Arcadia Group Pension Trust Limited v Joanne Teresa Smith

In a trustee blessing application, the court must first determine that the proposed act is within the trustees’ powers and is undertaken for a proper purpose. An express amendment power is not implicitly fettered merely because the scheme is being wound up or the employer is insolvent, particularly where the power remains exercisable at that stage and contains no such restriction.

On a category (2) application, the court does not decide whether it would have made the same decision. It asks whether the trustees formed the relevant opinion, whether a reasonable body of properly instructed trustees could have reached it, whether relevant considerations were addressed and irrelevant considerations excluded, and whether conflicts were properly managed.

The claimant trustee sought declarations and the court’s approval for amendments to the rules of the Staff Scheme. The amendments would permit an unsegregated bulk transfer of the assets, beneficiaries and liabilities of the related Executive Scheme while both schemes were being wound up and the common employer was in liquidation.

The proposed merger would reduce the Staff Scheme’s surplus available for discretionary augmentation, although members’ accrued basic entitlements would remain secure. The defendant, appointed to represent beneficiaries who might oppose the relief, did not oppose it. The issues were whether the amendment power was fettered in the circumstances, whether the proposed amendment was for a proper purpose, and whether the trustees’ decision-making process justified the court’s blessing.

1. Relief granted. The claimant would act within the scope and purpose of the amendment power in amending the Staff Scheme rules to permit the merger, and the proposed exercise of the amended power was approved.
2. The court distinguished the two relevant categories of trustee application identified in Public Trustee v Cooper [2001] WLTR 901. The first concerned whether the proposed action was within the trustees’ powers. The second concerned the court’s blessing of a particularly momentous decision which was already within those powers. The court was required to address scope and proper purpose, but it was not required to decide whether the decision was objectively correct.
3. The amendment power was broad and expressly continued until winding up. Where the principal employer was in liquidation, it vested solely in the trustee. There was no principled basis for implying a further fetter merely because the amendment was proposed during winding up or insolvency. The power had previously been used to close the scheme to new members and prevent mergers, and its terms permitted a later reversal if circumstances warranted it.
4. The proper purpose of the power had to be assessed from the 2010 Trust Deed and Rules as a whole and in its context. That context included the scheme’s history, the previous use of the amendment power, the relationship between the schemes, the insolvency events and the manner in which funding had been managed. The merger would not deprive Staff Scheme members of their basic entitlements. It would dilute only their contingent interest in discretionary augmentation.
5. The court applied the category (2) decision-making standard summarised in Brass Trustees Ltd v Goldstone (Re Biwater Retirement and Security Scheme) [2023] EWHC 1978 (Ch). The trustee had to form the relevant opinion, act on a view which a reasonable body of properly instructed trustees could reach, take account of relevant considerations, disregard irrelevant ones and manage conflicts of interest.
6. The claimant had considered the nature of the basic entitlements, the discretionary nature of augmentation, the effect of dilution, the circumstances producing the surplus, and what was fair and equitable. The decision was objectively justifiable, rational and not tainted by conflict. In accordance with Edge v Pensions Ombudsman [1998] Ch 512, the trustee could weigh the interests of different cohorts and was not required to treat the existing Staff Scheme beneficiaries’ interests as exclusive.