EWHC 979 (Ch)
The claimant company, Colorcon Limited (Colorcon) applied for an order for rectification of the rules of its defined benefit occupational pension scheme relating to the annual revaluation rate of deferred pensions. The scheme provided for an annual revaluation of 5 per cent whereas Colorcon claimed that it was the common intention of the company and the trustees of the scheme who executed the rules that the annual rate of revaluation should be 5 per cent or the rate of increase of the Retail Prices Index, if lower. The first five defendants, who were trustees of the scheme, were neutral and were prepared to act in accordance with the court’s directions. However the sixth defendant who was a member of the scheme and represented the members who had opposing interests to those of Colorcon, told the court that it was the trustees’ and Colorcon’s common intention that the increases should be 5 per cent or the rate of increase of the Retail Prices Index, if lower.
The court granted Colorcon’s application for rectification, as it was satisfied that at the time the rules were executed, Colorcon and the trustees acted collectively and shared the same intention. As the trustees had admitted this to be their state of belief, it was not necessary to demonstrate this by alternative means but, nevertheless, various documents approved by the trustees since the execution of the rules provided proof that this was the common intention amongst trustees. Rectification in the form proposed by Colorcon would give effect to the relevant intention and would cure the defect in the existing rules.
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Comment: this case illustrates the principle that rectification is available where a common intention is held by the employer and trustees at the time scheme documents are entered into and which is not reflected in the documents. Nevertheless, the evidence needs to be convincing and cohesive for the court to order rectification on a summary judgment basis at it did here.