England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/11/2005

Mr Justice Hart:

1. This is an appeal against a Decision of the Pensions Ombudsman given by a letter dated 13^th May 2005. The appellant is Mr Ward who was the complainant before the Ombudsman.
2. Mr Ward's complaint to the Ombudsman arose out of the circumstances in which his employment by the second respondent, the National Probation Service (S. Yorkshire), terminated. That employment terminated on 30^th September 2002 as a result of a letter dated 29^th August 2002 which notified him of the forthcoming termination of his employment "by virtue of redundancy", and which provided him with a calculation of the redundancy payment to which he would become entitled (£13,048.83) together with an estimate of the annual pension payment (£7,843 p.a.) and the Pension Lump Sum (£23,531.00) which would become payable.
3. The estimate of the pension benefits accompanying that letter had been based on the willingness and ability of the first respondent, the pension authority, supported by his employer, to make an award of "added years" in respect of Mr Ward's entitlement under the Scheme. What the estimate did not allow for was that the ability of the pension authority to pay an annual pension based on the added years was constrained by statutory requirements having regard to the fact that Mr Ward was in receipt of a pension in respect of his previous career in the army. Mr Ward was not asked to supply details of his army pension until 27^th September 2002 when he was asked to complete a "Form 11" which elicited this fact. On receipt of that information, the pension authority informed him, by letter dated 1^st October 2002, that the added years element in his pension and in the lump sum was being withheld pending investigation of the effect of his army pension. By the end of October 2002 the position was established that the effect of the Local Government (Early Termination of Employment) (Discretionary Compensation) (England and Wales) Regulations 2000 was that the "added years" element of the pension could not be paid. This reduced the pension payable to Mr Ward to £5,863.37. The lump sum payment was unaffected by the regulations and was in due course paid.
4. The complaint was that the respondents had been guilty of maladministration in quoting to Mr Ward a likely pension based on added years without the caveat that Mr Ward's entitlement to such a payment depended on the amount receivable by him in respect of his army pension. Mr Ward's complaint was that, had he known the true position, he would not necessarily have accepted a dismissal on grounds of redundancy but would have considered other options.
5. The context in which Mr Ward's employment terminated was a decision by the National Probation Service to "outsource" certain of its functions, which included some of the functions attached to Mr Ward's post. The picture presented by Mr Ward to the Ombudsman was that he had been prepared to consider being made redundant and taking voluntary early retirement (he was then aged 59) if the package offered were sufficiently attractive, that the added years quotation given to him had represented such a package, and that he had therefore accepted being made redundant. His claim was that if the true position had been made clear to him at any time prior to 30^th September 2002 he would have explored other options with regard to his continued employment. These options consisted, he claimed, either in being transferred under TUPE to employment with the new contractor, or seeking redeployment within the South Yorkshire Probation Service.
6. His complaint went on to claim that the manner in which he had been treated had:

"resulted in me being subjected to an unacceptable level of stress, anxiety and depression which in turn has created a medical condition identified as 'Ischemic Heart Disease' for which I am still being prescribed appropriate medication and certified as unable to seek alternative employment… "

7. The Ombudsman's rejection of his complaint was expressed in the following terms:

"[1] Mr Bick has referred your file to me with your letter of 21 March, and I have now reviewed the background very carefully.

[2] That review led me precisely the point which Mr Bick highlighted in his letter to you of 11 March. Your position is that you would not have decided to take early retirement on the basis of the retirement benefits actually payable, despite these being higher than the amounts which had first been indicated, I often determine cases where the decision to retire has been based on the quotation of a higher pension than proves to be payable. You are seeking to make the same argument but on facts which do not carry the same weight.

[3] Up to the time of your redundancy, you were never guaranteed or promised the full benefits based on added years. It had been made clear to you that an award of added years would be discretionary. You were not told that such an award had been approved.

[4] Despite what you say, I am satisfied that your decision – before the possibility of added years was raised – was to accept redundancy and retire, and so I cannot see how you can argue that you would [have] taken a different decision had you known that the benefits on retirement would be higher than you had been led to believe.

[5] The maladministration which is said to have been admitted relates to disregarding of information you supplied about your Army pension. But I do not see that as altering the eventual financial outcome for you.

