The court has held that an employer can legitimately initiate court action in order to head off an application to the Pensions Ombudsman.
There was a dispute about a benefit enhancement worth several hundred thousand pounds. The member’s complaint was still being considered under the scheme’s internal disputes procedure - a prerequisite for an application to the PO in most cases - when the employer began legal action to decide the dispute. This denied the member access to the PO because it does not have jurisdiction once a complaint is the subject of legal proceedings.
The employer was candid that it went to court to put the member under the pressure of having to give oral evidence and to expose him to the risk of having to pay its legal costs if he lost. By contrast, the PO’s procedure is paper based and designed for complainants without legal representation. Only rarely is the loser ordered to pay the winner’s costs.
The member took legal action to challenge the employer’s move as an abuse of court process. He was unsuccessful. The judge explained that there is abuse where someone attempts to obtain an advantage they could not achieve in properly conducted proceedings. She held that timing court action for tactical reasons did not amount to such an attempt. Nor was the availability of an alternative, cheaper procedure sufficient grounds for striking out the employer’s claim.
Choice of procedure
There is much to be said for cheap and relatively informal dispute resolution. The legislation anticipates the PO will be the usual forum for disputes involving individual members, but the court also has jurisdiction. This case shows that the simultaneous availability of the PO and the court means procedural tactics in the early stages of a dispute can have a big influence on the balance of advantage between the employer (or the trustees) and a member, and on the outcome.
Early moves to court by employers are likely to be rare because many disputes are low in value and the employer opens itself to the risk of legal costs. But where there is a lot at stake and the employer is confident it is on strong legal ground, the move could be decisive.
Pre-emptive action by a member would depend on using the limited exceptions that allow the PO to accept a complaint before IDRP is finished. In those circumstances, the likelihood is that any court action subsequently begun by the employer would be stayed to allow the PO to make a decision.