Cowan and Others v. Scargill and Others Chancery Division Sir Robert Megarry V.-C. SIR ROBERT ME !

RR" V.-C. read the following judgment. I have before me an originating summons, issued on 1 December 1983, which raises certain questions on the exercise of the owers and duties of investment of the trustees of an em lo!ees" ension scheme, together with certain other questions. #he arties to the originating summons are the ten trustees of the $inewor%ers" &ension 'cheme. #he five laintiffs are the trustees a ointed b! the (ational )oal *oard +,the board, , or ,the (.).*.,-. #he five defendants are the trustees a ointed b! the (ational .nion of $inewor%ers +,the union,, or ,the (...$.,-. $r. 'tamler a eared on behalf of the laintiffs, and the first defendant, $r. /rthur 'cargill, a eared in erson. 0e had, I thin%, dis ensed with the services of a chancer! sil% and junior some da!s before the case began, but he had retained the services of a solicitor, who was able to sit with him in court and assist him. #he other four defendants too% no art in the argument, but $r. 'cargill told me that he was resenting his argument on behalf of them as well as on his own behalf. I should sa! at the outset that $r. 'cargill argued his case throughout with both courtes! and com etence. I wish to em hasise this, articularl! in view of the number of occasions on which I found it necessar! to interru t his submissions, usuall! because he was going too fast for coherent noteta%ing, or because I wished to be sure that I had correctl! understood his submission, or that he was not overloo%ing some oint which tended against him. #he main issue +and I ut it ver! shortl!- is whether the defendants are in breach of their fiduciar! duties in refusing a roval of an investment lan for the scheme unless it is amended so as to rohibit an! increase in overseas investment, to rovide for the withdrawal of existing overseas investments at the most o ortune time, and to *277
prohibit investment in energies which are in direct competition with coal. The investment plan in question is the "Investment Strategy and Business Plan 19 !"" which I shall call the "19 ! plan." The 19 ! plan was #irst presented to a meeting o# the trustees on 9 $une 19 ! as a replacement #or a similar plan approved in 19 % &the "19 % plan "'" and it has never been approved. The 19 % plan replaced a plan made in 19()" the #irst o# its *ind.

*efore I go an! further, I must sa! something about the minewor%ers" ension scheme. #his was established under the )oal Industr! (ationalisation +'u erannuation- 1egulations 1923, made under section 34 of the )oal Industr! (ationalisation /ct 1956+ and I shall call it "the scheme." It has been amended #rom
time to time under the powers con#erred by clause ,( o# the scheme. This allows amendments to be made by agreement between the board and the union" with a provision in clause , #or resolving matters in de#ault o# agreement. Both the scheme and the rules made under it are o# considerable comple-ity" but I need not e-plore these. Provision is made #or the payment o# pensions and lump sums on retirement" in.ury and certain diseases" and #or payments to widows and children o# members. The #unds o# the scheme are provided by contributions #rom members and by payments made by the board.

#he scheme covers all industrial em lo!ees of the board, and there is a arallel scheme for the board"s non7industrial staff, called the (.).*. 'taff 'u erannuation 'cheme +,the staff scheme,-. #he two schemes wor% together in various wa!s. #here is a joint investment sub7committee +,8.I.'.).,- com osed of re resentatives of the

committees of each of the schemes, some being re resentatives of both committees9 and the 8.I.'.). deals with much of the detail of the investment of the funds of the two schemes, with some investments being made with mone!s rovided b! both schemes. #he funds of each scheme are large, each being worth something in the region of :3,333 million, with some : ;33 million being available for investment each !ear under the scheme. /n advisor! anel of investment ex erts assists the 8.I.'.)., and $r. 0. 1. 8en%ins, the board"s director7general of investments, is the secretar! of the 8.I.'.). 0e heads a large staff which carries out most of the wor% of managing the funds. #he ractical o eration of this organisation for some !ears now has been that the trustees have a roved the general strateg! for investment in the form of the 1946 and 1983 lans, while the 8.I.'.)., which meets more frequentl!, has dealt with roblems that arose when some ro osed investment was ver! large, or did not fall within the guidelines laid down b! the lan, or was in some other wa! a matter that should be discussed. / art from that, $r. 8en%ins and his staff have a wide discretion in ma%ing investments in accordance with the lan, and the! do all the detailed wor%. /s I have mentioned, there are ten trustees under the scheme. #he! form a committee of management +,the committee,- which is in control of the fund. <ive of the ten are a ointed and removable b! the board and five are a ointed and removable b! the union, with rovision in each case for alternates. <rom the members of the committee a ointed b! the board, the board a oints a chairman and a joint de ut! *278
chairman" and #rom the members appointed by the union" the union appoints the other .oint deputy chairman. /t all material times 0r. $. 1. 2owan" the deputy chairman o# the board" has been chairman o# the committee" and 0r. 3. B. 4arrison the .oint deputy chairman appointed by the board. 4e is also chairman o# the $.I.S.2. 5ntil /pril 19 !" 0r. &now 6ord' 7ormley was the .oint deputy chairman appointed by the union+ but when he retired as president o# the union" 0r. Scargill became president in his place" and he also became the union8s .oint deputy chairman o# the committee. The members o# the committee are e-pressly made trustees o# the #unds o# the scheme" though they are given power to act by a ma.ority+ but there is also an e-press provision that the chairman o# a meeting o# the committee is not to have a second or casting vote. The powers o# investment are very wide" and there are also very wide provisions #or appointing agents and #or delegation. The scheme is #ully #unded. 0embers and the board ma*e basic contributions which are very appro-imately the same total amount" and the board also ma*es de#iciency payments in accordance with actuarial valuations. In addition" the board has been ma*ing #urther voluntary contributions so that pensions may *eep pace with in#lation. The net result" I understand" is that something o# the order o# two9thirds o# the payments come #rom the board and one9third #rom the members.

In earlier !ears, no formal lans or schemes for investment were made. 0owever, in 1946 a four !ears" business lan was a roved b! the 8.I.'.). and the committee, and in $a! 1983 this was re laced b! the 1983 lan. Investment has been made since then on the basis of this lan. .nder this, there were three main categories of investment, namel!, mar%etable securities +both gilts and equities-9 land9 and ,industrial finance,, which includes equities in small quoted com anies, roject finance for industr!, and investment in agricultural o erations. /ll three heads include overseas investment, and the first two include oil and gas. ,#argets,, in the form of ercentages, were set for various categories of investment. #he 198; lan was a revised lan that was intended to re lace the 1983 lan. It was submitted to the 8.I.'.). on 11 $a! 198;, and was a roved as being a ver! satisfactor! lan for the next two !ears, , rovided good use was made of the flexibilit! which it afforded for further overseas equit! investment., #he 8.I.'.). accordingl! submitted it to the committees of management of the two schemes with a recommendation for a roval. #he committee of the staff scheme a roved it at its

meeting on 8 8une 198;9 but it met a different fate at the 52th meeting of the committee for the minewor%ers" scheme held the next da!, 9 8une. / art from the re lacement of $r. =ormle! b! $r. 'cargill, the com osition of the committee had remained unchanged for some !ears9 and for man! !ears the members had wor%ed together with little dissention. #here had been a shar division about the wa! in which the scheme"s shares should be voted at an annual general meeting of one com an!, but, subject to that, a consensus had alwa!s emerged after discussion. /t the meeting on 9 8une 198;, $r. 'cargill, almost at the outset, said that an im ortant rinci le had to be discussed, and that he *279 was concerned about the rights o#
trustees to determine where the #und8s resources were invested. This arose on a question o# unionisation in a company in which the #und had a minority shareholding. It was agreed that there should be a special meeting to consider this and other matters o# policy a##ecting the investments o# the #und.

/fter certain other items had been considered, $r. 8en%ins resented the 198; lan, and went through it in detail. $r. 'cargill then raised objections to the lan. 0e subsequentl!, in a letter of 19 /ugust 198;, questioned the accurac! of the draft minutes of that meeting, and ut forward his own versions of certain arts of those minutes9 and it is from $r. 'cargill"s versions that I shall quote. 0is o ening objection was to sa! that ,while he a roved of the remainder of the ro osals, his organisation raised objections to investments in oil, investments overseas and the acquisition of land overseas., 0e said that there should not be an! future investment in these three areas, and moved reference bac% of the business lan for 198;. 0e also said that in the long term all investments ,should be withdrawn from these areas., >hen $r. )owan suggested that the lan should stand until the next meeting of the 8.I.'.). and that the alterations should be raised then, $r. 'cargill said that he ,could not acce t $r. )owan"s recommendation as he considered it would negate the meeting and would mean the committee of management was no more than a re orting bod!. 0e said that the three areas of investment were in direct conflict with the olic! decision of (...$. conference, and he suggested that investments in these three areas should not ta%e lace. 0e ro osed that a s ecial se arate meeting should be held to discuss the rinci les, and again moved a reference bac% of that art of the lan dealing with these three items., #he u shot was that the meeting was adjourned so that the discussion could be resumed at an earl! date. I ause there to sa! that although there have been minor variations in the wording of $r. 'cargill"s objections, the! have remained substantiall! in this form throughout. ,?il, has been re laced so as to become ,energies which are in direct com etition with coal,, so as to exclude, for instance, etrol and lubricating oil. <urther, a distinction seems to have emerged between overseas investments, where not onl! must there be no increase in the ercentage but also the existing investments are to be dis osed of as is o ortune, and, on the other hand, com eting energies, where no new investments are to be made, but there is no requirement to dis ose of existing investments. 0owever, I do not thin% that these variations matter much. Immediatel! after the meeting of 9 8une, $r. )owles, the legal adviser to the board, who had been in attendance at the meeting, wrote to all members of the committee, summarising the oral advice that he had given at the meeting. #he thrust of this was that the suitabilit! of investments was to be judged almost exclusivel! b! reference to financial criteria rather than their acce tabilit! for olitical or other extraneous reasons, and that it was im ro er to lace an embargo on certain classes *280 o#
investments regardless o# the #inancial consequences. :n 1( $une 0r. Scargill wrote to 0r. 2owan about the letter #rom 0r. 2owles" saying that the union had ta*en legal

advice" and that it was "on the basis o# this advice that we raised our ob.ection" to the investments in oil and overseas investment. &3or brevity" I shall use "oil" as re#erring to energy industries in competition with the British coal industry.' The letter re#erred to 0r. 2owles8 statement that the suitability o# investments was to be .udged "almost e-clusively by re#erence to #inancial criteria rather than their acceptability #or political or other e-traneous reasons"" and continued "0y colleagues and I do not accept that this interpretation is correct." The letter quoted a sentence #rom the legal advice that the union had obtained+ it now appears that this sentence came #rom an 1 9page memorandum by a well9*nown #irm o# 6ondon solicitors dated !9 /pril 19 !" as" indeed" 0r. Scargill made plain in addressing me. I shall return to this later. /t this stage I need only say that 0r. Scargill had #rom time to time re#used various requests to produce this memorandum. 4owever" on ;ay < o# the hearing it was pointed out to him that i# he asserted that he was supported by a legal opinion but he still re#used to produce it" questions might then arise about how #ar the opinion did in #act support him+ and he thereupon said that he would put the opinion in evidence" which he did a #ew days later. /t no stage has there been any suggestion that the de#endants had relied on any other legal advice.

?n ;2 8une 198;, $r. )owles addressed another note to all members of the committee. 0e ointed out that the legal advice mentioned in $r. 'cargill"s letter was concerned with the right of trustees to o t for one articular investment as against a viable alternative +a view that was not questioned-, and said that this was not the issue under discussion. #he committee"s dut!, $r. )owles said, was to manage the funds in the best interests of the beneficiaries9 and he then said@ ,>hat is im ro er is for the committee of management to fetter the wa! the! exercise their discretionar! owers as trustees in the future b! im osing an embargo on a wide range of investments regardless of the financial consequences., $r. 'cargill"s re l!, on 33 8une, was to state that the legal o inion obtained b! the (...$. covered all as ects of the scheme and the trustees" res onsibilities, so that it was incorrect to draw the conclusion that the advice was not directed to the issue under discussion. 0e went on@ ,>e are advised that we can refuse to invest abroad or in oil and other energ! industries, and it ma! be that, in the final anal!sis, the difference of o inion between !ou and ourselves will have to be resolved elsewhereA, #his was in substance re eated in subsequent letters to others. ?n 2 8ul!, $r. )owles wrote to $r. 'cargill, see%ing to discuss the difference of o inion with the solicitors who had advised the union9 and he said that he assumed that the! had seen the o inion obtained from two )hancer! sil%s on the obligations of the committee in relation to the scheme"s investments, and his own recent advice. 0e also said that it *281 was di##icult to comment on the union8s request #or legal advice

and on the advice itsel# without seeing them" and said that it would be help#ul to be supplied with copies. 0r. Scargill8s reply was that "we ourselves have been counselled that it is wiser not to supply you with copies o# the legal advice given us at this point."

#hen, on ;1 'e tember, $r. 'cargill wrote to $r. )owan, reiterating the ,total o osition, of the (...$. trustees to investment overseas and in oil, see%ing agreement to withdraw overseas investments, and see%ing other changes in the o eration of the scheme. #hese included ma%ing future investments require the a roval of the ,chairman and the vice7chairman,, and roviding for the chairmanshi to alternate between $r. )owan and the resident of the (...$. #he adjourned 52th meeting of the committee had not !et been held@ on 12 8une $r. )owan had ro osed three dates in 8une and 8ul! before the holida! season, but $r. 'cargill had rom tl! re lied that he was committed on all three dates, and he suggested no alternatives. $r. )owan then became gravel! ill, and did not return until earl! in 8anuar! 1983. 0e then wrote to $r. $. $c=ahe!, one of the union trustees, to suggest that he and $r.

'cargill should meet him +$r. )owan- and $r. 0arrison to discuss the fund"s roblems. #he meeting was held on ;2 8anuar! 1983, and a letter from $r. 'cargill sets out the changes sought b! him and $r. $c=ahe!. / number of further changes were added to those that had alread! been sought. Instead of alternating chairmen, there were to be joint chairmen@ there were to be quarterl! meetings of the committee@ the 8.I.'.). was to be com osed of trustees onl!@ there was to be an investigation of all ex enses aid for the ast two !ears@ there were to be fortnightl! meetings of the two joint chairmen with $r. 8en%ins so that the trustees could be involved in the actual decision7ta%ing@ and no investments above a certain level +e.g. : ; millionshould be made without agreement between the two joint chairmen and the rofessional fund managers. #he letter stated that ,our legal advisers are satisfied that we are acting within the law., ?n ;8 <ebruar! 1983 two meetings of the committee too% lace. In the morning there was the 56th meeting, and in the afternoon there was a resum tion of the adjourned 52th meeting. /t the morning meeting, the minutes of the original 52th meeting on 9 8une 198; were considered. #he! had been revised in the light of $r. 'cargill"s ro osed corrections, but the joint secretar!, after consulting his and his assistants" notes, had been unable to agree all of $r. 'cargill"s corrections. /t the meeting, the committee, after discussion, acce ted that no agreement could be reached on the minutes. /fter certain other oints, the committee turned to the minutes of the scheme"s investment sub7committee. #he ractice was for the 8.I.'.). to meet as a bod! and reach its conclusions, and then for the meeting to s lit into two investment sub7committees, one for the minewor%ers" scheme and the other for the staff scheme, and then for each sub7committee to ado t the decisions of the 8.I.'.). #he committee had before it the minutes of its investment sub7committee for 14 /ugust 198; +mista%enl! stated to be for ;5 /ugust-, the ;5 (ovember 198; and the ;5 <ebruar! 1983. $r. 'cargill moved the rejection of the minutes on the ground that the! contained oints about *282 investments which were contrary to the union8s position
as raised at the meeting o# the committee on 9 $une 19 !. 0r. 2owan pointed out that the meetings had ta*en place and the minutes had been agreed as a true record. &The minutes o# the meeting o# 1( /ugust" I may say" had been duly signed at the meeting o# the $.I.S.2. on !< =ovember" and similarly on !< 3ebruary 19 , the minutes #or !< =ovember had been duly signed.' 0r. Scargill" however" said that the committee" as trustees o# the scheme" were entitled to re.ect any minutes put be#ore them+ and in the event it was accepted that no agreement could be reached on the acceptance or re.ection o# the minutes in question.

