Saga Group Ltd & Anor v Paul [2016] EWHC 2344 (Ch)

Case No HC-2016-0019[2016] EWHC 2344 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue The Rolls Building, 7 Rolls Buildings, Fetter LaneDate Thursday, 28 th July 2016
London EC4A 1NL
Before
HIS HONOUR JUDGE HODGE QC(Sitting as a Judge of the High Court)
Between
(1) SAGA GROUP LIMITEDClaimants(2) SAGA PENSION TRUSTEE LIMITEDClaimantMICHELLE PAULDefendant
Digital Transcription of Marten Walsh Cherer Ltd.,1 st Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HPTelephone: 020 7067 2900 Fax: 020 7831 6864 DX: 410 LDEEmail: info@martenwalshcherer.comWebsite: www.martenwalshcherer.com
MR. JONATHAN EVANS QC (instructed by Sacker & Partners LLP) for ClaimantsMR. DAVID E. GRANT (instructed by Allen & Overy LLP) for Defendant
JUDGMENT
[1]This is my extemporary judgment on the hearing of the claimants’ application for summary judgment on their claim for rectification of a deed dated 18th August 2003 (to which I shall refer as “the 2003 Deed”) which was a new definitive deed and provided new rules for the Saga Group Pension and Life Assurance Scheme (to which I shall refer as “the Scheme”). The rectification sought is the substitution of the term “Final Pensionable Salary” in place of the term “Pensionable Salary” both of which are defined terms in rule 57.2 of the 2003 Deed. Rectification is sought on the ground of common mistake.[2]The claim form was issued on 29th June 2016. The particulars of claim were not originally verified by a statement of truth but that omission has now been cured and will be addressed in my substantive order. The claimants’ application notice seeking summary judgment is dated 30th June 2016. The first-named claimant, Saga Group Limited, is and was at all material times the principal and only participating employer of the Scheme. The second claimant, Saga Pension Trustee Limited, is the current Trustee of the Scheme having been appointed on 28th September 2011. The parties to the 2003 Deed were the company and the then Trustees; and the second claimant brings this claim as successor to the former Trustees.[3]The defendant, Michelle Paul, is currently the Head of Cruise Marketing at Saga Group Limited and is a member of the Scheme entitled to final salary benefits in respect of service after 1st December 2000. It would be in her interests for rectification to be refused. She has been joined to act in a representative capacity and the claimants seek appropriate representation orders, pursuant to CPR 19.7(2), to ensure that all persons with competing interests in the outcome of the rectification claim will be bound by the result. The claimants seek orders appointing the second claimant to represent all those with an interest in rectification being granted and appointing the defendant as the representative of all those with an interest in rectification being refused. The defendant has been provided with independent legal advice from specialist solicitors, Allen & Overy and from specialist pensions counsel, Mr. David E. Grant. With the benefit of that advice she has decided not to oppose the application for summary judgment.[4]Her witness statement is dated 14th July 2016. In it she makes it clear that her statement is made in her capacity as a member of the Scheme and that it is intended that she should represent all of the members of the Scheme in whose interests it may be for the claim for rectification to be refused. She states that she understands that the claimants are seeking an order that she be appointed as such a representative member; and she confirms that she is content to be appointed and is unaware of any reason why she should not be. She says that she has never been a director of either claimant and has no direct knowledge of the matters which relate to the claim for rectification. She was asked if she would act as a representative beneficiary by Janet Thompson, the present Chair of the Trustees. She confirms, without waiving privilege, that she has been provided with legal advice throughout the matter by Allen & Overy and by Mr. Grant. She says that in February 2015 Mr. Grant and Allen & Overy took her through the details of the issue and of the rectification case that had been prepared by the claimants at that stage. They also explained to her her role and duties as a representative member. At that stage her legal advisers considered that there were certain aspects of the rectification claim that required further investigation and they therefore wrote to the claimants’ legal advisers in March 2015. The defendant understands from reading a letter from the claimants’ solicitors in May 2016 that the claimants then spent some time searching for additional documents and asking further questions of the various witnesses. She states that her legal advisers reviewed that additional documentation and, after discussing it with her in June 2016, they informed Mrs. Paul that in their opinion the evidence for rectification was, as a result of the additional documentation and witness evidence, sufficiently strong for there to be no real prospect of defending the rectification claim and that they proposed to inform the claimants’ solicitors that Mrs. Paul would not be opposing any application for summary judgment.[5]Mrs. Paul states that members of the Scheme were notified by a letter dated 8th July 2016 about the issue of the use of the term “Pensionable Salary” as opposed to “Final Pensionable Salary” in the 2003 Deed and that the claimants intended to seek rectification of the 2003 Deed. That communication informed members that a member of the Scheme had been appointed to represent their interests in the rectification application and provided contact details of the second claimant’s legal advisers so that members could raise any questions they had in relation to the action. At the time she made her witness statement Mrs. Paul understood that no enquiries had been made by any members. Mr. Evans has informed me this morning that one telephone call has in fact been received from a Scheme member but that merely sought clarification and did not raise any objection to the rectification claim.[6]I have seen a copy of the letter of 8th July 2016. It begins by stating in bold type that:
“The Trustee wishes to inform [the addressee] of a forthcoming court hearing in relation to the Plan. No action is required from [the addressee] at the present time but it is important that [the addressee] read this statement.”
[7]The letter then poses a number of questions which are numbered and set out in bold type. The first is:
“What is the issue?”
The second is:
“What are the Trustee and the Company proposing?”
