Partner Jane Kola comments in Pensions Expert on lawyers’ urge for a simpler system to rectify drafting mistakes in pension scheme rules
Lawyers are urging reform to ease the correction of obvious drafting mistakes in pension scheme rules, after Lloyds Bank was forced to go to the High Court to avoid a £25m hit to its liabilities.
According to the law reporting service Law360, the court endorsed proposed changes to a Lloyds Bank employee pension plan on December 11 last year, allowing the bank to add a paragraph that it says was inadvertently left out of three deeds and could have cost it £25m.
Such errors are not uncommon. In November, it was reported that an orthotics and prosthetics manufacturer was forced to go to court to amend a word in rules drafted 20 years ago, which if left unchanged would have cost the plan £10m.
Jane Kola commented: “It’s another in an increasingly long line of cases where the courts have been prepared to correct obvious errors in deeds, as long as there is a substantial body of documentary and other evidence to support the view that it is just an error and not a rewriting of history.
“Decided by a master as a part of a summary judgment process rather than full-blown High Court litigation, this continues the trend towards the correction of errors being dealt with less expensively than in the past, but this is still a relatively costly business.”
“Correcting obvious errors in deeds still remains far too expensive,” Ms Kola added. “Clients who rightly want certainty have little choice but to seek a court order to gain that certainty as the law stands. This is clearly an area which needs reform so that the courts are only troubled by the cases where there is a real doubt on what the deeds were intended to achieve or mean.”
“The lesson from this and the many cases before is that it pays to keep all of the old files so evidence of the parties’ intentions survive,” Ms Kola stressed.
She added that checking deeds for errors regularly increases the chance that the documentation needed for rectification will survive. “If the error is less than 15 years old it may also be possible to seek a contribution towards the costs of correction from the party responsible for the error,” she said.
Read Jane’s comments in Pensions Expert.
The views in this article are intended for general information purposes only and should not be used as a substitute for professional advice. Arc Pensions Law and the author(s) are not responsible for any direct or indirect result arising from any reliance placed on content, including any loss, and exclude liability to the full extent. Always seek appropriate legal advice from a suitably qualified lawyer before taking, or avoiding taking, any action. If you have any questions on the points raised in the above, please do not hesitate to get in touch.