/fter certain other matters, the committee turned to the draft re ort and accounts for the !ear ended 33 'e tember 198;. #here was a substantial discussion of various items, and then $r. 'cargill said that he was ,not re ared to acce t the re ort and accounts since the! contained items which were contrar! to union olic!,9 and he then referred to a articular item. /fter $r. )owan had said that the accounts stated what had been done, and that trustees could not reject the facts because the! did not agree with the olic!, $r. )hadburn, one of the union trustees, said that the! could not agree to something which the! had disagreed with for nine months. / vote was ta%en on the acce tance of the re ort and accounts, the board"s five nominees voting for and the union"s five nominees voting against. I am glad to sa! that the minutes of this meeting were dul! acce ted and signed at the 54th meeting on 15 (ovember 1983. In that state of affairs, the resumed 52th meeting was held that afternoon, on ;8 <ebruar!9 and I am glad to sa! that the minutes of this meeting too were dul! acce ted and signed on 15 (ovember 1983. $r. )owan said that the board had an interest in

investment strateg! because the! were res onsible for two7thirds of the contributions, and if the committee became at cross7 ur oses in that strateg!, and investment income was im aired, the board might find it im ossible to continue to a! additional contributions in order to finance cost7of7living increases to ensions. #his referred to the voluntar! a!ments that the board made without being required to do so b! the scheme. $r. $c=ahe! re lied that it was the members who rovided the wealth which allowed the board to a! contributions, and ,as such the union had a unilateral right of dis osal of these resources., $r. 8en%ins then introduced the 198; lan. #his is set out in a document some 33 ages long. /fter $r. 8en%ins"s introduction, $r. )owles reminded the trustees that the investment ower must be exercised solel! for the benefit of the trust. $r. 'cargill said that there was no difference in the arguments from those resented in 8une. ,#he! rejected the legal o inion that had been given and the! also rejected the investment lan resented b! $r. 8en%ins., 0e said that one investment ,raised moral questions about investment in rivate health care and ro osals should not be merel! based on commerce., )ontinued investment abroad and in oil ,would be to the detriment of coal and would be against the interests of the scheme"s beneficiaries., 0e then ut forward his ro osals for change, and asserted that the legal advice received b! the (...$. trustees ,was contrar! to what had been *283 received that day." 0r. 2owan
said that he could not understand why the =.5.0. trustees were determined that money should not be invested overseas. This had not been the case until the previous $une" and he wondered what had happened to change the situation. 0r. Scargill then said that he believed that all the money available #or investment could be invested in Britain. "The policy o# the =.5.0. was being carried out" although be#ore $une it was not." /#ter enumerating his proposals" he said that lawyers advising the =.5.0. said that trustees could not be criticised #or not investing in certain areas. The position o# the =.5.0. trustees "was not negotiable and their ob.ection to these three areas o# investment were matters o# principle." There was then another vote on the approval o# the 19 ! plan" with a #ive to #ive decision as be#ore. The 19 ! plan was there#ore not approved. 3inally" it was agreed that there should be a meeting between senior representatives o# the board and the union to discuss investment overseas and in oil and gas" with a committee meeting as soon as possible therea#ter.

#here then followed a number of discussions and a series of resultant memoranda which $r. 'cargill and $r. )owan in turn ut forward. #hese set out different forms of wording for some or all of the changes which $r. 'cargill sought. $r. 'cargill began, with his memorandum dated 13 $a! 19839 and this became %nown as memorandum /, with the others in sequence. In view of $r. 'cargill"s sustained criticisms of $r. 8en%ins, I thin% I ought to read the last aragra h of his memorandum. It runs@ ,>e wish to lace on record our dee a reciation of our investment fund manager, $r. 0ugh 8en%ins, and his staff for all the wor% the! have done and continue to do on behalf of the minewor%ers" ension scheme., $r. )owan re lied with memorandum * on 2 8ul!, and memorandum ) on 14 /ugust. 18 /ugust saw $r. )owan"s memorandum D and $r. 'cargill"s memorandum B. #hen there came, also on 18 /ugust, memorandum <, which became a matter of controvers!. It stated most, if not all, of the oints that $r. 'cargill wished to have established. 0e relied u on it as showing that agreement had been reached between $r. )owan and $r. 0arrison on the one hand, and $r. 'cargill and $r. $c=ahe! on the other. 0owever, the covering letter and $r. )owan"s evidence ma%e it clear that memorandum < was intended not for the committee but as the basis for a resentation to the board for alterations in the scheme which some +but not all- of the rovisions of the memorandum would require. $r. 'cargill strongl! contended that in

some wa! this memorandum bound the committee as regards the arts which did not require the board"s a roval, because, he said, if there had been a meeting of the committee, $r. )owan and $r. 0arrison would have voted with the five (...$. members, and so the memorandum would have been carried b! seven votes to three, or b! six to four, if onl! $r. )owan felt bound. $r. 'cargill did not ex lain how a binding decision could be roduced b! a meeting which had not been held merel! because a note had been re ared after discussion b! four of the ten members9 and in an! case $r. )owan"s covering letter stated *284 that the document is "not to be
read as an agreement binding or in any way restricting the present trustees in the discharge o# their duties." Plainly the document decided nothing. In addition" 0r. Scargill wrote on > September with a #urther document" memorandum 7" which di##ered in certain minor respects #rom memorandum 3. 4is letter stated that memorandum 3 had departed in some degree #rom the document prepared by him and 0r. 0c7ahey. 2learly he was not accepting memorandum 3.

In ?ctober 1983 $r. )owan wrote to $r. 'cargill to sa! that there ought to be a meeting of the committee as $r. 8en%ins had said that it shortl! would no longer be racticable to invest on the basis of the 1983 lan9 and he sought agreement to roceeding on the basis of the 198; lan ending the committee meeting. $r. 'cargill re lied, agreeing that there should be a meeting, but refusing to agree to an! investments being made on the basis of the 198; lan, bearing in mind his ,total o osition, to investments overseas and in energ! in direct com etition with coal. ?n 15 (ovember there was the 54th meeting of the committee. #his time a shorthand writer was resent in order to avoid an! difficult! about minutes. #he result is some 52 ages long. /t an earl! stage $r. )owan told the committee that the board had decided that it would no longer ma%e u an! deficienc! in the income from the fund if that income did not suffice for increasing ensions in line with the rate of inflation. 0e had given warning of this ossibilit! at the afternoon meeting of the revious ;5 <ebruar!. #he reason, he said, was that the board was concerned at the dela!s in im lementing the 198; lan, and was also of the o inion that this might well diminish the income from the fund. #o this statement $r. 'cargill too% ,the strongest ossible exce tion,, and rejected the criticism that the scheme had suffered in an! wa!. *efore me, $r. 'cargill was critical of $r. )owan"s statement as showing that $r. )owan was s ea%ing not as a trustee but as a re resentative of the board, and also that it was an attem t to ut ressure on the trustees. I can see nothing wrong in $r. )owan informing his fellow trustees of the decision of the board, a decision which might reduce the benefits of the scheme9 and I see no merit in requiring the board instead to write to the committee, as $r. 'cargill suggested. / trustee who informs his fellows of some im ending disadvantage to the trust does not cease to act as a trustee b! so doing@ indeed, it would almost certainl! be a breach of his dut! to remain silent. I shall not quote from the minutes of the meeting at an! length. $r. 'cargill and others of the (...$. trustees made it erfectl! clear that the! would not agree to an! further investment overseas or in energies com eting with coal in an! circumstances. #hus when $r. 'cargill was as%ed whether he would still sa! ,(o, if a better financial result could be obtained b! investing abroad, he said@ ,#he answer to that question has alread! been ut fairl! in this meeting reviousl!. #he (ational .nion of $inewor%ers unanimousl! at its conference, in its individual branches, in its areas, and b! re resentation of the trustees to this meeting, have declared unequivocall! that the! are o osed to an! investment overseas., *285 The =.5.0. trustees were then as*ed" ";o you regard yoursel# as within the
trust law o# this country to be mandated?"" and 0r. Scargill replied" "@e regard

ourselves to be acting within the law and we have been so legally advised." It was then put to him that under the law you could not be mandated by someone outside to do what you did not thin* right in terms o# the #inancial returns" and 0r. Scargill repliedA

