Rescued by rectification: the Radley College case

The High Court has held that past amendments to a scheme's rules were valid, notwithstanding defective execution. The Court also ordered rectification of an amendment which was not as the parties had intended.

 

Background

The scheme in question was a defined benefit arrangement. In 2001 and on two occasions in 2005, the parties purported to amend the scheme's rules via "scheme amendment authorities" (SAAs). Among other things, the SAAs provided for changes to pension increases for subsequent service: first from 5% fixed to RPI max 5%, and then from RPI max 5% to RPI max 2.5%. In 2006 the parties had adopted a new set of rules (the 2006 Rules).

The scheme's amendment power stated that agreed amendments were to be declared in writing by the trustees and signed by all of them.

 

The issues

Three potential problems had been identified:

• A fully-signed version of the 2001 SAA could not be found. There were however two (inconsistent) part-signed versions.
• One of the trustees, Mr Beauchamp, had signed each SAA against a signature block stating the signature to be "For and on behalf of the principal employer". So, on the face of it, he had not signed in a trustee capacity.
• The 2006 Rules did not reflect the change from RPI max 5% to RPI max 2.5%.

 

The decision

The Court's analysis and conclusions were as follows.

The 2001 SAA

In the absence of a copy, secondary evidence was admissible to prove the existence of a document.

Having regard to witness evidence and the basis on which the scheme had been administered, it was "overwhelmingly clear" that all of the trustees must have signed the 2001 SAA.

Accordingly the Court found as a fact that the later version of the 2001 SAA was the definitive version and had been signed by all the trustees.

Mr Beauchamp's signature

The capacity in which a party signed a document was crucial. On the face of the SAAs, Mr Beauchamp had signed on behalf of the principal employer, not as a trustee. But that was not to say that he did not intend to sign in a trustee capacity.

A solution lay in the Court's power of rectification, which could extend to the signature blocks.

There was compelling evidence that Mr Beauchamp had supported the changes being made by the SAAs, had intended that the SAAs should be signed by the trustees, and had understood that he was a trustee.

On that basis, the Court ordered rectification of the signature blocks to confirm that Mr Beauchamp signed in both his principal employer capacity and his trustee capacity.

The 2006 Rules

It was entirely clear that the absence of an "RPI max 2.5%" provision in the 2006 Rules was a mistake. The evidence demonstrated that the 2006 Rules had been intended to consolidate previous amendments and to take account of changes in the law. There was nothing which suggested that the parties had intended to reverse the change to RPI max 2.5%. If that had been the intention, there would have been related documentary evidence. In particular, it was inconceivable that the parties would have proceeded without obtaining actuarial advice.

Accordingly the Court ordered rectification of the 2006 Rules to reflect the change to RPI max 2.5%.

 

Comment

The rectification claim in respect of the 2006 Rules was relatively straightforward, and was not opposed by the representative beneficiary.

More noteworthy are the issues surrounding the SAAs.

Trustees who are revisiting their own historic documentation will be encouraged by the Court's willingness to assume (on the facts) that the missing 2001 SAA was signed by all relevant individuals. The judge's pragmatic approach was driven, in part, by a recognition of the realities: "it is not surprising that the definitive document has been lost some 23 years after it was signed".

The approach which the Court took in respect of Mr Beauchamp's signature was, as the judge tacitly acknowledged, novel. The trustees had argued that the problem could be solved by applying the maxim that "equity regards as done that which ought to have been done". The Court chose not to go down that route, but perhaps only because an alternative solution had been suggested during the course of the hearing: the Court could make a rectification order, not as to the operative provisions of the SAAs, but as to the execution blocks against which Mr Beauchamp had signed.