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Cite as: [2014] IEHC 38
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Judgment Title: Greene & Ors -v- Coady & Ors Neutral Citation: [2014] IEHC 38 High Court Record Number: 2012 7254 P Date of Delivery: 04/02/2014 Court: High Court Composition of Court: Judgment by: Charleton J. Status of Judgment: Approved | |||||||||||||||
Neutral Citation: [2014] IEHC 38 THE HIGH COURT COMMERCIAL RECORD NO. 2012/7254 P BETWEEN: JOHN P GREENE, MARCUS AUSTIN, GERALD BARRY, DAVID BEDDAR, DEIRDRE BRODIE, EDWARD A BROOKS, ANDREW PHILLIP BROWNE, PAT BUCKLEY, LES P BYRNE, BRIAN CASLEY, PATRICK CHAPLIN, NOEL CLIFFORD, JOHN CRONIN, THOMAS CULBERT, MARY CULLIGAN, DAN CULHANE, PAT CURRAN, DECLAN CUSACK, KIERAN CUSACK, JOHN AIDAN DALTON, MARGARET DALY, COLM DE BARRA, WILLIAM G DELANEY, CLINTON BRYAN DICKERSON, JOHN DOLAN, GERRY DONNELLAN, TOMMY DOYLE, JOHN L DUDLEY, PATRICK DESMOND EUSTACE, GERARD FAHY, CYRIL FINNUCANE, MARY FITZGIBBON, PAUL FITZGERALD, PETER G FITZGERALD, DAVID FRAHILL, PATRICK J GALLAGHER, BRIAN GREANEY, ANNE PATRICIA GRIFFIN, SHANE GRIFFIN, LIAM HALL, DENIS HARNETT, JOHN HEHIR, THOMAS GERARD HEHIR, JOHN HEALY, MARY HENNESSY, GER HICKEY, PATRICK GERARD HOGAN, TOM HOGAN, MICHAEL HOWE, MICHAEL HUNT, JOHN JAMES KELLY, MARIE KENNELLY, P J KENNEDY, PAUL KENNY, MICHAEL KENNY, EOIN KILKER, JOHN KILLEEN, KEVIN KINSELLA, MICHAEL LAFFIN, CATHERINE LEAHY, MICHAEL LIDDANE, ELWOOD KEVIN LYNCH, JIMMY LYONS, MARIAN E M MALONE, TOM MOLONEY, FINTAN A MOLONY, JOHN FRANCIS MULLEADY, SEAMUS MURRAY, PATRICK JOSEPH MURPHY, KIERAN JOSEPH MCAVINUE, JOHN MCCORMACK, ADRIAN MCEVOY, JIM MCGEE, PAT MCGRATH, MARY MCGUANE, JOHN MCINERNEY, ELIZABETH MCMAHON, ROSE MCMAHON, DAN MCNAMARA, JOHN MCNAMARA, PAUL MCNAMARA, GERALDINE NEYLON, MICHAEL NEYLON, PETER GEOFFREY NICHOLSON, MARY NOLAN MURPHY, JOHN NOLAN, DON NOLAN, MARGARET NOLAN, COLM O'BRIEN, BRENDAN O’BRIEN, GERALDINE O’BRIEN, MICHAEL O’CONNELL, MICHAEL O'CONNELL, TONY O’CONNELL, MOSSY O’CONNOR, RORY O’CONNOR, BRIAN O’DRISCOLL, DOMINICK O’DWYER, GERARD P O’GRADY, RAY O’HALLORAN, MARY O’LOUGHLIN, PEADAR O’LOUGHLIN, JIM O’MEARA, GERRY O’ROURKE, EILEEN O’ROURKE, PAT O’ROURKE, JOHN POMEROY, ALAN POWER, COLM J POWER, JOHN POWER, MICHAEL REA, SHIRLEY REA, PAT REGAN, TONY RYAN, BRENDAN SLATTERY, JAMES P SEXTON, RUTH STANLEY, PETER TALBOT, CHRISTOPHER TAYLOR, NOEL B TAYLOR, SHEILA TREACY, DONALD WALSHE, LIAM WALSHE, EAMONN WELSH, And by Order JOHN BOWLER, THERESA DARCY, MICHAEL MAGUIRE AND JOHN MCMAHON Plaintiffs - and -
DANNY COADY, SIOBHAN DUFFY, DANNY MURPHY, THOMAS O’BRIEN, GERARD O’SULLIVAN AND DERMOT TUITE Defendants Judgment of Mr Justice Charleton delivered on the 4th of February 2013 1.0 The plaintiffs are beneficiaries or potential beneficiaries of the pension fund of Element Six Limited at Shannon Industrial Estate in County Clare. The defendants are the trustees of that fund. The plaintiff beneficiaries claim damages against the defendant trustees for breach of trust in accepting, on 25th of November 2011, an offer of €23.1 million (plus €14 million outside that fund) from Element Six Limited, as the contributor of the pension fund, to close its liability to contribute from the end of 2011. Instead, the plaintiff beneficiaries claim that the defendant trustees should have made a contribution demand for €129.2 million, or more, to make up the funding deficit to the pension fund and that their failure to do so was a wilful default. The trustees divided equally on the issue: the three company nominees voting in favour and the three worker nominees voting against with the chairman Danny Coady exercising his casting vote in favour. That vote is alleged by the plaintiff beneficiaries to have been vitiated by conflict of interest, to have taken into account irrelevant matters, to have ignored relevant issues and to be a decision that no reasonable body of properly informed trustees could have taken. Of the six defendant trustees, three came from company management; Danny Coady, Siobhán Duffy and Dermot Tuite. They gave evidence in this action. Three others came from the operations side; Danny Murphy, Thomas O’Brien and Gerard O’Sullivan. They did not give evidence. Danny Coady, Siobhán Duffy, Gerard O’Sullivan and Dermot Tuite were at the time of the decision active members of the pension scheme, meaning eligible members of the payroll, while Danny Murphy had taken voluntary redundancy in 1993 as had Thomas O’Brien in 2008. 1.1 Pension funds have come under severe strain over the last seven years. With the national banking crisis of 2008 and the context of bank failures in the United States of America, the European Central Bank has set historically low rates of interest. A hidden subsidy from ordinary people to the poor performance of financial institutions is the paltry rate that any bank will now pay a depositor. Deposit rates depend largely on loan rates. Current loan rates are in contrast to what were predicted in business circles in 2006 to be interest rates for bank loans that would rise from already quite high levels. If an income on a fixed capital sum is sought through the banking sector, to now generate a return through a bank deposit equivalent to that of 2006 requires, perhaps, double or more. With the financial turmoil has also come a less certain return on business investments and the capital value of many pension funds has dropped. In addition, those buying into any annuity fund on retirement these days can expect to live for several years longer than their parents’ generation. 1.2 The sixth element in the periodic table of elements is carbon; hence Element Six Limited as the name of the company which was the funder of this defined benefit pension scheme. The company is part of a worldwide multi-national conglomerate that deals in diamonds, including the De Beers companies in South Africa. The Shannon entity used to manufacture diamonds from other forms of carbon in high-pressure presses. The plant was started in 1961. At its height, in 1988, it employed over 1000 people. Since then employment has declined. In 2001 the equipment for manufacturing was moved by the group away from Ireland and other European locations to South Africa; presumably for reasons of cost. This was a big blow to the sustainability of the Shannon plant which was then left with administration and the finishing and distribution of raw industrial diamonds. In 2009, the head company in the group, Element Six Abrasives SA in Luxembourg, announced the closure of the Shannon plant. Apparently this must have been qualified since a plan of survival was quickly put together by the Shannon management. This involved about 300 redundancies and other savings amounting to some €30 million off operating costs. It resulted in the plant being saved. The group then publicly announced that it was in Shannon for sustainable employment into the long term. On the evidence, there are now some 359 employees of Element Six Limited in Shannon of whom about 270 are involved in factory work involving finishing raw industrial diamonds and coating and preparing these for various uses. The rest of the staff members are administrative, management and distribution workers. 1.3 Some employees of the Shannon plant gave evidence. They described it as a very pleasant place to work with good conditions and an uplifting sense of comradeship. Part of the remuneration package up to 2001 was a defined benefit scheme. That is the pension trust in issue here. A defined benefit scheme is one where people work on a promise that on retirement they will get a fixed percentage of their wages. This is in contrast to a defined contribution scheme, where each individual builds up a pot of money by contributions over their working life and it is that pot which is used to fund a pension on retirement; the amount dependent on the vagaries of the market. A defined benefit scheme can be seen, and was presented during this hearing by the plaintiff beneficiaries, as part of the ongoing remuneration of a worker, albeit deferred. From 2001 on, workers joining the Shannon plant could not join the defined benefit scheme. Instead they were entered into a defined contribution scheme. This fixes contributions by the employer as part of the remuneration package and by the employees out of wages towards the build up of an invested fund that can be used to buy a retirement annuity on the open market, or to otherwise encash the fund on payment of appropriate tax. The contributions here were 5% from wages and 5% from the employer. As markets go up and down, there is little certainty as to how well anyone’s defined contribution fund will do, so there is no guaranteed income when they come to retire or when they die and their spouse inherits the benefit. People also retire at different ages from paid employment. With the redundancy package of 2009 tempting many people into finishing paid work early, many people are awaiting their 65th birthday, the current age for eligibility, before the benefit of their work flows as a pension. From 2009, even for employees in the Shannon plant from prior to 2001, the defined benefit fund was shut to future increases. Instead, such employees kept their defined benefit, as then earned, but could not add to their entitlements in that regard; being put as regards future gains in potential pension into the defined contribution scheme for as much as they would contribute from then until retirement. 1.4 On the defined benefit scheme, there are 173 active working members, 258 pensioners and 375 people who have retired under 65 but whose entitlement to their pension is deferred until age 65. 1.5 Pensions are regulated by the general law, by specific statutory provision and, inevitably also, by a trust deed. The trust deed
… (vii) Power in relation to this Trust Deed and the Rules to rely upon the advice or opinion, whether or not obtained by them, of any lawyer, banker, broker, actuary, accountant, medical practitioner, assurance company or pension consultants of good repute or other professional person as the Trustees see fit and the Trustees shall not be responsible for any loss occasioned thereby. The cost of obtaining by the Trustees of any such advice opinion shall form part of the expenses incurred by the Trustees in connection with the Plan. 2.2 Central to this litigation has been the issue of conflict of interest. Therefore central to the resolution of this dispute is clause 9 of the trust deed:
(ii) Any of the Trustees or any director of corporate trustee who is a Member may retain any benefits payable to him from the Plan for his own benefit absolutely and may participate in any discussion in respect of and vote on any resolution which affects or may affect any benefits payable to him from the Plan in any way whatsoever.
