A cautionary tale – High Court grants order for rectification of pension scheme amendments

A recent High Court case provides a useful insight on the circumstances the court can apply its powers of rectification. These include situations where there are missing signatures and execution blocks in the essential documents that form part of a scheme's historical record. 

Ballard & Ors v Buzzard [2024] EWHC 2765 (Ch)

The trustees of the Radley College Pension and Assurance Scheme (the Scheme) and the Scheme's Principal Employer sought rulings from the court as to the validity of amendments purportedly made to the Scheme's provisions regarding pension increases.

The Scheme's amendment power set out a three-stage process for alterations:

• The Principal Employer would provide written authorisation of the proposed amendment (the Authorisation Requirement).
• The Trustees would then decide if they would implement the proposed amendment.
• Once the Trustees had decided to make a proposed amendment that was within the scope of their authority, they were required to "forthwith declare any such alteration or addition to the Rules in writing under their hands…" (Declaration Requirement). The rule amendment would take effect when all the Trustees had signed such a Scheme Amendment Authority (SAA).

The court was asked to consider the validity of several amendments made between 2001 and 2005 intended to make reductions to annual increase provisions and the scheme's definition of pensionable earnings. The parties were unable to find a copy of the 2001 SAA that had been signed by all five of the then trustees. There was also an issue concerning the execution of all three SAAs arising from the way in which they had been drafted. This is because the SAA included signature blocks allowing for a signature "For and on behalf of the Principal Employer" and for four signatures to be provided against the word "Trustee".

Copies of the fully signed 2005 SAAs were available, but one trustee (B) had signed on the signature block labelled "For and on behalf of the Principal Employer". The court was also asked to consider the validity of rules adopted in 2006 (the 2006 Deed) to consolidate earlier rule changes and to reflect changes in the law. The parties submitted that the 2006 Deed did not reflect the intention of the Trustees and the Principal Employer since it did not include the changes to the pension increase provisions adopted by the 2005 Pension Increase SAA.

On the issue of the missing fully signed version of the 2001 SAA, Mr Justice Thompsell said that it was permissible to rely on secondary evidence to prove the existence of the contents of a lost document.  In this case, two part signed documents were located and witness evidence of execution was submitted. Bearing in mind that it was not unreasonable for the definitive document to have been lost 23 years after it was signed, the court made a finding of fact that the 2001 SAA is the definitive version; that it was signed by the two remaining trustees who had not signed the copy in possession of the court.

The court then went on to consider the issue surrounding one trustee signing in the "For and on behalf of the Principal Employer" block and entering their employment role.  Could a signature expressly stated to have been given in one capacity be treated as also being given in a different capacity?

This was dealt with as an issue of rectification, a legal remedy where a court can order that a document is able to be read differently from the version in the possession of the parties.  The court granted rectification of the documents based on "overwhelming" evidence that both the individual trustee in question and all the other trustees intended that the signature of the individual trustee in question would be effective in both his employer and his trustee capacities. 

On the basis that the SAAs were now valid, the court also ordered the rectification of the consolidating rules that failed to properly reflect the changes made by one of the earlier SAAs.

What does this decision mean for trustees and employers?

The Judge in this case described it as a 'cautionary tale', bemoaning the fact that defects in the execution process had given rise to costly litigation and to the use of the court's time that would have been unnecessary had these defects not existed.

So, whilst a remedy was found, it was not without time and legal costs being incurred for all concerned.

The moral of this cautionary tale is:

• Employers and trustees must ensure that all pensions scheme amendments are executed in strict accordance with the scheme's governing rules; and,
• The importance of maintaining complete and accurate records of all executed documents is essential.

In summary, the case highlights the necessity for employers to meticulously adhere to execution formalities and maintain comprehensive records.

Read the decision in full here.