,I made it erfectl! clear that the osition of the (...$., determined b! its conference, its branches and its areas, was totall! and unequivocall! against overseas investment. #hat has also been reflected to this meeting b! the trustees. #here is no ambiguit! about the statement that I made and we are so advised legall! that we are acting within the law., / little later he added@ ,&eo le re resenting the (ational .nion of $inewor%ers as trustees have reflected their views quite clearl! that the! are against overseas investments in an! circumstances., 'ubsequentl! he said@ ,#he (ational .nion of $inewor%ers" trustees are o osed in all circumstances to the investment of mone!s in the minewor%ers" ension scheme overseas., $r. Cincent, one of the (...$. trustees, then said that this was not a mandate@ ,it is (...$. olic!,9 and $r. >illiams, another (...$. trustee, said that the (.B.). decision was unanimous, and that the olic! went through the annual conference ,without an! o osition 7 unanimous., /fter further discussion, $r. )owles said that trustees must not fetter their discretion to invest, whereat $r. 'cargill asserted that ,the ro osals on rinci les which we have advanced are, in our legal advisers" view, quite within the law., $r. )owles then said that he had as%ed $r. 'cargill to show him a co ! of his o inion, but he had not done so, to which $r. 'cargill re lied that ,if this action subsequentl! comes before another authorit!, at that stage no doubt !ou will be resented with our advice., ?n being as%ed whether ,overseas, included B.B.). countries and the third world, $r. 'cargill said that it certainl! did. ,I am s ea%ing about investment in the .nited Dingdom 7 let there be no ambiguit! about that. #hat is the olic! of m! union and it is a rinci le decision., #owards the end of the meeting, $r. 'cargill moved an amendment that the 198; lan should not be im lemented unless it incor orated a ro osal +inter alia- ,to have no further increase in overseas investment over the 1983 lan., / age later he said that he had made his amendment ,ver!, ver! clear,9 and he then stated it as being that the 198; lan be ado ted subject to three amendments, the first of which was ,that there be no increase in the ercentage of overseas investment., ,(o further increase , and ,no further increase in the ercentage, do not, of course, roduce the same result. >here the amount of the fund is steadil! increasing, as is the case here, the first rohibits an! urchase, whereas the second ermits it within limits. I do not thin% that the difference matters much, as the issue is not how much restriction there should be, but whether there should be an!. In the end, the meeting was adjourned. ?n ;5 (ovember 1983, the adjourned 54th meeting was held. /t an earl! stage, $r. 'cargill said@ *286 ,In order that the record be absolutel! straight, at no time have the trustees of the (...$. had an! other consideration than the benefit of the beneficiaries and it is towards that end that all our actions have been directed., (ot sur risingl!, $r. )owan ointed to the conflict between rinci les which sought to diversif! the fund so as to maximise the return for beneficiaries b! investing at home and abroad if necessar!, and rinci les which laced an embargo on decisions b! the investment managers which the! might consider to be in the best interests of the beneficiaries. $r. 'cargill asserted that his ro osal was a erfectl! reasonable ro osal that was in the interests of the beneficiaries9 and he said that the line being ta%en b! the (...$. trustees was no different from the line ta%en when the 198; lan was first resented. #here were various references to the matter having to be resolved

in the courts, and then, after $r. 'cargill had said that the! ,would not dream of coming to this meeting mandated or with a fixed olic!,, the meeting turned to other matters, some of which I shall have to refer to later. /s I have mentioned, the originating summons was issued on 1 December 1983. *! the summons, the laintiffs see% directions under three heads@ ,1. Directions whether the defendants are in breach of their fiduciar! duties as members of the committee of management of the scheme and trustees of its mone! and investments in refusing to concur in the ado tion of the Investment 'trateg! and *usiness &lan 198; +initiall! resented to a meeting of the committee on 9 8une 198;unless amended so that +1- there is to be no increase in the ercentage of overseas investment9 and +;- overseas investment alread! made is to be withdrawn at the most o ortune time9 and +3- the committee ado ts a ro osal within the business lan of not investing in energies which are in direct com etition with coal. ;. Directions whether the Investment 'trateg! and *usiness &lan 198; should now be ado ted b! the committee and im lemented. 3. Directions for the com letion of the accounts of the scheme for the !ear to 33 'e tember 198;., #here is also a request for various consequential and other relief. I can dis ose of the third head quic%l!. /t the outset of Da! 1, I as%ed $r. 'cargill wh! it would not be ossible for him and the other (...$. trustees to sign the 198; accounts with the addition of some words which showed that the! did not question the accurac! of the accounts but dissociated themselves from certain matters disclosed in them. $r. 'cargill then said that this had never been suggested b! the laintiffs, but that it was certainl! a matter that could be considered. #owards the end of Da! 9 $r. 'cargill referred to the oint again, and said that if some such words could be inserted in the accounts, the defendants would have no objection to signing them. #he matter was then left for discussion between the arties. $r. 'tamler did not thin% such words would roduce an! obstacles from his oint of view, and so I shall sa! no more about the third head unless I am as%ed to do so. I turn to the law. #he starting oint is the dut! of trustees to exercise their owers in the best interests of the resent and future beneficiaries *287 o# the trust" holding the
scales impartially between di##erent classes o# bene#iciaries. This duty o# the trustees towards their bene#iciaries is paramount. They must" o# course" obey the law+ but sub.ect to that" they must put the interests o# their bene#iciaries #irst. @hen the purpose o# the trust is to provide #inancial bene#its #or the bene#iciaries" as is usually the case" the best interests o# the bene#iciaries are normally their best #inancial interests. In the case o# a power o# investment" as in the present case" the power must be e-ercised so as to yield the best return #or the bene#iciaries" .udged in relation to the ris*s o# the investments in question+ and the prospects o# the yield o# income and capital appreciation both have to be considered in .udging the return #rom the investment.

#he legal memorandum that the union obtained from their solicitors is generall! in accord with these views. In considering the ossibilit! of investment for ,sociall! beneficial reasons which ma! result in lower returns to the fund,, the memorandum states that ,the trustees" onl! concern is to ensure that the return is the maximum ossible consistent with securit!,9 and then it refers to the need for diversification. 0owever, it continues b! sa!ing@ ,#rustees cannot be criticised for failing to ma%e a articular investment for social or olitical reasons, such as in 'outh /frican stoc% for exam le, but ma! be held liable for investing in assets which !ield a oor return or for disinvesting in stoc% at ina ro riate times for non7financial criteria., #his last sentence must be considered in the light of subsequent assages in the memorandum which indicate that the sale of 'outh /frican securities b! trustees

might be justified on the ground of doubts about olitical stabilit! in 'outh /frica and the long7term financial soundness of its econom!, whereas trustees could not ro erl! su ort motions at a com an! meeting dealing with a! levels in 'outh /frica, wor% accidents, ollution control, em lo!ment conditions for minorities, militar! contracting and consumer rotection. #he assertion that trustees could not be criticised for failing to ma%e a articular investment for social or olitical reasons is one that I would not acce t in its full width. If the investment in fact made is equall! beneficial to the beneficiaries, then criticism would be difficult to sustain in ractice, whatever the osition in theor!. *ut if the investment in fact made is less beneficial, then both in theor! and in ractice the trustees would normall! be o en to criticism. #his leads me to the second oint, which is a corollar! of the first. In considering what investments to ma%e trustees must ut on one side their own ersonal interests and views. #rustees ma! have strongl! held social or olitical views. #he! ma! be firml! o osed to an! investment in 'outh /frica or other countries, or the! ma! object to an! form of investment in com anies concerned with alcohol, tobacco, armaments or man! other things. In the conduct of their own affairs, of course, the! are free to abstain from ma%ing an! such investments. Eet under a trust, if investments of this t! e would be more beneficial to the beneficiaries *288 than
other investments" the trustees must not re#rain #rom ma*ing the investments by reason o# the views that they hold.