(a) to observe and perform such of the provisions of this Trust Deed and the Rules as are hereunder to be observed and performed by them; (b) to pay to the Trustees upon the written demand of the Trustees such contributions as are payable under the rules subject to the provisions of Clause 15 hereof. 15. The Principal Employer or any of the Employers may at any time terminate its liability to contribute to the Fund by giving no less than one month’s notice in writing to the trustees but without prejudice to its liability to pay any contributions or expenses which have become payable prior to the expiry of such notice or to pay any expenses which will arise in connection with the determination of the plan in accordance with Clause 23.
(i) any loss of, any depreciation or default upon any of the investments, shares, debentures, securities, stocks or policies or any other property in or upon which the monies and assets of the Fund or any part thereof may at any time be invested pursuant to the provisions hereof; (ii) any delay which may occur from whatsoever cause in the investment of any monies belonging to the Fund; (iii) the safety of any securities, documents of title or other investments relating to the Fund deposited by the Trustees for safe custody; (iv) any payment or payments to any person or persons erroneously made or caused to be made by the Trustees; (v) the exercise of any discretionary power vested in the Trustees by this Trust Deed and Rules or otherwise including any act or omission by any committee, agent, employee or delegate appointed by the Trustees; or (vi) by reason of any other matter or thing; PROVIDED ALWAYS that any of the Trustees and any officer or employee of a corporate trustee shall be liable for wilful default on his part but such liability shall not extend to the remaining Trustees. (b) A trustee who is engaged in the business of providing a trusteeship service for payment shall be liable for negligence. (c) The Trustees shall not be obliged to bring or defend any legal proceedings in relation to the Plan and shall not be chargeable for any breach of trust in any way in connection with any such omission.
(ii) The Employers’ contributions shall be calculated on the basis agreed between the trustees and the principal employer and shall be subject to review at intervals of not more than five years. (iii) Each Employer shall, in respect of any Member employed by it whose benefits are being augmented or who is receiving an additional benefit in accordance with rule 4(b), pay such contributions to the Fund, in addition to the contributions specified in paragraph (i) as shall be required in accordance with the provisions of Rule 4(b). Review of a decision of trustees
There have also been English cases concerned with pension schemes in which the courts have upheld challenges to the exercise of the discretionary powers on the ground that no reasonable body of trustees could have arrived at the particular decision and it could accordingly be characterised as ‘perverse’. This approach was influenced by the principles adopted in modern judicial review cases, and while its application in such cases may have been justifiable, it has to be remembered that public law concepts such as ‘natural justice’ or (in Ireland) ‘fair procedures’ are not necessarily applicable in private law contexts, such as trusts. Relevance and weight
“It is for the courts if the matter is brought before them to decide what is a relevant consideration. If the decision maker wrongly takes the view that some consideration is not relevant, and therefore has no regard to it, the decision cannot stand and must be required to think again. But it is entirely for the decision maker to attribute to the relevant consideration such weight as he thinks fit, and the courts will not interfere unless he has acted unreasonably in the Wednesbury sense … regard must be had to (material consideration) … but the extent, if any, to which it should effect the decision is a matter entirely within the discretion of the decision maker”. In the same case Lord Hoffman commented “The law has always made a clear distinction between the question of whether something is a material consideration and the weight which it should be given. The former is a question of law and the latter is a question of proper judgment which is entirely a matter for the planning authority. Provided that the planning authority has regard to all material considerations, it is at liberty, (provided that it does not lapse into Wednesbury irrationality) to give them whatever weight the planning authority thinks fit or no weight at all. The fact that the law regards something as a material consideration therefore, involves no view about the part, if any, which it should play in the decision making process. The distinction between whether something is a material consideration and the weight which it should be given is only one aspect of a fundamental principle of British planning law, namely that the courts are concerned only with the legality of the decision making process and not with the merits of the decision. If there is one principle of planning law more firmly settled than any other, it is that matters of planning judgment are within the exclusive province of the local planning authority or the secretary of state”. (See also City of Edinburgh Council v. Secretary of State for Scotland [1998] 1 All ER 174; and R. v. Director General of Telecommunications ex parte Cellcom Limited [1999] COD105.) Moreover I think that the language used by the applicant at paragraph 22 of its statement of grounds underlines an essential and fatal aspect to this part of the case. It asks the court to decide that the Respondent should have afforded more weight to one aspect of the statutory plan. This is precisely what the court should not be asked to do: the question of weighing evidence is only and solely a matter for the statutory decision making body. Were the position otherwise, the court would be making the determinations of facts and evidence which the legislature has consigned to a specialist statutory body. It would constitute the court as an appellate body therefore, as opposed to a reviewing tribunal.
Conflict of interest
Conflict of interest may also arise in the case of trade union officials acting as trustees, where they could believe they are appointed to represent a particular faction or group. Professional pension consultants acting as trustees may experience a conflict of interest if remunerated by the employer. Trustees may also include members of the scheme. Such persons may experience conflict of interest in relation to the payment of benefits where the trustees have discretion in these matters under the trust deed and rules of the scheme. Conflict of interest should not necessarily prevent trustees acting in good faith in situations where trustees are conscious of a possible conflict of interest it may be necessary, before a decision is taken, to obtain legal, actuarial or other professional advice, as appropriate. 5.4 As to informed consent, it is clear that a trustee may proceed to act in a situation where duties potentially conflict, or duty and interest conflicts, provided there is a fully informed consent from the principles. This does not require the disclosure of all information which is material to the transaction and the conflict, provided that the consenting party is aware of all material facts and is enabled to make a decision to retain the trustees notwithstanding; Snell’s Equity, 7-038. In the course of argument, and in the course of the evidence of Vernon Holgate expert witness on behalf of the plaintiff beneficiaries, it arose as to how an issue of conflict would have been dealt with under the statutory regime in England and Wales. It is of little assistance to analyse that situation. The law there has been refined. It was clear, however, that with the rule as strict as that of conflict in a trustee, that some amelioration must be possible. In re Drexel Burnham Lambert UK Pension Plan [1995] 1 WLR 32, that issue came up at the end of the judgment of Lindsay J at page 43 where he said:
“In the modern world, conflicts of interest cannot be avoided. They can, however, be managed. As long as trustees are aware of the potential for conflict and know what is required of them as trustees, they will be able to carry out their trustee duties to the best of their abilities.” If the “managing” of conflicts is frequently to involve, as it has done here, argument before and a decision of the court, time and money will be spent on legal processes which many would, with some justice, think unnecessary and undesirable. When the legislature considers how far and on what terms to embody the report of Professor Goode and his colleagues into law or otherwise to reform the law in this area, I commend to it consideration of the creation of a clear exception to the so-called “general rule of equity” so that in appropriate cases the administration of pension trusts by trustee-beneficiaries might safely proceed without the expense and delay of proceedings. 5.6 One matter is clear. On setting up a trust, the funder and the beneficiaries have an expectation that can never be departed from in law: that the trustees will pursue the aims of the trust honestly and in good faith. Clarity of conscience and ability to think both clearly and objectively is thus required on any decision that impacts on the management of the trust for the benefit of those for whom it was set up. No matter what is said in a trust deed, this fundamental obligation can never be departed from. If there exists probable evidence that a decision was taken out of, or influenced by, an improper motive, that is a breach of trust. An obvious example would be a deliberate scheme by trustees to bypass a proper investment in favour of a decision which assists their own financial or professional interests. While dishonesty is almost always required for such a result, it may be that it might stand alone; as where trustees conceal their own wrong rather than make an honest account of the trust business to the beneficiaries. What is inherent in the duty of trustees, no matter what exemption be provided in a trust deed, is that the trust should function. In the context of conflict of interest, an exemption may be provided under a trust deed, but the purpose of entering into the office of trustee is to fulfil the objects of the trust; and this cannot happen if a conflict of interest or duty is such as to paralyse or even influence any trustee so that he or she cannot rationally and objectivly approach and decide on a problem. Unlike the straightforward application, sometimes unfair because of its strictures, of the rule that a trustee must not in any sense be conflicted, to allege that a trustee was, notwithstanding exemption from the rule, unable to or did not function objectively and for the benefit of the trust is to take on the burden of proving that as a fact. 5.7 As to the argument that clause 9 is solely designed to exempt trustees from the strictures of being in a conflict of interest situation, this is contradicted by the manner in which conflicts of duty and of interest are generally treated as being on the same footing in the leading texts. The principle guarding against conflicts between interest and interest applies equally to clashes between duty and duty. The principle must be the same; otherwise the law would be illogical. Snell, minus footnotes, puts the matter thus at 7-036:
