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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Legal & General Assurance Society Ltd [1999] EWHC Ch 196 (3rd November, 1999) URL: http://www.bailii.org/ew/cases/EWHC/Ch/1999/196.html Cite as: [1999] EWHC Ch 196, [2000] 1 WLR 1524

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Legal & General Assurance Society Ltd [1999] EWHC Ch 196 (3rd November, 1999)

HC 1998 NO. 00649

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

B E F O R E

THE HONOURABLE MR JUSTICE LIGHTMAN

B E T W E E N:

LEGAL & GENERAL ASSURANCE SOCIETY LIMITED

Appellant

(1) THE PENSIONS OMBUDSMAN
(2) CCA STATIONERY LIMITED
(3) PERSONAL INVESTMENT AUTHORITY
OMBUDSMAN BUREAU LIMITED

Respondents

A N D

CO 952/99

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CROWN OFFICE LIST

THE QUEEN

(1) THE PENSIONS OMBUDSMAN
(2) PERSONAL INVESTMENT AUTHORITY
OMBUDSMAN BUREAU LIMITED

LEGAL & GENERAL ASSURANCE SOCIETY LIMITED

JUDGMENT

Mr Nigel Inglis-Jones QC and Mr Richard Hitchcock instructed by
Sacker & Partners for Legal & General
Miss Monica Carss-Frisk instructed by Mr John Yolland
for the Pensions Ombudsman
Mr James Strachan instructed by Mr Philip Roberts for the
Personal Investment Authority Ombudsman Bureau Limited
CCA Stationery did not attend the hearing and were not represented

Hearing: 18th-19th October 1999
Judgment: 3rd November 1999

1. This judgment is given in two sets of proceedings relating to decisions on preliminary issues by the First Respondent, the Pensions Ombudsman ("the PO"). The decisions are challenged by way of appeal in the first set and by way of judicial review in the second. The proceedings raise the questions whether an appeal lies against a determination by the PO of a preliminary issue and whether the remit of the PO extends to investigating the fairness of the provisions of an insurance contract entered into by trustees as the investment vehicle of their pension scheme.

2. The PO is a commissioner whose office is established under Part X of the Pension Schemes Act 1993 ("the 1993 Act"). The jurisdiction of the PO is set out in Part X of the 1993 Act as amended by Sections 157-160 of the Pensions Act 1995, and as further provided in Rules and Regulations laid down from time to time pursuant to Section 149(2), (3) of the 1993 Act. Under Section 146 of the 1993 Act, the PO may investigate and determine complaints of alleged maladministration in connection with any act or omission of the trustees or managers of an occupational pension scheme or personal pension scheme.

3. The Second Respondent, CCA Stationery Limited ("CCA"), is the complainant in a complaint against the appellant, Legal & General Assurance Society Limited ("L&G"), made to the PO on the 10^th March 1998 ("the CCA Complaint"). The CCA Complaint is for practical purposes identical to a complaint ("the Edwards Complaint") made to the PO on the 15th September 1997 by an employee of CCA Mr Edwards. (I shall refer to the two complaints together as "the Complaints" and CCA and Mr Edwards together as "the Complainants"). CCA was the principal employer of the CCA Stationery Limited Pension and Assurance Scheme ("the CCA Scheme"). The trustees of the CCA Scheme ("the Trustees") used as its investment vehicle insurance contracts offered by L&G, a proprietary life office, which was (as well as insurer) the administrator of the CCA Scheme at least until the 24^th February 1992. The first contract between the Trustees and L&G was made in 1971 ("the 1971 Contract"). The 1971 Contract was replaced on or about the 28^th January 1980 by a second contract between the same parties ("the 1980 Contract"). The 1980 Contract in Part VII sets out the terms for discontinuance (or surrender) of the 1980 Contract:

In late February 1992, the existing shareholders of CCA sold CCA, and the purchasers thereupon caused CCA to take steps to discontinue the 1980 Contract and exercise the option contained in clause 1(ii) of Part VII. In a report to CCA dated the 13^th March 1992 L&G informed CCA that, whilst the notional value of the pool assets was £3,707,000, it had calculated the single cash sum payable to the Trustees at £2,973,000, and thereafter L&G paid this sum to the Trustees. L&G however refused to disclose the "basis currently in use by" L&G and used by L&G for the purpose of calculation of the single cash sum ("the Formula") on the ground that it was highly confidential. The combination of the difference between the notional value and the cash sum (which is capable of being viewed by those uninformed as to the reasons for the difference as a penalty payable on discontinuance) and the refusal on the part of L&G to disclose the Formula has been the occasion for dissatisfaction on the part of CCA and members of the CCA Scheme and has given rise to the Complaints.

