UK - Employers and trustees will have to reimburse legal expenses if a successful claim is made to the ombudsman regardless of the circumstances.
Ombudsman David Laverick – in a dramatic policy U-turn – has ordered the trustees of insurance broker Darwin Clayton’s pension scheme to pay the claimant, Mrs O’Connor, £13,825 as “redress for expenses incurred as a result of their maladministration”.
Lawyers said they were shocked by Laverick’s direction, which conflicts with the notion that members should seek free advice from OPAS.
Pinsent Curtis Biddle associate Simon Tyler explained that the ombudsman historically took the view that members did not need to incur legal expenses, except in unusual circumstances.
The determination involved the payment of a widow’s pension, which was said to be a guaranteed benefit under scheme rules. The ombudsman upheld the complaint and ordered the scheme trustees to pay the full widows benefit.
“But the ombudsman also ordered the trustees to reimburse two-thirds of legal costs the member incurred on the basis that she would not have incurred those legal costs had it not been for the trustee maladministration,” Tyler added.
He said this determination leads to the conclusion that the ombudsman has decided to order reimbursement of members’ legal expenses even in non-exceptional cases.
“If so, that would represent an additional risk for employers and trustees when a complaint has been issued against them.”
Simmons & Simmons solicitor Kirsty Bartlett said: “It will be interesting to see where the balance will lie in future determinations between ensuring a level playing field – with both parties to a complaint being legally represented if they wish – and in encouraging a forum in which complaints are resolved quickly and cheaply.”
She added: “I suspect that we will not see the ombudsman awarding the trustees or employer a portion of their legal costs in dealing with an unsuccessful complaint.”
Linklaters pensions litigation partner Mark Blyth stressed that, if this determination was evidence of a future trend, this was a “worrying development”.
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