The High Court has held that when determining disputes of law, the Pensions Ombudsman cannot take a less restrictive approach to time limits than the courts would take. This will be a welcome ruling for employers and trustees following some uncertainty about whether he can go beyond the normal rules of limitation.

The background

In the case, Arjo Wiggins v Ralph, a former scheme member complained about having been encouraged to transfer out of the final salary scheme to a section 32 policy (with no guaranteed final salary benefits) on being made redundant in 1986, rather than remaining as a deferred member.

During the Ombudsman investigation, the employer argued that the complaint to the Ombudsman, brought in July 2007, did not meet the normal three-year time limit applicable to Ombudsman cases and that he should not exercise his discretion to accept it out of time, especially in a case where the fifteen year longstop period that applies to negligence claims in court actions under the Limitation Act had passed.

However, the Ombudsman took the view that Parliament had given him a discretion "capable of indefinitely extending the time within which a complaint may be brought". He referred to the detriment to the member of not being heard on a matter of "far greater financial significance to him than [to the employer]" and exercised his discretion to entertain the complaint, determining it in the member's favour. The employer appealed.

The ruling of the High Court

The High Court has upheld the appeal. It concluded that when the Ombudsman is determining disputes of law (which will include claims for breach of trust, breach of contract and negligence) he cannot take a more liberal approach than the courts, including in relation to limitation defences. The result of a legal dispute should not differ depending on whether it is decided by a court or by the Ombudsman.

The judgment does not change the position in relation to cases involving maladministration. He may still investigate complaints in relation to "pure maladministration" (such as cases involving rudeness, delay or incompetence where the courts would not have jurisdiction to determine such a complaint because it is not a dispute of law) and grant remedies which are not limited by reference to the statutory time limits for court actions. Nevertheless the judge reminded the Ombudsman that, even in this situation, "the staleness of a claim" will be relevant to his discretion as to whether to consider it at all.

Conclusion

Following a number of cases where the Ombudsman has made determinations when a court would have treated them as time-barred, there has been some concern that those involved in the running of pension schemes had potential exposure to claims they might previously have thought were out of time. The judgment of the High Court this week therefore provides a useful clarification of the position.

The judgment can be viewed here.

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This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 09/12/2009.