4. The primary focus of the Complaints is upon the fairness of the 1980 Contract and in particular the fairness of the surrender terms therein contained and the failure of L&G to disclose the Formula. The Complaints each allege:

"(a) a failure on the part of L&G to ensure that [the 1980 Contract] provided sufficient funds in the event of a surrender together with a failure to notify the Employer, for whom they were managing the [CCA Scheme], of the potential lack of funds which would be available on surrender;

(b) a failure to provide fair surrender terms (L&G's 'current basis'), together with a failure to inform the Employer, on whose behalf they were acting, of the basis of the calculation under the surrender terms;

(c) a failure to comply with the Pension Schemes Act 1993 as regards members' statutory right to a cash equivalent."

5. On the 5^th May 1998 L&G served upon the PO and the Complainants' solicitors, Nabarro Nathanson ("the Solicitors"), a notice raising preliminary issues ("the Preliminary Issues") going to the jurisdiction of the PO to investigate the Complaints. Provision for preliminary issues is made by Regulation 6(4)(b) of the Personal and Occupational Pension Schemes (Pensions Ombudsman) (Procedure) Rules 1995 ("the 1995 Rules"). On the 25^th July 1998 the PO issued a provisional determination ("the Provisional Determination") in respect of certain of the Preliminary Issues. The PO declined to consider others as preliminary issues. The effect of the Provisional Determination was that investigation of the Edwards Complaint was provisionally discontinued, but the investigation of the CCA Complaint was provisionally continued. On the 28^th August 1998 L&G made submissions in response to the Provisional Determination. On the 7^th January 1999 the PO promulgated a final determination ("the Determination") to the same practical effect as the Provisional Determination.

6. L&G have commenced two actions in the High Court in respect of the Determination, one (by way of appeal) in the Chancery Division and the other (by way of judicial review proceedings) in the Queen's Bench Division (Crown Office List). Both actions came before me for trial at the same time. CCA was not represented and took no part in the proceedings. The PO attended by Counsel to assist the Court. The proceedings in the Chancery Division were commenced by a notice of originating motion dated the 4^th February 1999. In the proceedings L&G appealed against three decisions of the PO in the Determination, contending that in making those decisions the PO erred in law. Those decisions were:

(a) that the CCA Complaint was brought within the time limits by which his jurisdiction is bound;

(b) that he is not deprived of jurisdiction to investigate in relation to the CCA Complaint by operation of Regulation 4 of the Personal and Occupational Pension Schemes (Pensions Ombudsman) Regulations 1996 ("the 1996 Regulations");

(c) that the fact, if such it be, that L&G was no longer responsible for the management of the CCA Scheme at the relevant time does not affect the PO's jurisdiction over former managers.

There is as yet no authority on the question whether an appeal lies against a determination by the PO of a preliminary issue. That is the first question I have to decide on the appeal.

7. The proceedings in the Queen's Bench Division (Crown Office List) were commenced by a notice of application dated the 5^th March 1999. There are two parts to this application. The first part is an application for permission to apply for an order of prohibition preventing the PO from investigating that part of the CCA Complaint which relates to the fairness or otherwise of L&G's surrender terms. L&G had sought to raise as a preliminary issue the question whether it was within the remit of the PO to investigate that part of the complaint and the PO had declined to determine it. By an Order dated 15^th April 1999, I granted permission to apply for such order. The second part is an application for permission to challenge the three decisions the subject of the appeal in the eventuality that it might be held that there is no jurisdiction in the High Court to entertain the appeal. By my Order dated the 15^th April 1999 I adjourned this part of the application for permission until the date of the hearing of the appeal.

