The Girls' Day School Trust v GDST Pension Trustees Ltd & Anor

The Girls’ Day School Trust (“GDST”) is an employer of teaching and other staff. It was formerly a participating employer in the Independent Schools Pension Scheme (“the Old Scheme”). The Old Scheme was itself a section within an industry-wide pension scheme called “The Pensions Trust for Charities and Voluntary Organisations” (“The Pensions Trust”).

By a Deed dated 2 November 2012 GDST (along with a subsidiary) established a new occupational defined benefit pension scheme (“the New Scheme”) to be open to new members. It was intended that the New Scheme should receive a bulk transfer of past service benefits from the Old Scheme so as to enable GDST to cease to be a participating employer in the Old Scheme. A transfer agreement to achieve this was signed on 29 November 2012. One of its terms was that the benefits to be provided in the New Scheme were to be the same as those in the Old Scheme. To that end a draft definitive deed and rules had to be prepared and provided to Verity Trustees Limited (“Verity”) as trustee of The Pensions Trust (and hence of the Old Scheme).

By clause 5.1 of the Deed dated 2 November 2012 it was provided that GDST Pension Trustees Limited (“the Trustee”), which was the trustee of the New Scheme, should procure that a definitive deed and rules were produced as soon as reasonably practicable, and that the Trustee and Verity should use all reasonable endeavours to cooperate to produce a final version (which was to be the subject of agreement by Verity) as soon as reasonably practicable. The clause provided that Verity could only refuse to agree the terms of the draft definitive deed and rules if the formal wording of the draft constituted a breach by GDST of the terms of the transfer agreement.

Under those arrangements the Definitive Deed and Rules dated 28 August 2014 (“the Definitive Deed”) were produced and executed by the affixing of the seal of GDST to the Definitive Deed, and the execution of the Definitive Deed by Caroline Hoare and Amanda Riddle, two directors of the Trustee.

In this claim GDST seeks an order that the Definitive Deed be rectified to correct what is said to be a mistake in its written terms. The Defendants to the application are the Trustee and Vivienne Chartres. The Trustee is neutral as to the terms upon which it holds the property vested in it but has considered whether there are any proper grounds upon which it can oppose the relief sought. Vivienne Chartres is intended to be a representative defendant (appointed under CPR 19.7(2)(d)) whose appointment would further the overriding objective.

The principles upon which I intend to act in addressing this application are as follows. I preface my summary with the caveat that it is not intended to restate the principles in different language, but merely to refer to familiar principles fully expressed in well established authorities (and collected together in Hodge: The Modern Law and Practice Governing Claims for Rectification for Mistake (2^nd edition)).

First, the Court must decide what the Definitive Deed means in light of the natural and ordinary meaning of the actual words of the provision in question, the overall purpose of that provision and of the Definitive Deed as a whole, the facts and circumstances known or assumed by the parties at the time when the Definitive Deed was entered, and commercial common sense (but disregarding evidence of the subjective intention of any of the parties).

Second, for the purposes of this application it is accepted by GDST that (notwithstanding suggestions in Day v Day [2013] EWCA Civ 280 at paragraphs [22] and [48]-[50] that pensions schemes are voluntary settlements) I ought not to have regard only to the subjective intention of GDST itself. I agree with this approach (which erects a higher hurdle in the path of GDST). The principle I shall therefore apply is that expressed by Warren J in The IBM Case [2012] EWHC 2766 (Ch) in the context of the exercise of a power of amendment by a trustee with the consent of the employer (for I see no material difference between that context and that in which the present claim arises). GDST must demonstrate that it and the Trustee had a common, continuing, objectively established intention in respect of the particular matter which by mistake was incorporated into or omitted from or otherwise not correctly reflected in the Definitive Deed in its executed form: and in the present case that had the Definitive Deed been executed in its intended form Verity could not have objected to it.

Third, this must be established by cogent evidence.