#rustees ma! even have to act dishonourabl! +though not illegall!- if the interests of their beneficiaries require it. #hus where trustees for sale had struc% a bargain for the sale of trust ro ert! but had not bound themselves b! a legall! enforceable contract, the! were held to be under a dut! to consider and ex lore a better offer that the! received, and not to carr! through the bargain to which the! felt in honour bound@ *uttle v. 'aunders F1923G ; /ll B.1. 193. In other words" the duty o# trustees to their
bene#iciaries may include a duty to "gaBump"" however honourable the trustees. /s @ynn9Parry $. said at p. 19>" trustees "have an overriding duty to obtain the best price which they can #or their bene#iciaries." In applying this to an o##icial receiver in In re >!vern Develo ments Htd. F1945G 1 >.H.1. 1394" 11%)" Templeman $. said that he "must do his best by his creditors and contributories. 4e is in a #iduciary capacity and cannot ma*e moral gestures" nor can the court authorise him to do so." In the words o# Sir $ames @igram C.9 2. in Balls v. Strutt &1 <1' 1 4are 1<)" 1<9A

,It is a rinci le in this court, that a trustee shall not be ermitted to use the owers which the trust ma! confer u on him at law, exce t for the legitimate ur oses of his trust9..., &owers must be exercised fairl! and honestl! for the ur oses for which the! are given and not so as to accom lish an! ulterior ur ose, whether for the benefit of the trustees or otherwise@ see Du%e of &ortland v. #o ham +1865- 11 0.H.)as. 3;, a case on a ower of a ointment that must a l! a fortiori to a ower given to trustees as such. #hird, b! wa! of caveat I should sa! that I am not asserting that the benefit of the beneficiaries which a trustee must ma%e his aramount concern inevitabl! and solel! means their financial benefit, even if the onl! object of the trust is to rovide financial benefits. #hus if the onl! actual or otential beneficiaries of a trust are all adults with ver! strict views on moral and social matters, condemning all forms of alcohol, tobacco and o ular entertainment, as well as armaments, I can well understand that it might not be for the ,benefit, of such beneficiaries to %now that the! are obtaining rather larger financial returns under the trust b! reason of investments in those activities than the! would have received if the trustees had invested the trust funds in other investments. #he beneficiaries might well consider that it was far better to receive less than to receive more mone! from what the! consider to be evil and

tainted sources. ,*enefit, is a word with a ver! wide meaning, and there are circumstances in which arrangements which wor% to the financial disadvantage of a beneficiar! ma! !et be for his benefit@ see, for exam le, In re #."s 'ettlement #rusts F1965G )h. 128 and In re 2.6. D19)9E 1 2h. > (. But I would emphasise that such
cases are li*ely to be very rare" and in any case I thin* that under a trust #or the provision o# #inancial bene#its the burden would rest" and rest heavy" on him who asserts that it is #or the bene#it o# the bene#iciaries as a whole to receive less by reason o# the e-clusion o# some o# the possibly more pro#itable #orms o# investment. Plainly the present case is not one o# this rare type *289 o# cases. Sub.ect to such matters" under a trust #or the provision o# #inancial bene#its" the paramount duty o# the trustees is to provide the greatest #inancial bene#its #or the present and #uture bene#iciaries.

<ourth, the standard required of a trustee in exercising his owers of investment is that he must ,ta%e such care as an ordinar! rudent man would ta%e if he were minded to ma%e an investment for the benefit of other eo le for whom he felt morall! bound to rovide@, per 6indley 6.$. in In re @hiteley &1 )' ,, 2h.;. ,<(" ,>>+ see also at pp. ,>%" ,> +
and see 6earoyd v. @hiteley &1 (' 1! /pp.2as. (!(. That duty includes the duty to see* advice on matters which the trustee does not understand" such as the ma*ing o# investments" and on receiving that advice to act with the same degree o# prudence. This requirement is not discharged merely by showing that the trustee has acted in good #aith and with sincerity. 4onesty and sincerity are not the same as prudence and reasonableness. Some o# the most sincere people are the most unreasonable+ and 0r. Scargill told me that he had met quite a #ew o# them. /ccordingly" although a trustee who ta*es advice on investments is not bound to accept and act on that advice" he is not entitled to re.ect it merely because he sincerely disagrees with it" unless in addition to being sincere he is acting as an ordinary prudent man would act.

<ifth, trustees have a dut! to consider the need for diversification of investments. *! section 6+1- of the #rustee Investments /ct 1961A ,In the exercise of his owers of investment a trustee shall have regard 7 +a- to the need for diversification of investments of the trust, in so far as is a ro riate to the circumstances of the trust9 +b- to the suitabilit! to the trust of investments of the descri tion of investment ro osed and of the investment ro osed as an investment of that descri tion., #he reference to the ,circumstances of the trust, lainl! includes matters such as the siIe of the trust funds@ the degree of diversification that is racticable and desirable for a large fund ma! lainl! be im racticable or undesirable +or both- in the case of a small fund. In the case before me, it is not in issue that there ought to be diversification of the investments held b! the fund. #he contention of the defendants, ut ver! shortl!, is that there can be a sufficient degree of diversification without an! investment overseas or in oil, and that in an! case there is no need to increase the level of overseas investments be!ond the existing level. ?ther ension funds got on well enough without overseas investments, it was said, and in articular the (...$."s own scheme had, in 198;, roduced better results than the scheme here in question. #his was not so, said $r. 8en%ins, if !ou com ared li%e with li%e, and excluded investments in ro ert!, which figure substantiall! in the minewor%ers" scheme but not at all in the (...$. scheme@ and in an! case the latter scheme was much smaller, being of the order of :4 million. I shall not ursue this matter. Bven if other funds in one articular !ear, or in man! !ears, had done better than the scheme which is before *290 me" that does not begin
to show that it is bene#icial to this scheme to be shorn o# the ability to invest

overseas. The main di##erence between the 19 % and the 19 ! plans" I may say" is that although the target #or overseas investments remains at 1> per cent." the 19 ! plan increases the percentage o# the cash #low that can be invested in overseas realty #rom ( 1F! to 1% per cent." and rela-es the overall limit o# 1> per cent. in this respect. It should be added that" in addition" something li*e 1% per cent. o# the assets o# British companies in which the #und has invested consist o# overseas holdings" so that there is this additional #oreign element. /s #or oil" the 19 ! plan made no real di##erenceA the e-isting holdings o# .ust under 1! per cent. could have been maintained i# that plan had been implemented.

'ixth, there is the question whether the rinci les that I have been stating a l!, with or without modification, to trusts of ension funds. $r. 'tamler asserted that the! a lied without modification, and that it made no difference that some of the funds came from the members of the ension scheme, or that the funds were often of a ver! substantial siIe. $r. 'cargill did not in terms assert the contrar!. 0e merel! said that this was one of the questions to be decided, and that ension funds ma! be subject to different rules. I was somewhat unsuccessful in m! attem ts to find out from him wh! this was so, and what the differences were. >hat it came down to, I thin%, was that the rules for trusts had been laid down for rivate and famil! trusts and wills a long time ago9 that ension funds were ver! large and affected large numbers of eo le9 that in the resent case the well7being of all within the coal industr! was affected9 and that there was no authorit! on the oint exce t Bvans v. Hondon )o7o erative 'ociet! Htd., #he #imes, 6 8ul! 1946, and certain overseas cases. I shall refer to the authorities in a moment, and consider the question of rinci le first. I can see no reason for holding that different rinci les a l! to ension fund trusts from those which a l! to other trusts. ?f course, there are man! rovisions in ension schemes which are not to be found in rivate trusts, and to these the general law of trusts will be subordinated. *ut subject to that, I thin% that the trusts of ension funds are subject to the same rules as other trusts. #he large siIe of ension funds em hasises the need for diversification, rather than lessening it, and the fact that much of the fund has been contributed b! members of the scheme seems to me to ma%e it even more im ortant that the trustees should exercise their owers in the best interests of the beneficiaries. In a rivate trust, most, if not all, of the beneficiaries are the reci ients of the bount! of the settlor, whereas under the trusts of a ension fund man! +though not all- of the beneficiaries are those who, as members, contributed to the funds so that in due time the! would receive ensions. It is thus all the more im ortant that the interests of the beneficiaries should be aramount, so that the! ma! receive the benefits which in art the! have aid for. I can see no justification for holding that the benefits to them should run the ris% of being lessened because the trustees were ursuing an investment olic! intended to assist the industr! that the ensioners have left, or their union. *291 I turn to the authorities. Gvans v. 6ondon 2o9operative Society 6td. The Times"
) $uly 19() is a decision o# Brightman $. which has apparently achieved a considerable measure o# renown among those concerned with pension #unds as being the only Gnglish authority on the sub.ect. I do not thin* that I need discuss the details o# the case" because it seems to me to be per#ectly clear that it is a decision upon a particular rule o# the pension #und there in question" rule (" and not upon the general law. 1ule ( provided #or the pensions committee to ma*e loans on certain terms to the 2o9operative Society in question" and the pension #und had been receiving #rom the society less than the mar*et rate o# interest on such loans. The substance o# the decision was that the terms o# rule ( permitted not only the sel#9investment o# the pension #unds but also the payment o# less than the mar*et rate o# interest on such loans" even though the society was the trustee o# the #und and so was pro#iting #rom its trust. I #ind it impossible to read pp. 1(9!% o# the transcript without reaching the conclusion that the .udge was deciding the case on the e-tent to which rule ( too* the