8. The 1980 Contract was (as was the 1971 Contract) an insurance contract designed as a long term investment and administration vehicle for the trustees of small to medium sized occupational pension schemes. Under the 1980 Contract, the Trustees paid premiums to L&G - the contributions required in order to fund the benefits due under the CCA Scheme - and L&G placed those in the with profits section of its long term fund. While the 1980 Contract remained ongoing, the premiums thus invested had guaranteed increments and also discretionary bonuses added to them in such a way as to provide a smoothed investment growth. The ongoing contract also provided a guarantee: provided that the Trustees paid the premiums ascertained by L&G to be necessary in order to meet the liabilities of the CCA Scheme, L&G guaranteed, while the 1980 Contract remained ongoing, to pay the benefits due to scheme members as and when they fell due. This guarantee was fulfilled throughout the life of the 1980 Contract. Also throughout the life of the 1980 Contract L&G met periodically with CCA and the Trustees. Amongst other things the purpose of these meetings was to review the funding position of the CCA Scheme, the performance of the 1980 Contract, and the propriety or otherwise of retaining the 1980 Contract as the investment vehicle for the CCA Scheme.

9. On the 28^th August 1991, L&G was informed for the first time that CCA was likely to be sold. In those circumstances the possibility of the CCA Scheme, and therefore the 1980 Contract, being discontinued was discussed. Mr. Walmsley, who was until the sale of CCA its controlling director as well as one of the Trustees, was anxious that a funding review be carried out swiftly, and L&G understood the reasons for this to be the nearness of the impending sale and the fact that he wished three senior employees to leave CCA on favourable early retirement terms. On 20^th November 1991 L&G wrote to CCA and emphasised that, were the CCA Scheme and the 1980 Contract to be terminated, the CCA Scheme would be in deficit. On the 26^th November 1991 L&G wrote to Halliwell Landau, solicitors retained by CCA in respect of the proposed sale, confirming its understanding that the 1980 Contract was to continue after the sale, but stating that, were such not to be the case, discontinuance terms would be applicable. L&G went on to invite Halliwell Landau to discuss the discontinuance terms if they felt it relevant. In fact neither CCA (prior to the sale) nor their solicitors took that matter any further.

10. The first knowledge L&G had of the sale of CCA was from a letter dated 24^th February 1992 from Mr. Scholes, the new Chairman and Chief Executive appointed after the sale of CCA had been completed. This informed L&G that it had been replaced with immediate affect as the administrator of the CCA Scheme by Pearson Jones & Company (Trustees) Limited, later PJC Pension Services ("PJC"), and that PJC were authorised to negotiate with L&G the discontinuance terms under the 1980 Contract. On the 26^th February PJC wrote to L&G stating that it was taking over all administration services with immediate effect and requested L&G to let them have its discontinuance terms. By its reply to PJC dated the 2^nd March 1992 L&G warned that due to the generally poor investment conditions as opposed to the declared bonuses under the 1980 Contract, and due to the fact that the 1980 Contract incorporated a Capital Guarantee, the amount available on discontinuance would be substantially lower than the nominal asset value of the contract shown, for instance, in the recent actuarial valuation. The 1980 Contract was discontinued. On the 13^th March 1992, L&G supplied a discontinuance quotation to PJC and subsequently paid the sum which L&G calculated as due to the Trustees.

11. The first issue raised before me was whether it was possible to appeal to the High Court against a determination by the PO of a preliminary issue. Apparently this question has never arisen before. It is obviously a question of the greatest importance since the determination of a preliminary issue may affect, or indeed be determinative of, the outcome of a complaint or question. This issue was raised by Ms Monica Carss-Frisk, Counsel for the PO, not in order to prevent the decisions of the PO being reviewed, but to assist the Court on the appeal by bringing to its attention a question which arises relating to the jurisdiction of the court. Far from seeking to take advantage of any technicality, she made it clear that the PO was anxious to obtain as much guidance as was available from the court on the various questions of law raised in these proceedings and that, if it were held that an appeal was not available on the issues raised on the appeal by L&G, the PO did not oppose those issues being determined in the judicial review proceedings. I should acknowledge the quality of the assistance that I received from her measured and incisive submissions in this case.

12. The availability of an appeal must depend upon the provisions of the 1993 Act and the 1995 Rules. Section 146 of the 1993 Act confers jurisdiction on the PO to investigate certain specified complaints and disputes. Section 149(2) provides that the Secretary of State may make rules with respect to the procedure that is to be adopted in connection with the making of complaints, the reference of disputes and the investigation of complaints made and disputes referred. Section 151 provides (so far as material) as follows:

"151 Determinations of the Pensions Ombudsman

(1) Where the Pensions Ombudsman has conducted an investigation under this Part he shall send a written statement of his determination of the complaint or dispute in question-

(a) to the person by whom, or on whose behalf, the complaint or reference was made, and

(b) to any person (if different) responsible for the management of the scheme to which the complaint or reference relates and any such statement shall contain the reasons for his determination.

