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Secretary State Scotland v. Turner [2003] ScotCS 123 (25 April 2003)

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President Lord Osborne Lord Weir

A1297/01 OPINION OF THE COURT delivered by LORD OSBORNE in APPEAL under section 151(4) of the Pension Schemes Act 1993 by THE SECRETARY OF STATE FOR SCOTLAND, for and on behalf of the SCOTTISH OFFICE PENSIONS AGENCY Appellant; against MRS. ELINOR CRAIG TURNER Respondent: against a final determination dated 1 March 1999 by the Pensions Ombudsman in relation to the complaint of the Respondent _______

Act: O'Neill, Q.C., Bevan; R. Henderson

Alt: McNeill, Q.C., Holroyd; Balfour & Manson (for Waddell & Mackintosh, Solicitors, Troon)

25 April 2003

1. The respondent was formerly a health visitor employed by the National Health Service in Scotland over a period of years. She was initially a contributing member of the National Health Service (Superannuation)(Scotland) Scheme, a statutory occupational pension scheme providing benefits on a final salary basis. She contributed to the scheme for a period from June 1968 until approximately August 1978, when her contributions and membership ceased. Her contributions for this period were subsequently refunded to her and her period of pensionable service was cancelled. From August 1978 she was employed in a number of short-term positions. Thereafter she returned to employment on 1 August 1993, but it was not until 13 June 1994 that she rejoined the scheme and resumed making contributions. These continued until the date when she left her employment. Ten days after rejoining the scheme, the respondent commenced a period of sick leave. Her ill-health continued and, as a result of her absence through sickness, her employment was terminated on 2 February 1995.
2. In September 1994, the respondent wrote to the Scottish Office Pensions Agency, to which we hereafter refer as "the agency", enquiring whether she could purchase her previously refunded service under the scheme, either by way of a lump-sum payment, or by periodic payments. On 4 November 1994, the agency replied to the respondent's enquiry by a letter in which it was stated:

"As you have not yet returned from sick leave, you are not eligible to purchase additional service by the payment of periodic contributions. You may still, however, purchase additional service by the payment of a lump-sum."

The letter also stated that, if the respondent opted to purchase additional service by the payment of a lump-sum, the election form enclosed with the agency's letter had to be completed and returned to it. The single payment had to be received by the agency within three months of the date of its letter. The respondent elected to purchase 9 years 182 days of additional service by the payment of a single lump-sum. On 23 December 1994, the agency wrote to her confirming that the cost of the purchase would be £18,668.27. This letter also stated:

"If you wish to take out a contract to purchase additional service by the single payment method the enclosed election form should be completed and returned to the agency."

On 4 January 1995 the respondent personally delivered her cheque for the sum mentioned to the offices of the agency. By a letter dated 5 January 1995, the agency confirmed receipt of the respondent's cheque for £18,668.27, stating:

"I can confirm that you have been accredited with 9 years 182 days additional service. Your additional service will be added to your reckonable service within the (Scheme) and will be taken into consideration on calculation of your eventual retirement benefits payable."

3. The respondent's health worsened and she continued to be absent from work on sick leave. On 10 January 1995, she saw her employer's occupational health adviser. On 19 January 1995, the respondent received a letter from the agency which stated:

"A telephone call from your employer informs us that you have been on sick leave since 23 June 1994 and under Regulation 27(2) (of the Scheme Regulations) purchase of additional service is not eligible during a period of absence from duty on account of sickness etc. As you are still absent from work and come within this category you are not eligible to purchase additional service and I have therefore arranged for the return of your payment of £18,668.27 ... ."

This letter further stated:

"When you called into the office to hand over the cheque ... (it was) understood from you that you had returned to work and were therefore eligible to purchase by lump-sum."

4. The respondent then complained to the agency, advising it that she had followed its procedures and that, as appeared from its letter of 4 November 1994, the agency had been aware that she was on sick leave, since it was on that basis that she had been advised to pay by lump-sum rather than periodic payments. She refused to take back her cheque which had been returned to her and claimed:

" ... I consider my contract of purchase to be complete, and acting on legal advice have returned it to the (agency's) finance department."

5. On 24 January 1995, the respondent informed the agency that her employment was to be terminated due to ill-health and returned the agency's cheque to it. On 2 February 1995, the respondent's employment was indeed ended. It is claimed by the agency that, shortly after this, it received the respondent's application for early retirement on the grounds of ill-health. Subsequently, on 9 March 1995 the agency wrote to the respondent admitting that the advice she had been given by it was wrong. It then averred that, by reason of Regulation 27(2)(a) of the National Health Service (Superannuation)(Scotland) Regulations 1980, as amended, an election to purchase additional service might not be made during a period of absence from employment on account of sickness. It claimed that there was no authority within the scheme for the purchase of additional service when a person was on sick leave and that any contract entered on that basis was void, notwithstanding the advice the respondent had received from the agency. It went on to state:

"When you made your election to purchase 9 years 182 days additional service on 11 November 1999 you were absent from your employment because of sickness and that election therefore must now be deemed to be void."

In recognition of the fact that the respondent had made her decision in good faith and on its advice, the agency offered her an ex gratia payment to reflect the loss of the use of the funds involved while they were held by it after payment for the purchase of the additional service. On 10 March 1995 the agency returned the respondent's cheque to her, but she did not encash it until 5 September 1995. Finally, by letter dated 22 May 1995, the agency advised the respondent that her application for early retirement on the ground of ill-health had been successful and informed her of the pension and lump-sum to which she was entitled. The amounts quoted were unrelated to the issue of the intended purchase by her of additional service.

6. Against the foregoing background, the respondent submitted a complaint to the Pensions Ombudsman, established under section 145 of the Pension Schemes Act 1993. Under section 146(1) of that Act:

"The Pensions Ombudsman may investigate and determine the following matters -

1. a complaint made to him by or on behalf of an actual or potential

beneficiary of an occupational or personal 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, ... ".

We refer to the respondent's complaint, dated 2 September 1997, for the detailed grievances raised. In due course, the Pensions Ombudsman, on 1 March 1999, issued a written statement of his determination of the respondent's complaint, in terms of section 151(1) of the 1993 Act, to which we refer. In that statement he made certain directions requiring the taking of certain steps by the agency. These are to be found in paragraphs 59-62 of the statement. In summary, these directions required the agency first, to pay interest to the respondent on the sum of £18,668.27, to which we have referred, for the period specified, secondly, to confirm to the respondent that she might elect to pay a lump-sum for the purchase of the previously refunded service, pursuant to Regulation 27(1)(a) of the Regulations, the sum being £18,668.27 and the amount of additional service being 9 years 182 days, and to appropriately increase the pension and lump-sum available to the respondent, thirdly, requiring the agency to reimburse the respondent for her legal fees reasonably incurred in connection with this matter, and fourthly, to pay the respondent the sum of £1,000 as recompense for the distress and inconvenience caused by is maladministration.

7. Following the making of the determination by the Pensions Ombudsman, the appellant appealed to this court under section 151(4) of the 1993 Act, which provides for an appeal on a point of law from such a determination to the Court of Session. In the appeal, five separate grounds of appeal have been stated, set out in the appeal print. At an early stage in these proceedings, it was recognised that an error had been made as regards the form of the appeal. The procedure followed in fact has been the presentation of an appeal print containing the statement of the Pensions Ombudsman, together with grounds of appeal; whereas the procedure which should have been followed in terms of Rule of Court 41.41 would have involved the stating of a case containing questions of law. However, on 23 September 1999 the court relieved the appellant from the requirement of proceeding by way of stated case and allowed the appeal to proceed in its present form.
8. When the appeal came before us, on behalf of the appellant it was indicated that paragraphs 45, 46, 51, 53 and 54 of the Ombudsman's determination were questioned. A fundamental question, raised in ground of appeal (i) related to the interpretation of Regulation 27 of the National Health Service (Superannuation)(Scotland) Regulations 1980, as amended by the National Health Service (Superannuation)(Scotland) Amendment Regulations 1983. That Regulation, headed "Purchase of Added Years of Contributing Service", is in inter alia the following terms:

"27(1) Subject to its receipt by the Secretary of State and to the following provisions of this regulation an officer may, on giving written notice to the Secretary of State, elect -

1. within 12 months of -
1. first becoming an officer or
2. becoming an officer without being able to reckon as service a previous period of employment as an officer,

to make a payment in accordance with the provisions of paragraph 1 of Schedule 7; or

1. where at least two years will elapse between the date of his next

birthday following the material date and his date of intended retirement, to make payments in accordance with the provisions of paragraph 2 of Schedule 7;

and if he so elects and makes payments in accordance with the provisions of Schedule 7 which apply to him there shall be added to his contributing service after he has completed such payments a further period of service determined in accordance with this regulation and that Schedule.

1. An officer may not elect to make payments under this regulation -
1. during a period of absence from duty without leave or a period of leave

of absence from duty on account of sickness or a period of leave of absence from duty without remuneration or with reduced remuneration; ...