case out o# the ordinary law o# trusts" and that but #or rule ( the ordinary law o# trusts would have been applied to the case. In my .udgment" the case does nothing to support the contentions o# the de#endants. Instead" I thin* it provides some support #or the plainti##s.

*lan%enshi v. *o!le +1941- 3;9 <.'u . 1389 was a case heard in the ..'. District )ourt for the District of )olumbia b! 8udge =esell. #he trustees of a ension fund had allowed large sums of mone! to remain in ban% accounts bearing no interest at a ban% controlled b! the union. ?ver an 187!ear eriod, var!ing sums between J15 million and J42 million, re resenting between 15 er cent. and 55 er cent. of the fund"s total resources, had been left in this wa!. #he fund was established for the benefit of em lo!ees of coal o erators, their families and de endants, and over 92 er cent. of the members of the fund were also members of the union. It was contended that the trustees could ro erl! consider not onl! the interests of the beneficiaries but also collateral matters such as increasing the tonnage of union7mined coal9 but this was rejected. #he court re7affirmed the dut! of undivided lo!alt! to the beneficiaries that a trustee owes, and did not acce t that regard should also be aid to the union or its members who generated some of the income of the fund, or to the industr! as a whole. #hat seems to me to be lainl! right. >ithers v. #eachers" 1etirement '!stem of the )it! of (ew Eor% +1948- 554 <.'u . 1;58 arose out of the im ending insolvenc! of the )it! of (ew Eor% in 1942. #he #eachers" 1etirement '!stem +,#.1.'.,- and four other (ew Eor% ension funds agreed to urchase J;,233 million unmar%etable and highl! s eculative (ew Eor% )it! bonds over the next two and a half !ears in an attem t to stave off the imminent ban%ru tc! of the cit!9 the share contributed b! #.1.'. was J863 million. #.1.'. was an unfunded scheme, and the evidence was that if the cit! ceased to ma%e its massive contributions to the scheme, the reserves would be exhausted in some 8 to 13 !ears, even if the contributions b! em lo!ees continued and there was a constant rate of retirement of teachers. In the ..'. District )ourt for the 'outhern *292 ;istrict o#
=ew Hor*" $udge 2onner considered and accepted Blan*enship v. Boyle" ,!9 3.Supp. 1% 9 and the traditional rules o# equity" but held that the trustees had been .usti#ied in purchasing the bonds since they had done so in the best interests o# the bene#iciaries" and not out o# concern #or the general public wel#are or the protection o# the .obs o# city teachers. The ob.ect o# the trustees" who had imposed stringent conditions in an attempt to protect the T.1.S." had been to ensure the continuance o# the city8s ma.or contributions to the scheme" and preserve the city8s position as the ultimate guarantor o# the payment o# pension bene#its+ and this was in the best interests o# the bene#iciaries. This di##ered #rom the position in Blan*enship v. Boyle" where

,the trustees ursued olicies which ma! incidentall! have aided the beneficiaries of the fund but which were intended, rimaril!, to enhance the osition of the union and the welfare of its members, resumabl!, through the creation andKor reservation of jobs in the coal industr!,@ . 1;26. / art from the ex ression ,andKor,, I would agree. #he /merican cases do not, of course, bind me9 but the! seem, if I ma! sa! so, to be soundl! based on equitable rinci les which are common to Bngland and most jurisdictions in the .nited 'tates, and the! accord with the conclusion that I would have reached in the absence of authorit!. /ccordingl!, on rinci le, on the Bvans case, and on the two /merican cases, I reach the unhesitating conclusion that the trusts of ension funds are in general governed b! the ordinar! law of trusts, subject to an! contrar! rovision in the rules or other rovisions which govern the trust. In articular, the trustees of a ension fund are subject to the overriding dut! to do the best that the! can for the beneficiaries, the dut! that in the .nited 'tates is %nown as

,the dut! of undivided lo!alt! to the beneficiaries,@ see *lan%enshi v. *o!le, 3;9 <.'u . 1389, 1392. In considering that dut!, it must be remembered that ver! man! of the beneficiaries will not in an! wa! be directl! affected b! the ros erit! of the mining industr! or the union. $iners who have retired, and the widows and children of deceased miners, will continue to receive their benefits from the fund even if the mining industr! shrin%s@ for the scheme is full! funded, and the fund does not de end on further contributions to it being made. If the board fell on hard times, it might be unable to continue its voluntar! a!ments to meet cost7of7living increases, quite a art from the statement about this made b! $r. )owan at the 54th committee meeting on 15 (ovember 1983. #he im act of that remote ossibilit! falls far short of the imminent disaster facing the )it! of (ew Eor% and #.1.'. in the >ithers case, 554 <.'u . 1;589 and I cannot regard an! olic! designed to ensure the general ros erit! of coal mining as being a olic! which is directed to obtaining the best ossible results for the beneficiaries, most of whom are no longer engaged in the industr!, and some of whom never were. #he connection is far too remote and insubstantial. <urther, the assets of even so large a ension fund as this are nowhere near the siIe at which there could be *293
e-pected to be any perceptible impact #rom the adoption o# the policies #or which 0r. Scargill contends.

I turn to consider the grounds on which the rohibitions ut forward b! the defendants have been su orted. <irst, there are the reasons ut forward during the discussions b! the trustees. I have alread! quoted a number of these. &ut shortl!, these were that the rohibitions were (...$. olic!@ the union, as a matter of rinci le, was totall! and unequivocall! o osed to investment overseas. #hese views were ut forward in various wa!s on various occasions, but the substance was unvar!ing. 0owever, as I have mentioned, earl! in the meeting on ;5 (ovember 1983, nearl! 18 months after the dis ute had bro%en out, $r. 'cargill asserted that at no time had the (...$. trustees had ,an! other consideration than the benefit of the beneficiaries and it is towards that end that all our actions have been directed., /t no stage did he ex lain how or wh! it was for the benefit of the beneficiaries to ut union olic! into force under the scheme b! im osing the rohibitions. (or did he attem t to reconcile his statement at the same meeting that he would not dream of coming to it ,mandated or with a fixed olic!, with his consistent attitude of total o osition to overseas investment as a matter of rinci le that was not negotiable. <rom time to time $r. 'cargill made other assertions of this nature, again unex lained. I can see no esca e from the conclusion that the (...$. trustees were attem ting to im ose the rohibitions in order to carr! out union olic!9 and mere assertions that their sole consideration was the benefit of the beneficiaries do not alter that conclusion. If the (...$. trustees were thin%ing onl! of the benefit of the beneficiaries, wh! all the references to union olic! instead of ro er ex lanations of how and wh! the rohibitions would bring benefits to the beneficiariesL (o doubt some trustees with strong feelings find it ir%some to be forced to submerge those feelings and genuinel! ut the interests of the beneficiaries first. Indeed, there are some who are tem eramentall! unsuited to being trustees, and are more fitted for cam aigning for changes in the law. #his, of course, the! are free to do9 but if the! choose to become trustees the! must acce t it that the rules of equit! will bind them in all that the! do as trustees. I must also refer once more to the legal advice which the union obtained from the solicitors. $r. 'cargill re eatedl! asserted that their legal advisers had ta%en the view that the ro osals of the (...$. trustees +namel!, the rohibitions- were within the

