Pensions Disputes

Maddy Frost: Good afternoon to those who have joined us. I am just going to give it another under a minute for others to join and then we'll kick off.

Aaron Dunning-Foreman: You have a lovely minute of just staring at us all looking at you blankly in the camera.

Maddy: Right it's a minute past 12 now so I think we will get going. Welcome everybody to today's webinar which is the second webinar in volume 2 of our scheme session series.

Now today we are continuing the theme of pensions with transfer and today we will be looking at the tools that we can deploy to resolve issues that might come on during the buyout journey.

So my name is Maddy Frost, I am a partner at the Pensions team at Gowling. I am a general pensions advisory lawyer so I am delighted today to be joined by two of my colleagues who, I am happy to say, are very well equipped to lead this session today as pension disputes resolution specialists.

First, we have Charlotte Scholes, a Legal Director, and we also have Aaron Dunning-Foreman, a Principal Associate, both here at Gowling. Now between them Charlotte and Aaron have over 20 years' experience resolving issues relating to pension schemes and avoiding disputes.

Now Charlotte and Aaron both sit in our pensions dispute team which forms part of an eight strong group of specialist pensions trouble-shooters and problem solvers – specialising exclusively in resolving issues that trustees and employers might encounter during the life of a pension scheme.

They are not pension advisory lawyers who dabble a bit in disputes, nor are they commercial advisory lawyers who dabble a bit in pensions. They are a specialist group which form part of Gowling's 40 plus pensions team of lawyers who are immersed in pensions and connected to the wider pensions industry.

Now as part of the aim of today's session is to dispel the suggestion that we only bring out the likes of Charlotte and Aaron when things have gone wrong. They are actually people who trustees and employers should want to have a dialogue with.

So let me tell you a quick fun fact about each of them.

So, over the summer, Charlotte was on a flight Damon Albarn, that's the lead singer from Blur for those of you who don't know, and unashamedly asked for his autograph, apparently for her daughter.

Aaron is a proud father of two, although not feeling quite so proud this morning when he was woken up at 2.00am by the sound of both his five year old and his eight year old secretly playing in their room. So please forgive Aaron if he is a little bit tired today, but I am sure his energy and upbeat nature will see him through.

So just before I hand you over to our experts, just a couple of housekeeping points if I may.

The session is due to run until 1.00pm. We are going to aim for no more than 45 minutes of content to give plenty of time for questions and, if you do have questions as we go through, please do feel free to use the Q&A function at the bottom of your screen.

Now, only us speakers will be able to see your questions so ask away, there are no stupid questions here. We will pick up as many of those as we can at the end of the session and, just so you know, we will be recording the session, we will place it on our website following the session, and we will send everyone who signed up a link so they can watch the recording at your leisure.

So that said, over to Charlotte. Thanks, Charlotte.

Charlotte Scholes: Thanks very much Maddy for that excellent introduction.

Good afternoon everybody, or good afternoon by four minutes. Welcome to today's session. As Maddy said, the theme for this is risk transfer and what I wanted to start of with is just reminding everyone that obviously when a scheme reaches a funding level that buyout becomes within reach, that is obviously a really good place to be. However, as anyone who has ever been involved in buying out a pension scheme will know, the journey to buyout can be an interesting one.

While you may start out with the expectations of it being a bit like walking through fields of lavender, you may find that things are not quite as they first seem.

For starters the lavender, as it turns out, is in fact bluebells – yes, that is what is on the slide – or worse still the journey to buyout can be somewhat full of pot holes and challenges. And the purpose of today's sessions is to show you that notwithstanding those challenges there are ways that your legal team and in particular disputes lawyers can help you. Any solution needs to match your project plan and we understand the buyout industry and the standards that insurers expect.

But before we leap into what those solutions might look like I am going to hand you over to Aaron to ask you some interesting fast questions. We want to get a feel for the sorts of problems you may have faced in practice and what attitude towards engaging with dispute lawyers you have. Over to Aaron.

Aaron: Thanks very much Charlotte.

So as Charlotte mentioned, what we wanted to do is to get a feel from the audience as to the kind of problems you are all experiencing and see if that is aligning with what we have been seeing. And hopefully we will be able to flex our session around the responses you are able to give.

So if I am clever to work the technology, which is not guaranteed, the first question I would like to ask you – and it should come up as a poll shortly – is, actually of the people on here how many of you or have you ever come across problems with your pension scheme.

So hopefully that has come up for you and we have three options for you. You might be sitting there and thinking "oh yes, my pension scheme runs like a dream"; you might be thinking "I only have problems once or twice"; or you might be thinking "I have problems all too often".

So I will leave that poll open for a moment longer to let others finish their voting. I can give you a quick preview now whilst those votes are still coming in. Not a huge amount of you are saying your schemes all run like a dream right now which is difficult for you, but at least you are in the right place because that is what this session is all about.

So I will publish the results and, again, hopefully that is coming up on your screen so we can see where we are, and, you know, it looks like 88% of you have experienced problems at least once or twice if not all too often.

So, OK, you are in the right place.

Now then, our next question is really trying to flesh out well what are those problems you are coming across? We would like to know what is the most common problem out there and again we can flex our session around that.