In many of the earlier cases regarding conflicts between inconsistent duties the fiduciary was a party to the impugned transaction, although in a representative capacity, so that the general principle prohibiting conflicts between duty and interest could be applied. The courts recognised that the concern about temptation where a fiduciary has a personal interest in a transaction also applies, in a moderated form, where a fiduciary is involved in the transaction on behalf of another party: “if the principle be, that the Solicitor cannot buy for his own benefit, I agree, where he buys for another, the temptation to act wrong is less: yet, if you could not use the information he has for his own benefit, it is too delicate to hold, that the temptation to misuse that information for another person is so much weaker, that he should be at liberty to bid for another… That distinction is too thin to form a safe rule of justice.” Over time, this concern led the courts to develop a separate principle, prohibiting a fiduciary from acting where there was a conflict between duties owed to multiple principles at once, even where the fiduciary was not a party to the transaction. Thus, modern fiduciary doctrine requires a fiduciary to avoid acting, but only where there is a conflict between duty and interest, but also where there is a conflict between duties owed to multiple principles. 5.9 The defendant trustees also argue that the law excuses conflicts that arise from the inherent nature of the trust situation. This situation commonly arises in pension trusts. Employee or pensioner nominees, who will benefit ultimately in their pension from proper investment of the trust fund and employers representatives, who may in the context of their responsibility be tasked with saving expense to the company, can both be required to make decisions that simply cannot be avoided. There the rule cannot apply. Nor could it be said that every trust is required to respond to every situation of conflict by engaging in the expense of hiring professional trustees. While it may be said that the strict application of the rule against conflicted trustees making decisions can have unpalatable consequences, any exemption arising from the situation of trustees not being of their making must be sensibly applied. It is only if the conflict directly arises from the situation of the trust that any such exception can arise. Any conflict that comes from a trustee voluntarily assuming responsibilities outside those in the necessary contemplation of the terms of the trust deed and which conflict with the trustee’s duty cannot give rise to exoneration. This exception, however, is well founded in law. In Sargeant and Another v National Westminster Bank Plc and Another (1991) 61 P & CR 518 a man owned three farms which he let to his children who farmed in partnership. On his death, he appointed his wife and children trustees and also left the residue of his estate to them for sale while at the same time providing that the trustees could buy any portion of his estate. On one of the children, Charles, dying intestate the other children exercised an option under the partnership deed to acquire his interest in the partnership. The executors of the estate of Charles claimed an entitlement to a one-third share of the vacant possession and claimed that the other children as trustees could not put themselves in a position where their interests and duties conflicted. While accepting that a conflict of interest arose, the Court of Appeal excused it, Nourse LJ stating at page 5 of the judgment:
5.12 Snell must surely also be correct in establishing this exception to fiduciary conflicts on the basis of consent. Such consent is clearly present where the trust deed sets up an exclusion from the fiduciary conflict rule in express terms. This can be understood as implicit consent and authorisation in advance that such conflicts as may arise are exempted by the trust deed. It is then a question of interpretation as to whether the scope of the clause covers the exemption in question. In which case, a trust deed must be interpreted in accordance with the recognised canons. Interpretation Before I consider this question, I should make some general observations on the approach which I conceive ought to be adopted by the court to the construction of the trust deed and rules of a pension scheme. First, there are no special rules of construction applicable to a pension scheme; nevertheless, its provisions should wherever possible be construed to give reasonable and practical effect to the scheme, bearing in mind that it has to be operated against a constantly-changing commercial background. It is important to avoid unduly fettering the power to amend the provisions of the scheme, thereby preventing the parties from making those changes which may be required by the exigencies of commercial life. 6.1 Kelly J also considered the judgment of Warner J in Mettoy Pension Trustees Limited v Evans [1990] 1 WLR 1587 at 1611:
‘The duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate common sense and desire to make sense of the settlors’ or parties’ expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language if it can do so without doing complete violence to it.’ What the court has to do here is to perform that duty in the comparatively novel and different context of pension scheme trusts.
(2) The background includes the rules of [the pension scheme] and the fiscal limitations on pensions that can be paid without jeopardising the status of [the pension scheme] as an exempt approved scheme; (3) The interpretation must be one that is practical and purposive, rather than detached and literal; (4) If more than one interpretation is possible, the correct choice may depend on the practical consequences of choosing one interpretation rather than another; (5) If one would conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention that they plainly could not have had; (6) If detailed semantic and syntactical analysis of words in a contract leads to a conclusion that flouts business common sense, it must be made to yield to business common sense; (7) The ultimate question is what meaning would be conveyed to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the date of the contract. (8) The court must not construct from the background alone a contract that the parties did not make. (9) There are strict fetters on the ability of the court to imply further terms. (10) Whether a term is to be implied is to be determined as at the date of the contract. Jurisdiction to rule on trustee decision
7.2 There was some possibility in this case of the defendant trustees applying to the High Court to exercise its jurisdiction to guide their decision. The trustees did not consider applying until after their decision to accept the company’s offer. Thereafter the issue mainly contemplated would have been whether their decision was possible under clause 9 of the trust deed. Here the argument is that the trustees ought to have applied because their conflicts of interest, their deadlocked state with three in favour of accepting the company’s offer and three against, required an independent resolution. The trustees, then differently constituted, would have been aware of the possibility of a High Court application from issues that arose in 2008 and a brief mention of this jurisdiction in a legal opinion of the 8th May of that year. At the trustee meeting of 18th of November 2011, the representative of their legal advisor, Holmes O’Malley Sexton, according to the official minutes, noted that the trustees could seek directions from the High Court in relation to what actions they should take, e.g. does the employer have a liability to pay the deficit and do the trustees have a liability to seek payment of the deficit. This echoes an opinion of counsel dated 8th of November 2011 which discussed many questions, including the issue of conflict of interest, and then expressed this view:
7.4 This issue is therefore to be resolved on the question of whether the trustees were overwhelmed or influenced in the discharge of their duties and therefore had an obligation to make the decision in question through the jurisdiction of the High Court. In so far as any issue was merely very difficult to decide and where the trustees retained the ability to act in good faith and honestly, a failure to apply to the High Court cannot undermine the decision of trustees unless that failure was a decision which no reasonable body of trustees could have made. Certainly, in this case there is nothing to suggest that the legal advisors warned that such an application should have been made. Even still, trustees cannot hide behind legal or other advice because it is up to them to make decisions. Nothing in the papers or on the evidence, however, suggests that the option of applying to the High Court for directions as to how to deal with the company’s offer was so clearly the right thing to do that to fail to take that course was a decision that no reasonable body of trustees would have made. Furthermore, it is arguable that in such a case it must be shown that the High Court would have decided the matter differently to the trustees. Wilful default
Each of the acts and omissions of the trustees at issue in these proceedings was undertaken deliberately and constitutes wilful default that is not exempted from liability under clause 24(a) of the Trust Deed. 8.2 Even if the argument of the plaintiff beneficiaries was correct that wilful default simply means failing to do something, in this instance failing to serve a contribution demand, then any court must be driven back to the touchstone of trustee liability: is this wilful default one which no reasonable body of trustees would commit? It cannot be otherwise: a court is not entitled to review a trustee decision by substitution of that decision with its own view. 8.3 There is greater sense in analysing the phrase ‘wilful default’ in the context of the exclusion of negligence as a ground of liability for ordinary trustees, the inclusion of negligence for professional trustees and the use of a phrase common to trust deeds. In this regard, the decision of the Supreme Court in ICDL v European Computer Driving Licence Foundation Limited [2012] IESC 55, (Unreported, Supreme Court, November 14th, 2012) concerned that express phrase, but in the context of a contract where the phrase used was “wilful act” and liability was for such or for “gross negligence”. The authorities cited in the majority judgment were from vendor and purchaser and workmen’s compensation law at paragraphs 123-129. The Supreme Court was not defining this phrase as one of universal application, much less for trustees, and was analysing it within a particular context; which is not this context. The dissent of O’Donnell J is to be noted as the majority removing from the limitation clause what the parties intended. No comment on this is made. 8.4 The phrase ‘wilful default’ has a particular resonance in trustee law. The most recent cited case is Spread Trustee Company Limited v Hutcheson and Others [2011] UKPC 13, [2012] 1 All ER 251. This concerned a Guernsey statute that limited the degree to which exclusion clauses in trust deeds could limit the liability of trustees and that included in that case limitations on the liability of professional trustees. The Trusts (Guernsey) Law 1989 for the first time made statutory provision for Guernsey trusts. It provided by section 34(7): “Nothing in the terms of a trust shall relieve a trustee of liability for a breach of trust arising from his own fraud or wilful misconduct.” Subsection (7) was amended by section 1(f) of the Trusts (Amendment) (Guernsey) Law 1990 by the addition of the words “or gross negligence” at the end. So no liability could be excluded under Guernsey law for the trustees acting fraudulently, through wilful misconduct or grossly negligently. Since that case centred on time scales, when the various provisions were passed into law was important, and on the question of gross negligence, it deals with other issues. The Privy Council, however, approved the earlier decision of the Court of Appeal in Armitage v Nurse and Others [1998] Ch 241. There, the trust deed excluded liability for any loss caused to the trust fund by the trustees, save loss occasioned through actual fraud. It was held that since contracting parties could exclude liability for gross negligence, such a wide exoneration of future conduct was also open to parties to a settlement. Millet LJ was of the view that perhaps trust deed exclusion clauses were too extensive and that where trustees were professional, a wide exclusion of liability was inconsistent with the ordinary test of negligence to which professional people were otherwise liable. In this trust deed, the exclusions operating on the trustees under clause 24 would not have applied had they been professionally engaged in that capacity. Quoting from a Law Commission paper on fiduciary duties to the effect that trustees cannot exclude themselves from liability for fraud, bad faith and wilful default, Millet LJ set this out as follows:
“Beyond this, trustees and fiduciaries cannot exempt themselves from liability for fraud, bad faith and wilful default. It is not, however, clear whether the prohibition on exclusion of liability for ‘fraud’ in this context only prohibits the exclusion of common law fraud or extends to the much broader doctrine of equitable fraud. It is also not altogether clear whether the prohibition on the exclusion of liability for ‘wilful default’ also prohibits exclusion of liability for gross negligence although we incline to the view that it does.”