The third is:
“What has the Trustee done to protect member interests?”
The fourth is:
“Does this affect [the addressee]?”
The fifth is:
“Is there anything I need to do?”
It states that the announcement is for the information of the addressee only and that he or she is not required to take any action as a result of it. The letter states that the writer will, of course, let the address know of the outcome of the application. But then, importantly, paragraph 6 is headed “Contact”. It states that if the addressee has any queries regarding anything in the announcement they are invited to contact the Trustee’s legal adviser, who is identified by name, and the address of the firm is then provided.[8]On behalf of Mrs. Paul it is pointed out that whilst the court should be careful to dispel any taint of a deal done behind closed doors, an over-zealous requirement of notification or consultation might undermine the very purpose of representation orders. Here Mrs. Paul and her specialist legal representatives have analysed and tested the claim over an extended period of time and it is difficult to see what further scrutiny by another member or members could reasonably add.[9]I am satisfied that there has been such independent scrutiny and that members of the Scheme have been notified of what is happening in appropriate terms. I am satisfied that, as a matter of principle and authority, there is no requirement that a representative beneficiary should consult with members of the class which it is proposed he or she will represent, but that it is good practice, albeit not mandatory, for the employer or the Trustees to inform members of forthcoming litigation. Indeed, that is addressed at paragraph 29.97 of the online version of the Chancery Guide.[10]I accept the submission on behalf of Mrs. Paul that the letter in the present case strikes an appropriate balance between accuracy and accessibility. I have no concerns about the nature of the communication or about any taint of a “done deal” in the present case. I also bear in mind that one does not wish to alarm Scheme Members unnecessarily. In my judgment, the nature of the letter in this case, providing a contact point with the solicitors representing the Scheme Trustee, strikes an appropriate balance.[11]Although, with the benefit of independent specialist legal advice, the defendant has decided not to oppose the application for summary judgment, rectification is a jurisdiction that can only be exercised by the court after most careful and anxious consideration of the evidence. It is not relief that can be granted by consent without such consideration. It affects persons other than the immediate parties to the litigation; and it operates retrospectively and not prospectively. Nevertheless, I am satisfied that it can be granted summarily in appropriate cases, namely, where there is no realistic prospect of the claim being successfully defended and there is no other reason why the claim should go to trial. I am satisfied also that there are numerous examples, both reported and unreported, of summary judgment applications being made, and succeeding, in the pensions context.[12]It is for the court to be satisfied by the claimants that there is a sufficiently strong legal and evidential basis for rectification to be granted in the terms sought. A preliminary point arises as to whether this application should proceed in public. Both parties are of the view that it should; and I agree. A practice has begun to develop in some summary judgment cases concerning applications in respect of pension scheme documentation whereby the representative defendant has provided a copy of his or her legal advice to the court on a confidential basis and has made submissions as to the merits of the application in private. That practice is described at paragraph 29.96 of the online edition of the Chancery Guide.[13]Examples of situations where a defendant acting as a representative does not consider it appropriate to oppose the relief sought are said to have arisen in claims for rectification of Pension Scheme Rules. It is said that in such unopposed applications for summary judgment, a practice has built up for the hearing to be held in open court but for submissions on behalf of the representative beneficiary as to the merits of the summary judgment application to be held in private and in the absence of the claimant. Reference is made to the cases of Misys Limited v. Misys Retirement Benefits Transfers Limited [2012] EWHC 4250 (Ch) at paragraph 20 per Briggs J and Konica Minolta Business Solutions (UK) Limited v. Applegate [2013] EWHC 2536 (Ch) at paragraph 7 per Mr Edward Bartley Jones QC (sitting as a Deputy Judge of the Chancery Division).[14]Mr. Jonathan Evans QC, who appears for the claimants, submits that this is not the appropriate course and that the application should be heard in public, with no confidentiality being retained in any of the material relied upon by any of the parties. He submits:(1) that the strong starting point under CPR 39.2 is that matters should be dealt with in public and that this should only be departed from in exceptional circumstances and to the extent strictly necessary. He refers, by way of analogy, to observations of Morgan J in the case of V v. T [2014] EWHC 3432 (Ch) reported at [2015] WTLR 173 at paragraph 19. That was an application under the Variation of Trusts Act 1958.(2) Consistently with that, a summary judgment application would not ordinarily be dealt with in private and there is no reason why summary judgment applications in pensions cases should be treated differently.(3) The fact that a defendant is intended to act in a representative capacity should not make any difference in this regard and the question of whether a representation order should be made should itself be dealt with in public.(4) In an uncontested summary judgment application the defendant will necessarily have shown its hand to the claimants by indicating that it does not consider that there is any realistic prospect of successfully defending the claim. The defendant therefore no longer retains a potential bargaining position which could be prejudiced by dealing with the matter in public. In this respect the position is said to be different from an application for approval of a compromise in representative proceedings. There, the consistent practice is for each party’s submissions as to why approval should be given to be made in the absence of the other parties, thereby preserving confidentiality in the relevant legal advice, in accordance with the procedure developed by Wynn-Parry J in the case of Re Moritz [1960] Ch 251. Mr. Evans acknowledges that in such cases there is a real need to preserve confidentiality in each party’s assessment of its position in case approval is refused and the case has to be fought or negotiations resumed.[15]The recent decision of Norris J in the case of The Girls’ Day School Trust v. GDST Pension Trustees Limited [2016] EWHC 1254 (Ch) is said to indicate that ordinarily applications of the present kind should be dealt with on an open basis: see in particular paragraphs 17 and 50. The practice of dealing with the matter in public, rather than in private, for which Mr. Evans contends, is said to have been recently endorsed. Reference is made to two unreported judgments, both extemporary, one of Henderson J in the case of Pye v. Laight on 6th July 2016 and the other, coincidentally by me (sitting as a Judge of the Chancery Division), in the case of Amec Foster Wheeler PLC v. Smith delivered on an extemporary basis last Wednesday, 20th July 2016.