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08 Oct 2020

SPS Technologies v Moitt provides helpful clarification for future pensions rectification cases

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Members of Stephenson Harwood’s pensions litigation team (part of the newly formed EPP practice) have advised the Representative Beneficiary in the latest summary judgment pensions rectification case, SPS Technologies v Moitt.

The team acted for the Representative Beneficiary appointed to represent the interests of members of the SPS Technologies pension scheme in opposing the employer’s rectification application, insofar as any appropriate arguments existed.  This case ultimately proved to be one where no such arguments were identified and, accordingly, the application proceeded by way of an unopposed summary disposal hearing, such as that first used in Sovereign Trustees v Lewis [2016] EWHC 2592 (Ch).

The case is interesting in that the judgment, released on 11 September 2020 by Chief Master Marsh, includes a helpful summary of a number of common issues which can arise in these types of cases and how to address those issues.  In particular, it dealt with the following:
 

  1. Chief Master Marsh both confirmed and endorsed the use of the summary disposal hearing process in appropriate circumstances, which allows for certain applications to proceed on a summary unopposed basis, where no reasonable grounds of opposition exist.
      
  2. The use of a confidential opinion by the Representative Beneficiary, discussed with the judge at the application in the absence of the other parties, was specifically considered.  This procedure had been adopted over many years by a number of High Court judges and was described as useful to the court – particularly in situations when the claim was not being opposed.  In those circumstances, it was explained that the court valued the candour that was made possible by having a private hearing to discuss the strengths and weaknesses of the claimant’s evidence and the reasons why the Representative Beneficiary had chosen not to defend the claim. 
     
  3. In relation to the rectification application itself, the judgment included a helpful summary of the issues to be considered, including restating the relevant test for granting rectification, as recently settled in FSHC Group Holdings v GLAS Trust [2019] EWCA Civ 1361.  In particular, Chief Master Marsh confirmed that, in relation to the test for rectification, applying common sense and logic was insufficient to enable the court to grant an order for rectification; the court still needed to be provided with convincing proof that an error had occurred.  Applying the GLAS case, Chief Master Marsh said that for common intention mistake to be evidenced, the intention of the parties was to be assessed subjectively and he considered that this applied equally for cases where there was a unilateral transaction (as in this case) and a bilateral transaction.

  4. In relation to the substance of the error in this case, the outcome was to potentially allow deferred members to be favoured over those who remained in active service – something that parties invariably argue is illogical and, as such, must be an error.  Chief Master Marsh has now judicially endorsed this view, with this type of benefit structure being described as inherently “illogical” (in particular in this case, as members could simply terminate their pensionable service in order to receive higher benefits). However, as mentioned above, the fact that the benefit structure was illogical was not sufficient evidence for the court to grant rectification - the parties still need to provide convincing proof, on the balance of probabilities and based on the intention of the parties that an error had been made.

  5. Finally, common with various rectification cases, this case concerned a serial rectification of successive deeds on the basis that the error became embedded in the scheme and was not noticed on two subsequent occasions. Chief Master Marsh confirmed, relying on Industrial Acoustics v Crowhurst [2012] EWHC 1614 (Ch), that this is primarily an evidential issue because it is commonly the case that the parties will not have addressed their minds to the particular error in any subsequent deeds. Chief Master Marsh, confirmed, therefore, that the approach to successive deeds can be seen alongside a principle concerning the admissibility of evidence, also expressed by Warren J in IBM, namely that conduct after the date of the document can constitute evidence of the intention of the person effecting it.  This conduct may include matters such as there being no change to the manner in which the Plan is administered and plan booklets published after a change to the Plan that reflect the same position as before.
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