So I have worked the technology correctly again you should see up on your screen the options. So are your most common problem error in your schemes rules? Is it missing documents? Is it simply members are not being paid correctly or are you having more disputes with your service providers than perhaps you once did before.

I feel like I have quite a lot of power here because all of the results are coming in for me and I can see them. I do not know if you can all see them on your screen as well. I am told you can so I do not have as much power as I thought.

What you can see then and I will end the poll now, one or two votes coming in. So I will put the results up just in case others could not see them, we have got a real mixed bag there but what is coming across is actually the problems you are all dealing with cover all of those topics – and it is interesting to see a few people are having increased disputes with their service providers. Because I think if we ran this poll a couple of years ago that would not have featured quite in the same way.

OK, now then, my final question – and this is a slightly high risk question that Charlotte and I are going to go with – but we are going to go with it and see, is what is your first reaction when you are told you have to involve a pensions dispute specialist?

Now you might think great, who does not like working with a friendly pensions dispute specialist. You might think, oh no, that's our journey plan gone up in smoke or you might think "oh no, this is going to be far too expensive".

Selfishly, I am going to keep the poll open slightly longer because I have not had many "great, who doesn't like working with a friendly disputes specialist". So I will give you all a bit more time to see if that changes. Oh it is – I feel like I have influenced the results.

I will just leave it open one more moment or so. OK, I will close the poll there and I will share the results with everyone and I am pleasantly surprised that at least 20% of you are OK and like happy to work with your friendly disputes team, that is great. But, you know, not surprised at all here that there is this combined perception of if you parachute in some pension specialists we are not going to know what is happening with your journey plan it could compromise it, things might sort of get their own legs. And also a huge number of you worried about what the costs are of sorting your problems out.

So, without further ado you are in the right place for all of those things. We will try and pick up on some of those concerns as we go and let me just tell you where we are going next.

Hopefully my slide has moved across.

What we are going to cover today then is we are going to talk to you about the common problems that are coming up and we have seen some of that in the survey results there.

We are going to talk to you about what we think the aims should be when a problem comes up and how we would like to engage with you to understand what your aims are and how we need to solve these problems; and then we will go through the all important fixes – what are the tools in our toolkit to help resolve those problems.

Charlotte and I always think it is really important on these webinars or conferences to actually then back up what has been said with some case studies to show how it works in real life. We think those case studies are really quite interesting and, in some ways, the best part of this. So we want to make sure we have left enough time to go through a couple of case studies for you.

So, without any more, I will pass back to Charlotte to talk about problems.

Charlotte: Thanks Aaron. So what sort of document problems might you see in practice? What sort of problems might emerge?

These may be familiar to you already but I will, for the reasons Aaron has explained, rattle through some of these.

So, first up on the list of potential issues, is execution issues. So the most common example is where you find there is a signature missing on a deed. That is obviously less than ideal but can be quite common.

Second on the list are drafting errors. So an example of this would be where the deed and rules confer a higher than intended level of benefit on members and this does not reflect the intention of the parties at the time. Commonly, one might see this in the pension increase rule, there have been quite a few drafting errors we have come across recently in those sorts of rules.

Another very common area for document problems to arise is around changes to reflect the Barber decision – so sex equalisation changes. Often there has been a defect in the process for seeking to implement those changes. A very common mistake is where an announcement has been issues where a deed should have been done – that is quite a tricky problem to resolve. However, there are lots of variations on this general theme and we will come on to talk about some of those later on in the case studies – and there are potential ways to get around those.

Third up on the list, I am sorry, fourth on the list is closure issues. So, these typically occur where there is a [courage restriction in the amendment power. Now, for those of you who are not massively familiar with what a courage restriction, essentially a courage restriction – or a courage fetter as it is often known – is a restriction in the scheme's power of amendment which prevents the trustees and employ from severing the link with a final salary of members at the point where the parties want to cease accrual of the scheme.

Now courage restrictions are usually unearthed at the point the scheme tries to close to future accrual but very occasionally the issue emerges many years later when a scheme is going through the DD process and preparing for buyout. So the question then is what, if anything, can be done to remedy the position after the event?

And the final item on the list is missing documents. Now often we know a change has been made but we cannot find evidence of the relevant decision making and I think it is fair to say it is the way of the world with pensions that they often have a very long lifespan and often the documents and the changes go back a number of years. So often documents do go missing. Very often they go back to the age of paper or even parchment and certainly they predate the age of emails and cloud storage.

So those are the document problems. As Aaron mentioned there are also various practical problems that can emerge. So I am just going to let Aaron speak to you quickly about those.

Aaron: Thanks very much, Charlotte.

So what Charlotte has taken you through there are documentation problems where at the core the benefits that you might have been paying to your members might actually not be the correct benefits in accordance with the trustee rules as a result of those various documentation problems.

So they are very much your legal problems with you documentation. But, of course, that then links in with some practical problems.

So just to keep us on our toes I will take these in reverse order as they appear on the slide. Of course, if your benefits are not as you thought they were because you have documentation problems, that will almost inevitably mean you have some administration and data errors and members have not been paid correctly historically which has two consequences.

One, you will need to fix their benefits going forward and before you can conclude your buyout journey and consider what policies you need to be putting place. But you might also need to look back and see what has gone wrong in the past and whether you need to correct past errors – under payments, over payments – and that is a very practical problem that schemes will have to grapple with as they start to flush out issues in their buyout journey.

