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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Mitre Pensions Ltd v Pensions Ombudsman Determination [2000] ScotCS 160 (13 June 2000) URL: http://www.bailii.org/scot/cases/ScotCS/2000/160.html Cite as: [2000] ScotCS 160

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[1] This is an appeal, in terms of section 151(4) of the Pension Schemes Act 1993, from a determination of the Pensions Ombudsman that the appellants, Mitre Pensions Limited, had been responsible for maladministration and should reimburse to the Scheme all costs and expenses taken by them between 1 January 1996 and 31 December 1997.

[2] Section 146(1) and (2) of the Pension Schemes Act 1993 provides as follows:

[3] In terms of section 146(7) an "authorised complainant" includes a member of the scheme.

[4] Section 151 provides inter alia as follows:

[5] There was very little dispute on the facts. The Hamilton and Forbes Limited Pension and Life Assurance Scheme was an insured final salary scheme which was established in 1972, the employers being Hamilton and Forbes Limited. Under the rules of the Scheme, preserved benefits fell to be calculated on members' "final pensionable salaries", namely, the "pensionable salary as determined on...[1 April] immediately preceding...the date of cessation of employment". "Pensionable salary" was defined as "basic annual salary...but excluding bonuses, commission, overtime, directors' fees or any other additional emoluments". While the rate of employees' contributions was not specified in the rules, the rate was in fact set at 5% of pensionable salary. The six complainants (who were referred to in the determination as Mr. C, Mr. NM, Mr. B, Mr. M, Mr. EAF and Mr. JAF) were all members of the Scheme. EAF and JAF were trustees of the Scheme and each was a director of the employers. Administrative receivers were appointed to the employers on 5 June 1992 and all the complainants, except C who was a deferred member, were made redundant either shortly before or on that date. The appellants, Mitre Pensions Limited, were appointed as Independent Trustee on 3 September 1993. The other trustees, namely EAF, JAF and another trustee who was a director of the employers, but has since died, remained in office. The employers' liability to contribute to the Scheme was terminated by the receivers with effect from November 1993 and under Rule 18(a) of the Scheme this constituted a winding-up event.

[6] The appellants, as Independent Trustee, discovered that no audited Scheme accounts had ever been prepared; no formal meetings of the trustees had ever been held and there were no minutes; one of the trustees had left the firm's employment several years earlier and his address was not known; one of the companies shown in the Scheme documents as being a participating employer had been dissolved in 1985 and at least one person was listed as a member of the Scheme who had not worked for a participating employer. However, at that early stage, the Scheme appeared to have a small surplus. The appellants set about clarifying matters to enable the Scheme to be wound up. In particular, an auditor was appointed and C was formally removed as a trustee with effect from June 1994. From that date onwards the trustees were the appellants (as Independent Trustee), EAF and JAF. By September 1994 it appeared that the Scheme would be in deficit and the appellants explored with the receivers questions relating to payments of pension contributions. On 14 September 1994 the appellants received a schedule showing the amounts actually paid to the employees from 31 March 1992. By February 1995 the appellants were in possession of payroll information from the receivers which showed the amounts actually paid to the employees (including the directors) from the commencement of the 1991/2 tax year onwards and the employee pension contributions deducted or intended to be deducted. The appellants then realised for the first time that there was a difference between the figures which the insurers, Royal Life Insurance Limited, had used to calculate members' benefits and the amounts which had apparently been paid to them. The appellants discovered that the insurers had based their calculations on the figures for basic salary which had been supplied by EAF, through the insurance brokers, in February 1992 in anticipation of the 1 April 1992 annual renewal date. In the case of EAF and JAF the insurers had been informed that their pensionable salaries as at 1 April 1992 would be £75,000. The figures supplied in February 1992 in relation to three of the members (B, NM and M) were slightly less than the amounts which the payroll records revealed as being paid to them on 1 April 1992. So far as the salaries of EAF and JAF were concerned, the figures supplied in February 1992 exceeded the amount revealed as actually having been paid on 1 April 1992 by £30,342 each. In April 1995 the appellants wrote to EAF and JAF asking for their explanation and in May 1995 instructed the insurers to recalculate the benefits on the basis of the figures provided by the receivers. The pension contributions of EAF and JAF for the year ending 5 April 1992 were £1,575 each and that represented 5% of a pensionable salary of £31,500. However, the salary of each of them for the Scheme year commencing on 1 April 1991, as declared to the insurers, was £45,000. It was subsequently confirmed that their basic salaries were £31,500 and in the case of EAF a bonus element had been added. The respective pension contributions of EAF and JAF for the year ending 5 April 1993 represented 5% of a pensionable salary of £38,868. The sums shown as having been paid to each of them for that year equated to annual salaries of £44,658 for EAF and JAF.

[7] EAF and JAF explained to the appellants that the figure of £75,000 declared in February 1992 was correct and they submitted copies of their P60s for the 1991-2 tax year. The copy of EAF's P60 form was partly printed and partly hand written and showed two sets of figures. The printed figure showed a salary of £38,856 and the handwritten figure showed an additional £36,751, making a total of £75,607. According to the records of the Inland Revenue, he had accounted for tax on £75,437. The copy of JAF's P60 also showed two figures, one printed and one handwritten. The printed figure showed a salary paid of £38,866.60, while the hand written figure showed an additional £30,977 making a total of £69,833. The Inland Revenue records showed that he had paid tax appropriate to a salary of £38,866.60. JAF explained to the appellants that the handwritten figures had been added by EAF, who was the company secretary, after the P60 had been prepared by the wages staff and represented additional monies actually paid, this having been done to keep the directors' "overall remuneration" confidential. In the foregoing circumstances the appellants asked EAF and JAF for any documentation which might confirm that the basic salaries of the two directors had been increased to £75,000, but no such documentation was produced. By 11 January 1996 the appellants had concluded that the additional remuneration paid in 1991-2 represented "bonus or some form of remuneration additional to the basic and accordingly not pensionable under the rules", and took the view that the figures produced by the receivers showing the amounts actually being paid at 1 April 1992 should be used in the calculation of benefits. The appellants sought to persuade EAF and JAF to agree to that approach but they refused to do so. The issue as to the amount of the "final pensionable salary" of EAF and of JAF was an important one as, if the final pensionable salary of each was £75,000, the Scheme would be in deficit, whereas if the correct figure in each case was the lower one shown in the receivers' records, then the Scheme would be in surplus.

[8] By April 1996 the appellants considered that an impasse had developed and that, in view of the ongoing dispute, it would not be safe for them to attempt to complete the winding-up of the Scheme. They decided that the best way of resolving the impasse would be for the other trustees (EAF and JAF) to apply to the Pensions Advisory Service (OPAS) with a view to having the dispute referred to the Ombudsman in terms of section 146 of the Pension Schemes Act 1993. Various complaints were then made to OPAS and that body, after carrying out certain investigations, advised that it concurred with the appellants' proposed method of determining the final pensionable salaries of EAF and JAF. The OPAS adviser had corresponded with them and believed that they were coming round to his point of view and that the dispute had arisen because JAF had misunderstood what was meant by "basic annual salary". The OPAS adviser stated that he believed that JAF would be prepared to accept that his benefits would not be based on the figure of £75,000 and, indeed, JAF subsequently confirmed that at one stage he did consider agreeing that that was the case. The OPAS adviser then urged the appellants to proceed to complete the winding-up. He stated that if the Ombudsman, or anyone else, reached a different conclusion the appellants could not be criticised for making a reasoned decision on the facts. He also expressed the view that further delay would be considered to be the fault of the appellants. However, the appellants were not prepared to accept the views of the OPAS adviser, as they believed that it would be necessary for them to have the "unequivocal agreement of the other trustees" for the figures of final pensionable salary before the winding-up could be completed. On 31 October 1996 the trustees agreed the final pensionable salaries of the other employees, but could not reach agreement on the final pensionable salaries of EAF and JAF. At that time EAF expressed the view to the appellants that further books in the hands of the receivers, which had not hitherto been examined, would assist. The appellants decided to examine these books but in the event they did not assist and JAF now says that he never believed that they would. In December 1996 one of the members, on the advice of OPAS, submitted a formal complaint to the Ombudsman and between December 1996 and September 1997 the other complainants did likewise. The appellants' response to the complaints was that they felt that they "cannot proceed with, never mind complete, the winding-up unless [EAF and JAF] are able to substantiate or withdraw their claims" or the other members agreed to take scaled-down benefits. The appellants stated that they were seeking the "unequivocal agreement" of the other two trustees, EAF and JAF.