 

(2) Where the Pensions Ombudsman makes a determination under this Part ... he may direct [any person responsible for the management of the scheme to which the complaint or reference relates] to take, or refrain from taking, such steps as he may specify in the statement referred to in subsection (1) or otherwise in writing.

...

(3) Subject to subsection (4), the determination by the Pensions Ombudsman of a complaint or dispute, and any direction given by him under subsection (2), shall be final and binding on-

(a) the person by whom, or on whose behalf, the complaint or reference was made,

(b) any person (if different) responsible for the management of the scheme to which the complaint or reference relates, and

(c) any person claiming under a person falling within paragraph (a) or (b)]

(4) An appeal on a point of law shall lie to the High Court ... from a determination or direction of the Pensions Ombudsman at the instance of any person falling within paragraphs (a) to (c) of subsection (3).

(5) Any determination or direction of the Pensions Ombudsman shall be enforceable-

(a) in England and Wales, in a county court as if it were a judgment or order of that court, and ...."

 

13. In my judgment, the provision for an appeal in Section 151(4) is limited to appeals from final determinations and does not extend to appeals from interim determinations. The whole subject matter of Section 151 is final determinations. Subsection (1) is concerned with determinations of "the complaint or dispute in question", and that must mean "final determinations of the complaint or dispute". Subsection (2) is concerned with the giving of directions consequent upon such a final determination. Subsection (3) makes the determinations covered by the section "final and binding" and subsection (4) makes them enforceable as if judgments or orders of the County Court - again apposite only to final rather than interim determinations. Indeed there is no reference to interim determinations in the 1993 Act. The only reference to them is in Regulation 6(4) of the 1995 Regulations made pursuant to Section 149(2) of the 1993 Act. Regulation 6(4) provides that upon receiving a copy of the details of a complaint or dispute, the respondent may in its reply or in a separate notice to the PO request a determination of any question as a preliminary issue. Beyond this barest of references to preliminary issues, nothing further is said even in the 1995 Regulations.

14. Whilst it is true that a preliminary issue will or may result in a determination of that issue, such a determination is outside the ambit of Section 151(4). Any conferment of a right of appeal to the High Court from a decision on a preliminary issue requires an amendment of Section 151: the statutory power to make regulations conferred by Section 149(2) cannot authorise any such right of appeal and Regulation 6(4) does not purport to do so. In the circumstances with great regret I must hold that there is no jurisdiction conferred on the High Court to hear appeals from decisions of the PO on preliminary issues. This is most unfortunate: occasions can and will occur when appeals from determinations on preliminary issues, as much as on final determinations, are called for. It may be that appeals should only be allowed on preliminary issues with leave, but the lacuna precluding any appeal in any case is calculated to occasion serious injustice and inconvenience. The absence of a right of appeal does not preclude the availability of judicial review proceedings as a means of challenging the PO's decisions in cases where judicial review is available, but judicial review will not always be available and in any event it is scarcely sensible to have distinct grounds and channels for review of the PO's decisions in the case of interim and final determinations. Fortunately (by common consent) this is a case where the challenges to the decisions of the PO are such that, since they cannot be determined by way of appeal, they can be the subject matter of judicial review proceedings. Therefore I give permission to L&G to proceed with the judicial review proceedings raising those challenges. I must now turn to each of the four questions of law raised in the judicial review proceedings.

15. The time limits for investigations by the PO are laid down in Regulation 5 of the 1996 Regulations. This provides:

"(1) Subject to paragraphs (2) and (3) below, the Pensions Ombudsman shall not investigate a complaint or dispute if the act or omission which is the subject thereof occurred more than 3 years before the date on which the complaint or dispute was received by him in writing.

(2) Where, at the date of its occurrence, the person by or in respect of whom the complaint is made or the dispute is referred was, in the opinion of the Pensions Ombudsman, unaware of the act or omission referred to in paragraph (1) above, the period of 3 years shall begin on the earliest date on which that person knew or ought reasonably to have known of its occurrence.

(3) Where in the opinion of the Pensions Ombudsman, it was reasonable for a complaint not to be made or a dispute not to be referred before the end of the period allowed under paragraphs (1) and (2) above, the Pensions Ombudsman may investigate and determine that complaint or dispute if it is received by him in writing within such further period as he considers reasonable."

