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AON Pension Trustees Ltd v MCP Pension Trustees Limited [2010] EWCA Civ 377

Author: Jo Summers & Caroline Eady ( - 16/11/2010

The Facts

AON Pension Trustees Ltd (AON) had been retained by MCP Pension Trustees Ltd (MCP) to administer the Maxwell Communication Works Pension Scheme (“the Scheme”) from 1992 to 1997. In 1996, 32 people were transferred into the Scheme from a plan operated by another Maxwell Group employer but, when the Scheme was wound up in 2003, these members were overlooked and did not receive their benefits. Once the oversight came to light, MCP had to make a claim on their overlooked beneficiary insurance policy. The insurance covered the benefits due to 19 of those ‘overlooked beneficiaries’ for whom provision had to be made. The final amount due was over £1million.

MCP alleged that this oversight had arisen because, at some point after the transfer of these 32 people, AON had incorrectly amended their records to remove reference to them. At the behest of their insurers, MCP sought damages in respect of the loss alleged to have been suffered as a result of AON’s breach of contract or negligence in the provision of administration services.

AON disputed the claims on various grounds, one of which relied upon the fact that MCP had undertaken an extensive advertising campaign prior to the winding up of the scheme, in accordance with the requirements of section 27 of the Trustee Act 1925. Since none of the overlooked members responded to the notice, AON contended that MCP did not have notice of their claims and were therefore protected from liability. Consequently, AON argued, the insurance monies should not have been paid out and the claims against AON could be dismissed.

Given the potential importance of such a defence, the parties agreed to have it tried as a preliminary issue and this was heard before Mr Jeremy Cousins QC in May 2009, sitting as a Deputy Judge in the High Court (MCP Pension Trustees Ltd v AON Pension Trustees Ltd [2009] EWCH 1351 (Ch)). It was then appealed and heard by Lady Justice Arden, Lord Justice Dyson and Lord Justice Elias.

Section 27 Trustee Act 1925 – Protection by means of advertisements

This provision is a useful means of protection for trustees. It allows them to advertise in the London Gazette and other suitable newspapers for any creditors or beneficiaries of whom they have no notice. After the specified period, not being less than two months, the trustees can safely distribute the trust property to those beneficiaries of whom it has notice and generally avoid liability in respect of others.

The full text of the provision is as follows:

"(1) With a view to the conveyance to or distribution among the persons entitled to any real or personal property, the trustees of a settlement, trustees of land, trustees for sale of personal property or personal representatives, may give notice by advertisement in the Gazette, and in a newspaper circulating in the district in which the land is situated and such other like notices, including notices elsewhere than in England and Wales, as would, in any special case, have been directed by a court of competent jurisdiction in an action for administration, of their intention to make such conveyance or distribution as aforesaid, and requiring any person interested to send to the trustees or personal representatives within the time, not being less than two months, fixed in the notice or, where more than one notice is given, in the last of the notices, particulars of his claim in respect of the property or any part thereof to which the notice relates.

(2) At the expiration of the time fixed by the notice the trustees or personal representatives may convey or distribute the property or any part thereof to which the notice relates, to or among the persons entitled thereto, having regard only to the claims, whether formal or not, of which the trustees or personal representatives then had notice and shall not, as respects the property so conveyed or distributed, be liable to any person of whose claim the trustees or personal representatives have not had notice at the time of conveyance or distribution; but nothing in this section—

(a) prejudices the right of any person to follow the property, or any property representing the same, into the hands of any person, other than a purchaser, who may have received it; or
(b) frees the trustees or personal representatives from any obligation to make searches or obtain official certificates of search similar to those which an intending purchaser would be advised to make or obtain.

(3) This section applies notwithstanding anything to the contrary in the will or other instrument, if any, creating the trust."

Does s27 apply to pension trustees?

AON’s submission addressed the question of whether section 27 could be applied to pension schemes and invited the High Court judge to express a view on the issue, by way of assistance to pension scheme trustees generally.

The judge noted that there is no authority directly addressing the question. However, he accepted that pension trusts clearly fall within the meaning of “trusts for sale of personal property” used in the Act. Reference was also made to two earlier cases, Kemble v Hicks (No 2) [1999] PLR 287 and NBPF Pension Trustees Ltd v Warnock-Smith & ors [2008] 33 PDLR, where it appears to have been assumed that s27 would apply to pension trustees.

