Opinion: Pension disputes would benefit from early transparency

It seems that hardly a day passes ­without a press report on the financial challenges faced by occupational pension schemes.

Philippa James
Philippa James

Where those financial challenges generate disputes between sponsoring employers and members as to how a scheme is to be administered, they often raise complex issues ranging from the exercise of the trustees’ powers to whether the employer discharged its duty of good faith and ­questions of estoppel.

When trustees have to go to court the last thing they need is a cumbersome and expensive litigation process. At the heart of the matter is Part 64 of the Civil Procedure Rules (CPR), which requires that, where trustees ask the court to determine ­questions arising in the execution of a trust, the claim must be commenced under CPR Part 8. The effect of this is that a valiant effort has to be made to shoehorn litigation down a ­procedural path to which complex ­pensions cases are not well suited.

The problems start with the claim form. The rules require trustees to serve their witness evidence with the form, but how can they know what this ought to cover? Trustees, who are usually ­neutral, are in the ­position of having to prepare evidence without knowing how the protagonists plan to argue their corner.

The first round of witness evidence is often of limited assistance, necessitating later rounds of supplemental statements.

From the perspective of a commercial ­litigator it is difficult to resist the ­conclusion that the costs of preparing ­witness evidence would be better spent once the parties had a clear picture of the issues in dispute. So how do the parties develop such a clear picture?

Statements of case are not generally required. This often has the consequence that parties’ arguments are left to be inferred from witness evidence prepared from incomplete material and do not become clear until the parties try to agree a list of issues, or even as late as exchange of skeleton arguments shortly before trial.

It would help the orderly conduct of cases for the protagonists to set out their cases on the questions raised by the trustees at a relatively early stage.

The members may say, with some ­justification, that the information they need to build their case is in the hands of the trustees or the employer. The answer to this is to equip all parties with the means to articulate a structured case at an early stage.

So there is an element of chicken and egg here: disclosure works best where the battle lines are drawn, but how can they be drawn until everyone has been able to assess the issues? One solution would be a preliminary disclosure exercise, using the questions in the claim form as the ­yardstick of relevance, sufficient to enable the parties to set out what they each see as the relevant issues, giving a framework for a standard disclosure ­exercise prior to service of witness ­statements.

Although what is appropriate will vary from case to case, applying some structure to disclosure seems preferable to the ­parties having to juggle ongoing ad hoc requests for documents through to (and even during) trial as the issues unfold.

It is not all bad. The problems ­outlined above can be – and often are – avoided by cooperation between parties on voluntary disclosure, the service of ­particulars on specific issues and other sensible case management directions, adapting ­directions typically found in CPR Part 7 ­litigation as and when required.

But these cases are too important and high-value – and affect too many stakeholders – for this to be an adequate substitute for an appropriate procedural framework.

A clear and flexible practice direction, drawing on accumulated best practice, would set these cases on the right path.

Philippa James, pensions partner, and Stuart Pickford, commercial dispute resolution partner, Mayer Brown