Fourth, the intention of a corporate body (such as GDST or the Trustee) is that of its board (or any similar constitutional organ). That intention may be discerned either from the terms of the board minute recording a collective decision (read together with any relevantly connected documents); or from the intention of any individual or sub-committee to whom the board collectively either (a) has delegated the task of deciding or (b) has entrusted the task of negotiating and reporting on a transaction (which transaction the board intends to effect in accordance with the intention of its delegate). The task in hand is to identify in relation to the transaction the person or persons who actually approved the nature and terms of the transaction, not the person or persons upon whose authority the transaction was entered. On this see Hawksford Trustees Jersey Limited v Stellar Global UK Limited [2012] EWCA Civ 55 and Day v Day [2013] EWCA Civ 280.

Fifth, if persuaded that GDST and the Trustee intended to enter into a transaction in different terms (themselves agreed, in the sense that the parties’ intentions in relation to them converged) then I may mend the instrument though I may not mend the bargain.

Sixth, it is not necessary that there be a trial before such relief is granted. The jurisdiction under CPR Part 24 (as to which I intend to adopt the approach outlined by Lewison J in Easyair Limited v Opal Telecom Limited [2009] EWHC 339) is available in relation to rectification cases. It has been exercised in the context of pension cases in Pioneer GB Ltd v Webb [2011] EWHC 2683 (Ch) (Sales J), Misys Limited v Misys Retirement Benefit Trustees Limited [2012] EWHC 4250 (Ch) (Briggs J) and Industrial Acoustics Limited v Crowhurst [2012] EWHC 1614 (Ch) (Vos J) amongst other pension cases.

Seventh, it is not necessary to determine the application for summary judgment at a hearing. The Court may dispose of an application without a hearing if it considers that to do so will save time or expense, and that a hearing is not necessary. Where the Court disposes of an application without a hearing it will give the parties a time-limited right to apply to vary or discharge the order. As to the power and its limitation see CPR 64B PD paragraph 6.1 and 6.2 applying to trust cases the provisions of CPR 23.8. In this case the parties are agreed that the matter should proceed without a hearing. Plainly the Court retains a discretion to order a hearing, and in relation to a summary judgment application concerning the rectification of a pension scheme would ordinarily require a hearing (which will in practice often be at no cost to the principal employer, the trustees or the scheme members). That is for two reasons:-

There may, of course, be exceptional cases. The underlying issues may not be complex. The evidence may be wholly compelling. All of the issues might be canvassed in an opinion obtained by a representative scheme member which considers the interests of all scheme members. Publicity of a written judgment may achieve far more than the delivery of an oral judgment to an almost empty courtroom. A period of delay before implementation of the judgment may provide that degree of openness which assures those affected that there is nothing to hide. Notice to all scheme members of an intended hearing, with permission for the Claimant to vacate the hearing in the event that no scheme member gave notice of intention to attend (the course taken by HH David Cooke in University of Wales, Trinity St David v Davies & Ors) may serve the same purpose.

Eighth, the Second Defendant is intended to be a representative defendant. Her part is to present to the Court her considered view (upon receipt of advice directed to her circumstances) as a person having the same interest as other class members in relation to the rights asserted in the claim. She is “representative” in the sense that she is typical of the class. She is not “representative” in the sense that she has consulted with other class members and “represents” their views to the Court. Those seeking a representation order or those appointed under such an order frequently do notify members of the class of the appointment and of the issues to be considered, and invite comment: but that exercise has to be paid for, and is not an essential prerequisite to the proper discharge of the role of a representative.

Ninth, when reaching its view the Court may in exceptional circumstances properly consider evidence which is tendered to it on a confidential basis. In the adversarial litigation the ordinary rule is quite clear: the judge must only receive and act on one party’s evidence if it is at the same time made available to the other party. But there are exceptions. The Court when giving directions to those acting in a fiduciary capacity or when considering whether it ought to approve a compromise has a long established power to receive confidential evidence from some of the parties to the issue and to receive oral submissions thereon in the absence of other parties: Re Moritz [1960] Ch 251 and Capita ATL Pension Trustee v Zurkinskas [2010] EWHC 3365 (Ch). The same power exists (though it would be more sparingly exercised) in relation to those who represent a class: (Smith v Croft (No2) [1988] Ch 114).

