Act: McNeill, Q.C., MacGregor; Maclay Murray & Spens LLP

Alt: Lindsay; Dundas & Wilson

20 January 2011

The Scheme

[1] The appellants are the trustees of an occupational pension scheme known as Lithgows Limited Pension Scheme ("the Scheme"). The Scheme is a multi-employer pension scheme. Lithgows Limited is the principal employer. There are eight other participating employers in the Scheme, of which Ormsary Farmers, a limited partnership registered under the Limited Partnership Act 1907, is one. Ormsary Farmers has four partners, of whom two, who are limited companies, are limited partners and the other two, the general partners, are individuals.

[2] The Scheme is an eligible scheme for the purposes of the Pensions Act 2004. As such it is a scheme in respect of which the respondent must impose certain levies. These include a risk-based protection levy.

The procedural history
[3] Under the 2004 Act the respondent must, before the beginning of each financial year, determine in respect of that year, among other things, the factors by reference to which the pension protection levies are to be assessed and the rate of the levies (section 175(5)). By notice published on 1 March 2007 the respondent made its determination in respect of the year 2007/08. This followed an extensive period of consultation. By that determination it resolved that the factor known as the "Failure Score" (a measure of the risk of an employer becoming insolvent, resulting in potential liability to the fund administered by the respondent) applicable to a participating employer would be the normal failure score which Dun & Bradstreet UK Limited ("D & B") assigned or would have assigned to that employer in the ordinary course of its business on and as at 30 March 2007, based on data provided to D & B on or before 29 March 2007. (The relative paragraph of the determination is recited verbatim at paragraph [17] below.)

[4] D & B maintains a large database of financial information pertaining to companies, partnerships and limited partnerships. In the case of companies which are under statute required to file publicly accounts and other financial records, that information will include, or have regard to, such records. Where such records are not available publicly (as they are not with limited partnerships such as Ormsary Farmers) D & B may require, for the assessment of the entity's failure score, to rely on other information which is available - such as its history in payment of its debts. D & B are prepared to receive and take into account duly authenticated private accounts but insist that, if such material is made available to it, it - or at least an abstract of it - must be fed into its database, which is publicly available.

[5] No challenge has ever been made by the appellants, or by Ormsary Farmers, to the validity of the determination published on 1 March 2007. On 9 November 2007 a levy, in the form of an invoice, was raised by the respondent against the appellants, who on 4 December 2007 requested a review of the invoice. That request triggered an appeal under the relative statutory scheme. (At the same time the appellants sought from D & B a review of the failure score which it had assigned to Ormsary Farmers. The determination provided for correction in certain circumstances of an assigned failure score. D & B was not persuaded to alter the failure score assigned by it. This review was not pursued further.) The basis of the statutory review on this aspect (a number of other aspects of the levy were sought to be reviewed) was that because the information relating to Ormsary Farmers, which was not publicly available, had not been taken into account, the failure score was not accurate and could not be relied on. It was contended that, instead of the score of 69 assigned to Ormsary Farmers by D & B, a score of 100 (the highest score of financial soundness) should be substituted. Ormsary Farmers were prepared to provide financial information to the respondent and to D & B but only on the basis that it remained confidential - that is, that it did not feature on the database. That condition was not acceptable to the respondent or to D & B.

[6] The appellants pursued their statutory review on this aspect through the Reconsideration Committee of the respondent. That review was unsuccessful. Its outcome was intimated on 6 October 2008. By letter dated 31 October 2008 the appellants referred the matter to the Pension Protection Fund Ombudsman under section 213 of the 2004 Act. The Ombudsman on 25 September 2009 rejected the grounds of review.

[7] The Ombudsman in his decision letter observed that the determination of 1 March 2007 was not a matter reviewable by him and could not be amended on an individual application for review or reconsideration. The levy had, he held, been accurately calculated in accordance with the determination.

[8] The appellants now appeal to this court. Such an appeal is available only on a point of law (section 217(1)).

[9] In their application to the respondent for review and in their subsequent notice of reference to the Ombudsman the appellants made no mention of any rights under the European Convention of Human Rights. As part of the procedure in the reference the Ombudsman sought comments from parties on his draft determination. In response the appellants for the first time made reference to the Convention. They said:

"The Partners of Ormsary Farmers are individuals with unlimited liability. They are entitled to protection under Article 8 of the European Convention on Human Rights, Right to respect for private and family life. That covers the financial accounts of Ormsary Farmers. ...".

The Ombudsman in his determination dealt with that matter as follows:

"15 The Applicant has suggested that there has been some breach of Article 8 of the European Convention on Human Rights. Briefly, this provides that there should be no interference by a public authority in the individual's right to respect for his private and family life, his home and his correspondence; except in accordance with the law and necessary for (amongst other things) the economic well-being of the country.

