Free opinion
Sir: Kathleen Page (Letters, 4 July) poses a question concerning the Maxwell pension funds which I have seen posed elsewhere in the press but not answered. The question is: why do not the banks who have taken Maxwell pension fund assets as security for lending have to give them back just as a fence would have to give back stolen prop- erty? The legal principle invoked by Kath- leen Page is correct and simple: a thief can- not confer title to stolen property on a fence or a purchaser from a fence.
The Maxwell case differs. Maxwell and any of his cronies who stripped the assets of the pension funds differ from the ordinary thief or fence in that they (as directors of the pension fund management companies) were authorised to dispose of assets of the pension funds provided that they did so for proper investment purposes of the pension funds. They could, therefore, validly dis- pose of the assets of the funds to lenders as security, as there are obviously circum- stances in which pension trustees might legitimately borrow on the security of the
fund's assets. So long as the lenders were innocent of knowledge of any fraudulent purpose on the part of Maxwell and the other directors (or of circumstances sug- gesting a fraudulent purpose), they could legally obtain an effective security for their lending. The banks are therefore entitled to take their stand on their legal title to the pension assets, and make the administra- tors of the pension funds prove, in court, that they were implicated in guilty knowl- edge of wrongdoing before they can be compelled to hand back the assets. Nation- al Westminster Bank, to its great credit, has decided not to stand on its legal rights in one instance, and has agreed to hand back a block of shares to the administrators.
Kathleen Page will no doubt see that the principle that boards of directors can con- fer such a title on lenders is important: without it, commerce can scarcely be car- ried on. The real question of principle aris- ing out of the Maxwell affair is whether the human agency able to deal with pension fund assets should be (or include) the prin- cipal shareholder and controlling director of the employer company.
R.M. de Lacy
3 Gray's Inn Place, Gray's Inn, London WC1
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