[9] In paragraph 26 of his determination, the Ombudsman summed up the situation as he saw it by observing (1) that the appellants had made investigations from the receivers about the final pensionable salaries and had received the payroll and pension contribution figures in February 1995; (2) that no information of significance had been received from the other trustees or the insurance brokers after the spring of 1995; (3) that enquiries were not directed to the Inland Revenue until August 1995; (4) that the investigation of the employers' books was not commenced until November 1996 and (5) that information from the employers' former auditors was not sought until the summer of 1997 (although that particular assertion was disputed by the appellants). EAF and JAF reiterated to the Ombudsman their assertion that all pensionable benefits should be based on the figures (of £75,000) declared to the insurers in February 1992.

[10] The Ombudsman determined the dispute which had arisen as to the amounts of the "final pensionable salaries" of EAF and JAF. He found as a fact that their basic annual salaries, net of bonuses and other emoluments for the Scheme year commencing on 1 April 1991, were £31,500 and that each of them paid the appropriate 5% pension contribution. Although they had told the insurers prior to the April 1991 renewal that their pensionable salaries would be £45,000, this was an exaggerated figure achieved by adding to their pensionable salaries the bonus element that EAF, at least, had been paid. The Ombudsman further found as a fact that their final pensionable salaries, net of bonuses and other emoluments, for the year commencing 1 April 1992 were £38,868 and that the appropriate 5% pension contribution had been paid. The exaggerated figure of £75,000 set out in the February 1992 notification to the insurers was approximately equal to EAF's basic salary plus the bonus element that he had been paid. The Ombudsman also observed that whether JAF was paid anything like the figure shown on his copy P60 must remain in question as it appeared that he only accounted for tax on a very much smaller sum.

[11] The Ombudsman then turned to the complaints of delay at the instance of the four members, namely, C, NM, B and M. These four members had complained that the appellants, as the Independent Trustee, had failed to provide them with details of their benefits and that delay had been caused in the winding-up of the Scheme, principally because of the failure to determine the final pensionable salaries of EAF and JAF.

[12] The Ombudsman accepted that the appellants had inherited a mess and could not be criticised for any delay which occurred before February 1995. Winding up a scheme inevitably takes a fair amount of time. However, he took the view that what had happened after February 1995 was a different matter. The Ombudsman's criticisms of the appellants, so far as delay was concerned, are set out in paragraphs 40 to 43 inclusive of the determination, which are in the following terms:

[13] On the basis of these conclusions the Ombudsman upheld the complaints of delay against the appellants as Independent Trustee.

[14] In paragraph 47 the Ombudsman did not uphold the complaints which had been brought by EAF and JAF. He observed that it lay ill in their mouths to blame the appellants, as they had been implicated in the delay. They had clung to an untenable position - namely, that £75,000 represented basic salary - but there was no evidence that they seriously believed that to be the case. However, he expressed the opinion that EAF and JAF had been badly served by the appellants who, as professionals, should have guided and helped them, not allowed them to cling to misconceived beliefs.

[15] The Ombudsman directed the appellants to proceed to complete the winding-up of the Scheme forthwith and made the other directions set out in paragraphs 51, 52 and 53 of the determination. In particular, in terms of the direction contained in paragraph 53, the appellants were directed, within 21 days, to reimburse to the Scheme all costs and expenses taken by them as Independent Trustee between 1 January 1996 and 31 December 1997, this being to compensate the Scheme for the loss caused by their maladministration and not because the fees and expenses were necessarily unreasonable in themselves.