16 Strictly there has been no such interference, because the partners in Ormsary Farmers have not been required to divulge information. They have a choice. It is just that if they do not do so, on their account, there are adverse financial consequences in the form of a higher levy than would otherwise be calculated.

17 This goes somewhat beyond the reviewable matter before me, but in any event it does not seem to me to be very different from the broader commercial decision that Ormsary Farmers have taken in deciding, for other purposes - and perhaps by default, not to supply information to D & B. Those with whom they have dealings generally would, if they use D & B, have to make decisions largely in the dark and on Ormsary Farmers account more information would give a better financial picture. (Of course I do not know whether there are any such dealings and whether other parties could be satisfied in some other way, but the principle is there even if the [Pension Protection Fund] levy is the first time it has had practical consequences.)"

The grounds of appeal

[10] In their grounds of appeal the appellants maintain, among other contentions:

"2 ... the Ombudsman erred in law in failing to hold that the Board of the Pension Protection Fund ('The Board') was bound, in pursuance of section 6(1) of the Human Rights Act 1998, to direct Dun & Bradstreet UK Limited ('D & B') (a) to receive financial information from the Appellants regarding Ormsary Farmers on the basis that such information would be treated as confidential and would not be published so as to be accessible by third parties; and (b) to take the said financial information into account in calculating the Failure Score of Ormsary Farmers on or as at 30 March 2007 for the purposes of calculation of the levy payable by the Appellants."

"4 Publication of confidential information concerning the financial circumstances of Ormsary Farmers would constitute an infringement of the rights of the general partners under Article 8 of the European Convention on Human Rights, namely the right to respect for private and family life, home and correspondence. By making a determination which requires the provision of information to enable an employer's Failure Score to be calculated accurately, but fails to make provision for such information to remain confidential where not already in the public domain, the Board would be acting unlawfully in terms of section 6(1) of the said 1998 Act. In these circumstances the determination must be read as if it contains such provision. Accordingly, the Ombudsman erred in law in failing to hold that the Board was under an obligation so to direct D & B when calculating the Failure Score applicable to Ormsary Farmers."

Discussion

[11] Article 8 of the European Convention provides:

"1 Everyone has the right to respect for his private and family life, his home and his correspondence.

2 There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others."

[12] Of its nature Article 8 provides protection only for human beings. Neither the appellants, as trustees of the Scheme, nor Ormsary Farmers have any right under that Article; nor do the corporate partners of Ormsary Farmers. Only the general partners of Ormsary Farmers have such a right.

[13] Those general partners are not parties to these proceedings. Nor could they be. The right to seek a review of the amount of a levy, the right to refer a reviewable matter to the Ombudsman and the right to appeal to this court against the Ombudsman's determination are vested in, and only in, the appellants. Mr McNeill for the appellants sought to meet that difficulty by a submission that the appellants in these proceedings were acting "in a representative capacity", that is, were acting for and on behalf of the general partners of Ormsary Farmers. He cited two decisions of the Commission of Human Rights. These were Asociacion de Aviadores v Spain (1985) 41 DR 211 and Confederation des Syndicats Medicaux Francais, Federation Nationale des Infirmiers Francais v France (1986) 47 DR 225. In the first of these cases the Commission noted that the Asociacion claimed itself to be the victim of a breach of rights and freedoms protected by the Convention (page 222). As the Asociacion, which was formed in 1977, could not claim to have been directly affected by the infringements alleged (punishments imposed on its members after the Spanish Civil War), it could not qualify as a victim. The case does not address the circumstances in which a person may advance the claims of a victim in a representative capacity. In the second case the applicant association did maintain that they were representing various individuals (doctors and nurses respectively). The Commission held (at page 229) that in such circumstances it was essential, under the relative procedural rules, to identify those individuals and to show that the association had received specific instructions from each of them. That not having been done, the application was rejected.

[14] Neither of the cases cited by Mr McNeill assists the appellants. Although in the present case a representative capacity was asserted, there is nothing to vouch the proposition that the individual general partners have given instructions to the appellants to represent them in these proceedings. It is difficult to see how the appellants, who no doubt have responsibilities towards other participating employers in the Scheme, could represent two of the four partners of Ormsary Farmers. The position is very different from a professional organisation representing its members. Even if the appellants could represent the general partners and had instructions from them, that would have been of no avail in the present proceedings. The appellants in these proceedings can represent only their own interests as the trustees of an eligible scheme. There is no room for their acting in this process in a representative capacity.

[15] That is sufficient for disposal of this appeal. But with respect to a number of other arguments addressed to us we deal, albeit in short compass, with these.

[16] The suggestion that the human rights of the general partners under Article 8 were engaged was introduced only at a very late stage - when the Ombudsman's draft determination was being circulated for comment. The basis on which the Article 8 rights of the general partners were being directly affected by the requirement that, if a more favourable score was to be considered for Ormsary Farmers, that partnership's financial records would require to be provided on a non-confidential basis was never laid before the Board or, except in very general terms, the Ombudsman. It was, and is, impossible on the material available to determine whether these general partners have "victim status". The financial records in question are not those of the general partners but of the partnership. The extent of the general partners' interests in the partnership is not disclosed. On the meagre information available it is not possible to determine whether the Article 8 rights of the general partners are engaged, far less, if they are, whether any infringement might be justified having regard to Article 8.2.