The other practical problem that we are seeing more often now is difficulties with your service providers and perhaps exiting difficult contracts. So what we have in mind here are problems where, because the market is quite buoyant at the moment, may be your service providers do not have the bandwidth that you would expect them to have to help you complete your projects as part of the buyout journey.

May be increasing errors are creeping in and you are finding it very difficult to manage what the project is with those service providers and you are just, basically, having frustrations with those who you have worked with before and trying to find ways either exit those contracts as the last resort. But, more generally, trying to find ways to fix that relationship and get things back onto an even keel so you are all pulling into the right direction for your project.

So there are some of the practical problems that we are coming across and hopefully that resonates with some of you and these are the sort of things you are also seeing and, if there are other things you are struggling with or problems you are seeing that we have not mentioned, please pop something in the Q&A and we will try and get to that as well.

So I'll pass you over to Charlotte now. So we have told you what the problems we are seeing are and now the all important piece around what are our aims? What do we do when we discover a problem?

Charlotte: So, thanks Aaron. One of the first things that we do when one of these problems emerges is we ask ourselves - what is going to sound like a very basic question but is actually a very important question – which is, is this really a problem?

Now, I will just say just because someone else has said it is a problem we do not necessarily assume it will be. At the risk of saying something that you may already be familiar with, if you ask a room of ten lawyers the same question you may get ten different answers. So it is important to consider whether what one person has said is a problem is not necessarily going to be construed as a problem by someone else.

Often it is worth reading around the troublesome clause in question and see if any other clauses may come to your rescue.

Another really important question to ask is what is this problem worth?

Now although we have included this and it is the second question on the slide, in my book this is always the first question to ask. Clearly there is no point trying to fix a problem that is only worth a few hundred quid or, frankly, a few thousand. But if you are talking about a drafting error that gives rise to unintended liabilities worth millions of pounds, that is obviously going to dictate the approach you are going to want to take.

Once we have established the answer to those questions we will then think about some of the fixes.

Now, at the risk of sounding like Bob the Builder, we do ask "can we fix it?" and most of the time the resounding answer is yes we can. But every now and again it is not possible to fix a problem. But the point of today's session is to focus on what we can do.

So just moving over to the next slide. One of the key aims and part of forming our strategy is to work out how we keep stakeholders on side. So how do we do this you might be wondering?

Well, what we work out really early on is where is the scheme at in the buyout process? Is it right at the start of the process for example? Is it six months in or does it have six months to go?

That is all obviously going to dictate the steps that we take and the strategy we form and if the scheme is on the cusp of signing a deal with an insurer our approach is obviously going to be radically different to a situation where a buyout is five years off.

Ideally problems are spotted with time in hand and, if that is the case, we will try to work with stakeholders to insure the scheme is not out of pocket, insofar as we can.

So, for example, if there is a potentially responsible party, we would help the trustees and employers to recover – whether that is by way of a professional negligence claim or simply via a commercial negotiation leveraging a pre-existing commercial relationship – we would have that conversation with trustees, employers and the relevant party to try and find some kind of recompense for the scheme and make the scheme good.

So that is the theory, but how does it work in practice? You know, what tools do we have available to us to help and what might those solutions look like?

So at this point I am going to hand over to Aaron to talk about some of the fixes.

Aaron: Thanks Charlotte and, at the risk of stretching your Bob the Builder analogy – I am not sure we are allowed to say it because of trademark but I have said I now – we are really going to be looking at the tools in our toolkit here.

So, we have tried to put these in an order of the easiest tool to use first. The easiest, cheapest, quickest tool to use first and then moving down that process.

So looking first at fixes for your documentation problems is, as Charlotte flagged, one of the key tools we have is actually how many read the rules another way. Do we think this is a problem, or can we find other parts of the rules that might save us? So, even if on the face of a particular part of the rules it looks like there is a problem, if we take a step back from that provision and look more widely, how do we find support from other rules that either minimise the impact of that problem so you can live with it, or eliminate the problem altogether.

So that is our first objective. If you come into the Gowling pensions dispute team that is what we are looking at doing first because that is the path of lease resistance.

If that is not possible on its own we kind of look outside of the rules because, occasionally, you can find support or information or evidence of what was intended and what was going on outside of the rules and that can also help us formulate a strategy with you as to how to resolve this problem in the timeframe that you have and giving due credit for all the liabilities that are at stake. The importance of this matter, your timetable to buyout, all feed into the strategies that we work with you to develop.

Often evidence gathering is quite key. We might look through documents, we might want to speak to key individuals. Really what we are trying to get to here is if we cannot find a bulletproof way through those rules on our own what trustees will need for comfort, what the employer might want for comfort but really importantly what your insurers who are taking on liabilities will want for comfort, is an opinion from a barrister and specially from a KC.

So that is the next step of our problem solving toolkit. It is actually working in a collaborative way to put together a case that would enable a barrister to sign off on a position that is an acceptable outcome for all parties. You will not always get the right answer from the barrister immediately. But that is why it is very important for us to engage with the barrister in an iterative process so we can say well, this is what we have looked at; this is what we have not looked at. If we are not at the point where you can sign off and give some comfort around this what more could we look for? What more do you need? And we will try our best to find a solution to most problems as we can through this process because, as I said, our goal is the path of least resistance; the most effective and fast solution.

