Smithson and others v Hamilton  EWHC 2900
The High Court held that the use of the “Hastings-Bass principle” to amend a drafting error in a trust deed, thus circumventing the strict conditions for an order of rectification, amounts to rectification by the back door and is not acceptable.
The relevant scheme rules permitted active members to retire before the age of 65 but at or after 60 without the consent of the employer and entitled them to take their pension early without an actuarial deduction. The trustees contended that this was a mistake in drafting which conferred an overly generous benefit and sought to remove the rule, relying on the principle in Hastings-Bass. However, the application of the Hastings-Bass principle would cause the entire rule to be set aside; it would not modify the rule which was the necessary remedy here. The trustees attempted to address this problem by giving an undertaking that if the court set the rule aside, they would introduce a new rule which would omit the previous mistake. The court ruled that this would amount to rectification by the back door and would not be acceptable. The court also found that the Hastings-Bass principle did not apply on the facts of the case, as the adoption of the trust deed and rules was essentially the act of the employer and not of the trustees. Although the trustees still had fiduciary duties and responsibilities in relation to the making of the trust deed and rules, they were not such as to cause Hastings-Bass to apply to the situation.
Earlier cases have appeared to permit employers and trustees to correct drafting errors retrospectively using the rule in Hastings-Bass, with the employers and trustees giving a relevant undertaking to the court.
View the High Court judgment.