England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
HHJ Judge Mackie QC
(Sitting as an additional Judge)
[2010] EWHC 2631 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/02/2012

Lady Justice Arden :

1. This is an appeal from the order of HHJ Mackie QC dated 21 October 2010 allowing an appeal by the respondent, the Department for Education ("the DfE"), formerly the Department for Children, Schools and Families, against a determination of the Deputy Pensions Ombudsman ("the Ombudsman") dated 3 March 2010. The appeal raises a point of general principle as to the interpretation of certain provisions of the Teachers' Pension Scheme ("TPS") dealing with the procedure for applying for an early pension on the grounds of ill health.

Factual background

2. The appellant, Mrs Joan Lesley Molyneux, was a mathematics teacher at Wade Deacon High School, Widnes, Cheshire. She started her employment in 1984. She is a member of the TPS. However, her health began to suffer. From January 2002 onwards she was repeatedly absent from work for extended periods suffering from anxiety and depression. She was referred to an occupational health physician on several occasions.
3. On 20 August 2008, Mrs Molyneux applied for ill-health retirement benefits. The notes to the application form made it clear (1) that she had to demonstrate incapacity by medical evidence, and (2) that the incapacity had to be permanent, that is, likely to last until normal retirement age, which was sixty years of age.
4. The medical evidence adduced by Mrs Molyneux to support her application consisted of reports from her doctor, Dr Edwards, the school's occupational health adviser, Dr Williams, and an occupational health psychologist, Dr Worsley-Harris. Dr Worsley-Harris stated that in her opinion it would be unrealistic to expect Mrs Molyneux to attempt to return to her work role now or in the future.
5. On 30 October 2008, the DfE refused Mrs Molyneux's application on the recommendation of its medical adviser, ATOS Origin ("ATOS"). ATOS's view was that, despite the medical evidence that had accompanied her application, Mrs Molyneux could not be said to be permanently incapacitated.
6. Mrs Molyneux exercised her right to require an internal review on two occasions. She submitted further evidence to support her application. Both appeals were dismissed, again on the recommendation of ATOS. ATOS's view remained, in essence, that permanent incapacity was not shown. ATOS considered that Mrs Molyneux's medical history suggested that her illness was specific to her particular workplace and workload, and that it might be feasible for her to return to teaching of some sort, for example, individual or small group coaching, before normal retirement age. ATOS indicated that the long-term prognosis for depression was good in most cases.
7. Mrs Molyneux's employment with the Wade Deacon School terminated on some date between 16 April 2009 and 16 June 2009.
8. On 17 June 2009, Mrs Molyneux lodged a complaint against the determination of the DfE under section 146 of the Pensions Schemes Act 1993 ("the 1993 Act") with the Ombudsman.

Relevant provisions of the TPS

9. The TPS was set up by statutory instrument pursuant to section 9 of the Superannuation Act 1972. It constitutes a "public service pension scheme" for the purpose of section 1 of the Pension Schemes Act 1993 (the "1993 Act") and accordingly its terms are to be found in legislation.
10. Regulations have been made to establish the qualification for ill-health pensions under the TPS and the procedure for applying for them. At the time of Mrs Molyneux's application to the Secretary of State, the relevant regulations were the Teachers' Pension Regulations 1997, as amended by the Teachers' Pensions etc (Reform Amendments) Regulations 2006 and the Teachers' Pensions (Miscellaneous Amendments) Regulations 2008. The material provisions of those regulations as so amended ("the amended regulations") are summarised below.
11. Qualification for an ill-health pension: Reg E4(4) of the amended regulations provides for the payment of ill-health benefits to a teacher who becomes incapacitated before the age of 60. The test of incapacity is set out in schedule 1 to the amended regulations. To qualify as "incapacitated", a teacher must be "unfit by reason of illness or injury and despite appropriate medical treatment to serve as such and is likely permanently to be so".
12. Procedure for applying for an incapacity pension: Reg E33(2A) of the amended regulations provides that the application must be accompanied by all necessary medical evidence. Reg E33(2A) provides:

"(2A) Where the application for payment is made on the basis that the person is entitled to retirement benefits under Regulation E4(3) or (4) (incapacity), the application shall:

…

(b) … be accompanied by all the medical evidence necessary to determine whether [first limb] the person falls within regulation E4(3) or (4) and [second limb], where applicable, that the person's ability to carry out any work is impaired by more than 90% and is likely permanently to be so." (words in brackets added)

13. Reg E33(3) confers an additional power on the Secretary of State to require further information:

"(3) If the Secretary of State notifies him in writing that he so requires, the applicant is to provide any relevant information (including medical evidence such as is mentioned in paragraph (2A)) specified by the Secretary of State that is in his possession or that he can reasonably be expected to obtain."

