NHS Business Services Authority v Leeks & Ors

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MR JUSTICE SALES ____________________

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MR P GREATOREX (instructed by Treasury Solicitor's Department) appeared on behalf of the Claimant MRS J LEEKS appeared in person ____________________

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MR JUSTICE SALES:

This is an appeal from the decision of the Pensions Ombudsman in this matter in a report dated 12 August 2013. Appeal from such a decision is available on a point of law.

The Pensions Ombudsman made findings of maladministration in respect of the conduct of the appellant (the Authority) and also in respect of the conduct of the second respondent (the Employer). This was in relation to the way in which pension entitlements of the first respondent (Mrs Leeks) and information about those entitlements were handled by it. The Authority is the scheme administrator for the NHS Pension Scheme. The Employer was the NHS Trust which employed Mrs Leeks at the relevant time.

The Pensions Ombudsman also made findings regarding injustice and loss suffered by Mrs Leeks. He directed the Authority to pay Mrs Leeks the sum of about £110,000 in respect of pension payments which he found she had lost in consequence of the maladministration by the Authority.

Although the Pensions Ombudsman found the Employer was also guilty of maladministration, he made no direction for it to make a payment to Mrs Leeks.

The Authority now appeals to this court, relying on a number of grounds. The Authority submits the Pensions Ombudsman erred in law as follows:

(1) in finding that there had been maladministration by the Authority; alternatively

(2) in directing the Authority to pay compensation for the maladministration found; alternatively

(3) in directing the Authority to pay compensation beyond March 2009; and further or alternatively

(4) in not directing the Employer to pay all or at least some of any compensation found to be due.

On the appeal, the Authority was represented by counsel, Mr Greatorex. The Employer chose not to appear or make representations. Mrs Leeks attended the hearing in person and made short points directed to the factual background. She was not represented.

The Pensions Ombudsman was joined as an interested party in the appeal in order to make written submissions on the first ground of appeal relied on by the Authority and on the meaning of the concept of "maladministration" in the context of sections 145 to 152 of the Pension Schemes Act 1993.

FACTUAL BACKGROUND

Mrs Leeks was born on 10 January 1947. She worked for the NHS from 1965 to 1979 and then again from 1988. She worked part-time for much of these periods as a mental health officer. She was a member of the NHS Pension Scheme (the Scheme) throughout this service. She is a nurse and has no expertise in or knowledge of pensions matters.

Within the context of the Scheme, the calculation of the pension benefits from time to time was complicated, particularly in Mrs Leeks' case. Her service accrued pension entitlements at a preferential rate because of special arrangements applicable to her as a mental health officer and also at modified rate because of her part-time work.

The Pensions Ombudsman reviewed the precise position regarding her pension entitlements under the rules of the Scheme with care. The relevant finding for present purposes is that when Mrs Leeks reached age 60 on 10 January 2007, her pension entitlements had accrued to the maximum extent possible. At that point, she would have been entitled to take her full pension without deduction. There was no good reason from that time on for her to continue to make contributions to the Scheme.

However, Mrs Leeks did not realise this. The Employer did not inform her that her pension entitlement was now fully accrued and did not cease deducting pension contributions from her pay. Similarly, the Authority did not so inform her and continued to accept and keep her contributions to the Scheme after that date.

The Pensions Ombudsman said this at paragraphs 13 to 23 of his report:

Meanwhile, Mrs Leeks raised a dispute under the Scheme's internal dispute resolution procedure. She maintained that, had she been given proper information about her pension position by 10 January 2007, she would have sought to retire at that point. Under the Scheme rules, she would have been entitled to retire at that point and take her full pension entitlement. After a short interlude, she would have been entitled to resume her salaried employment with the Employer. That is what she maintains she would have done if she had been properly informed about her position.

In support of that contention, she provided a letter in relation to the position of her manager within the Employer, to which the Pensions Ombudsman referred at paragraph 32 of his report as follows:

Instead, Mrs Leeks says she was deprived of the opportunity to take her pension from January 2007. She simply continued working for the Employer. In March 2009, the Authority eventually informed her that her pension entitlement was complete and that she could retire and, indeed, could have done so in January 2007. It reiterated that information in later correspondence.

However, Mrs Leeks continued to work for the Employer down to the time of the Pensions Ombudsman's determination and beyond. Issues of causation in respect of the loss she claims she has suffered therefore arose for determination by the Pensions Ombudsman.