law. 0e also rejected $r. )owles" advice on the obligation to exercise the investment ower solel! for the benefit of the trust, and said that this was contrar! to the legal advice that the union had received. .nli%e $r. )owles, $r. 'cargill lainl! had access to the whole of that legal advice. >hen at last he roduced the memorandum containing that advice, after his revious refusals to do so, it could be seen that the advice in fact rovided no su ort whatever for the rohibitions that the union trustees sought to im ose, and that it accorded with $r. )owles" advice, rather than contradicting it. #he distinction that $r. )owles made in his note of ;2 8une 198; between o ting for one articular investment as against a viable alternative, and, on the other hand, im osing an embargo on a *294 wide range o# investments" does not
require a lawyer to understand it yet 0r. Scargill continued to claim that the advice obtained by the union supported his views. The solicitors8 memorandum also discussed proposals #or a Pension Scheme /ct" re#erring to the @ilson 1eport o# $une 19 % &2mnd. (9,(' and comments on it" and saying that any such /ct was some years away. The memorandum thus clearly distinguished the law as it was #rom the law that there may be.

I do not %now what were the instructions that were given to the solicitors, or what questions the! were as%ed9 but judging from the memorandum, at least one question seems to have been how far ension fund trustees could give effect to their social views in ma%ing investments and how far the! would be at ris% if the! did so. <or the most art, if I ma! sa! so, the advice seemed to me to be sound, racticable, and readil! intelligible to a la!man of ordinar! intelligence9 but it certainl! does not rovide an! su ort for the rohibitions ro osed b! the defendants. I therefore reject an! contention that the defendants" attem ts to im ose the rohibitions were su orted b! the legal advice that the! had obtained or that it su orted their rejection of the advice given b! $r. )owles. $r. 'cargill"s assertions of such su ort are sim l! untrue, and obviousl! so. I also reject an! assertion that rior to the commencement of these roceedings the benefit of the beneficiaries was the sole consideration that the union trustees had@ that also is untrue. #he union trustees were mainl!, if not solel!, actuated b! a desire to ursue union olic!, and the! were not utting the interests of the beneficiaries first, as the! ought to have done. #he! were doing so deliberatel! and in the teeth of ro er legal advice from both sides of the table as to the duties of trustees, and there has been no suggestion that at an! time the! obtained further legal advice, as trustees who had genuinel! intended to carr! out their fiduciar! duties would have done when the serious conflict of views had become lain. #he! were adamant in their determination to im ose the restrictions, whether or not the! harmed their beneficiaries. In this res ect I can see no difference between $r. 'cargill, who vehementl! o osed investment overseas and in oil as soon as he became a trustee, and the other four union trustees, who for !ears before the advent of $r. 'cargill had been o erating under a olic! of substantial investment overseas and in oil. /s soon as $r. 'cargill arrived, the! rom tl! abandoned their revious attitude and fell in beside him. #his conclusion, however, does not end the matter. If trustees ma%e a decision u on wholl! wrong grounds, and !et it subsequentl! a ears, from matters which the! did not ex ress or refer to, that there are in fact good and sufficient reasons for su orting their decision, then I do not thin% that the! would incur an! liabilit! for having decided the matter u on erroneous grounds9 for the decision itself was right. I must therefore turn to the 33 or 32 affidavits which, with their voluminous exhibits, made u the eight large volumes that were before me. 'ome of the evidence filed b! the defendants tended to show that the rohibitions would not be harmful to the beneficiaries, or jeo ardise the aims of the fund, and that

some ension funds got along well enough *295 without any overseas investments.
Such evidence misses the point. Trustees must do the best they can #or the bene#it o# their bene#iciaries" and not merely avoid harming them. I #ind it impossible to see how it will assist trustees to do the best they can #or their bene#iciaries by prohibiting a wide range o# investments that are authorised by the terms o# the trust. @hatever the position today" nobody can say that conditions tomorrow cannot possibly ma*e it advantageous to invest in one o# the prohibited investments. It is the duty o# trustees" in the interests o# their bene#iciaries" to ta*e advantage o# the #ull range o# investments authorised by the terms o# the trust" instead o# resolving to narrow that range.

#here was other evidence filed b! the defendants which was more to the oint9 and it was met b! countervailing evidence of the laintiffs. #his evidence was directed to economics and investment strateg!. /t the outset I must sa! that I found the laintiffs" evidence the more cogent and ractical, and more directl! related to what was in issue. #he general thrust of the defendants" evidence in su ort of the restrictions that the! see% to im ose was along the following lines. &ensions funds in *ritain have enormous assets. If all, or nearl! all, of these assets were invested in *ritain, and none, or few, were invested overseas, this would do much to revive this countr!"s econom! and so benefit all wor%ers, es eciall! if the investments were in the form not of urchasing established stoc%s and shares but of ,real, investment in h!sical assets and new ventures. <or the minewor%ers" scheme, the ros erit! of the coal industr! would aid the ros erit! of the scheme, and so lead to benefits for the beneficiaries under the scheme. #his oint was ut in various wa!s, and a short summar! necessaril! omits man! facets9 but in the end the a roach seems to me to have been along these general lines. I readil! acce t that a case, and erha s a strong case, can be made for legislation or other rovisions that in the general ublic interest would restrict the outflow of large funds from this countr! and ut the mone! to wor% here. I have alread! mentioned the >ilson 1e ort9 and in 8ul! 1983 the #...). issued a re ort, some 32 ages long, called ,&ension <und Investment and #rusteeshi ,, which went into such matters in considerable detail, dealing with man! other oints as well. / art from legislation, the re ort recommends the introduction of guidelines to restrict overseas investment b! ension funds9 and of course the investment clauses in schemes ma! include such restrictions, or ma! be altered to include them. It is onl! in the last five !ears that the abolition of exchange control has made it eas! to invest abroad, and the full effect of this restored libert! has erha s not !et been full! felt and evaluated in the investment world. It ma! well be, too, that a strong case could be made for the o osing view, recluding an! restriction on overseas investment b! ension funds. *ut I am not concerned with changes in the law or in the scheme for an! ension fund, whether this fund or an! other. I have to deal with this fund under the scheme as it now stands. I am concerned with a fund under which there are man! beneficiaries who no longer have an! financial interest in the welfare of the coal industr!. #he! ma! well be ,interested, in it in the sense that *296 they remember the years that they spent in it
with a##ection or the reverse" and they may well #ind it "interesting" to *now what is going on in it" in the sense o# grati#ying a natural curiosity and concern about the industry and the people in it. But apart #rom such matters" they are not a##ected by the industry and its success.