1. If an officer who has elected under paragraph (1)(a) of this Regulation to make a single payment ceases to be an officer during the period mentioned in paragraph 6(3)(a)(ii) or paragraph 6(3)(b)(ii) of Schedule 7 (otherwise than by virtue of regulation 24(1)) his election under the said paragraph (1)(a) shall cease to have effect.
2. An officer who elects to make payments under paragraph (1)(b) of this regulation shall at the time of giving notice of his election provide a statement in writing signed by him that he knows of no reason why his health should prevent him from completing the payments required. If within 12 months of commencing payments under the said paragraph (1)(b) such an officer dies or makes application for the payment of an annual pension under Regulation 10(1)(a)(i) which subsequently becomes payable, then on the happening of such event the election made by the officer shall cease to have effect and any payments made by him pursuant to such election shall be refunded: ... ".

It is also appropriate to quote the provisions of Schedule 7 to the Regulations, as amended:

"Purchase of Added Years under Regulation 27

1. The sum payable under regulation 27(1)(a) by an officer shall be calculated in accordance with the provisions of paragraph 6 of this Schedule and shall be paid by a lump sum payment within three months of either the material date or the end of the period mentioned in paragraph 6(3)(a)(ii) of this Schedule.

2. The sum payable under regulation 27(1)(b) by an officer shall be calculated in accordance with the provisions of paragraph 7 of this Schedule and shall be paid by additional percentage contributions beginning on the birthday following the material date and ending on the date of intended retirement."

9. It was submitted that the crucial issue was whether the word "payments" in Regulation 27(2) embraced a payment under Regulation 27(1)(a) and paragraph 1 of Schedule 7 to the Regulations, that is to say a lump-sum payment. Regulation 27(2) was of fundamental importance, since it provided that an election to make "payments" could not be made during a period of absence from duty on account of sickness. The respondent in this case had sought to make a lump-sum payment at such a time. The Ombudsman appeared to say that the reference to "payments" in that Regulation did not embrace a payment elected to be made under Regulation 27(1)(a), but only covered payments elected to be made under Regulation 27(1)(b). It was submitted that that view was erroneous. The Ombudsman had found support for his view in the terms of Regulation 27(3) and (4). Those provisions had application when there was a cessation of employment. They did not assist in the interpretation of Regulation 27(2).
10. It was accepted on behalf of the appellant that advice had been given to the respondent to the effect that, while she had been absent from work on account of sickness, a lump-sum payment could be made under the Regulation, on which advice she had acted. Indeed that payment had been acknowledged as a payment properly made under the Regulation. It was accepted that that advice had been unsound, although it had been in accordance with a booklet of guidance issued by the agency. In support of his argument, junior counsel for the appellant made reference to the Regulations which preceded and succeeded those of 1980, which were broadly to the same effect as those Regulations. It was submitted that there was a comprehensible policy embodied in the Regulations in this regard. Regulation 27(2)(a) of the 1980 Regulations was designed to protect the general body of members of the scheme and, indeed, public funds from unfair claims. In this connection reliance was placed on Teachers' Pensions Agency v. Hill [1999] I.C.R. 435. There Sullivan J. had considered policy implications in the interpretation exercise which he undertook. The decision in Derby Daily Telegraph Limited v. Pensions Ombudsman [1999] I.C.R. 1057 indicated that the rules of pensions schemes should be construed in a purposive and practical, rather than a detached and literal, way. The approach adopted by the Ombudsman in the present case would undermine the policy underlying Regulation 27. In any event, his interpretation of Regulation 27(2) involved reading into that Regulation words which were unwarranted, in particular, reading the word "payments" as meaning "a series of payments". If his interpretation were correct, it would imply that incorrect advice had been given to numerous individuals over a substantial period of time.
11. Junior counsel for the appellant next made submissions in support of ground of appeal (ii), in which it is contended that the Ombudsman erred in law in paragraph 51 of his determination in considering that, regardless of questions of the vires of the appellant's actings under and in terms of the Regulations, there could still be constituted a valid and enforceable contract between the appellant and the respondent. The approach adopted by the Ombudsman in paragraph 51 of his determination, based on the view that a contract had been constituted between the agency and the respondent by virtue of the acceptance by the respondent of the agency's offer contained in the letter of 4 November 1994, which was intended to have contractual effect, was unsound. Such a contract would have involved ultra vires actings on the part of the agency. Such actings could not result in the creation of an enforceable contract. The decision in N.H.S. Pensions Agency and Another v. Pensions Ombudsman and Beechinor [1997] O.P.L.R. 99 supported this submission. It showed that the agency could not do what the Ombudsman had expected of it. Considerations of personal bar could not confer validity on ultra vires actions, as appeared from Young v. Fife Regional Council 1986 S.L.T. 331.
12. As regards ground of appeal (iii), junior counsel for the appellant submitted that the Ombudsman had erred in law, as appeared from paragraph 51 of his determination, in concluding that his directions could, in effect, create a power in the agency to do an act which their constitution did not empower them to do. Section 151(2), (3) and (4) of the 1993 Act appeared to indicate that the powers of the Ombudsman were broad. However, it was quite clear that they were not unfettered, since the provision for an appeal on a point of law to the court showed that any direction issued by the Ombudsman required to be lawful. In this connection reliance was placed on Hillsdown Holdings plc v. Pensions Ombudsman and Others [1997] 1 All E.R. 862; and Wakelin and Others v. Read and Another [2000] O.P.L.R. 277.
13. Junior counsel for the appellant then proceeded to make submissions relating to ground of appeal (iv). He contended that there was no basis for the finding of maladministration by the Ombudsman. An incorrect view of the law reached in good faith could not amount to maladministration. In this connection reliance was placed on Westminster City Council v. Haywood [1998] Ch. 377. Maladministration had to involve injustice and loss.
14. In relation to ground of appeal (v), it was submitted that the Ombudsman in this case had himself acted ultra vires in that he had considered the complaint to the extent that it alleged the existence of collateral contractual rights said to have been established between the parties. The jurisdiction of the Ombudsman was confined to questions of entitlement under and in terms of the particular pension scheme under consideration. In this connection reliance was placed upon Engineering Training Authority v. Pensions Ombudsman and Another [1996] O.P.L.R. 167. The Ombudsman had no jurisdiction to investigate complaints concerning ordinary contractual relations between employer and employee. In the whole circumstances the appeal should be allowed and the decision of the Ombudsman quashed.
