Industrial Acoustics Company Ltd. v Crowhurst & Ors

Rectification of pension-scheme rules may be granted where the employer and trustees had a common continuing intention, objectively established, which existed when the instrument was executed and was not reflected because of mistake.

In a pensions context, an express outward agreement may not be essential where it is clear by implication that the parties did not intend to make the relevant change. Subsequent administration and documentation may assist in establishing the parties’ objective intention. Summary judgment is appropriate only where there is no real prospect of successfully defending the claim and no other compelling reason for trial.

Industrial Acoustics Company Limited sought summary judgment for rectification of the rules of its retirement benefit scheme and a related resolution. The documents stated a normal retirement date of 60 for certain female members, although earlier resolutions had raised that date to 65. The Company and the trustees intended to amend the rules for an unrelated purpose and mistakenly failed to preserve the effect of the earlier equalisation resolution.

The claim was unopposed. The court also considered whether a deferred member should represent beneficiaries who would oppose rectification and whether all scheme members required individual notification.

1. Summary judgment. The court applied CPR Part 24.2. Because evidence was particularly important in a rectification claim, the court required itself to be well satisfied that there was no real prospect of successfully defending the claim and no compelling reason for trial.
2. Rectification test. The applicable test, adopting the formulation preferred by Etherton LJ in Daventry District Council v. Daventry and District Housing Limited, required proof that: (i) the parties had a common continuing intention concerning a particular matter in the instrument; (ii) that intention existed at execution; (iii) it was established objectively by reference to what an objective observer would have understood; and (iv) the instrument failed to reflect it by mistake.
3. In a pension scheme, the absence of an express outward statement that a particular change was not intended does not necessarily defeat rectification. It may be permissible to infer clearly that the parties did not intend the change, particularly where the change was never discussed. Evidence of subsequent administration and documents may assist in determining the objective intention at execution.
4. The evidence showed that the Company and trustees intended the earlier equalisation resolution to remain effective. The later rules and resolution reversed that effect only because of drafting mistakes. All four requirements for rectification were satisfied.
5. Representation and notification. The deferred member was suitable to represent beneficiaries opposing rectification. There was no legal requirement to notify every scheme member before the application where the representative had proper advice and full access to the relevant evidence. Notification remained desirable wherever practicable.
6. Rectification orders were made in respect of the 1998 rules and the 1999 resolution, together with the representation orders.

First-instance decision. No prior appellate decision is stated in the judgment.