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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> NBPF Pension Trustees Ltd. v Warnock-Smith & Anor [2008] EWHC 455 (Ch) (14 March 2008) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2008/455.html Cite as: [2008] EWHC 455 (Ch), [2008] Pens LR 211, [2008] 2 All ER (Comm) 740

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand. London, WC2A 2LL
		14/03/2008

Mr Justice Floyd:

1. This is an application by trustees to obtain the sanction of the court to the distribution of remaining surplus funds the subject of two occupational pension schemes, and to their purchase of insurance to obviate the need for the further retention of reserves. It is all about the last knockings of the fund.
2. The two pension schemes are known as BEST and NBPF. The Trustees are Bus Employees Pension Trustees Limited ("BEPTL") and NBPF Pension Trustees Limited ("NBPFPTL") respectively, the Claimants in the two actions.
3. BEST and NBPF are the former pension schemes of the National Bus Company ("NBC") which was privatised between 1986 and about 1989. At the conclusion of that process BEST and NBPF were purportedly wound up and the benefits of those members who had not already left as a result of the privatisation process or otherwise were bought out with Standard Life, the insurance company. In 1990 (pursuant to a Deed of Variation entered into in relation to each scheme dated 14 November 1986), the surplus in both schemes (amounting jointly at that time to about £200 million) was paid to NBC. The Secretary of State for the Environment Transport and the Regions ("the SoS") later became the statutory successor in title to NBC.
4. The assets which have been and are to be distributed were recovered by BEPTL and NBPFPTL in late 1999 in settlement of actions brought by them against the SoS, following a complaint to the Pensions Ombudsman by Mr Frank Wheeler, a BEST pensioner and now one of the representative Defendants in the BEST action. The recoveries amounted to about £300 million in BEST and about £55.77 million in NBPF.
5. Doubts about the validity of the 1986 Deed of Variation were compromised in July 2001 in Part 8 Claims on 7 November 2000 brought by BEPTL and NBPFPTL to determine these questions. The so-called "Eligibility Compromise" in relation to NBPF and BEST was approved by Mr Justice Hart and embodied in two Orders dated 24 July 2001.
6. The Eligibility Compromise determined which categories of person in each scheme were eligible to benefit from the exercise of the Trustees' discretion over the sums which had been recovered from the SoS. The Eligibility Compromise also determined which powers were available to the Trustees. The broad effect of the compromise was that all persons who had been members of BEST and NBPF since 30 April 1986 (and those claiming through them) became eligible to benefit from the exercise of the Trustees' discretion over the surplus recovered from the SoS, but the varying strengths of their respective cases would be reflected in percentage discounts applicable to different categories of claimant.
7. Schemes of distribution (the so called Final Distribution, although, because of the need for the Reserve, it was not) were proposed by the Trustees in relation to NBPF and BEST. By Orders dated 27th March 2002 Lloyd J, as he was then, authorised and permitted the Trustees of each of the schemes to distribute the assets of their respective scheme in the manner set out in the schedule to his Order.
8. The Schedules to Lloyd J's orders provided for a untraced beneficiaries and a Reserve fund as follows -

"12.4 Untraced beneficiaries: where [NBPFPTL][BEPTL] is unable to trace any Included Beneficiary despite having made all reasonable efforts to do so, the Actual Share attributable to that Included Beneficiary shall, if [NBPFPTL][BEPTL] so decides, be added to the Reserve.

16. Reserve

[NBPFPTL][BEPTL] will set aside an initial amount of [£4.5 million][£8.5 million] to deal with unexpected issues which, although anticipated, cannot be dealt with in advance of distributing the bulk of the Actual Shares (since to do so would severely delay the distribution) or which require to be dealt with in a manner that could not reasonably be foreseen in advance."

