Canada: A Pension Scheme Trustee Owes No Fiduciary Duty To The Scheme's Sponsoring Employer

The High Court has emphatically dismissed a claim by Keymed (Medical and Industrial Equipment) Limited (Keymed) against two of its former directors (Keymed (Medical and Industrial Equipment) Ltd v Hillman and another [2019] EWHC 485 (Ch) (the Judgment)).

Keymed had alleged that the directors had acted in breach of their duties as company directors and as trustees of two of its pension schemes. The Court rejected all the allegations made against them.

Aspects of the case were fact-specific and involved issues of company rather than pensions law. However, the Judgment is likely to be of considerable interest in the pensions industry. Until now, there had been no case which considered head-on whether a trustee of a pension scheme owes a fiduciary duty to the employer sponsoring that scheme.

Keymed had argued that, because the trustee of a pension scheme might in certain circumstances be obliged to consider the employer's interests, it followed that the trustee owed a duty to the employer. Moreover, the company argued that, if the proper purpose of the scheme involved the trustee taking into account an employer's interests, then it followed that the trustee owed a duty to the employer to take its interests into account.

The Court's emphatic finding that a pension scheme trustee owes no fiduciary duty to the scheme's sponsor employer will be of considerable interest in the pensions industry, as will what the judge said about the extent to which it is permissible for a trustee to take into account the employer's interests in considering whether and how to exercise its powers.

What was the background to the case?

Keymed is part of the Olympus Group. The defendants were directors of Keymed, as well as trustees of two of its pension schemes. Keymed alleged that the directors had preferred their own interests over those of the company by, in broad terms:

  • establishing a separate executive pension scheme for themselves;
  • amending the scheme's rules to remove (i) tax restrictions and (ii) a provision reducing benefits for young spouses; and
  • adopting conservative investment and funding strategies.

What were the issues identified by the judge?

The judge had to decide whether:

  1. the directors had exercised their powers as trustees for an improper purpose by removing the tax restrictions without in good faith taking into account Keymed's interests (the Tax Issue);
  2. when amending the scheme's rules dealing with the payment of spouses' benefits, the directors had exercised the scheme's amendment power for an improper purpose and without regard to their duty as directors of the company to promote its success (the Spouses' Benefits Issue);
  3. the directors had acted in breach of duty by adopting conservative investment and funding strategies for the scheme (the Investment Issue); and
  4. the directors had breached their duties to report misconduct in relation to the scheme (the Reporting Issue).

What findings did the Court make in respect of these issues?

The PIP Issue

The Court found that the directors had properly declared their interests to Keymed's board. There was no evidence of any dishonesty or improper conduct. The new scheme had been created to reduce the risk of PPF limits negatively impacting the old scheme's members and not for the directors' personal advantage.

The Spouses' Benefits Issue

The Court decided that scheme's amendment power had not been exercised for an improper purpose. The relevant deed had been executed by Keymed with full knowledge and understanding of its effects, and aware that the directors would be potentially entitled to an enhancement of their existing benefits under the scheme.

The Investment Issue

The Court found that the investment and funding strategy which had been adopted was not outside the range of strategies that could reasonably be adopted. The adoption of a conservative investment and funding strategy and Keymed's payment of additional contributions into the scheme when it was cash rich did not impose undue strain on the company given its long term funding obligations (indeed, it might be in its interests).

Moreover, those strategies had been acquiesced in, if not endorsed, by Keymed itself, as demonstrated by the fact the strategy continued after the directors had left the company. Professional advisers involved at the time had also been comfortable with the strategy.

The Reporting Issue

As there had been no misconduct, no duty to report ever arose.

What did the Judge say about a trustee's duties to the scheme's employer?

Probably the most significant aspect of the Judgment is the conclusion that just because a trustee is entitled to take account of the employer's interests in seeking to fulfil the purpose of the scheme, should it consider it appropriate to do so, did not mean the trustee owes a fiduciary duty to the employer. Indeed, such a duty would (the Judge said) be "profoundly undesirable", as it would strike at the heart of the principle that no fiduciary should serve two masters.

Drawing upon what the Court has said in Re Merchant Navy Ratings Pension Fund; Merchant Navy Ratings Pension Trustees Ltd v Stena Line Ltd ([2015] EWHC 448 (Ch) (MNRPF)), the judge stated that:

  • Asplin J in MNRPF decided that, provided it promotes the purpose of the pension scheme and does not seek to subordinate that purpose to other interests, the trustee may take into account the employer's interests.
  • Having regard to the interests of the employer should not be allowed to override the trustee' duties to other beneficiaries. If the employer's interests conflict with those of the scheme's beneficiaries, then the employer's interests must be subordinated to those other interests. In fact, the judge found that in most cases there would be no conflict between the interests of the employer and those of the members concerning the funding of the scheme.
  • Even when it is appropriate for the trustee to take into account the employer's interests, the trustee does not have to give them overriding regard. Even where a particular decision would be neutral for members, a trustee only needs to give effect to the employer's interests if the trustee considers it appropriate to do so.

Conflicts of interest can usually be managed. Whilst there might be a potential conflict of interest where individuals sit on the boards of both a scheme's employer and trustee, it may be possible depending on the facts of the case to handle such a conflict.

What does this mean for trustees?

There has long been a school of thought that an employer is a beneficiary under a pension scheme if it is entitled to any surplus which remains once benefits have been paid out. That question is not explicitly addressed in Keymed and there are suggestions in the Judgment that the judge did not consider that an employer is a scheme beneficiary.

However, the Judgment is clear that a pension scheme trustee does not owe the employer a fiduciary duty when the trustee is considering whether and how to exercise its powers. This is likely to give trustees comfort.

Although the judge stated clearly that trustees may take the interests of employers into account, the Judgment does not consider whether, in certain circumstances, trustees might be obliged to take into account those interests. In a footnote he simply noted that so such "special circumstances" were pleaded.

In that context, it is important to remember that, in considering whether and how to exercise its powers, trustees are under a duty to take into account all relevant factors (as well as exclude from their considerations irrelevant factors). Accordingly, it will still be open to employers to call into question trustees' decisions by alleging that the trustees failed to take sufficient account of their interests in reaching those decisions providing they could show that such interests were relevant to the trustees' decision.

Trustees will note the Court's decision that they should not allow employers' interests to outweigh those of members and other scheme beneficiaries. However, in the context of potential complaints from members, trustees will be reassured by the judge's conclusion that it would not be improper for the trustee to take into account the employer's interests even if the protection of those interests is a matter of indifference to the scheme's beneficiaries.

Read the original article on

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
19 Sep 2019, Seminar, Birmingham, UK

Providing GCs, Heads of Legal and senior in-house lawyers with timely, topical and practical legal advice on a variety of topics.

26 Sep 2019, Seminar, London, UK

Providing GCs, Heads of Legal and senior in-house lawyers with timely, topical and practical legal advice on a variety of topics.

8 Oct 2019, Seminar, Birmingham, UK

Supporting the development of paralegals, trainees and lawyers of up to five years' PQE by providing valuable knowledge and guidance together with practical tips.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions