QUEENS BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| THE QUEEN on the application of
1. Henry Bradley
2. Robin Duncan
3. Andrew Parr
4. Thomas Waugh
| Secretary of State for Work and Pensions
|Parliamentary Commissioner for Administration
|| Interested Party
Philip Sales QC and Daniel Stilitz (instructed by The Solicitor, Department of Work and Pensions) for the Defendants
Clive Lewis QC and Ben Hooper (instructed by The Treasury Solicitor) for the Attorney-General, intervening on behalf of the Speaker of the House of Commons
The Interested Party did not appear and was not represented
Hearing dates: 7-9 February 2007
Crown Copyright ©
Mr Justice Bean :
The Pensions Act 1995
The complaints to the Ombudsman
(1) First, it was alleged that the legislative framework during the relevant period (which she defined as being from commencement of the 1995 Act to commencement of the 2004 Act) had afforded inadequate protection to the pension rights of members of final salary occupational schemes;
(2) Secondly, it was alleged that on a number of occasions Ministers and officials had ignored relevant evidence when taking policy decisions related to the protection of pension rights accrued in such schemes;
(3) Thirdly, it was alleged that the information and advice provided by a number of government departments and other public bodies about the degree of protection that the law provided to accrued pension rights had been inaccurate to the extent that it had amounted to the misdirection of the members and trustees of such schemes;
(4) Fourthly, it was alleged that public bodies were responsible for unreasonable delays in the process of winding up the schemes. (This final element was the subject of a finding and recommendation by the Ombudsman which was accepted by the Government and formed no part of the case before me.)
The Financial Assistance Scheme
The Ombudsman's Report
"saw itself as acting – and told the public that it was doing so – in partnership with others both to promote the benefit of occupational pension schemes and to remind individuals that where they could, they had an obligation to save for their retirement …
recognised throughout the relevant period that pensions were complex and often not a topic that was generally understood and that, consequently, there was a need for greater financial education, for improved awareness of pensions, and for clearer information about the various savings options;
saw itself as having a key role in promoting such better education, awareness and information about pensions and saving for retirement – and told others that it would do so;
said at the relevant time that the information leaflets and other official public publications issued by public bodies were an integral component of the promotion of the benefits of saving for retirement and aimed to assist people to make informed choices about the various pensions options;
[and] accepted at the relevant time that it had certain obligations in relation to the accuracy, completeness, clarity and consistency of its publications."
"I have seen nothing that would make me doubt that the Government's intention behind the MFR was always that it could only provide a limited degree of security to non-pensioner members – which was apparent from its design – and I have seen that the discussion behind closed doors within and between the public bodies responsible for occupational pensions policy generally reflected this.
However this was not properly disclosed to those most affected by such an intention. I consider that the official information given to the public about the degree of security provided by a scheme being funded to the MFR level:
(1) was, prior to September 2000, misleading, incomplete and inaccurate – in that it gave assurances which were incompatible with the design and purpose of the MFR as prescribed by Government, and with its practical operation. These assurances were that the MFR was designed to ensure that schemes had sufficient assets to meet their liabilities and that a scheme funded to the MFR level would be able to pay cash transfers of accrued rights to non-pensioners. In addition, no disclosure or even mention was made of risks to accrued rights or of the potential effects of the statutory order of priority on wind-up;
(2) was, between September 2000 and April 2004 deficient – in that it lacked any degree of consistency of what might be expected from the MFR. Some official statements and publications – especially those aimed at the general public – continued not to mention risk and to give a misleading impression as to the security of pension rights, while others began to explain the true position; and
(3) was only broadly accurate from April 2004 onwards."
She summarised her finding of maladministration relating to official information (part of what was described in argument before me as the First Finding) as being (para 5.164):
"that official information about the security that members of final salary occupational pension schemes could expect from the MFR provided by the bodies under investigation was sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading, and that this constituted maladministration."
