England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/10/2017

The Hon. Mr Justice Norris :

1. Angela Smith (born in August 1959) was a member of the NHS Pension Scheme. Regulation R2 of the NHS Pension Scheme Regulations 1995 created a class of members with Special Class Status ("SCS"). To qualify for SCS the member had to meet the following criteria:-

(a) be in pensionable employment as a nurse, physiotherapist, mid-wife or health visitor at the coming into effect of the Regulations:

(b) have accrued rights arising out of a previous period of employment:

(c) have not had a break in such pensionable employment for five years or more: and

(d) have spent the whole of the last five years of pensionable employment as a nurse, physiotherapist, mid-wife or health visitor.

The key benefit of having Special Class Status was that it conferred entitlement to retire at 55 with a full pension (instead of the normal pension age of 60).

2. In 1995 Mrs Smith was employed as a healthcare support worker in an SCS role with Sheffield Teaching Hospital ("Sheffield Teaching"). She had been so employed since 1981. She was a potential SCS member. In 2000 she combined her role as a healthcare support worker at Sheffield Teaching with a part time role as a Staff Side Coordinator ("Coordinator") with Sheffield Children's NHS Foundation Trust ("Sheffield Children's FT"). Although her work as Coordinator was not clinical, but was purely administrative, she retained her potential SCS standing because she continued her part time role as a healthcare support worker at Sheffield Teaching.
3. In November 2008 she was elected to a representative role as Staff Side Chair ("Chair") at Sheffield Children's FT. This was another remunerated part time role, but meant that she would have to give up the healthcare support worker role at Sheffield Teaching. Sheffield Teaching agreed to second her to Sheffield Children's FT for this purpose, and to accept Mrs Smith back as a healthcare support worker. Her new role at Sheffield Children's FT as Coordinator and as Chair meant that her job was purely administrative with no clinical element. So her new role did not qualify for SCS standing. But she could restore that status if in less than 5 years she resumed her healthcare support worker role and then continued in that resumed role for a further 5 years.
4. It is common ground that before she took this new role she was advised by Sheffield Teaching that provided she did not have a five year break away from Sheffield Teaching she would retain her SCS categorisation. It is also common ground that this advice was incomplete and wrong, because it overlooked the requirement that she also needed to spend the whole of the last five years of her pensionable employment in a relevant SCS post. It is further common ground that if Mrs Smith had received the correct advice (that there was this additional requirement) she would still have exchanged her role of healthcare support worker at Sheffield Teaching for her new role as Chair at Sheffield Children's FT not least because it attracted a substantially higher salary and was of a higher status.
5. In August 2010 Mrs Smith sought further information about her pension entitlement. It is not in dispute that because she was not then in an SCS role the computer-generated pension statements would have proceeded on the footing that she was an ordinary Scheme member with a normal retirement age of 60 and entitled only to a reduced pension if she retired at 55. It was therefore necessary for a hand-written pension estimate to be produced. Such a statement was produced and said:-

"If you go @ 55… then (assuming spec. class status) your benefits are likely to be… pension £7,355.56 l/sum £49,021.68… obviously if anything changes these figures would have to be revised".

Mrs Smith enquired how long she would have to be back in her "special class job" before she could apply for her pension. The response she received was:-

"The least time we would recommend is a week but the choice is yours as long as the five years isn't exceeded".