So that is why it is really important to evidence gather and work with your barrister in that collaborative way.

Coming very quickly onto practical problems as well. So that whole process, those fixes work for your documentation problems, but I also spoke to you about your practical problems.

I gave you some examples of some frustrations with your service providers and not perhaps performing the way you would want them to perform and perhaps not having the bandwidth to help with your projects – be that GMP realisation/reconciling your data, doing any of those various steps towards buyout might feel like you are hitting your head against a wall at times.

Ultimately one nuclear option would be to replace them and terminate the appointment. But we all know, in reality, depending on where you are in your journey, that is not a very practical solution and, in fact, gives rise to its own problems.

So, what are the fixes for these practical problems? Well, you can look through the contract and we can help you find some contractual levers that you can pull to help focus minds and to help get your service providers back on track with you.

But in addition to those you have got these commercial levers that you can also pull to get their focus, get your attention again. Things about they will have concerns about their own reputational issues and engaging them in a dialogue can often solve most of the problems. Because ultimately you all want to work together to get to an outcome; and I think part of that piece there as well is, you might find sometimes that the compounding problem with, for example, the way your benefits are being administered, might give you concerns that there is a breach of rule that needs to be report to TPR.

Now, of course, we as legal advisers would not race to reach that conclusion to say that you need to report a breach. But if you start to move into that territory you are opening a dialogue with your service providers along the lines of, we are concerned that if this does not get sorted out soon we might have to report it to TPR, can sometimes be a really effective way of getting attention from the more senior people at those organisations to get them back on track with you.

The other two bullet points in the middle there I will just touch on very quickly.

This is – how do you fix practical problems where the scheme is out of pocket?

Well, you know, sometimes innovation is really an exciting word right now but what these two other bullet points in the middle – early correspondence and the pre-action protocol- that is really just focussing on writing to people and trying to get a deal done so you can move on. You know, the problem has happened, it has cost x amount of money, let us make good that money and move on with our project please. I think all too often people overlook these two steps here and think straightaway about costly court proceedings that are going to take time and we have a couple of case studies, I think, will bring out that sometimes cracking on with a quick commercial settlement is very effective and often overlooked and people think it is better just to ignore it because we do not want to get caught up in litigation.

The final fix for practical problems, I mentioned overpayments and underpayments there and taking a practical approach to that and, I think, that could be a whole session on its own. So I will just distil it down to this, which is, you need to look at that as a project in and of itself and involve your advisers in that as soon as you can.

Because, yes, while technically speaking, the legal position is that you should seek to recover - for example, past over payments and correct benefits going forward. If you have overpaid 100 members a £1,000, which is a significant amount in total, the practical reality is writing out to those 100 members, triggering potentially 100 disputes to try and wrestle £1,000 back of each of them, might cost you a lot more money and time than it is worth in the context of what you are trying to achieve in the scheme in your particular journey plan.

So it is about looking at those problems practically and finding a solution which actually brings your members along with you and minimises the scope for costly complaints and delays.

OK, so we have, kind of, Charlotte, I keep forgetting, what did you refer to this … when we were talking about this, this wheel of fortune is it?

Charlotte: It looks a bit like the wheel of fortune.

Aaron: OK, so what we have done here is we have put together a wheel of fortune which just tries to pull together in one slide, for you, what these fixes might look like.

So, on the outer ledge, if you like, are the more practical fixes and the inner core are the more involved legal processes. I will very quickly pick up a couple of the ones from the outer core of the wheel of fortune, and I have touched upon some of them already.

So, I mentioned that it might work having an iterative process of seeking a counsel's opinion to help solve the problem, and part of that iterative process would involve checking adviser files, interviewing key people from around the time and, basically, amassing as much evidence as we can to put before counsel and find a solution. That will involve checking member's records as well.

The final one that is worth pulling out here, because I think it is so often overlooked because it seems like you will never get it, is member consent.

So, when you have issues with your documentation, the biggest problem is you cannot retrospectively change benefits if that is going to be detrimental to members and so, yes, with your big large scale errors member consent might feel very impractical and frankly impossible.

But if you are dealing with a specialist subset of your membership, a special category or an unusual category of members that has come in from the history of the scheme they might represent a high liability, but not a huge number of people, and actually trying to at least consider a member consent strategy is well worth it.

So, having picked off the easy ones to talk about I will now handover to Charlotte, and I have left her the more technical inner core just to run you through.

Charlotte: Thanks Aaron. I totally agree member consent is so often overlooked and is a really good one to bear in mind.

So, as Aaron said, I am going to talk now about the inner core at the risk of mixing analogies between the earth and the earth's core, I am going to just leap straight in.

So, construction is the first one I am going to move round clockwise.

What is construction?

Well, we are not talking about building here, despite all the references to Bob the Builder. The point about construction is occasionally documents just do not make sense and where that happens parties can ask the court to construe a document for them.

So, when we talk about construction applications, we are referring to the process by which the court determines the meaning and the legal effects of the documents.