Rectification proceedings are adversarial in form. Part 24 proceedings are adversarial in structure. Whilst in Part 24 applications it will ordinarily be in the interests of the respondent to the application to set out in open evidence the strength of the respondent’s position and the weakness of the applicant’s position, there may be cases where this is not desirable. Where a representative respondent accepts that there really are no grounds for proper opposition, but does not wish (for example because of the need to maintain a negotiating position) to arm the applicant with reasons why this is so the established Chancery practice of submitting confidential evidence and, if necessary making submissions in the absence of the other party is useful. It was adopted by Briggs J in Mysis (supra) and by Vos J in Industrial Acoustics (supra) and followed by Mr Edward Bartley-Jones QC in Konica Minolta Business Solutions (UK) Limited v Applegate [2013] EWHC 2536. In the instant case the representative defendant wishes to explain her stance by reference to the Opinion of Counsel which she has received: but she does not wish to waive privilege in relation to that Opinion (and the Trustee and GDST do not wish to press her to do so). I consider that the Court may properly receive such evidence: but the agreement of the other parties does not preclude the Court from taking the view that after judgment the evidence ought to be “open” and in particular available for inspection by scheme members on the Court file.

Having set out my approach I turn to the factual basis of my decision (reminding myself that this is a summary judgment application, not a mini trial, and that my task is only to consider whether the Claimant has established that any apparent defence to the claim must be fanciful and stands no real prospect of success). In considering that question I do not confine myself to examining whether at present there is any obvious conflict of fact: I intend also to bear in mind that there might be reasonable grounds for believing that a fuller investigation of the facts might add to or alter the evidence now available, and so alter the outcome of the case.

Many of the key facts are beyond dispute. The Old Scheme was itself a section within the Pensions Trust. The terms of the Old Scheme were to be found in the Trust Deed of the Pensions Trust, the Common Rules of the Pensions Trust, the Defined Benefit Rules of the Pensions Trust and the ISPS Scheme Document. This last document was very short. It was expressed by reference to the terms of the other Pension Trust documents to which I have referred. It contained some specific definitions, and then said in clause 4:

“The Scheme shall comprise those options from the [Defined Benefit Rules] as shown on the attached Schedule”

The Schedule then referred to the Defined Benefit Rules and made a selection from the “option matrix” which it contained.

Paragraph 5 of the Defined Benefit Rules contained the provision for contributions by active members. The options selected for the Old Scheme included a member contribution of:

Paragraph 6 of the Defined Benefit Rules contained provisions as to accrual rates. The options selected for the Old Scheme provided for a rate of accrual of:

When the New Scheme was established it was intended that there should be a bulk transfer of accrued benefits from the Old Scheme to the New Scheme on such terms as were not objected to by Verity (as trustee of the Pensions Trust and accordingly of the Old Scheme). The Transfer Agreement dated 29 November 2012 declared that Verity did not have to transfer assets from the Old Scheme to the New Scheme unless the New Scheme provided for and in respect of active transferring members, “benefits for their pensionable service immediately after the Transfer Date…which are the same as the benefits which would have been provided for and in respect of that pensionable service under the terms of [the Old Scheme] as at the day before the Transfer Date had they remained active members in pensionable service…”.

The Transfer Agreement also imposed on GDST (by clause 24) an obligation to use all reasonable endeavours to procure that the New Scheme provided for discretionary benefits and discretionary increases to benefits on the same basis as were currently provided under the Old Scheme and which otherwise replicated the Old Scheme’s custom or practice.

Further, the Transfer Agreement made it a condition that the governing provisions and balance of powers in the New Scheme should mirror those of the Old Scheme. Verity was only entitled to object to the terms of the New Scheme if it considered that those terms amounted to non-performance of GDST’s obligations under the Transfer Agreement.

A first draft of the Definitive Deed for the New Scheme emerged on 1 February 2013. Entirely unsurprisingly it had been prepared by the pension lawyers retained on behalf of GDST, Gowling WLG LLP (formerly Wragge & Co). It was sent to Verity and to its advisors (Linklaters LLP) for consideration. There followed one year’s negotiation over its intended terms. From this process there emerged a final version of the Definitive Deed (“Version 1”).