"5.239. But what of whether that maladministration caused injustice? It seems to me that the financial losses suffered by complainants did not come about as a result of the workings of a system about which individuals had been properly informed – and where the risks inherent in that system had been highlighted to them clearly by those responsible for it.
5.240. On the contrary, the financial losses incurred by complainants were crystallised before those individuals even knew that such an eventuality might befall them and in context where they had had no warning to enable them to take remedial action or to otherwise protect their position.
5.241. That seems to me to be a clear injustice. Not only did those individuals trust the information they were provided with about the framework put in place by Government to protect their pensions, they were unable to properly consider their financial position or to make fully informed choices about their pension options.
5.242. They were also unable to consider what action they could take to remedy the financial weakness of their scheme, as the official information given to them was deficient.
5.243. Official information effectively distorted the reality of the position in which scheme members found themselves. As a result, they were wholly unaware that their pension rights were dependent on the ongoing security of the employer sponsoring their scheme.
5.244. That constitutes an injustice which was caused by maladministration. While I cannot say that maladministration alone caused the financial loss suffered by complainants, I do consider that it was a significant factor in creating the environment in which those losses were crystallised.
Injustice: summary of findings
5.245. I have found that injustice – in the forms of a sense of outrage, lost opportunities to make informed choices or to take remedial action, and distress, anxiety and uncertainty – was caused by maladministration.
5.246. I have also found that the maladministration I have identified was a significant contributory factor in the creation of the financial losses suffered by individuals, along with other systemic factors. A further consequence of that maladministration was financial injustice – the distortion of the reality facing scheme members so that they were wholly unaware that their pension rights were dependent on the ongoing security of their employer."
(1) who were members of final salary schemes which commenced wind-up from 6 April 1997 to 31 March 2004; where
(2) the scheme wound up with insufficient assets to secure pensions in payment and to pay cash equivalent transfer values in respect of fully accrued pension rights to all non-pensioner members or to secure the full liabilities for each non-pensioner in other ways; and where
(3) the scheme is not eligible for the pensions compensation scheme, because it had not suffered losses wholly attributable to fraud or other unlawful behaviour; and where
(4) the individual has incurred an actual financial loss because of the shortfall in the pension promised in respect of, inter alia, the contributions made by them and/or their employer to the scheme.
The number of people within this definition is estimated by the parties to be between 75,000 and 125,000.
"I recommend that the Government should consider whether it should make arrangements for the restoration of the core pension and non-core benefits promised to all those to whom I have identified above are fully covered by my recommendations – by whichever means is most appropriate, including if necessary by payment from public funds, to replace the full amount lost by those individuals."
The Speaker's intervention
"Freedom of Speech – That the freedome of speech and debates or proceedings in Parlyament ought not to be impeached or questioned in any court or place out of Parlyament".
As Lord Browne-Wilkinson observed in tendering the advice of the Judicial Committee of the Privy Council in Prebble v Television New Zealand Ltd  1 AC 321 at 332:-
"In addition to Article 9 itself, there is a long line of authority which supports a wider principle, of which Article 9 is merely one manifestation, viz. that the courts and Parliament are both astute to recognise their respective constitutional roles."
"….. their Lordships are of the view that parties to litigation, to whomsoever commenced, cannot bring into question anything said or done in the House by suggesting (whether by direct evidence, cross-examination, inference or submission) that the actions or words were inspired by improper motives or were untrue or misleading. Such matters lie entirely within the jurisdiction of the House …..
However, their Lordships wish to make it clear that this principle does not exclude all references in court proceedings to what has taken place in the House. In the past, Parliament used to assert a right, separate from the privilege of freedom of speech enshrined in Article 9, to restrain publication of its proceedings. Formerly the procedure was to petition the House for leave to produce Hansard in court. Since 1980 this right has no longer been generally asserted by the United Kingdom Parliament, and their Lordships understood from the Attorney-General that in practice that the House of Representatives in New Zealand no longer asserts the right. A number of authorities on the scope of Article 9 betray some confusion between the right to prove the occurrence of parliamentary events and the embargo on questioning their propriety……. their Lordships wish to make it clear that if the defendant wishes at the trial to allege the occurrence of events or the saying of certain words in Parliament without any accompanying allegation of impropriety or other questioning there is no objection to that course."
