) 21 WR 135 and Guardian Trust and Executive Co of New Zealand v Public Trustee of New Zealand [1942] AC 115, which recognised that a claimant’s failure to answer an advertisement does not remove liability where the trustees had notice.
2. Actual notice and forgetfulness. On the preliminary assumption that the transfers had occurred, the trustees had actual notice of the transferees’ interests. Notice is not equivalent to continuing conscious knowledge. Once actual notice has been received, it generally persists as notice at the time of distribution. Genuine forgetfulness therefore did not remove the trustees’ liability. The observations in Re Montagu’s Settlement Trusts [1987] 1 Ch 264 concerned whether knowledge affected the conscience of a constructive trustee. They were obiter and, if intended to apply to section 27, Elias LJ would respectfully not follow them.
3. Constructive notice. It was unnecessary to resolve the full reach of constructive notice. Elias LJ expressed reservations about treating the five Baden categories in Baden Delvaux v Societe Generale [1993] 1 WLR 509 as the necessary starting point. If actual notice had not existed, none of those categories would have applied on the assumed facts.
4. Separate relief. Relief under section 61 of the Trustee Act 1925 could excuse a trustee wholly or partly for breach of trust, but would not negate the underlying liability. The section 61 issue was not pursued.
5. Additional observation. Lady Justice Arden observed that the position of a pension-fund trustee may resemble that of a voluntary liquidator. A liquidator may incur personal liability for claims that proper inspection of records and appropriate inquiries would have disclosed, despite Rule 4.182A of the Insolvency Rules 1986. A trustee in doubt may apply to the court for directions.

• Court of Appeal (Civil Division): [2010] EWCA Civ 377; appeal dismissed and remitted for trial on the outstanding issues.
• High Court of Justice, Chancery Division: Deputy Judge Jeremy Cousins QC held that section 27 of the Trustee Act 1925 did not relieve the trustees from liability, reported at [2010] 2 WLR 268.