Unipart Group Ltd & Anor v UGC Pension Trustees Ltd & Anor

THE CHIEF MASTER: Today is the disposal hearing of this Part 8 claim in which the claimants seek an order for rectification of the Unipart Group Pension Scheme Deed and Rules. The proceedings are undefended. The claimants are the relevant employers. Until recently the second claimant was the principal employer of the Scheme but as from July 2016, the first claimant became the principal employer. The first defendant is the Scheme’s trustee and the second defendant, Mr O'Hara, is a representative of the class of beneficiaries under the Scheme who may be affected by the outcome of these proceedings.

Mr Fenner Moeran QC appears for the claimants, Mr Saul Margo appears for the Trustees and Ms Emily McKechnie appears for Mr O'Hara.

During the course of the hearing, I was asked to make a representation order appointing Mr O'Hara to represent the relevant class of persons. In considering that issue, I had regard to the fact that these proceedings were brought to the attention of the relevant members of the Scheme at around the time the claim was issued and they were invited to make any observations that they wished concerning this claim. There have been no such observations.

In those circumstances, I was satisfied that it was appropriate to make the representation order and I am grateful to Ms McKechnie for her assistance during the course of this hearing, as I am to all three counsel.

I can say immediately that the grant of an order for rectification is appropriate. I say that, having clearly in mind the stringency that is required from the court when considering such claims. The relevant law is not in any doubt, and I need only, without citing it, make reference to the judgment of Etherton LJ (as he then was) in Daventry District Council v Daventry and District Housing Ltd [2011] EWCA Civ 1153 at paragraph [80].

It is also helpful to bear in mind that, when applying those principles, the court must be satisfied there is convincing evidence that is sufficient to make out the factors which underpin a successful application for rectification. It matters not whether the evidence is described as ‘clear’, or ‘convincing’ or by using any other similar adjective. Here, as I will explain in a moment, the greatest possible care has been taken in preparing the evidence for the court and it is plain that no stone has been left unturned.

Before dealing with the substance of the application, I will briefly make a remark about the procedure that has been adopted today, because there is a degree of judicial controversy about it. I was invited by all three counsel today to adopt an approach which has a longstanding provenance in the Chancery Division in relation to applications of this type, namely that the representative party provides the court with a confidential opinion about the merits of the application. It is to my mind a useful procedure in a case that is undefended because it brings to the hearing a degree of stringency which might not otherwise be there if the hearing is dealt with on the basis of submissions in open court. It is helpful for the court to be able to explore possible gaps in the approach adopted by the claimants or the evidence which they have brought to bear.

The provision of a confidential opinion is allied with the opportunity to have a private conversation with counsel who appears for the representative party, at which, in the absence of the other parties, a candid discussion with the court can take place. If the court has any concerns, they can be explored but, more importantly, it gives the representative party the opportunity to raise points of concern given that it is rare (particularly in a claim for rectification) for the application of the principles to the evidence to lead to an entirely black or white outcome; always bearing in mind that the remedy is a discretionary one.

There has been concern expressed about whether this procedure is contrary to the principles of open justice and such concerns were expressed fully in the judgment of HHJ Hodge QC in Saga Group Ltd & Anor v Paul [2016] EWHC 2344 (Ch). For my part, I propose to say nothing more in this short extemporary judgment other than that, with the greatest of respect, I disagree with the learned judge and it remains my view that this procedure not only has positive benefits but does not offend against the principle of open justice given that it is, at worst, a very limited exception to it.

If it were necessary to do so, I would place reliance on the judgment of Norris J in The Girls' Day School Trust v GDST Pension [2016] EWHC 1254 (Ch) where he was dealing with a Part 24 application in a rectification case without a hearing. I take from his judgment that in a case where there is an oral hearing it is permissible for the court to adopt the procedure that I have today.

I turn now to deal with the substance of the application. The chronological starting point is that in 1999, Unipart Group of Companies Limited ("UGC") acquired the Partco Group plc (“Partco”). Partco had two pension schemes ("PGPS" and "PLPS"). The intention was (and indeed this ultimately took place in February 2001) to merge those two schemes with the Scheme under consideration in this case. That intention can be seen from the deed dated 22 February 2001. I do not need to refer to that deed in any detail, save to remark that in clauses 3 and 4, which dealt respectively with the transfer of the PGPS and PLPS schemes, it was clearly intended that the benefits accruing to members in the future, and benefits that had accrued, would remain identical to those which were in place at that time. Put more simply, it was not intended that there would be any change to such benefits.

