Rather than pursuing formal rectification proceedings, the trustee made a section 48 application to the High Court, asking for an order that it be permitted to administer the Plan as though the mistakenly deleted words in the increase rule had not been omitted from the consolidating deed. This was the way in which the trustee had, in fact, been administering the Plan both before and after the 2011 consolidation.
The trustee obtained a QC’s opinion which stated that the relevant rule provided for different rates of increase to apply to certain benefits, without indicating which pension or part of the pension was to be increased by each stated amount. This lack of direction made the consolidated rules unworkable and the Court could therefore conclude that something had gone wrong with the drafting.
Although the submitted construction involved reading a whole sub-paragraph into the consolidated rules, it was argued that this did not contravene the principle in an earlier case, Cherry Tree Investments, as the inclusion would operate to make sense of what had been rendered a nonsensical provision by the consolidation drafting. It would not change the meaning of the document but would give practical effect to its existing meaning. It reflected that a clear mistake had been made and it was obvious how to correct it.
The trustee’s application was granted. Having allowed the original rules and the deed of amendment to be admitted in evidence, Snowden J considered it obvious to an objective observer that there had been a mistake in drafting the increase rule in the consolidation process. The increase rule no longer made sense and it was clear that the consolidated rules did not intend to bestow on members a choice of the most favourable rate of increase each year. There was no mechanism in the rules for such an election and giving members this option would have been a radical alteration to the Plan.
Snowden J therefore agreed it was obvious that the wording in the original increase rule had been omitted in error. He was satisfied that this solution did not infringe Cherry Tree Investments as “the consequence was not to create a new contractual provision in rules that would work without it; its inclusion is necessary to make the existing rules work.”
The Judge also made clear that, although the order would protect the trustee against any complaint that it had wrongly administered the Plan, it would not bind members, who were free to contend that a different construction of the consolidated increase rule should apply.
Unlike a rectification claim, there is no requirement under section 48 to appoint a representative beneficiary. Snowden J originally proposed to make the section 48 order conditional upon the trustee giving notice to the members and also to allow any member to apply to have the order set aside or varied within two months. However, he accepted the trustee’s further argument that it was impractical to notify all members individually of the change. It was relevant that the implementation of the order would maintain the increases in benefits which the trustee had been paying all along.
Snowden J did not accept that the members should not be told of the existence of the order at all as, where a section 48 order relates directly to benefit levels, members should be informed of it unless there was a compelling reason not to do so. He then accepted that this could be achieved with an appropriate notice in the next regular communication to members which would be “sensible and proportionate”.