[16] Counsel for the appellants made five principal submissions to us. In the first place he submitted that in respect that the Ombudsman's determination proceeded on the basis that the appellants, as Independent Trustee, could have proceeded alone to complete the winding-up of the Scheme - without the agreement of the other trustees or a direction from the Ombudsman or the court - he had erred in law. The Independent Trustee was only one of three trustees and the appellants were not in a position at any time to complete the winding-up as that needed a majority of the trustees or a direction from the Ombudsman or from the court. In terms of clause 13 of the Scheme the trustees acted by a majority vote, and the winding-up was not a matter within the discretion of the appellants. The appellants could not have proceeded to wind up the Scheme while ignoring the other two trustees. It followed that the Ombudsman's conclusion that the appellants could have proceeded to complete the winding-up by the end of 1995 was without foundation and that error by the Ombudsman vitiated the whole of his determination. While the Ombudsman had suggested, in paragraph 41, that the appellants should have investigated taking steps to have EAF and JAF removed as trustees, the appellants had no power to remove them. Removal of trustees is dealt with in the Trust Deed and only the principal employer can remove trustees. Reference was made to Mettoy Pension Trustees Limited v. Evans [1990] 1 P.L.R. 9 at page 43. However, the appellants could not reasonably have concluded that they had, without doubt, the power to remove the other two trustees simpliciter. Section 121(2) of the Act was so obscure that the appellants could not have been confident of their right to remove the other trustees without being challenged in court. In any event, all that the Ombudsman said was that the appellants should have investigated the possibility. On any view, however, it was submitted that the appellants had not been in a position unilaterally to wind up the Scheme.

[17] In the second place, in respect that the Ombudsman's determination proceeds on the basis that the appellants were bound to complete the winding-up without being exonerated by the members, or by the court, he had erred in law. Even if the appellants could have proceeded to complete the winding-up, it was submitted that they were not bound to do so unless they were exonerated by the members or by the court. That raised the question of the protection to which the Independent Trustee was entitled against claims by disappointed beneficiaries in relation to which the normal trust rules applied. The trustees, including the appellants, were not bound to denude until they received an exoneration and discharge (Wilson and Duncan, Trusts, Trustees and Executors (2nd edition) at pages 444 and 449; Mackenzie Stuart on Trusts, pages 338-9 and 342). This was an issue of great importance in this case because, if the appellants had paid EAF and JAF the benefits which they had been claiming, the Scheme would have been in deficit and liable to claims. If they had paid out the other members there would not have been sufficient funds to pay EAF and JAF the benefits they had been seeking and there could have been claims at their instance. Indeed, they had said that they were going to fight in support of their claims. In these circumstances the appellants had either to obtain the agreement of EAF and JAF or an authoritative determination from the Ombudsman or by the court. The rules of the Scheme did not provide for exoneration of the Independent Trustee, as it was a body corporate (clause 15). This approach on the part of the Ombudsman constituted a further error of law which, on its own, was sufficient to vitiate the determination.

[18] In the third place, the Ombudsman's decision had been based on conclusions which were not supported by the facts and accordingly he had erred in law. For example, the Ombudsman had been wrong to say that the appellants had not sought information from the employers' former auditor until the summer of 1997, the truth being that they were contacted in 1995 at the same time as the Inland Revenue. The only sequential investigation related to the cash books which EAF had suggested should be examined, that suggestion having been made for the first time in October 1996. The appellants had obtained information from the receivers at an early stage. Otherwise, the investigations had not been sequential. Further, the Ombudsman has confused "unequivocal proof" and "unequivocal agreement". During the critical period the appellants were not seeking a particular standard of proof - what they wanted was agreement. The appellants had concluded by January 1996 that the lower figures were the correct ones but there was no effective action that could have been taken other than the action which was, in fact, taken, namely, the reference to OPAS and then to the Ombudsman. While it was suggested that EAF and JAF might have consented to the lower figures, as proposed by the appellants, it must be borne in mind that they had said that they would defend their position vigorously. OPAS had not been able to persuade them that they were wrong and the Ombudsman (in paragraph 47) had stated that they had clung to an untenable position when there was no evidence that they believed in it. Further, the appellants had been under pressure from the insurance brokers to accept the contention put forward by EAF and JAF, who were trustees. In the circumstances, the appellants could not properly be criticised for failing to discuss the issue any further with EAF and JAF. There was no basis for the Ombudsman's conclusion that the appellants had fostered dispute and had been wrong not to follow the advice given by OPAS, as it had been established that that advice was wrong in law. The Ombudsman's reasoned justification for the delay which he found (in paragraph 43) to have occurred must be found in paragraphs 41 and 42 but the contents of those paragraphs did not support the conclusion relating to delay.