[16]Mr. Grant, appearing for the defendant representative beneficiary, considers that since the confidential approach was, to his knowledge, deployed as recently as 19th July before Chief Master Marsh in the case of Sovereign Trustees v. Lewis, where judgment is apparently still pending, it is perhaps helpful to explain in a little more detail the evolution of the practice. It is said to date back at least as far as the decision of Sir Andrew Morritt, the Chancellor, in Scania v. Wager [2007] EWHC 711 (Ch). In that case a confidential opinion was apparently not shown to the claimant employer or to the Scheme Trustees. That practice, described as “the normal practice”, was followed by His Honour Judge Toulmin CMG QC in the case of Colorcon Ltd. v. Huckell [2009] EWHC 979 (Ch) reported at [2009] Pensions Law Reports 2001. These, and the later authorities referred to at paragraph 29.96 of the Chancery Guide, all provide a basis for the current practice in unopposed applications for summary judgment of submissions for the representative party as to the merits of the summary judgment application being held in private and in the absence of the claimant.[17]Against that, however, Mr. Grant points out: first, that in Pioneer GB Limited v. Webb [2011] Pensions Law Reports 425 Sales J required counsel for the representative beneficiary to make his submissions in open court, remarking that whilst he could understand why there might be some reluctance about identifying the strengths in the claimant’s claim, there was no reason not to identify the weaknesses. Secondly, in Hogg Robinson PLC v. Harvey [2016] Pensions Law Reports 61 counsel for the representative beneficiary made his submissions (effectively limited to certain points identified by the Trustee) in open court. Thirdly, and most dramatically, Mr Grant is aware of one case, before His Honour Judge Purle QC in the Birmingham District Registry of the Chancery Division, where Judge Purle refused to read the confidential opinion of counsel for the representative beneficiary on the basis that the other parties had not seen it and Judge Purle required counsel to make his submissions in open court.[18]Mr. Grant acknowledges that hearing applications of the present kind in public has the following advantages:(1) it complies with the presumption that matters should be heard in public and avoids the fact that any departure therefrom is anomalous;(2) it avoids the practical difficulties of retaining a copy of the confidential opinion on the electronic court file; and(3) it avoids the issues concerning the inspection of the confidential opinion by an affected member or person claiming through them that so affected the views of Norris J in The Girls’ Day School Trust case. There at paragraph 50 Norris J indicated that: “For the future any party seeking to rectify a mistake in the expression of a pension scheme by obtaining an order for summary judgment without a hearing must understand that it is likely that the Court will insist that after judgment all evidence be open to inspection: and that if this is not acceptable then the application for summary judgment must be listed for a public hearing …”; with permission for the claimant to vacate the hearing in the event that no scheme member gave notice of intention to attend, a course apparently taken by His Honour Judge David Cooke in the case of University of Wales, Trinity St. David v. Davies & Ors.[19]Mr. Grant identifies the chief disadvantages of departing from a practice which has operated for at least nine years in a generally satisfactory way as first, that if – which he acknowledges is admittedly unlikely – the court spots a reasonably arguable defence which neither party has, and it decides not to grant the order sought, the representative beneficiary will indeed have shown her hand in advance of a potential contested trial; and, secondly, in cases which combine both an application for summary judgment and an application for the approval of a compromise, a different approach will need to be adopted for each aspect of the application.[20]The answer to the first point was, in my judgment, provided by Mr. Evans. He pointed out that the rationale of maintaining confidentiality in a compromise case is in case the court is not minded to approve the compromise. Preserving confidentiality in that situation enables the parties to argue the case for a compromise without having revealed one’s hand in a case where, necessarily, there is some merit in each party’s position because they have negotiated a compromise which reflects the relative merits. That situation is to be contrasted with one where a party has openly conceded that there is no merit in the defence and therefore there is no negotiating position. One’s hand has already been revealed by acknowledging that an application for summary judgment will not be opposed. In that situation the hand is empty. Mr. Evans points out that, as Mr. Grant acknowledges, the court is extremely unlikely to disagree with the assessment of points that have already been considered by specialist solicitors and counsel. The most likely situation in which a court is unlikely to be prepared to grant summary judgment is where the court itself, rather than either of the parties, has identified a new point, which no one has previously considered. In that situation there can be no difficulty about the parties going away and arguing the new point at trial. By definition, it is not a point as to which the parties have already revealed their hand because it is not a point that had ever occurred to them.[21]Mr. Evans points out that there may be a different approach required in the case of a hybrid application. Such a case may be one where there are a number of difficulties with pension scheme documentation. Some are clearly rectifiable and are therefore unopposed. Others give rise to potential arguments and therefore are compromised. Mr. Evans points out that that was actually the situation before Henderson J in the recent case of Pye v. Laight. There, Henderson J properly endorsed the position of the summary judgment application being heard in public in full with the compromise aspect being dealt with privately.[22]I accept the points made by Mr. Evans. In my judgment, summary judgment applications of the present kind should be dealt with in public, with all relevant information being made freely available. That is consistent with the open justice principle. It also avoids the difficulties that so exercised Norris J in The Girls’ Day School Trust case where he indicated that, for the future, it was likely that the court would insist that all evidence be open to inspection after judgment. In my view there is no reason why all the evidence, including the legal advice that has led the representative defendant to take the view that the summary judgment application should go ahead unopposed, should not be made public at the hearing.[23]I accept Mr. Evans’s point that there is no objection to the defendant revealing his or her hand because it is empty so long as the court does not identify a new point which has not occurred to the parties, in which case there will be no difficulty in any event because the point was never in the hand at all. The court should be able to consider the position on a fully informed but open basis.