Cowan v Scargill
Encyclopedia
Cowan v Scargill [1985] Ch 270 is an English trusts law
case, concerning the scope of discretion of trustees to make investments for the benefit of their members. Together with Harries v The Church Commissioners for England it holds that trustees cannot ignore the financial interests of their beneficiaries.
pension fund had £3,000 million in assets. Five of the ten trustees were appointed by the NCB and the other five were appointed by the National Union of Mineworkers. The board of trustees set the general strategy, while day to day investment was managed by a specialist investment committee. Under a new "Investment Strategy and Business Plan 1982" the NUM wanted the pension fund to (1) cease new overseas investment (2) gradually withdraw existing overseas investments and (3) withdraw investments in industries competing with coal. This was all intended to enhance the mines' business prospects. The five NCB nominated trustees made a claim in court over the appropriate exercise of the pension fund's powers.
Mr JR Cowan was the deputy-chairman of the board. Arthur Scargill
led the NUM and was one of the five member nominated trustees, and represented the other four in person.
stated it was clear that Cowan together with the rest of the law on fiduciary duties clearly allowed for ethical investment. More recently, authored by Paul Watchman of Freshfields, a report for UNEP suggested that the effects of Cowan had been overstated and that it was no precedent at all for saying ethical considerations could not be taken into account.
Company law
English trusts law
English trusts law is the original and foundational law of trusts in the world, and a unique contribution of English law to the legal system. Trusts are part of the law of property, and arise where one person gives assets English trusts law is the original and foundational law of trusts in the...
case, concerning the scope of discretion of trustees to make investments for the benefit of their members. Together with Harries v The Church Commissioners for England it holds that trustees cannot ignore the financial interests of their beneficiaries.
Facts
The trustees of the National Coal BoardNational Coal Board
The National Coal Board was the statutory corporation created to run the nationalised coal mining industry in the United Kingdom. Set up under the Coal Industry Nationalisation Act 1946, it took over the mines on "vesting day", 1 January 1947...
pension fund had £3,000 million in assets. Five of the ten trustees were appointed by the NCB and the other five were appointed by the National Union of Mineworkers. The board of trustees set the general strategy, while day to day investment was managed by a specialist investment committee. Under a new "Investment Strategy and Business Plan 1982" the NUM wanted the pension fund to (1) cease new overseas investment (2) gradually withdraw existing overseas investments and (3) withdraw investments in industries competing with coal. This was all intended to enhance the mines' business prospects. The five NCB nominated trustees made a claim in court over the appropriate exercise of the pension fund's powers.
Mr JR Cowan was the deputy-chairman of the board. Arthur Scargill
Arthur Scargill
Arthur Scargill is a British politician who was President of the National Union of Mineworkers from 1982 to 2002, leading the union through the 1984–85 miners' strike, a key event in British labour and political history...
led the NUM and was one of the five member nominated trustees, and represented the other four in person.
Judgment
Megarry VC held the NUM trustees would be in breach of trust if they followed the instructions of the union, saying ‘the best interests of the beneficiaries are normally their best financial interests.’ So if investments of an unethical type ‘would be more beneficial to the beneficiaries than other investments, the trustees must not refrain from making the investments by virtue of the views that they hold.’ Only if all beneficiaries, all of full age, consent to something different is it possible to invest ethically. His judgment outlined his view of the law.Significance
While the case has often been cited as controversial, given the doubts it may have given rise to over ethical investment, it did not lay down a rule that pension funds or other trustees must single-mindedly act in their beneficiaries' exclusive financial interest, nor did it say that pension trusts cannot invest ethically if they have opted for such an investment in their trust deeds. However Megarry VC did appear to question a previous decision by Brightman J in Evans v London Co-operative Society that pension trustees could take into account the interests of employees of the workplace in making investment decisions. The most important report on pensions, the Goode Report chaired by Roy GoodeRoy Goode
Sir Royston Miles "Roy" Goode CBE QC is an academic commercial lawyer in the United Kingdom. He founded the Centre for Commercial Law Studies at Queen Mary, University of London. He was awarded the OBE in 1972 followed by the CBE in 1994 before being knighted for services to academic law in...
stated it was clear that Cowan together with the rest of the law on fiduciary duties clearly allowed for ethical investment. More recently, authored by Paul Watchman of Freshfields, a report for UNEP suggested that the effects of Cowan had been overstated and that it was no precedent at all for saying ethical considerations could not be taken into account.
See also
- Re Gestetner Settlement [1953] Ch 672
- Evans v London Co-operative Society [1976] CLY 2059, (6 July 1976) Times
- Re Hay’s Settlement Trust [1982] 1 WLR 202
- Re Manisty’s Settlement [1974] 1 Ch 17, Templeman J, courts will intervene on dispositive discretions (who gets what) if it ‘could be said to be irrational, perverse or irrelevant to any sensible expectation of the settlor'
- Klug v Klug [1918] 2 Ch 67
- Re Hastings-Bass [1975] Ch 25
- Kerr v British Leyland (Staff) Trustees Ltd (1986) [2001] WTLR 1071, pension beneficiaries who have 'purchased their rights' are entitled to 'properly informed consideration' of claims they make
- Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587
- Stannard v Fisons Pensions Trust Ltd [1992] IRLR 27; [1991] PLR 225
- Abacus Trust Co v NSPCC [2001] WTLR 953, trustees took advice on how to minimise tax liability, but did not implement the advice till after the tax year’s end.
- Green v Cobham [2000] WTLR 1101, the trustee changed residential status. This meant huge capital gains liability increase. Held, not all factors taken into account, so breach of trust.
- Abacus Trust Co v Barr [2003] Ch 409
- Sieff v Fox [2005] 1 WLR 3811
Company law
- Evans v Brunner, Mond and Co Ltd [1921] 1 Ch 359
- Re Lee, Behrens and Co Ltd [1932] 2 Ch 46
- Re Horsley & Weight Ltd [1982] Ch 442