14. Time limit for applying for an enhanced (or more generous) incapacity pension: by virtue of reg E33(2A)(c) of the amended regulations, Mrs Molyneux had to make her application within six months of the termination of her pensionable employment in order to qualify for so-called 'enhanced' benefits. Any application made after that time would not be eligible for an enhanced pension unless either the Secretary of State extended the time limit under reg H7 of the amended regulations or Mrs Molyneux could also satisfy the higher requirements of the second limb of reg E33(2A).

The Ombudsman's determination

15. In a determination dated 3 March 2010, the Ombudsman determined that the DfE "did not have all relevant information before making their decision and there was an incorrect assessment of the consequence of treatment options." Consequently, Mrs Molyneux's application had not been properly considered. The Ombudsman expressly rejected DfE's position that, in making an application for ill-health retirement, it was the applicant's responsibility to provide all the information needed. The DfE should have told ATOS to make enquiries of Mrs Molyneux's medical practitioners for further information. The DfE was, therefore, directed to reconsider the application.
16. The DfE appealed to the High Court under section 151 of the 1993 Act, which limits such an appeal to a point of law.

The judge's judgment

17. The judge observed that the Ombudsman made no express reference at all to reg E33(2A), and had expressed views "which appear to contradict it". The judge accepted that there might be categories of case in which the DfE should ask further questions. In the majority of cases, however, where reg E33(2A) puts the duty on the applicant to submit "all the medical evidence necessary to determine whether the person falls within regulation E4(3) or (4)", it could not usually be inefficient or improper administration to make a determination on that evidence. The Ombudsman's direction to the DfE to reconsider Mrs Molyneux's application and seek further information from her medical advisers would probably not have been made had she considered reg E33(2A).
18. The judge allowed the appeal and ordered the matter to be remitted to the Ombudsman to reconsider her decision, taking particular account of reg E33(2A).

Discussion and conclusions

19. The reason for this appeal lies in the fact that any new application by Mrs Molyneux would be outside the time limits imposed by the amended regulations (unless the Secretary of State grants an extension of time). Mrs Molyneux was given the reasons for the rejection of her application but she failed to take the step of lodging a fresh application accompanied by further medical evidence in the year or so that she had after she received the original decision of the Secretary of State. Mrs Molyneux has, therefore, now to establish that, as a matter of law, before he rejected her application, the Secretary of State should have give her notice under E33(3) requesting further medical evidence and that he should not have taken a decision until she had had an opportunity to obtain and submit that further evidence.
20. The appeal, therefore, is presented on a very narrow basis. Mrs Molyneux does not suggest that the decision of the Secretary of State is unlawful on any other basis. Mrs Molyneux knew what further medical evidence was required from the reasons which the Secretary of State gave when rejecting her application. There was nothing to stop her requesting, and then submitting, that information even in the absence of any notice served by the Secretary of State under reg E33(3). The adequacy of the reasons for rejection is not challenged.
21. Mr Scott Redpath, for Mrs Molyneux, put Mrs Molyneux's case as follows. Even though the TPS is governed by legislation, there is no difference in principle between the position of the Secretary of State making a decision on an application under the TPS from that of a trustee making a similar decision under a pension scheme governed by a trust deed. So far as material, he occupies the same role as a pension fund trustee. The powers conferred by a pension scheme must be exercised in good faith: see Mihlenstedt v Barclays Bank International Limited, 28 July 1989, per Nicholls LJ, with whom Sir John May agreed. That means that the Secretary of State is bound genuinely to consider any application. In addition Mr Redpath submits that the principles approved by this court in Harris v Shuttleworth [1994] ICR 991 at 999 apply. Those principles are that:

"(a) the trustees must ask themselves the correct questions;

(b) they must direct themselves correctly in law; in particular they must adopt a correct construction of the pension fund rules; and

(c) they must not arrive at a perverse decision, i.e. a decision at which no reasonable body of trustees could arrive, and they must take into account all relevant but no irrelevant factors."

