34: The settled test for rectification of pension scheme documents

The case of SPS Technologies Limited v Moitt and others [2020] EWHC 2421 (Ch) (‘SPS’) confirms there is now a settled test for the rectification of pension scheme documents. Chief Master Marsh stated that:

‘the law on rectification can now be regarded as being settled as a result of the extensive review by the Court of Appeal in the judgment of Leggatt LJ in FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2019] EWCA Civ 1361. The application of the principles discussed in that case as they affect pension cases was subsequently considered in Blatchford Ltd v Blatchford and others [2019] EWHC 2473 (Ch).’

What does SPS say about the test for rectification of pension scheme documents?

As a brief reminder, rectification is a process whereby an application can be made to the courts to put right an inadvertent mistake in a written document so that it properly reflects the actual intention of the party or parties to that document. It is a problem that is relatively familiar in pension schemes where a re-write of, or amendment to, a pension scheme’s rules contains an error.

SPS confirmed a number of areas with respect to the rectification of pension scheme documents:

1. Mistakes in pension scheme documents will usually be caused either by the trustees or principal employer acting unilaterally or both of them acting jointly with the same objective. There is therefore a need to demonstrate that the pension scheme document does not accurately reflect the actual intention of the party (or parties) to the document – it is the subjective intention of the party (or parties) that is key;
2. In respect of a collective body (such as a trustee board acting unilaterally or jointly with another person) it is their collective intention that is important;
3. It is the subjective intention of the person or persons who actually approve the document that is relevant, not the persons on whose authority any document was entered into;
4. Any claimant needs to provide convincing proof, on the balance of probabilities of the intention of the party or parties. In respect of that proof, Chief Master Marsh commented that, ‘inevitably after such a lengthy period, the contemporaneous documents provide the best sources of evidence and the witness statements are inevitably a reconstruction of events that happened many years ago’. The courts are therefore likely to put greater weight on documents than witness statements, particularly where mistakes are uncovered after a number of years have passed;
5. In order for a pension scheme document to be rectified, it must be demonstrated (following Univar UK Ltd v Smith and others [2020] EWHC 1596 (Ch)) that:
   a) the parties had a common continuing subjective intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;
   b) the intention continued at the time of the execution of the instrument sought to be rectified; and
   c) by mistake, the instrument did not reflect that common intention.
6. Where there are serial mistakes, such as where a mistake in an original deed is repeated in subsequent deeds, then (following IBM UK Pensions Trust Ltd v IBM UK Holdings Ltd and others [2012] EWHC 2766 (Ch)) once rectification is established in respect of the first document in the series, it is necessary to show that the subjective intention of the parties in executing the later documents was to reflect the entitlement which members had as a matter of law in order for those subsequent documents to also be rectified ie not to just repeat the provisions of the original deed. If the intention of the parties was just to reflect, in new language, the provisions of the original deed then those later documents will not be capable of being rectified.

Conclusion

The confirmations in the judgment provide valuable clarity on the legal test applied to claimants seeking rectification of pension scheme documentation. Convincing proof of intention will be key and documentary evidence is likely to carry more weight than witness statements, particular where the mistake was made some years ago.