"In proceedings in any court or tribunal, it is not lawful for evidence to be tendered or received, questions asked or statements, submissions or comments made, concerning proceedings in Parliament, by way of, or for the purpose of – (a) questioning or relying on the truth, motive, intention or good faith of anything forming part of those proceedings in Parliament; (b) otherwise questioning or establishing the credibility, motive, intention or good faith of any person; or (c) drawing, or inviting the drawing of, inferences or conclusions wholly or partly from anything forming part of those proceedings in Parliament."
Their Lordships went on to say that that Act declared what had previously been regarded as the effect of article 9 of the Bill of Rights 1689 and that section 16(3) contained "the true principle to be applied" in the case.
The 1967 Act
(1) Subject to the provisions of this section, the Commissioner may investigate any action taken by or on behalf of a government department or other authority to which this Act applies, being action taken in the exercise of administrative functions of that department or authority, in any case where –a) a written complaint is duly made to a member of the House of Commons by a member of the public who claims to have sustained injustice in consequence of maladministration in connection with the actions so taken; andb) the complaint is referred to the Commissioner, with the consent of the person who made it, by a member of that House with a request to conduct an investigation thereon.
(2) Except as hereinafter provided, the Commissioner shall not conduct an investigation under this Act in respect of any of the following matters, that is to say – (a) any action in respect to which the person aggrieved has or had a right of appeal, reference or review to or before a tribunal constituted by or under any enactment or by virtue of Her Majesty's prerogative; (b) any action in respect to which the person aggrieved has or had a remedy by way of proceedings in any court of law:Provided that the Commissioner may conduct an investigation notwithstanding that the person aggrieved has or had such a right or remedy if satisfied in the particular circumstances that it is not reasonable to expect him to resort or have resorted to it."
"(1) Where the Commissioner proposes to conduct an investigation pursuant to a complaint under this Act, he shall afford to the principal officer of the department or authority concerned, and to any person who is alleged in the complaint to have taken or authorised the action complained of, an opportunity to comment on any allegations contained in the complaint.
(2) Every investigation shall be conducted in private, but except as aforesaid the procedure for conducting an investigation shall be such as the Commissioner considers appropriate in the circumstances of the case; and without prejudice to the generality of the foregoing provision the Commissioner may obtain information from such persons and in such manner, and make such enquiries as he thinks fit, and may determine that any person may be represented by counsel or solicitor or otherwise, in the investigation…..
(4) The conduct of an investigation under this Act shall not affect any action taken by the department or authority concerned or the person to whom the complaint relates, or any power or duty of that department, or authority, or person to take further action with respect to any matters subject to the investigation…."
(1) For the purposes of an investigation under this Act the Commissioner may require any minister, official or member of the department or authority concerned or any other person who in his opinion is able to furnish information or produce documents relevant to the investigation to furnish any such information or produce any such document.
(2) For the purposes of any such investigation the Commissioner shall have the same powers as the Court in respect of the attendance and examination of witnesses (including the administration of oaths or affirmations and the examination of witnesses abroad) and in respect of the production of documents.
(3) No obligation to maintain secrecy or other restriction upon the disclosure of information contained by or furnished to persons in Her Majesty's service, whether imposed by any enactment or any rule of law shall apply to the disclosure of information for the purposes of an investigation under this Act; and the Crown shall not be entitled in relation to any such investigation to any such privilege in the respect of the production of documents or the giving of evidence as is allowed by law in legal proceedings."
(Section 8(4) makes an exception for the Cabinet or its committees.)
(1) "In any case where the Commissioner conducts an investigation under the Act or decides not to conduct such an investigation, he shall send to the member of the House of Commons by whom the request for investigation was made (or if he is no longer a member of that House, to such member of that House as the Commissioner thinks appropriate) a report of the results of the investigation or, as the case may be, a statement of his reasons for not conducting an investigation.