15. In reply, junior counsel for the respondent began by summarising the form of his submissions and explaining the background to the whole matter. His submissions commenced with the matter of the interpretation of the 1980 Regulations. He drew attention to the ordinary method of operation of the scheme, involving the making of periodic contributions under Regulation 9. Regulation 27, on the other hand, was concerned with what might be described as abnormal contributions in respect of the purchase of added years of contributing service. In Regulation 27(1), the word "payments" where is appears after sub-paragraph (d) plainly referred to either a lump sum payment made in accordance with the provisions of paragraph 1 of Schedule 7 or periodic payments made in accordance with the provisions of paragraph 2 of that Schedule. However, it was contended for the respondent that the word "payments" in Regulation 27(2), properly construed, referred to periodic payments only under the latter paragraph of the Schedule. A detailed examination of the Regulations showed that there were two different regimes, one applicable to lump-sum payments and the other applicable to periodic payments. That feature of the Regulations was consistent with the interpretation of the word "payments" in Regulation 27(2) contended for by the respondent. In addition, practical considerations were material. If a lump-sum payment were made into the scheme and subsequently health problems developed, so far as that contributor was concerned, that situation would be less prejudicial to the scheme overall, as compared with a situation where a contributor had resolved to make periodic payments and had then developed health problems. In this connection reference was made to Schedule 7 to the Regulations, paragraphs 4, 6, 7 and 8. Regulation 27(4) underlined the concerns reflected in the scheme in relation to the problem of illness which might develop following upon an election to make periodic payments, as opposed to a lump-sum. In interpreting the provisions of a scheme of this kind, the starting point had to be the plain and ordinary meaning of the language used. If that approach were followed, the conclusion was that a lump-sum could be paid at a time when a contributor was absent from duty on account of sickness. If the plain meaning of language led to absurd results, it was necessary to look for what he described as the "golden meaning". If that were done, the result sat comfortably with the plain meaning. In that connection reference was made to Teachers' Pension Agency v. Hill. Attention was then drawn to the provisions of Section 6 of the Interpretation Act 1978, which provided inter alia that "unless the contrary intention appears, ... (c) words in the singular include the plural and words in the plural include the singular." Reference was also made to Blue Metal Industries v. Dilley [1970] AC 827. On the assumption that the respondent's submissions were wrong so far and that there was doubt regarding the interpretation of Regulation 27, it would be necessary for arguments based on T, Petitioner 1997 S.L.T. 724 to be deployed with a view to resolving any ambiguity. In order to avoid unnecessary argument, it might be appropriate for the court to indicate whether or not it regarded the provisions of Regulation 27(2) as involving ambiguity.
16. Turning to the issue of vires, junior counsel for the respondent observed that there was no provision in the scheme conferring expressly incidental powers upon the agency. In these circumstances, it would be reasonable for the court to read into the scheme such incidental powers, so that matters "on the margin" could be dealt with. Even statutory creatures had powers going beyond those expressly enacted by the statute, as appeared from Young v. Fife Regional Council, at page 334. It was the submission of the respondent that any contract involved in this case was within the "margins" of the scheme; although not strictly within its terms, there was a power in the agency to contract to provide benefits similar to those afforded under the scheme. The making of such a contract would be "within the scheme".
17. In any event, at the material time, the pension provider was the Secretary of State for Scotland, acting through the agency, which was a limb of Government. On account of that situation, it was capable of doing what it wanted, provided that such a course was not expressly prohibited. In this connection reference was made to Hooper and Others v. The Secretary of State for Work and Pensions [2002] EWHC 191 (Admin); Stair Encyclopaedia of the Laws of Scotland, Volume III, paragraph 86; and to the Superannuation Act 1972, Sections 10 and 26.
18. Looking more generally at the doctrine of vires, it was submitted that it was not rigid. Its purpose was to avoid violating the legislators' intention, as appeared from Birkdale District Electric Supply Co. v. The Corporation of Southport [1926] A.C. 355, at pages 364, 368 and 369. Here there was no suggestion that the respondent's election to pay a lump-sum could not have been accommodated actuarially. In any event, the respondent could have struggled to return to work and then made the lump-sum payment, which, on any view, would have been within the terms of the scheme. The respondent's position was supported by Smeaton v. St. Andrew's Police Commissioners (1871) 9 M(H.L.) 24.
19. Junior counsel for the respondents next turned to the issue of personal bar. Even if there had been ultra vires action on the part of the agency or its officials, personal bar might operate, since there was an equitable dimension. In this connection reliance was placed on Maritime Electrical Company Limited v. General Dairies Limited [1937] AC 610, at pages 615, 623 and 624, Muirhead v. Martin (1889) 17 R. 125, at pages 129 - 134, and Robertson v. The Minister of Pensions [1949] 1 K.B. 227, at page 232.
20. Junior counsel for the respondent then proceeded to consider the issue of maladministration. He drew attention to the terms of Section 146 of the Pension Schemes Act 1993 which spoke of "injustice in consequence of maladministration". The nature of the concept was discussed in Hogg Robinson Financial Services Limited v. Pensions Ombudsman and Others [1998] O.P.L.R. 131. It was plain that there was an injustice in the circumstances of the present case. The way in which that injustice might be remedied would be by the recognition of the respondent as a full member of the scheme, credited with the benefit of the payment which she had tendered. While it was recognised that there was no general and comprehensive definition of maladministration, the court should be slow to interfere with the determination of the Ombudsman that maladministration had occurred. By way of further elucidation of the concept of maladministration, reference was made to Westminster City Council v. Haywood. From that case it appeared that an error of law did not necessarily amount to maladministration, but could do so. Maladministration might or might not fall into some existing legal category.
21. Junior counsel for the respondent went on to examine the determination of the Ombudsman. He recognised that there were certain internal inconsistencies in it, in particular, as between paragraphs 52 and 54. Paragraph 54 ought to be seen as a finding of maladministration on an alternative basis.