 

16. The PO determined that the CCA Complaint had not been submitted before the expiry of three years after the occurrence of the acts or omissions complained of (within Regulation 5(1)) or within 3 years of the date that CCA became aware of those acts or omissions (within Regulation 5(2)); but that it had been brought within such further period as was reasonable (within Regulation 5(3)). The first two of these propositions is common ground; contention focuses on the last of these three propositions and on the words in Regulation 5(3) "if it is received by him within such period as he considers reasonable". Mr Edwards as a member could at any time have made a complaint against L&G as manager. For the first time the Pensions Act 1995 on the 6^th April 1997 conferred on CCA as employer a statutory right to make a complaint against L&G as manager. CCA did not make a complaint until the 10^th March 1998. The short question is whether it was open to the PO to hold as he did that the delay between the 6^th April 1997 and the 10^th March 1988 was in all the circumstances reasonable.

17. I must first set out the relevant chronology:

(1) the 1980 Contract was discontinued on or about the 24^th February 1992;

(2) L&G provided its discontinuance quotation on the 13^th March 1992 and the last tranche of payments to the Trustees was made on the 31^st March 1994. There was a continuing failure after the 13^th March 1992 on the part of L&G to disclose the Formula;

(3) the 1996 Regulations were made on the 25^th September 1996, were laid before Parliament on the 2^nd October 1996 and came into force on the 6^th April 1997. It may be assumed accordingly that CCA knew that it would have a right to make a complaint long before it became exercisable on the 6^th April 1997;

(4) the Solicitors on behalf of Mr Edwards made his complaint on the 15^th September 1997. It was a complaint made on his own behalf alone, and not on behalf of anyone else, though in it he claimed a payment of the full loss occasioned by the alleged maladministration to the scheme fund. On the 17^th September 1997, the PO rejected his complaint as out of time;

(5) on the 23^rd September 1997 the Solicitors requested the PO to reconsider his decision. By letter dated the 1^st October 1997 the PO wrote back setting out reasons why he would not uphold the complaint;

(6) on the 31^st October 1997 the Solicitors wrote to the PO stating that CCA and Mr Edwards were working closely together in respect of a complaint to the PO, and asking whether the PO envisaged any problems if CCA submitted the same complaint. (I may add that it is common ground that Mr Edwards was being used as a stalking horse in respect of a complaint by CCA). By his reply dated the 31^st October 1997, the PO replied that it was believed that any complaint by CCA would necessarily be rejected as out of time;

(7) by letter dated the 22^nd December 1997 the Solicitors requested the PO to review both complaints. The PO's reply dated the 10^th February 1998 ("the Letter") was in the following terms:

"I have shown Dr Farrand the file and he has decided to accept Mr Edwards' complaint for investigation...

Before I arrange for the complaint to be forwarded to the manager in the normal way, I would like you to consider further the possibility of a complaint by the company as employer against the manager, as mooted by yourself. No such complaint has yet been made, but from what you have said it does appear that such a complaint would be appropriate and Dr Farrand has indicated to me that he accepts that such a complaint would not be time barred."

The CCA Complaint duly followed on the 10^th March 1998;

(8) the PO allowed L&G to make representations on the question whether the CCA Complaint was out of time, but rejected those representations both in the Provisional Determination and the Determination.

 

18. (a) Bias

The first question raised by L&G is whether the decision of the PO that the CCA Complaint was received "within such further period as he considered reasonable" was tainted by pre-judgment or bias. The Letter both invited the CCA's Complaint and pre-judged it as made within time without any opportunity being afforded to L&G to make representation on the issue. The total impropriety of this action on the part of the PO was acknowledged by the PO's Counsel before me. L&G argued that, though the PO did subsequently allow L&G to make representations on this issue, the attitude and mindframe displayed by the PO in the Letter coloured his views on this issue at all later stages. The reasonable concerns on the part of L&G regarding the attitude of the PO occasioned by the Letter were undoubtedly aggravated by the refusal of the PO at any time before this hearing to acknowledge that, in writing the Letter in the terms which he did, he did anything wrong. Before me the PO (somewhat surprisingly) sought to justify this attitude on the ground that the PO could not be expected to "fall on his sword", demean himself and acknowledge any such error. In my judgment L&G had every ground for feeling a sense of grievance and unease in respect of his impartiality and open-mindedness and it was incumbent on the PO to seek to reassure L&G on this score. The obvious and proper way to reassure L&G was to acknowledge his error in pre-judging the issue in the Letter. Where a person is entrusted with the role of investigating maladministration by others, he must surely be ready to acknowledge maladministration on his own part in the course of his investigation, most particularly when this is necessary to re-establish confidence in him. But whilst in the circumstances I have referred to anxiety on the part of L&G on the ground of perceived pre-judgment and bias which is fully understandable, since the PO did in fact permit L&G to make representations and gave consideration to them in his determinations, I do not think that the evidence before me enables me to set aside the decision on that ground. Justice would better be seen to have been done if the decision on time-limits could in the circumstances have been made by someone else, but that was not possible because the 1993 Act confines all decision-making to the PO.

