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Published 21 January 2016
The recent High Court decision in December 2015 of Re BCA Pension Plan  All ER(D)38 (Dec) has highlighted the rarely used, straightforward and inexpensive procedure set out in Section 48 of the Administration of Justice Act 1985. This legislative provision enables certain mistakes in trust documentation – an all too frequent problem - to be dealt with in a pragmatic way.
The case itself involved a pension scheme, but S.48 covers all trusts and wills and is therefore capable of broad application.
So how does S.48 permit a mistake to be addressed? Where there is a question about how the terms of a will, or a trust should be construed, and a Counsel of 10 years call provides an opinion supporting the assertion that a different construction of the trust deed should apply, the Court can make an Order authorising the Trustees (or personal representatives) to take steps or follow a course of action in accordance with Counsel's opinion. Indeed, it is possible for the Court to make such an Order without hearing any argument.
The facts of the case of Re BCA Pension Plan are a great example of the use of S.48. Certain words were omitted when the trust deed and rules of the pension scheme were consolidated, making it unclear how pension increases were to take place. The Trustees asked the Court to approve the administration of the scheme on the basis that those words had not been deleted. The Court agreed that it was obvious that a mistake had been made in deleting the words, and the correct construction required the clauses to be read with those words included. The Trustees' application was therefore successful.
The benefit of an order under S.48 is that the Trustees and personal representatives have protection from claims that they have wrongly administered the scheme (i.e. they are acting in the manner approved by the Court). However there are some drawbacks, which mean that other solutions can sometimes be more suitable than S.48.
First, the Court Order does not bind the beneficiaries, so they can still challenge the interpretation of the clauses in question approved by the Court. Where the beneficiaries are better off as a result of the Court endorsed construction this is unlikely, but if they are likely to be worse off, this is a significant drawback. In any event a S.48 Order is likely to contain appropriate notification provisions to the beneficiaries so quite rightly, there is no hiding the issue from them. Where it is important to have an Order that binds beneficiaries, alternative approaches such as rectification may be preferable. This is because each class of beneficiaries will be represented, and the resultant order will bind all the beneficiaries of the Trust. Hence, one of the reasons why rectification is the more expensive route.
Secondly, where the clause makes sense and is capable of reasonable interpretation, but it is not what was intended, then the Court will need to see contemporaneous evidence of the parties' intention. In those circumstances, rectification is likely to be the better option.
However, in a situation where there are difficulties over the literal interpretation of the trust documentation, S.48 can be an extremely useful and cost-effective way of achieving a solution. A welcome route and in the right case, this provides more than a glimmer of hope for Trustees and personal representatives, and their insurers.
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