The facts
In SPS Technologies Limited v Moitt & Ors [1] Chief Master Marsh granted summary judgment for rectifying three deeds relating to the SPS Technologies UK Pension Plan. The same error persisted in each of the deeds, and the claimant sought a rectification order. Chief Master Marsh found that there was sufficient evidence that an error was made to justify rectification.
The 1998 definitive deed and rules were intended to establish that 'Transferred Members' (any member who at any time had been granted pensionable service under the Plan in respect of his membership of a Previous Plan) should have entitlement to early retirement whether in pensionable service or in deferment, and that the actuarial reduction would apply regardless of whether they took early retirement from pensionable service.
The drafting of the 1998 rules diverged from this intention. Their effect was to dis-apply the actuarial reduction if a Transferred Member took an early retirement pension from deferment. Consequently, Transferred Members who continued to work for the employer suffered the actuarial reduction, whereas Transferred Members who had left pensionable service were rewarded with waiver of the reduction on early retirement. This error was carried through in the 1999 definitive deed and rules, and a 2003 deed of amendment. Chief Master Marsh considered that the evidence provided a clear picture that the documents did not implement the intentions of the parties.
Rectification and intention
The law on rectification permits the court to amend documents where it can be shown that, due to a mistake in the written instrument, it does not reflect the common intention of the parties. The criteria for satisfying the test for rectification was explored by the Court of Appeal in FSHC [2]. It was determined by the Court of Appeal that a contract could be rectified for common mistake where it could be demonstrated by the evidence (such as communication between the parties) that the contract terms did not reflect the subjective intention of the parties. The judgment provided clarity on the application of the relevant test for intention and confirmed a shift towards assessment of subjective intent, rather than assessment of objective intent.
In June 2020 Trower J handed down his judgment in Univar [3]. This case presented the first major test for the approach outlined by the Court of Appeal in FSHC. In his judgment Trower J confirmed that assessment of subjective intention is the correct approach, which we have considered further here. Throughout his judgment, Trower J relied heavily on documentary evidence to determine the intention of the parties. This suggests that demonstration of subjective intent through witness evidence will require careful drafting, and that contemporaneous documents will continue to be crucial when seeking to demonstrate intention.
SPS Technologies and the future for rectification
Trower J’s application of the subjective intention test in Univar was not considered in the SPS Technologies judgment. However, Chief Master Marsh expressed the view that 'the law on rectification can now be regarded as being settled, as a result of the extensive review by the Court of Appeal in the judgment of Leggatt LJ in FSHC'. Chief Master Marsh went further in his affirmation of the judgment in FSHC, confirming that in the case of common intention mistake, it is the subjective intention of the parties that matters. The view expressed by Chief Master Marsh on the question of how to assess intention provides further clarity that the correct approach is to assess subjective intent.
Chief Master Marsh also confirmed several key legal principles in testing intention. These included that the claimant needs to show convincing proof, on the balance of probabilities, of the intention of the claimant; that in the case of a collective body such as trustees or a committee, collective intention is relevant; and that the task is to establish who approved the transaction, not who had authority to do so. These principles offer an insight into how intention is likely to be assessed moving forwards.
The witness evidence provided in the case overwhelmingly supported the argument that the documentation did not correctly implement the intention of the parties. Even so, Chief Master Marsh commented that 'Inevitably after such a lengthy period, the contemporaneous documents provide the best sources of evidence and the witness statements are inevitably a reconstruction of events that happened many years ago'. Though the judgment did not reference Univar this comment suggests a concurrence in the approach to witness evidence. An important question therefore remains as to the role and value of witness evidence in satisfying the threshold of convincing proof.
Overall, the success of this summary judgment application suggests that the test set out in FSHC will continue to be implemented. This may increase the likelihood of rectification being approved on a summary judgment basis, improving the accessibility of rectification for applicants wishing to correct scheme administration errors.
This article was written by Ben Powell and Suzanne Padmore. Please contact either of them to discuss issues raised in the article.
[1]SPS Technologies Limited v Moitt & Ors [2020] EWHC 2421 (Ch)
[2]FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2019] EWCA Civ 1361
[3]Univar v Smith and others [2020] EWHC 1596 (Ch)