In m! view, therefore, the broad economic arguments of the defendants rovide no justification for the restrictions that the! wish to im ose. /n! ossible benefits from im osing the restrictions that would accrue to the beneficiaries under the scheme +as distinct from the general ublic- are far too s eculative and remote. Harge though the fund is, I cannot see how the ado tion of the restrictions can ma%e an! material

im act on the national econom!, or bring an! a reciable benefit to the beneficiaries under the scheme. #here is nothing whatever to suggest that the board will be in an! difficult! in ma%ing its a!ments under the scheme unless the restrictions are ado ted. #here is not a shred of evidence to suggest that the board is in a state of imminent disaster li%e that which faced the )it! of (ew Eor% in the >ithers case, 554 <.'u . 1;58, or that even if it were the im osition of the restrictions would save it9 and in an! case the scheme, unli%e that in the >ithers case, is full! funded. /s for diversification, I can see that the ris%s inherent in an individual investment can be met b! a modest degree of diversification9 but where the ris%s are not merel! for one articular investment but for a whole sector of the mar%et, such as mining or tea, a wider degree of diversification will be needed. In an! case, the question is one of excluding a ver! large sector of the mar%et, and reventing diversification into investments in other countries which ma! do well at a time when the whole *ritish mar%et is de ressed9 and I can see no ossible benefit in such an exclusion, es eciall! in the case of a ver! large fund with highl! s%illed investment ex ertise. /ccordingl!, on the case as a whole, in m! judgment the laintiffs are right and the defendants are wrong. #he question, then, is what order should be made. #he summons is cast in the form of as%ing the court to give directions9 but I doubt whether this is the most a ro riate remed!. I thin% that at this stage it would be more a ro riate for me to ma%e declarations, and leave it to the defendants to carr! out their duties as trustees in accordance with those declarations. I am read! to assume that the! will com l! with the law once the court has declared what it is. $! onl! hesitation arises from a letter dated 3 8anuar! 1985 from $r. 'cargill in which he answered a request to sign a document b! sa!ing that he had ,no intention of signing
anything in connection with this investment"+ and he suggested getting the signature o# Cinelott $. "who apparently appointed himsel# a trustee #or the purposes o# this investment." This re#ers to a motion be#ore Cinelott $. on !1 ;ecember 19 , in which he had authorised ma*ing a particular overseas investment" the 1/0P/2 investment. /gainst this" however" must be set 0r. Scargill8s proper attitude in this court on the signing o# the accounts+ and so" despite his regrettable letter" I shall not assume that the de#endants intend to demonstrate their un#itness to continue as trustees by re#using to comply with the law as declared by the court. /ccordingly" sub.ect to what may be said when I have concluded this .udgment" I propose to *297 ma*e suitable declarations" and to give liberty to apply #or directions or other appropriate relie# i# the declarations are not duly acted upon. It is important to get this large trust bac* on the rails+ and it may help to do this i# at this stage the court re#rains #rom giving directions or ma*ing any coercive orders" whether under the inherent .urisdiction or otherwise" and remains in the bac*ground while the normal operation o# the scheme is being re9established. It is very much to be hoped that there will be no need to consider the e-ercise o# the court8s inherent power to remove trustees. I should add that it is clear that the court can ma*e declarations even though they have not been claimed in the proceedingsA see 0arrison7*roadle! v. 'mith F1965G 1 >.H.1. 526.

*efore I art with the case, there are certain other matters that I should mention. #he! do not affect what I have to decide, but the! have lainl! been bones of contention that have disturbed the smooth running of the scheme, and I do not thin% that I should ass over them in silence. <irst, there is the general question of deadloc%. $r. 'cargill laced much em hasis on the rovisions of the scheme which established five trustees from each side and no casting vote@ the conce t of deadloc% was built into the scheme, and ought not to be disturbed b! the court. Initiall! he a eared to be arguing that the court had no jurisdiction to resolve an! deadloc% unless it was so com lete that the affairs of the trust had been brought to a standstill9 but b! the end of the hearing he had acce ted that the court had jurisdiction to resolve an! deadloc%. I therefore need not discuss In re *illes +1983- 158 D.H.1.+3d- 21;, which su orts this view in

relation to investment b! trustees. Des ite $r. 'cargill"s em hatic submissions, I can see no articular significance in the so7called deadloc% rovisions. In an ordinar! trust, the trustees can do nothing unless the! are unanimous@ a majorit! cannot revail over a minorit!, and so the o ortunities of a deadloc% are even greater than under the scheme, where a majorit! suffices. )ertainl! I can see nothing in the so7called deadloc% conce t to affect the jurisdiction of the court. (or, des ite what $r. 'cargill said, can I see an!thing significant in the fact that at the 52th meeting of the committee, on 9 8une 198;, when $r. 'cargill first raised his objections to the 198; lan, $r. )owan adjourned the meeting without ta%ing a vote, although there were onl! four (...$. trustees at the meeting and so the 198; lan could resumabl! have been a roved b! 2 votes to 5. #he adjournment seemed to me to be no more than the entirel! ro er conduct of a chairman at a meeting when an im ortant oint has arisen which has been strenuousl! debated and one side in the debate has not been full! re resented. /lthough $r. 'cargill stressed the adjournment, I could not discover an! real relevance in it. 'econd, there is the 1/$&/) affair. #his was the /merican investment which, as I have mentioned, was authorised b! Cinelott 8. on ;1 December 1983 on motion. #he com laint is that the matter was ut before both the committee and the judge as a matter of urgenc!, whereas it has now emerged that in fact considerabl! more time was available. (othing that I have to decide turns on this, and I shall not discuss it. *ut I thin% that I should sa! that I can well understand $r. 'cargill having had feelings of sus icion in the matter, although in the *298 end I thin* that his
complaint really comes down to that o# a #ailure by 0r. $en*ins to discover more about the proposals than he in #act had #ound out at the time+ and it has now been shown that there were di##iculties in obtaining that in#ormation.

#hird, there was a com laint that $r. 'cargill and the other (...$. trustees were being treated as second class trustees, in that the! were not given information about ro osed investments when some of the (.).*. trustees were given it. /gain, I can understand the com laint9 but it is at least in art due to the structure under the scheme. ?ne of the (.).*. trustees, $r. )owan, is chairman of the committee. /nother, $r. 0arrison, is both a joint de ut! chairman of the committee and the chairman of the 8.I.'.). It is therefore not at all sur rising that $r. 8en%ins should from time to time consult $r. 0arrison or $r. )owan, or both, on oints that arise on investments. Eet $r. 'cargill, who is also a joint de ut! chairman of the committee, is not normall! consulted in this wa!, and so he feels aggrieved at the difference in treatment between one joint de ut! chairman and another. #he ex lanation that $r. 0arrison was consulted not qua joint de ut! chairman of the committee but qua chairman of the 8.I.'.). lainl! did not satisf! $r. 'cargill, who in cross7examining $r. 8en%ins as%ed him whether he did not regard him, $r. 'cargill, as a second class trustee. /s I have said, I can understand $r. 'cargill"s com laint9 but it is nothing that arises under the originating summons that is before me. It is a matter for discussion when an! changes in the constitution and o eration of the scheme are under consideration. #he same a lies to what I thin% is $r. 'cargill"s more fundamental grievance, namel!, that the trustees, though res onsible for general olic!, have too little control over individual investments. <ourth, I thin% that I should sa! something about certain other matters. $r. 'cargill was critical of $r. 8en%ins as being lac%ing in inde endence of the board, which aid his salar!9 as disregarding $r. 'cargill"s views and failing to give ro er consideration to his suggestions for investment9 and in failing to rovide various items of information. I shall not go into the details9 I merel! sa! that it seemed to me that after these matters had been examined there was little, if an!thing, that su orted the

criticism. $r. 'tamler ointed out that $r. 'cargill had said at the resumed 52th meeting of the committee on ;8 <ebruar! 1983 that he was not suggesting that $r. 8en%ins was doing an!thing other than carr!ing out the existing olic! decisions of the trustees9 it was the olic! decisions and the rinci les that were wrong. ?n 13 $a! 1983, too, there was the ,dee a reciation, of $r. 8en%ins and his staff for all the wor% that the! had done and were continuing to do that $r. 'cargill chose to ex ress in his memorandum /. #hat, of course, was before the 1/$&/) affair, and this and other matters have fed the sus icions that $r. 'cargill had been harbouring. If it has done no more, I ho e that the course of not reventing these matters from being ex lored during the hearing will have contributed towards alla!ing those sus icions. I shall sa! nothing about various other matters that emerged during the hearing, such as the ill7fated )entre Cideo venture. I have read *299 through my notes and I have
re#erred to many passages in the transcripts+ and at the end o# the day I have reached the conclusion that there is no need to lengthen any #urther this already too lengthy .udgment.

<or the reasons that I have given, and subject to an! submissions that there ma! be on the form of relief, I ro ose to ma%e declarations along the lines that I have stated. I shall retain the matter. Declaration in accordance with aragra h 1 of the originating summons. <urther consideration of summons adjourned. Direction that aragra h 3 relating to com letion of accounts, and costs of roceedings, be restored for further hearing on date to be fixed. +D. (. *. -