HHJ SIMON BARKER QC
Introduction
- This appeal is brought under s.151(4) of the Pension Schemes Act 1993 ('PSA 1993') in respect of a determination by the Pensions Ombudsman ('PO') dated 9.3.16. Dr William Baugniet ('WB') was the complainant and is the appellant. Capita Employee Benefits Limited, trading as Teachers Pensions, ('TP') and the Department for Education ('DfE') were respondents to the complaint and are respondents to the appeal. S.151(4) provides that an appeal on a point of law lies to the High Court from a determination of the PO at the instance of specified persons including a person by whom the complaint was made to the PO.
- S.146 PSA 1993 sets out the functions of the PO and provides at s.146(1), in so far as material,
"The [PO] may investigate and determine the following matters-
(a) a complaint made to him by an actual or potential beneficiary of an occupational pension scheme who alleges that he has sustained injustice in consequence of maladministration in connection with any act or omission of a person responsible for the management of the scheme,
(b)
.
(c) any dispute of fact or law in relation to an occupational or personal pension scheme between-
(i) a person responsible for the management of the scheme, and
(ii) an actual or potential beneficiary".
- The relevant scheme is the Teachers Pension Scheme ('TPS'). WB is a beneficiary. TP is administrator of the TPS and DfE is its manager, each is a person responsible for the management of the TPS.
- There is no statutory definition of maladministration. The Shorter Oxford English Dictionary's definition includes : "inefficient or improper management of affairs". In Arjo Wiggins Limited v Ralph [2009] EWHC 3198 (Ch), also an appeal from the PO, Lewison J, as he then was, referred to maladministration as
"
a broad concept which goes further than a violation of legal rights. There can be maladministration even if a person's legal rights are not infringed";
cited numerous types of conduct in the process of managing the affairs of a pensions beneficiary which would amount to maladministration; and continued
"on the other hand, many of the categories of matter within the [PO]'s remit will involve allegations that legal rights have been infringed.
6 So a determination by the [PO] might involve questions of breach of contract; breach of the terms of a pension trust deed; breach of trust; misrepresentation, poor advice or negligence".
Lewison J also noted that s.150(7) PSA 1993 enables the PO to refer any question of law for determination in connection with a complaint or dispute to the High Court.
- In Arjo Wiggins, Lewison J also considered the powers of the PO by reference to other authorities. The following are relevant to this appeal :
(1) it is well settled that, in principle, the PO must decide disputes in accordance with established legal principles rather than by reference to what he himself considers to be fair and reasonable, Henderson v Stephenson Harwood [2005] PLR 209;
(2) in general, the PO does not have the power to make an order that the court could not make, Wakelin v Read [2000] OPLR 277, although the PO is not tied to the precise form of relief a court would grant, Henderson v Stephenson Harwood;
(3) injustice resulting from maladministration not involving infringement of legal rights may be afforded a remedy, such as an apology and/or modest compensation for distress or inconvenience, Westminster City Council v Haywood [1998] Ch 377. In 1998, the court considered that an award in excess of £1,000 should be not be made absent very exceptional circumstances, City and County of Swansea v Johnson [1998] Ch 189.
- As to the upper limit of compensation for maladministration not infringing a legal right and falling short of being very exceptional, City and County of Swansea was determined almost two decades ago. Reconsideration the £1,000 upper limit for unexceptional cases is appropriate, if not overdue. Inflation indexes are a matter of public record. In the absence of specific evidence, but by reference to the Bank of England's online inflation calculator, the present £sterling equivalent of £1,000 in 1998 is in excess of £1,600. In proportionate terms that is a material uplift. In my view, after two decades it is time to rebase the upper limit for compensation falling short of being very exceptional at £1,600.
- Miss Ovey, TP's counsel, acknowledged that complaints which may be characterised in lawyer's terminology as negligence fall within the PO's power to investigate and determine any dispute of fact or law under s.146(1)(c). That is so, but, as Miss Ovey acknowledged and as is clear from Arjo Wiggins, negligence may also be characterised as maladministration by a complainant.
- Explaining the role and approach of the PO, Miss Ovey submitted that the PO does not look closely at the distinction between maladministration and disputes of fact or law for the purpose of establishing his jurisdiction and that he looks to investigate the facts when dealing with any complaint. However, and as is apparent from the above summary of relevant law, the distinction may be important, not least when it comes to remedy.
- It is for the PO, whose functions and powers include investigation, to be alert to such a possibility depending on the facts of the complaint. This is all the more so where the complainant contends that (s)he has suffered financial loss.
The determination under appeal
- WB is dissatisfied with a determination by the Pensions Ombudsman dated 9.3.16.
- WB's complaint concerned the service credit afforded to him on transferring the value of a personal pension with Scottish Widows ('SW') built up during previous employment into the TPS following WB's change of occupation to teacher as from 1.9.10. On this appeal WB raised two issues of law in the context of his pension transfer : (1) the legal significance and consequences of delay and (2) whether there is a legal right to or requirement of informed consent.