A trustee who is guilty of such conduct either consciously takes a risk that loss will result, or is recklessly indifferent whether it will or not. If the risk eventuates he is personally liable. But if he consciously takes the risk in good faith and with the best intentions, honestly believing that the risk is one which ought to be taken in the interests of the beneficiaries, there is no reason why he should not be protected by an exemption clause which excludes liability for wilful default.
Accordingly, much of the argument before us which disputes the ability of a trustee exemption clause to exclude liability for equitable fraud or unconscionable behaviour is misplaced. But it is unnecessary to explore this further, for no such conduct is pleaded. What is pleaded is, at the very lowest, culpable and probably gross negligence. So the question reduces itself to this: can a trustee exemption clause validly exclude liability for gross negligence? It is a bold submission that a clause taken from one standard precedent book and to the same effect as a clause found in another, included in a settlement drawn by Chancery counsel and approved by counsel acting for an infant settlor and by the court on her behalf, should be so repugnant to the trusts or contrary to public policy that it is liable to be set aside at her suit. But the submission has been made and we must consider it. In my judgment it is without foundation. There can be no question of the clause being repugnant to the trust. In Wilkins v. Hogg (1861) 31 L.J.Ch. 41, 42 Lord Westbury L.C. challenged counsel to cite a case where an indemnity clause protecting the trustee from his ordinary duty had been held so repugnant as to be rejected. Counsel was unable to do so. No such case has occurred in England or Scotland since. I accept the submission made on behalf of Paula that there is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of a trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts. But I do not accept the further submission that these core obligations include the duties of skill and care, prudence and diligence. The duty of the trustees to perform the trusts honestly and in good faith for the benefit of the beneficiaries is the minimum necessary to give substance to the trusts, but in my opinion it is sufficient. Honesty and good faith The Robins case A chronology 11.1 In 2008, it emerged that the defined benefit scheme had a funding deficit of approximately €100 million. By letter dated 10th of April 2008, the Pensions Board indicated that it was proposing to give a section 50 direction unless a funding proposal was received. On 23rd of October 2008, Willis, the actuaries on behalf of the scheme, certify that there was a deficit of €96.8 million. Negotiations were entered into with Element Six Limited. The contribution demand was made by the trustees of the company. The company denied that this power arose but made a funding proposal to last from 1st of April 2009 to 1st of July 2020 which was to pay the equivalent of €10.725 million per annum into the scheme. This was accepted by the trustees and approved by the Pensions Board in April 2009. Legal advice was taken in respect of the steps. 11.2 Within two years, however, the problem of the deficit returned. Among the ideas considered by the trustees were increasing the normal retirement age from 60 to 65; removing the fixed increase in payments to pensions which at that stage kicked in at 3% extra per annum every January; offering enhanced transfer values to members who elected to transfer their accrued assets to a defined contribution plan voluntarily; and offering enhanced employer contribution rates above 5% to those persons. At a meeting with the trustees on 23rd of June 2011, the company warned that it was “treading water as a whole and therefore Element Six did not see any merit in putting any more money into the defined benefit plan unless it proved to be sustainable in the long run were the underlying risks were reduced.” Carmel Sexton had previously been a trustee but was chosen by the Shannon company to interact with the trustees. This has been much criticised. In evidence, however, there was no basis upon which her integrity could have been doubted. The choice by the company increased the suspicions of the plaintiff beneficiaries and no one is to blame for that but the company. She met with Danny Coady on 29th of June 2011 to discuss the way forward. These interactions continued with meetings in the preparation of presentations by a subgroup for the trustees. A preliminary draft of the Willis presentation was prepared by 21st of July 2011 and went through several iterations. In it Willis noted that the funding proposal was on track to satisfy the funding standard by 1st of July 2020. It soon became apparent, however, that the company was unwilling to continue contributing and fundamental strategy seems to have been “to de-risk the pension arrangement and to have more certainty.” Danny Coady, as chairman of the trustees, began to seek legal advice from Holmes O’Malley Sexton. Counsel were later briefed and none of the advice given can be faulted. By August of that year it was clear that the funding proposal was off track. A letter of 25 August from Willis shows a clear projection of the issue. It became clear that the company would not pay the next tranche €10.725 million. On 6th of September 2011, the company wrote to the trustees summarising the current position and complaining about the change in legislation, about the pension levy and stating clearly that the current position was untenable:
11.5 The bind that the trustees were in can be discerned from the pros and cons of the proposal. In favour were the possibilities that: the trustees would be able to provide benefits as prescribed under the plan without reduction; the 3% annual pension increase would be covered; active and deferred members would get transfer values that would include allowances proposed retirement pension increases; it may enable the trustees to negotiate a larger lump sum contribution to the plan on winding it up; and the members may criticise the trustees if the demand was not invoiced. The downside of the demand was listed as: it might cause the company to become insolvent, resulting in the company being wound down; the Shannon plant might shut; the jobs of members would be lost; there would be a knock-on effect on the local economy; and that it was “not clear whether [the] demand will stick”. By this stage the arbitrary deadline set by the company for acceptance by 24th of October was fast approaching. The threat to close was then explicitly made to the members of the scheme by the company by letter dated 17th of October 2011:
11.7 By undated letter, probably the 19th or 20th of October 2011, the company replied to the questions posed by Danny Coady on 17th of October. The company refused to transfer the entire amount of the offer into the defined benefit scheme, instead of splitting it between that scheme and the defined contribution scheme. The company further said that the “funding proposal is not and was never intended to be a contract – it is a statutorily required document that does not override the provisions of the trust deed and rules or impose contractually binding obligations.” This is most unconvincing but this was designed so that the trustees would not see it that way. The threat to close the plant was reiterated, this time on the basis of an instruction from the ultimate board of directors of the group: “Without funding the company would be forced to look at a plan to close down the site with the loss of all jobs on the site. While this outcome would be dire, should the proposal succeed then we would be able to make this €35.4 million available to members to provide fair benefits and sustain the site into the future.” Advice was then sought from counsel. This was to the effect that a contribution demand did not need to be made immediately but could be validly made within the four-week notice period under the trust deed. On 24th of October 2011, the company formally wrote to the trustees giving the relevant figures, again threatening to wind up the company and asking for “an indication within the next 18 days of the trustees’ outline position on the proposal.” On 24th of October 2011 formal notice was received from the Shannon company:
11.9 The opinion of counsel was then received dated 8th of November 2011. This did not nor could it have provided definite answers and neither could it nor did it seek to tell the trustees what they ought to do in discharge of their responsibility. Counsel thought that there was “at least a stateable case that the trustees are entitled, and obliged, to demand the deficit as certified by the actuary” and that the funding proposal over the 11 years to 2020 was an “at least arguable” agreement to pay the deficit that was binding on the company. This was later said in the opinion to be “cogently arguable”. Arising out of the relevant legal advice Danny Coady formed the view that there was a strong case to take the company to court either to meet the full deficit or alternatively to meet its commitments under the funding proposal. His email of 9th of November 2011 does not show any lack of gumption in communicating with his fellow trustees but it does show caution:
11.11 On 22nd of November 2011, another opinion was received from counsel regarding the issue of superannuation being ranked as a preferential debt on liquidation. Counsel were of the view that in the event that the trustees demanded the certified sum from the employer and this remained unpaid, then the sum demanded was a preferential debt. A qualifier was added which was that: “it should be noted that certainty would only be achieved if, and when, a liquidator brought directions application before the High Court…” 11.12 The trustees then met on 25th of November 2011 to make the decision as to whether to accept or to reject the company’s offer. The trustees were given a full report from Howarth Bastow Charleton, part of which is quoted later, a presentation from Willis and a summary of the issues and opinions from Holmes O’Malley Sexton. It is impossible to fault any of the presentations that were made. All were considered, properly prepared and concisely laid out. These advisers left the meeting so that the trustees could make the decision in private. From the evidence, it is clear that there was a full review of the information in the relevant reports. This was indicated by debate, which in testimony was described as impassioned. The notes record:
Pressure by the funding company Later events 13.1 An application to the High Court was considered after the decision, and indeed partly drafted, and there has been much discussion as to that issue. This application certainly would have included a decision as to whether the exercise by the trustees of the discretion under clause 9 of the trust deed had been possible notwithstanding conflicts of interest and might have included other matters had court documents been eventually refined beyond what appears to have been basic instructions. An extension of time in that regard was granted by the company but was accompanied, and this is by now entirely predictable, by restrictions demanded by the company. On 1st of December 2011 the company wrote:
The figures involved 14.1 As has been seen, in 2009, the company made a funding proposal that an extra €10.725 million would be paid into the defined benefit scheme annually until 2020. These payments were made in January in respect of the previous year. 10 payments were left as of 25th of November 2011. That amounts to €107.25 million. The capitalised value of receiving money early is of course less than the full amount. Getting money years before it is due means that the money can be used. On the Willis calculations, depending on the discount factor, a matter of debate, the remaining sum was capitalised at between €65.9 million and €79 million. Willis certified that the minimum funding basis was €137.1 million. The deficit on a full buyout basis exceeded that figure; in fact the evidence was that it was over €200 million. For the entire group of companies, the profit levels over the three prior years had not much exceeded €35 million. The assets of the company on an insolvent liquidation would not cover, on any calculation, even close to the capitalised value of the funding proposal of 2009-2020. An issue arose as to whether the group multinationally might not fund the entire deficit of the Shannon company, given the commercial sensitivity a blow of the dimensions of an insolvent liquidation would strike at its creditworthiness. At the level of the ultimate board in Luxembourg, at least one doubt had been expressed as to this course. The trustees were not to know this, however. Further, notwithstanding all of the evidence and documentation at trial the Court cannot assess this as probable one way or the other. At a bare minimum, it was a definite risk. 14.2 In addition, there was the issue of whether the funding proposal at €10.75 million per annum constituted a contract, the breach of which would give rise to an entitlement to damages on the capitalised value mentioned above. The Court has listened carefully to the evidence on this matter and in particular has received particular guidance from Alan Broxson, expert witness on behalf of the defendant trustees. If the circumstances in which a funding proposal is made involve a definite offer by the funder to the trustees and a definite acceptance by them and if the sum to be paid is fixed over a period of years, then the ordinary rules of contract suggest that the solution to this issue is that over that period that agreed sum is what the funder must pay to the trustees on behalf of the beneficiaries. The answer to this is, however, capable of dispute. Pension funds go up and down. There are good years and bad years. The obligation of the funder under the trust deed to pay in accordance with its terms so as to allow a defined benefit to employees can be buoyed up and down with the rise and fall of the market. It will be more or less painful depending on profit levels of the funder and return on investments on the open market of funds invested by trustees. But while it is correct to characterise a defined benefit scheme as a kind of deferred income, whereby employees work at a particular level of remuneration knowing that on retirement they will receive a particular percentage remuneration up to a maximum level depending on how many years they work, nonetheless section 50 of the Pensions Act 1990 recognises the vagaries inherent in pension funding. It allows trustees to take measures to reduce the benefits payable under a scheme. Section 50 has gone through a number of iterations, but the version as of the latest amendment in June 2011 provides:
(a) the trustees of the scheme fail to submit an actuarial funding certificate within the period specified in section 43, or (b) the actuarial funding certificate certifies that the scheme does not satisfy the funding standard and the trustees of the scheme have not submitted a funding proposal in accordance with section 49, or (c) the actuarial funding certificate certifies that the scheme does not satisfy the funding standard and the trustees of the scheme have submitted a funding proposal in accordance with section 49, (2) The reduction in benefits under subsection (1) shall- (a) to the extent specified, override paragraph 2(2) of the Second Schedule and paragraph 4(b)(i)(I) of the Third Schedule, and (b) be such that in the opinion of the actuary concerned— (i) the scheme would satisfy the funding standard in accordance with section 44 immediately following the reduction, or (ii) in the case of a scheme referred to in subsection (1)(c), the scheme could reasonably be expected to satisfy the funding standard at the effective date of the next actuarial funding certificate or, where applicable, any later date specified under section 49(3). (3) Where the Board gives a direction under subsection (1), the trustees of the scheme shall— (a) (i) take such measures as may be necessary to reduce, in respect of members of the scheme then in relevant employment, the benefits which would be payable to or in respect of them from the scheme such that the scheme would, in the opinion of the actuary concerned, satisfy the funding standard in accordance with section 44 immediately following the reduction [or in the case of a scheme where a funding proposal has been submitted to the Board pursuant to section 49, such that in the opinion of the actuary concerned the scheme could reasonably be expected to satisfy the funding standard at the effective date of the next actuarial funding certificate or, where applicable, any later date specified under section 49 (3), and (ii) notify the members of the scheme of the reduction in benefits within a period of 2 months, or such longer period as the Board considers appropriate, (b) within a further period of one month, submit to the Board- (i) details of the reduction in benefits including copies of the notifications issued to members of the scheme, and (ii) an actuarial funding certificate certifying that –
(II) in the case of a scheme where a funding proposal has been submitted to the Board pursuant to section 49, at the effective date of the next actuarial funding certificate or, where applicable, any later date specified under section 49 (3), the scheme could reasonably be expected to satisfy the funding standard. 14.4 Then there was the issue of priorities. The trustees obtained legal advice on this. Endlessly parsed through the hearing, counsel were of the view that certainty as to the priority of the debt due on making a contribution demand, or on requiring the early payment of the 11 year funding proposal, would only “if, and when, a liquidator brought a directions application before the High Court querying whether any sum demanded by the trustees constituted a preferential or unsecured liability of the employer”. In pursuit of a definite answer, Howarth Bastow Charleton had contacted the Department of Jobs, Enterprise and Innovation, the Pensions Board and the Office of Corporate Enforcement but no definite clarification was available. Again, the issue was not easy but the defendant trustees did their best. The Companies Act 1963 provides at section 285(2), as inserted by section 10 of the Companies (Amendment) Act 1982 in relation to preferential payments on a winding up:
… (i) any payments due by the company pursuant to any scheme or arrangement for the provision of superannuation benefits to or in respect of employees of the company whether such payments are due in respect of the company’s contributions to that scheme or under that arrangement or in respect of such contributions payable by the employees to the company under any such scheme or arrangement which have been deducted from the wages or salaries of employees.
14.6 The figures are stark. No adviser can exercise a crystal ball and nor can a trustee. Variables abound. However the relevant figures are massaged, they give rise to no possibility of recovering the pension contribution demand in full, as certified by Willis, much less any higher sum mentioned during the hearing. A real risk was proposed to the trustees through the best advice then available, which advice was prudent and sensible, which was that making the contribution demand would have left the beneficiaries considerably worse off. Further, the sums potentially available are close to the offer of Element Six Limited. 14.7 The biggest variable was perhaps whether the extra €14 million could be taken into account as then, if it could be so considered by the trustees, the sum under consideration as what might be recovered on an insolvent liquidation would be much closer at €37.1 million to what the company was offering. This is considered below. 14.8 On the variability within the figures, it is worth quoting the summary from the final Howarth Bastow Charleton report:
The company seems to expect the trustees to assume the pension will receive an injection of $47.8 million (€35.4 million), however as highlighted by your legal adviser, only $31.2 million (€23.1 million) is to be paid into the pension scheme. Under the company’s proposal the balance of $16.6 million is not for the benefit of the scheme at all. Our analysis of the likely liquidation scenario shows that our best estimate of the payments to the scheme on liquidation (assuming the pension deficit is a preferential creditor) is $57 million. As highlighted in the report, this is based on the anticipated future cash flows discounted to today’s value of money. We believe we have chosen fairer assumptions in reaching this estimated outcome and indeed we have specifically excluded the value of any suitable increase in assets which might become available if previous transactions referred to in this report were to be successfully set aside. Overall, on the basis of the legal evidence you have secured, combined with our own judgement, we believe the company’s offer to the scheme of $31.2 million (€23.1 million) is some $25 million (€18.5 million) or so lower than what one might anticipate on a liquidation. 14.10 The best information about this controversy comes from the final Howarth Bastow Charleton report. The most pertinent paragraph is as follows:
The extraction of these cash reserves from the company, through: • payments for the intellectual property ($54 million); • inter-group charges ($65 million [year to date] September 2011); • repayments of intercompany loans ($17.7 million [year to date] September 2011; • repayments of capital contributions ($68 million); and • payment of dividends ($19 million). have reduced cash balances to a level significantly lower than at any time since 2006. This in turn has a direct impact on the level of funds that would be available to creditors on liquidation. Undoubtedly were there to be in the words of the company an “adversarial” liquidator appointed then I believe the liquidator would seek to set aside some or all of the above transactions and thereby seek the recovery of assets (predominantly cash) for the company and by implication its creditors. We make this comment guardedly and without any agenda, as if the liquidator were to be appointed, then most probably due to the level of inter-company – and syndicated lender balances (who would most probably give their proxy to the company) the company’s nominee of liquidator would most probably prevail. It is unlikely our firm would be the company’s nominee.
