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Between agenda items at a recent meeting of the Association of Pension Lawyers in Ireland conversation turned to the type of matters our various firms’ pensions practices are currently working on.

What was surprising was the amount and range of pensions-related litigation.  The issues being litigated included scheme wind-ups, employer capital reduction applications and creditors accessing funds within bankrupts’ pension arrangements.  The amount of current pensions-related litigation highlights the need to consider litigation risks and strategy at a very early stage in transactions that could prove contentious.

Here are some pointers to manage litigation risks should they arise in the future:

  1. Before entering into any transaction consider what possible claims or legal proceedings might arise and take steps to structure the transaction to try to minimise the risk and/or impact of any claims.  For example, if an employer intends to restructure its defined benefit scheme and provide an age / service related defined contribution benefit structure, has it done enough to meet its duty of good faith to members and has it properly considered age discrimination issues?
  2. In the transaction or originating document(s), be clear on the forum in which claims will be dealt with.  For example, in many trust deeds, there is an arbitration clause which applies to any disputes or differences arising between the employer and trustees.  Arbitration is a binding dispute resolution process, from which there is very limited right of appeal to Court.  Ensure you are aware of the dispute resolution process and what it will involve.
  3. Be clear on the process, timescales, rights of appeal, possible remedies and other issues such as costs and whether the process is confidential (as arbitration is) or open (as most civil court claims are).  If proceedings are dealt with in the Commercial Court, tight deadlines will be imposed on the parties to deliver Court documents.
  4. Remember that once proceedings commence, the parties will be subject to orders requiring the production of a very wide range of documents which are relevant to the dispute.  Some types of document do not have to be disclosed, especially where they are legally privileged (on the basis that they contain legal advice or were prepared in contemplation of legal proceedings) or are “without prejudice” documents.   Most other types of document will be disclosable.  A question to ask yourself is whether a document you are about to create (e.g. an email, a letter or an attendance note) is one which you would be happy to disclose and be questioned on in court.  If you would not be happy to produce it in Court, consider whether you need to create it.  Alternatively, check with your lawyer whether one of the exemptions from disclosure orders might apply.
  5. Disclosure orders in proceedings will usually only be made against parties to the proceedings although disclosure can be sought from parties not involved in certain circumstances.  It might be worth speaking to your lawyers about this.  If an entity is not likely to be party to legal proceedings (e.g. a parent of a scheme sponsor), it might make strategic sense for the legal advice to be sought by that entity instead of the entity which is likely to be involved in proceedings.
  6. Court imposed disclosure orders usually set a strict deadline by which disclosure must be made with some sort of sanction for non-compliance.  It is far easier to comply with such orders if there has been good document management from the outset.  Scrabbling around for badly organised files which may have been archived offsite is definitely to be avoided.
  7. Retention and destruction of documents is the final issue to consider.  Documents should be retained for at least as long as the longest limitation period applicable to possible claims, bearing in mind any requirements under the Data Protection legislation not to hold personal data for longer than is necessary.  If a claim is made, you will need to be able to produce documentation to back your defence or to comply with disclosure orders.  Claims may not have to be made until a considerable period after the alleged breach occurred.

It behoves us all to be mindful that disputes can and do happen and to plan accordingly.