KO UK Pension Trustees Ltd v Susan Margaret Barker

On a trustee’s application for the court’s blessing of a momentous decision, the court asks whether the proposed exercise is lawful and within the trustees’ powers, and whether the trustees have acted honestly and rationally. The trustees must have formed the relevant opinion, considered relevant matters, ignored irrelevant or improper matters, and reached a decision that a reasonable body of properly directed trustees could have reached. The court does not substitute its own view on the merits and should not withhold approval merely because it might have exercised the power differently. A representative beneficiary’s role is to investigate and present any realistic grounds for opposition; the beneficiary need not oppose approval where no such grounds exist.

The claimant trustee of an occupational defined benefit pension scheme sought approval under the second limb of Public Trustee v Cooper for two in-principle decisions. The first concerned varying the termination payment under existing buy-in insurance arrangements in return for the principal employer terminating the scheme, allowing the trustee to wind it up and access surplus. The second concerned distributing that surplus by equal-percentage benefit augmentations for all beneficiaries.

The defendant, a former trustee and pensioner, was appointed as representative beneficiary for those who might oppose the relief. After receiving disclosure and independent legal advice, she did not oppose the application, although concerns remained about compensation for five active members. The central issue was whether the trustee’s decisions satisfied the legal limits governing a blessing application.

1. Relief granted. The court approved both the proposed insurance transaction and the proposed distribution of surplus through benefit augmentations. The claimant and defendant were appointed to represent the respective beneficiary interests identified in the order.
2. The court’s function on a blessing application was supervisory. It had to be satisfied that the trustee had actually formed the relevant opinion; that the proposed exercise was within the trustee’s powers and lawful; that a reasonable body of correctly directed trustees could properly have reached it; that relevant considerations had been taken into account and irrelevant considerations ignored; and that no conflict of interest had vitiated the decision.
3. The court was not required to decide whether the transaction was the best available commercial decision. It did not substitute its own judgment for that of the trustee, provided the trustee had acted honestly, rationally and reasonably within the scope of its fiduciary powers.
4. The proposed transaction fell within the trustee’s investment powers. It involved varying, terminating and replacing insurance arrangements while securing the same liabilities, in order to obtain more certain and immediate improvements for beneficiaries. The proposed equal-percentage augmentation was also a decision which a reasonable body of trustees could properly make.
5. The interests of the five active members remained under consideration. The heads of terms could not pre-judge the statutory consultation required before cessation of their accrual, and the trustee was entitled to preserve flexibility concerning any mitigation package, subject to its fiduciary duties and the interests of the other beneficiaries.
6. The defendant had properly performed the representative-beneficiary role. Given the absence of credible grounds for challenge after legal and evidential scrutiny, she was not obliged to oppose the application. The claimant’s costs and the defendant’s costs were ordered to be paid from scheme funds on the indemnity basis, pursuant to Civil Procedure Rules 1998, rule 46.3.