Invalidly appointed trustees and the validity of their decisions

2 November 2009

Summary
Can decisions of trustees be overturned if a number of those trustees were appointed invalidly? The Pensions Ombudsman’s (Ombudsman) judgment in the recent case of Rath-v-The Trustees of the Association of Investment Trust Companies Pensions and Life Assurance Scheme has shown that the decisions of trustees should not be invalidated just because one of the trustees had been invalidly appointed.

Mr Rath’s complaint

Mr Rath complained about a number of decisions that the trustees (the Trustees) of the Association of Investment Trust Companies Pensions and Life Assurance Scheme (the Scheme) had taken. He additionally complained that at least one of the Trustees (Ms Ferguson) had not been properly appointed.

Mr Rath provided evidence that Ms Ferguson had acted as a Trustee from 1 October 2004 although a formal deed of appointing her was not executed until 14 January 2008. Mr Rath stated that along with the other Trustees, she had made important decisions concerning the administration of the Scheme and the distributions of the Scheme’s surplus assets. He complained that the decisions that the improperly appointed Trustee had been party to should be declared invalid, because of the irregularity of Ms Ferguson’s appointment.

The Trustees responded that even if Ms Ferguson’s appointment was invalid, this did not invalidate the decisions she and the remaining trustees had taken. She had only made decisions along with the other Trustees. It would be wrong to invalidate all of the decisions of the Trustees merely because one of them may have been incorrectly appointed.

Following inconclusive negotiations, aimed at settling this dispute with the Trustees, Mr Rath referred his complaint to the Ombudsman.

Ombudsman’s ruling

In rejecting Mr Rath’s complaint, the Ombudsman stated:

“If (and I make no such finding) Mrs Ferguson’s appointment cannot be regarded as confirmed retroactively, that would not invalidate the decisions made by the other trustees during the period she was acting as if appointed.”

Comment

It is always important to ensure that trustees are appointed correctly. There are a number of ways of resolving issues of appointments that may not be valid. One such method is to retrospectively confirm the appointment of the trustee, if the scheme rules will allow it. In Mr Rath’s case, the fact that collective decisions had been taken by a number of Trustees and not just one, ensured that despite an appointment that could be invalid, the decisions of the Trustees would not be invalidated.

For the full text of the case, please click here.