There was a significant difference between the benefits under the two Partco Schemes and those under the UGC Scheme. The difference can be explained in shorthand by, on the one hand, the Unipart UGC Scheme providing for what is described as ‘underpinned revaluation’ in relation to those members with an entitlement to a deferred pension and, on the other hand, statutory revaluation under the two Partco Schemes. The revaluation to be obtained under the statutory scheme is less beneficial than under the underpinned revaluation.

The provisions relating to underpinned revaluation, as it was in place at the date of the merger, can be seen from the then-current Definitive Deed and Rules dated 23 December 1993. That Deed had been the subject of a number of amendments after 1993 but none are pertinent for present purposes. Under clause 12.4 of the 1993 Deed, the relevant provision is found at 12.4.1.2 and provides:

The point here is that, at least potentially, the benefit to be obtained from an increase under (b) could exceed (a), (a) being the statutory revaluation. So the merger proceeded on the basis that benefits were to remain identical with the beneficiaries under the two Partco Schemes only being entitled to statutory revaluation and the beneficiaries under the Unipart Scheme being entitled to underpinned revaluation.

Following the merger, it was proposed that the 1993 Deed be updated. The evidence placed before me demonstrates clearly that the underlying intention was largely, as one of the witnesses has described it, a “tidying-up exercise”. Some changes were proposed and what is plain from the evidence is that where changes were proposed, they were considered and advice was obtained. There is no instance of an intended change slipping through unnoticed in the sense that there is no intended change which is not in the Amended Deed.

What was intended to happen is discussed at length in the evidence that has been placed before me. I have seen evidence from Mr Mourgue (who was a director of UGC) and Mr Rimmer (who was the company secretary of both UGC and UGL). In addition, there is a witness statement from Mr Dowling, the pensions manager, and Mr Dessain, who was the chairman of the trustees and was then a director of the trustee. In addition, and significantly, there was a witness statement from Mr Williams, who was a solicitor at Clifford Chance, who were acting for the second claimant at the relevant time. Mr Mourgue and Mr Rimmer were the signatories on behalf of UGC. They had delegated authority from the board via membership of the pension strategy committee of the board. Mr Dessain and Mr Rimmer were authorised signatories on behalf of the trustee.

The manner in which the drafting process proceeded was that the body of the Definitive Deed, dated 14 January 2002, set out the basis upon which members would benefit and, in relation to the revaluation of deferred pensions, it is dealt with at clause 14.7. I should say that recital (e) to the Definitive Deed explains its intention was to set out the benefits under the Scheme for and in respect of members who were active members, or death benefit only members, of the Partco Group Pension Scheme and Partco Limited Pension Scheme immediately prior to the merger of those schemes with the Scheme. The intention one derives from that recital is that the merger was not intended to affect their existing entitlements.

The way in which their position was dealt with was that in the fourth appendix, provisions particular to the PGPS members were provided, and in the fifth schedule, similarly, the provisions directly relevant to the PLPS members. The evidence I have been shown, and which I accept, plainly indicates there was no intention on the part of either the employer or the trustee to implement an improvement to the provisions that were applicable to the PGPS and PLPS members. That intention required that the fourth and fifth appendices made clear that the provisions of clause 14.7 did not apply to them. Neither appendix does this. As a consequence, the default provisions of clause 14.7 apply.

The explanation for how this has come about is amply demonstrated in the evidence and, perhaps unusually, it is possible to pinpoint with a high degree of accuracy exactly when the error occurred. It is not necessary for the purposes of this judgment to go through that evidence in detail. It suffices to say that there were errors on the part of Mr Williams when drafting the fourth and fifth appendices in the original form. The fourth appendix, in its original form, rightly included a provision which opted out of clause 7.2 of the Deed. But, as a result of a misunderstanding on his part, it was subsequently deleted in the course of the drafting process. In the case of the fifth appendix, Mr Williams relied on an earlier draft that had been produced by Eversheds and overlooked that the provisions of that draft were not apposite to achieve the outcome that the employer wished to achieve.

There is in this case no doubt in my mind that whatever errors occurred (and the quality of the evidence that has been provided amply meets the relevant threshold) it is not, I think, necessary for me to go through the four parts of the test set out by Etherton J one by one. I can say that they are all met.

One further issue that is possibly relevant is that the mistake occurred a very long time ago (some 16 years ago). However, having considered that matter, I can see no reason in principle why it might affect the exercise of the court's discretion in relation to the grant of rectification in this case. The error was spotted some time ago, possibly as early as 2007, when it was flagged by actuaries. Perhaps in an ideal world it would have been preferable had steps been taken at an early stage. However, the evidence here is compelling and I can see no reason why delay should have any effect upon the outcome.

For the reasons I have given, I am content to make the order for rectification in the terms that are sought.