6. It is not in dispute that this advice was also wrong because it again overlooked the requirement that to qualify it was necessary to hold an SCS role for the last five years of pensionable employment. Mrs Smith does not suggest that if the correct advice had been given in August 2010 she (then aged 51) would have forthwith given up her higher status, higher salaried role and reverted to being a part time healthcare support worker at Sheffield Teaching for the last five years of pensionable employment (retiring at 56). She continued to be seconded by Sheffield Teaching to Sheffield Childrens' FT as Coordinator (with the right to resume an SCS role at Sheffield Teaching) and to be employed as Chair at Sheffield Children's FT. The former role was for 10 hours per week: the latter for 25 hours.
7. The advice given in August 2010 accorded with some generally expressed advice given on the website of the NHS Business Services Authority ("NHSBSA"); but a reading of the Scheme Rules (which Mrs Smith had) or of a Factsheet produced by NHBSA (and referred to on the website) would have disclosed the true position. It was not suggested that Mrs Smith should have taken either of those steps: and Sheffield Teaching accepted that whatever the rights and wrongs of the position as between itself and NHSBSA it must accept responsibility for the misinformation provided.
8. After 4 years and 11 months at Sheffield Children's FT Mrs Smith considered resigning her position as Chair at Sheffield Children's FT and reverting to her role as a healthcare support worker at Sheffield Teaching. She would thereby have earned the higher salary paid to the Chair for the maximum period but (as she believed) would have preserved her SCS status for the purpose of taking retirement at 55 without pension reduction. She sought another pension entitlement quotation, this time on the footing that she continued as Coordinator at Sheffield Children's FT for 10 hours per week and became a healthcare support worker at Sheffield Teaching for 25 hours per week. Because in that scenario she then would be in an SCS role, the February pension quotation proceeded on the footing that she was within the SCS category, but it said:-

"Please be aware that this is an estimate quotation only. Figures are based on known information and have been projected using your current pay and service pattern. This estimate quotation is for guidance only. Exact retirement figures cannot be given until final pay and service details are known."

The quotation estimated that she would be entitled to a commuted pension of £7,351.44 and to a lump sum of £49,009.32.

9. Mrs Smith went ahead with her move in February 2014. She resigned as Chair and reverted to the position as it had been in 2008 namely as a healthcare support worker with Sheffield Teaching and as a part time Coordinator at Sheffield Children's FT. She was now approaching her 55^th birthday.
10. In March 2014 Mrs Smith was made redundant from her Coordinator's role with Sheffield Children's FT (and received a redundancy payment of £18,600). In April 2014 she went on long-term sick leave from her healthcare support worker role occasioned by back pain (and she never returned to work).
11. In May 2014 Mrs Smith sought a pension quotation. Sheffield Teaching provided an estimate which Mrs Smith queried: and then Mr Ashton wrote an undated letter containing an estimate of a part-commuted pension to be £7345 plus a lump sum of £48,971, apparently on the basis that she had SCS status, and that her normal pension age was 55 (not 60). The fact that the figures were estimates and that final figures could not be given until final pay and service details were known was clearly stated on the original estimate.
12. In June 2014 Mrs Smith sought a further pension quotation. This showed an estimated part-commuted pension of £7345 plus a lump sum of £48,971, again on the basis that the normal pension age was 55 and there was no reduction in benefit. The actual estimate itself contained the qualification noted above: but it is not clear that the estimate itself was provided to Mrs Smith. In any event, she had submitted her form AW8 (applying for her pension) before she received this information.
13. Mrs Smith resigned as a healthcare support worker with effect from 31 August 2014. But the part-commuted pension she received was £6147.23 and the lump sum £40,981.61, because when her final pay and service details were known it became apparent that she did not qualify for SCS and her normal pension age was 60 (not 55).
14. In December 2014 Mrs Smith lodged a complaint in these terms:

"I was told I would receive a pension of special class nature payable from my 55^th birthday. I relied on that information in taking my decision to retire from employment. I could have stayed in employment beyond this date, but actively decided to draw on my pension based on the figures I was told. A return to my old role is no longer possible, as the secondment role I had undertaken has now been filled by someone else. Following my retirement I was distraught to learn that a much lower pension would actually be payable from NHSPS. Had this lower rate of pension been told to me at the correct time, ahead of my retirement, I would have elected to remain in work. As it is, I have retired from work and find myself suffering an irrevocable detriment as a direct consequence of being provided with incorrect information from my employer…"

15. In May 2015 Sheffield Teaching wrote to Mrs Smith acknowledging the distress which the incorrect information would have occasioned and they offered her £5000 in full and final settlement of her complaint. But Mrs Smith rejected this: and on 23 June 2015 she complained to the Pensions Ombudsman.
16. So far as material to this appeal, the case she advanced was:-