22. Senior counsel for the appellant adopted the submissions made by his junior. His motion was that the Ombudsman's decision should be quashed and no remit back to him made. He began by examining the position of the Ombudsman under the 1993 Act. Section 146(1)(a) referred to an "injustice in consequence of maladministration in connection with any act or omission of a person responsible for the management of the scheme." The question had to be asked whether the administrators of the scheme in question acted correctly in dealing with the situation which they faced. In the circumstances of the case, all that the Ombudsman had had to do was to interpret Regulation 27 of the 1980 Regulations. Had he done that, he would have come to the conclusion that the interpretation contended for by the appellant was correct. In response to questions by the court suggesting that the functions of the Ombudsman were somewhat wider than had just been submitted, it was accepted that compensation might be awarded for, example, excessive delay. However, what was clear from the statutory arrangements set out in the 1993 Act was that the Ombudsman was not comparable to a court of general jurisdiction. It was submitted that maladministration was not so much concerned with the merits of a decision taken by the person responsible for the management of the scheme as with the manner of the reaching of such a decision.
23. Turning to the Ombudsman's handling of the present case, the history of his handling of the complaint was described, including his production of two provisional and one final determinations. Senior counsel for the appellant next described the facts of the case, as found by the Ombudsman. He submitted that, having regard to the chronological sequence of events involved, it was apparent that the respondent had applied to the agency for early retirement in the knowledge that her attempt to purchase additional years of service had failed and that her lump-sum payment had been rejected. Accordingly any consequences flowing from that application were the respondent's own responsibility. It was absurd to suggest that the court could contemplate the conjectural possibility that, had the respondent been given correct advice in the first instance, she would have struggled to return to work before attempting to make the lump-sum payment.
24. Senior counsel for the appellant next examined in detail the conclusions of the Ombudsman set out in paragraphs 45 - 58 of his determination. In paragraph 46 the Ombudsman dealt with the issue of interpretation in a manner which, it was submitted, was erroneous. It was perfectly clear that the prohibition contained in Regulation 27(2)(a) applied to both lump-sum and periodic payments. There was no ambiguity in those provisions. Any argument based upon Schedule 7 to the Regulations was insufficiently potent to displace the effect of the plain language found in Regulation 27(2).
25. Reverting to the Ombudsman's determination, there was nothing controversial in paragraphs 47 - 50. However, in paragraph 51 the Ombudsman concluded that a collateral contractual relationship had come into being between the agency and the respondent. His conclusion in that regard was erroneous. It was clear that the agency's letter of 4 November 1994, replying to the respondent's enquiry regarding the possible purchase of her previously refunded service, was not intended to do anything other than explain what the respondent was entitled to do under the Regulations. It was plainly not a contractual offer. Furthermore, in the last sentence of paragraph 51, the Ombudsman had plainly misunderstood the scope of the powers conferred upon him by Section 151(3) of the 1993 Act. For the reasons already explained, it was not open to the Ombudsman to direct that the agency should perform ultra vires acts. There existed legislative provision for the financing of pension schemes, such as that involved in this case, as appeared from the provisions of the Superannuation Act 1972, in particular Sections 10, 12 and 26. Accordingly if the Ombudsman were right in concluding that a "contract" had been entered into between the agency and the respondent in some way, that contract would have had to have been paid for out of funds other than the funds underlying the scheme.
26. The contents of paragraph 52 of the Ombudsman's determination did not make sense. The respondent had not been entitled to make the election which she purported to make at a time when she was on sick leave. Paragraph 53 raised, but did not resolve, the issue of a possible change of position on the part of the respondent in reliance on information provided by the agency. That aspect of the matter was not resolved, since the Ombudsman considered that a contractual relationship had been created, upon which he and the respondent could rely. Turning to paragraph 54, it was submitted that it was inconsistent with other features of the Ombudsman's determination. Here, for the first time, he referred to "maladministration" on the part of the agency "as a result of the incorrect and misleading information contained in its letter of 4 November 1994". That statement had, as its premise, the same view of Regulation 27(2) as was contended for by the appellant, which had previously been rejected by the Ombudsman. In that paragraph he was saying that the information imparted in the letter of 4 November 1995 was wrong. However, in paragraph 55 he then purported to proceed upon the basis that that information was correct. The approach of the Ombudsman was confused and misconceived. In the decision in Westminster City Council v. Haywood it was observed that the remedy for maladministration ought to put the complainant in the same position as if the informant had performed his duty and provided correct information; not to put him in the position in which he would have been if the incorrect information provided had in fact been correct. For the same reasons, what was said in paragraph 56 of the determination was also wrong. As regards paragraph 57, while maladministration had been found, the Ombudsman was not specific in saying what that maladministration had been. In short, the Ombudsman's determination was illogical and lacked coherence.
27. The question arose of what remedy, if any, might now be available. Had the present proceedings taken their proper form of a stated case, the court would have had before it certain questions of law which could have been answered. Once that had been done, that would have been the end of the matter. As it was, the court could simply find that one or more of the grounds of appeal was correct; there would also require to be a recall of the directions made.
28. Senior counsel for the respondent adopted the submissions made by his junior. He agreed at the outset that the expression of the Ombudsman's determination and his disposal of the complaint were, to some extent, unsatisfactory. However, it was important to understand the background to the work of the Ombudsman. Thereafter he proceeded to explain that background by reference to the legislation. The 1993 Act had been the reaction of Parliament to a public concern regarding the administration of certain pension schemes. By that Act the office of Ombudsman had been created. There was relatively little authority to expiscate the concept of maladministration. Furthermore, the respondent found herself in an odd position on account of the procedure which had been adopted in the present appeal. Had the stated case procedure been followed, the appeal might have developed quite differently. The respondent herself had no right of appeal, since she had been successful in her complaint. For these reasons, when the court came to examine the issue of the disposal of this case, it would require to look carefully at the singular procedure which had been adopted.