[6] It is therefore my Determination that your complaint should not be upheld. Copies of my Determination have been sent to South Yorkshire Probation Service and the South Yorkshire Pensions Authority, and the investigation has now been completed." (paragraph numbering added by myself)

Mr Bick was a Senior Complaints Investigator in the Ombudsman's office who had investigated the complaint in correspondence with Mr Ward and the second respondent in the period from August 2004 to 11^th March 2005. The reference to the information which Mr Ward had supplied about his army pension is a reference to the fact that Mr Ward had informed the employer about that pension at the date, many years before, when his employment had commenced.

8. Mr Randall who has presented this appeal on behalf of Mr Ward has argued four grounds upon which the case ought to be remitted to the Ombudsman for further consideration, namely:

i) that the Ombudsman has not dealt with Mr Ward's claim in respect of non-financial loss;

ii) that the Ombudsman has given no reasons for dismissing the claim in respect of non-financial loss;

iii) that the Ombudsman has given inadequate reasons for dismissing the claim in respect of financial loss; and

iv) that the Ombudsman could not reasonably have reached a conclusion on the disputed issues of fact without the benefit of an oral hearing.

The claim in respect of non-financial loss

9. The question which arises here is why the Ombudsman did not in terms deal with Mr Ward's claim in respect of non-financial loss. There are several possible reasons for the omission which I discuss in the following paragraphs.
10. (i) That he had not in fact found any maladministration and therefore had no jurisdiction to award compensation under this head. This seems unlikely since, while the decision does not in terms find that there had been maladministration, a finding that there had not been maladministration would have disposed of all questions without more ado. One of the issues canvassed in the correspondence conducted by Mr Blick was whether Mr Ward had been notified of the need to complete Form 11 and/or of the possible effect of his army pension on any added years award in December 2001 when the possibility of his seeking early voluntary retirement had first arisen. Mr Ward had been adamant that he had not. The proposition that he had was not maintained by the respondents in the correspondence. The inference I draw is that the Ombudsman was proceeding on the footing that the failure to qualify the added years quotations which had been given to Mr Ward until after his retirement did amount to maladministration, presumably on the ground that the employer and/or pension authority ought either to have been aware of the existence of the army pension, or at any rate not advised of the effect of added years without adding the qualification that it might be affected by the existence of other pension entitlements.
11. (ii) that the maladministration could not in principle give rise to non-financial loss unless it also gave rise to financial loss. Mr Phillips, on behalf of the respondents submitted that this proposition was sound in law. He cited in its support a passage from the judgment of Millett L.J. in Westminster City Council v. Haywood [1998] Ch. 377 at 410G-H which is in the following terms:

"If, as the Pensions Ombudsman implicitly found, it consisted in the wrongful reduction in Mr. Haywood's pension, then it might well be appropriate to compensate him, not only for his pecuniary loss, but also for the anxiety which he suffered until be knew that his pension was to be restored to its proper level. But once this analysis is rejected and the maladministration is identified as the failure to warn Mr. Haywood that there was some doubt as to the amount of his pension, or as the promise t pay him more than he could lawfully be paid, then the basis on which the Pensions Ombudsman made the award of £1,000 can no longer be supported. Properly identified, the maladministration caused neither pecuniary loss nor anxiety or distress, but the reverse. The most that can be said is that it inevitably led to disappointed expectations."

12. As I read that passage it is not authority for the proposition relied upon. What Millett L.J. was saying was that maladministration consisting of one's being told that one has an entitlement greater than is in fact the case cannot cause distress or anxiety: it is in itself a happy event although it will inevitably later lead to disappointment. That does not mean that the inevitable disappointment cannot itself qualify for an award in respect of non-financial loss. As the immediately following paragraph in his judgment makes clear, the reason why no such award was appropriate in that case was that the disappointment was amply compensated for by the fact that Mr Haywood had actually received money in excess of his entitlement and in excess of any award which might otherwise have been made under this head.
13. The reasoning in Haywood would accordingly have left it open to the Ombudsman to have made a small award to Mr Ward in respect of his disappointed expectations.
14. (iii) The claim was not in fact being advanced. On 7^th October 2004 Mr Bick had written to Mr Ward advising him of his view that the decision to retire early had not been taken on the basis of a belief on the part of Mr Ward that the would receive the higher benefits and that, on that footing, only a modest award in the range of £100 to £500 would typically be considered in respect of distress inconvenience or disappointed expectations. In reply to that Mr Ward had written:

"In the latter stages of your letter you make comment about levels of compensation. This gives me the opportunity to advise you what I may be seeking. Bearing in mind that this episode of maladministration and ill-advice has resulted in me making a decision to end my employment with the national Probation Service. These are:

a. Compensatory adjustment for the difference in Benefit quotations on which I made my decision to end my employment with the National Probation Service – i.e. the reduction of approx £!700.00 for as many years as I continue to draw my Pension or an agreed commutation of such figures.

or

b. Compensatory adjustment between the salary I would have continued to receive minus the Pension that I am currently receiving up to my retirement age of 65."

15. It was submitted by Mr Phillips that the Ombudsman had been entitled, in the light of that reply, to assume that the only real complaint was in respect of the financial loss alleged. As to that I am not persuaded that a fair reading of the reply was that Mr Ward was no longer advancing any case at all for having suffered disappointed expectations. I think, however, that the Ombudsman was entitled to assume that the original claim, to the effect that the disappointment had caused ischemic heart disease which had in turn rendered Mr Ward unemployable, was no longer being seriously advanced.
16. That any disappointment suffered by Mr Ward was so transient as not to justify an award. If the Ombudsman's findings in respect of the financial loss claims were correct, this would in my judgment have been a conclusion which was not only open to the Ombudsman, but was the only conclusion which could reasonably have been reached. The position as found by the Ombudsman was that Mr Ward had made his decision to retire on the basis of the original package which had been offered to him. The fact that he had later been given an incorrect (and higher) estimate had not affected that decision. The correction of that estimate was not itself maladministration but the correction of a maladministration. Had the correction been made before, even very shortly before, the termination of the employment it could not have given rise to anything more than a token award. The fact that the correction took place very shortly after the termination of employment did not change anything.
17. Given the conclusion in the previous paragraph, it does not appear to me to be appropriate to remit the matter to the Ombudsman solely for the purpose of having him explain the basis on which he has made no award for non-pecuniary loss in this case.

The claim for financial loss

18. The critical issue, which is identified in the Decision, was whether Mr Ward's decision to accept redundancy and retire had been influenced in any way by having been provided with the higher (incorrect) figures. The Ombudsman expressed himself as satisfied that it was not because the relevant decision had already been taken by Mr Ward before the incorrect figures had been supplied.
19. It was not submitted on behalf of Mr Ward that the Ombudsman's decision was perverse in the sense that there was no evidence before him on which he could have come to that decision. The complaint is, rather, that he has failed to explain why he has come to that decision and that it is possible therefore that he misunderstood the factual issues which arose in coming to that decision.
20. It is plain from the correspondence conducted by Mr Bick that the latter was at some pains to establish the precise background to the termination of Mr Ward's employment, and that he had some difficulty in obtaining a clear picture. As late as 8^th February 2005 he was speaking of his "increasing exasperation at being able to produce a clear statement of material facts". In fact, once one excises from the correspondence various lines of inquiry which turned out to be false trails, the undisputed facts were as follows:

i) The National Probation Directorate stated their intention to outsource relevant functions in the Autumn of 2001. Mr Ward was employed as a bursar by the South Yorkshire Area of the Service with responsibility, inter alia, for those functions. The outsourcing was scheduled to take place on 1^st October 2002. The question arose in early 2002 whether Mr Ward's employment would be subject to a TUPE transfer to the new contractor. If not, the possibilities were either that he would be made redundant or, if he wished, be redeployed within the South Yorkshire area of the Service.

ii) In March 2002 Mr Ward was advised that in the event of his being made redundant he would receive a redundancy payment in the region of £12,700 and appears to have been advised that he would then receive an estimated £4,197.53 p.a. pension and a lump sum of £15,710.63.

iii) By late April 2000 the exercise to establish whether his employment would be subject to a TUPE transfer had been completed, the upshot being that only 39% of his functions were to be the subject of the transfer with the result that his employment was not contemplated as being transferable to the new contractor under TUPE. Mr Ward seems to have co-operated in this exercise and in no way disputed its conclusions.

