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The Chairman of Committees: I should inform the Committee that if Amendment No. 135A is agreed to, I cannot call amendment No. 136.

[Amendment No. 135A not moved.]

Lord Lucas moved Amendment No. 136:


Page 18, line 15, at end insert:
("( ) If, where this section applies to any trust scheme, the trustees purport to exercise the power referred to in subsection (1) (a) by making a payment to which this section applies without complying with the requirements of this section, sections 3 and 9 apply to any trustee who has failed to take all such steps as are reasonable to secure compliance.
( ) If, where this section applies to any trust scheme, any person, other than the trustees, purports to exercise the power referred to in subsection (1) (a) by making a payment to which this section applies, section 9 applies to him.").

The noble Lord said: In moving this amendment I shall speak at the same time to Amendments Nos. 155 and 156.

Clearly it would be detrimental to the interests of scheme members if trustees or others made payments from a pension scheme surplus to the employer without complying with the statutory requirements. These amendments provide for sanctions to be imposed for breaches of the obligations in this regard in the Bill in order to encourage compliance. I beg to move.

13 Feb 1995 : Column 555

On Question, amendment agreed to.

Clause 33, as amended, agreed to.

Baroness Dean of Thornton-le-Fylde moved Amendment No. 137:


After Clause 33, insert the following new clause:

("Protective cost orders

.—(1) Where, on the application of a member (in this section referred to as "the representative member") representing the views of not less than 10 per cent. of the members of a scheme or of a member-nominated trustee appointed under section 14 above, a court is satisfied that serious or persistent breaches of trust may have been committed which do not fall within section 3, the court may grant an order in such form as it considers appropriate compelling the trustees of the scheme to pay to the representative member or to the member-nominated trustee the reasonable costs of obtaining legal and other advice in order to pursue claims on behalf of the scheme.
(2) Any costs ordered to be paid in accordance with subsection (1) of this section shall be payable only upon the presentation of a certificate by the solicitors acting for the representative member or the member-nominated trustee, as the case may be.
(3) A court may grant an order under subsection (1) of this section if it is satisfied on the evidence before it that—
(a) an independent trustee properly advised would have applied to the court for directions to commence or continue proceedings, and
(b) on such application the court considers that it would have given leave to such independent trustee to proceed.
(4) Where a court grants an order under subsection (1) of this section it may from time to time renew or amend such order.
(5) Where a court grants an order under subsection (1) of this section it may make provision for the payment of past, as well as future costs.
(6) On an application under subsection (1) of this section, a court may grant an order notwithstanding the fact that the breaches of trust which are or which form part of the grounds for the application fall within section 3, if it is satisfied that it is in the best interests of the members so to do.

The noble Baroness said: This amendment provides for the situation in which a minimum of 10 per cent. of members, or indeed a member-nominated trustee, can go to the court and, where the court is satisfied that there is a serious or persistent breach of trust which does not fall within Section 3, for the trustees of the scheme to pay reasonable costs for the legal action to be taken. The powers of the regulatory authority are clearly covered in the Bill under Clause 3 in Part I. On the first day of the Committee stage last week, the Minister said that OPRA would have all the powers necessary to enforce compliance with the law. Later in the debate he went on to say:


    "While I am open to considering refinements in relation to OPRA's regulatory powers where there is a good case for doing so, we should not widen its powers in such a way that it becomes involved in trust law and other matters which are best left to the courts".—[Official Report, 7/2/95; col. 161.]

I agree with the Minister because trust law goes much wider and has wider duties than has the Pensions Bill. That is why we have put forward this amendment. Presently, in the absence of a protective costs order, the beneficiaries will still be left without any way of seeking redress for grievances where OPRA either has no power to intervene or refuses to intervene. I say "refuses" because there are many cases where the regulatory

13 Feb 1995 : Column 556

authorities—IMRO, for instance—have been asked to intervene in suspected wrongdoing and have refused and then those suspicions have been proven in fact.

This amendment is put forward because, first, the Bill will have limited powers; and, secondly, the trustees' responsibilities come under trust law. I should like to share with the Committee, even at this late hour, an experience which in my view makes such a clause essential.