29. The fundamental issue in the case was that of the proper interpretation of Regulation 27, in its statutory context. Examination of Schedule 7 to the Regulations did not reveal any deleterious consequence flowing from the possibility of the making of a lump-sum payment in circumstances such as those in which the respondent stood. Furthermore, the interpretation advanced on her behalf was not just her own. It had commended itself to a specialised Ombudsman, who was a lawyer of standing. The leaflet issued by the agency had supported her position. In addition to that, the administrative department of the agency had thought fit to write the letter of 4 November 1994. On the issue of the interpretation of Regulation 27, it was plain that the words "payment" and "payments" had been used variously. The word "payments" in Regulation 27(1) inevitably included a lump-sum payment and periodic payments. However, the word "payments" in Regulation 27(2) had to be viewed separately. It was necessary to understand the process of the purchase of extra years of pensionable employment. In this connection, reference was made to the whole terms of Regulation 27. It was apparent from those terms that lump-sum and periodic payments were the subject of different regimes. The language of the section had to be interpreted in the light of that state of affairs. Plainly the health of the payer was crucial in the case of persons seeking to make periodic payments, as appeared from the provisions of Regulation 27(4). The terms of Regulation 27(3), relating to a lump-sum payment, contained no similar provisions. In the light of that, the appellant's interpretation of Regulation 27(2) was bizarre. This submission was elaborated under reference to the provisions of Schedule 7 to the Regulations. Senior counsel for the respondent went on to make a comparison between the 1980 Regulations as they stood before and after amendment in 1983. He contended that, prior to amendment, the 1980 Regulations had enabled a member of a scheme to "select against the scheme". Regulation 27 of the amended Regulations had made a material change preventing such action. If the appellant's interpretation of it were accepted there was an inconsistency with that legislative history.
30. If the respondent's interpretation of Regulation 27 were correct, it would follow that there had occurred maladministration on the part of the agency with consequent injustice. Accordingly the Ombudsman's determination would be correct and the appeal should fail, although it was accepted that certain features of his reasoning were unsatisfactory. In particular, it was accepted that paragraph 54 of the determination was inconsistent with what preceded it in paragraphs 45 to 52. It might be that paragraph 54 could be viewed as an esto position. It was, however, difficult to see how, if the letter of 4 November 1994 were wrong, there could be a contract between the agency and the respondent. If the court was of the view that there was no ambiguity in the language of Regulation 27, that view should be expressed, otherwise arguments based upon T., Petitioner would require to be deployed.
31. Senior counsel for the respondent then proceeded to consider (1) the powers of the Ombudsman; and (2) maladministration. There were certain difficulties attached to the idea that the appellant had power to enter into a contract with the respondent apart from the scheme, or to accept her back into it. It was not open to the Ombudsman to venture into the area of ordinary contractual employment relationships, although the words of section 146(1)(a) of the 1993 Act contemplated that his powers extended to matters which were "in connection with" the acts or omissions of persons responsible for the management of the scheme. That embraced matters which were related to a pension to which a beneficiary claimed entitlement. Turning to the matter of maladministration, the straightforward view was that the concept simply meant bad administration or bad management, which fell below the standard that a person had a right to expect. Legal issues might be involved in maladministration. However, it was accepted that the exercise of discretion could not be reviewed on its merits. Maladministration might embrace negligence or breach of contract.
32. At this point, the hearing of submissions was adjourned to afford the court an opportunity to reach a conclusion in relation to the principal issues in the case, including, in particular, the issue of the interpretation of Regulation 27, since it was a matter of agreement that the future course of the appeal would be dependent upon those conclusions. In particular, the question whether submissions related to T., Petitioner would be necessary depended upon the view taken of Regulation 27. Also the question of whether a remit should be made to the Ombudsman would depend upon the conclusions reached.
33. Following upon that adjournment we announced the conclusions which we had reached and, in the light of those conclusions, we afforded parties the opportunity to address the court in regard to whether, having regard to the terms of the Ombudsman's determination, the case should or should not be remitted to him to reconsider the question of whether there was, in any respect, maladministration on the part of the appellant, and, if so, what directions, if any, he should make. We now set forth the conclusions which we have reached on the issues involved and our reasons for them, before dealing with the question of whether the case should be remitted to the Ombudsman.
34. The crucial issue of interpretation relates to the language used in Regulation 27(2), as amended, in particular, the words "An officer may not elect to make payments under this regulation - (a) during .... a period of leave of absence from duty on account of sickness ....". In our opinion, there is no doubt or ambiguity concerning the meaning of these words. It appears to us that the words "payments under this regulation", in the context of an election to make such payments, must refer to both of the different kinds of payments described in Regulation 27(1), which deals with the making of such an election. As is apparent from the terms of that part of the Regulation, the opportunity is afforded to make either a payment in accordance with the provisions paragraph 1 of Schedule 7, or payments in accordance with the provisions of paragraph 2 of schedule 7, that is to say a lump-sum payment, or additional periodic contributions. Had it been intended that the expression "payments under this regulation" in sub-paragraph (2) should mean simply payments in accordance with the provisions of paragraph 2 of Schedule 7, it would have been a matter of simplicity for that to have been provided. It has not been and so we conclude that that was not the intention.