9. The amount of the Reserve in NBPF is £ 5.5 million approximately (compared with about £55.77 million recovered, i.e. about 10%) and the Reserve in BEST is £16 million approximately (compared with £300 million recovered), i.e about 5%.
10. The Trustee of each scheme wishes to complete the distribution of all of the assets under its control and to wind up the scheme of which it is a Trustee. The proposed manner of distribution in relation to the reserve remaining in each scheme is set out in two witness statements in the BEST proceedings of Ms. Carolyn Saunders, the responsible solicitor in Taylor Wessing who are solicitors for the claimants, and a further two witness statements of Ms. Saunders in the NBPF proceedings.
11. The Trustees' discretion to deal with the Reserves of their schemes stems from proviso (3) to rule 49(b) of the BEST rules and proviso (3) to rule 54(b) of the NBPF rules, in each case as modified by paragraph 3 of the Eligibility Compromise. In each Scheme, the relevant rule reads:

"(b) the Fund shall after payment thereout of

(A) all costs charges and expenses of or incidental to the administration and management of the Scheme and the winding up thereof...

be applied by the Trustee in providing non-commutable (subject to proviso (7) below) and non-assignable annuities or contingent annuities (including for this purpose such ancillary benefits, such as death benefits, as in the opinion of the Trustee may be relevant) for the Beneficiaries of the same amounts and subject to the same terms as the pensions referred to below and in the following order of priority..." (followed by detailed provisions on the orders of priority in which "pensions" were to be secured)."

12. Proviso (3) to the relevant rule (which has to be read subject to certain provisions of the Eligibility Compromise) in each case reads as follows:

"If the Fund shall be more than sufficient to provide all of the aforesaid benefits then the excess shall (subject to proviso (8) below [Revenue limits in relation to Approved Funds]) be applied in providing additional amounts of annuities (including any ancillary benefits as aforesaid), as the Trustee shall in its absolute discretion determine, for the benefit of all or any of the Beneficiaries to whom this paragraph (b) refers on such basis as the Trustee with the advice of the Actuary shall decide"

The role of the Defendants

13. As a perusal of the order of Lloyd J shows, the proposals for distribution are necessarily complex. I was told that it was possible to identify over 200 distinct categories of potential recipient.
14. In order for the Court to form a view on whether it can approve the proposed distributions of the remaining funds, it is necessary to have parties before it who can present the Court with a critical analysis of the proposals, and who can present any arguments for saying that the proposals are wholly or partially invalid. It would have been wholly impractical to divide the potential beneficiaries into classes with separate representation. In whatever way the beneficiaries are divided up there will always be conflicts of interest within the classes. At the Eligibility Compromise hearing, Hart J approved of an approach in which a single legal team would consider all the possible objections to the Trustees' proposals. This team was instructed by the beneficiary Defendants who hitherto had represented the two main classes of members in the eligibility litigation, i.e. "the Standard Life Members" and "the Transferees". At the hearing of the application for the approval of the Final Distribution they no longer represented their former classes but instead agreed to instruct solicitors and counsel to carry out the task of examining critically the Trustees' proposals on behalf of the membership generally.
15. The same approach has been taken by the Defendants on the applications now before me. They appreciate that in many cases their legal team will be concerned on behalf of groups of members whose interests conflict with their own. They have nevertheless given their legal representatives a free hand to present any arguments they believe to be relevant. Mr Michael Furness QC appeared at the hearing to perform this function, which I am satisfied he performed with the help of his instructing solicitors Baker & McKenzie, to the very high standards expected in such circumstances.
16. On the Trustees' side full disclosure has been made of the considerations that they have taken into account in formulating the distribution proposals, and there has been wide publicity for their proposals amongst beneficiaries (who have also been made aware of their right to object to the proposals if they disagree with them). The Defendants' legal representatives have raised a series of points with the Trustees which they have responded to.
17. It seems to me that this approach, though not of course perfect, is really the only practicable one in circumstances such as these.