14.14 What appeared to the Court to be normal from the point of view of the trustees was that sums of money would be moved in and out of the company at the behest of the ultimate board of directors of the group in Luxembourg. Perhaps international firms of accountants regard this as normal. It can be correct for sums to move from related company to related company; but there must be a valid reason and every payment must be representative of value taking into account the directors of care and fidelity to their own company and how the interests of the group impact on that. Anyone doing accounts for a group of companies should remember, however, that each company is a distinct legal personality and that as a creation of law with distinct privileges, that whether linked to a group or not, is also subject to the fundamental rule that it cannot deplete its capital through transactions that do not provide value for money. A company does not have a legal capacity to throw away its money. Even within a group, each payment must be scrutinised by the board of directors, and by the accountants signing off on accounts, as a transaction that is economically justified in terms of the benefit to the company and the corporate benefit to the group as to the balance between what is being paid and what is returned for that remuneration. A dividend is the legitimate way for a company to make a distribution to its members. Over-payment for services or goods by a company to a related company can be a breach of directors’ duties where the analysis of benefit to the company through the transaction and benefit to the group that supports the company is not shown. Directors in the exercise of their fiduciary capacity must not authorise payments that are not made for the benefit of the company within the context of a group of companies. These are merely indications: full analysis will await an appropriate case. The issue is as to how matters appeared to the trustees. So, how were the trustees to regard these still mysterious after much debate transactions? 14.15 The best estimate of recovery of some of these sums available to the Court was that of Jim Luby, the insolvency expert who gave evidence on behalf of the plaintiff trustees. Had he been liquidator of Element Six Limited, and achieving that result at a meeting of creditors would not be a foregone conclusion, he would have considered that there was material on which he could legitimately threaten litigation against the recipients of the payments. Without such a threat, there would be no chance of recovering funds. Where, obviously, the question of moving into the expense of actual litigation was involved, any party challenged might see advantage in delay perhaps up to the door of the court of trial and perhaps to final judgment. His best estimate was that there was perhaps a 50/50 chance of recovering €10 million or more for the benefit of the liquidation fund on the material available to him. That is a genuine and helpful observation. Nonetheless, this factor is but one of many that the trustees were entitled to consider. As can be seen, it might weigh the figures up in consequence of recovery and might weigh them down as to the costs and time involved in such litigation. The trustees did not have the benefit of Jim Luby’s expert opinion at the time and the fact that they, as it turned out, gave little or no weight to the potential to recover further funds does not of itself give sufficient ground to challenge their decision. 14.16 Looked at reasonably, the trustees had much to lose and definite money to gain. This was the dilemma facing them. Possibly some yield might have come from challenging and then litigating the mysterious financial transactions by the Irish company; probably the debt to the pension fund could have been regarded as a priority on the liquidation of the company, but this was not certain; probably the funding proposal would have been regarded as a contract, but this was less certain; probably the company would have shut down with the loss of all the jobs in Ireland; possibly the estimates on liquidation were uncertain and could reasonably have been worse than the advisors to the trustees predicted; probably liquidation would have gone on for two years or more; definitely the company was making the direst possible threats and transmitting them in unambiguous form; and probably, whether the decision was one way or the other, the trustees were still going to be reviled. Conflict as a matter of fact 15.1 Those same four trustees were employed; thus standing to lose their jobs with the company should Element Six SA in Luxembourg carry out its threat to shut down the Shannon plant. All of them, in addition, were said to be likely to want to stay based in Shannon, as opposed to assuming a peripatetic existence around the globe in various De Beers companies and facilities. In practice, Dermot Tuite had been ill and was not planning, he said in evidence, to stay more than a year or so longer in employment. Danny Coady was already travelling extensively and his responsibilities in finance meant that it mattered little where he was based. To a lesser extent this also applied to Siobhán Duffy. Probably it mattered most to Gerard O’Sullivan. In fact, probably this element of convenience was very much a lesser consideration that can be disregarded in any analysis of this situation. The Court has listened to all of the evidence on this matter and having seen and heard the relevant witnesses in the proper context sees no sign of this conflict having influenced the trustees in any way. These conflicts so far were inherent in the issues in contemplation within the trust deed; and even had there been no exoneration through clause 9, the conflicts were both unavoidable and were contemplated as requiring to be decided by the trustees from the inception of the trust. A similar consideration applies to the decision to wind up the trust before 1st of January 2012. By doing this, these same four employees have lost the benefit of a 3% increase on retirement but it was contemplated by the trust deed that these kinds of decisions would need to be made by working trustees; in this case against their interest. 15.2 On 24th of November 2010, the board of Element Six Limited met at Shannon and decided to pay an interim dividend of $19 million. None of the trustees were involved in this decision. Dermot Tuite and Danny Coady are alleged to be implicated in this dividend and a conflict is said to arise because both were directors of the sole registered shareholder which was Shannon Diamond Holdings Limited. Ultimately, as a matter of plain reality, the sum would have been disbursed to that and other companies for the benefit of the group as a whole. The Court has given its view of that kind of practice above. The argument is that if the dividend had been sought back by the liquidator of Element Six Limited that they would have a conflict of duty. The Court has listened closely to all of the evidence and from what appeared in all of that and in the documents considers that this issue played no role in their decision as trustees. 15.3 An extraordinary general meeting of Element Six Limited was held on 10th of March in Shannon. Even though Danny Coady and Dermot Tuite were not directors of Element Six Limited, they were of Shannon Diamond Holdings Limited which was the shareholder of that company. Thus they attended. The issue was that the net assets of the company were less than half of the called up share capital and thus the meeting was required under section 40 of the Companies (Amendment) Act 1983. In evidence, the implication arose that the dividend, repayment of capital mentioned in the Howarth Bastow Charleton report to the trustees for 25th of November, and the repayment of the loan were germane to the issue and that the real solution was the closure of the pension fund. In contrast, there was every indication that the meeting was formal and that the reference in the minutes that there was “a plan in place to assess and improve the situation” was an overall group plan outside their competence to which they paid no or very little heed. There is no evidence that the plan was to close the pension fund. The Court believes the testimony of these witnesses on this issue. 15.4 Dermot Tuite and Danny Coady were also directors of Element Six Abrasives Treasury Limited and, as stated above, Shannon Diamond Holdings Limited, to which a repayment of €17 million had made in respect of a loan. The Court can see nothing wrong with the repayment of this loan regardless of what companies any of the trustees were directors. There is nothing to suggest that this loan was either improperly made or dishonestly repaid so as to avoid being thrust into the category of ordinary debt without priority on liquidation. The Court has listened to all of the evidence on this matter and having seen and heard the relevant witnesses in the proper context sees no sign of this conflict having influenced the trustees. Insofar as Danny Coady might ultimately benefit from an increase in the group’s overall balance sheet, or Siobhán Duffy or Dermot Tuite, this played no part in the decision. The decision was all about what was available, what was possible and what stood to be lost. Nothing else. 15.5 Those are the conflicts. As a matter of fact, no conflict of interest or duty influenced the decision of any of the trustees much less undermined or overwhelmed their ability to act honestly and objectively in the interests of the beneficiaries and in good faith. 15.6 Were the trustees exonerated by the trust deed from acting where there was a conflict of interest? The argument by the plaintiff beneficiaries is that they are not. This argument does not survive analysis. It is always possible for a trust deed to provide in advance for exemption from anything except the core obligation of trustees to exercise fidelity to the objects of the trust for the ultimate good of the beneficiaries through acting honestly and objectively and in good faith. The Court has seen and heard from those trustees who voted in favour of accepting the company’s offer. They presented as having entirely put aside any issue of conflict. They were not disabled in their capacity to act. At all times they considered the relevant material and were not influenced by any personal interest which they had. Instead, as a matter of objective assessment, the decisions which they took were untainted by conflict. The wording of the trust deed as to exemption from conflict admits of no distinction as between conflicts of interest and conflicts of duty. The law, as previously analysed in this judgment, does not admit of such a distinction; in any case any such hair-splitting would involve the ostensible recognition of a distinction without a difference. That is not attractive and it is not well founded in law. Also argued is the proposition that a trust deed may admit of exoneration from a minor conflict of interest but not from a major conflict of interest. This viewpoint was particularly central to the expert opinion of Vernon Holgate, expert witness for the plaintiff beneficiaries. As he said, however, no authority was available to support his view; save for England and Wales practice based on the express legislative requirements that arose when a conflict manifested itself. 15.7 A trust deed may exempt from major conflicts of interest as well as minor ones and it may exempt from conflicts of duty as well. It is a matter of construction. Fundamentally, the point made on the state of the law earlier might usefully be reiterated: the trustees can be allowed in the trust deed to overcome conflicts of interest. If they as a matter of fact do so, no decision of theirs can be challenged on that ground. If as a matter of fact, the conflicts of interest are such as to overcome or disable their ability to act in good faith independently for the good of the beneficiaries, then a trustee decision cannot stand; since that duty is the irreducible minimum that beneficiaries and funders are entitled to expect of the operation of a trust. In this regard, there is no authority, and there is no warrant either as a matter of logic, for the incorporation of some standard based perhaps upon principles of public law whereby a major conflict may give rise to a presumption that a conflict cannot be overcome or whereby objective conflict is to be a lesser standard that a trust deed can exonerate but major conflict is to be equated with subjective bias. No: there is either exoneration under the express words of the trust deed or there is not; and there is either evidence that the irreducible minimum duty of the trustees was compromised by a conflict or there is not. In this case there is exoneration and there is no evidence that the Court can accept that the trustees acted any way other then for the ultimate good of the beneficiaries as a whole. Matters to be taken into account 16.1 Fundamentally, on the issue of the threat by the company to close the plant should the offer not be accepted, the key evidence comes from the three trustees who gave evidence: Danny Coady, Siobhán Duffy and Dermot Tuite. It is clear that the threat to close the plant at Shannon must have motivated all of the trustees to some degree. Dermot Tuite knew the personality of the individual pushing this proposal; he did not give evidence at the trial, and he regarded him as serious and not a person to make empty threats. He considered that once a contribution demand was made that the company would be sent into liquidation. Siobhán Duffy regarded the threat to shut the plant as serious. She was aware that there were contingency plans in place and that the company could survive as a group without Shannon. Stocks of product, finished industrial diamonds being the core product, had been moved to other plants outside of Ireland for distribution so that customers would have not interruption in service. Danny Coady recalled how in 2001, the Shannon plant had suffered a serious blow when the high-pressure synthesis presses had been moved to South Africa from Ireland. Thus, as a bolt out of the blue, as he put it, manufacturing in Ireland had ceased and the Shannon plant was left with finishing the raw diamonds, like shaping and coating, and with administrative functions. He also recalled that in 2009, the executive behind the offer and the way it was put had announced the closure of the Shannon plant. Only through a management plan to reduce costs by €30 million, in large part through 300 redundancies, was it possible to save employment. While the fine words of the press statement of that time resonate as hollow in the light of the latter threat to shut the plant should the offer not be accepted, trustees have to deal with reality and not with public relations. At the meeting of 24th of October 2011, a company representative had presented a clear scenario on behalf of the company: accept or lose all employment. To all of the trustees, the only indication upon which any analysis was done, and the only real scenario facing them on the analysis of Howarth Bastow Charleton, of their legal advisors Holmes O’Malley Sexton, and of their actuaries Willis was an insolvent liquidation. Whereas documents later discovered from the ultimate head company in Luxembourg place a degree of doubt over that for reputation reasons, any such doubt was unknown to the trustees. Prudently, they could only reckon that had they made a contribution demand that the Shannon plant would be shut and its assets disposed of in an insolvent liquidation. 16.2 This is not a question of conflict of interest. Beneficiaries are not to be divorced from the reality of their lives as living breathing people with the needs of the real world. Perhaps the three company trustees jobs might probably be saved or relocated, as they told the Court, but the job of the trustees was to take into account the total benefit of any decision they would make, or the total detriment of such a decision, on the people whose interests they were trusted to shepherd. The needs of people include work and stability in both employment and residence. Giving some weight, therefore, to the reality of the threat to shut the plant would be appropriate. 173 people who were beneficiaries under the defined benefit scheme might, perhaps, have gained more money had the trustees called the company’s bluff, putting the Court in a position to know if it was an empty threat or not, but had the company made another of its decisions akin to 2001 and 2009, those people would have the detriment of no employment, having probably to move home or commute further, and the funds towards the defined contribution scheme would have been cut off for the simple reason that a person cannot earn towards a pension or contribute to pension funding without earning money through a job. 16.3 Broadly, the expert evidence was of a sensible viewpoint. These are the answers of Vernon Holgate on this issue:
Answer: It’s just the loss of the – the implication behind that is that the company will cease to exist and therefore won’t be able to pay any contributions at any time. So effectively you have got a winding up situation so that is a lose-lose. The company his gone, people have lost their jobs and importantly from the trustees’ point of view they have lost their financial sponsor. Question: So do you regard that as a serious consideration then? Answer: Yes. Question: And which the trustees are entitled to take into account? Answer: You are, yes. Because the financial health of that business and its interests are something which you are linked to; it’s a kind of partnership.