The judge’s attention was drawn to textbooks and articles, which stated that s27 was sufficiently wide to include pension schemes, and he was told that in practice s27 had been used many times previously by pension trustees.
Based on these factors, the judge was persuaded that the section was sufficiently widely worded as to apply to pension schemes in principle. He commented: "there is a very widespread body of opinion amongst those experienced in pension schemes practice that the section is of application."

It is refreshing to see a judge paying such close attention to what happens in practice, in the absence of direct judicial precedent. The Court of Appeal, in turn, heard no argument on this point but found the judge’s reasoning 'highly persuasive'.

What constitutes notice?

Having established that pension trustees can rely on the protection afforded by s27, the question was whether these trustees had notice of the ‘lost beneficiaries’. If the trustees had notice of the potential claims, they could not rely on s27 even if those beneficiaries failed to reply to the advertisements placed by the trustees.

This was confirmed by the case of Re Land Credit Company of Ireland (1872) 21 WR, where the courts held that if the trustees have knowledge of a claim, they cannot "avoid satisfying it by the mere publication of advertisements." This case was decided under the provisions of Lord St Leonard’s Act, the predecessor to the 1925 Act. The Privy Council came to the same conclusion, in relation to the New Zealand equivalent provisions, in the Guardian Trust case [1942] AC 115.

This leads to the question; what actually constitutes notice? There is no definition in s25 or indeed anywhere else in the Act.

AON claimed that notice and knowledge are effectively the same thing, so that if one lapses the other does too. But the judge agreed with MCP, finding that knowledge and notice could not be equated.

The Court of Appeal focused on what constitutes ‘actual’ rather than constructive notice. It was accepted that the trustees had known, at one point, of the existence of these additional beneficiaries. Again AON argued that by forgetting that information, the trustees no longer had actual notice of those beneficiaries’ claims at the time of distribution.

The Court of Appeal gave short shrift to these arguments. Lord Justice Elias held it is ‘irrelevant’ whether the trustees have forgotten that they had notice of claims. “Once actual notice is given, then in general it will persist and remain notice at the time of distribution”.
Actual knowledge is not, therefore, relevant for the purposes of section 27. A trustee could forget a fact of which he previously had notice and this would not serve to negate that notice at the time of the distribution.


The judge held that, on the true construction of section 27, MCP could not be protected by the provision because they had notice of the new members and their identities at the time of the transfer in 1996. They were, as a result, liable to the overlooked members and it was correct that the insurance monies had been paid out.

He also made the point that a pension scheme trustee, who had been aware of a member’s interests at some time in the past, should not escape liability for incorrectly distributing funds due to the trustee’s oversight or that of his agent.

The Court of Appeal agreed, commenting: "It would be astonishing if, as between the interests of the innocent beneficiaries and forgetful trustees, Parliament had intended to give precedence to the interests of the latter".

The outstanding issues, i.e. as to whether AON had been negligent or had acted in breach of contract, are yet to be heard.

Other protections

There are a couple of other options available to protect trustees but they have their drawbacks. The trustees may consider holding back a reserve fund but this may not be practical in light of the 12 year period afforded to beneficiaries of trusts under the Limitation Act 1980. Alternatively, the trustees could obtain indemnities from the other beneficiaries but, again, this may not be practical where there are a large number of beneficiaries. It also involves an element of risk as the trustees may not be in a position to recover the money and is not an option where there are minor beneficiaries involved.

Finally, as pointed out by Mr Justice Elias in his Court of Appeal judgment, if trustees are found to have acted in breach of trust, it may be possible for them to obtain relief from liability by relying upon section 61 of the Trustee Act 1925.

This section provides as follows:

"If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve him either wholly or partly from personal liability for the same."

In fact, the question of whether MCP could claim relief under section 61 was originally proposed as a preliminary issue, to be heard together with the section 27 point, but it was not pursued.


This case makes it clear how important it is for trustees to keep accurate and up-to-date records of their beneficiaries, if they hope to rely on the protection afforded by section 27 Trustee Act 1925. Trustees should also consider taking out insurance, particularly when dealing with a large number of beneficiaries over a long period of time. Where a beneficiary is known to have existed, but has later been overlooked, then section 27 cannot offer protection. Again, insurance is likely to be the trustees’ best means of protection.

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Please Note:
These articles were based on the legislation in force at the date of publication. The laws may well have changed since. These articles should not be taken as being or replacing proper legal advice.


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