Pension Deed rectified by Summary Judgment without a hearing
The High Court has recently granted summary judgment for rectification of a trust deed without a hearing.
The judge did this "in such plain circumstances" where the evidence demonstrated that there was "no real prospect of a realistic challenge" to the position that the final version of the deed should have been executed, not an earlier draft.
The judge in Girls' Day School Trust v GDST Pension Trustees & Anor was willing to do this notwithstanding that one item of evidence, a legal opinion provided to the representative beneficiary in the action was confidential but he noted 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".
Rectification is an equitable form of relief whereby the court corrects a mistake in a contractual document to reflect the parties' true contractual intentions. It can be granted where there has been a common mistake of the contracting parties such that the document recording their agreement did not reflect their common contractual intention; or if one of the contracting parties is unilaterally mistaken as to the recording of the contractual terms in the document in question, while the other knows of this mistake and takes unconscionable advantage of it.
The claimant is an employer of teaching and other staff and had formerly been a participating employer in an existing pension scheme (the Old Scheme). By a deed dated 2 November 2012 the claimant (along with a subsidiary) established a new occupational defined benefit pension scheme (the New Scheme). As well as being open to new members it was intended that the New Scheme should receive a bulk transfer of past service benefits from the Old Scheme, so as to enable the claimant to cease to be a participating employer in the Old Scheme. A transfer agreement to achieve this was signed on 29 November 2012.
The 2012 deed provided that the first defendant, the trustee of the New Scheme (the New Trustee), should produce a definitive deed and rules for the New Scheme as soon as reasonably practicable. A first draft of the definitive deed was produced in early 2013. There followed a year's negotiation before a final version was prepared and sent to the Executive Council of the claimant for consideration on 14 March 2014 (the March 2014 Draft).
However, before the March 2014 Draft could be revised following any comments from the Executive Council, or executed, the Executive Council received a detailed paper from the claimant's Chief Executive drawing attention to the scheme's deficit. As a result on 14 May 2014 the Executive Council decided that to address the deficit a package of changes would need to be implemented (including a rise in the member contribution rate to 9.5% from 6%). A fresh draft of the definitive deed was produced, which shifted from a replication of the benefits of the Old Scheme, to the retention and potential exercise of powers under the Old Scheme to create a different benefit structure to be implemented within the New Scheme.
A final version of the definitive deed was then agreed and sent to the Scheme Actuary for certification on 22 July 2014 (the July 2014 Draft). However, the version of the definitive deed subsequently sent to the claimant and the New Trustee for execution, and duly executed by them, was not the July 2014 Draft but the March 2014 Draft.
In the course of the subsequent process of implementing changes to the scheme it became apparent that the executed definitive deed did not contain the expected provisions of the July 2014 Draft.
The claimant applied for rectification of the definitive deed to correct this mistake by changing the terms of the definitive deed to those set out in the July 2014 Draft.
The first defendant, the New Trustee, took a neutral stance in the proceedings having first considered whether there were any proper grounds to oppose the relief sought.
The second defendant was a representative beneficiary appointed under CPR 19.7(2)(d). Over a period of nine months, with the benefit of legal advice, the second defendant tested the claimant's position. Further evidence was elicited in this time but, as the judge later noted, "this material has confirmed rather than undermined the claim… This is a case where the documentary trail speaks for itself". Therefore, the second defendant also did not oppose the application.
The judge confirmed that the definitive deed, as executed, could not be construed as including the provisions included in the July 2014 Draft but omitted from the March 2014 Draft.
However, the judge found that it was "plain that the signature of the Definitive Deed in its present terms was a mistake: and that it is equally plain what the intended terms were". Accordingly the judge held that the case was suitable for summary judgment and granted rectification of the definitive deed to include provisions included in the July 2014 Draft but omitted from the March 2014 Draft.
Interestingly, the judge's grant of summary judgment without a hearing was made despite concerns he raised about part of the evidence (an opinion of leading counsel provided to the second defendant), being kept confidential from the claimant and the first defendant (so as not to waive the second defendant's privilege in it), and about adequate publicity absent a public hearing.
As regards the former, in this "plain case", the judge had granted summary judgment without a hearing because:
(i) the evidence (even without the opinion) was full and had been scrutinised and tested, and the opinion would be open to inspection on the court file by any scheme member or beneficiary, meaning justice had been done in public;
(ii) when written, the possibility of disclosure of the opinion had not arisen and had it been so its language may have been different;
(iii), a full judgment had been given which set out all the relevant facts upon which the opinion drew;
(iv) this was an "absolutely plain case"; and
(v) it was covered by the civil procedure rules which allow someone who is not a party to obtain from the court records any written evidence filed in relation to an application unless ordered otherwise - in this case it was appropriate to order that the evidence would be kept in a sealed envelope not to be opened without leave of the court in the case of the New Trustee and claimant (who had agreed to the confidentiality regime under which the opinion had been produced) or by permission following an application to be served on the representative beneficiary in the case of someone not a party.
However, the judge noted 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".
As regards the latter, the judge ordered the judgment be published on the BAILLI website upon its hand-down, delayed the rectification for 42 days after the date of the judgment and noted that it was agreed that the scheme members would be provided with copies of the judgment on request and informed of the judgment (and that if this was not done within 14 days after handing down the matter could be restored).
In light of this, any future claimant for rectification of a pension trust deed should not assume that it will be possible to proceed without a hearing unless the case was "plain" and appropriate safeguards are put in place. In particular the judge noted that the agreement of parties that the opinion would be kept confidential and privileged but could be relied upon by the second defendant, did not preclude the court from taking the view after judgment that the confidential evidence in question ought to be "open" and available on the court file for inspection by scheme members.