The relevant legal principles

18. It is important to remember that, on these applications, the Trustees are not surrendering their discretion with regard to the manner of distribution. The court is being asked to authorise as lawful the distributions of the reserves formulated by the trustees in the exercise of their discretion: see Hart J in Public Trustee v Cooper (unreported) 20^th December 1999 (p. 31) quoting from an earlier decision in chambers of Robert Walker J and finally quoted in full in Merchant Navy Ratings Pension Fund Trustees Limited v Chambers and others [2001] Pensions LR 137 at [5]. There are four categories of case where the court may be called upon to adjudicate on a course of action, actual or proposed, of trustees:

•    Where the issue is whether the trustee has power to do what is proposed. This is an issue of construction of the trust deed requiring argument from both sides.

•    Where the issue is whether the proposed course of action is a proper exercise of the trustee's powers - for example the trustee is taking a "momentous" decision and seeks the Court's blessing.

•    Where the trustee actually surrenders his discretion for good reason, such as deadlock.

•    Where there is hostile litigation after the event.

19. Apart from certain matters which I will come to, the present proposals fall mainly into the second of these categories. The test which the court should apply when deciding whether to sanction the course of action was set out by Blackburne J in Merchant Navy Ratings Pension Fund Trustees Limited v Chambers and others (supra) where he said:

"The test is whether it can be said that in reaching its decision to implement the proposal, the trustee has taken into account irrelevant, improper or irrational factors, or whether it has reached a decision that no reasonable body of trustees properly directing themselves could have reached: see Sir Richard Scott V-C in Edge v Pensions Ombudsman [1998] Ch 512 at 534B to H as approved by the Court of Appeal at [2000] 3 WLR 79 at 100H to 103E. The court must also be satisfied that the trustee has in fact formed the opinion that it would be desirable to implement the proposal. See Public Trustee v Cooper at page 35."

20. Provided that they do not fall foul of this principle, it is for the trustees alone to weigh up the various factors which impact on their proposals. Their decision cannot be challenged merely because another view might have been taken, unless it is so unreasonable that no reasonable trustee could have reached it. The importance of this principle has been emphasised in the pensions context by the Court of Appeal in Edge v Pensions Ombudsman [2000] Ch 602 at 619 where the Court quoted with approval a passage from the judgment of Sir Richard Scott V.-C in the same case, who said, [1998] Ch 512 at 535:

"Neither a duty to act impartially nor a duty to act in the best interest of all the beneficiaries describes, in my judgment, the nature of the duty on the trustees when considering what steps to take to deal with the surplus. They had a discretionary power to make amendments to the rules in order to provide additional benefits to members, whether pensioners or still in service. It was within their discretion to provide benefits to members in service to the exclusion of members no longer in service. They certainly had a duty to exercise their discretionary power honestly and for the purposes for which the power was given and not so as to accomplish any ulterior purposes. But they were the judges of whether or not their exercise of the power was fair as between the benefited beneficiaries and other beneficiaries. Their exercise of the discretionary power cannot be set aside simply because a judge, whether the Pensions Ombudsman or any other species of judge, thinks it was not fair."

21. It follows, as it seems to me, that where, taking into account the material available, there are a number of rational schemes for distribution which a trustee may take, it for the trustees and not the court to decide between them.

The proposals

22. I have had the benefit of very detailed written and oral argument about the Trustees' proposals in relation to both schemes, and I have been taken through the proposals in relation to each scheme. In particular I have been shown the justification for those aspects of the proposals for distribution of the remaining surplus which do not follow precisely the scheme in relation to the Final Distribution. At the conclusion of the hearing I indicated that I was prepared to sanction the distribution proposals to the extent that they were not opposed by the Defendants. I have applied the principles set out above in coming to that conclusion.
23. Two matters were the subject of some debate, and fall into a different category. To these I now turn.