[19] In the fourth place, the Ombudsman's decision that the appellants had caused injustice and loss by reason of delay was unreasonable in the Wednesbury sense, being irrational, and that was an error of law. The Ombudsman observed in paragraph 43 that the appellants, as Independent Trustee, should have been in a position to determine the final pensionable figures "by say six months after it first realised there was a discrepancy" and that, if that had been done, the winding-up would have been completed by the beginning of 1996. However, no reasonable Ombudsman could have reached that conclusion on the facts of this case. If the appellants had stated that they were satisfied that the figure of £75,000 was wrong once the P60s were produced, without giving EAF and JAF an opportunity to state their case and without seeking information elsewhere, that could have been challenged in the courts. It was reasonable to ask EAF and JAF to produce supporting evidence, if there was any, and seek evidence elsewhere. The fact that the Inland Revenue took four months to provide the information that had been requested from them was not the fault of the appellants. On any view, there was no possible justification for the Ombudsman's conclusion that the winding-up should have been completed by the end of 1995, having regard to the strong possibility of legal challenges if the appellants had acted in the way in which the Ombudsman says they should have acted.

[20] Counsel's contention was that if he was correct in any one of the four submissions which he had made, the determination of the Ombudsman fell to be quashed.

[21] Lastly, if the court was against him on his first four submissions, counsel submitted that the measure of the compensation adopted by the Ombudsman was unreasonable in the sense of being irrational - and in this respect, too, the Ombudsman had erred in law. The Ombudsman has ordered reimbursement of all costs and expenses incurred by the appellants in 1996 and 1997 and it therefore follows that he does not accept that any costs at all would have been incurred after the end of 1995. But in 1995 all that the appellants could have done was to intimate that it was their intention to proceed in a certain way and in that event there could well have been a legal challenge by EAF and JAF which would have entailed delay and expense. That factor had been ignored by the Ombudsman. Any finding of compensation should take account of such alternative expenditure as was likely to have been incurred in 1996 and 1997 and the matter should be remitted back to the Ombudsman with a direction that the cut-off point was not 31 December 1995. So far as the Ombudsman's directions were concerned, no objection was taken to the direction contained in paragraph 50 but the directions contained in paragraphs 51, 52 and 53 should be quashed.

[22] Counsel for the Ombudsman began by informing the court that the Ombudsman had only decided to seek to intervene when he became aware that there would be no other contradictor and his role in the appeal would be to assist the court, as far as he was able, to arrive at the correct conclusion on the points of law which were raised, without being partisan (Dolphin Packaging Materials Limited v. Pensions Ombudsman [1996] P.L.R. 95 per Turner J. at para. 41). However, where the complainants were unrepresented, as in this case, he may have to advance such arguments as could be put forward in favour of upholding the determination (Trustees of the Digital Pension Plan v. Pensions Ombudsman, 2 April 1998 per Park J. at page 7).

[23] The role of the Independent Trustee was different from that of the other trustees, although it was accepted that, like each of the other trustees, the Independent Trustee only had one vote. While the complaint was that the appellants had failed in their duty, it was submitted that "trustees" in section 146(1) includes a trustee and means "trustees or any of them". The Independent Trustee was intended to be in the driving seat so far as the winding-up was concerned. In this case the appellants had not pushed the disputed issue to a vote. If they had been defeated, they would simply have had to resign as Independent Trustee. However, the truth of the matter was that the appellants had been strung along by the non-professional trustees. In practice, the Independent Trustee acts as a sole trustee (Ellison, Pensions Law and Practice, para. 7.074) and professional trustees were subject to a high standard of care and were well remunerated. In the present case the standard of proof was on a balance of probabilities and the court would have to be satisfied that the Ombudsman had erred in law. However, the challenge to the Ombudsman's decision had been based on the facts or an assessment of the facts and not on a point of law.

[24] So far as the first submission made by counsel for the appellants was concerned, it was accepted that the terms of section 121(2)(b) of the 1993 Act are obscure. It was not suggested that the appellants should have sought to decide the principal issue in dispute against the views of the majority of the trustees, nor was it suggested, in view of the state of the authorities, that the appellants could be criticised for failing to determine that they had power to remove the other trustees. However, it was submitted that if the power contained in paragraph 14 of the Deed of Variation was not transferred to the appellants, it remained with the receivers. That had been the basis on which C had been removed as a trustee by the receivers at the request of the appellants. The appellants should have realised that EAF and JAF were not putting forward a tenable case and they should have gone to OPAS in 1995.