[24]I acknowledge that the Chancery Guide was, as Mr. Grant points out, drafted with the involvement of the Pensions Litigation Court Users Committee; but nevertheless it does seem to me that hearings of the present kind should proceed on a fully open basis. Nothing that I say about the hearing of summary judgment applications is intended in any way to affect the very different position, addressed at paragraph 29.95 of the online version of the Chancery Guide, where a compromise is proposed in proceedings in which a representative is to be, or has been, appointed, and the court’s approval is required for the benefit of the represented persons. I acknowledge that in that situation, the court will almost invariably require an opinion on the merits of the proposed compromise from counsel instructed on behalf of the represented class; and that, in accordance with the practice in Re Moritz, such an opinion should remain confidential and not be served upon, or shown to, the other parties. The application for the court’s approval should be in public, but discussion of the merits of the proposed compromise (from the point of view of the represented class) will usually take place in private and in the absence of the other parties. But I see no reason why a similar practice should apply where a defendant, acting as a representative, does not consider it appropriate to oppose an application for summary judgment in a claim for the rectification of pension scheme rules. So I will proceed on the basis that this hearing is taking place in public.[25]The 2003 Deed was made by the company and the then Scheme Trustees in exercise of the power of amendment contained in rule 24 of the then governing Deed. That power was held by the company and the then Trustees jointly; and therefore the focus of the present enquiry must be on the intention of each of the company and the then Trustees. The Scheme had been established in the late 1970s as a final salary pension scheme, that is to say one where the pension payable at retirement is a fraction of the member’s final pensionable salary. Typically, “Final Pensionable Salary” is defined not as salary in the last year before the member’s retirement but as the average salary in a given period leading up to retirement.[26]In the instant case, the original definition of “Final Pensionable Pay” was “average earnings in the last five years before retirement”. That definition was changed in or about 1998 when a more complex definition was adopted and the period over which earnings were averaged was reduced to three years. Nevertheless, it remained the case that pensions were based on an average of earnings in a period leading up to retirement, and not on earnings in the last year alone.[27]Rule 57.2 of the 2003 Deed provided for the member’s pension to be calculated by reference to pensionable salary and not final pensionable salary. The consequence was that the pension was calculated by reference to earnings in the member’s last year alone and not an average of earnings in a stated period before retirement. Obviously, if the member’s earnings in that final year were greater than the relevant average, the pension would be higher, and the cost to the Scheme, and thus to the employer, was correspondingly higher. But the converse was also the case. Mr. Grant points out that, interestingly, in the second of the three calculations of members who had taken retirement benefits provided in the papers originally supplied to Allen & Overy, acting for Mrs. Paul, final pensionable salary was more than pensionable salary.[28]It is the contention of the claimants that the reference to pensionable salary in rule 57.2 of the 2003 Deed was a drafting mistake. It is said that the intention of both the company and the then trustees was to replicate the effect of the earlier 1998 Deed in that regard and to retain the use of the defined term “Final Pensionable Salary” in the calculation of pension. The claimants seek rectification accordingly. They say that the 2003 Deed was intended to be a consolidating Deed, that is to say one replicating the existing provisions of the Scheme, but drawing them all into a single document, and modernising and updating where necessary save for a few, what are said to be, irrelevant changes that were specifically discussed and agreed. Hence, as regards the use of final pensionable salary in the calculation of final salary pensions, the intention was to make no change and for the provision to remain as set out in the 1998 Deed. The drafting error in rule 57.2 occurred in the very first draft of the 2003 Deed, which was prepared at some time before 8th August 2002. The Deed was prepared by the claimants’ then professional advisers, Mercer Limited, and was simply never corrected.[29]Mr. Evans sets out the relevant background leading up to the execution of the 2003 Deed at paragraphs 13 through to 28 of his written skeleton argument. I can take the history up at paragraph 29. On the 18th August 2003 the 2003 Deed was executed by all of the eight Trustees at that time and, on behalf of the company, by Mr. Howard, as a director, and by Mr. Fraser, as Secretary. Rule 57.2 of the 2003 Deed used the term “Pensionable Salary” in the calculation of a pension payable at normal retirement date. The claimants contend that this is not what was intended. It represented a change from the 1998 Deed whereas it should have replicated the effect of that Deed in this respect by using the term “Final Pensionable Salary. It is important to note that at all times since the execution of the 1998 Deed, including after the 2003 Deed was executed, the Scheme has been administered on the basis that final salary pensions are calculated by reference to the definition of “Final Pensionable Salary” contained in the rules of the Scheme from time to time and not by reference to the definition of “Pensionable Salary”. This is reflected in the actuarial valuation report on the Scheme as at 30th November 2003.[30]In a written proposal dated 31st March 2006, by which the company formally proposed to the then Trustees the further changes to the Scheme that were in due course implemented by the 2006 Deed, the company referred to the existing benefit structure of the Scheme as providing a pension calculated by reference to final pensionable salary and not by reference to pensionable salary simpliciter.[31]The mistake in rule 57.2 of the 2003 Deed was discovered following queries raised in November 2010 by subsequent professional advisers when they reviewed a draft of the proposed consolidated definitive Deed and rules for the Scheme. Those queries led to a train of enquiry regarding the use of the definitions “Final Pensionable Salary” and “Pensionable Salary” in the 2003 Deed. By an e-mail dated 29th February 2012 from the Scheme’s Administrator to Mr. Furnell of the company it was confirmed that the Scheme was being administered on the basis that pensions for final salary members at normal retirement date were calculated by reference to final pensionable salary and not pensionable salary simpliciter as the 2003 Deed provides.[32]There is no question that pension scheme documents can be rectified on the basis of the principles which ordinarily apply to the rectification of other documents. Those principles were set out by the Court of Appeal in Daventry District Counsel v. Daventry and District Housing Limited [2011] EWCA Civ 1153, reported at [2012] 1 WLR 1333. At paragraph 80 Etherton LJ, speaking with the express agreement of Lord Neuberger of Abbotsbury MR, said that the relevant principles were as follows. It must be shown:
“ (1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) [that agreement should exist] at the time of execution of the instrument sought to be rectified; (3) such common continuing intention to be established objectively, that is to say by reference to what an objective observer would have thought the intentions of the parties to be; and (4) by mistake, the instrument did not reflect that common intention.”
