David Whitehead Sons Limited Small Self Administered Scheme Cas 59054 · CAS-59054-Y3C4

CAS-59054-Y3C4

Ombudsman’s Determination Applicant: Mrs Y

Scheme: David Whitehead & Sons Limited Small Self Administered Scheme (the SSAS)

Respondents: Mr L

Rowanmoor Executive Pensions Limited and Rowanmoor Trustees Limited (Rowanmoor)

Complaint Summary Mrs Y has complained that the Trustees of the SSAS have failed to pay her the death benefits to which she is entitled in a timely manner. In particular, Mrs Y has complained that Mr L is doing all he can to frustrate and delay the process, including failing to provide Rowanmoor with an up to date portfolio valuation.

Summary of the Ombudsman’s Determination and reasons The complaint is upheld against Mr L because his actions in relation to the payment of Mrs Y’s benefits amount to breach of his fiduciary duty as a trustee.

Detailed Determination Material facts

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“The members’ entitlement to benefits are determined by the contributions made to the Scheme on their behalf and the investment income earned on these contributions, but are subject to the maximum benefits allowable under Inland Revenue regulations.”

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The 2003 Valuation Report noted that the purpose of the valuation was to check that the intended contributions to the SSAS and the resulting benefits were within Inland Revenue limits. It recorded total employer contributions in each of the years ending September 2000, 2001, and 2002 at £20,000. The total member contributions in each of these years was £2,954. The 2003 Valuation Report concluded:

“The maximum contributions permitted by the Inland Revenue for the current triennium are set out below:

Annual contribution [Mr L] [Mr Y]

expressed as a percentage 41.3% 58.3%

of each year’s remuneration

in the first year of the triennium £16,070 £19,080

based on current remuneration

These contributions are the maximum contributions for the member to all schemes of the Employer.

I confirm that the current level of the members’ contributions being paid towards the scheme is within Inland Revenue limits.

1 The actuary had assumed continuous service and continued rights for the purposes of the valuation.

3 CAS-59054-Y3C4 Contributions can be paid at a lower level but not at a higher level than those shown. In particular it should be noted that if remuneration fluctuates, the maximum payable is the fixed percentage of that variable remuneration.”

“The last report was prepared as at 13 September 1999 and there have been no major changes, however, it would appear the assets have been split incorrectly in the last report. Therefore, I have re-visited the split since we took over this scheme.

Also, the IFA confirmed the [Company] was part of the Lonrho Textile Group that was sold out in 1996. For the purposes of the calculations I will assume that the members are entitled to continuous service and continued rights.

Also, the GMP value was incorrectly calculated in the report …”

“During the lifetime of the SSAS, we have assumed that the employer contributions to the scheme would be split pro rata to the employee contributions … thus giving the following split for the year to September 2004, and any previous years as:

[Mr L] £10,959

[Mr Y] £9,041

The member contributions are genuine contributions to the SSAS by [Mr L] and myself, which are represented by deductions each month from our respective salaries and paid into the SSAS bank account …”

2 Then James Hay Pension Trustees Ltd. 3 A copy of the schedule has not been supplied to the Pensions Ombudsman’s Office.

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“… subject to the legal point of whether an agreement made in a conversation between the directors counts as a company decision, we believe that the more credible split is the 54.80% to [Mr L] / 45.20% to [Mr Y] split.”

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Mrs Y’s position

Mr L’s position

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Rowanmoor’s position

Conclusions

“A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may

4 Bristol and West Building Society v Mothew [1996] 4 All ER

10 CAS-59054-Y3C4 conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal.”

“A conflict of interest may arise when a fiduciary … is required to take a decision where:

1. the fiduciary is obliged to act in the best interests of his beneficiary; and

2. at the same time he has or may have either

1. a separate personal interest or

2. another fiduciary duty owed to a different beneficiary in relation to that decision, giving rise to a possible conflict with his first fiduciary duty, which needs to be properly addressed.”

5 Marks and Spencer v Freshfields Bruckhaus Deringer [2004] 3 All ER 773 6 CAS-35438-M6P6

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“5.1 The Employers shall make such contributions to the Scheme as the Principal Employer may from time to time agree with the Trustees. ...” (Emphasis added)

“5.2 An Employer may at any time pay additional contributions to the Trustees provided that this does not prejudice Registration and the Trustees are satisfied that this will not result in the Scheme being treated as having made an Unauthorised Payment …” (Emphasis added)

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Directions

Anthony Arter Pensions Ombudsman

20 January 2022

7 Section 206, Finance Act 2004

14 CAS-59054-Y3C4 Appendix 1 Trust Deed and Rule of the SSAS

“Decisions at Trustee meetings (or sub-committee meetings) must be unanimous. If the Trustees cannot reach a unanimous decision on any matter (excluding decisions relating to the termination or winding up of the Scheme) the matter shall be referred to an expert unanimously appointed by the Trustees whose determination shall be binding on the Trustees …”

“… the Trustees may delegate and/or authorise the sub-delegation of all or any of their powers, duties, trusts or discretions (including this power to delegate) to any person …”

“13 Exclusion of Liability

13.1 To the extent permitted by law and subject to clause 14 and sections 33 and 34 of the 1995 Act no Trustee shall incur any liability for:

(a) the exercise or failure to exercise any power or discretion;

(b) acting as a Trustee of the Scheme;

(c) the acts and omissions either of co-Trustees, agents, Advisers or any other pension, or

(d) any other act or omission.

