Avoiding pensions litigation: written instructions to advisers

Jason Shaw

I recently gave an Allen & Overy client seminar about avoiding some of the most common causes of pensions disputes. One of the causes of pensions litigation that I identified was mistakes in scheme documentation: the parties intended the document to say X but it actually says Y. I suggested a few practical points for trying to avoid these mistakes arising in the first place. One of those points focused on the value of giving clear instructions to advisers when instructing them to amend the scheme documentation. It was a point that seems to have been well received and so I thought it was worth covering it again in brief in this blog.

In an ideal world, trustees and employers will have clearly articulated between themselves the intention behind any proposed amendment to the scheme. That intention will then be relayed to the legal advisers and given effect to in a properly executed deed of amendment. Reality is quite different. Often the intention behind an amendment evolves over time as the point is discussed between the trustees and the company at meetings and in correspondence. Advisers are then asked, often orally in a quick telephone conversation, to document the amendment that has been agreed.

There are, however, significant benefits in taking the time to send advisers clear written instructions setting out what the trustees intend the amendment to achieve. In order to provide clear written instructions, the trustees must be clear themselves as to the purpose of the amendment. Thus, it will help clarify in the trustees’ own minds exactly what it is they are trying to achieve and the consequences of that. Clear written instructions will also allow the advisers to understand what the trustees’ intention is, ask questions, and flag any potential issues. Both of these should result in fewer mistakes in scheme documentation.

However, if there is a mistake with the amending document then those written instructions will also play a vital role in remedying that mistake. One of the most common – and appropriate – methods for remedying mistakes in scheme documentation is to ask the court to rectify the document containing the mistake. In order for the court to grant rectification, it will need to see clear evidence of the parties’ intentions and be convinced that the document fails to reflect those intentions. Clear written instructions to advisers is potentially a great piece of evidence (far better than a ex-trustee being asked to recall the details of a telephone conversation they had with their advisers some years earlier).

The better the evidence, the stronger the case for rectification and, if the evidence is particularly strong, it might be possible to obtain rectification by summary judgment. Rectification by summary judgment could save a considerable amount of time and money as it would avoid the need for a full hearing that could last a number of weeks and be incredibly expensive. Summary judgment is arguably becoming the norm for rectification, but it will only come to the trustees’ aid if the evidence is there. Clear written instructions will help.

Jason Shaw is a senior associate at Allen & Overy LLP.

Comments published on Pensions Talk do not necessarily reflect the views of Allen & Overy or its clients.

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