35. As we have narrated, it was argued to us that there existed two separate regimes in relation to such payments, the first applying to the election to make a lump-sum payment and the second applying to an election to make periodic payments. It was suggested that the provisions of Regulation 27(3) and (4) clearly demonstrated the difference between these regimes. While we accept that Regulation 27 contains separate provisions relating to elections to make the different kinds of payments, we do not consider that the existence of those regimes detracts from or affects the clear legislative intention apparent from the language in Regulation 27(2), to which we have referred. Having reached this conclusion, we considered that there was no need for us to hear any further argument on that matter, based upon the case of T. Petititoner. It follows that, on a correct interpretation of Regulation 27(2), the respondent did not have the right to elect to make a lump-sum payment under paragraph (1)(a) of that Regulation, since she was, at the material time, absent from duty on account of sickness. It also follows therefore that the conclusions expressed by the Ombudsman in paragraphs 45 and 46 of his determination involve an error of law on his part.
36. We turn next to deal with the issue of a possible contract between the respondent and the agency based upon the letter dated 4 November 1994 and the subsequent actings of the respondent and the agency. We find ourselves quite unable to hold that there existed any basis for the conclusion by the Ombudsman in paragraph 51 of his determination that a contract between the agency and the respondent had come into being, or the conclusion expressed in paragraph 53 that the agency was in breach of such a contract. In our view, it was not open to the Ombudsman to regard the letter of 4 November 1994 as a offer intended to have contractual effect. We consider that that letter was expressed as and intended to be a reply to the respondent's enquiry as to a possible election by her in terms of Regulation 27. In our view, it cannot be seen as a contractual offer on the part of the agency to enter into a contract with the respondent under which she would make a lump-sum payment which, in the circumstances then existing, she was not entitled to make on a proper view of Regulation 27,. Looking at the matter in another way, we are persuaded that the agency would have had no power to enter into a contract such as that contemplated by the Ombudsman. We are confirmed in that view by such cases as NHS Pensions Agency and Another v Pensions Ombudsman and Beechinor and Westminster City Council v Haywood. Furthermore, we regard the observation made in the last sentence of paragraph 51 of the Ombudsman's determination as unsound in law. About that there was no dispute before us. In our opinion, it is quite clear that the provisions of section 151(3) of the 1993 Act do not confer a power on the Ombudsman to direct the taking of any action which would itself be unlawful. It is evident to us that the provisions of section 151, and particularly sub-section (4), contemplate that directions of the Pensions Ombudsman must be of such character as to be in accordance with law.
37. Having announced the foregoing conclusions following upon the adjournment, we entertained argument concerning the course which might properly be followed in the circumstances. Senior counsel for the respondent submitted that, in the light of the conclusions reached by the Court, the decision of the Ombudsman should be quashed and the matter remitted to him for reconsideration. He referred to the procedural history of the present appeal. The position was that, in the light of the views expressed by the Court, particularly on the interpretation of Regulation 27, the respondent should have the opportunity of making submissions to the Ombudsman in the light of the Court's interpretation. Even if the correct procedure had been followed and a stated case had been before the Court, following upon the answering of the questions raised, there could have been a remit. He submitted that this Court could not substitute its own decision for that of the Ombudsman. If his decision were quashed, the position would be that he would have an undetermined complaint before him.
38. Senior counsel for the appellant submitted that there should be no remit. The Ombudsman's decision should be quashed. However, he indicated that he was prepared now to concede that the agency had been guilty of maladministration in respect of the provision of bad advice to the respondent in the letter of 4 November 1994. That letter had raised certain expectations on the part of the respondent. It was accepted that this would provide a new basis for the directions of the Ombudsman in paragraphs 59 and 62 of his determination. This concession was made with a view to bringing to an end the present lengthy litigation. It was pointed out by the Court to senior counsel for the appellant that, in paragraph 53 of the determination, the Ombudsman had raised, but not decided, the issue of whether there had been a change of position on the part of the respondent in reliance on the information provided to her by the agency. Standing that statement, there might be a basis for reconsideration of the position by the Ombudsman. Senior counsel for the appellant, in reply, submitted that there were no facts found to support such a case. The respondent had made an application for early retirement after it had been made clear to her that her lump-sum payment could not be accepted. Accordingly, it could not be claimed that she had relied upon what was said in the letter of 4 November 1994. While it was accepted that a remit to the Ombudsman would not be incompetent, it would serve no useful purpose in the particular circumstances of the case.
39. In reply, senior counsel for the respondent submitted that a remit should be made to enable the issue raised, but not determined, in paragraph 53 of the determination to be addressed by the Ombudsman. Prima facie the Ombudsman was entitled to investigate a complaint relating to the manner in which the scheme had been administered, including the giving of bad advice.
40. In the light of this discussion on further procedure in this case, we have concluded that the directions contained in paragraphs 60 and 61 of the determination should be quashed; and that those contained in paragraphs 59 and 62 should stand. We shall remit the case to the Ombudsman with a view to his resolving the issue raised, but not determined, in paragraph 53 of the determination, upon the basis of the concession of maladministration made on behalf of the appellant, to which we have referred. In regard to that, it seems that there are certain matters of fact which were not resolved, as appears from paragraphs 11 to 15 of the determination.