- The circumstances of WB's pension transfer were not straightforward and were affected by events outside the control of the parties. In his grounds of appeal, WB expressly accepted the PO's findings of fact. For the purposes of this appeal TP co-ordinated the preparation of a full chronological bundle and the parties made extensive reference to the documents because an appreciation of the factual background is necessary in order to understand the PO's determination and the grounds of appeal. I assume that the appeal bundle reflects the material presented to and gathered by the PO, except in so far as it includes correspondence post-dating the PO's determination, not least because no application was made for the removal of any material.
- Given the importance of the chronology of events to the determination of this appeal, I pause here to summarise the facts in chronological order :
(1) It is a matter of record that in the Budget statement of 23.3.11 the then Chancellor of the Exchequer announced that the then recently published recommendations of the Independent Public Service Pensions Commission would be the basis for consultation with public sector workers, unions and others and proposed increasing employee contributions by an average of 3%. The Commission's recommendations included moving from final salary pensions to career averaged earnings as a new basis for general use in public service pension schemes in the future but without affecting accrued rights. This sounded a warning bell in relation to pensions at a time when low interest rates had become an established feature of investment and the government was focussing on austerity measures to bring about recovery from the 2007/2008 financial crisis;
(2) in and from April 2011, WB was considering transferring the value of his SW pension into the TPS. To this end, on 11.5.11, SW provided two transfer values: one for £39,664.32 based on WB's regular monthly premiums of £80.77 paid to 28.8.07 and the other for £7,021.73 in respect of protected rights based on DSS premiums paid to 1.7.08, when a premium of £919.00 gross had been paid. WB sent a duly completed transfer in form together with the SW transfer values and a declaration of claim discharge in favour of SW to TP, which TP received on 8.8.11;
(3) on 17.8.11, TP wrote to WB informing him that
"
Using [the transfer value information provided by [SW] we have calculated that this will buy an estimated service credit of 5 years and 124 days pensionable service in the [TPS].
.
The transfer value offered by your previous scheme takes account of the current market conditions. If there are any delays in responding to this offer there may be an effect on the actual credit service that you receive. If you decide to proceed, a further calculation will be undertaken to determine your actual amount of service after we have received the payment from your previous provider.
.
We also recommend that you seek independent financial advice before making any decisions.
If you decide to proceed with the transfer you should return the Decision Form direct to [TP]. At the same time you should forward the Request for Transfer Payment Form to your previous pension provider. If we do not hear from you within 12 months of today's date we will assume you have decided not to proceed with the transfer.
If you decide to accept the transfer and have not received confirmation from us within 4 months that the transfer is completed, you may wish to contact your previous provider";
Although TP's letter refers to the transfer value offered by SW taking account of current market conditions, which appears to be a reference to SW having regard to market conditions when stating a value, it is also the case that TP, as part of TP's calculation of service credit, applied an actuarial factor (1/1.274 at the relevant time) in respect of market conditions when calculating service credit;
(4) upon receipt of that letter WB telephoned TP to request details of the calculation of the estimated service credit and was told that TP had based its calculation on a total figure of £39,664.42. Upon informing TP of their error TP asked WB to obtain a quote from SW showing the total value on one page;
(5) on 31.8.11, SW replied complying with WB's request and pointed out that the original information provided, distinguishing between unprotected and protected rights, "includes sufficient information for any pension scheme looking to accept a transfer of pension benefits". WB sent this further transfer valuation to TP on 27.9.11. TP noted internally "We have received a very different TV from [SW] so I have run through the system again";
(6) on 30.9.11, TP wrote to WB informing him that the estimated service credit was 6 years and 45 days. The letter was otherwise in the same form as that of 17.8.11. TP enclosed the 31.8.11 SW declaration of discharge countersigned on behalf of TP accepting the transfer as scheme administrator, not trustee. The letter informed WB again that the service credit was an estimate which "takes account of the current market conditions" and warned again that "any delays in responding [might] have an effect on the actual service credit that you receive";
(7) on 26.10.11, WB wrote to SW instructing a transfer value payment to TP and to TP requesting a transfer of pension credit into the TPS. TP received WB's request on 27.10.11 and SW received WB's instruction on 28.10.11. On 31.10.11, SW informed WB that £47,766.83 had been transferred to TP in settlement of the transfer value which TP received on 3.11.11. On 4.11.11, TP acknowledged receipt and informed WB that the amount of his service credit would shortly be confirmed in writing;
(8) in the meantime, also on 26.10.11, the government approved revised HM Treasury guidance on discount rates used for calculating Cash Equivalent Transfer Values ('CETV') and the Government Actuaries Department ('GAD') advised that work on the operation of CETVs should be suspended with immediate effect. The documents in the appeal bundle reveal a dispute between WB and TP as to whether the embargo was implemented on 26.10.11 or 27.10.11. I regard that dispute as immaterial because the PO determined as a fact that 26.10.11 was the day that the embargo took effect and further because implementation was by reference to the date of actual receipt of the transfer value, which was unquestionably after 27.10.11;
(9) on 3.1.12, TP wrote to WB referring in general terms to the budget announcement of 23.3.11 and stating that new CETV factors were awaited and that there was no timescale for the provision of those factors. It appears from correspondence between TP and the PO that TP received the new factors on 23.1.12;
(10) on 3.1.12, again on 1.3.12, and yet again on 18.2.13, TP wrote to SW requesting confirmation of the amount of the transfer concerning WB. SW replied promptly to both the 1.3.12 and 18.2.13 letters and, in a letter to WB dated 16.5.14, said that the information in those letters would have been issued to TP "as a matter of course when the transfer took place in 2011". SW's reply is entirely credible and the reasoning of the PO, adopting the opinion of the adjudicator for the Pensions Ombudsman Service ('the adjudicator') noted by reference to the material before him that TP's letter of 3.1.12 was sent because TP could not locate the original documentation received from SW, which stands as a fact for the purposes of this appeal;
(11) on 31.5.13, TP wrote to WB informing him that his transfer of pension value amounted to a service credit of 3 years and 235 days. This prompted a telephone call from WB to which TP responded by a letter dated 13.6.13. TP explained the reduction in service credit as follows :
"Your acceptance form was received on 27 October 2011 and a payment of £47,766.83 was received on 3 November 2011. Unfortunately, we were unable to finalise your transfer at this time as an embargo had been placed on all transfers by the [GAD]. When the embargo was lifted early 2012, the pension factors had been changed with effect from 27 October 2011.