Contemporaneous documents, the authenticity of which cannot be challenged on any realistic basis, then disclose what became of Version 1. On 13 March 2014 it was sent to Caroline Hoare of GDST, the Director of People and the person responsible for human resources, pensions and benefits, legal advice and governance for the whole organisation. Under the operative policies of GDST it was for the Executive team (of which she was a member) to make recommendations to the board (or “Council”), for the Council to consider them, and then (if approved) to direct implementation by the Executive team. She was also a trustee director of the Trustee. Along with Version 1 she was sent other documents for comparison purposes.

The following day an engrossment of Version 1 with some last minute “tidying up” alterations (“Version 1A”) was prepared and submitted for consideration by the Council of GDST on 14 March 2014. At that meeting Council did not authorise the execution of the Definitive Deed but said that it would provide certain comments on the document. Before those comments had been provided and considered Gowling WLG advised GDST that the Definitive Deed in the form of Version 1 should not be executed: so it was not.

Before any revision to Version 1A could be considered the Council of GDST received a detailed paper from its Chief Executive drawing attention to the deficit in the scheme. On 14 May 2014 the Council decided (as recorded in its Minutes) that in order to contain the deficit and avoid closure (with the risk of alienating and demotivating long serving and loyal employees) a package of proposals must be implemented: these included future benefit accrual at 1/80^th instead of 1/60^th, a rise in member contribution rate to 9.5% (from 6%) and an alteration to the Normal Retirement Age to align it with national guidelines.

This led to the production of a fresh draft (“Version 1B”) on 1 June 2014, the object of which was to retain certain options already contained in the Old Scheme which would permit implementation of the proposed package. Amongst the alterations made was the insertion of rule 47.4 (which enabled GDST to notify the Trustee and all active members that future service benefit accrual would be at the rate of 1/80^th) and rules 40.2 and 47.5 which enabled GDST to provide a pension based on career average revalued earnings. Version 1B also confirmed (in rule 40.1) the power to alter contribution rates. The focus of the Definitive Deed therefore shifted from a simple replication of the actual benefits under the Old Scheme to the retention and potential exercise of powers under the Old Scheme to create a different benefit structure that could be implemented within the New Scheme.

Because of this change of emphasis the Trustee did not approve Version 1B resolving (on 6 June 2014) to wait until it had received reassurance that there had been no changes to the balance of powers. Caroline Hoare was given the task of carrying matters forward.

By 25June 2014 the Trustee’s legal advisers (including Mr Christopher Tidmarsh QC) had advised the Trustee regarding the available amendment powers: and shortly thereafter GDST decided that it did not wish to amend the Normal Retirement Age. So that element of the salvage package was not further pursued. Verity’s legal advisers at this stage also confirmed (a) that the Pensions Trust could properly agree to the terms of the proposed Definitive Deed and (b) that it was the practice of the Pension Trust to allow an employer to move from one “matrix option” to another provided that the statutory consultation processes were adhered to. The Trustee requested production of a final draft (because it was clear that at least one provision relating to death benefits required examination, and because the Trustee required the inclusion of a cap on members’ contributions contained in the Old Scheme but omitted from the New Scheme).

This led to the production of a final version of the Definitive Deed (“Version 2”). It made further revisions to Version 1B by modifying the existing draft of rule 40.1 and by making fresh alterations to rule 58.3 and 59.4.

As to rule 40.1 the original text read as follows:-

“Subject to rule 64 {absence}, each Active Member shall pay contributions to the Fund of a fixed percentage of his or her Pensionable Salary as notified from time to time to the Active Member and the Trustee by the Active Member’s Employer”.

The text as revised in Version 2 read as follows:-

“Subject to rules 64 {absence}, rule 40.2 and rule 42, each Active Member shall pay contributions to the Fund of a fixed percentage of his or her Pensionable Salary as notified from time to time to the Active Member and the Trustee by the Active Member’s Employer. The Percentage should be no greater than half of the total combined contribution rate for Active Members and Employers.” (Emphasis added).

The amendments to rule 58.3 and 59.4 related to death benefits and enlarged the circumstances in which a double-rate pension was payable to a Member’s dependents.