[25] With regard to the appellants' second principal submission, it was not clear that the general rule relating to the discharge of trustees applied to trustees of pension funds, as there might well be a large number of beneficiaries and it would be difficult to obtain discharges from all of them. It was accepted, however, that a winding-up would involve a denuding of the trust assets and the purchase of annuities. There was no indication in this case that the appellants had asked the beneficiaries for a discharge and were refused. Indeed, it was not clear that the appellants understood that EAF and JAF were taking their stand in their capacity as members of the Scheme.

[26] With regard to the third principal submission, the fact of the matter is that the case put forward by EAF and JAF was wholly lacking in merit and they could have been removed as trustees by the receivers and/or the appellants. Alternatively, they could have been removed by application to the court on the ground of deadlock (Yuill and Another, Petitioners (1900) 8 S.L.T. 254; Fleming v. Anderson 1948 S.L.T. (Notes) 43). If EAF and JAF had not granted discharges as beneficiaries, the appellants could have raised an action of multiplepoinding and if the appellants had been successful they would have been entitled to their expenses. The legal responsibilities of the other two trustees and the factual realities of the position could, and should, have been put forcefully to EAF and JAF at the meetings of the trustees in 1996. Only one of the other trustees required to be persuaded. The explanation put forward by EAF and JAF regarding their final pensionable salaries was grotesquely implausible and the appellants had failed in their duty to persuade EAF and JAF of the utter hopelessness of their case. The appellants had failed to discuss with them the legal proceedings that would have been open to the appellants, including their removal as trustees. EAF and JAF should have been told (1) that their case was wholly lacking in merit and was being rejected and (2) that they could be removed as trustees, either by the receivers or by the court and, failing removal, that an action of multiplepoinding could be raised. On any view the appellants, in an endeavour to resolve the main dispute, could and should have exerted pressure on EAF and JAF, but they failed to do so. The Ombudsman's factual assessment was that the Scheme should have been wound up by the end of 1995 and that was a conclusion which he was entitled to reach. The Ombudsman was entitled to use his specialist expertise in reaching his determination (Earl of Seafield v. Stewart 1985 S.L.T. (Land Ct.) 35). By more or less inviting resort to OPAS and the Ombudsman the appellants had been "fostering dispute". In effect, EAF and JAF only stayed on as trustees at the invitation of the appellants and they remained to the end uncertain of their rights as trustees. The OPAS correspondence suggests that they had, in fact, been open to persuasion. The length of time which should have been taken to wind up a small scheme such as this was a matter within the discretion of the Ombudsman who was entitled to take the view that, if the appellants had displayed the firmness which they should have done towards the other trustees, EAF and JAF would not have pushed their rights to the full extent. In this connection the Ombudsman's view of the responsibility for the delay was shared by OPAS. The appellants allowed themselves to be strung along by the other two trustees and they should have realised very much sooner that an impasse had been reached. In the present case the delay for which the appellants had been responsible had been correctly characterised by the Ombudsman as maladministration. Maladministration was simply bad administration and there was nothing to be gained from attempting to define the term (R. v. Local Commissioner, ex parte Bradford Metropolitan City Council [1979] 1 Q.B. 287;

R. v. Local Commissioner, ex parte Eastleigh Borough Council [1988] 1 Q.B. 855 at page 863)

[27] With reference to the fourth principal submission for the appellants, there had, by 28 October 1993, been a great deal of correspondence with B about a transfer of his pension. He repeatedly complained about the delay and was finally moved to ask if he had any pension funds at all. Even those who were less vocal had been paid at most 95% of their pensions and had been unable to transfer them. There was material before the Ombudsman entitling him to hold that the delay had caused injustice and that accordingly an award of compensation was justified. The delay had adversely affected all the members of the Scheme and they had all complained.

[28] Lastly, it was submitted on behalf of the Ombudsman that, if his approach to the substance of the case was correct, even in general terms, the issue of damages was very much within his discretion. In a case of delay such as this, it would be inequitable for the pension fund to have to pay for the professional services of those whose job it had been to wind up the Scheme without delay. The award of compensation selected by the Ombudsman was a moderate one in the circumstances and it was estimated that the amount involved would be about £26,500.

[29] As we have said, counsel for the Ombudsman appeared and requested to be allowed to make submissions to us and counsel for the appellants did not object to this course of action. There was no appearance by or on behalf of any of the complainants and in the circumstances we indicated that we were prepared to hear counsel for the Ombudsman on the understanding that he would be making submissions in order to assist the court in its deliberations on the issues which were before us.