Answer: There is a lot said about this. The obligation is to act in the best interests of the members, the best overall interest of the members… And what does that mean? Can it mean things outside the pension fund and, you know, we certainly agonise about this, but you rarely in a situation where the only determining factor for your decision is whether or not people lose or keep their jobs. But it would be a consideration, in my view, but the extent to which it is a consideration differs. Question: You see, it’s pretty hard. If you look at one of these old-fashioned tobacco weighing scales where you have these big brass scales and you have weights on one side and then you put the tobacco on the other and you see what the weight is. You see them in antique shops. Is it like that? And in which case if a kilo represents a decision where you go in favour of the company’s proposal, of that kilo how much is the fact that if you don’t go with the proposal… everyone is going to lose their jobs? You and the beneficiaries, but you are thinking about the beneficiaries? Answer: Yeah, well, if you’re saying that that thing is so balanced that the one difference is loss of jobs. Question: Well, I am saying that you are going down the route of accepting… and the route of accepting, let us weigh it as a kilo. Can you give me in terms of this situation what regard do you think the trustees are entitled to have to the fact that the Shannon plant is going to be shut and their beneficiaries are going to lose their jobs? Answer: I think it would be correct to have regard to it. I mean, my own approach and I have to say, Judge, that even when you ask for a legal opinion on this, the extent to which you can take it into account, you do get various answers. But my own approach is that the trustees don’t live in a vacuum and if the consequences of a particular approach is that jobs are lost, I think it’s an issue that they are entitled to take into account. Question: Is it a 10%, or again, I suppose, you think it’s silly to ask? Answer: If you are talking about percentages, maybe it is 10%, judge; it’s a very difficult one to answer.
The matters to which we have referred are not to be taken as an exhaustive or a prescriptive list. It is likely that, in most circumstances, pension trustees who fail to take those matters into account will be open to criticism. But there may well be other matters which are of equal or greater importance in the particular circumstances with which trustees are faced. The essential requirement is that the trustees address themselves to the question of what is fair and equitable in all the circumstances. The weight to be given to one factor as against another is for them 16.7 Secondly, there is the issue of how much the trustees were entitled to take into account; only the €23.1 million to the defined benefit scheme or the external benefit of the €14 million extra to the defined contribution scheme structured so as to benefit only those people who were in both schemes. One of the trustees, Dermot Tuite, was definite in taking that wider benefit into account and said so at the crucial meeting of 25th of November. Of the reports prepared for the trustees, that of Holmes O’Malley Sexton does not deal with this issue. The expertise shown by the authors of legal advice to the trustees from this source was consistently to the point and well expressed. The main advisor from that firm was at the meeting at that point, advisors later left before the decision was taken, and her lack of dissent could reasonably be taken as positive advice. The Howarth Bastow Charleton report considers the figure of €23.1 million as being the crucial figure for comparative purposes. The report from Willis refers to the larger figure on an actuarial basis in analysing the appropriate range of choice open to the trustees. Apart from Dermot Tuite, the evidence of the other trustees was that some degree of consideration was given to the wider offer. In the direct examination of Siobhán Duffy, the testimony emerges as follows:
Answer: Okay. With regard to the proposal that was given to us by the company, all of the money that was in the proposal, the €35.4 million or that €37.1 million, was all going to members of the scheme and as a trustee I felt that since our obligation was to the beneficiaries of the scheme that it was relevant to consider the two sums. And also there was the point that the condition was that the €23.1 million was conditional on us accepting the €14 million, so they were linked. Question: Yes. You had raised with the company, I think, the trustees had raised with the company the prospect of paying it all into the scheme, isn’t that correct? Answer: We had. We had asked the company actually on the first day that it was presented, the trustees had asked the company was it possible to actually put all of the €35.4 million, as it was at the time, into the fund and the company had advised us that no, it wasn’t. And I think you’ve heard through other evidence the reasons that they gave was that they wanted to give an equitable distribution across the different members of the scheme. Question: Yes. And the wind up of the scheme of course has a particular order of priorities, isn’t that correct? Answer: Yes. The wind up of the scheme in Irish pension law has a particular priority. So with regard to pensioners, pensioners get preference, so therefore they get one hundred per cent of what is due to them at the given time, and then afterwards the deferred and actives are treated. … Question: And one of the things… you asked Willis to do was to work out for you the amount that would go to each category under the company’s offer on the one hand or under an insolvent liquidation on the other hand; isn’t that correct? Answer: That is correct. In order to understand the proposal that was put in front of us and also to understand what our options were with regard to a wind up and an insolvent liquidation we asked Willis to give us a breakdown of what that meant to the different members of the fund. … Question: All right. And it sets out, for instance, but under the company’s proposal the actives were getting €17 million additional money? Answer: Correct. Question: And whereas if €42.5 million was paid into an insolvent winding up they would get less, €14 million? Answer: Correct. Question: On the second line it says that they would get €3 million, in fact its €2.5 million, by an increase in the rate of payment into the defined contribution scheme? Answer: If they worked until the age of 65. Question: If they worked until the age of 65 they get that under the company’s proposal but they wouldn’t get it on an insolvent winding up? Answer: Correct. Question: And then it does the same comparison for deferred pensioners. They would get €14 million additional money under the company’s proposal but €21 million under a €42.5 million payment arising from an insolvent liquidation? Answer: Correct. Question: And pensioners would get €2 million, that’s going to the low paid pensioners I think, under the company proposal, but they would get a maximum of €8 million if €42.5 million came in, from an insolvent winding up? Answer: Correct.