We were still not able to finalise the transfer as we had not received a letter from [SW] confirming the final transfer payment amount. We wrote to them three times which resulted in a letter being received in 2013. At this point we were able to finalise the transfer at 3 November 2011 (when the payment was received).
As the pension factors had changed, this resulted in a reduced service credit of 3 years 235 days. I have enclosed the final clerical calculation for you".
Based on the findings of the adjudicator and by reference to the documents in the appeal bundle before me, TP's statement in the penultimate paragraph quoted above lacks candour to the point of untruth. The truth is that TP had lost and/or failed to have regard to timeous communications from SW. In addition, and as will become apparent, yet again the calculation of WB's entitlement was incorrect;
(12) on 28.6.13, WB wrote to TP making a formal complaint. The factual basis of the complaint was that the transfer should have been considered as having been notified before the change of pension factors because (1) TP's original calculation error led, so WB contended, to a 43 day delay (17.8.11 to 27.9.11), and (2) the transfer notice was signed and posted the day before the change of pensions factors took effect. WB characterised his own position as faultless and complained of maladministration on the part of TP;
(13) WB's letter was treated as triggering the first stage internal dispute resolution procedure which TP resolved against WB by relying on SW's quotation for personal pension fund transfer value as the total transfer value, making no reference to the protected rights transfer value, and not accepting any responsibility for the original error. TP's internal dispute resolution letter, dated 16.10.13, expressly confirmed that the Regulations had been correctly applied;
(14) WB then invoked the second stage of the dispute resolution procedure and referred his complaint to the pensions policy manager at the DfE. The DfE's response, dated 13.11.13, accepted that TP did miscalculate the transfer value and did cause a delay. However, the DfE expressed the view that it was equally arguable that WB had caused a similar delay between completing and sending the transfer application. As to processing WB's transfer after the embargo, the DfE stated that
"A decision to reverse a transfer is largely dependent upon the transferring scheme accepting the repayment of the transfer value, but the view was taken that transfers being processed should be concluded.
In terms of your having suffered a loss, on the date that the transfer value was received it was determined by reference to factors provided by the [GAD] that it was equivalent to a particular amount of service. While this figure was less than you had expected based on the previous quotation, there was no legal entitlement to any other service credit figure until the transfer was actually received".
In relation to the delay in calculating the revised service credit figure, the DfE accepted, presumably without check, TP's assertion that the delay was in part due to SW "failing on three occasions to reply to correspondence from TP". The DfE continued
"
as you have observed, your age was recorded wrongly in the calculation of the service credit and TP have since confirmed that if your correct age had been used in the calculation, the service credit would have been lower".
The DfE rejected complaints of breach of fiduciary duties, explained why complaints of unjust enrichment were misconceived, and expressed as its conclusion as to whether the regulations had been correctly applied
"I am satisfied that the correct process has been followed by TP therefore I must turn down your appeal for a service credit of 6 years and 45 days. I will, however, refer this case back to TP to seriously consider making a payment in compensation for their administrative shortcomings".
WB was referred, if dissatisfied, to the Pensions Advisory Service and the PO;
(15) thus, it appears that no dialogue had taken place with SW about its willingness to receive the return of the transfer value, and that no information as to options had been communicated to WB. In later correspondence the DfE offered to unwind and reverse the transfer without any allowance for growth if SW was amenable.
(16) in addition, it does not appear that TP communicated further with WB in response to any referral back by the DfE to "seriously consider" a compensation payment to WB. The appeal bundle does not contain evidence of, or pointing to, any such consideration by TP;
(17) In a subsequent letter, received by WB in the early part of 2014, the DfE referred to TP's further miscalculation of WB's service credit erring in WB's favour, as a result of the elementary arithmetical error of misstating WB's age by a decade for the purposes of the transfer in and informed WB
"
if the calculation was now to be revised using the correct factors for age 34 the service credited to you would be less. In the circumstances it has been accepted that the service credit offered and accepted should stand. If the legal entitlement of this service credit is called into question, this inevitably will have to be reviewed".
WB regarded this as a thinly veiled threat attempting to dissuade him from referring his complaint to the PO.
