The use of litigation tactics in pension scheme member disputes has been brought into focus following a recent decision of the High Court in England. The court’s decision in Pell Frischmann Consultants v Prabhu opens up the possibility for employers to take a pension scheme member’s dispute directly to court as a tactical measure to avoid protracted internal dispute resolution procedure (IDRP) and Pensions Ombudsman proceedings.

The decision confirmed that a company can take a member dispute directly to court as a tactical measure to avoid protracted internal dispute resolution procedure (IDRP) and Pensions Ombudsman proceedings. The court held, on the facts, that it was not an abuse of process or a contravention of the English Civil Procedure Rules for the employer to bring a claim to the High Court to resolve a dispute with a scheme member, even though this would prevent the member from bringing his complaint to the Ombudsman. The Pensions Schemes Act 1993, which governs how the Ombudsman investigates complaints, has the effect that once court proceedings have begun a member cannot complain to the Ombudsman.  

In this case, the employer brought court proceedings while the member’s complaint was still under consideration as part of the scheme’s IDRP. The employer’s motivation was to ensure firstly that it could seek costs from the member if he lost and secondly that there could be a cross examination of the evidence relating to the facts of the claim. Neither of these would have been likely if the Ombudsman was the forum for resolution. As a result of the court proceedings, the trustees were forced to suspend the IDRP and the member was prevented from making a claim to the Ombudsman.

There may be some justification for employers making a pre-emptive application to court in terms of ensuring a potentially swifter resolution and disincentivising “weak” claims. This case does however have potentially serious implications for members who may be forced to deal with complaints through the courts, exposing the member to considerable costs (court and legal fees) and the risk of having to pay the employers’ costs should the member’s complaint fail, or to agree to settle the dispute in order to avoid court.

Normally, the Ombudsman cannot investigate and determine a complaint until it has been through the scheme’s IDRP. If the use of pre-emptive court proceedings by employers becomes more prevalent, members may however be encouraged to make their first application to the Ombudsman instead of their scheme’s IDRP on the basis that it would be reasonable, in the circumstances, for the Ombudsman to adjudicate. This would then prevent the court from considering the matter.  

The case considered the potential for abuse of process in the context of the English Civil Procedure Rules. We would expect a similar outcome should such a case come before the Scottish courts.