Mettoy Pensions Trust Ltd v Evans

Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513

A settlor may authorise another to distribute property to a class of objects without imposing an obligation to do so. This is called a mere power of appointment. The donee of the power may be granted a “personal” or a “fiduciary” power.

A “fiduciary” power, unlike a “personal” power, is a power of appointment granted to an individual virtute officio, such as a trustee. The fiduciary power is similar to a personal power in only one respect in that there is no obligation to distribute the property. But unlike a personal power, the trustees are required to deal with the discretion in a responsible manner.

The High Court in Mettoy created a third type of power namely “a fiduciary power in the full sense“. This is a power that cannot be released by the Trustees. The courts will not compel the Trustees to exercise their discretion, for the gift remains a fiduciary power and is not treated as a trust. But if the Trustees fail to exercise the power, the court may adopt a scheme that has the effect of exercising the power in accordance with the gift and surrounding circumstances

 

 

 

Warner J at pp 550-551 stated:

“…. the court’s approach in the construction of documents relating to a pension scheme should be practical and purposive, rather than detached and literal….

…although there are no special rules governing the construction of pension scheme documents, the background facts or surrounding circumstances in the light of which those documents have to be construed – their “matrix of fact” (to use the modern phrase coined by Lord Wilberforce) include four special factors. The first is that, as the Court of Appeal pointed out in two unreported cases, namely Kerr v British Layland (Staff) Trustees Ltd [1986] CA Transcript 286 and Mihlenstedt v Barcklays Bank International Ltd [1989] IRLR 522, the beneficiaries under a pension scheme such as this are not volunteers. Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto their contributions”

Warner J at pp 550 stated in relation to a scheme enabling, on liquidation of the employer, any surplus in the fund to be paid at the absolute discretion of the employer to secure further benefits for members, but leaving any further balance to the employer:

“In my opinion it is not correct to say that the rights of the beneficiaries under the scheme are satisfied when they have received their mandatory benefits and that anything more lies in the bounty of the employer. I think the beneficiaries have aright to be considered for discretionary benefits”.

Notes

Referred to in Re UEB Industries Ltd Pension Plan [1992] 1 NZLR 294

Mettoy had gone into liquidation; there was a substantial surplus in the Members’ pension fund. Under the Rules of the find, if the pension scheme were wound up, the surplus was subject to a power of appointment; any money not so appointed went to Mettoy itself.

The power of appointment was held by the Employer and not the separate Trustee.

Rule 13(5) provided as follows:

Any surplus of the trust fund remaining after securing all the aforesaid liabilities in full may, at the absolute discretion of the employer be applied to secure further benefits within the limits stated in the rules, and any further balance thereafter remaining shall be properly apportioned amongst the principal employer and each participating employer.”

Warner J found that the power of appointment was a fiduciary one.

Warner J adopted a fourfold classification of fiduciary discretions:

  • (i) powers given without any obligation on the powerholder to exercise the power or preserve it; there was no duty to exercise the power, the power could be released, but there could not be a fraud on the power (Re Mills, Mills v Larence [1930] 1 Ch 654; [1930] All ER Rep 355) {Not a fiduciary power},
  • (ii) powers conferred on the trustees or other trustees of the power itself; the power cannot be released; there is a duty to the objects to consider, as and when may be appropriate, whether and if how he ought to exercise it (Re Manistry’s Settlement [1973] 2 All ER 1203, Re Hay’s Settlement Trusts [1981] 3 All ER 786 {“a fiduciary power in the full sense“};
  • (iii) any discretion which was really a duty to form a judgement to the existence of particular circumstances giving rise to particular consequences {Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896};
  • (iv) discretionary trusts; the holder of the discretion is under a duty to select from amongst a class of beneficiaries who is to receive, and in what proportions, income or capital of the trust property [1991] 2 All ER 513 at 545-546).

Werner J held that the power came within category (ii); to hold otherwise would have rendered the position of the beneficiaries – those entitled or potentially entitled to pensions – illusory.

Furthermore the objects of the power, the pensioners, were not volunteers, as the fund surplus had arisen partially from their own pension contributions, and not from successful investments or over-contribution by the employer alone { [1991] 2 All ER at 550-551. Also see Thrells Ltd v Lomas [1993] 1 WLR 456; Re Williams Kakin & Sons Ltd [1993] OPLR 171}

If the power were not fiduciary, the surplus would vest in the liquidator, the pensioners having no effective legal claim on it and it would be available for the creditors, just as in Re Courage Group’s Pension Scheme.

In this case there was a fiduciary power with no one to exercise it since the Directors of the Employer had been replaced by a Liquidator who had a duty to the creditors of the company..

The effect is that whether a mere power of appointment (albeit a fiduciary power) or a trust power is created is a highly speculative question. The court is required to place itself in the position of the settlor and consider whether the author of the trust intended to “authorise” (mere power) of “compel”  (trust power) the trustees to distribute the fund.

 

In Mettoy Pension Trustee Ltd v  Evans [1991] 2 All ER 513 it was discovered that the appointment of a sole corporate Trustee in 1980 had been ineffective and did not discharge Five natural person trustees who had purported to retire. The terms of the Trust required that there have to be at least three trustees. Therefore a revised Deed was executed on the 15 March 1983 where three of the natural person trustees signed the revised Deed which had been amended to provide for the valid retirement of the natural person trustees in favour of a body corporate.

 

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