The Pensions Ombudsman v EMC Europe Ltd & Ors

The Pensions Ombudsman’s jurisdiction is limited in its wider, procedural sense. It should not entertain a complaint where the remedy sought would determine or adversely affect the contractual or other legal rights of a person who cannot be joined to the investigation and would not be bound by the determination. This applies where the proposed remedy would require a compromise or other agreement to be set aside. The risk of subsequent court proceedings to restrain enforcement is itself relevant. A parent company’s contractual rights are different from mere loss in the value of its shareholding. Delay in notifying respondents may be relevant to the Ombudsman’s discretion, but ordinarily raises a fact-sensitive procedural question rather than a pure question of law.

The Pensions Ombudsman referred a question of law under section 150(7) of the Pension Schemes Act 1993. The reference arose from a complaint by a member of a defined benefit occupational pension scheme concerning a compromise agreement under which the scheme’s participating employers were released from further liabilities.

The complainant sought to have the agreement set aside and the scheme administered as if it had never been made. The principal issue was whether the Ombudsman could accept jurisdiction when a parent company, which was not subject to the Ombudsman’s jurisdiction, had contracted as a party to the agreement and had provided the consideration. An alternative issue concerned delay in notifying the employers of the decision to investigate.

1. The reference was determined against the Ombudsman. It would not be proper for the Ombudsman to assume jurisdiction over a complaint seeking to set aside the compromise agreement.
2. The statutory scheme operates alongside the jurisdiction of the courts, but it does not authorise the Ombudsman to make a determination which a court could not properly make in the absence of a person whose rights would be adversely affected. The principles stated in Edge v Pensions Ombudsman [1998] Ch 512 and affirmed on appeal in Edge v Pensions Ombudsman [2000] Ch 602 applied.
3. EMC had a contractual right under the compromise agreement which would be adversely affected if the agreement were set aside. That was materially different from a parent company suffering only a reduction in the value of shares in a participating employer. EMC had provided the whole monetary consideration for the release and was, in substance, the buyer of that release.
4. The fact that the agreement had been executed did not avoid the jurisdictional problem. A determination against the participating employers could lead to fresh court proceedings, including an application for an injunction restraining enforcement. The risk of such parallel litigation was inconsistent with the limited statutory jurisdiction.
5. The court did not need to decide the arguments based on Article 1 of the First Protocol or Article 6 of the ECHR.
6. As an alternative observation, the Ombudsman’s letter in 2006 fell just short of a decision to investigate for the purposes of Rule 5(2) of the Personal Occupational Pension Schemes (Pensions Ombudsman) (Procedure) Rules 1995. The Rule 5(2) obligation arose in 2008 when the Ombudsman decided to proceed, although earlier notification of intended investigation was appropriate. Whether the resulting delay justified discontinuance was a fact-sensitive matter for the Ombudsman’s discretion. Standing alone, it would not have justified declining jurisdiction on this reference.