High Court affirms the importance of careful drafting

The High Court has once again confirmed that to understand pension scheme documents the courts will focus on the meaning of the words used and attach less weight to the background facts than might be appropriate when interpreting commercial contracts. This is consistent with other recent pensions cases, such as the Court of Appeal’s decision in Britvic PLC v Britvic Pensions.

In De La Rue Plc v De La Rue Pension Trustee Ltd, a careless cross-reference from a deferred revaluation rule into a pension increase rule had created uncertainty about how deferred members’ benefits should be revalued. On a wider interpretation, the rule could be read as giving deferred members a right to the better of statutory revaluation or a scheme-specific revaluation method. Read narrowly, deferred members would only be entitled to statutory revaluation.

Focussing on the wording of the rules, Mr Justice Trower decided that the narrower interpretation (favoured by the scheme employer) was the better interpretation.

This decision confirms once again how critical it is that the utmost care is taken when drafting or amending pension scheme rules to avoid being stuck with unintended benefits. The words used are of paramount importance.