Hogan Lovells

Key Dates

Univar UK Ltd v Smith & Others [2020] EWHC 1596 (Ch).

Judgment given on 19 June 2020.


Summary

The High Court has granted rectification of a scheme's pension increase and revaluation rules, so that they apply the statutory minimum requirements rather than inflation linked to the Retail Prices Index (RPI).  The original 1996 trust deed and rules (the "1996 Deed") provided for:

The 1996 Deed was replaced in 2008 by a consolidating trust deed and rules (the "2008 Deed"), which provided for pension increases and revaluation to be by reference to RPI.  It also provided for deferred pensions to be revalued annually instead of the statutory requirement to revalue once at the time the pension comes into payment.  The sponsoring employer argued that it was never intended at the time of the 2008 Deed to "hard-wire" increases/revaluation by reference to RPI or to change to annual revaluation and that the effect of doing so had increased the cost of funding the scheme by around £26m.

The 2008 Deed

Rectification

The judge considered the case law on rectification and noted the following.

Court's decision

The judge held that the evidence demonstrated a collective intent of the trustees and the employer to produce a new trust deed and rules which consolidated the scheme documentation, having regard to legal changes and changes in way scheme was administered.  No substantial change was intended to be made by the 2008 Deed unless it fell within an authorised category – which the amendments to the increase and revaluation provisions did not.  Rectification was therefore available.

Defences        

The representative beneficiary raised various defences arising from the following questions.

The judge rejected the defences.  Arguments he relied on included the following.

It was very unlikely that anyone would have thought that having RPI-linked revaluation (as distinct from revaluation linked to another inflation measure) would be a significant factor in a member's decision to opt out of the DB section.  This was especially so as the member communications made the same statement about revaluation for members who did not opt out, plus it was clear that the employer intended to break the final salary link applicable to any members who remained in the DB section. It was therefore difficult to identify circumstances in which the option of remaining in the DB section would benefit any member. 



Date Accessed: 28/05/2022