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Exoneration clause protected trustee whose negligence was not “conscious” 2

United Kingdom
22/02/2007
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Reference: L00418

The claim was brought against a former trustee of the company’s pension scheme, who had also been chairman of the now-dissolved employer. Following wind-up of the underfunded scheme, members’ pensions had been scaled back by up to 97%.



The acts complained of took place in the late 1980s and early 1990s. The trustees had not collected employer contributions due, had failed to keep records of disinvestment, used 20% of scheme assets to buy the employer's premises without a valuation, and then failed to seek to recover the employer’s rent on the property. They had also failed to take actuarial, investment or legal advice in relation to any of these actions.



This unsurprisingly amounted to negligence, but the liability of the former trustee turned on the meaning of the exoneration clause, which restricted personal trustee liability to “breach of trust knowingly and wilfully committed”. The Ombudsman felt unable to hold, on the facts, that the trustee had been “consciously negligent”. As such, and following case law, his acts fell short of knowing or intentional breach of trust and no direction would therefore be made against him.

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