(2) In any case where the Commissioner conducts an investigation under this Act he shall also send a report of the results of the investigation to the principal officer of the department or authority concerned and to any other person who is alleged in the relevant complaint to have taken or authorised the action complained of….
(3) If, after conducting an investigation under section 5(1) of this Act, it appears to the Commissioner that injustice has been caused to the person aggrieved in consequence of maladministration and that the injustice has not been, or will not be, remedied, he may, if he thinks fit, lay before each House of Parliament a special report upon the case".
"It is hereby declared that nothing in this Act authorises or requires the Commissioner to question the merits of a decision taken without maladministration by a government department or other authority in the exercise of a discretion vested in the department or authority".
The Local Government Ombudsman
(1) "If in the opinion of the Local Commissioner, as set out in the report, injustice has been caused to the person aggrieved in consequence of maladministration, the report should be laid before the authority concerned, and it shall be the duty of that authority to consider the report, and to notify the Local Commissioner of the action which the authority has taken, or propose to take.
(2) If the Local Commissioner:-a) does not receive any such notification within a reasonable time; orb) is not satisfied with the action which the authority concerned has taken;c) does not within a reasonable time receive from the authority concerned that they have taken action, as proposed, to the satisfaction of the Local Commissioner,
he shall make a further report setting out those facts; and section 30 above shall apply, with any necessary modifications, to that further report."
Were the findings of the Ombudsman binding on the Secretary of State?
"….the Parliamentary intention was that reports by Ombudsmen should be loyally accepted by the local authorities concerned. This is clear from section 30(4) and (5) which require the local authority to make the local report available for inspection by the public and to advertise this fact, from section 31(1), which requires the local authority to notify the Ombudsman of the action which it has taken and proposes to take in the light of this report and from section 31(2), which entitles the Ombudsman to make a further report if the local authority's response is not satisfactory. Whilst I am very far from encouraging councils to seek judicial review of an Ombudsman's report, which, bearing in mind the nature of his office and duties and the qualifications of those who hold that office, is inherently unlikely to succeed, in the absence of a successful application for judicial review and the giving of relief by the court, local authorities should not dispute an Ombudsman's report and should carry out their statutory duties in relation to it."
"On an issue such as this it does not seem to me reasonable for the Secretary of State to disagree with the independent adjudicator who has heard all the evidence unless
(1) the adjudicator's factual conclusion was itself demonstrably flawed, as irrational or for failing to have regard to material considerations or for having regard to immaterial ones – none of which is suggested here;
(2) fresh material has since become available to the Secretary of State such as could realistically have affected the adjudicator's finding – this too was a matter we considered in Powergen;
(3) arguably, if the adjudicator has decided the appeal purely on the documents or, if, despite having heard oral evidence, his findings of fact owe nothing whatever to any assessment of the witnesses. This third scenario seems unlikely and I express no concluded view as to whether in this event the Secretary of State could properly ignore the fact that the adjudicator is an independent tribunal whereas he is not."