On 26 June 2014 Version 2 was sent by Gowling WLG to Caroline Hoare (as Director of People for GDST). Gowling WLG drew attention to the cap on Member’s contributions and to the tweaks in the rules relating to children’s pensions. Caroline Hoare then confirmed that she was content that this version should be sent to the legal advisers of the Trustee. This was done later on 26 June 2014. A marked-up edition of Version 2 was circulated by those advisers to the board of the Trustee on 27 June 2014 with a request for confirmation that it was acceptable.

So far as GDST is concerned, Caroline Hoare explained to Chris Thompson (a legal adviser at GDST) the background to Version 2 and confirmed to him that it properly reflected the requirements of the interim deed for the New Scheme but was designed to implement the Council’s decisions in relation to pension changes should GDST wish to implement changes at the conclusion of the statutory consultation process. Chris Thompson in turn conveyed this information to Hannah Ousley (another member of the GDST legal advice team): and she in turn conveyed this information to John Jay and to Helen Williams (who had been authorised by the Council to execute the documents on behalf of GDST).

So far as the Trustee is concerned on 19 July 2014 the board of the Trustee conducted a conference call attended by (amongst others) Caroline Hoare and Amanda Riddle. All the directors agreed to the signature of the document under consideration. Although not identified as such there can be no real doubt that this was Version 2.

In the light of that on the 22 July 2014 Version 2 was sent to the Scheme Actuary for certification.

Steps were then taken for the preparation of a copy for execution. The engrossment was sent to Caroline Hoare on 19 August 2014 with a request that she procure its signature by GDST and by the Trustee. The engrossment was a copy of Version 1A, not of Version 2. No engrossment of Version 2 has ever been produced.

The engrossed copy was duly executed by the affixing of the seal of the GDST in the presence of John Jay and Helen Williams, and by execution by Caroline Hoare and Amanda Riddle on behalf of the Trustee. The engrossed copy contained the Scheme Actuary’s (certificate which related to Version 2).

With the terms of the New Scheme set GDST completed its statutory consultation process and reflected upon the outcome. It decided to increase member contribution rate to 9% (but phased over two years), to alter future service accrual to 1/80^th. Gowling WLG were then asked to implement these changes in accordance with the powers reserved in Version 2. In that process it became apparent that the executed Definitive Deed was not in the expected terms.

Vivienne Chartres (the intended representative defendant) has been provided with all of this material and has had the opportunity (of which full advantage has been taken) of probing and testing it with the benefit of skilled and experienced legal advice over a period of nine months. She has elicited further material not originally included in the proposed evidence: but this material has confirmed rather than undermined the claim by GDST. There is no basis for thinking that further material which may affect the outcome of the case is available. Beyond demonstrating that Caroline Hoare’s recollection unassisted by detailed consideration of the documents may be faulty, a trial will achieve no purpose. This is a case in which the documentary trail speaks for itself. Vivienne Chartres does not therefore oppose the grant of summary judgment for rectification. Nor does the Trustee.

Their view does not, of course, constrain me. My own views are as follows.

The Definitive Deed as executed cannot by any legitimate process of construction be read as including the provisions included in Version 2 but omitted from Version 1A. If properly construed it does not contain the transaction that was objectively intended to be undertaken then it is liable to be rectified or set aside on the ground of mistake.

I am satisfied that there is no real prospect of any challenge to the propositions (a) that it was not intended by the Council of GDST to enter a definitive deed in the terms of Version 1A and (b) that it was intended to enter a definitive deed in the terms of Version 2. The Council had been advised not to enter into a definitive deed in the terms of Version 1A, and had decided not to do so because of the need to consider how to address the scheme deficit. The Council had entrusted to Caroline Hoare the task of negotiating the terms of a definitive deed which included the flexibility to implement a salvage package that would avoid scheme closure. It is objectively demonstrated by the documents passing between the parties and their respective legal advisers that she did, and that the result was Version 2. Any bystander looking at what she said and did when she received Version 2 would understand that that is the version which she herself approved, passed (as approved) to the Council’s legal team, and procured to be passed to those authorised by the Council to enter into the formal documentation. The mind of those formally entering into the transaction was the mind of the person who presented the documents for formal completion. There can be no doubt that Caroline Hoare intended to present and believed herself to be presenting Version 2 with its associated Scheme Actuary’s certificate.