Now, it is worth saying, that such applications are only suitable where there is no underlying factual dispute between the parties – so about the nature of the document or how it came into being – and the only matter in dispute is effectively the correct interpretation of that document.

What happens is the court considers the document and decides the correct interpretation. The evidence in such cases is very limited, the court is basically looking at the document and construing it on its face.

So, for example, the background documents, the admissible evidence, is pretty limited and previous negotiations between the parties and their declarations of intent – for example, the emails around the time – generally will not be admissible.

What the court will try and do is they will try and take a practical and purpose of approach and they will try and apply business and commercial sense to a document. Usually this is a friendly and consensual route where all the parties work together. Generally, what you will have is an employer arguing for one interpretation, which tends to be the cheapest option, and then the trustee may argue on behalf of members for the more generous interpretation.

However, sometimes the trustee will just stay neutral and he will have a representative beneficiary who will take on the role of arguing on behalf of members for whatever confers the greater benefit on members.

Now, you might be wondering how long do these sorts of applications take?

Well, they do vary. At one of the spectrum you can get cases on within a couple of months of getting the papers to court and you can even have them dealt with without a court hearing. In other cases, it can take a bit longer, for example, if there is a bit of tussling between the parties. They are often front ended processes so it could take a year maybe 18 months. But, as I say, you can get these cases on within months.

What is the legal effect of getting a ruling from the Court of Construction?

Well, it binds members, which is good, and the trustees are bound to follow the order. So from the trustees and the employers perspective that is a pretty good outcome, and there's not much members can do to dispute the court's order.

So, next up on the wheel of fortune, is section 48 of the Administration of Justice Act 1985.

Now, I am taking this next because it is staying on a theme of construing documents. It is actually quite a handy procedure and it is not used that often and not really publicised that much.

So what it does is, section 48 of the Administration of Justice Act 1985, allows the court to authorise trustees to take action on the basis of counsel's opinion. In other words, if the trustees or the employer are able to present an opinion to the court to say they think the document should be construed in a particular way - or rather counsel finds that a document should be construed in a particular way - and the judge agrees with that, you effectively have a blessing from the court, blessing the trustees actions for administering the trust in accordance with that construction of the document.

So, for example, the court could bless a trustee to construe a rule in a particular way to construe a way any plain, erroneous wording.

Now, this is a pretty simplified process. Although such hearings, if they do take place as hearings, they can be dealt with on paper, they tend to be pretty short. You can even have telephone hearings and the cost of seeking such an outcome from the court tends to be lower than would be the case for a construction application.

So, what you might be wondering is what is the real difference between going for a construction application and an application under section 48 of the Administration of Justice Act?

Well, the crucial difference is the court's decision is not binding on members. Although the trustees would be protected from the MAL administration claims, technically members can still argue that the interpretation adopted by counsel and the board is incorrect.

Now, I think that is going to be quite a difficult thing for members to do. So, in practice the risk is probably pretty low but it is worth just being aware of that distinction.

Next up on the wheel of fortune is rectification.

So, why would you use rectification when you have got construction section 48 available to you?

Well, the answer is this. If there is clearly a mistake in a document that perhaps the mistake is not necessarily apparent on the face of the document, you might be looking at rectification rather than construction.

So, what is rectification? Very, very briefly because I am conscious we need to get onto the case studies.

It is an equitable remedy which basically means that is only available at court's discretion. It can be used to rewrite mistaken wording in a legal document so that it accords with what the parties to the document had intended.

Parties cannot agree to rectification as between themselves.

Now, it is worth flagging that because sometimes deeds of rectification or deeds of correction emerge during a risk transfer DD process and those deeds, unless they are backed up by a court order, do not have any legal effect.

Now, that is not to say they are entirely unhelpful because, of course, what they do is they evidence the intention of the parties at the time they are executed. But it is worth being aware of the fact that they do not, of themselves, have any legal effect.

Rectification tends to be sought by employers who obviously are looking to put right any provision in a pension scheme that is likely to cost them more money.

If such applications are granted by the court they are binding on members and all the parties to the application, or they bind all the members of the trust. As is the case with construction applications, you tend to have a represented beneficiary involved but occasionally you just have two parties. You might have the employer arguing for the cheaper option and the trustee arguing on behalf of members.

Every now and again it is so clear that there has been a mistake that the parties to a rectification application agree that it can be dealt with on what we call a summary basis. That means effectively the party who's role it is to dispute the rectification says "I have no reasonable prospect of arguing against the fact this was a mistake so I am not going to have that argument". In which case they may get an opinion from counsel that they share with court on a confidential basis and the hearing could be dealt with in a very short period of time, potentially a day to half a day; and potentially for a fraction of the cost of a full blown contested rectification case.

So, that is a real whistle-stop tour of construction section 48 and rectification of the inner core.

We are now going to move onto the case studies which I suspect are going to be the most interesting bit for all of you guys.

So, without further ado, Aaron please move the slide on. Thank you.

Aaron: Thanks very much Charlotte.

So what we will try to do here is bring to life with some case studies, that are based on some previous experience, to show how sometimes practical solutions and looking at ways to resolve issues and avoid disputes can actually get you the best outcome. It is not always the fears you showed at the start of this webinar around what it means to involve pension dispute specialists.