Taxable payments

24. The first question was whether the Trustees either presently have or should be given (pursuant to Section 57(1) of the Trustee Act 1925) power to make distributions in the form of taxable payments. The issue arises because, as originally set up, the schemes were "Exempt Approved" schemes. In 1989, such schemes would have lost their exempt status if such taxable payments were made. That consequence no longer follows. I should stress that it is not proposed that any beneficiary should receive any amount which would cause his or her benefits to exceed applicable Exempt Approval Limits, on the basis of the information which the Trustees have.
25. Mr Nigel Inglis-Jones QC who appeared on behalf of the Trustees submitted that the Trustees had a power to confer "ancillary benefits" under rules 49((b) or 54(b) of the applicable Trust Deed, and that this power was wide enough to cover the lump sum taxable benefits; alternatively that I should confer the necessary power on the Trustees under section 57(1).
26. I reject the first argument. Each scheme contained a rule in its trust deed (32 in the case of NBPF and 27 in the case of BEST) prohibiting payments in excess of relevant Inland Revenue limits. Reading the rules as a whole I am unable to conclude that there is an existing power to make such a payment.
27. Section 57(1) allows the court to confer on trustees a power in the management or administration of trusts, where the court considers it expedient for the trust as a whole, but not where it would affect the substance of the beneficial trusts themselves: see Lewin on Trusts 18th Edition, paragraphs 45-12 to 45-16.
28. The Trustees' proposals are practical ones aimed at getting some money to particular classes of recipient who are otherwise fully entitled to receive benefits under the scheme. The power is not general, but limited to the specific cases set out in the proposals. I am wholly satisfied that what is proposed is merely a variation in the mechanism for getting that money to its intended recipient, and does not disturb the underlying interests. I therefore decided to make the order sought on this ground.

Insurance and untraced/refusing/unknown beneficiaries

29. The Trustees needed to consider what is to be done about three classes of potential beneficiaries:

i) those beneficiaries known to them but whom they have not been able to trace despite their efforts ("Untraced Beneficiaries");

ii) those beneficiaries known to them who are refusing or failing to accept benefits ("Refusing Beneficiaries");

iii) those beneficiaries or potential beneficiaries about whom they do not know ("Unknown Beneficiaries").

30. As Mr Furness QC submits, there are in principle three things which a trustee can do if faced with decisions such as these:

i) it can cut out the classes from those entitled to benefit;

ii) it can retain a fund to meet the claims of those who may subsequently emerge or change their minds;

iii) it can obtain insurance to cover their claims in some amount and for some period of time.

31. As originally put forward in the sixth witness statement of Ms Saunders, the Trustees' proposal was to include in the reserve to be distributed those assets which represent the aggregate value of the actual shares of the Untraced Beneficiaries. It was also proposed to take out "missing beneficiary" insurance to provide for any beneficiaries who may be overlooked in error: the Unknowns. To this end, quotes had been obtained for overlooked beneficiary cover. As explained by Ms Saunders, this form of insurance sought to protect the Trustee against claims from any beneficiary of whom it was unaware.
32. As a separate matter the Trustees wish to take out "run-off insurance, to offer protection against claims for breach of duty. This form of insurance would cover claims brought by beneficiaries known to the Trustees who have been wrongly unpaid or underpaid.
33. The Defendants questioned the basis for the difference in the treatment of the Unknown and the Untraced beneficiaries. The former were to be protected by insurance and the latter were not. In her seventh witness statement, Ms Saunders reported that the Trustees had reconsidered their proposals regarding the Unknown Beneficiaries. She said that "in the circumstances and as an alternative to taking out the insurance for overlooked beneficiaries" the Trustee "is intending to ask the court to exclude the overlooked beneficiaries from entitlement to participate in any of the surplus funds".
34. The policy of insurance for overlooked beneficiaries provides cover for the Trustees against

"breach of duty by the Trustees by reason of any neglect error omission or act attempted occurring or committed in good faith resulting in

"(a) a claim from a person entitled to be a beneficiary under the Trust but for whom no provision has been made

(b) a claim from a beneficiary under the Trust alleging that the benefits provided are less than that to which he is entitled under the terms of the Trust but in any event the indemnity provided by this clause (b) shall only be operative in the event that the insured shall have affected run-off liability insurance with the Company"

35. The policy of insurance for run-off liability provides cover for the Trustees against

"liability at law for damages and claimant's costs and expenses .... in respect of claims arising out of the conduct of the Trust made against the Insured as Trustees and notified to the company during the Period of Insurance for breach of duty by the Trustees."