"…..the desirable objective of an independent scrutiny of decisions in this field would be negated if the Secretary of State were entitled to act merely on his own assertions and reassertions about relevant facts contrary to express findings made at an oral hearing by a special adjudicator who had seen and heard the relevant witnesses. That would approach uncomfortably close to decision making by executive and administrative diktat. If therefore the Secretary of State is to set aside or ignore a finding on a factual issue which has been considered and evaluated at an oral hearing by the special adjudicator he should explain why he has done so, and he should not do so unless the relevant factual conclusion could itself be impugned on Wednesbury principles, or has been reconsidered in the light of further evidence, or is of limited or negligible significance to the ultimate decision for which he is responsible. "
The First Finding – Maladministration
a) On page 1, the question is asked "why was the Pensions Act needed?" Four reasons are given, the first being that "the Government wanted to remove any worries people had about the safety of their occupational (company) pension following the Maxwell affair";
b) On page 14, under a heading "Trustees' duties", PEC3 states that "trustees will still be responsible for running schemes and investing in the money for the benefit of the members. But they will also have to talk to the employer before deciding how to invest the money. The trustees must make sure that the scheme keeps to the law, including the rule that a scheme must be funded to a certain level (the "minimum funding requirement"…)";
c) On page 15, under the heading "new minimum funding requirement for salary related schemes", the leaflet states:-
"The Pensions Act introduces a new rule aimed at making sure that salary related schemes have enough money in them to meet the pension rights of their members. If the money in the scheme is less than this minimum level, the employer will need to put in more money within time limits. The minimum funding requirement is intended to make sure that pensions are protected whatever happens to the employer. If the pension scheme has to wind up, there should be enough assets for pensions in payment to continue, and to provide all younger members with a cash value of their pension rights which can be transferred to another occupational pension scheme or to a personal pension." (emphasis added)
"The description of the MFR was, in the context of a general information leaflet, accurate and adequate. The description is couched in qualified, non-technical language. Thus the MFR is described as being "aimed" at making sure schemes have enough money. It "is intended" to ensure schemes are protected. Adherence to the MFR entails that there "should" ...not "will") be enough assets. Nowhere does the leaflet state or imply that adherence to the MFR provides a guarantee that all liabilities will be met. The description of the MFR was appropriate given that what was being described was a new protective measure, in circumstances where there had been no such protective measure prior to the introduction of the 1995 Act. "
The First Finding: Causation of Injustice
"So there is no reason in principle why the considerations which determine whether there has been maladministration should necessarily be the same as those which determine whether there has been unlawful conduct. The Commissioner's power is to investigate and report on maladministration; not to determine whether conduct has been unlawful. So there is no reason why, when exercising the power to investigate and report which has been conferred on him by the 1974 Act he should necessarily be constrained by the legal principles which would be applicable if he were carrying out the different task (for which he has no mandate) of determining whether conduct has been unlawful."
This is, with respect, clearly correct, and indeed binding on me; but Henry LJ was not, as I understand his judgment, suggesting that all legal principles, including causation, could be set aside. He was confining his remarks to the differences between maladministration and unlawful conduct.
The Third Finding
"In the Department's view it would have been far more vulnerable to justified criticism if it had substituted an alternative judgment in the face of clear and consistent advice from the actuarial profession and from the Government Actuary's Department without good reason, such as applied in the case of the recommendations made by the actuarial profession in 2000 and 2003. Both of those recommendations involved more complex changes which would have required long administrative lead-in times. In both cases the Minimum Funding Requirement was expected to have been abolished by the time the changes would have had much, if any, practical effect. "
"As with any decision, I should say that I do not consider that advice or recommendation from the actuarial profession – or from GAD or any other professional advisor – absolved DWP from seeking to establish all of the relevant facts before making their decision. A decision maker, although acting with the benefit of professional advice, retains responsibility for their decision. Regard should be had to all relevant considerations and those that are not relevant should be ignored. It should also be ensured that any decision taken is made on an adequate evidence base and the reasons for any decision can be demonstrated subsequently."
The First Recommendation
The Human Rights Convention claim
(a) The Secretary of State's rejection of the Ombudsman's First Finding of maladministration (consisting of the provision of misleading official information) is quashed;
(b) The Secretary of State's rejection of the Ombudsman's First Finding, in so far as it went on to conclude that the maladministration which she had identified had caused injustice to all those individuals who had suffered losses on the winding-up of their occupational schemes during the relevant period, is upheld;
(c) The Secretary of State's rejection of the Ombudsman's Third Finding of maladministration (relating to the change in the Minimum Funding Requirement in 2002) is upheld;
(d) The free-standing claim under Article 1 of the First Protocol to the European Convention on Human Rights is dismissed;
(e) The Secretary of State is directed to reconsider the Ombudsman's First Recommendation in the light of this decision.