So, I will kick off with our first case study, and this is an interesting one insofar as it is a problem that is not unusual. This has come up on many schemes where it looks like pension increases and revaluation has been applied incorrectly. It is a problem that has a big monetary number against it when you come to buy out and when you detect the problem and what to solve; and it is also a problem that can cause quite a lot of emotion between members, trustees and the employer. Members who want the better benefits, trustees who feel they need to standby how they would administer the scheme and the employer that needs to fund it.

So, I think, the main thing I wanted to bring out of this case study is to say when this problem arises that you are looking at something has gone wrong over a very long time horizon and there are two implications for that.

That is, more money might have been spent in the past paying out higher levels of benefits than were due and more money might be spent in the future securing a higher level of benefits as part of your end game.

If you are looking to find a solution to this problem, and to avoid a dispute, you can work collaboratively with all the parties involved to test what might be acceptable to everyone.

When you are in the context of a buyout and looking at the end game, what is acceptable to parties might be quite different to them when they are not near that process.

So, to give you an example in this case, what was decided upon and documentation was put in place to make this very secure on all fronts, whilst it seems members have been overpaid for the past those members could have been required to pay previous overpayments.

The employer would agree to an augmentation for what had been done in the past to make that good and that was on the basis that all parties agreed that for the future, and in terms of looking at what a buyout might look like, the benefits would be corrected for the future.

So what that meant was that trustees felt that they had secured a good outcome for their members. The employer weighed up the costs of agreeing to waive what had happened in the past versus the cost of the exercise of trying to get any of that money back and the cost of the relationships – and the delay that might put on the project – and was comfortable with augmenting benefits for the past; and it also meant that the trustees could write out to the members and explain what had happened and bring the membership along.

In the end you had very few complaints and it is an equitable outcome for everyone.

So, that was an example of a very big problem that could have cost a lot of money and, if it had gone to court and been litigated over or had hundreds of member complaints, it would have been significant.

But working in a more collaborative way and finding more practical solutions that respect the buyout journey you can find a solution that avoids a dispute arising.

So that is case study one.

Charlotte, I will pass back to you and see which one you are picking up next.

Charlotte: Right, so I was going to speak a little bit about problems with sex equalisation.

So this is where the validity of an amendment to equalise NRDs called into question. So, this is basically a hypothetical case study.

Imagine a situation where the trustees of a scheme are advised that there are doubts as to whether NRD has been equalised when intended, this may sound very familiar, and in this particular example, as was common in the 1990s, you have same individuals who are both company directors and scheme trustees.

But the issue here is that the amendment power required evidence of consent to the amendment by both the trustees and the employer in those set capacities. But there is a lack of contemporaneous evidence to show that both parties – so the trustees as opposed to the directors – have, in fact, positively consent.

Or, just to put it another way, you have evidence showing that an individual has given consent in one capacity but you do not have evidence showing that individual has given consent in another capacity.

So, in essence, the issue is a lack of evidence. So, you might be thinking what can you do about that, to plug the gap in the evidence?

I say in this example in this situation is after you revisit the company archives or the trustee archives and the minute books, it is reasonably likely you will find some more documents and, indeed, in one particular example, we did.

I would also suggest you contact all the key individuals involved in the amendments – to the extent they are still alive – and seek to obtain witness evidence from them.

So, for example, you might include the company secretary and former directors of the company. Some of them may have retired, I appreciate some of them may not all be around, and also look to speak to the former trustees.

Then, next up on the strategy list, is to approach leading counsel with this case and, indeed, in one case this is what we did. We collated all the evidence we could and go to leading counsel and ask him to opine on the basis of the evidence collated to date.

However, in our particular example, counsel gives an initial opinion that while he has got a lot of sympathy and he can see there has been a decision to change NRD, ultimately he suggests some further digging is done.

So, what this demonstrates, and this is a point that Aaron has made at the outset, is this is an iterative and collaborative process.

So, in our example, you go back to counsel a number of times with update evidence and further documents; and you go back to the parties I have mentioned already, the company secretary and the former directors of the company.

But you find is that you swiftly produce a bank of evidence that satisfies counsel and in the end you get an opinion from counsel that upholds the validity of the change to NRD.

Now, this may all sound like a fanciful situation but it is actually based on a real life story so we know it works in practice. What this does is it does not just give the trustees the certainty on how to administer the scheme going forward (and also obviously helps with the fast) and it protects them from any future criticism that the change has not been validly made.

But it also saves them millions of pounds in unintended liabilities, avoids the cost of court proceedings and it has the further benefit that when the scheme actually gets to the buyout point - which could be in months or it could be in years - it has an opinion from a KC that it is able to show to an insurer to persuade the insurer that there are no issues with NRD and that the scheme has been properly equalised.

So that is one example.

Aaron, I think you were going to take the next example talking about drafting errors and what you might do there.

Aaron: Yes, and I am also conscious of time, so do you think we should look to do one more case study and then look at the questions, Charlotte?

Charlotte: Absolutely, no problem, and I can see that there are some questions that have come through in the Q&A so I agree with that.

Aaron: I was going to fire one at you as part of your case study but I thought that was perhaps a bit unfair and perhaps we will pick them up at the end.

Charlotte: That is very kind, thank you.

