The Pensions Ombudsman and the Courts – uneasy bedfellows?

13 / 09 / 2013

Even though the first Pensions Ombudsman took office as long ago as 1990, the relationship between the Pensions Ombudsman and the Courts remains work in progress.

History

Essentially there has long been a tussle between the Pensions Ombudsman operating his statutory remit independently of rules of law, and the Court which considers that the Ombudsman’s jurisdiction is subject to normal legal rules. The above debate has been illustrated in many cases since 1990. For instance, in Edge (1999) the Court held that the Pensions Ombudsman could not reach decisions which would adversely affect persons not party to the Ombudsman’s investigation, and in TKM (2002) the Ombudsman decided that failure by a trustee board to give reasons for a decision amounted to maladministration (whereas, as a matter of trust law, trustees’ reasons are not usually required to be disclosed save in exceptional circumstances).

New cases

The following new cases further flesh out the relationship between the Pensions Ombudsman and the Courts:

Supporting the Pensions Ombudsman – in July this year the Court of Appeal confirmed the earlier High Court decision that the Government Actuaries Department (“GAD“) was “concerned with the administration” of the Firemen’s Pension Scheme and therefore GAD was within the Pensions Ombudsman’s jurisdiction. The jurisdiction covers investigation and determination of disputes of fact or law or complaints of maladministration. GAD had failed to update actuarial commutation tables and this led to complaints by members. The Court of Appeal decision means the Pensions Ombudsman can now consider the members’ complaints. Thus here the Court helped the Ombudsman.

Blocking the Pensions Ombudsman – by contrast, in its recent decision in Pell Frischmann (July 2013) the High Court decided that the employer lawfully commenced  court proceedings even though this had the effect, under the Pension Schemes Act 1993, of halting the member’s current complaint under the scheme’s internal dispute resolution procedure.

The Court noted  that the employer was open about its purpose – it wished to ensure the member’s claim was dealt with by the Court rather than by the Pensions Ombudsman. Court proceedings would enable the employer to seek costs against the member if he lost, as well as enabling the complainant member’s evidence to be tested by cross-examination. So in this case the Pensions Ombudsman was stymied in its jurisdiction.

Historical reminder

In some cases the Pensions Ombudsman has been very generous to complainants so far as time limits are concerned.  As a matter of public policy, litigation is restricted by time limits. For instance, there is the general longstop date –  High Court proceedings cannot be issued more than 15 years after the act or omission complained of. In Arjo Wiggins v. Ralph in 2009 the Court made it clear that, in cases involving legal rights, the Pensions Ombudsman must give effect to a defence based on limitation if such a defence would be available in Court proceedings. By contrast, in cases involving merely “maladministration”, the Pensions Ombudsman is not so restricted by public policy.  Whilst there is a three-year longstop under the Pensions Schemes Act the Ombudsman can, and frequently does, choose to waive that restriction.

Conclusion

The uneasy relationship between the Pensions Ombudsman and the Courts continues to develop. This is driven not by animosity but reflects their different functions and differing jurisdiction. Notably the Pensions Ombudsman’s jurisdiction includes the concept of “maladministration” and not just breaches of legal rules. Both institutions have a role to play in dispute resolution. Traditionally the Pensions Ombudsman has been the low-cost forum in which to have disputes heard. Our view is that the jurisdiction of the Ombudsman must not be steam-rollered by the Courts, as inevitably this could lead to higher costs for complainants and defendants or deter parties from bringing complaints altogether. Expert legal advice will usually be essential in Pensions Ombudsman as well as Court matters and the Wedlake Bell Pensions & Employee Benefits team are well-versed in dealing with all types of pension disputes.