Rectification of a pension deed was granted to correct a mutual mistake that had resulted in a failure to distinguish between the different percentage rates applicable to pensionable service payments before and after a given date.
LTL 4/2/2016 EXTEMPORE
Ch D (Rose J)
The claimants’ pension scheme, which had been established on January 1 1959, had provided for pension benefits on a defined contribution basis and on a defined benefit basis. Following the coming into force of the Pensions Act 1995, the claimants instructed their pension administrators in 1996 to prepare a new deed to implement the minimum changes necessary, which came into effect in 2001. The 2001 deed was intended to amend two rules in the schedule to the deed: the relevant rules governed the normal retirement pension and were amended to reflect a definitive increase on April 6 1997 at the lesser of 5% pa compound interest or the relevant percentage increase in the retail price index, which was an increase from 3%. The deed failed, by mutual mistake, to distinguish between pensionable service falling before and after April 6 1997. In support of the contention that there had been a mutual mistake, the claimants relied on various contemporaneous documents as reflecting the common intention of the parties, including: a letter from the administrators to the trustees in October 1996 confirming what had been decided in a meeting between the trustees and the company, namely that a distinction between pre and post-April 1997 pensionable service had been intended; letters sent to members telling them of the differences in benefit prior to and post-April 1997, and extracts from actuarial valuation reports. The issues were whether (1) rectification should be granted; (2) it was right that the scheme should bear the costs of the instant application, in light of the claimants’ separate claim against the adminstrators for tortious damages.
HELD: (1) The party seeking rectification had to show that: the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; there was an outward expression of accord; the intention continued at the time of the execution of the instrument sought to be rectified, and that, by mistake, the instrument did not reflect that common intention, Chartbrook Ltd v Persimmon Homes Ltd  EWHC 409 (Ch),  1 All E.R. (Comm) 1083 followed and CIT Group (UK) Ltd v Gazzard  EWHC 2557 (Ch) considered. The contemporaneous documents all pointed in the one direction that there was to be a split in the maximum increases: the various witnesses’ evidence supported that contention too. The criteria for rectification of the deed with the replacement definitive deed had been made out: the changes had been only those required by the 1995 Act, and no one had given the deed a contrary construction. Further support for that conclusion had been the way in which the scheme had been administered. The defendant had no prospect of successfully defending the claim and there was no reason why the claim ought to proceed to trial. (2) The court questioned whether it was appropriate that the scheme should bear the costs of the instant application, which were to be decided on an indemnity basis if not agreed. The usual order in a case such as the instant was that the costs be borne by the fund: the administrators could, however, argue that they did not owe a duty of care to the company and were therefore not liable for the company’s costs. In that light, it seemed right that the fund should bear the costs in order to forestall that possibility in the separate proceedings. The court’s concern that the scheme would be thereby depleted was assuaged by the fact that there would be a small surplus in the current year so that any increases would be limited to a maximum of 3% or 5% under the deed as rectified.