The policy excludes liability in respect of "any claim ... from a person entitled to be a beneficiary under the trust but for whom no provision has been made".

36. After the short adjournment on the day of the hearing before me, the Trustees submitted that, despite what was said by Ms Saunders, they now considered that both types of insurance were still needed, even if the court considered that the Unknown Beneficiaries were excluded from entitlement to participate in the surplus funds. This was because they had realised that the cover for a claim from a beneficiary who was known to them and for whom no provision has been made would come from the overlooked, rather than the run-off policy. In those circumstances depriving the Unknown Beneficiaries of the right to their shares in the surplus would not remove the need for the overlooked beneficiary insurance to benefit those who may be known to the Trustees, but for some reason have erroneously not had provision made.
37. The trust deed in BEST, but not in NBPF, contains an exoneration clause providing that the Trustee shall not be liable except in respect of gross negligence or wilful default. The insurers have confirmed that they will not rely on this clause and will pay where there would be liability if that clause did not exist.
38. So far as the Untraced Beneficiaries are concerned the efforts which have been made to trace them are undoubtedly substantial, and further efforts by way of advertisements are to be made between now and an effective cut-off date of 31^st May 2008. I am satisfied that it would be an appropriate exercise of the Trustees' powers to place the shares of this group into the Reserve pursuant to paragraph 12.4 of the order of Lloyd J. It was common ground that the effect of this exercise of their powers will be that the Untraced will not have a claim. The same applies to the Refusers.
39. The question of what to do about Unknown Beneficiaries is more difficult. It is, as Mr Furness QC submits, closely wound up with the question of what to do about insurance.
40. The first question is whether it would be proper for the Trustees at this stage to say that they will not accept claims from beneficiaries unknown to them beyond the cut off date. The Unknown Beneficiaries have been subject to the same advertising, and have had similar time and opportunity to come forward as the Untraced Beneficiaries. Any given beneficiary who discovers that he or she has a claim does not know whether, up to that time, they were Unknown or Untraced - they all belong to the larger generic class of the unreached. If it is proper, as I believe it to be, for the shares of the Untraced to be added to the reserve, with the consequence that their right to claim their share is defeated, I see no compelling reason why the Unknowns should not also be deprived of the right to participate in the surplus. A decision by the Trustees to take that step does not seem to me to fall foul of the standards which they are required to apply in making their decisions. They have to balance, as time marches on, the competing considerations of those who have been found and who are entitled to an increase in their benefits, and those who have not been found and may never be found. The Defendants did not really seek to persuade me that the Trustees could not exercise their power in that way. Moreover they did not seek to persuade me that the Trustees could not properly decide in the exercise of their discretion to treat Untraced and Unknown differently, and I think they were right not to attempt to do so.
41. The real thrust of Mr Furness's argument was that, once the claims of these categories of potential beneficiary have been disposed of by effectively forestalling any claim, the need for expensive insurance of the kind proposed here falls away. The cost is undoubtedly significant. For example the cost of a 12 year policy for run-off liability insurance with a limit of aggregate indemnity of £2 million is £93,500. The cost of overlooked beneficiary insurance with a limit of indemnity of £2 million for an open-ended policy period would be £75,000. Those are the figures for NBPF. The corresponding figures for BEST are twice that: £191,250 and £187,500. The grand total is more than half a million pounds.
42. In Kemble v. Hicks [1999] Pensions LR 287 Rimer J, as he then was, had to consider a similar application by a trustee of an occupational pension scheme of an insolvent company to effect insurance. The proposed cover was very narrow and was confined to claims arising in respect of breach of duty other than wilful default or worse. The cover extended to claims in respect of which the statutory trustee would anyway enjoy the benefit of an exoneration clause. The trustee recognised that, in practice, the cover would only provide indemnity against claims which were anyway doomed to failure, and would therefore only cover the trustee against irrecoverable costs incurred by the trustees in fending off hopeless claims. Rimer J, whilst expressing his sympathy for the trustee's wish to be protected by such cover, approached the matter on the basis that the sole benefit of the insurance was to protect the trustee and was not for the benefit of any scheme beneficiaries or other claimants. He came to the conclusion that he had no jurisdiction to authorise the trustee to purchase the insurance. He held that the cost of taking out the proposed insurance cover could not be described as "expenses of the administration and of the determination of the plan". At paragraph 11 he said this