(18) WB then made a complaint to SW and also raised the question of delay and potential transfer reversal with SW. By letter dated 16.5.14, SW explained the chronology from its viewpoint and rejected any suggestion that it had caused delay before the transfer. SW confirmed that it would be happy to accept a transfer value but could not provide an estimated fund value; SW also required WB to obtain independent financial advice before any transfer reversal. Those terms were not attractive to WB;
(19) all of this left WB feeling considerably out of pocket and aggrieved. He referred the matter to the PO on 28.10.14. WB summarised his complaint
"When I requested a transfer in, TP should have provided an accurate and timely calculation of service credit. TP has not honoured the quote accepted as the basis for the transfer to proceed. This results in a loss of pension rights. TP/DfE have not handled the transfer process in line with the law, regulations and its own literature. Correspondence has been very stressful and protracted. The transfer process itself took 19 months after payment was accepted in 2011".
WB identified the injustice suffered as loss of 2 years 175 days service credit by the application of a new and different set of actuarial factors to those prevailing at the time of WB's consent to transfer. The cause of the injustice was identified as delay caused by TP's own miscalculation. In addition, WB contended that the DfE's caveat about further reduction to the service credit caused him stress. WB identified the relief sought as
"(1) A determination by the [PO] that TP should have provided an accurate and timely service credit calculation. Had TP done so, I would have been able to transfer before the embargo was imposed. (2) That TP reinstate 6 years 45 days as the definitive service credit which formed the basis for consent to the transfer. (3) Compensation for time spent and stress";
WB also referred to the DfE's letter which "threatened to review downwards my service credit if I challenged it before the PO".
On a fair reading of WB's complaint to the PO, WB had articulated separately a complaint of delay the subject of maladministration and/or a dispute of fact or law causing him financial loss, and another complaint of maladministration for which he sought appropriate compensation not based on monetary loss.
(20) responding to the PO, TP maintained that it was not made clear to TP that the protected rights figure of £7,021.73 was not included in the £39,664.42. TP relied on the window for initiating the transfer in process opening as soon as WB joined the TPS in 2010 and maintained that the provision of incomplete information to TP caused the delay complained of by WB;
(21) the DfE's response to the PO confirmed the start date of the embargo as 27.10.11 and the end date as 23.1.12, when revised transfer factors were issued to TP. The DfE opined that TP were responsible for some but not all of the delays in the process leading up to transfer and that WB was also culpable. The DfE also confirmed that it had accepted the credit resulting from TP's error relating to WB's age at transfer but was not minded to consider any further exceptional treatment as sought by WB;
(22) in a lengthy reply submission to the PO, WB first addressed causation by focussing on 17.8.11 as the date when TP produced a service credit quote and contended that there was then ample time for acceptance and completion of the transfer before 27.10.11. As to whether TP had miscalculated, WB relied on the DfE's endorsement of his and SW's view that TP were in error. WB accepted that he took 25 days to consider and accept the correct offer based on then current market conditions which, on WB's case, would have left ample time for processing his acceptance. WB also addressed offer and acceptance, and contended that in line with the information in TP's own leaflet, which includes under the heading "What happens after TP receives the information from my previous pensions provider?"
"TP will calculate your potential service credit in the TPS.
TP will tell you how much the transfer value will buy.
You will then have to decide if you want the transfer to take place",
he was promised but ultimately denied the opportunity to give informed consent to a transfer. WB also made reply submissions on delay in notification of the transfer credit and TP's error in calculating the transfer credit under the revised factors;
(23) the PO then raised various queries with TP and the DfE based on WB's reply. In response, TP persisted in its position that there was nothing in the original transfer documentation from SW to support the proposition that the smaller value had not been aggregated into the larger value; and,
(24) on 2.2.16, the adjudicator's opinion was issued to WB and TP as a basis, if accepted, for bringing the PO's investigation to an end. It was not accepted by WB as he made clear in a letter dated 19.2.16 and in which WB emphasised (1) the causative significance of TP's delay, (2) his right to give informed consent, (3) the breadth of the remedies available to the PO, and (4) the inadequacy of £500 as compensation for the particular inconvenience and stress caused to him. At the heart of these representations was the contention that but for TP's delay, TP would have received the funds transfer by 18.10.11, i.e. well before the embargo was imposed.
- Against this background, the PO then considered WB's complaint and the adjudicator's opinion and, on 9.3.16, issued his determination which endorsed and adopted as his own the adjudicator's reasoning. The PO identified three objections by WB to the adjudicator's reasoning : (1) but for delays caused by TP in 2011 WB's service credit would not have been affected by the embargo and would have been 6 years and 45 days, not 3 years 235 days; (2) the adjudicator did not recognise WB's fundamental right of informed consent and TP's and the DfE's discretion when the embargo was lifted and the new factors were applied, thereby denying WB the opportunity to decline the new terms and undo the transfer; and, (3) the remedy proposed was inadequate as it did not properly reflect either the financial loss suffered or the distress and inconvenience caused.
- On the 'but for' or causation point, the PO accepted the adjudicator's findings in his opinion that TP was "partly responsible for some of the delays" which delays were critical to the calculation of the service credit. TP was found to have made an incorrect assumption that the protected rights were included in the larger transfer. The adjudicator's opinion included that
"it was not entirely clear from SW's original transfer value that the two transfer values had to be aggregated, but TP could have phoned or emailed SW to obtain clarity"
and continued
"
If TP had realised sooner that the two transfer values needed to be aggregated it might have been possible for it to calculate the service credit before the embargo was imposed. However, after [WB] received the reformatted transfer value estimates from SW at the end of August 2011 more than three weeks passed before he explained the position to TP, so he was partly responsible for that delay".
