Pell Frischmann Consultants Limited v Prabhu1

In this case, in what pensions experts believe to be the first reported case of its kind, the sponsoring employer brought court proceedings against the member whilst the scheme’s internal dispute resolution procedure was ongoing. This precluded the member from taking his claim to the Pensions Ombudsman. The member’s application to strike out the company’s claim on the grounds of abuse of process was dismissed – the company’s strategy prevailed.

Facts

If a member wishes to bring a formal complaint against pension scheme trustees, this needs to be done through the scheme’s internal dispute resolution procedure. If having done so the member is still unhappy, he or she may take their claim to the Pensions Ombudsman. However, the member cannot go direct to the Pensions Ombudsman without having first brought his complaint through the scheme’s internal dispute process.

The member concerned claimed that he was entitled to an enhanced pension under the Pell Frischmann Retirement Benefits Scheme. This was disputed by the trustees, on the grounds that the award of an enhanced pension had not been properly authorised by the trustees or the company. It was estimated that the enhancement would cost between £420k to £520k to fund. The member brought his claim via the scheme’s internal dispute procedure in March 2012. In July 2012, while the claim was still being considered by the trustees, the company issued court proceedings.

Application for strike-out

The member applied for the claim to be struck out on the grounds of abuse of process as he had been precluded from taking his claim to the Pensions Ombudsman. The Pensions Ombudsman does not have jurisdiction to investigate a complaint once it is the subject of court proceedings.

The company openly acknowledged that the intention of the application was to ensure that  the complaint would be dealt with by the courts, rather than the Ombudsman. This was so that the company would be able to seek costs against the member should the claim fail and also to enable oral evidence to be heard on the matter. This latter point was an issue for the company as oral hearings before the Pensions Ombudsman are extremely rare.

The judge dismissed the application for strike-out and refused to allow the prospective costs order against the company which the member had applied for in the alternative. The judge stated that “the Court should not strike out save in the most clear and obvious cases and the fact that the issue of proceedings might have been motivated by an improper motive is beside the point if the claimant has a genuine claim”.

Comment

The employer has no formal role in the trustee’s internal dispute resolution process. Similarly, whilst the Pensions Ombudsman may take submissions from an employer, the employer does not have any direct control on how the case is heard, nor can costs be recovered. By initiating court proceedings, the company was able to ensure that a dispute involving material sums would be heard in a forum where the company would be a party to proceedings, oral evidence could be given and the member would bear a cost risk in bringing the claim.

The decision makes it clear that it is open to employers to begin court proceedings and sidestep the Pensions Ombudsman as a tactical step. This option may be of particular interest for employers in cases where significant sums are involved and the employer is willing to bear the cost of court proceedings in exchange for a greater say in, and oral scrutiny of, the issue at hand.