Answer: Well, the offer that was – the monies going directly into the fund were €23.1 million, yes. The offer was for an additional €14 million to be paid to the beneficiaries of the scheme. Question: And did you approach it on the basis so that the offer you are considering was one of €37.1 million? Answer: Ultimately I had to consider the €14 million, yes. Question: So the answer is – you approached your decision on the basis of the offer being €37.1 million? Answer: Again I have to say again that I had to consider the €14 million. It had to be considered. Question: Who advised you to approach it on the basis of €37.1 million rather than €23.1 million? Answer: There was no direct advice. There wasn’t any direct advice that I should consider it to be €37.1 million. Question: There wasn’t any indirect advice either, was there? Answer: No, I don’t believe so. Question: Mr McEnery [of Willis] approached it on the basis of €23.1 million, isn’t that so? Answer: Mr McEnery-based it on the €23.1 million because it was his understanding that’s what our legal advisers had indicated. Question: And in fact that’s the approach that the legal advisers seem to have taken as well, isn’t it, Holmes O’Malley Sexton? Answer: Certainly at stages that is exactly what they had said, yes. Question: And counsel was never asked for advice as to whether the appropriate comparator was €23.1 million or €37.1 million? Answer: No, I don’t believe so. Question: If the offer was €23.1 million, do I take it you would have refused the offer? Answer: I actually didn’t ever consider it to be only €23.1 million. Question: I appreciate that. You said that. There must come a point in time where the offer is in your opinion not enough. Treating the offer as being one for €37.1 million you seem to have taken the view that the offer should be accepted. If the offer was in fact €23.1 million, on the basis of the McEnery [Willis] report and other information you had available, what would your decision have been? Would it still have been to accept the offer rather than to serve a demand and face the possibility of liquidation? Answer: As I said, I haven’t considered that, and certainly my thought process is that the level of risk that we’re talking about on liquidation – and not just risk in terms of proceeds, but risk in terms of time it will take for all those things to be settled, during that period it’s going to cause serious disruption to all of the beneficiaries and is going to cause them problems. So, for me the way up here, risk is the biggest single thing to consider here. As I say I didn’t consider it. I can’t say whether I would or I wouldn’t. I think risk would still have been a big consideration for me. Question: Risk was factored into Mr McEnery’s figures [in the Willis report]. He had put in the discount factor, he had calculated the risk of certain assets not being fully recovered, so he took the risk into account in the figures that he came up with? Answer: But he didn’t consider the impact on the beneficiaries of the scheme of litigation and liquidation going on for a prolonged period of time. Question: Did you consider the impact on the beneficiaries of the scheme of them getting nearly €23.1 million into the scheme when €240 million was required in order to provide their benefits when there would be inevitable litigation that you had been warned of in advance anyway? Did you take that into account? Answer: I considered everything. Question: Well now, risks had been taken into account in Mr McEnery’s figures. If the offer had been €23.1 million and no €14.4 (sic) million on the side, would you have still taken it on the basis that you don’t want to take any risk? Answer: I may well have done so. Question: If it was €10 million would you still have taken it on the basis that you still don’t want to take any risks? Answer: I really would have had to think about it long and hard. 16.10 The relevant expert evidence does not undermine the approach that the trustees took. It is instructive to note the similarity of their approach. Alan Broxson for the defendant trustees gave evidence as follows:
Answer: Yes, I think it is right. I think I said in my evidence that a trustee would probably prefer that the totality goes into the fund, because that is the way the rules are actually structured, because then it is clear as to how the money is distributed, but if the company takes a different view, provided the money is going into the benefit of somebody, well maybe I won’t go and fight so much over it. It depends on how tough the company is being and what they want to do with it. Question: Again the dilemma that is posed is obviously very extreme because if you take the €2.5 million that is still a defined contribution scheme that applies only really to people, it can’t apply to anyone who wasn’t ever in the defined benefit scheme? Answer: Yes. Question: So that is not benefiting all of the trustees, it’s benefiting only those who are continuing to work, in other words who are active? Answer: I think you are right, Judge, and I think my reading of that was that what the company was at here—just remember that the company removed the entitlement to future credit going forward and removed pension increases—and therefore the people with the longest past service, pensioners, which will include pensioners and deferreds, they would have all of that. The people who were losing, the people who are actually bearing the cost, if you like, of past problems. And this is unfortunately the case, and I hesitate to put it in these terms but, as I said, the problem in most pension funds are caused by the weight of the pension liability and when companies make a change to the benefit structure to try to recover it, inevitably it is those still in employment who actually suffer most. So it is not a surprise to me therefore that companies will try, as part of the settlement, to somehow redress that. That is simply what I have seen and I have seen it happen several times. Question: Then we are talking about €2 million to low incomes. That became €2.5 million, but I think that was for those who were pensioners already who are under €17,500 [pension income] annually? Answer: Indeed, yes. Question: So is that kind of more reasonable to take that into account? Answer: Well, where we sit as trustees, we have known for quite some time, that the Pensions Act was unduly favourable to pensioners and the very fact that the Minister has recently proposed in a Bill, which is going to the Dáil to change the priority and if you look at it it’s geared to protect the lower pensioners, I think what the company was trying to do, if you like, was very much what the Minister has now tried to do. So, you know, as, if you look at it from the outside you would have to say that is a reasonable thing to do. Question: And then, finally, you have the €8.1 million which was €7.8 million, which is going to the actives. So those were working and actively contributing that is going… outside… into the defined contribution scheme. Again, do you take that into account, given that it’s only a sector? Because as I understand the sector in terms of the numbers we are talking about kind of … 173 actives, as opposed to 258 who are actually on pension and 375 who are deferred and really, I suppose, 375 who are deferred or hit the worst? Answer: Like I said, Judge, inevitably the actives are the ones who lose most in a restructuring. And that has happened in this case and I can therefore perfectly understand why the company would want to do that to redress some of the laws that they have suffered to get a better balance and it’s interesting that the changes being made by the Minister in fact will achieve that going forward.
Answer: I think it’s one of the few areas of directed legal advice which they received which told them to take it out. So if you – it undermines the value of this as a slide. Question: Sure. Well I’m not sure that they did. Just leaving that aside for a moment Mr Holgate if you wouldn’t mind just leaving that aside, it does emphasise the importance of considering the total offer, doesn’t it? Answer: I think, I think it is a very difficult area where people are talking about making settlements for one class of members into another trust, not your trust. But, these are a group of active members and they are beneficiaries. You owe them obligations and rights and duties, if you are not seeking to prefer one group over another and you want to take that into account and you can be sure that payment would be made for their benefit, I don’t think it is unreasonable to factor that in. Actually the problem tends to come from the lawyers who will not let you. So there is a difference between, if you like, my professional view and the legal view.
Answer: Yes. Question: …And in summary they are payments of various sorts, some to active members and some to lower paid pensioners outside the fund, isn’t that correct? Answer: Yes. Question: All right. And they are intended to provide benefits for those two categories of people that wouldn’t easily be provided through the fund, that is active’s and low paid pensioners, and they wouldn’t be easily provided through the fund because of the priority issues, because of the priorities that apply in the winding up of a [pension] fund, isn’t that correct? Answer: Yes. Overall factors in the decision 17.1 Siobhán Duffy said that one of the factors was the liquidation of the company, certainly, but she couldn’t lose sight of the fact that making a demand would mean the entire loss of the offer. She regarded the trustees as having weighed the certainties and the uncertainties to try and make the best decision. She was shocked by some of the evidence given at trial on behalf of the company. The Court shares her concern. Her clear view was that the trustees would not obtain a better return by making a demand. Her view of the variables on the Howarth Bastow Charleton analysis was that some between €42.5 million and €18 million might be available on liquidation. There was also an issue as to whether the contribution demand would be considered as a debt on the company in liquidation at all. The lower figure was encountered in the event that the debt was not preferential. She had personal knowledge of the Shannon plant, as did the other trustees, but the personal view that you took in relation to the money that might be recovered in liquidation was more sanguine. Trustees are entitled to take their own information into account as well as seeking the advice of experts. After all, the reason they are there as trustees is to exercise their judgment on the basis of common sense and local knowledge as well as seeking expert advice for more difficult decisions or ones which are outside the sphere of their immediate competence and experience. Her view of the Shannon buildings was that there were empty buildings which had not been shifted over some years; that the legacy and obsolete stock that was being valued might not be as saleable as the estimates on liquidation proposed; that a great deal of the product on hand was unfinished; that without brand support from the parent company, or some branch of it, sales at an appropriate value were dubious apart from the possibility of sale at low value to a buyer in China; and she felt that the process of liquidation could have been a long one perhaps lasting over a period of three years. Dermot Tuite took a similar view. He said that the decision of 25th of November 2011 had come after a detailed consideration of the legal advice available, the report of Howarth Bastow Charleton, the presentation by Willis and the knowledge which the trustees had of the company and the background. The threat of liquidation was serious. If the demand was made then the offer might be lost. He felt that the offer was the least bad offer but that the offer was not good. The Willis report gave the numbers but he differed from the accountancy report on the issue of the value of local property. He felt that the company was paying high rates on big buildings and that some of these buildings had zero attraction for investors. On the question of the inventory, sales he thought would be dubious as what was involved was a raw material. Holmes O’Malley Sexton took the trustees through all the relevant information. One proposal by the company trustees was to seek a meeting with a higher official than the one with which they were meeting but some of the trustees declined. Danny Coady had regard to the seriousness of the situation. The pension deficit was a multiple of the annual group profit. He had interacted with Carmel Sexton on the question as to whether more money might be available and she had told him that there was no more on the table. This answer was given by Carmel Sexton in good faith from a source within the company that was not acting in good faith. The concerns which he had were shared by the other trustees. The fact that some trustees came out in favour and some against does not render a decision unreasonable. The variables in the decision were: whether Element Six Limited would shut down the plant; whether the debt could be recovered through liquidating the insolvent company; would the debt to fund the pension deficit be preferential; and could the sums in dispute that were alleged to have been siphoned off be recovered? On the latter issue, he felt there was little room for manoeuvre as a major firm of accountants had signed off on the relevant accounts. As he saw it, the rationale for the decision was that the company would end up in liquidation; that money in the hand had to be considered as against the multiple risks on a liquidation; that among the risks was whether, and the extent to which, the pension fund was a creditor or not and the extent to which this debt was preferential or not; that the time for liquidation could be up to three years and that it could be a very difficult liquidation; and that, overall, the his sense of responsibility required him to take the guaranteed money on behalf of the beneficiaries. Letting go of the money was not an option. Everything was given serious consideration in light of the threat of shutting down the company. Payments outside the scheme of €14 million which were going to go to the beneficiaries are to be considered in addition. Reasonable body of trustees 18.1 Having regard to all of the evidence which the Court has heard and seen and the variable factors as they were reasonably considered at the time, the decision of the trustees could not be regarded as one which no reasonable body of trustees could have made. The trustees’ decision of 25th of November 2011 was well within the range of what might be considered a reasonable response to a very difficult situation. The same observation applies to all the other trustee decisions that have been put in issue in this case. Result 19.1 The defendant trustees did their best. They were not overwhelmed or crippled or influenced to any degree by any conflict of duty or interest. As a matter of fact, their decision was solely made in the interests of the beneficiaries. That decision was arrived at on a fair appraisal of the situation as they saw it and after all reasonable enquiries. It was made honestly and in good faith. Their actions can only be judged according to the knowledge which they had at the time of their decision. They might be criticised had they not obtained the best possible advice; but, they did this and from reliable and expert sources. They took all of that advice into consideration and, with prudence and fortitude, made the decision which they thought was in the best overall interests of the beneficiaries under the defined benefit scheme. They did not take any irrelevant factor into account and nor did they ignore any relevant factor. Nor does the weighting which the defendant trustees gave to particular factors emerge as unreasonable. Ultimately, in the entirety of the circumstances, the decision which the trustees made to decline to serve a contribution demand and to accept the company’s offer of €37.1 million in winding up the pension scheme was not one with which any court could take issue. 19.2 Having heard counsel on costs, the Shannon company has indemnified the trustees and is not seeking costs. Having lost, plaintiff beneficiaries are not seeking costs either.
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