As to consequences, this followed through to a finding
"... I think that the [PO] would be of the view that the delays on the part of TP constitute maladministration for which [WB] should receive compensation for the significant non-financial injustice (i.e. distress and inconvenience he has suffered"
and went on to recommend a payment of £500 by TP to WB.
- The PO determined that the delays were attributable to "several parties"; I take this to be a reference to WB and TP but not the DfE. The PO agreed that TP's delays constituted maladministration entitling WB to compensation for non-financial injustice which he awarded in the sum of £750. The PO's reasoning was that other compensation should not be awarded because WB was "partly responsible for the delay" and he identified two periods of culpable delay on WB's part : (1) not requesting a transfer until the summer of 2011, several months after joining the scheme, and (2) delaying completion and posting of the transfer documentation (i.e. the period 30.9.11 to 26.10.11).
- The PO's determination on the question of WB's fundamental right of informed consent and TP's and the DfE's discretion when the embargo was lifted and the new factors were applied, by which WB contended he was deprived of the opportunity to decline the new terms and undo the transfer, was adverse to WB. The PO relied upon the fact that the service credit quoted was an estimate rather than a firm offer, and further that neither DfE nor TP had any obligation to exercise a discretion to apply the pre-embargo transfer factors. The adjudicator had pointed out that the DfE had no control over the transfer factors to be used from time to time, which were the responsibility of the GAD, and no authority to introduce transitional arrangements; this is to be taken as part of the PO's determination by adoption.
- That is not quite the end of the background to this appeal. By letter dated 2.6.16, TP informed WB that, following an audit, it had come to light that, correctly calculated, WB's service credit was in fact higher (not lower) than 3 years 235 days and was 4 years 203 days. On seeking details of the audit, WB was informed that there had not been an audit, simply a checking of the calculations relating to him in the light of his complaint. On pressing for an explanation WB was told that in error TP had applied the pre-embargo adjustment for market conditions to the sum transferred by SW whereas there should not have been any such adjustment under the new scheme. Unsurprisingly, WB's response was that this was a yet further incident of maladministration which had led to inconvenience and distress for him. Although not articulated by WB to the DfE at the time, it certainly calls into question the DfE's approach to the second stage dispute resolution procedure and indicates that no independent work was done by the DfE to review or check the accuracy of TP's representations and underlying assertions and calculations.
The parties' submissions
- WB's submissions on delay are straightforward and clear. They are that TP's delay was culpable and avoidable; that but for TP's miscalculation and inactivity he would have secured a service credit of 6 years and 45 days before the embargo was imposed; that he would have secured such a service credit is not open to realistic doubt; and, that the time that he took to consider information and his position was reasonable and was not causative of his failure to beat the embargo. WB stressed that neither the adjudicator nor the PO appear to have turned their minds to the potency of the various pre-embargo delay periods. WB characterised the adjudicator's opinion and the PO's determination as perverse and wrong in law.
- WB made a further point, without detracting from his main point on delay. This was that had he not spotted TP's miscalculation it is beyond question that he would have received a service credit of 5 years and 124 days rather than 3 years and 235 days; thus, he suffered demonstrable financial loss by reason of TP's incompetence. WB submitted, without prejudice to his primary case, that natural justice demanded that TP, which as a limited liability company trades as a profit making entity, should bear the cost returning him to at least that position within the TPS. There is considerable force in this submission, which does not appear to have been considered by the PO. Even if not made by WB to the PO, it is a circumstance which is readily apparent from the chronology of events. This is relevant to the questions of whether TP's miscalculation resulted in financial loss and, if so, the appropriate compensatory remedy.
- Miss Ovey, for TP, accepted that WB should not be blamed for any delay and submitted that, nevertheless, the PO did not err in finding that TP's delay did not lead to financial loss.
- As to delay, Miss Ovey submitted that TP's delay was overshadowed and outweighed by lapses of time on WB's part. Miss Ovey further submitted that, viewed in context, delay of 17 days on TP's part should not entitle WB to substantial financial compensation, however it might be formulated, because there was no underlying legal cause of action. Miss Ovey submitted in the alternative, that if that was not correct, a much wider investigation would be required than has been carried out so far and the matter should be remitted to the PO because it is not the appeal court's function to decide the facts. As an example of the wider factual investigation necessary, Miss Ovey posited whether WB was aware of the content of TP's website. This was a reference to post-budget but pre-embargo postings that CETVs may change and have an effect on transfer values. This point was made in the context of WB's negligence claim. In this context it seems to me to be of very limited, if any, relevance, but I do see that it may have some force in the context of WB's informed consent point.
- On the issues of informed consent and legitimate expectation, WB referred to paragraphs 7 and 8 of the PO's determination and submitted that the PO had not taken stock of the magnitude of the service credit reduction which was such that the original estimate could not be regarded as an estimate in any meaningful way and thereby negated his consent as informed consent to proceed with the transfer. WB relied on TP's leaflet. WB further submitted that the appropriate course for TP was either to have refused the transfer or to have sought his express consent before accepting it subject to the embargo.
