The High Court has upheld a scheme amendment under which the rate of increase to pensions in payment was reduced from a fixed five per cent to the lower of the Limited Price Index (LPI) and five per cent.
In this case, the court had to consider the validity of an amendment made to a scheme based on standard Legal & General rules. These rules required the trustees to "forthwith declare" amendments in writing.
The main issue was whether the trustees had properly declared the amendment, because only four of the five trustees had signed the documents setting out the amendment. There was evidence the failure to get the signature of the fifth trustee was merely an omission as that trustee had been present at the meeting at which the trustees resolved to make the amendment.
Vos J considered the existing case law on amendments and meaning of pension scheme documents. In particular, he referred to a previous case, BESTrustees v. Stuart1, which involved an identical amendment power.
In BESTrustees, the issue was whether the scheme had been validly amended to close the Barber window. Some, but not all, elements of the amendment power had been met. Because no declaration had been made, the announcement was ineffective. Therefore the amendment failed.
This case is different as there had been a declaration, and all other requirements of the amendment power had been met. The only missing ingredient was one trustee's signature.
The court applied the maxim that “equity treats as done that which ought to have been done”, and upheld the amendment.
The validity of scheme amendments is a complex area. This case does not change that.
It is, however, unusual because all the requirements of the amendment power, except one signature, were present. The judge did not see this as fatal to the amendment. Instead, he applied an equitable maxim to fix the problem.
We do not believe this case marks a fundamental change to the settled case law on amendments. It is a pragmatic decision. However, the case does underline the need to observe the requirements of the power of amendment carefully. Failure to do so will simply lead to issues on the validity of the amendment that could lead to the need for a court application to resolve the matter.