Aaron: So, the final case study, and I will do this one quite quickly, and I think it is worth picking this one up. Because, case study one and case study two, showcased using clever, legal mechanisms and working quite a clever way to resolve a problem.

Case study three resolves your problem but it is not this clever, innovative thing. It is just a good old-fashioned getting a deal done.

So, the case study here is a drafting error was detected of the type that Charlotte described, where something had gone wrong with the drafting, something that had been cut and copied from one previous version of the rules and dropped back in in a slightly different way.

The result of this was it created a much more generous benefit for a category of members.

Now, fortunately, that was quite a specific category of members and so when we did the other thing Charlotte flagged (what is it all worth) the liabilities fluctuated between £800,000 to £1,000,000. Not a small problem but not an insurmountable problem.

We quickly looked at the rules to see if we could read it another way but there was not a safe way to do that.

We thought there would have been a strong case to go to court and have it rectified but that would cost more money and take more time than it might be worth.

So, instead we went straight to engaging with the providers that had done the drafting wrong in the first place and trying to get a deal done. We are going to have to insure that benefit as it is cheaper than trying to fix it, but let us make sure we are not out of pocket doing it.

I think it is a good case study to flag because from start to finish that process took under 12 months and, as a result, an agreement was reached where about 80% of what the additional liabilities cost was paid into the scheme.

It is just that kind of problem where, if you do not know about these practical fixes, that you might just think "do you know what, let us not even look into this because the legal costs and the time it is going to take to try and fix this, it will all come out in the wash, in the buyout".

That might be true, and it does depend on where you are in your buyout journey, but there are these fixes out there.

So I think we will leave the case studies now and may be pass back to Maddy to chair our Q&A.

Charlotte: Maddy, I am very happy to take one of the questions that has come in about private investigators because I do actually have experience of this.

Maddy: OK Charlotte, shall we kick off with that one then as you have mentioned.

We have had a question come in about how far can you go to find people from the time? Private investigator?? I like this one.

Charlotte: So I assume that this question and, the person perhaps who has asked the question may wish to elaborate further, but I assume this question is being asked in the context of perhaps recovering overpayments, because this has been my experience of where it has come up.

So, sometimes one of the situations in which you find yourself is overpayments are made to members after death, and they can go into their bank account and they can be mysteriously spent; and it can be quite a business trying to track down the potential party from whom you might recover that money.

Often you find, despite your best attempts to send lots of letters to the executors of the estate or those that are responsible for dealing with probate, you are not getting any responses. It has been in that context that I have used private investigators to effectively go and find where that person lives and you can also get asset reports on the extent to which recovering overpayments from that individual is going to be a worthwhile exercise, because clearly there is no point pursuing somebody who does not have the financial wherewithal to pay you back.

So, I have used private investigators. I do not know if you are also asking in the context of looking for missing beneficiaries. I have not used them in that context but I do not really see why you could not.

Aaron: And, Charlotte, as I know you probably will not be able to see the Q&A at the same time, the person that has asked that question has also clarified to say I think it is more in the context of when you are doing your investigation and you think a deed has been executed incorrectly. So, in your case study that you gave around getting individuals at the time, it is how far do you go to trace down those people to help build your case?

Charlotte: Ah OK, right I have seen that elaboration now too.

Well, I suppose this goes to the whole cost benefit analysis does it not. If it is going to be worth absolutely millions of pounds then I think it is worth using a private investigator. We normally go down the usual routes of Companies House and then there are various other resources we can use to try and track down people where you can basically do desktop searches.

But, yes, if I thought the problem was worth millions of pounds and we wanted to track down a former trustee and we knew they were out there, I would use a private investigator.

Maddy: Thanks Charlotte. I am just flicking through the questions to try and find the trickiest ones for Aaron but there is one here that I would quite like the answer to, Aaron, and that is, what do we do if we go through the process you mentioned we get a case of a opinion but we just do not like it?

Aaron: Oh the question of "I do not like that opinion can we go to speak to another barrister and get a different answer please?"

That is really tricky, even more tricky for trustees that do not get the same luxury of opinion shopping really. But I think the key thing here is that it is about taking control of that process of instructing counsel.

Counsel would need to work in an iterative way with them and we need to set out the instructions in such a way that counsel does not inadvertently shut the door on something where he has not been asked to do, or where she has not been asked to do that.

I think I would compare it to those of you who work closely with your legal advisers might ask us a question and sometimes you will get an email saying "I think we will have a quick call on this" and we will discuss some issues with you before finalising advice and reaching a landing. It is just about reaching that same process with counsel.

So, if you get an opinion from counsel that you do not like, the trick of it is making you have structured your instructions and structured the way you are going to counsel in such a way that they should not ever give you a definitive "no", it is a "well, this does not work for this reason, this is what you need to next".

Ultimately, you go through that process and you still do not like the opinion you have got, that probably means you have just got a very difficult problem and your quick fix of going to counsel is not going to cut it unfortunately.

Maddy: Okey dokey. Let's get to another question.

One thing I find with trustees and something of disputes that comes along is this idea of communicating with people, this concept of privilege and it is often something that is quite difficult to grapple.

Charlotte, you mentioned this so I wonder if you can give us a little bit more about privilege and what that means and what trustees should be aware of?