- In his oral submissions WB identified three errors on the PO's part : (1) failure to recognise that consent to take on a burden of risk must be sought and given on a specified basis; (2) failure to recognise that TP's service credit quote created legitimate expectations subject only to considerations consented to; and, (3) failure to acknowledge that TP's knowledge of new actuarial considerations created a fiduciary duty of information so that the quote should either have been withdrawn or reissued for consent before transfer thereby affording WB the opportunity to reverse the transaction. In relation to these submissions WB referred to TP's leaflet in relation to transfers in and the magnitude of the difference between the quote and the service credit awarded at the conclusion of the embargo, a greater than 40% reduction.
- WB further submitted that TP/the DfE had breached his fundamental rights under article 1 of the First Protocol of the European Convention on Human Rights ('Art.1') by imposing a service credit to which he did not consent. Art.1 provides
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties".
- WB also submitted that because the actual service credit awarded was also wrong, in fact doubly so (TP having made the arithmetical error of aging him by a decade, and also having miscalculated his entitlement on that basis), it is tarred by illegality under paragraph 12 of Schedule 6 Part 2 of the Teachers Pensions Regulations 2010 (respectively 'Para.12' and 'the Regulations'). It is not necessary to set out the full text of Para.12 in this judgment. It concerns inwards transfers from a previous scheme. Para 12(2) is important and provides in relation to the period of reckonable service in the TPS that
"The period is one equal to the period of reckonable service that would enable the Secretary of State to pay a transfer value, calculated on an actuarial basis, of the same amount as the one accepted".
The Regulations also provide that the factors to be taken into account in the actuarial calculation are the age and annual rate of the beneficiary's contributable salary.
- WB's point was that the Regulations do not specify which actuarial factors have to be applied. That cannot be correct. TP, as administrator of the TPS, would be bound to apply the prevailing factors from time to time as directed by the DfE, as scheme manager, or the GAD. The Regulations are aimed at providing uniform certainty. Of course, whether there is a legal remedy for financial loss is a different question.
- WB submitted that the only warning as to risk given in the letter of 30.9.11 was that as to current market conditions. On the evidence that is not correct. There was a more general warning as to delays. In any event, there had been a wider and more general statement as to re-basing public sector pensions in the 23.3.11 budget statement.
- Both Miss Ling, counsel for the DfE, and Miss Ovey drew attention to this point, or at least the fiduciary duties aspect, as having been developed after the PO's decision and, therefore, not legitimately a point on appeal. In particular, no scope of duty was defined and no breach thereof was identified in the complaint to the PO.
- They also submitted that their clients, respectively the manager and the administrator of the TPS, were bound by the Regulations which govern the TPS. Accordingly, neither the court nor the PO could compel TP to apply the old factors or to award TP a service credit of 6 years and 45 days because that would result in a flouting of the Regulations.
- Miss Ling submitted that the PO's decision on this issue was correct. She submitted that WB's contention that he had not given informed consent and his reliance on the applicability of the principle of informed consent, alternatively that he had a legitimate expectation as to service credit entitlement were misconceived. She pointed to the public announcement as to review of public sector pensions, which include the TPS, in the 23.3.11 budget and the express caveat that 6 years 45 days was an estimate and that the service credit could be affected by delays.
- Miss Ling submitted that there was no legal basis for any trust or fiduciary duties being owed to WB personally by the DfE or TP. In particular, there was no legal basis for asserting that the TPS's administrator or manager had a legal duty to advise or warn beneficiaries of the scheme or that any duty or expectation arose out of TP's leaflet. The TPS is a statutory scheme and their duties were to administer and manage the scheme according to law, including the Regulations. In relation to information, their duty was to ensure that the information they provide was correct but not to go further.
- As to informed consent, Miss Ling referred to Steria Ltd v Hutchinson [2006] EWCA Civ 1551 for the proposition that a letter of invitation, such as those written by TP, had to be read together with accompanying material such as a leaflet and in the context of the whole to ascertain what, if any, representation or promise was made to the employee. However, where a disclaimer was made or warning given amounting to a qualification, reservation of position or the introduction of conditionality it was impossible to circumvent the disclaimer or establish absolute and unqualified, unreserved or unconditional reliance.
- On legitimate expectation, Miss Ling referred to Rowland v Environment Agency [2003] EWCA Civ 1885 as confirming the legal requirement that a representation must be unequivocal and lack any relevant qualifications for a representee to have a legitimate expectation.
- Thus, where both the letter ("estimated service credit") and the leaflet ("potential service credit") made clear that the basis for the transfer in decision was not an assured or certain amount and introduced equivocation, there could be no legitimate expectation or right of informed consent to the contrary. Putting her client's case shortly, Miss Ling submitted that WB had either to accept uncertainty if opting for transfer into the TPS or stay with SW.
- Miss Ling submitted that a further consequence of the provision of an estimate was that 6 years and 45 days service credit was not a possession for the purposes of Art.1 Moreover, Art.1 was not engaged absent interference with peaceful enjoyment, deprivation or control of use, none of which had occurred in relation to the estimated service credit. Accordingly, WB's reliance of Art.1 was misconceived.