[30] Section 146(1) of the Pension Schemes Act 1993 provides inter alia that the Pensions Ombudsman may investigate and determine any complaint made by an authorised complainant who alleges that he "has sustained injustice in consequence of maladministration" in connection with any act or omission of the trustees. It is only if the Ombudsman finds that there has been maladministration that he can go on and enquire whether a complainant has suffered injustice thereby. The Act does not contain any definition of "maladministration" but counsel for the appellants conceded that, in appropriate circumstances, delay could amount to maladministration. However, each case must depend on its own individual circumstances and in our opinion delay will not be able to constitute maladministration unless the delay has been culpable and unjustified. In the present case the principal question for our determination is whether or not the Ombudsman was entitled to find that there had been maladministration on the part of the appellants.

[31] The appellants were appointed as Independent Trustee on 3 September 1993 and the employers' liability to contribute to the Scheme was terminated by the receivers with effect from November 1993. The Ombudsman found that the appellants had "inherited a mess" and he set out in paragraph 9 of the determination the situation which confronted the appellants after they had taken office. The Ombudsman also found that the appellants cannot be criticised for any delay which occurred before February 1995 and he observed that winding up a scheme almost inevitably takes a fair amount of time. However, he concluded that the winding-up of the Scheme should have been completed by the end of 1995 and that the failure to complete it by then constituted maladministration. He took the view (1) that the appellants should have begun their enquiries from third parties much sooner and should have carried them out simultaneously; (2) that if EAF and JAF had been helped to understand the Scheme rules and led through the figures, they may well have consented to the determination proposed by the appellants; (3) that if EAF and JAF had not consented the appellants could have investigated taking steps to procure their removal as trustees; and (4) that the appellants had fostered dispute and had not followed the advice given by OPAS. It is not suggested that the appellants did not answer letters or that they delayed replying to communications and, indeed, from a perusal of the file of correspondence it is clear that the appellants were, all along, anxious to complete the winding-up of the Scheme but found themselves faced with serious difficulties, particularly the apparently intractable attitude adopted by the other trustees, EAF and JAF. No criticism is levelled at the solution which the appellants had put forward, which was to reject the claims by EAF and JAF that their final pensionable salaries should be based on the figure of £75,000. However, the Ombudsman concluded, in effect, that there were steps which were open to the appellants, and which they should have taken, to bring matters to a head sooner than they did. In this connection it is important to note that the Ombudsman found that EAF and JAF were implicated in the delay. EAF had suggested that supporting evidence would be found in the books of the employers which were in the hands of the receivers and JAF acquiesced in the appellants' fruitless quest for information from those books, in spite of the fact that he did not believe that there was information there which would assist. They had clung to an untenable position - namely, that £75,000 represented basic salary - but there was no evidence that they seriously believed this to be the case. The difficulties facing the appellants in consequence of the intransigence of EAF and JAF were compounded by the fact that it is clear from the correspondence that EAF and JAF were strongly supported in their position by the insurance brokers. The critical question which arises in this case is whether the Ombudsman was entitled to find that the appellants should have completed the winding-up by the end of 1995, the appellants not having been responsible for the delay prior to February 1995.