(a) had she been given the correct information she would not have resigned as Chair in February 2014 and reverted to her healthcare worker support role:

(b) the redundancy of the Coordinator role would not have impacted upon her part-time role as Chair (though Sheffield Children's FT said that the Chair had to be employed by them which, following the redundancy of the Coordinator role, Mrs Smith was not):

(c) she would have continued working until her pension entitlement was sufficient to enable her to retire:

(d) she has been unable to take up other employment because she has been caring for family members diagnosed with terminal illness:

(e) the loss for which she seeks compensation is the pension "shortfall" (what it was indicated in the June 2014 estimate she would receive less what she in fact receives) being an annual pension of £1198 and a lump sum of £7,990.

17. The decision of Deputy Pensions Ombudsman Johnston was given on 2 February 2017. She held:-

(a) The June 2014 estimate arrived after the decision to retire had been taken:

(b) The May 2014 pension estimate had not been relied on (because Mrs Smith had queried the figures and sought the June 2014 estimate):

(c) The advice given in August 2010 was a clear and unequivocal representation that Mrs Smith could draw her pension on SCS terms so long as she was back in her SCS role at the time she applied for it, which was incorrect and amounted to maladministration:

(d) An incorrect statement about entitlement to benefit did not automatically entitle a member to the level of benefit incorrectly quoted:

(e) It was for the member to show that the incorrect statement caused them to act in a way that they would not otherwise have acted, that it was reasonable for them so to act, and that doing so caused them loss:

(f) Mrs Smith relied on the information she had been given in August 2010 in making her decision to resign as Chair in February 2014 (since by so doing she evidently believed that she would be preserving her SCS status, although that and its advantages were no longer available to her):

(g) If she had continued as Chair it was probable that she would not have been made redundant as Coordinator (and so would not have received the redundancy payment):

(h) If she had continued as Chair and Coordinator from February 2014 she would probably still have retired on 31 August 2014 (because retirement at about 55 was her evident long-term aim):

(i) Although Mrs Smith asserted that she would have continued to work until her benefits were at the level she could afford to retire on she had not identified what that level was:

(j) The nature of her claim suggested that the target was the June 2014 estimate, but she had taken the decision to retire before receiving those figures so it was "questionable whether the exact level of benefits… was a major factor in her decision":

(k) Although bound to mitigate any financial loss she had suffered Mrs Smith had not in fact sought to work since the time at which the level of her pension and lump sum entitlement had become clear (which supported the conclusion that she would not have continued to work after 31 August 2014):

(l) If she had retired as Coordinator and Chair on 31 August 2014 her pension would, in fact, have been lower (a part commuted pension of £5920 and a lump sum of £39,469) according to uncontradicted figures from NHSBSA:

(m) Since she had received both a substantial redundancy payment and a higher pension and lump sum than would have been payable in the counterfactual scenario Mrs Smith had not demonstrated that she had suffered any financial loss:

(n) She should be compensated by a payment of £500 for the distress which the giving of incorrect information and the disclosure of the true position had caused her.

18. Under section 151(4) of the Pension Schemes Act 1993 an appeal lies from this decision on a point of law. The Grounds of Appeal identify two points which were argued:-

(a) that the Deputy Pensions Ombudsman was wrong in law in finding that Sheffield Teaching's maladministration had not caused Mrs Smith financial loss;

(b) that the Deputy Pensions Ombudsman was wrong in law to award only £500 as compensation - that figure being so low as to be perverse and unreasonable.

19. At the hearing of the appeal it was argued that I should award Mrs Smith some £36,000 being:-

(a) one year's pension "shortfall" assessed by reference to the May/ June 2014 estimates:

(b) future pension "shortfall" (using the same figures) capitalised for the life of Mrs Smith by reference to the Ogden tables:

(c) the lump sum "shortfall" using the same figures:

(d) credit being given for the redundancy payment.

(The claim was not put that way during the complaint itself).