"if the purpose effect of the cover were to provide benefits for missing beneficiaries or for other claimants under that scheme then the position might be different. That would or might justify the view that the proposed cover was a true substitute for the setting aside of a part of the funds necessary to cater for any such claimants' interests and would or might also justify the conclusion that its cost was truly a cost of the administration of the Scheme."

43. Rimer J also considered in the alternative whether a power could be conferred on the trustee under section 57(1) of the Trustee Act 1925 to effect the insurance. He said

"The difficulty I have with claimed reliance on section 57 is that I do not accept that it is available to authorise trustees to enter into a transaction of a nature not permitted by the trust, deed, and being one intended to be exclusively for their own benefit."

44. Rimer J cited passages from the judgment of Farwell J in In re Craven's Estate, Lloyd's Bank Limited v Cockburn (No. 2) [1937] Ch 431 at 436 and from the judgment of Buckley LJ in In re Earl of Strafford, dec'd, Royal Bank of Scotland Ltd v Byng [1980] 1 Ch 28 at 45, which I set out below:

"the word 'expedient' there quite clearly must mean expedient for the trust as a whole. It cannot mean that however expedient it may be for one beneficiary if it is inexpedient from a broad view of other beneficiaries concerned the court ought to sanction the transaction. In order that the matter may be one which is in the opinion of the court expedient, it must be expedient for the trust as a whole"

" 'Expedient for the trust as a whole' must mean, it seems to me, the same as 'expedient in the interests of all the beneficiaries under the trust', provided that it be kept in mind that in considering the interests of the beneficiaries collectively, trustees must take into account the effect of what is proposed upon the several individual interests of the beneficiaries and hold the scale barely between them".

