A recent court decision involving the use of section 48 of the Administration of Justice Act 1985 may pave the way to an alternative approach to defective scheme documentation in appropriate cases.

Posted by John Hamilton on
In a recently reported case involving the BCA Pension Plan, the court has confirmed that its trustees can administer the scheme as if certain words from a previous pension increase rule had not been accidentally omitted during a rule consolidation exercise. In the proceedings, the trustees of the plan relied on section 48 of the Administration of Justice Act 1985, which allows trustees, having obtained legal advice from senior counsel, to make an application to the High Court for an order authorising them to take certain steps. 

In 2011, the Plan's rules were consolidated in a rule rewrite exercise. When that exercise was undertaken, certain parts of the pension increase rule were omitted. Without the missing words, the rules provided for different rates of increase to apply to pensions and no indication was given as to which part of the pension was to be increased.

In a pragmatic decision, the court held that there had clearly been a mistake when the pension increase rule was drafted in the 2015 rule consolidation, as the relevant rule did not make sense without the additional wording. Therefore in order to correct the mistake the court held that it was necessary to include certain deleted words.

The use of section 48 has not been common in pension schemes. However, its use does have limitations. In particular, although it protects trustees against a complaint that they have wrongly administered a scheme, it will not prevent members from arguing a different interpretation.  Furthermore, the section 48 route will not be available where there is a dispute regarding the detail of what is defective and how it should be put right. However, in appropriate cases where there has been an obvious error, it may provide a quicker and less costly route than an application for construction or rectification.

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John advises corporate and trustee clients on pensions law and is a director of Blake Morgan's Pension Trustees Limited, the firm’s independent trustee company.

John Hamilton
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