[33]Mr. Evans points out that those principles have been elaborated in the context of the rectification of pension scheme documentation. First, where (as here) the document that it is sought to rectify is not a contract, that is to say an agreement between two or more parties, but is rather a document constituting the exercise of a power (in the instant case, a power of amendment) which is held jointly by two parties, it is not necessary to establish a consensus between the two parties (in the sense of a communicated agreement as regards their common intention). Rather, what has to be objectively proved is what each of the two parties who exercise the power intended to achieve. Reference is made to the judgment of Warren J in the case of IBM Pension Plan [2012] EWHC 2766 (Ch), reported at [2012] Pensions Law Reports 469 at paragraphs 19 to 21. Whilst, in the IBM case, the power of amendment was vested in the Trustee, subject to the employer’s consent, and this case concerns a joint power, that does not alter this principle. The point is that the court is not dealing with an agreement but with an exercise of a bilateral power.[34]Mr. Grant, in his written skeleton argument, expands upon that point. He submits that in essence what is relevant is the objectively ascertained evidence of the parties in whom the power of amendment vests. By comparison, the intentions of any other party to the Deed, and of the Scheme Members, are irrelevant.

(i) of Warren J’s judgment in the IBM case:

“(i) There needs to be cogent evidence of the intentions of both the trustee and the employer where the power of amendment requires the consent of both. Following Chartbrook, it must now be taken as clear that the intention of each party must be objectively manifested but I would maintain, if the point is relevant, that there does not need to be evidence of an accord between the employer and the trustee. If the evidence shows what each of them, objectively, intends and if they both execute the relevant amending instrument with the same intention, even if not communicated to each other, that is enough. This is not a surprising result. In a case such as Chartbrook or Daventry, what is sought to be rectified is a contract; it makes sense that, in order to displace the contract actually made by rectifying it, there should be found a consensus, albeit not one giving rise to a legally binding agreement. In contrast, in a case such as the present, no sort of agreement is required for there to be a valid deed of amendment. What is needed is an exercise of the power of amendment by the trustee and the consent of the employer to the exercise of that power. If that is to be called a consensus, so be it, but it is a different animal from the agreement or consensus which is relevant in a contractual case.”
It is said that the fact that, unlike IBM, the power of amendment in the instant case was in the joint hands of the principal employer and the Trustees clearly has no bearing on Warren J’s analysis.[35]Whilst the central legal position is (for the time being) reasonably settled, Mr. Grant submits that there are some peripheral issues which ultimately arise from the fact that a pension deed is neither(a) a synallagmatic contract, which is why the test for rectification of pension deeds is easier, and one can have regard to internal documents which the other parties never see; or(b) a voluntary settlement in the classic sense of a document where the power of amendment is vested in one party and where the relevant evidence in claims for rectification is subjective evidence.[36]The first point that Mr. Grant makes is that, despite some misgivings, it is relatively clear, at least at first instance, that the intention of the pension scheme members is not itself relevant. I accept that that is the case. The second point is said to arise out of the decision of the Court of Appeal in Day v. Day [2013] EWCA Civ 280, reported at [2014] Ch 114. That was a case which concerned the rectification of a unilateral conveyance. The Court of Appeal suggested, albeit clearly obiter, that pension schemes were also to be regarded as voluntary settlements where, in the words of the Chancellor, Sir Terence Etherton, what was relevant was the subjective intention of the settlor. At paragraph 22 the Chancellor cited three pension cases in support of the proposition that it was not a legal requirement for the rectification of a voluntary settlement that there was any outward expression or objective communication of the settlor’s intention. The clear implication that pensions were to be treated in the same way as voluntary settlements is said to have been made explicit by paragraphs 48 to 50 of the judgment of Lewison LJ in which he said, amongst other things, that the case of Industrial Acoustics Company Limited v. Crowhurst [2012] EWHC 1614 (Ch), reported at [2012] Pensions Law Reports 371, was another voluntary disposition case. In that case the power of amendment was in the hands of the trustee with the employer’s written consent.[37]Mr. Grant submits that those statements are based on an apparent misreading of what Vos J was intending to convey at paragraph 45 of his judgment in the Industrial Acoustics case. It is said that rather than espousing a subjective approach, Vos J was dealing with the fact that in the case before him, although there was no express manifestation of an intention not to do Z, where the intention was only to do X and Y, it was perfectly possible to infer that the parties did not intend to do Z. In other words, Vos J was not addressing the nature of the intention required for a claim for rectification, but rather the different issue of how the relevant intention was to be proved. What he said was merely that it seemed to him that there would “… be cases, particularly in a pensions context, where it will be permissible to allow rectification when one can say by implication perfectly clearly that the parties did not intend by the Deed they entered into, to effect a particular change, even though they had not stated outwardly to each other (or indeed at all) that they did not intend to effect that change, simply because the change was not in any form discussed.”