The Pensions Ombudsman made these findings of maladministration:

In relation to injustice and loss, the Pensions Ombudsman made these observations:

The Pensions Ombudsman also addressed questions of loss and mitigation of loss in the next section of his report. This section included the following, at paragraphs 75 to 86:

THE LEGAL FRAMEWORK

Mr Greatorex's helpful skeleton argument sets out the relevant legal framework in a way which was not contentious for the purposes of this appeal, as follows:

"4. The statutory framework governing the [Pensions Ombudsman] is set out in sections 145-152 of the Pension Schemes Act 1993. The relevant provisions are as follows:

In relation to questions of causation, Mr Greatorex also referred me to the decision of the Court of Appeal in Hibbert Pownall & Newton (a Firm) v Whitehead & Anor [2008] EWCA Civ 285 . At paragraph [25] in the judgment, Laws LJ referred to general considerations of justice, which include as a principle:

In support of this proposition, Laws LJ quoted a passage from the speech of Lord Macnaghten in Bwllfa & Merthyr Dare Steam Collieries (1891) Limited v Pontypridd Waterworks Company [1903] AC 426 at 431, as follows:

The Pensions Ombudsman made written submissions in relation to the concept of maladministration in section 146(1)(a) of the Pension schemes Act. He points out that this term has been held to include:

See Secretary of State for Health v Marshall [2008] EWHC 909 Ch

In Arjo Wiggins Limited v Ralph [2009] EWHC 3198 (Ch) , Lewison J said:

The Pensions Ombudsman submits that as there is no statutory definition of maladministration and as the term is flexible, then given that pension schemes, particularly large ones, inevitably employ automated systems to assist in effective and accurate administration and that members rely on the information provided, in the pensions context it would be inappropriate and unduly restrictive if the meaning of the word could not apply to limitations inherent in automated systems.

DISCUSSION

The first ground of appeal is in relation to the Pensions Ombudsman's finding of maladministration in relation to the Authority. Mr Greatorex submits that even though the term "maladministration" is broad, it cannot be stretched to cover the limitations inherent in a scheme administrator's automated systems; in the alternative, even if that is not accepted, the finding in this case about what a scheme administrator's systems ought to be capable of and the conclusion that because they fell short of this there was maladministration was not properly open to the Pensions Ombudsman in this case. In particular, Mr Greatorex submitted that two particularly relevant considerations pointed away from any finding of maladministration and were not properly considered by the Pensions Ombudsman, namely identification of the precise limitations in the systems and, secondly, what would be required to correct them.

I do not accept these submissions. The Scheme is a complex pension scheme with complex rules. The Authority is the Scheme administrator and is, or should be, expert in understanding those rules. It deals with non-expert lay people who are members of the Scheme. It has or should have full, detailed information about their pensionable service for the purposes of the Scheme. It is reasonable to expect that a scheme administrator such as the Authority should be in a position to give accurate information to scheme members. In particular, it should tell them when their entitlements are complete and when no further contributions are due from them.

In this case, there was a background of a known deficiency in the Authority's systems, to which the Pensions Ombudsman referred at paragraph 39 of his report:

In my judgment, in the circumstances of this case, the Pensions Ombudsman was well entitled to make the finding of maladministration which he did against the Authority on the basis that he did. In the circumstances of its special expertise and its particular responsibility as scheme administrator, the Authority's failure to inform Mrs Leeks and its continued acceptance of her contributions in respect of her pension were matters which I consider plainly justified the Pensions Ombudsman in making the finding of maladministration that he did. He did not have to make any more elaborate findings or rulings than he did.

I accept the submission of the Pensions Ombudsman that maladministration is a concept which can apply to unreasonable limitations inherent within automated systems operated by pension scheme administrators. Mr Greatorex submitted that even if defects in an automated system could constitute maladministration, the Pensions Ombudsman was under an obligation, before finding maladministration, to identify in detail with evidence in support what could and should have been done to rectify those inadequacies in the automated systems operated by the Authority and to consider the reasonableness of those steps.

I do not accept this submission of the Authority. In my view, the Pensions Ombudsman was entitled to have regard to the special position and responsibility of the Authority as scheme administrator and simply to find that the systems which the Authority had in place fell so substantially below being able to satisfy the reasonable expectations of members as to what they could look to the Authority to provide by way of important information for them as to constitute maladministration.