20. This would, of course, be the appropriate computation if the pension estimates had been warranties or promises. But to achieve this outcome on a proper basis of assessment (i.e. that set out in Westminster City Council v Haywood (No1) [1998] Ch 377 at 394H) Mrs Smith would have to show that there was sufficient evidence before the Deputy Pensions Ombudsman for findings:-

(a) that she would not have retired until she had achieved an annual pension of £7345 and a lump sum of £48,970:

(b) that this was achievable within a defined period:

(c) that during this period there would be a job at the appropriate salary level:

(d) that she would have worked in that job for that defined period.

21. The key findings of the Deputy Pensions Ombudsman were:-

(a) that the combined Coordinator/Chair role would have continued beyond the date upon which Mrs Smith chose to return to an SCS role:

(b) that Mrs Smith would have continued in that role only until 31 August 2014:

(c) that at that date the pension she would have received upon retirement from that role would not have exceeded that which she in fact received.

22. Mrs Smith challenges finding (b). Because an appeal lies only upon a point of law she must demonstrate either that there was no evidence to support such a finding or that such a finding was perverse (being unsustainable in the light of the evidence as a whole). In my judgment her challenge fails.
23. Mrs Smith's complaint was throughout conducted on the basis that she was entitled to receive that which she had been "promised" – a full pension from age 55. As at February 2014 and August 2014 that was an impossibility under the scheme because of the need to be in an SCS post for the 5 years preceding retirement (meaning that she would have to work until age 60 in order to acquire the right to retire at 55 on an unreduced pension). So the question was: for how much longer would she have worked? That required her to address the issues identified in paragraph [20] above: but because of the approach Mrs Smith adopted she did not attempt to do so.
24. The Deputy Pensions Ombudsman therefore simply had to weigh Mrs Smith's unsupported assertion that she could have stayed in employment beyond her 55^th birthday and would have worked until the benefits were at a level she could afford to retire on (which, on the evidence, was for an undefined period to achieve an undefined target pension) against the inferences properly to be drawn from the facts:-

(a) that early retirement was clearly a significant objective (why else seek to preserve SCS status by resigning as Chair?):

(b) that Mrs Smith never quantified her "financial needs":

(c) that she had already received a redundancy award of £18,600 towards those needs because of the course she had chosen to take:

(d) that having retired with a lower than expected pension Mrs Smith had not sought to supplement her income or mitigate her loss by working in an administrative capacity (although running the case that but for the incorrect estimates that is precisely what she would have continued to do).

25. Whilst not everyone would have reached the same conclusion as the Deputy Pensions Ombudsman, her finding simply cannot be described as lacking any evidential foundation or as perverse or irrational. She had very limited material with which to work, effectively being faced with the choice of either wholly accepting or wholly rejecting the financial loss claim. Mr Uberoi (for whose clear argument I express my thanks) submitted that in those circumstances the Deputy Pensions Ombudsman should have used her investigatory powers to help Mrs Smith prove her case. But this was not a Ground of Appeal: and I would require some persuading that a complaint is an iterative process in which the Pensions Ombudsman was routinely required to undertake a provisional analysis and then invite the complainant to supplement any deficiencies (so that a failure to do so is an error of law).
26. I dismiss the appeal founded upon Ground 1.
27. In Ground 2 Mrs Smith challenged the compensation awarded for non-financial loss. In my judgment this challenge succeeds.
28. The sum awarded was £500. Mr Uberoi submits that an award at that level betrays an error of principle. I agree.
29. The starting point must be:-

(a) that this was an assessment made by an experienced tribunal to whose decisions respect is due:

(b) that an appeal court is only entitled to interfere if the process of assessment or the outcome of the assessment demonstrably involve an error of law.

