England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM
THE PENSIONS OMBUDSMAN

		Royal Courts of Justice Strand, London, WC2A 2LL
		27 July 2009

Mr Justice Blackburne :

1. This is an appeal brought by Mr Sekander Musawi under section 151(4) of the Pension Schemes Act 1993 ("the 1993 Act") against a decision of the Pensions Ombudsman dated 6 November 2008. Section 151(4) permits an appeal on a point of law.
2. Mr Musawi is a member of the Bank of Credit and Commerce International Staff Pension Scheme ("the Scheme"). The Scheme was established in the late 1970s. It is governed by a Definitive Trust Deed and Rules dated 17 November 1981 ("the Deed" and "Rules"). Mr Musawi left pensionable service under the Scheme on 30 November 1986.
3. On 17 July 1991 the first respondent, Bevis Trustees Limited ("Bevis"), was appointed independent trustee of the scheme under what was then section 57C of the Social Security Pensions Act 1975. The Scheme commenced winding-up in consequence of the entry into liquidation of the Bank of Credit and Commerce International SA ("BCCI") on 14 January 1992. Clause 15.1 of the Deed required that upon the liquidation of BCCI the Scheme be "determined" and that the trustees take steps to secure certain pension benefits prescribed under clause 16 of the Deed.
4. In April 1992 members of the Scheme were informed by a written announcement that the Scheme was to be determined under clauses 15 and 16 of the Deed, that an annuity policy for each member would be purchased to secure pension entitlements and that before such policy was secured a transfer to another pension scheme would be available.
5. In July 1995, acting pursuant to the provisions of clause 16 of the Deed, Bevis purchased an insurance policy ("the Policy") from the second respondent, Legal and General Assurance Society Limited ("L&G") for the payment of pension benefits. That same month an announcement was made to members that L&G would provide individual annuity policies for all members who remained in the Scheme, adding:

"…if you want to transfer out at this stage you will be given the opportunity to do so. But even after the policies have been secured with Legal & General, you will still have the right to transfer out to a pension scheme or policy of your choice up until your 59^th birthday or, if earlier, the day your pension starts."

6. In November 1995 Mr Musawi was sent a benefit statement from L&G informing him what the then transfer value was, that that value might go up or down in future and, in particular, that:

"If you have not started to draw your pension you may, at any time before your 59^th birthday, choose to give up all of the benefits described on your statement and in this summary and take a transfer value …"

7. On 11 June 2002 Mr Musawi celebrated his 60^th birthday and thereby reached normal retirement date ("NRD") under the Scheme. That same day, L&G wrote to Mr Musawi offering him three options which had become available to him upon his reaching NRD. Of those three options, Mr Musawi elected to take a tax-free lump sum payment of £15,876.94 and to defer taking his residual pension entitlement calculated as at that date in the sum of £2337.10 per annum. He did so in writing by a document signed by him and dated 13 June 2002.
8. Seven days later, on 20 June 2002, L&G wrote to him to say that the lump sum payment of £15,876.94 had been sent to his account, as he had instructed, and that his residual pension was held in deferment until a time of his choosing. The letter continued:

"The pension will continue to increase in line with the retail price index as well as having an actuarially applied increase to compensate for its late payment."

The letter reminded him that the latest date to which he could defer his pension was that of his 75^th birthday.

9. On 26 June 2002 Mr S J Hunt, administration manager Bulk Purchase Annuities with L&G, wrote to Mr Musawi to say that, following their recent telephone conversation, he had now managed to obtain a transfer value based on his residual entitlement. He stated that the then current value amounted to £74,692.00 and was guaranteed to hold good for a period of three months from the date of the letter. He then added:

"I know from our other conversations that you realised that this may now purely be an academic exercise …"

10. A month later, on 25 July 2002, L&G wrote to Mr Musawi, referring to previous correspondence concerning his pension scheme benefits and then stating:

"You have currently elected your cash sum of £15,876.94 and therefore the only option available to you is to draw your residual pension from a later date. However, I can advise that, based on the hypothetical transfer value amount of £92,972, guaranteed until February 2002, the transfer value based on your residual entitlement amounts to £77,095.06."

The letter went on to sate that this was based on the last quoted transfer value in February 2002 but trusted that the information was helpful for his purposes. The letter then reminded him that Mr Musawi was entitled to request payment of his residual pension at any time of his choosing.