In that regard, it should be noted that, in the course of making submissions to the Pensions Ombudsman, the Authority did not submit that its systems were just too difficult and expensive to put into a state where they could actually provide accurate information of a kind of such importance to scheme members. The Authority just pointed out that the Scheme was large and complex with a large membership. One might think that in such a case there is all the more reason to ensure that the Authority, given its expertise, position and special responsibility for so many people, should have adequate systems in place to ensure that it could provide accurate information to members of the Scheme at appropriate points. If the Authority fails to ensure that it had effective automated or other procedures in place to perform that basic function and fulfil that basic responsibility, it is clearly going to be on risk of findings of maladministration by the Pensions Ombudsman in individual cases. The inference may be drawn that that is simply the risk that the Authority is willing to take. It is not something which disallows a finding of maladministration in a case such as this. I consider that the Pensions Ombudsman was fully entitled to make the finding of maladministration that he did.

Under this heading, Mr Greatorex made some further points. He referred to the finding by the Pensions Ombudsman at paragraph 63 that the Authority did send Mrs Leeks some relevant information in early 2007, shortly after she turned 60. He submitted that the Pensions Ombudsman's findings at paragraphs 63 to 65 that, despite this, she did not appreciate what her entitlements were at that stage were not sustainable.

This is in substance a perversity challenge in relation to the findings in that regard made by the Pensions Ombudsman. In my view, that challenge fails. I consider that there clearly was a proper evidential basis on which the Pensions Ombudsman could make the findings which he did, in particular at paragraphs 64 and 65 of his decision.

Mr Greatorex also made submissions referring to the responsibility of the Employer, as determined by the Pensions Ombudsman, for maladministration on its own behalf. However, as Mr Greatorex correctly accepted in the course of submissions, the fact that maladministration was found on the part of the Employer does not logically lead to the conclusion that there was no maladministration in the circumstances of this case on the part of the Authority. The Pensions Ombudsman was well entitled to make findings of maladministration against both the Employer and the Authority.

Mr Greatorex referred to the fact that the Pensions Ombudsman, at paragraph 59 of his decision, found that the Authority had made the Employer aware of the shortcoming in the Authority's systems and asked them to refer relevant cases to it and his comment that this was "a sensible precaution". Again, however, there is no inconsistency between these observations by the Pensions Ombudsman and his fundamental finding that there was maladministration on the part of the Authority. In the circumstances where maladministration in the form of non-provision of proper or accurate information was capable of occurring, it no doubt was a sensible precaution at the very least for the Authority to inform employers in this way. But the fact that the Authority took a precaution of this kind because of the defects in its information systems does not show that there was an absence of maladministration.

For these reasons, I dismiss the various points and grounds of challenge to the Pensions Ombudsman's decision made by Mr Greatorex under the heading of Ground 1.

Ground 2 is the submission to the effect that no compensation should have been awarded against the Authority. This is a causation argument. The substance of it is that Mr Greatorex submits that there was no proper basis on which the Pensions Ombudsman could find that, had Mrs Leeks been given proper information in January 2007, she would have retired from her employment and then, after a short interlude, would have resumed her employment.

In my judgment, this ground of appeal and the various aspects of it also fall to be dismissed. I consider that the Pensions Ombudsman was entitled to make the relevant findings on causation which he did at paragraphs 64 and 65 of his decision.

The Pensions Ombudsman was plainly conscious of causation issues relating to the fact that Mrs Leeks did not resign from her employment when, in March 2009, she was given proper information about her pension entitlements. He examined her reasons for doing that and found that she had appropriate grounds specific to the circumstances in which she then found herself for not retiring at that stage and acted reasonably in declining to do so: see paragraph 79 of his decision. There was evidential material before him, including in the complaint form lodged by Mrs Leeks, which provided a proper and lawful evidential foundation for him to make those findings.

For example, in her complaint form Mrs Leeks said:

On the basis of this statement by Mrs Leeks and other materials which were before him, I consider that the Pensions Ombudsman was entitled to make the findings relevant to causation that he did, in particular in paragraph 64 and 65 of his decision. There were particular reasons why Mrs Leeks did not retire in March 2009 which had no application in the circumstances which would have obtained in January 2007, had she been properly informed about her pension entitlements at that stage. In light of this, there was no inconsistency between Mrs Leeks' conduct in March 2009 and the Pensions Ombudsman's finding that she would have retired in January 2007, if given the correct information. There was a sufficient basis in the evidence before him to support his finding that this is what she would have done.

