Merchant Navy Officers Pension Fund Trustees Ltd (MNOPF) v Watkins

Rectification may be ordered where the document may already accord with the parties’ true intention, provided there is sufficiently compelling evidence of mistake. The court need not first determine the document’s true construction where uncertainty makes that unnecessary and the rectification case is strong.

Where a trustee has a unilateral power of amendment, the relevant intention is the collective intention of the trustee board. Evidence may include contemporary documents, drafting history, subsequent conduct, financial circumstances and the practical consequences of the alleged mistake. Rectification remains available where the executed wording introduced an unintended change to pension rights.

The claimant trustee sought rectification of the 1999 trust deed and rules governing the Merchant Navy Officers Pension Fund. The defendant was appointed to represent members who might benefit if the claim failed.

The 1999 amendment to Rule 10.1 appeared to require guaranteed increases for deferred pensions based on both new-section and pre-1978 service. The trustee’s case was that the amendment resulted from an unintended cross-referencing error and that only new-section benefits were intended to receive automatic increases. The claim was unopposed, but the court had to decide whether the evidence satisfied the strict requirements for rectification.

1. Rectification available despite construction uncertainty. The court followed Walker v Armstrong [1856] 8 De G.M & G and Re Hampel Discretionary Trust 1999 [2012] EWHC 2395 (Ch) in accepting that rectification may be pursued where the document may accord with the true intention. It was unnecessary to incur the additional expense of construing Rule 10.1 first.
2. Relevant intention. Because the amendment power was unilateral, the relevant intention was that of the claimant trustee, represented by the collective intention of its trustee board. The court applied the analogous principle in Re Butlins Settlement [1976] Ch 251. Compelling evidence remained necessary.
3. Evidence of mistake. The contemporary drafting brief, board papers and minutes showed that the board intended only the stated amendments and no change to the revaluation of pre-1978 benefits. The drafting history explained the unintended substitution of Rule 6.0 for the former cross-reference. The absence of actuarial consideration of compulsory increases, the scheme’s inadequate funding, the continuation of the former administrative practice, and the capricious limited class of beneficiaries all supported that conclusion.
4. It was legitimate to consider subsequent conduct in ascertaining true intention, following Gallaher v Gallaher Pensions Limited [2005] PLR 103. The continued absence of revaluation of old-section benefits strongly indicated that compulsory revaluation had never been intended.
5. The evidence was compelling and the strict requirements for rectification were satisfied. Rule 10.1 was rectified by replacing the reference to deferred pension under Rule 10.1.1 with wording excluding pre-1978 service. The defendant was appointed to represent affected members.