iv) By that stage (early May 2002) the options available to Mr Ward were either to explore with the employer the possibilities of suitable alternative employment within the Service or to secure the agreement of his employer to the severance package which had been indicated to him in March 2002 as the consequence of his redundancy. The employer could not agree to that package until it had obtained the agreement of the National Probation Directorate (the "NPD") to be responsible for funding it. It is clear that at this stage both Mr Ward and his employer were co-operating in the process of obtaining the NPD's agreement to fund the package. No enquiry was made by Mr Ward of the possibility of his obtaining suitable alternative employment within the Service. On 26^th May the employer (by Mr Keith Griffiths) sent him fresh estimates of the contents of the proposed severance package (Annual Pension £5,900 p.a., Lump Sum £17,700 and redundancy payment £12,600), noting that the pension and lump sum did not include added years.

v) Mr Ward did not understand what was meant by "added years". He e-mailed Mr Griffiths with the query:

"…What does the option of 'added years' do to the bid? Judging by the way the Service seems to be heading I don't envisage myself returning on Relief basis or any other basis related to the same Pension Fund (partners ill health may have a lot to do with it too), just checking on the financial situation relating to this option."

vi) Mr Griffiths answered the query by saying:

"The effect of granting added years, which is a discretion available to the Board under the Pension Regs would be to increase your benefits as set out below:

Redundancy pay £12,600

Annual Pension £7,709

Lump Sum £23,127

If you would like me to make out a case for payment of those added years, please advise."

vii) Mr Ward replied on 28^th May 2002 saying:

"Try for that option without putting the original one at risk."

viii) The extent to which the NPD was prepared to fund redundancies arising as a result of the outsourcing decision, and in particular to fund awards of added years, was not clear until after 30^th July 2002 when the NPD released its criteria for such funding. Those criteria were satisfied in Mr Ward's case if he fell within the rubric:

"Where less than 50% of work transfers under any individual contract, and suitable alternative employment or additional duties cannot be found…"

ix) The case being advanced by the employer to the NPD in respect of Mr Ward's potential redundancy was, as put in an e-mail from Mr Griffiths to Simon Stone at the Home Office dated 24^th July 2002:

"Any news on Mick Ward's situation? From this end, having looked at all alternatives (there aren't any) all we can say is that on 1 October 2002, he'll definitely be out of a job."

x) It appears that Mr Ward was not told that his redundancy had been agreed by NPD, and that he would have an award of added years, until Friday 9^th August 2002. On 11^th August 2002 Mr Griffiths e-mailed him with calculations indicating his estimate of the redundancy benefits assuming that the employment terminated on 30^th September 2002. Those estimates were Redundancy Pay £13,048, Annual Pension £7,843 and Pension Lump Sum £23,531. Those figures were subsequently confirmed in the attachment to the letter sent to him on 29^th August 2002 terminating his employment, by virtue of redundancy, on 30^th September 2002.

21. The issue plainly raised by those facts was what would have happened had the maladministration not occurred. For this purpose the maladministration consisted of the incorrect information given to him by the communications dated 11^th and 29^th August. The premise of the complaint was that, had Mr Ward then been supplied with the correct information, he would in some way have challenged the decision his employer was about to make to dismiss him on grounds of redundancy, or at least have considered doing so. Realistically the only form which such a challenge could have taken would have been to request the employer to offer him some suitable alternative employment, since, on the only evidence before the Ombudsman on the point, his employment was not eligible for transfer to the new contractor under TUPE. The issue of fact before the Ombudsman was therefore whether, had he known the true position on 11^th August 2002 Mr Ward would then have sought suitable alternative employment with the employer, and, if so, whether he would have obtained it. The employer's evidence to the Ombudsman was that:

"Mr Ward could have asked to be considered for a transfer to suitable alternative employment with this Service at any time up until termination of his employment. Mr Ward never once asked for a transfer. Had he done so this would have been given priority consideration…"