In light of the Pensions Ombudsman's findings in paragraphs 64, 65 and 79 of his report, he was entitled to find that Mrs Leeks did suffer injustice and loss in consequence of maladministration: see Westminster CC v Haywood [1998] Ch 377 at 410A-B. In summary, he found that by reason of the maladministration and the absence of proper information being provided to Mrs Leeks she was led to continue in her employment and lost the opportunity of retiring and then rejoining her employment. There were proper grounds on which the Pension Ombudsman could find this. There were also proper grounds on which he could find that there was no break in the chain of causation until the question of uncertainty and lack of trust in the Authority on the part of Mrs Leeks was finally dispelled by the Pensions Ombudsman's determination itself: see paragraph 82 of his decision, set out above.

It is in the context of this ground of appeal, in particular, that Mr Greatorex submits that the principle in Hibbert Pownall & Newtown referred to above, that the court should not speculate when it knows the position for a certainty, is relevant. In my view, however, the present case is not one in which the guidance in that judgment is germane. The present case is a case where different features of the evidence regarding how Mrs Leeks might have behaved if given proper information in January 2007 pointed in different directions. That evidence had to be assessed by the Pensions Ombudsman in the round, in the way which is usual when any judicial decision-maker assesses questions of fact and evidence.

This is not a case in which Mrs Leeks' behaviour in March 2009 shows for a certainty how she would have behaved in January 2007, had she been provided with proper information. The Pensions Ombudsman was called upon to make an evaluative judgment as to the likelihood of what would have happened had proper information been provided in January 2007, on the evidence available before him. The fact that Mrs Leeks did not promptly retire from her employment when informed of the true position in March 2009 does not show that there is any error in the assessment made by the Pensions Ombudsman. He fairly and properly addressed the reasons for her behaviour in March 2009, in particular at paragraph 79 of his decision, and gave reasons why the position confronting Mrs Leeks in March 2009 was materially different from that with which she would have been presented had she been given the proper information in January 2007. Again, this was an assessment which in my judgment the Pensions Ombudsman was entitled to make.

Mr Greatorex was also critical of the Pensions Ombudsman's reasoning at paragraph 66 of his decision, set out above. I do not consider that this criticism is sustainable either. In the light of the matters to which the Pensions Ombudsman referred, in particular the indication from Mrs Leeks' manager and the fact that she had in fact continued in employment with the Employer after January 2007 (so there was obviously work for her to do), the Pensions Ombudsman was entitled to find that she would have had a genuine opportunity to retire and then return to work promptly had she been informed about her entitlements properly in January 2007. Since the Pensions Ombudsman was entitled to find that she would have had such an opportunity, he was also in my view entitled to find that she would have taken advantage of it and behaved as she maintained she would have behaved.

Also under this ground of appeal, Mr Greatorex submitted that it was clear that, at the very least there was uncertainty about the position, and the Pensions Ombudsman should have taken this into account by reducing any compensation to reflect that uncertainty. He submitted, further, that this would avoid putting Mrs Leeks in a better position than if there had been no maladministration or she had successfully taken her complaint to court.

I do not accept these submissions. In my view, the Pensions Ombudsman was entitled to decide what the proper basis for assessing the extent of the injustice suffered by Mrs Leeks might be. He proceeded on the basis of making findings at relevant points in his decision on the balance of probability. In my judgment, this was a lawful approach for him to adopt in the circumstances of this case and does not give rise to any good ground of appeal.

The third ground of appeal is a challenge to the award by the Pensions Ombudsman of compensation for the period beyond March 2009. Mr Greatorex submits that, even if Grounds 1 and 2 are not accepted, the Pensions Ombudsman was wrong to award compensation to Mrs Leeks beyond March 2009, for two reasons. First, in her complaint to the Pensions Ombudsman she had not sought compensation beyond March 2009, so the Pensions Ombudsman had no jurisdiction to make an award beyond that date. Secondly, March 2009 was when she was provided with the correct information which she should have been given in 2007, so any maladministration ceased at that point and Mr Greatorex submitted, for reasons similar to those he advanced under Ground 2, that there was no proper basis for the Pensions Ombudsman to find that there was any continuing causative effect of the maladministration found by him beyond the time when proper information was given to her.