30. Judicial guidance as to the range of assessment is limited. In Maclaine v Prudential Assurance Co Ltd [2006] Pens. L.R 231 at para [18] Warren J noted the observations of Hart J (made in 1999 in Swansea City Council v Johnson [1999] Pens. L.R 187) that it required "exceptional circumstances" for an award to exceed £1000 for distress and inconvenience (and implicitly endorsed them). That sum would have a present value of about £1625; so one must take care about accepting figures in reported cases uncritically.
31. The current "Pensions Ombudsman's Guidance on Redress for Non-financial Injustice" includes the following passage:-

"…. If the non-financial injustice is not significant, no award is likely to be made. On the other hand, if the non-financial injustice is significant, then awards should properly reflect this. In line with industry practice our usual starting point for awards will be £500 or more. In most cases, redress for non-financial injustice is likely to range from £500-£1000. But sometimes higher awards are necessary, for example where there was ill health or lifestyle choices were affected. Although the courts have historically held that an award over £1000 should be given in exceptional circumstances, there has been a recognised general shift in attitudes to make higher awards. In 2011 we awarded £5000 and £4000 respectively under this head of claim in the cases of Lamden (74315/3) and Foster (82418/1)"

These two cases demonstrate that the range of awards has increased: but since their facts are not known they cannot serve as benchmarks for the present case. I was also shown the cases of Tuttle (86135/1) (£1000 in respect of an incorrect NHS quotation) and Payne (PO-107) (£2500 in the context of a decision to retire early based on an inaccurate pension estimate). These are illustrations of the outcome of the process, but do not stand for any rule or principle.

32. Nonetheless, in that context an award of £500 to Mrs Smith (the starting point for awards) does strike one as low. Of course, that impression is of itself not a sufficient ground upon which to alter the award. The appeal court must be able to identify grounds which suggest that the figure probably results from an error in the application of principle (making all due allowance for the fact that these are assessments, not computations, and that in making the assessment the Pensions Ombudsman is not required to set out elaborate reasoning).
33. I am satisfied that it does so in the instant case for the following reasons:-

(a) The Deputy Pensions Ombudsman appears to have found only one instance of maladministration (which was sufficient to raise the issue of financial loss, but must also have influenced the measure of compensation for non-financial loss):

(b) The number of instances of maladministration is material to the likely level of distress:

(c) An analysis of the evidence shows a chain of pension estimates and summaries of position each of which overlooks the need to serve for five years in an SCS post immediately before retirement, and each of which amounts to an instance of maladministration:

(d) These estimates include an original and a corrected statement (by letter from Mr Ashton) in May 2014; the corrective letter, which was probably received before the form AW8 was sent, makes it factually incorrect to say that Mrs Smith could not have relied on the May pension estimate because she queried it:

(e) The distress at learning that the information provided over a 6 year period (ending immediately before retirement) has been inaccurate (because the pension at the intended retirement age is reduced not preserved) is likely to be of a different order from that occasioned by a single instance:

(f) There was a period of about 4 months in which Mrs Smith's entitlement to a full or reduced pension was the subject of debate between those responsible for her pension which prolonged the period of distress and uncertainty:

(g) The level of offer made by Sheffield Teaching demonstrates an employer's understanding of the level and duration of distress (though it undoubtedly includes other elements):

(h) An award of £500 (effectively, the starting point for awards) must in these circumstances embody an error of fact and/or of principle.

34. I must therefore exercise the compensating power afresh. I award £2750. The top end of the "normal" band (which Warren J endorsed) may be taken to be £1600. The award should be above that because of the number of opportunities there were to correct the misinformation given (namely, that only one week's service was required on return to an SCS post), the relative ease with which the true position could be ascertained (a reference to the SCS defining regulation itself), and the period through which the maladministration persisted. There is no necessity to reduce this because Mrs Smith did not suffer financial loss. There is no logical connection between the amount of the financial loss and the size of the award for distress caused by maladministration.
35. I therefore allow the appeal on the second ground.
36. I do not require attendance on the handing down of this Judgment. My provisional order on costs is that Mrs Smith shall receive 50% of her costs of the appeal (to be assessed in default of agreement on the standard basis). If either party wishes to dispute this provisional view then (a) the parties should exchange written submissions within 14 days of the date of handing down; and then (b) the appellant should lodge those submissions (together with any short reply submissions) 7 days thereafter.