(b) Unreasonableness

The second complaint by L&G is that the PO's decision on this question of the timing of the CCA Complaint was "Wednesbury" unreasonable. The PO explains his decision in the Determination as follows:

"5.2 The second objection is that CCA did not bring the complaint until some 6 years after the relevant events, and that I did not have evidence before me as to the reasonableness of the complaint not being brought until then. However CCA were not able to bring a complaint until 6 April 1997, the date when complaints from employers were first brought within my remit. In my provisional determination of these matters I explained that I considered it reasonable for the complaint not to have been made when it could not have been ....

5.4 I remain of the opinion that it was reasonable for the complaint not to be brought during the time that Mr Edwards' complaint was being pursued. For much of the time [the Solicitors] were attempting to persuade my officials, against their judgment, that Mr Edwards' complaint should be investigated. [L&G] imply that a well informed prudent solicitor would have advised his client to complain much earlier than [the Solicitors] actually did. Even if this were so, I do not think that either [the Solicitors] or CCA's actions can be said to have been unreasonable in the circumstances.

5.5. For the reasons given above in my opinion, it was reasonable for CCA's complaint not to have been submitted before the expiry of three years after they were first aware of the acts or omissions complained of. Also in my opinion the complaint was brought within such further period as was reasonable."

19. As I have already said, no issue arises as regards the first sentence of paragraph 5.5: that is common ground. Contention focuses on the second. It is clear that CCA decided to postpone bringing any complaint until after it knew whether the Edwards' Complaint was accepted: the Edwards' Complaint was intended as a stalking horse. What the PO never inquired into was why CCA adopted this policy. I find it very difficult to understand how it can have been found that the adoption by CCA of this policy was reasonable when the reasons for doing so are totally unexplained and unexplored. It may be thought that reason required both complaints to proceed in tandem (as CCA ensured was the case once the PO showed his hand on the 10^th February 1998). The delay by CCA was deliberate and substantial and persisted even during periods when the Edwards' Complaint had been rejected. I do not think that the CCA Complaint was brought within a reasonable further period, but I hesitate to hold that no sensible PO acting with due appreciation of his responsibilities would have held the period reasonable. Accordingly whilst I consider that the PO's decision is on the margins of rationality, with some hesitation I have concluded that I cannot disturb his decision on this ground.

20. The next issue raised by L&G was whether the jurisdiction of the PO was excluded by Regulation 4 which precludes him from investigating any complaint or dispute which can be investigated by the Personal Investment Authority Ombudsman Bureau Limited ("the PIAOB"). The PO rejected the argument that he was so precluded referring to and relying on his understanding of the interpretation by the PIAOB of its own rules. The question of jurisdiction however depends, not upon how PIAOB interpret their rules, but upon the true construction of its rules. This question brings me to explain the participation of the PIAOB in these proceedings.

21. It is important that, when proceedings raise for determination issues of law which vitally affect some third party (e.g. the determination of that party's statutory powers or duties), the third party should be notified of this fact at as early a date as is possible so that he can decide whether he should seek permission to intervene and seek leave to make submissions to the court. If this is not done, the court may adjourn proceedings to allow the third party this opportunity. Unfortunately this course was not taken in this case and PIAOB only learnt of this hearing shortly before it began. Nonetheless at the commencement of the hearing Mr Strachan on behalf of PIAOB submitted a skeleton argument and applied for permission to be added as a party to address the Court on the construction of its rules. I acceded to this application. The skeleton was of such exceptional clarity and force that on reading it L&G conceded that PIAOB had no jurisdiction in respect of the CCA Complaint and abandoned this ground of appeal. I ordered L&G to pay PIAOB its costs which I assessed at £1,500 plus Value Added Tax.