45. It seems to me that the present case differs from that being considered by Rimer J in a number of respects. Taking NBPF first, there is no exoneration clause. So the Trustees are potentially liable to claims from those whom they have innocently failed to make provision for. In the case of BEST, whilst there is an exoneration clause, the proposed insurance will operate as if there were none. Secondly, and in both cases, the Trustees' proposed distributions have already been the subject of applications to the court for approval. Thirdly, the pension funds being administered in the present case involve very large sums of money and very large numbers of claimants indeed, so the prospect of claims being made is a real one.
46. Mr Furness accepted, in my judgment correctly, that Kemble v Hicks does not foreclose the possibility of trustees having or acquiring powers to effect insurance. He submits however that the insurance policies put forward by the Trustees in the present case offer such limited benefit to the beneficiaries that the court should refuse its sanction. He puts this on two bases, similar to those considered in Kemble, namely (a) it is not within the relevant Rule because it was not a "cost, charge and expense of or incidental to the administration and management of the Fund and the winding up thereof and (b) it was not expedient for the trust as a whole under section 57(1).
47. A far preferable course, he submits, is for an appropriate amount to be retained in the trusts for a defined period to meet future claims.
48. Mr Furness developed his submission by asking forensically, once the court has given its sanction to the arrangements both past and future, and Untraced, Refusers and Unknowns have been excluded from any claim, what possible benefit is there to the trust as a whole? The number of potential claims is very small and, he submits, it is difficult to envisage a claim where no provision has been made where a claim for an indemnity might not be made against some other professional advising the Trustees. The benefit, he submits, is really for the Trustees alone, or at least not sufficiently for the benefit of the trust as a whole to make the exercise a justifiable one. He also draws attention to the need for a claimant under the insurance policy to prove a breach of duty, which he submitted imposed a higher standard than merely showing entitlement to claim from the fund.
49. Mr Inglis-Jones submitted that the insurance would operate for the benefit of the trust as a whole. He submitted that if the relevant Trustee has made an innocent, non-negligent mistake in administering the funds, it will ensure that funds are available even after the trust is wound up. He submitted that the terms of the insurance policy were wide enough to cover innocent mistakes, so that they imposed no higher burden on a claimant than claiming against a fund. He also relies on practical considerations which make the continued retention of the fund less practical, such as the fact that the Trustee directors are no longer prepared to serve, as they would have to if the Fund continues with a further reserve.
50. Taking the run-off insurance for NBPF first, I recognise that the insurance in question is of fairly limited potential application. However, in a trust of this size, with very large funds distributed and numbers of claimants, it is unreasonable to expect trustees to shoulder the risk and burden of claims brought against them for innocent errors that may have occurred in the administration of the fund. In practice they would either have to retain some funds, or obtain cover in some other way.
51. So far as the cost of the insurance is concerned, though substantial, it is in my judgment fair to look at this cost in the context of the total distributions. These are, to date, some £60 million in NBPF and £326 million in BEST. A 1% error in distribution could give rise to a claim for several million pounds. In that context I do not think it is possible to say that the expense is not one which the Trustees can justify.
52. Whilst it is fair to say that the Trustees have also had the luxury of a number of applications to the Court, I do not think that such applications are a substitute for the sort of insurance which is now sought. The Court is sanctioning the overall methodology of the distribution: it has not and could not sanction the execution of that methodology.
53. I also do not think it is an answer to say that the Trustees might have an indemnity against other parties: they may do but they may not.
54. In my judgment, the run-off insurance here is not just for the benefit of the Trustees; it will benefit claimants who have been wrongly paid or unpaid, and will have the capacity to do so for some considerable time to come. It seems to me that in those circumstances the power to effect the insurance properly comes within the terms of the rules. If I am wrong about that, then I authorise it under section 57(1).
55. Rather, more complicated is the fact that in the case of BEST, the insurance is wider than the Trustees' liability because of the exoneration clause in the Trust deed. But Mr Furness did not argue that this fact created a difference between the two schemes now that the effect of the exoneration clause has been waived by the insurance company. The question is not whether taking out the insurance benefits the Trustee, but whether it benefits the trust as a whole. That issue depends on whether it provides real benefits for claimants, which in my judgment it does in both cases.
56. I would therefore in principle be prepared to sanction the purchase of run-off insurance.
57. So far as the missing beneficiary insurance is concerned, I raised at the hearing a concern that the effect of the Trustees' proposals was both to exclude the Unknown Beneficiaries from being able to claim, and to provide insurance cover against the eventuality that they did subsequently claim. As I have explained, certainly until the afternoon of the hearing, these two proposals were looked at as alternatives, and rightly so. It is not clear to me on the material placed before me that the insurance proposal properly takes into account the fact that Unknown Beneficiaries will have no claim. To the extent that it covers those risks, it seems to me that the situation is analogous to Kemble v Hicks: it is insurance for claims which are barred in any event. It does not benefit any claimant. The court should not in my judgment give its sanction to that part of the expenditure which provides cover for this, now excluded risk.
58. In my judgment, the Trustees would be justified either under the rules or pursuant to section 57(1) in obtaining run-off insurance cover and also that part of the missing beneficiary insurance which covers them against claims by beneficiaries known to them (but not Unknown Beneficiaries).
59. It may turn out that the Trustees discover that the cost of insurance cover is no greater if it were to cover the Unknown Beneficiaries as well. They might then feel that, although I have said it would be an appropriate use of their powers, excluding the Unknowns from participation in the fund is no longer appropriate. In reaching that decision, they would have to bear in mind that to do so would result in different treatment as between Untraced and Unknown beneficiaries. That is exactly the sort of balancing exercise which they are best placed to perform, and is not part of the function of the Court to perform for them. If they so decide, then in my view the purchase of insurance to cover the claims of Unknowns who subsequently appear would be justified.
60. It follows that the application succeeds, except to the extent that it seeks approval for insuring against the excluded risk of claims from Unknown Beneficiaries.