[38]It was at that point that Lewison LJ’s citation from Vos J in the Industrial Acoustics case ceased. In fact, however, Vos J went on to refer to the submission of counsel and to his invocation of what had been said by Lawrence Collins J in the case of AMP v. Barker. Lawrence Collins J was said to have granted rectification in that case in reliance upon evidence, after the relevant resolution that fell to be rectified, of continuing administration on the basis of the unamended rule as evidence of the necessary outward expression of accord should that prove to be necessary, although he expressed the view that it was not.[39]Vos J went on to say that in the case of Gallaher Ltd. v. Gallaher Pensions Ltd. Etherton J had followed Lawrence Collins J’s decision in AMP and had relied on an Australian line of authority for the proposition that it was permissible to have regard to evidence postdating the contract to be rectified for any necessary outward expression of accord.[40]Mr. Grant submits that whilst it is difficult to describe pensions as akin to synallagmatic contracts, to describe them as voluntary settlements obscures the facts:(1) that pension scheme members are not volunteers; rather their pensions amount to deferred remuneration; and(2) the power of amendment in a pension scheme is, with few exceptions, a bilateral one, in the instant case being in the joint hands of the principal employer and trustee or in other cases at least requiring the consent of a second party. Mr. Grant submits that a better rationalisation might have been between mutual and unilateral mistake whereby in the case of common mistake, objective intention, and, in the case of unilateral mistake, subjective intention, are relevant. He submits that that has the consequence of avoiding the question of whether a pension scheme is to be treated as a voluntary settlement or not, and explains the observation of Warren J in Lemforder Ltd. v Lemforder Pension Trustees [2005] EWHC 2882 (Ch), [2006] Pensions Law Reports 85 at paragraph 41 that in cases other than unilateral mistake the basic requirements for a claim in rectification are well known.[41]It is also said that such an analysis would be consistent with the approach of Mr. John Martin QC in the case of Merchant Navy Officers Pension Fund v. Watkins [2013] EWHC 4741 (Ch) in which the power of amendment of the scheme was vested unilaterally in the claimant trustee; and it would also be consistent with the results in Day v. Day (and also Andrews v. Andrews [2014] EWHC 1725 (Ch) which followed Day v. Day). Mr. Grant submits that, consistently with Norris J’s decision in The Girls’ Day School Trust case (accepting that what was relevant was objective evidence of the parties’ intentions), the correct approach to adopt is an objective one. Mr. Grant points out that requiring objectively ascertained evidence is a more onerous test to overcome. He points out that if there is a tension between the obiter expressions of view in Day v. Day and the actual first instance decisions in the pension cases as to which is the appropriate approach to adopt, then, for summary judgment purposes, the proper approach is to adopt the more onerous test of requiring objectively ascertained evidence of intention.[42]Mr. Grant acknowledges that further consideration of these points may well be appropriate, possibly at the level of the Court of Appeal; but on a summary judgment application (such as the present), the appropriate test to adopt is one of objectively ascertained intention because that is likely to prove more onerous. Even if that objective test is appropriate, however, Mr. Grant accepts that on the evidence in this case, the test is made out. Secondly, whilst it is necessary to show intention objectively, in a case such as the present, where the error lay in making an unintended change, it is not necessary to show that it was ever outwardly stated by the parties that they did not intend that particular change. As is apparent from the passage in Industrial Acoustics Company Limited v. Crowhurst (previously cited), the very failure to discuss or mention the change may itself constitute objective evidence of an intention not to make the change. The same point was accepted by Mr. Edward Bartley Jones QC in the case of Konica Minolta Business Solutions UK Limited v. Applegate (previously cited) at paragraph 31. In other words, the absence of objective evidence of a positive intention not to make the particular change is not fatal to a claim for rectification. That is because an intention not to make the change can be sufficiently proved by the absence of any evidence that the change was intended.[43]A further point to note is that it is legitimate to have regard to what happens after a deed is executed in order to ascertain the intention at the time it was executed. Evidence that administrative practice did not change after execution of the relevant instrument sought to be rectified is capable of amounting to evidence that there was no intention to make a change. Authority for that is to be found in observations of Etherton J in the case of Gallaher v. Gallaher Pensions Limited [2005] EWHC 42 (Ch), reported at [2005] Pensions Law Reports 103, at paragraph 141 and in Merchant Navy Officers Pension Fund Trustees Limited v. Watkins (previously cited) at paragraph 20 by Mr. John Martin QC (sitting as a Deputy Judge of the Chancery Division).[44]In circumstances where, as in the present case, one of the parties to the document to be rectified is a corporate entity, such as a company, a question arises as to the identity of the relevant person’s intentions. That is because a company, as a non-natural person, is not itself able to have any intention. That is a conceptually straightforward question of attribution. One has to identify which individual’s intention should be attributed to the company for the purposes of the rectification claim. It is not necessarily the signatory to the document whose intention represents that of the corporate party. It may be that the signatory has legal authority to sign (such as the company secretary) but he has had no personal involvement in the transaction and is relying on those who have had the detailed day-to-day involvement with the preparation of the document to ensure that it achieves its intended effect. It is clear from the decision of the Court of Appeal in Hawksford Trustees Jersey Limited v. Stella Global UK Limited [2012] EWCA Civ 55 that it is the person who was the decision maker in relation to the transaction in question whose intention falls to be attributed to the company: see paragraph 41 per Patten LJ with the agreement of Etherton and Rix LJJ. In this case the claimants contend that the relevant people whose intention is to be attributed to the company are the entire board of the company’s directors.