- As to the Regulations, Miss Ling submitted that the new actuarial factors have been set by the GAD and HM Treasury and the task of the DfE and TP, under the Regulations, is to apply them uniformly.
- As to remedy, WB submitted that £750 was confined to distress and inconvenience, did not address substantial loss of service credit or financial loss at all, and, further, was made as compensation for inconvenience and distress. WB proposed a number of alternatives aimed at putting him in the position he would have been in had TP not miscalculated his service credit.
- In relation to financial loss, WB drew attention to an email from TP's solicitor which calculated the cost of one year's reckonable service at £6,140. WB submitted that whether or not that calculation is correct, the plain fact is that by an actuarial calculation it would be possible to quantify the financial cost of putting WB in the position he would have been in but for TP's miscalculation.
- Miss Ovey and Miss Ling made the point that WB's private pension with SW would not be directly comparable with his rights as a member of the TPS. That may well be true but it is nothing to the point if WB is correct because the loss to him is that resulting from his receiving a reduced service credit upon transfer into the TPS.
Decision on appeal
- In my judgment this is a case in which it was important for the PO, as part of his investigation, to analyse the nature of WB's complaint keeping in mind the distinction between maladministration not infringing a legal right on the one hand and maladministration infringing a legal right and/or a dispute of fact or law between a person responsible for a pension scheme's management and a beneficiary on the other.
- I do not accept Miss Ovey's submission that the PO was entitled to find that TP's delay did not cause financial loss.
- In WB's original complaint to the PO the core element of WB's complaint was causation, 'but for' TP's delay the transfer would have been effected before 26.10.11. WB drew a clear distinction in his complaint between conduct causing financial loss and conduct not causing financial loss but warranting compensation. The former was clearly a complaint of infringement of legal rights, the latter a complaint of maladministration not necessarily infringing legal rights. That the conduct complained of may overlap both heads of complaint is not a basis for dismissing one head of complaint or for failing to consider each of the two separately. Moreover, the PO's function and powers include investigation. In my judgment, the PO should have investigated or considered more closely and analytically the nature and effect of the 'but for' or causation complaint.
- The fatal error of law on the part of the adjudicator, replicated by the PO, was to find or determine that because WB did not act immediately or promptly, his own conduct entirely negated TP's delay in terms of culpability and financial consequences and was adequately addressed by modest maladministration compensation. What both the adjudicator and, crucially, the PO failed to do in respect of WB's 'but for' complaint was consider (1) the nature and effect of TP's error and (2) whether it was more likely than not that 'but for' TP's conduct WB would have obtained the 6 years and 45 days service credit before 26.10.11. Had such consideration been given to WB's complaint the outcome would, in all probability, have been very different.
- As to the legal nature of TP's error it is at least realistically arguable that TP's conduct fell below the standard of reasonable skill and care to be expected of an ordinary pensions administrator and that such a duty of reasonable skill and care was owed to WB in connection with his proposed transfer. The particulars of negligence, which emerge clearly from the evidence, would include that within TP both the person calculating WB's service credit and the person checking the calculation failed to read SW's transfer values properly (it is clear from the face of the protected rights value that the relevant last premium, which was a significant sum, post-dated the last premium taken into account on the larger transfer value; this provides a strong indication, if not absolute confirmation, that the protected rights transfer value was not aggregated into the larger transfer value) and/or, if in doubt, failed to seek clarification from SW timeously or at all.
- Further, I do not regard the adjudicator's opinion, and by adoption the PO's determination, that
"If TP had realised sooner that the two transfer values needed to be aggregated it might have been possible to calculate the service credit before the embargo was imposed"
as the product of sufficiently careful marshalling and analysis of disputed facts. Whether or not WB would have accepted a service credit based on an estimate of 6 years 45 days was not a hypothetical question open to any realistic uncertainty because he did accept that estimate. On the available evidence it is highly probable, if not certain, that but for TP's delay WB would have, not "might have", obtained the full service credit before the embargo. WB's own dating of the likely effective date of his transfer in, 18.10.11, is realistic.
- When comparing 'delay' on the part of TP and WB neither the adjudicator nor the PO appear to have considered the reasons for the passage of time on WB's part, but only to have measured the duration. WB had to make judgments as to his and his family's financial future evaluating knowns and unknowns. In contrast, TP's task was limited to (1) undertaking a prescribed arithmetical calculation manually, no doubt aided by a calculator, on a pro-forma template using given information and (2) checking that the arithmetical exercise had been performed correctly.
- As to Miss Ovey's submission that a negligence case would be bound to fail, I disagree. Further, and as the correspondence referred to in the chronology above makes clear, some measure of restoration was possible after the payment was made by SW; indeed, it may still be possible. Although complex and possibly requiring inquiries, and an award in the nature of damages, a suitable remedy could be fashioned and available upon liability being established.
- As to Miss Ovey's further submission that any argument based on negligence would require further findings of fact and submissions, on the evidence before me the key facts are readily apparent. Further, this is the type of case referred to by Peter Gibson LJ in Rowland, where the first instance tribunal has no advantage over the appellate tribunal of having seen and heard witnesses. However, the challenge is not to material findings of fact so much as to consideration of all the facts in the correct legal context. In this respect, I accept that there is scope for further consideration by the PO of more detailed findings of fact (as noted in this judgment) and such further submissions as he may invite or permit.
