Summary

Ombudsman's decision upheld that a Company was estopped from questioning in 1991 the validity of changes in the company's pension scheme which were effected by invalid Board resolutions in 1986.

Facts

Appeal brought under s.151(4) Pension Schemes Act 19953 by an English subsidiary of a US company challenging a decision of the Pensions Ombudsman concerning the implementation of a major restructuring exercise in the company's pension arrangements. This change was effected by Board Resolution and a Deed setting up a new scheme in May 1986 after due notice to scheme members. The only directors of the company at that time were the 1st complainant, Mr Axford ("A") and Mr Hood. In September 1986 Mr Hood resigned from the Board and was replaced by Mr Woodhouse ("W"). At the same time, the 2nd complainant, Mr Bainbridge ("B") was made a director. In 1991 the complainants were unfairly dismissed from their employment with the company and removed from their directorships, their complaints being confirmed by an industrial tribunal. In October 1991 the company failed to pay the complainants their share of the pension funds claiming that the 1986 resolutions were invalid because the second director, Mr Hood, neither knew about, nor signed the Board resolutions. On complaint to the Pensions Ombudsman by the complainants the Ombudsman found that the resolutions were were valid or alternatively that the Company was estopped from questioning their validity and directed the company to make payment. The Company appealed.

Held

(1) Art.106 of Table A (incorporated into the Company's Articles of Association) provided that where one of two directors was absent from the UK, the other director could pass a valid resolution simply by signing a resolution even though the quorum is fixed at two. However after considering commentaries in Gower's Company Law (5th Ed) 160, Pennington's Company Law (7th Ed) 768 and Palmer's Company Law para.8.301, it seemed that Art.106 is ambiguous and was not aimed at making a fundamental change to the quorum requirements. The Ombudsman's view was wrong in law and the resolutions of May 1986 were not valid resolutions. However in the Ombudsman's finding as to estoppel the reality of the matter was that W had come upon the scene as an independent voice when he joined the Board. If he was seeking to question the basis of the new pension scheme it was incumbent upon him to do something about it. His acquiescence was taken by the Ombudsman as sufficient encouragement to make it unconscionable for him to deny the validity of the resolutions. The decision was for the Ombudsman not for the Court. It was only if he applied the wrong principle of law that the Court could intervene and this would only arise if there was no evidence upon which he could reasonably conclude as he did. In fact he had such evidence and was entitled to reach the conclusion he did. Appeal dismissed.