Summary

It was not appropriate to appoint substitute trustees over company pension funds in place of administrators of the company and nor could remuneration be authorised.

Facts

Application by Polly Peck International plc (in administration) ('PPI') seeking an order to appoint an independent trustee to manage two pension schemes ('the schemes'). The current administrators, Price Waterhouse Coopers ('PWC'), brought the action on behalf of PPI and sought that the Trustee Corporation Ltd ('TCL') be appointed in place of PWC and that TCL be granted entitlement to claim expenses and remuneration out of the assets of the schemes. PWC had decided that the schemes should be wound up since no contributions were received into them any more. Until then, PPI had managed the schemes without expense to the funds of the schemes. The orders requested were deemed necessary by PWC because, under the terms of the schemes themselves, there was no provision for remuneration of trustees. Evidence was presented which suggested there might be a conflict of interest where PWC was under a primary duty to realise the assets of PPI for the benefit of creditors, whereas costs which would fall on and reduce the estate's assets, would be incurred by the trustees. A potential conflict was also perceived where the pension fund of Asil Nadir was concerned, that fund standing at about £700,000, because the company was the largest creditor of Mr Nadir. In addition, PWC highlighted various supposed practical difficulties, which they believed would be experienced by themselves as administrators in winding up the main scheme, but not by professional trustees. The respondent ('H') opposed the appointment and remuneration and sought an order to represent the interests of all parties entitled to benefit under the schemes and that all judgments or orders be binding on them. The bases of the applications where: (i) on earlier assurances that the administration would not adversely affect the schemes; (ii) on a rebuttal of the claimed conflict concerning Asil Nadir; and (iii) that the appointment of TCL would not further the beneficiaries' interests.

Held

(1) Section 8 Insolvency Act 1986 provided that under an administration order the affairs, business and property of the company should be managed by a person ('the administrator') appointed for that purpose by the court. Subsection 3 defined certain "purposes", and under subs.2 it was clear that once appointed, an administrator's duties included managing the "affairs" of the company. "Affairs" added something to the duties beyond business and property. A pension scheme and trusteeship set up by a company were part of the "affairs". Section 14 dealt with the powers of administrators and at s.14(1)(a) provided that an administrator may do all such things as might be necessary for the management of the affairs, business and property of the company. Therefore, the proper discharge of the duties of the trustee was necessary for the management of the company's affairs: Denny v Yeldon & Ors (1995) 3 All ER 624.

(2) The schemes provided for neither remuneration of trustees nor recovery of expenses. It could not be argued that s.30(2) Trustee Act 1925 permitted trustees to recover expenses, since s.69(2) of that Act prevented such a power arising where a contrary intention was shown in the trust instrument, and such a contrary intention was shown. Thus PPI, or PWC on its behalf, were bound to discharge the relevant duties of a trustee without charge to the assets. This was not an application that PPI should be remunerated, which would have been refused, although the court had an inherent jurisdiction to authorise payment: In re Duke of Norfolk's Settlement Trusts Perth (Earl) & Anor v Fitzalan-Howard & Ors (1982) 1 Ch 61. The court would be careful to protect the interests of the beneficiaries but it was also of great importance to the beneficiaries that the trust should be well administered. The court had to look at all the circumstances to see if it should authorise or increase remuneration. On the evidence, no further payments were necessary to secure the proper administration of the schemes or the interests of the beneficiaries. It would be wrong to direct the pension funds to bear any part of the administration costs. If, in a liquidation or administration, it was appropriate to wind up a scheme, it was equitable for the cost to be met out of any free assets of the company. The position might be different if the pension scheme, unusually, had provided that the company could charge for acting as trustee.

(3) These considerations also applied to the question whether to appoint TCL, which would not accept appointment without remuneration. If the court would not direct payment out of the trust funds to PWC, there was no justification for directing payment to any substitute such as TCL unless it could provide significant beneficial services that PWC could not. Under s.41 Trustee Act 1925 the court was empowered to appoint a new trustee if it was found "expedient", and in the circumstances of the case it could not be expedient to appoint a new trustee if, as here, it was not expedient to pay that trustee. The root of the application was that appointment of TCL would save money but that submission had to fail because under the present regime there was no cost to the assets of the schemes in any event. Nor did the evidence support a conclusion that TCL had any expertise not available to PWC, which was a leading firm of accountants, or that TCL would be more "cost-effective". On the contrary, there was likely to be a duplication of costs.

(4) As to the perceived conflict relating to Mr Nadir's pension fund, if the legal position was clear, the trustee would be obliged to follow the law, and if not the question would be referred to the court. Therefore no conflict was likely whoever was the trustee.

(5) PWC were, and remained, under a duty to discharge the duties of PPI as trustee of the schemes as part of the administration and without charge on the pension funds. Payment to PWC out of the funds would have been declined, and since TCL would not accept appointment without remuneration it was not "expedient" to appoint them as substitute trustees.

Application refused.