UK - Disgruntled scheme members are causing firms "endless and costly" delays by taking spurious action on wind-ups to the courts, experts claim.
Denton Wilde Sapte partner Elmer Doonan spoke out after a dispute over the wording of scheme rules during wind-up cost an electronics firm £1m – even though the employer eventually won.
The High Court action against Crosfield Electronics also added two years of delay to the wind-up which started in 1997.
And lawyers warn that costs could soar further as members’ claims have still not died down.
Doonan believes the assault on Crosfield poses a new threat to businesses which have to meet the legal expenses of these claims irrespective of the outcome.
Doonan – who acted for Crosfield, a mid-sized firm – said: “This is an object lesson on how a determined member with a complaint can cause endless delays in the winding-up of a scheme and cause undue expense to a company.”
And he pointed out the firm had to meet all legal costs – even though the court ruled in its favour.
Independent trustee Anne Hearn, acting on behalf of the Crosfield Pension Fund members, brought the action after members claimed the firm owed them pension increases totalling £13m.
Her argument was that in 1993 the company and trustees announced they were set to change the scheme rules to include LPI increases.
But Doonan said that after this conflict, a number of other members had “jumped on the bandwagon” with claims.
The firm is now considering applying to the High Court again to resolve these claims – at yet further expense to the company.
Thomas Eggar Trust Corporation director Vernon Holgate explained the dilemmas trustees faced in these situations.
“As a trustee you can’t tell the member to go away – even if it’s a complete nonsense.
“Sometimes you can do a deal, but if the member feels they are in a no-lose situation and the stakes are high, there’s sometimes no stopping them.”
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