22. Before I turn to the third issue which is concerned with the question whether L&G's conduct in respect of the discontinuance and calculation of the sum payable on discontinuance is an act of management, I think that it is convenient to turn to the related issue raised in the judicial review proceedings, namely whether the PO has jurisdiction to inquire into the fairness or otherwise of L&G's surrender terms.

23. The remit of the PO is to investigate maladministration by L&G acting in the capacity of a manager. The concept of "maladministration" is broad and includes bias, inattention, delay, incompetence, ineptitude, perversity, turpitude and arbitrariness: see R v. Local Commissioner for Administration [1979] 1 QB 287 at 311 H-312B. It is concerned with the decision-making process rather than the merits of a decision. I agree with Mr Inglis-Jones (for L&G) that the jurisdiction to investigate maladministration does not enable the PO to reopen and consider the merits or fairness of the terms of the 1980 Contract, which is a commercial contract between the Trustees and L&G. The terms (and in particular the terms for discontinuance and the Formula) may turn out to be advantageous or disadvantageous for the scheme members. But neither the entry into the 1980 Contract nor its continuance in force constitutes an act of management, let alone within the purview of the PO: nor in the ordinary course can the question of the perceived fairness or unfairness of the exercise by L&G of contractual rights granted by the 1980 Contract to L&G for its own benefit within the remit of the PO. The position of the PO on this issue has been equivocal before me as it has in correspondence preceding these proceedings. Thus e.g. in a letter dated the 1^st October 1997 the PO wrote to the Solicitors:

"The question of a surrender penalty applied to an occupational pension scheme is not a matter over which a scheme member has any influence, it being strictly a contractual matter between the trustees and the insurers. Therefore it is my view that as regards the surrender penalty [Mr Edwards] as a member of the pension scheme can have no complaint against [L&G] as managers."

The PO concedes that he can afford no relief to CCA if he finds unfairness, that he cannot alter the terms of the 1980 Contract or vary the sum payable thereunder on discontinuance. It is plain that he has no greater power in this regard than the Court: see Edge v. Pensions Ombudsman [1999] PLR 215. Nonetheless he maintains that he is free to investigate this issue. In my judgment, the fairness of the terms is outside his remit and L&G ought not to be subjected to an investigation on this topic.

24. I turn back to the third issue on the appeal. The short question raised is whether the process of the calculation of the sum payable on discontinuance made on the 13^rd March 1992 is capable of constituting maladministration by L&G. In my view the refusal on the part of L&G to disclose the Formula was in breach of the terms of the 1980 Contract. The principle must be clear that (in absence of some contractual provision to the contrary) where a contract provides for a payment to be made calculated in accordance with a formula known to one party alone, that party must disclose the formula to the other party: one party cannot require the other to accept his calculation made in accordance with a formula without such disclosure and to accept his figure in blind faith that the calculation is correct. There is no provision in the 1980 Contract requiring the Trustees to accept the calculation made by L&G without disclosure of the Formula and an opportunity to check the correctness of the calculation. If the calculation of the sum payable under the 1980 Contract is an act of management by L&G, then it does seem to me open to the PO to investigate the conduct of L&G as possible maladministration.

25. It is apparent that the full facts regarding the cesser of management functions by L&G have yet to be explored and it is not possible to say what stage had been reach on the 23^rd March 1992. I am not prepared to hold that the calculation was not an act of management by L&G and that it is not an area within the remit of the PO. Indeed there is much to be said for holding that the calculation and payment of the sums due under the 1980 Contract were the concluding acts of management by L&G and that so long as L&G withheld the Formula, this was an area which called for the attention of the PO in order to protect the interests of members and the CCA. I should however mention that (under pressure from me), at a very late stage L&G agreed to provide the PO and CCA in confidence with the Formula and the PO agreed to receive this information in confidence and only to pass it on to CCA in confidence. This action on the part of L&G should enable any doubts or anxieties about the correctness of the calculation by L&G (albeit belatedly) to be resolved without delay.

CONCLUSION

26. The parties should prepare a minute of order setting out in the form of declarations the answers which I have given to the issues raised before me. My decision leaves to the PO limited areas for further investigation. When deciding how far to pursue them, the relevant considerations in his mind no doubt will include the late provision of the Formula, the reasons for previously withholding it and the length of time that has elapsed since the dates of the events in question.

*****