[45]In the present case there are 11 witnesses from whom statements have been obtained by the claimants in support of the rectification claim. They include both of the individuals who executed the Deed on behalf of the company (Mr. Stuart Howard and Mr. Richard Fraser, respectively a director and the company secretary) and also six of the eight trustees who executed the 2003 Deed. Of the two remaining trustees, Mr. Maurice Hatch, if he is still alive, is now 94 years of age and blind and Mr. Wilson is on long-term absence from the company suffering from ill health and is unable to provide a witness statement. Evidence to that effect is to be found in the witness statement of the current Chairman of the Scheme Trustee, Mrs. Thomson, at paragraphs 21 and 22 and also in the witness statement of Mr. Lukehurst at paragraph 28 where he states that he has no reason to believe that the intentions of the two missing trustees, Mr. Hatch and Mr. Wilson, would have been any different from his own at the time they signed the Deed and Mr. Lukehurst does not recall them raising any questions about the present issue.[46]Mr. Grant acknowledges that, as is perhaps inevitable, some of the statements that have been obtained say more than others. He points out that it is noticeable that the most caveated statement is that of Mr. Fraser, the former Group Chief Accountant of the company and a former Trustee, who executed the Deed both as a Trustee and as Secretary of the employer and who is described by Mr. Lukehurst as the “most active and engaged Trustee”. Nonetheless, Mr. Grant accepts that the witness statements paint a clear picture:(1) that the scheme has always been administered on the basis that a member’s pension is a function of final pensionable salary;(2) that the revised Deed was a consolidation exercise;(3) that there was no discussion of a change to the calculation of a normal retirement pension; and(4) that had the change been deliberate, it would have been raised at the Trustee meetings and discussed, given its significance.[47]Having identified the applicable legal principles, Mr. Evans proceeds to apply them to the facts of the case at paragraphs 38 and following of his skeleton. As to the intention of the then Trustees he points out that six of the eight Trustees who executed the Deed were Mr. Atherton, Mrs. Devlin, Mr. Fraser, Mr. Goodsell, Ms. Burrows and Mr. Lowe, all of whom have provided witness statements. The other two, Mr. Hatch and Mr Wilson, have been unable to provide witness statements for the reasons already indicated.[48]The claimants rely on the matters set out at paragraph 58 of the particulars of claim in support of their case that at all material times down to and including the execution of the 2003 Deed, the intention of the then Trustees was that it should replicate the substantive effect of the 1998 Deed as regards the salary to be included in the calculation of a final salary pension, namely, that this should be final pensionable salary (as defined) and not pensionable salary simpliciter.[49]In summary, Mr. Evans relies upon the following:(1) the 2003 Deed was a consolidation exercise subject to certain limited and specifically identified changes such as to the pensions of spouses;(2) there was no mention or discussion of any change to the definition of salary to be used for the calculation of final salary pensions;(3) as regards subjective evidence of intention, six of the eight Trustee signatories have confirmed that they did not intend to change the definition to refer to pensionable salary. The other two are unable to provide witness statements; but Mr. Hatch is recorded by the claimants’ solicitors in an attendance note of 9th May 2013 as saying the same thing. It is to be inferred from the statement of Mr. Lukehurst that Mr. Wilson’s evidence would be to the same effect.(4) As for objective evidence of intention, the claimants rely upon the documents that they identify at paragraphs 18 to 28 of Mr. Evans’s skeleton, explanatory members’ booklets from time to time (which refer to “final pensionable salary” and not simply to “pensionable salary”), and, finally, the fact that the Scheme was always administered on the basis that the relevant definition was “final pensionable salary”.[50]In paragraph 39 of his written skeleton Mr. Grant identifies various documents which are said to constitute the best objective evidence that the intention of the Trustees was for a Deed which consolidated informal amendments made to the earlier 1998 Deed, save for specific, and specifically considered, additional changes. There are also two witness statements from the professional advisers from Mercer Limited who were responsible for the drafting, namely, Mr. Melvyn Wright and Mr. Jonathan Zoob, which also strongly support the contention that the reference to “pensionable salary” in rule 57.2 of the 2003 Deed was a drafting error.[51]As for the company’s intention, the 2003 Deed was signed by Mr. Howard and Mr. Fraser on behalf of the company. The intention of the company for the purposes of the claim is represented by the intentions of the members of its board. As to that, the claimants rely upon the evidence of Mr. Fraser, who was the company secretary, Mr. Goodsell, who was a director and Chief Executive of one of the company’s subsidiaries, and Mr. Howard, who was the Finance Director, as subjective evidence of the board’s intentions. As regards objective evidence, the claimants rely upon the same matters as have been already addressed in relation to the intention of the then Trustees.