13.2 Subject to clause 14 the Employers (on a joint and several basis) shall indemnify each and all of the Trustees against any costs, claims, demands, expenses, proceedings and liabilities which they may incur through acting as a Trustee of the Scheme except in cases of fraud by any Trustee (where the Trustee who committed fraud and any Trustee who knowingly ignored the fraud shall not be indemnified). Subject to section 31 of the 1995 Act, should the Employers fail to indemnify them (whether in full or in part) the Trustees shall be entitled to be indemnified from the Fund ...”

“14 Limitation and extent of protection

15 CAS-59054-Y3C4 14.1 The provisions of clause 13 shall not protect a Trustee in relation to any breach of trust arising out of fraud.

14.2 If the inclusion of any words in clause 13 and/or this clause 14 would at law render ineffective any protection given to any Trustee (whether given by law or under this Definitive Deed) then the clause is to be construed otherwise to the minimum extent necessary so that the protection would not be rendered ineffective.

…

14.4 No indemnity under clause 13 shall apply in respect of any loss or liability that is covered by any insurance policy or policy of indemnity. Where the terms of any such insurance or policy of indemnity provide that cover will only be provided to the extent that an indemnity is not available from another source, no indemnity under clause 13 shall have effect in relation to any liability which would otherwise be fully covered by the insurance of policy of indemnity.”

“16.1 The Fund shall be vested in the Trustees as joint tenants and held by them upon irrevocable trusts in accordance with the terms of the Definitive Deed.

16.2 All monies, assets, investments and property received by the Trustees for the purposes of the Scheme shall form part of the Fund …”

“… the monies, assets, property and investments held for by or on behalf of the Trustees on the trusts of and for the purposes of the Scheme and which from time to time constitute the fund of the Scheme. It includes (but is not limited to) contributions from Employers and Members, assets accepted or acquired by the Trustees for the Scheme and any resulting investment gains, returns or interest. This expression includes where appropriate any part of the Fund.”

“32.1 Except as provided for expressly in the Definitive Deed the Trustees shall have full power to determine conclusively any questions or matters of doubt concerning the Scheme or the construction of the Definitive Deed …

32.2 Such determination shall be binding on all interested parties.”

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“5.1 The Employers shall make such contributions to the Scheme as the Principal Employer may from time to time agree with the Trustees. The Employers shall contribute only such sums as relate exclusively to the benefits to be provided in respect of employment with that Employer.

5.2 An Employer may at any time pay additional contributions to the Trustees provided that this does not prejudice Registration and the Trustees are satisfied that this will not result in the Scheme being treated as having made an Unauthorised Payment. Such contributions may be made either for the general purposes of the Scheme or for one or more of the specific purposes referred to in this Definitive Deed …”

“At any time from a Member attaining Normal Minimum Pension Age … the Trustees may apply all or such part as they may determine of a Member’s Accumulated Credit towards the provision of a Scheme Pension or the purchase of a Lifetime Annuity.”

“… in relation to any Member … that part of the Fund which is determined by the Trustees subject to the following provisions of this definition as relating to the relevant Person at that time, having regard to:

(a) the contributions paid into the Scheme on behalf of the Person by the Employers and … by the Person;

(b) any transfer amounts paid into the Scheme on behalf of the Person;

(c) the income and capital position of the Fund (after allowing for expenses and other deductions); and

(d) any other matters which the Trustees consider appropriate.

Nothing in this definition shall confer on any person any right to any specific assets of the Fund which may be allotted to him on a notional basis for the sole purpose of determining the value of his Accumulated Credit from time to time. The Trustees may … have regard to the advice of an Actuary …

The Trustees shall in exercising their powers to determine the Accumulated Credit in respect of a Person exercise them in such manner that they are satisfied that their determination will not result in an Unauthorised Payment, or in an Unauthorised Payment being treated as having been made …”

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“In respect of benefits expressed to be payable in accordance with this Rule (“Death Benefit”):

(a) any Death Benefit shall be held separately from the rest of the Fund on discretionary trusts to be distributed on such terms and in such shares as the Trustees decide to or for the benefit of any of the deceased’s Death Benefit Beneficiaries …

(b) all Death Benefits shall be distributed within two years of the date of death of the deceased. If all or part of a Death Benefit remains unpaid at the end of two years from the date of death it shall be retained for the general purposes of the Scheme …”

18 CAS-59054-Y3C4 Appendix 2 Robert Graham & Co Report

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Findings

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24 CAS-59054-Y3C4 Appendix 3 Details of salary and dividend payments

Benefits paid to Mr Y between April 2006 and April 2011

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