- I also bear in mind that ombudsmen are appointed as experts in their field and have or develop a sense of where a particular successful complaint sits on the scale of available remedies. That is valuable expertise.
- On WB's first ground of appeal, reluctantly, I consider the proper course to be to remit the matter to the PO for reconsideration of the first ground of WB's complaint as a complaint raising an allegation of negligence (whether termed maladministration infringing a legal right or a dispute of fact or law is immaterial) causing financial loss and the appropriate remedy.
- As to WB's second ground of appeal, based on the PO's failure to recognise WB's fundamental right of informed consent, his legitimate expectation, Art.1 and the Regulations, I agree with Miss Ling that WB's submissions are misconceived for the reasons I have referred to above at paragraphs 29 to 37 in summarising the submissions of Miss Ling supported by Miss Ovey. I uphold the PO's determination on this ground and dismiss this ground of appeal.
- As to the appropriate remedy, the award of £750 was not intended to and does not address WB's financial loss resulting from the reduction in service credit.
- Upon full liability for financial loss being established, a court could award against TP as damages a sum equivalent to the present cost to WB of having a transfer into the TPS before the 26.10.11 embargo took effect (probably by 18.10.11) of a further period of service credit to bring WB's transferring credit up to 6 years and 45 days. That is an actuarial calculation which would be best considered before and approved by the PO. It is for the PO to consider directing TP to make such payment into the TPS for WB's benefit.
- As to compensation for the distress and inconvenience caused, it is important to bear in mind that TP's maladministration is not confined to the miscalculation of the service credit resulting from the failure to read and/or obtain clarification from SW of the relationship between the two transfer values.
- There are further facts relevant to maladministration not infringing a legal right but worthy of an award of compensation. The PO adopted the adjudicator's criticism of TP for delay in informing WB about the embargo. However, no consideration appears to have been given to TP's lack of candour when explaining to WB the cause of the delay in finalising the transfer, or to TP's approach to the internal disputes resolution procedure which lacked any semblance of objective review and amounted to dogged maintenance of its original position. Moreover, there is no evidence that TP reconsidered compensation, seriously or at all, following the second stage dispute resolution procedure reference back by the DfE.
- What emerges from the available evidence is persistent mishandling by TP of WB's pension transfer from SW into the TPS over a 5 year period. It does not appear that PO considered the further pre-9.3.16 aspects of maladministration on TP's part when settling on the sum of £750 as the appropriate measure of compensation for WB.
- Astonishingly, it was not until after the PO's determination that TP performed the correct service credit calculation for WB under the new criteria applicable to the TPS. Self-evidently this was not taken into account by the PO in his 9.3.16 determination. However, to avoid a further maladministration complaint, it would be sensible and proportionate for the PO to take this into account, in the light of any further submissions from WB and TP, as part of his determination on the reference back.
- That WB was put to considerable and continuous inconvenience and distress by TP is beyond question. As the matter is being remitted I shall direct the PO to reconsider the appropriate award of compensation for non-financial loss. The PO has extensive experience of such cases and is best placed to place a value, either within or, if TP's conduct is very exceptional, above the appropriate scale limit. As already indicated, I consider that an upper limit of £1,000 as general compensation for maladministration not infringing legal rights as out of touch with the value of money and urge the PO to rebase the upper limit at £1,600.
- As to whether TP's conduct falls short of very exceptional maladministration, thereby entitling an award of compensation not subject to a very modest monetary limit, it is startling that on three occasions TP performed the transfer in calculation for WB incorrectly and also failed to notice any error when performing the checking process. TP's lack of candour and TP's disregard of the DfE's finding and recommendation on the second stage dispute resolution procedure seem to me to be relevant and aggravating factors.
- Viewed from the perspective of a TPS beneficiary, a teacher, it would be troubling if TP's conduct in relation to the administration of WB's transfer in, taken as a whole, was anything less than very exceptional.
- In relation to TP, I therefore allow the appeal in part, and I order the matter remitted to the PO for further consideration and redetermination of
(1) WB's 'but for' complaint as a complaint of negligence and any appropriate remedy for financial loss; and
(2) reconsideration of the extent of TP's maladministration and the appropriate compensation for distress and inconvenience thereby caused.
- The reconsideration under (2) should take into account, after receipt of any submissions from WB and TP, the further inconvenience and stress caused to WB by the misstatement, until 2.6.16, of his service credit under the new scheme at a level below his true entitlement. It would be disproportionate for WB to have to raise a new complaint seeking compensation based on the inconvenience and stress caused by TP's failure to provide a correct service credit until 2.6.16. In substance, this is a further instance of alleged maladministration which forms part and parcel of the overall maladministration complaint against TP and is pre-eminently a matter for the PO to take into account as part of his reconsideration and redetermination.
- Finally, WB also made a complaint to the PO against the DfE of maladministration causing stress which does not appear to have been determined one way or the other by the PO. I have noted shortcomings on the part of the DfE in conducting the second stage dispute resolution procedure, including what WB termed a "threat" for which, as became clear after the PO's determination, there was no underlying rationale. What, if anything, should be the consequence of this complaint, is best left to the PO as part of the remission back for reconsideration.