[32] In the first place, it is clear that there were delays after February 1995 for which the appellants could not be held to be responsible. The appellants could not, in our opinion, be criticised for endeavouring to ascertain whether or not evidence existed which supported the contention advanced by EAF and JAF. In August 1995 the appellants wrote to the Inland Revenue seeking information as to the remuneration which had been paid to EAF and JAF but, despite repeated reminders, the information which they sought was not received until November and December 1995. It should also be noted that the appellants wrote to the company's former auditors requesting information in August 1995 and not in the summer of 1997 as the Ombudsman stated. Further, it was not until October 1996 that EAF told the appellants that supporting evidence could be found in the company's cash books and, in our opinion, the appellants could not properly be criticised for endeavouring to ascertain if there was relevant evidence in those books, although there was a delay of several months before the cash books were produced to the appellants, a delay for which they could not be held to be responsible. If the appellants had endeavoured to bring the disputed issue to a head in 1995 it cannot be assumed that EAF would not then have sought to put forward the possible source of supporting evidence in the employers' cash books and it seems to us that, if he had done so, the appellants would, on any view, have been justified in investigating whether or not any supporting evidence existed, and that would have taken time. The appellants were faced with contentions advanced by EAF and JAF (both of whom were trustees) which were subsequently found to be without foundation. It was conceded on behalf of the Ombudsman that, like each of the other trustees, the appellants only had one vote. It was suggested by the Ombudsman that the appellants should have investigated taking steps to procure the removal of the other trustees but there was, in our opinion, no evidence before the Ombudsman to the effect that the appellants could have removed them or had them removed. The terms of section 121(2)(b) are obscure and the appellants could not have been confident of being able to have EAF and JAF removed as trustees, and it cannot be said that the appellants were at fault in not taking action to have them removed. Even if it had transpired that they did have power to procure the removal of EAF and JAF as trustees, a misconception as to the extent of their power could not, in the circumstances of this case, constitute an element of maladministration. EAF and JAF had repeatedly stated that they were insisting on the position they had adopted, and they were supported by the insurance brokers. They could well have resisted any attempts by the appellants to have them removed as trustees. If EAF and JAF had gone to court in order to prevent their removal, or the appellants had gone to court in an attempt to have them removed as trustees, there would have been a potential for unquantifiable delay and expense (cf. Independent Pension Trustee Limited v. LAW Construction Co. Ltd. 1997 S.L.T. 1105) and an action of multiplepoinding would have had the same consequences.

[33] The Ombudsman stated that EAF and JAF were badly served by the appellants who should have guided and helped them and not allowed them to cling to misconceived beliefs. He stated that the appellants had "fostered dispute"; but in our opinion this criticism of the appellants was not justified by the evidence which was before the Ombudsman. The appellants had written to EAF and JAF setting out the conclusion which the appellants had reached, which was adverse to the contention being advanced by EAF and JAF. However, EAF and JAF repeatedly indicated that that was not acceptable to them and in our opinion there was no material before the Ombudsman justifying his conclusion that if EAF and JAF had been "helped to understand" the Scheme rules and then "led through" the figures they may well have consented to the determination proposed by the appellants. The weakness of their case was put to EAF and JAF by OPAS but that did not result in any concessions on their part, and while JAF later confirmed that he did at one time consider agreeing that his benefit would not be based on the £75,000 figure, the fact is that EAF and JAF all along adhered to the position which they had originally adopted. The Ombudsman observed that by the time the OPAS adviser intervened they should have been adequately aware of the issues, but still no concession was made. In our opinion, the Ombudsman's finding that EAF and JAF were badly served by the appellants, who allowed them to cling to misconceived beliefs, is not justified by the factual evidence which was before him, nor is his conclusion that the appellants "fostered dispute". While the appellants did not follow the advice of OPAS it must be borne in mind that that advice turned out not to be correct. In the particular circumstances of this case we are of the opinion that the appellants, faced with the impasse caused by the unreasonable attitude of the other trustees, were correct to refer the issue to OPAS with a view to having it determined by the Pensions Ombudsman and that, on the basis of the evidence before the Ombudsman, there were no other steps which the appellants could reasonably have taken prior to the reference which would not have carried with them the danger of a protracted and expensive litigation. On the basis of all the information before the Ombudsman, and the contents of the file of correspondence to which we were referred in detail, we are satisfied that the Ombudsman was not entitled to find that the winding-up should have been completed by the end of 1995 and that the delay which occurred was unjustified delay for which the appellants were to blame.

[34] That is sufficient to justify quashing the determination and the question as to whether or not injustice had resulted does not arise. We are also of the opinion that there was merit in the second principal submission advanced by counsel for the appellants. If the appellants had told EAF and JAF that they were rejecting their contention that their benefits should be based on the figure of £75,000 the financial position of the Scheme was such that if that decision had been implemented forthwith the appellants could have been faced with claims at the instance of EAF and JAF. That was presumably why the appellants were seeking to resolve the dispute by agreement before finally turning to OPAS. In our opinion the decision of the appellants to involve OPAS with a view to having the disputed issue resolved, if necessary, by the Ombudsman, was fully justified and was clearly to be preferred to an application to the court with the attendant risks of delay and expense.

[35] On the whole matter, principally on the basis that the Ombudsman was not entitled, on the facts, to find that the winding-up should have been completed by the end of 1995, we shall quash the directions contained in paragraphs 51, 52 and 53 of the Ombudsman's determination but leave standing the direction contained in paragraph 50.