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IPE special report May 2018

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Experts doubt Lyonnais case against Watson Wyatt

UK – Legal experts have expressed doubts that Credit Lyonnais’ legal action against Watson Wyatt will succeed – but suggest that if it did it could “open the floodgates”.

“Based on what little I know I would say it would not succeed,” said Angela Dimsdale Gill, head of pension fund litigation at the law firm Lovells. “If it did, it would open the floodgates to litigation.”

Earlier this week Watson said it received a claim from Credit Lyonnais alleging it was negligent in undertaking valuation work at the Credit Lyonnais Group UK Pension Scheme.

Watson has said it is confident that the work it undertook was “entirely appropriate” and that it is vigorously contesting the claim. Credit Lyonnais is not commenting on the action.

Dimsdale Gill said the French bank’s claim was not the first of its kind, but added that “a point of principle” and “a great policy decision” were at stake.

“Actuaries make assessments about liabilities in the future and it is widely accepted that they are estimates,” she said. “And if they get it wrong, it has always been felt it was not negligence”.

“What has gone wrong here, it seems, is that the claimant said that because it was not told about how much in deficit the pension fund was, it had allowed pension enhancements.”

She explained the innovative part of the case was that the sponsor argued it would have to pay to plug the deficit and pay for the increase decided without knowing about the deficit.

Another pension law expert, who declined to be named, told IPE that such cases tend to be difficult to prove and expensive. The person said that the publicity that this claim had received was likely to make the parties reach an agreement before the hearing, set for April 25.

The person added, however, that if the case were heard in court, Watson Wyatt’s representative, Simon Konsta of Barlow Lyde & Gilbert, was likely to fight “every step of the way”.

Dimsdale Gill said: “There would be good reasons for the actuaries wanting to settle the matter out of court. But on the other hand they Watson_Wyatt might think of it as a point of principle and could fight for it.”

“This is a great policy decision for the court,” she continued, adding the actuarial community would be following the case with interest.

If the judge found in favour of Credit Lyonnais other pension funds could be tempted to start similar procedures, she ventured.

The Society of Pension Consultants said: “Any precedence seems to have a significance. It depends partly on the specifics of the case.” The Institute of Consulting Actuaries declined to comment.

The judge appointed to the first hearing of the case is Master Nicolas Bragge of the Chancery Division of the Supreme Court.

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