[17] Mr Lindsay for the respondent also contended that, in so far as there might be any infringement of the Convention, the respondent had a defence under section 6(2) of the Human Rights Act 1998 in respect that under the statutory scheme in question it could not have acted differently. Under that scheme the Board was required to determine, in respect of each year, the factors by which the pension protection levies were to be assessed and the rate of these levies (section 175(5)). It had, in respect of the year 2007/08, done so by its determination published on 1 March 2007. That determination had, among other things, provided that the insolvency probability associated with the employer(s) in relation to a scheme (one of the multipliers for calculating the risk-based levy) was that relative to the "Failure Score" for the relevant employer or employers. Paragraph 32 of the determination provided:

"The Failure Score which applies to an employer shall be the failure score which Dun & Bradstreet UK Limited ('DBUK') informs the Board that it has assigned to that employer, after taking such steps to identify or obtain data relating to that employer as the Board has required. For the avoidance of doubt, the failure scores to be provided to the Board are to be the normal failure scores which were or would have been assigned to that employer by DBUK in the ordinary course of its business on and as at 30 March 2007, based on data provided to D & B on or before 29 March 2007...".

There then followed a number of provisos, including subparagraph (e) which provided for the correction of errors which DBUK had informed the Board it had acknowledged following representations made to it by or on behalf of the relevant trustees or managers or employer. No challenge had been made to the respondent's determination, by judicial review or otherwise. It was clear that the determination was not a "reviewable matter" under the 2004 Act - section 206 and schedule 9. Although certain representations had been made to DBUK by the appellants, DBUK had decided that there had been no error in the Failure Score attributed to Ormsary Farmers. Neither the determination nor DBUK's decision having been challenged, the Board was statutorily obliged to calculate the amount of the levy in respect of the Scheme in accordance with the determination, including the Failure Score attributed to Ormsary Farmers thereunder (section 181(3)(b)). The Human Rights Act 1998 provided by section 6:

"(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right.

(2) Subsection (1) does not apply to an act if -

(a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; ...".

If the respondent had acted in any way which was incompatible with a Convention right (which was denied), then section 6(1) was disapplied by section 6(2).

[18] In addressing this contention Mr McNeill acknowledged that the only reviewable matter under the statute was the calculation of the levy (section 206 and schedule 9, para 19). Calculation, however, must include "proper" calculation of the amount of the levy applicable to individual schemes. There was no reason why the review system should not include issues of insolvency probability, including the Failure Score assigned by Dun & Bradstreet. The terms of the determination itself suggested a degree of flexibility.

[19] It is clear that section 175(5) of the 2004 Act prescribes that, before the beginning of each financial year, the Board must determine certain matters. These include "the factors by reference to which the pension protection levies are to be assessed". There is no mechanism under the statute for review of such a determination. On 1 March 2007 the Board published a document headed "Determination by the Board under section 175(5) of the Pensions Act 2004". It bore to make a determination in respect of the financial year 1 April 2007 to 31 March 2008. Among the matters so determined was:

"That in respect of that year the factors ... by reference to which the pension levies are to be assessed ... are to be as set out in the Schedule to this determination."

The Schedule is a detailed document, Part 3 of which is concerned specifically with the risk-based levy. Within that part are provisions concerned with the insolvency probability associated with an employer, including the use of a "Failure Score". It is prescribed that the failure scores to be provided (by Dun & Bradstreet) to the Board "are to be the normal failure scores which were or would have been assigned to that employer by DBUK in the ordinary course of business ...". That provision, which was capable of being applied to individual employers in the light of the relevant data at the relevant time, is clearly an integral part of the determination. As such it is not a reviewable matter under the statute. There is no provision for departing, on a discretionary or other basis, from the normal failure score. The calculation of the levy, which is a reviewable matter, proceeds on the basis of the assigned normal failure score, subject only to any correction made and intimated by DBUK. It is not disputed that the normal failure score assigned to Ormsary Farmers by Dun & Bradstreet in the ordinary course of its business (and not departed from by it) was 69. A challenge to the use of the normal failure score assigned to a particular employer is in effect a challenge to an integral part of the determination. Such a challenge cannot legitimately be made by a challenge to the calculation of the levy. In these circumstances it is clear, in our view, that the mechanism used by the appellants to challenge the failure score assigned to Ormsary Farmers is misconceived and that the appeal is on that basis also without foundation. It is unnecessary in these circumstances to express a view on the effect, if any, of section 6(2) of the Human Rights Act.

[20] For the foregoing reasons this appeal must be refused.