I reject both these submissions. As to the first, I do not accept that it is correct on the facts that Mrs Leeks' application form to the Pensions Ombudsman made it clear that her complaint of injustice arising from maladministration related only to the period until proper information was provided to her in March 2009. In the section of the form headed, "Please detail the injustice you have suffered", she included the following statement:

In my view, on a fair reading of her complaint form, she was complaining of continuing injustice and loss suffered by her beyond March 2009 as a result of the maladministration about which she was complaining in respect of the earlier period. Accordingly, in relation to the first of the points made by Mr Greatorex, I consider that on a fair reading of her complaint she had sought compensation beyond March 2009 to meet the injustice that she had suffered and that the Pensions Ombudsman had jurisdiction to make the award that he did.

The second point is in substance the same argument based on the challenge to the findings made by the Pensions Ombudsman regarding causation which I have already addressed in the context of Ground 2. As I have explained, the Pensions Ombudsman was entitled on the evidence before him to make findings that had Mrs Leeks been properly informed about the position as she should have been in January 2007, she would have retired from her job but then, after a brief period, would have re-entered employment with the Employer. On the basis of those findings, the Pensions Ombudsman was entitled to make the findings that he did in relation to the continuing loss suffered by Mrs Leeks down to the date of his report.

I turn finally to Ground 4 (the submission that the Pensions Ombudsman erred in making a finding that the Authority alone should be liable for the compensation to be paid to Mrs Leeks). The precise legal position in relation to a situation in which two persons are both guilty of maladministration which causes the same loss to a complainant is obscure. I asked Mr Greatorex in the course of his submissions whether it is open to the Pensions Ombudsman to make rulings which in ordinary litigation terms might be described as findings of joint and several liability on the part of two bodies, both of which are responsible, as here, for relevant maladministration, and as a consequence of which a loss has been suffered by the victim of that maladministration. The relevance of the question in relation to joint and several liability is two-fold. First, from the point of view of a victim or claimant in a case where loss has been caused by two responsible parties who are jointly and severally liable for that loss, the effect is that the victim or claimant can recover the full amount of that loss from either of the responsible parties. This reduces the risk that might otherwise arise in relation to the possible of insolvency of one of those parties. In the present case, I have no information about the financial position of the Employer. Secondly, the relevance of a finding of joint and several liability is that in ordinary litigation a party which pays out to the claimant or victim in full will be entitled to claim contribution from the other responsible party and it would be for the court to work out what fair contribution should be made by the other wrongdoer. The working out of rights of contribution does not affect the ability of the victim or claimant to recover full compensation from one or other of the responsible parties, according to his choice and what suits him best.

Mr Greatorex had not had notice of this question and very fairly told me that he was not aware of the operation of joint and several liability in the Pensions Ombudsman context or of there being rights of contribution. If this were a matter which did not affect the rights of Mrs Leeks, it might have been a point which could have been explored further with the benefit of submissions not just from the Authority but from the Employer. However, the effect of this ground of appeal is that the Authority is seeking to use a right of appeal against the ruling of the Pensions Ombudsman in favour of Mrs Leeks, and against her objection and where she has no appeal of her own on foot to challenge the absence of a compensation award in her favour against the Employer, to secure some form of right of contribution against the Employer.

In my judgment, it would not be appropriate to allow the Authority's appeal on this Ground. As between Mrs Leeks and the Authority, there is no injustice in the decision of the Pensions Ombudsman. The Authority was guilty of maladministration which did indeed cause the loss suffered by Mrs Leeks. Further, it would be particularly inappropriate to allow the Authority's appeal in circumstances where, as here, the court has no information as to whether diminishing the right of compensation for Mrs Leeks against the Authority might give rise to a risk of under-recovery by reason of the financial position of the Employer. I can see no good reason why Mrs Leeks should be put into a worse position (by a reduction of the sum she is entitled to recover from the Authority) than she would have been in had the ordinary rules of civil procedure applied. I do not consider that it would be just or fair to allow the appeal in favour of the Authority against Mrs Leeks, in order to facilitate, in substance, the Authority in obtaining contribution from the Employer. That is a matter which is res inter alios acta ; a point of relevance between the Authority and the Employer, but with no proper bearing on the rights of Mrs Leeks against the Authority. In my view, therefore, there was no error of law on the part of the Pensions Ombudsman in making the compensation ruling he did in favour of Mrs Leeks against the Authority.

Further and in any event, the Pensions Ombudsman did address the question of dividing up the compensation awards as between the Employer and the Authoroity, in particular at paragraph 85 of his report, set out above. In my view, the reasons the Pensions Ombudsman gives there disclose no error of law in his approach.

For all these reasons, I dismiss this appeal.