Charlotte: Yes, absolutely, and I should say that because we pulled up slightly short on the presentation on the slides, this was actually going to be one of the key messages I was going to give to people which is – if you do discover problems in your pension scheme documentation it is usually a good idea early on to get the lawyers in as quickly as possible to ensure you cloak those communications in privilege and that you do not produce a very large evidence trail saying "gosh we think we have got this terrible problem in our scheme rules and it is going to cost us this amount of money".

Because if that all happens without it being for the purpose of seeking legal advice in an attorney/client communication then there is a risk that is disclosable to members in due course.

So, the point around privilege is just making sure you involve lawyers early on to make sure that those communications do not become disclosable to members; and frankly unless and until you find a communication you might want to keep the existence of the problem under wraps and then once you have found your solution, to the extent that members need to be told, you can reveal the nature of the problem to them.

Does that answer your question Maddy?

Maddy: It is not mine, but yeah.

Aaron: And I would add to that because I think I might have dropped that last slide off but it is actually a really important point that Charlotte had there was that the key thing here is do not panic when you have these problems.

In the same way, I mentioned that we would pick up the phone to you if we need to talk through something. If this thing comes up the easiest thing to do is an email that says "we trustees need to jump on a call please, we can talk about it then, what the problem is".

So, in that first initial flush of it looks like a problem has come up, I know not all of us are so good at picking up the phone anymore, but trying to manage that process at first by having some phone calls and then working out how you are going to deal with it is quite key.

Maddy: OK, probably just a final question, Aaron or Charlotte you might want, and I have some sympathy with this question actually being involved in risk transfer work.

It is quite intense, that period leading up to buying and then there are still lots of things to do before buyout.

When trustees or employers discover problems like this how on earth are we going to manage that and manage the buyout process?

Aaron: It is a really good question and you will, again, that I am waiting to see if Charlotte wants to pick it up or not. But I'll take part of it and see if …

Charlotte: Maddy did not assign it to anyone so I assume it is you, Aaron.

Aaron: So, I think, really what is key is that you need the people that are coming in to solve these problems to understand your scheme, understand the market and understand where you are on that journey.

So, there is no point parachuting in a litigator that does not know what is happening with your scheme and what your objective are because they are not going to be naturally finding solutions that work with what is happening there.

So, Charlotte mentioned a few times, the solution that we would be looking for, for you, will depend on where you are on your buyout journey.

If you are two years off and the problem is multi-million pounds you might want to start putting in a strategy that will fix that multi-million pound problem so that it does not jeopardise your timetable for buyout.

On the flipside, if you are on the cusp of completing on a buyout and you have discovered a problem, one of the first things you might want to do is actually engage with the insurers and see what they would price to give the better benefit.

Because, actually, if there is money there or if there is an employer standing behind that is keen to drive the buyout through that might be the most practical option.

So, insofar as I have understood the question as how on earth do we fix these problems without messing with the buyout timetable or what all the other projects we are doing, the answer to it is the solution should be shaped around that.

Charlotte: I have seen other questions come in actually which I am very happy to take if we have time.

Maddy: I think, Charlotte, we have another minute or two so if you are happy to take the question that has just come in I think it is a really good one.

The question is: is it better, if you are seeking counsel opinion regarding a dispute over the interpretation of the rules, should trustees do that independently of the responsible employer or collaboratively with the responsible employer? Great question.

Charlotte: Yes, I agree, it is a very good question and the answer is there is no playbook to this. There is no standard rule on how to do it.

You could do either, if you wanted my recommendation, I would say go and get one on your own initially and see what it says and see what you think about it. Because it is always possible to share it with the employer and you would share it with them on a limited waiver of privilege basis.

You can set it up in that way so it is shared with them but then it is not disclosable to members. But the problem is if you go and get a counsel's opinion that you do not really like and you are doing it with the employer and the employer is effectively your counterparty that you are going to have to negotiate with, I think it is much better to know in private what counsel has to say before deciding whether or not you want to unveil it to responsible employer.

Maddy: Brilliant. Well, I think it is fair to say I am personally very happy to have both Aaron and Charlotte at my fingertips to help with trustee clients, to try and avoid a lot of the things that we have been talking about today and to come to a pragmatic solution to any problems before we have to worry about going to court and racking up costs for clients.

So, I want to see whether today's session, we have done our job and allayed your fees in the respect of using the likes of Aaron and Charlotte.

Aaron is going to put up a final question for you.

How do you feel about working with our lovely pension dispute specialists?

Who does not like it – rather spend time at the dentist?

Mixed feelings, but I would be more confident they will find a solution?

Let us see what you think. How good a job have you done.

Charlotte: What a tactful bunch you are.

Maddy: Well that has certainly better than where we started, Aaron and Charlotte, so well done. It is, yes.

So people will not avoid you but mixed feelings. I think you would take that 58% mixed feelings?

Charlotte: Absolutely, yes.

Maddy: No-one has "I would rather go to the dentist" so I think that is good work all well done.

So that brings us to the end of today's session. I hope you have enjoyed it. We would much appreciate it if you could fill out the feedback form that you will be provided with at the end of the session. It just helps us to get ideas for future topics that you might find interesting and it just remains for me to say thank you so much to Aaron and Charlotte and thank you for joining and have a good afternoon.