EWJ August 62 2025 web - Journal - Page 54
Corrective Construction and Confidential
Opinions - Renishaw PLC v Ross Trustees
Services Limited [2025] EWHC 1445 (Ch)
by Paul Newman KC
... [for investment returns in the way prescribed in subparagraphs (a)-(d)].
Introduction
The Court has jurisdiction to correct errors in
documents by a process of construction, where it is
clear that something has gone wrong with the language and it is clear what a reasonable person would
have understood the parties to have meant. The application of this principle to pension schemes has been
confirmed in the Supreme Court.1
The problem
The problem related to the construction of the
comparator in the second sentence of sub-rule (2)
which had to be compared with a member’s final
salary pension as calculated in the first sentence. On a
literal construction, the comparator appeared to be
the entire cash amount of the ‘Member’s Pension Account’, referable to contributions made by the member over their entire working life, to be treated as an
annual sum paid to the member for each 3 year of
their retirement. This would have resulted in the
underpin being ten times more valuable than a
member’s final salary benefits for comparable service.
In Renishaw PLC v Ross Trustees Services Ltd, HHJ
Hodge KC, sitting as a Judge of the High Court, applied this principle to remove an anomaly in the drafting of a money purchase underpin in a defined
benefit pension scheme.
In doing so, the Judge took account of a confidential
opinion written for the Court on behalf of the representative member defendant without requiring it to
be made public: this was despite the decision of the
same Judge in an earlier case to lift the confidentiality
of such an opinion, a decision which itself had not
been followed on several subsequent occasions.
The employer instead argued that the relevant
comparator must have been intended to be the level
of the annual pension that could be purchased from
the ‘Member’s Pension Account’, which was consistent
with the way the scheme had always been administered in practice. Following careful consideration, including obtaining counsel’s opinion, the
representative member defendant’s position was that
there was no reasonable basis for opposing the relief
sought by the employer.
The provision in issue
The underpin in issue operated to increase a
member’s final salary pension by reference to the
‘member’s pension account’, a hypothetical pot that
broadly represented double the member’s contributions to the scheme, as adjusted for investment returns. The underpin was introduced in the early
1990s to deter members from transferring their benefits to personal pension schemes, by ensuring that
they would be no worse off from remaining in the final
salary scheme compared with the position in which
they would have been if they had transferred instead.
The Judge’s analysis2
The Judge accepted the employer’s argument, holding that there had been a clear mistake in the drafting
of the provision, for the following reasons:
- On the literal construction, the second sentence of
sub-rule (2) would not operate as an underpin, in the
sense of providing a minimum level below which a
member’s final salary pension could not fall: instead,
it effectively guaranteed, for any given member, that
the underpin would exceed their final salary pension
[31].
The relevant wording of the provision was as follows:
(1) On his retirement from the Service at Normal Retirement
Date a Member shall be entitled to a pension of the amount
specified in section
- If that had been the intention, the final salary
pension would have been the underpin to the money
purchase benefits, and not the other way round; indeed, the required comparison built into sub-rule (2)
would have been unnecessary because, in practice, the
money purchase underpin would always be higher, so
that it would have been far simpler and clearer simply
to give members a benefit based on the Member’s
Pension Account without any reference to their final
salary at all; and there would have been no need for
the inclusion of the two words ‘if necessary’ [35].
(2) of this Rule. (2) Subject to Rule 14A [which sets out the
Inland Revenue Limits] and to such other Rules as contain
provisions affecting his entitlement to benefit the amount per
annum of the pension referred to in section (1) of this Rule
shall be equal to one sixtieth of the Member’s Final Pensionable Salary multiplied by the number of years (with a maximum of forty) of his Pensionable Service (‘the Final Salary
Pension’). The amount of pension thus calculated shall, if necessary, be increased so as not to be less than the Member’s
Pension Account and for this purpose:‘Member’s Pension Account’ means an amount equal to twice
the contributions paid by the Member under Rule 5B adjusted
EXPERT WITNESS JOURNAL
- On the literal construction, the second sentence of
sub-rule (2) would not operate as any recognisable
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AUGUST/SEPT 2025