22. There was evidence before the Ombudsman from which he could draw the inference that Mr Ward had simply not been interested in obtaining alternative employment with the employer. So far as the contemporaneous evidence is concerned the inference is certainly possible that his preferred option all along was to be made redundant given the carrot of a sizable redundancy payment coupled with an immediately payable pension not subject to actuarial reduction for early retirement. Consistent with that was his co-operation in supplying figures for the purpose of the exercise which demonstrated that his employment could not be transferred under TUPE. Consistent also with that was the fact that he at no stage claimed to have made any inquiry of his employer as to whether there was any suitable alternative employment within the Service. That he was not interested in that possibility is also the inference which I would have drawn from the views he expressed about the unlikelihood of his ever working for the service again when the concept of "added years" was first mentioned to him in the e-mail dated 26^th May 2002. Furthermore, Mr Griffiths as early as 29^th April 2002 (when no question of added years award had even been mooted) seems to have been anxious to reassure Mr Ward that he would be pressing the NPD for an early decision in favour of redundancy ("I will forward [the TUPE assessment] to the NPD with the polite request that they get their fingers out"). The same indication was given in an e-mail dated 26^th May 2002 ("… I have today sent a further broadside off to the mandarins at the NPD").
23. Furthermore, these requests to the NPD (which do not appear to have been before the Ombudsman and were not before me) would prima facie have been on the footing not that Mr Ward did not want to be considered for suitable alternative employment but that he could not be found such employment. That was indeed explicit in the e-mail dated 24^th July 2002 quoted above.
24. I would add that I am myself also struck by the fact that although Mr Ward was alerted to the correct position very soon after his employment terminated he did not respond by challenging the basis of that termination. If he had seriously wished to take up some alternative employment with the Service he might have been expected there and then to have sought it.
25. By contrast there was no contemporaneous evidence to contradict those inferences. The only contradictory evidence was the bare assertion by Mr Ward in his original complaint that, had he been given the correct figures, he would have considered the other options, a proposition which he improved on in his final letter to Mr Bick dated 21^st March 2005 by asserting that he would have pursued one of them.
26. I return to the criticisms which are made of the Ombudsman's decision. The two critical paragraphs are those I have numbered [3] and [4]. I will take them in turn.
27. Paragraph [3] may be said to ring a slightly false note. It was not Mr Ward's case that he had been "guaranteed" the added years: his complaint was that he had been told, first, that the "added years" was a matter of discretion, and, then, that he had been given to understand that the relevant discretion had been exercised in his favour. Both these matters were in fact true. The problem was that he had not been told that, despite the decision to award him added years, the rules meant that he could not in fact be paid that extra element in his pension. To the extent that the Ombudsman was seeking to say that Mr Ward was not entitled to suppose, on the basis of what he had been told, that his pension would reflect the added years, I do not think that the material before him supported that conclusion.
28. The real complaint is, however, about the reasoning behind the conclusion at paragraph [4]. It is true that the Ombudsman does not explain why he has reached that conclusion beyond referring in general terms to his having very carefully considered the background (in paragraph [1]) and acknowledging that, in arriving at the decision which he has, he is not accepting Mr Ward's own assertions as to how he would have behaved had the maladministration not occurred ("Despite what you say"). On the other hand, once one reduces the material before the Ombudsman to its essentials, it is not difficult to see how and why the Ombudsman reached the conclusion which he did. Indeed I would say that it is obvious once that exercise has been carried out.
29. In those circumstances, even were I to accept the submission that the Ombudsman's decision was insufficiently reasoned to satisfy the applicable requirements, I see no point in giving Mr Ward the only remedy which he can seek from this court, namely an order remitting the complaint to the Ombudsman for him to re-consider it in the light of this judgment.
30. That reasoning assumes that the Ombudsman was entitled to reach the decision he did on the documents alone and without conducting an oral hearing. Mr Randall submitted that this was not a case which could fairly be decided on the basis of documents alone. He accepted that it was a matter for the Ombudsman as to what procedure to adopt for the purposes of conducting an investigation into a complaint (as indeed s.149(4) of the Pension Schemes Act 1993 expressly provides) and that, for this submission to succeed, it was necessary for him to persuade this court that the procedure adopted by the Ombudsman in this case was unreasonable on Wednesbury grounds. I am unable to see that it was. A review of the correspondence conducted by Mr Bick shows, in my judgment, that Mr Ward was given ample opportunity to comment in writing on all the material which was placed before the Ombudsman by or on behalf of the respondents. At the end of the day the decision on the critical issue was one to be made by testing Mr Ward's assertions of what he would have done had the maladministration not occurred against the inferences to be drawn from the contemporaneous documentation. I am quite unpersuaded that requiring Mr Ward to make those assertions orally would in any way have added to the picture. Nor, I would add, was the Ombudsman ever requested to take such a course.
31. I would therefore dismiss the appeal.