In June 1986 a company called Imperial, which had recently been taken over by Hanson, sold two of its paper mills in the north-west to a company called Melton Meads. The trustees were challenged by members. The trustees refused to deal with the matter and investigate the serious concerns that had been raised, which included dishonest breaches of trust, from which the directors may have benefited personally. Certain beneficiaries commenced the action and their union, the GPMU, funded it. But even those funds were stretched to the point that they had to go to the courts. For the first time ever in this country a protective costs award was made.

That was in July 1993. An appeal was lodged and in July 1994 the appeal court upheld the order. The appeal court refused leave to appeal to the House of Lords, but the company petitioned the House of Lords for leave to appeal to the appeals committee, and I gather a decision on that is expected this week.

That concern began with seven beneficiaries who found no regulatory body to support them. In fact the SIB refused to even acknowledge them or help them until the case reached court. The SIB has now started its own action for fraud. The beneficiaries had no help from anybody except their union. The bill today stands at £891,000 for professional advice and support and we still do not know what the outcome will be. If the outcome is against the beneficiaries, the union will be left to fund the £891,000. But what if they had not had the benefit of the union? Who would have come to their aid? The Occupational Pensions Board said that it was outside its remit; they could not obtain legal aid for the action. They would have been left on their own in a situation where the directors of the fund are now being pursued in law.

The noble Earl, Lord Buckinghamshire, said earlier that one could wax eloquent till midnight on a previous clause. It is against that background that I could continue until two in the morning. However, I shall not test the Committee's patience that far. I beg to move.

Lord Mackay of Ardbrecknish: I have no objection in principle to what the noble Baroness, Lady Dean, proposes, but I hope to persuade her, as quickly as I can, that the amendment is unnecessary.

Trust law already provides the facility in the amendment by way of what is known as the Beddoe's summons procedure. That allows trustees and members to protect themselves from the cost of litigation on the very basis which the noble Baroness described.

Under the Beddoe's summons procedure, those wishing to engage in proceedings involving the trust can apply to the court for an order that the costs should be met by the trust. The court would grant such an order

13 Feb 1995 : Column 557

only where there is some reasonable need for litigation and where there are reasonable grounds for its succeeding.

An additional point which the Committee may bear in mind when considering the amendment is that members who are concerned about the operation of their trust scheme will in future be able to bring their anxieties to the attention of the regulatory authority. The authority in turn will be able to investigate any complaint.

The intentions behind the amendment are already met, either under existing provisions of trust law or by the introduction of the regulatory authority. I hope that I have briefly explained to the noble Baroness that the amendments are unnecessary, and that she will feel able to withdraw her amendment.

Baroness Dean of Thornton-le-Fylde: I thank the Minister for that response, but pose a question back to him although I do not know whether he will be able to answer it this evening. The Minister said that there is a provision in trust law for members to go to court. If the members are not part of a union, who will fund them? There is no legal aid for these matters. The members felt obliged to go to court direct by themselves because the matter is not covered by OPRA, or OPRA does not want to know. So who will fund them? The amendment provides that the scheme will meet those costs where an award has been achieved. It gives some support to the individual member, or to at least 10 per cent. of them, or a member-nominated trustee who is equally concerned.

Additionally, although the Minister says that trust law provides the protection sought by the amendment, I am advised that the Melton Meads case is the first of its kind in the UK courts. I wonder whether that is because the costs involved in taking on such a case are frightening. One cannot simply go to court and plead for an order; one must also provide all the back-up for that application. That involves a not inconsiderable amount. In fact, before the union reached the court the costs had escalated to around £500,000.

I hear what the Minister says. I shall read with a great deal of interest in the morning exactly what he said this evening to the Committee. I may return to the matter at another stage, but in the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 34 [Restriction on employer-related investments]:

[Amendments Nos. 137A and 137B not moved.]

Clause 34 agreed to.

Clause 35 [Provision of documents for members]:

[Amendments Nos. 138 to 141A not moved.]


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