Rectification of pension scheme documents
The recent decision in Colorcon v. Huckell confirmed the position on rectification of scheme documents. In this case the scheme documents provided the rate of revaluation of deferred benefits would be 5 per cent. However, the company asserted that it was never the intention of the company and trustees to change the rate of revaluation from 5 per cent LPI (i.e. 5 per cent or the rate of increase in the Retail Price Index, if lower) and sought to correct this mistake.
The court summarised the three principles of rectification developed in Scania v. Wagner:
- pension scheme documents can be rectified like any other legal document;
- rectification requires a common intention between the relevant employer and trustees, although it is not clear whether an outward expression of accord is required; and
- rectification requires convincing proof on the balance of probabilities that the employer and trustees shared the required common intention about the meaning or effect of the relevant documents.
The judge decided that the company and the trustees shared the same intention, i.e. that the deferred pensions would always be revalued at 5 per cent LPI and there was convincing proof to support this. Accordingly, the company's request for rectification was granted. It was also held that an outward expression of joint accord was unnecessary but, in any event, such accord was shown by the various documents approved by the trustees, including the valuations and member reports which were consistent with a rate of increase of 5 per cent LPI.
Although this case is not entirely consistent with earlier decisions it provides a clearly argued judgment which is both pragmatic and sensible.