11. In 2004 Mr Musawi requested L&G to transfer his residual deferred pension benefit. On 15 November 2004 L&G refused Mr Musawi's request on the ground that he had no right to such a transfer because part of his pension - the cash-free lump sum - had fallen into payment under the L&G Policy.
12. A similar request by Mr Musawi to Bevis evoked a refusal by Bevis on the same grounds.
13. On 30 January 2008 Mr Musawi lodged a compliant before the Pensions Ombudsman under section 146 of the 1993 Act. His principal grounds of complaint were (1) that Bevis had entered into an agreement to purchase an insurance policy with L&G under which if a tax-free cash lump sum was taken under the Policy or if the member reached NRD, his residual pension rights had to be taken in the form an annuity with L&G and could not be transferred, (2) that neither Bevis nor L&G advised Mr Musawi that he could not transfer his residual pension if he took a tax-free cash lump sum from the Policy and (3) that his pension entitlement had been wrongly calculated by L&G on two grounds: (a) it included an allowance for a widow's pension upon his death but as he had separated from his wife, he had no need for a widow's pension and (b) it failed to give credit for the fact that, having deferred his pension, he should receive six years' worth of pension income coupled with increases in line with RPI, interest and guaranteed minimum pension ("GMP").
14. After concluding that there was jurisdiction to investigate Mr Musawi's application and after inviting, and receiving, responses to the complaint from Bevis and L&G, the Senior Complaints Investigator with the Pensions Ombudsman Service issued an interim decision on 3 October 2008 rejecting Mr Musawi's complaint of maladministration. On 6 November 2008, following a letter from Mr Musawi of 6 October 2008, the Pensions Ombudsman issued a final decision rejecting Mr Musawi's complaint. The rejection was on the following grounds: (1) it was within the power of the trustees of the Scheme to arrange a buy-out of Scheme benefits and liabilities by the purchase of an insurance policy with L&G; (2) there was no evidence that Mr Musawi was not made aware of the terms of the buy-out with L&G; (3) there was no evidence that the terms and conditions applicable under the Policy had been incorrectly applied; (4) neither the Deed and Rules, nor the Policy, nor applicable legislation included an option to take a cash lump sum and transfer the residual pension to a different pension plan; (5) Inland Revenue rules in force prevented transfer of a pension on the terms requested with the result that it would not have been possible to negotiate a contract of insurance which permitted partial transfer of pension benefit; (6) the spouse's pension provided for under the Policy could not be assigned to Mr Musawi in that the entitlement subsisted for any spouse which Mr Musawi might have at the date of his death; and (7) Mr Musawi had misunderstood the concept of a deferred pension inasmuch as it did not entitle him to receive six years' worth of pension income arrears together with RPI increases, interest and GMP.
15. On 20 November 2008 Mr Musawi filed his appellant's notice. The hearing of this appeal has been twice adjourned, initially to enable Mr Musawi to obtain legal advice and subsequently with a view to him obtaining legal representation. In the event Mr Musawi appeared in person. After hearing him in support of his appeal and hearing from Mr Jonathan Hilliard on behalf of L&G and Miss Emily McKechnie on behalf of Bevis in response, and after allowing Mr Musawi to reply, I announced that the appeal failed and that owing to the lateness of the hour I would set out my reasons in writing. This I now do.
16. Although his appellant's notice raised a large number of matters I confine myself to those pursued by Mr Musawi at the appeal hearing. His main complaint before the Pensions Ombudsman and before me by way of challenge to the Pensions Ombudsman's decision was of a failure either by the trustees (Bevis in the event) or by L&G to advise him that by taking a lump sum payment he would lose the right to a transfer of the remaining balance of his pension entitlement to another pension arrangement. The Pensions Ombudsman was correct to reject that complaint. Neither the Scheme (whether in the Deed or in the Rules) nor the Policy allowed that possibility. More than that: there was no duty on either body to volunteer advice to someone in the position of Mr Musawi as to what his entitlement was. See NHS Pension Agency v Beechinor [1997] PLR 95 at [12]. The only duty was to take reasonable care that any information in fact supplied, whether given in response to a request or in compliance with statute or because it was simply volunteered, was correct.
17. There is no evidence that that duty was broken in respect of any information that was supplied to Mr Musawi. Up to the date of his election on 13 June 2002 to take a tax-free lump sum the information provided was clear and accurate. Insofar as Mr Musawi relied on information communicated to him after he had made the election, the information was likewise accurate. But even if to any extent it was not or was misleading - this could at most affect the letter dated 26 June 2002 insofar as that letter might be taken as suggesting that, notwithstanding that Mr Musawi had taken part of his pension entitlement by way of a lump sum and had passed the age of 59, he would be entitled to request a transfer of the residue of his entitlement - the information so communicated cannot in law affect the consequences of the election which he had earlier made and which had shortly thereafter been implemented. In short, the misinformation, if such it was, was not causative of any loss.
18. In any event, as Miss McKechnie pointed out, once the Scheme went into winding up, there was no right under it to a transfer out. This was quite apart from the fact that under the Scheme, any right of transfer had to be of the whole of the pension benefit and had to be exercised prior to NRD. For each of these reasons Mr Musawi had no entitlement to any transfer in the events that happened. Such rights of transfer as he enjoyed under the Policy, although more generous than under the Scheme, were restricted in the ways indicated in the communications from L&G to Mr Musawi prior to the exercise by him of his election to take a tax-free lump sum.
19. It follows that the Pensions Ombudsman's decision on this aspect of Mr Musawi's complaint is not open to legitimate challenge.
20. Nor is there any substance to Mr Musawi's complaint that he was underpaid the residual pension when he later came to claim it. His complaint that he should have been paid arrears of pension for the years since he opted, on attaining NRD, to take a tax-free lump sum was dismissed by the Pensions Ombudsman who, in his determination letter of 6 November 2008, explained that Mr Musawi had simply misunderstood how the deferment operated:

"It is not that your pension suddenly starts as if it had gone into payment six years ago with arrears being due."

The letter then explained that, as stated in a letter to him from L&G dated 11 June 2002:

"…the residual pension while deferred will continue to attract Retail Price Index increases during the period of deferment as well as being increased actuarially to allow for the period of deferment up until the retirement date of your choosing."

21. That determination was entirely correct. It was in accordance with the Rules. As I suggested to Mr Musawi in the course of his submissions on the point, to claim both the pension, actuarially increased to take account of the period of the deferment (as the rules provide) and so-called arrears of pension during the period of deferment is like claiming both the penny and the bun.
22. Nor are there any other grounds for questioning the Pensions Ombudsman's determination relating to the amount of Mr Musawi's residual pension when it came into payment. In particular, there is no basis for questioning the correctness of the dismissal of Mr Musawi's complaint that the contingent entitlement of any widow that he might leave should have been assigned to him - so as to increase his entitlement - on the ground that he was separated from his wife and accordingly that there was no need to provide a widow's pension for her. As the Senior Complaints Investigator correctly stated in the interim decision letter of 3 October 2008 (later confirmed by the Pensions Ombudsman's letter of 6 November 2008) the spouse's pension:

"…exists as a facility which can be exercised in the event of a member acquiring a legal spouse. Therefore whether or not you are currently married (although you are separated from your wife you are not divorced), if you were to remarry and to subsequently die whilst marred, your widow would be entitled to a widow's pension. Consequently, it is not possible for the value of that widow's pension to be reassigned to increase your benefit."

The Rules, in particular Rule 11.4, simply do not enable the prospective entitlement to be added to the amount to which the Scheme member is entitled during his lifetime.

23. In his reply submissions Mr Musawi raised several other matters. He complained of a breach of article 14 of the European Convention on Human Rights, that there had been a breach of clause 16.4(ii) of the Deed and that he had been deprived of a guaranteed minimum pension payment. It is far from clear whether and to what extent these were matters which had been raised by way of complaint before the Pensions Ombudsman but I am in any event satisfied that there is no substance in them. In particular, there is no substance in the complaint that there was a breach of clause 16.4(ii). In fact Bevis, as it was entitled to do, exercised the power conferred by clause 16.4(i) to purchase from L&G the Policy as the means by which to provide the benefits to which Scheme members were entitled.
24. It follows that Mr Musawi does not establish any ground for challenging the Pensions Ombudsman's determination dismissing his complaint. It is for these reasons that I dismissed his appeal.