Blatchford Ltd v Blatchford & Ors

Rectification of pension scheme rules may be ordered where the employer and trustees had a continuing subjective common intention that the relevant provisions should remain unchanged, but the executed instrument introduced an inconsistent amendment by mistake. In this category of pension case, an outward expression of accord is unnecessary. The court should examine the prior position, the wording of the new rules, the absence of discussion or approval of the alleged change, its financial consequences and the subsequent administration of the scheme. A doubtful construction issue may be left aside where there is a strong rectification case. Convincing proof on the balance of probabilities remains necessary.

The claimant, the principal sponsoring employer of a pension scheme, sought rectification of Rules 39.6.3 and 39.6.4 in the 1996 definitive deed and rules. Those provisions appeared to change the pension increases payable to Category D members from a cap linked to the Retail Price Index to a minimum increase, and one provision was internally incoherent. The trustees were neutral. A representative beneficiary was appointed to represent members opposing rectification, but, after investigation and advice, did not defend the claim.

The issue was whether the wording of the 1996 Rules failed to record the continuing common intention of the employer and trustees.

1. Rectification ordered. The court ordered rectification of Rules 39.6.3 and 39.6.4. The wording was inconsistent with the parties’ continuing intention that the relevant benefits should remain unchanged.
2. Where pension scheme trustees and the employer have power to amend the rules, the requirements for rectification may be stated as follows: (i) they had a common subjective intention that there should be no change to the relevant part of the scheme; (ii) that intention continued until execution of the instrument; and (iii) the instrument introduced a change conflicting with it. An outward expression of accord is unnecessary in this context.
3. The court applied the approach in FSHC Group Holdings Ltd v GLAS Trust Corporation Ltd [2019] EWCA Civ 1361. The intention test is subjective. The pension context does not require proof of mutual communication where the validity of the amendment depends only on one party’s approval of what the other has done.
4. It was legitimate to proceed directly to rectification rather than undertake a doubtful construction exercise first. The approach was supported by Re Hampel Discretionary Trust 1999 [2012] EWHC 2395 (Ch) and MNOPF Trustees Ltd v Bryan Watkins [2013] EWHC 4741 (Ch).
5. Convincing proof on the balance of probabilities was required. The prior scheme terms, the radical and unexplained change in benefit structure, the absence of discussion or cost assessment, the internally inconsistent wording, and the fact that the scheme continued to be administered under the earlier arrangement provided compelling evidence of mistake and intention.
6. The passage of time did not establish laches because no significant prejudice had been suffered. The representative-beneficiary procedure and notification of affected members were appropriate safeguards in an uncontested claim.

Not stated in the judgment.