[52]In his written skeleton argument, Mr. Grant accepts that the evidence of the company’s intention is more “patchwork” in what the claimants acknowledge to have been a trustee-led exercise to consolidate changes previously agreed by the company. Taken as a whole, however, Mr. Grant accepts that the evidence sufficiently establishes that the intention of the company, through its board of directors, was for a consolidating deed to be prepared, accommodating changes made since 1998, save for expressly identified further amendments. That evaluation of the evidence is explained and developed at paragraphs 41 through to 52 of Mr. Grant’s written skeleton.[53]Mr. Grant considers, at paragraphs 56 to 68, six matters described as “potential complications” which might be thought to cause some concern; but he concludes that they are not enough, whether individually or collectively, to give rise to any defence to the rectification claim which has any reasonable prospect of success.[54]I accept the effect of the evidence. I am satisfied on all the evidence before the court that the claimants have provided convincing proof that by mistake rule 57.2, as executed, did not accurately reflect the objective intentions, and still less the subjective intentions, of the then Trustees and the company. I am satisfied, on the evidence, that the true intention was to replicate the earlier position and to refer to final pensionable salary instead of pensionable salary simpliciter. I am satisfied that the high evidential hurdle appropriate to a rectification claim is comfortably cleared in the present case. I am satisfied that the evidence is sufficiently strong for summary judgment to be given without a trial. I acknowledge that that is a decision that falls to be made by the court; but I am reinforced in my view that that appreciation of the evidence is also shared by counsel for the representative Scheme Member, the defendant. At paragraph 69 of his skeleton argument, Mr. Grant states the following appears from the documentary and witness evidence:(1) There has been no amendment to the earlier rule dating from 1998.(2) The recommendation of the advisers, Watson Wyatt, as far back as 2000, had been to retain final pensionable salary, which recommendation the company had apparently endorsed.(3) The purpose of the 2003 Deed was to incorporate previous amendments and to make specific additional amendments.(4) There was no relevant discussion of the wording of rule 57.2, in contrast to the consideration of other provisions, including provisions on spouses’ pensions. From that, one can readily infer that had there been an intention to change the calculation of final pensionable salary, that would have been discussed.(5) Finally, and importantly in the present context, the Scheme has been administered at all times on the basis that pension was a function of final pensionable salary.[55]For those reasons I am satisfied that the claim for rectification has been made out and that there is no real prospect of the defendant successfully opposing the rectification claim. There is no other reason why this claim should go off for trial; and, in terms of saving costs, there is every reason why it should be disposed of on a summary judgment application.[56]So for those reasons I will give judgment for the claimants and make an order in the terms of Mr. Evans’s draft. I will direct that the absence of verification of the original particulars or claim is cured by the substitution of the version of the verified particulars of claim which is to be annexed to the court order. I will order the 2003 Deed to be rectified by adding the word “final” before the words “pensionable salary” in rule 57.2. I will appoint the second claimant as a representative of all those persons, being present or former members of the Scheme and persons claiming in respect of such members, in whose interests it may be for rectification to be granted. Finally, I will appoint the defendant as a representative of all those persons in whose interests it may be for rectification to be refused.[57]So I will approve Mr. Evans’s draft form of order. Are there any matters I have omitted?58. There were just two points, that perhaps if a transcript is produced to you for approval, to bear in mind: points of accuracy that I noticed in your judgment. JUDGE HODGE: Yes. MR. EVANS: The first (or at least the first according to my note, it may not be the first in time) was when you referred to the judgment in the case of Gallaher v. Gallaher, for the purposes of it standing as authority for the admissibility of evidence of subsequent events, you ascribed that judgment to Mann J. It is in fact Etherton J. JUDGE HODGE: Yes, it should be. MR. EVANS: The second is when you were dealing with Mr. Grant’s submissions in relation to Day v. Day and quite where that leads, you were reciting his submissions including those appearing at paragraph 33(d)(i) on page 14 of his skeleton, which might be helpful to turn up ---- JUDGE HODGE: Yes. MR. EVANS: ---- and you quite accurately said what he said, which in little roman (i) refers to pensions being deferred contributions. JUDGE HODGE: Yes. MR. EVANS: I anticipate that is a slip and it should say “deferred remuneration”. JUDGE HODGE: Yes. MR. EVANS: But since it is not my skeleton, I will ---- JUDGE HODGE: No, that must be right. MR. EVANS: I suspect that is. MR. GRANT: That is correct, yes. MR. EVANS: In the interests of accuracy or understanding ---- JUDGE HODGE: Yes, that must be right.59. But, my Lord, with those two very minor corrections, I have no other comment. You have made the order in the terms we sought. There is no need for an order for costs; the costs are being dealt with by the company.60. So, my Lord, I think that covers everything.61. So that is for Mr. Evans and that is for Mr. Grant. The bundle of authorities goes back to Mr. Evans as well. (Documents returned to Counsel) Then if the solicitors could pick up the various files, there is a box for them, but it will not be sufficient to accommodate all of them. That goes back to Chancery Listing. MR. EVANS: My Lord, I think you said that you were going to pass back to me the signed order. I do have it, I beg your pardon. JUDGE HODGE: I gave it to you with Konica, yes. MR. EVANS: I have it. I am very grateful. JUDGE HODGE: Thank you very much. - - - - - - - - - - - - - - - - -

Cited in 3 later judgments