I am satisfied that there is no real prospect of any successful challenge to the propositions (a) that it was not intended by the Trustee to enter into a definitive deed in the terms of Version 1A and (b) that it was the intention of the Trustee to enter into a definitive deed in the terms of Version 2. It is fanciful to suggest that the intention of the Trustee in any way departed from the decision taken in the conference call of 17 July 2014. The Trustee spent six months in consideration of variations to Version 1A and having required the inclusion of specific provisions within Version 2 it is inconceivable that the Trustee would (without comment and without consultation with GDST or Verity) revert to an earlier discarded version of the definitive deed.

It is plain that the signature of the Definitive Deed in its present terms is a mistake: and it is equally plain what the intended terms were. The case is therefore fit for disposal by way of summary judgment.

I am prepared to grant summary judgment without a hearing in such a plain case provided that any taint of “a deal done behind closed doors” is dispelled. There are two areas of concern. One relates to part of the evidence being marked “Confidential”. The other relates to adequate publicity, absent a public hearing.

My initial view was that that there must be unrestricted access to all of the evidence considered upon this application (including an explicit lifting of all confidentiality attaching to the Opinion of Mr Grant which founds the approach taken by Vivienne Chartres to it). It has not been ordered (though the parties have presumed) that although the Opinion is evidence on the Court file the Opinion will not be open to inspection by any enquiring scheme member without the express permission of the solicitors for Vivienne Chartres (even though, once this application is disposed of by judgment and order, there is no need to preserve any negotiating position).

Reflecting upon that initial view I have decided against taking that course in this case. For the future any party seeking to rectify a mistake in the expression of a pension scheme by obtaining an order for summary judgment without a hearing must understand that it is likely that the Court will insist that after judgment all evidence be open to inspection: and that if this is not acceptable then the application for summary judgment must be listed for a public hearing and the course taken in University of Wales, Trinity St David v Davies & Ors (supra) followed.

In the instant case I am content not to insist that such special provision be made. First, the evidence (even without the Opinion) is full and has been scrutinized and tested: if (as I direct) it shall be open to inspection on the Court file by any scheme member or beneficiary justice will have been done in public. Second, at the time when the Opinion was written the possibility of disclosure outside a restricted circle was not in view: had it been in view the language in which some views were expressed might have been different, because the addressee is the Court, not a lay reader. Third, I have given a full judgment which adequately sets out all of the relevant facts upon which the Opinion draws. Fourth, having considered the facts and set out the law I regard this as an absolutely plain case. Fifth, I consider that the position is sufficiently covered by the CPR. Someone who is a party to the proceedings may obtain from the records of the Court any written evidence filed in relation to an application unless the Court otherwise orders: CPR 5B(1) and CPR PD5A at 4.2A(i). It is appropriate to order that exhibit “VC1” to the witness statement of Vivienne Chartres dated 25 February 2016 (“the Exhibit”)be placed in a sealed envelope marked “Confidential: not to be opened without the leave of the judge” and that neither GSDT nor the Trustee may inspect or obtain a copy of without the leave or the Court. That is because they agreed to the confidentiality regime under which the Opinion was produced. Someone who is not a party to proceedings may only obtain a copy of a document such as the Exhibit “if the Court gives permission”: CPR 5.4C(2). It is necessary for such a person to make an application: CPR 5.4D(1). I direct that any such application must be served on Vivienne Chartres. I am satisfied that this will afford access to the Exhibit in appropriate circumstances (though in view of the other features of this case I cannot at present envisage what those circumstances might be).

As to publicity

For completeness, I would record that I am satisfied that it is appropriate to make an order under CPR 19.7(2) appointing Vivienne Chartres to represent all persons in whose interest it might be for the relief sought to be opposed: and on the other hand an order under CPR 19.6(1) that GDST be appointed to represent the GDST Academy Trust and an order under CPR 19.7(2) that GDST be appointed to represent all persons in whose interests it might be for the relief sought to be granted.