Sovereign Trustees Ltd & Anor v Lewis

Rectification of a pension-scheme deed requires convincing objective evidence that the employer and trustees shared a continuing intention, held when the deed was executed, and that the document failed by mistake to express that intention. Mutual communication of the shared intention is unnecessary. Contemporaneous documents, witness recollection and subsequent conduct may provide the evidence. Successive deeds repeating an unintended provision may each be rectified if the requisite intention is established.

The trustee and principal employer of a pension scheme sought rectification of three deeds governing increases to spouses’ pensions. The April and October 2011 deeds unintentionally provided a uniform 5% annual increase. The January 2013 deed was intended to limit that effect prospectively, but repeated the offending wording.

The defendant, a representative pensioner member, did not oppose the relief. The issue was whether the objective evidence established the common intention required for rectification of each deed.

1. The court applied the four-fold inquiry identified in Daventry DC v Daventry District Housing Ltd [2012] 1 WLR 1333: common continuing intention; existence of that intention when the deed was executed; objective establishment of the intention; and failure by mistake to reflect it. The relevant principles were summarised in IBM United Kingdom Pensions Trust Ltd v IBM United Kingdom Holdings Ltd [2012] PLR 469.
2. For pension-scheme amendments, mutual communication of the shared intention is unnecessary. Contemporaneous words or conduct, documents and witness recollection may establish intention objectively. Subsequent conduct may also be relevant, as explained in Drake Insurance v MacDonald [2005] PLR 401. Rectification requires convincing proof on the balance of probabilities.
3. The April and October deeds were rectified because their purposes were limited and there was no intention to enhance spouses’ benefits. The January deed was also rectified because the evidence showed an intention to alter the position only for future service and to preserve the possibility of retrospective rectification.
4. Orders for rectification were made. The order was sealed on 22 July 2016 and amended under the slip rule on 13 September 2016 to correct minor errors.