Mr Redpath does not contend that the Secretary of State acted in breach of the general law, but rather that the general law provides the context within which reg E33 must be interpreted.

22. In the light of the principles summarised above, Mr Redpath submits that E33(2A) and E33(3) must be read together so as to impose an implied obligation on the Secretary of State. His core argument is that the Secretary of State had accordingly an implied obligation to request further information from an applicant where, for instance, the submitted medical evidence did not disclose incapacity to the degree required and to give him or her an opportunity to obtain and submit that evidence. That evidence would be needed to enable an applicant such as Mrs Molyneux to claim his or her entitlement to an incapacity pension under the TPS. It is, therefore, the function of the Secretary of State, submits Mr Redpath, to identify the missing information and give the opportunity mentioned.
23. Ms Elisa Holmes, for the Secretary of State, concedes that in administering the scheme the Secretary of State owes duties imposed by public law which are similar to those owed by pension fund trustees: see generally Bromley LBC v GLC [1983] AC 768 at 775-7, 814-5 and 841-2. In addition, she accepts that on that basis the principles in Harris v Shuttleworth apply. Miss Holmes argues, however, that the amended regulations are carefully constructed to place the onus on the applicant to provide the necessary medical evidence. She submits that E33(3) does not affect this result. It merely gives an option to the Secretary of State where, for instance, there are obvious gaps in what has been supplied.
24. In my judgment, the fundamental answer to Mr Scott Redpath's core argument is that reg E33 is too clear to admit of any such implication as he seeks to make. E33(2A) is framed as an obligation on the applicant to produce all necessary medical evidence, and E33(3) is framed as a supplementary power exercisable by the Secretary of State as he thinks fit.
25. It may be that there is room for elasticity in certain other words in E33(2A). For instance, it uses the word "accompanied" which may more accurately mean "supplemented" where the information is sent later before the Secretary of State makes his decision or before a decision on an internal appeal is made. But this casts no doubt whatever on the clarity of E33(2A) in throwing the whole of the onus of producing medical evidence on the applicant.
26. The role of the Secretary of State is supplemented by his public law duties informed by the general law on the duties of pension fund trustees. The obligation which Mr Redpath seeks to imply is not, however, a necessary corollary of these duties. In those circumstances, and in the light of the clear wording of E33, there can be no implication of the obligation on the Secretary of State which Mr Redpath seeks to imply.
27. Reg E33(3) clearly contemplates that the Secretary of State may request information, and it is expressly stated that this information may include necessary medical evidence. If reg E33(2A) is read totally literally, there could never be any information of a nature falling within reg E33(3) since it should always have accompanied the application. However, the amended regulations must be interpreted in a pragmatic way. As I held in the context of a contractual pension scheme in British Airways Pension Trustee Ltd v British Airways plc [2002] EWCA Civ 672 at [28], "a pension scheme should be construed so to give a reasonable and practical effect to the scheme." Reg E33(3) is a sensible power given to the Secretary of State to exercise in appropriate circumstances. For instance, he may want to exercise that power if there is clearly a document missing, which the applicant could easily produce so as to avoid an internal process review. In addition, the Secretary of State may choose to exercise this power where some relevant change of circumstances comes to light during the payment of a pension. Once understood, it is clear that there is good reason for the power in E33(3) and no compelling reason for it to be read as imposing any obligation.
28. Mr Redpath's interpretation of regs E33(2A) and (3) would moreover produce an impractical result. The Secretary of State would have to formulate questions for the applicant. He might then have to formulate further questions when the responses were received. As demonstrated by this case, it is likely to be just as easy for the applicant to find the information. Any apparent injustice in placing this burden on the applicant is mitigated by the two-stage internal review process established by statute, and the possibility of making a further application. If it had been intended that the Secretary of State should have a role in relation to any requisite further medical evidence, it is likely that the regulation would have given him power to seek it direct from the applicant's medical advisers, as well as from the applicant herself.
29. In those circumstances, the remaining grounds of appeal do not, in my judgment, need to be decided because they could not on their own alter the conclusion that I have reached. The judge reached the right conclusion and this appeal should be dismissed.

Lord Justice Aikens:

30. I agree.

The President of the Queen's Bench Division:

31. I also agree.