R (Bradley) v Secretary of State for Work and Pensions

JurisdictionEngland & Wales
Judgment Date21 February 2007
Neutral Citation[2007] EWHC 242 (Admin)
Docket NumberCase No: CO/4927/2006
CourtQueen's Bench Division (Administrative Court)
Date21 February 2007

[2007] EWHC 242 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

ADMINISTRATIVE COURT

Before

The Hon. Mr. Justice Bean

Case No: CO/4927/2006

Between
The Queen on the Application of
1. Henry Bradley
2. Robin Duncan
3. Andrew Parr
4. Thomas Waugh
Claimants
and
Secretary of State for Work and Pensions
Defendant
and
Parliamentary Commissioner for Administration
Interested Party

Dinah Rose QC and Thomas Hickman (instructed by Bindmans) for the Claimants

Philip Sales QC and Daniel Stilitz (instructed by The Solicitor, Department of Work and Pensions) for the Defendants

Clive Lewis QC and Ben Hooper (instructed by The Treasury Solicitor) for the Attorney-General, intervening on behalf of the Speaker of the House of Commons

The Interested Party did not appear and was not represented

Hearing dates: 7–9 February 2007

Judgement

Mr Justice Bean :

1

On the 15 March 2006 the Parliamentary Commissioner for Administration ("the Ombudsman"), Ms Ann Abraham, published a special report to Parliament entitled "Trusting in the Pensions Promise". The report found that the Department for Work and Pensions, and its predecessor the Department of Social Security, had been guilty of maladministration which was one of a number of factors that had caused injustice to over 75,000 people who had lost all or part of their final salary occupational pensions on the winding up of their pension schemes. Among her recommendations was that the Government should consider arrangements for the restoration of the core pension entitlements of these individuals. In a written statement to Parliament of 15 March and a more detailed oral statement by the Secretary of State in the House of Commons on 16 March the Government rejected all but one of the Ombudsman's findings and recommendations. The present claim is for judicial review of the decision to reject two of the findings and one of the recommendations which lie at the heart of the report.

The Pensions Act 1995

2

Before the passing of the Pensions Act 1995 there was no comprehensive legislative regime for the regulation of occupational pensions. Occupational pension schemes were governed essentially by the law of trusts. Following the activities of the late Robert Maxwell in diverting the assets of the pension schemes of his companies' employees it was widely recognised that additional protection for scheme members was required.

3

Part I of the 1995 Act was concerned specifically with occupational pensions. The principal innovations included the following:—the establishment of the Occupational Pensions Regulatory Authority ("OPRA") to oversee the trustees of pension schemes; the requirement for member nominated trustees; the imposition of a range of statutory duties and responsibilities on trustees; the requirement for a scheme auditor and a scheme actuary to provide professional advice to the trustees; the introduction of a statutory Minimum Funding Requirement ("MFR"), and the establishment of a statutory system of priorities for the application of a scheme's assets in the event of the scheme being wound up with insufficient assets to meet its liabilities in full.

4

Section 56(1) of the 1995 Act, establishing the MFR, required that the value of the assets of a defined benefit occupational pension scheme should not be less than the amount of the liabilities of the scheme. Since both assets and liabilities would inevitably fluctuate in value, the statute required assumptions to be made from time to time about whether the assets held were sufficient to meet liabilities falling due well into the future. Detailed provisions as to the method of calculation of the MFR were prescribed in the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996. Regulation 3(2)(c)(ii) provided that it should be assumed that liabilities in respect of members will be so secured that the benefits of active and deferred members will be "reasonably likely" to be equal in value to those payable in respect of their accrued rights under the scheme.

5

Section 73, headed "Preferential liabilities on winding up", provided for the order of priorities where on a scheme being wound up the assets were insufficient to satisfy the liabilities of the scheme in full. In summary the order was (a) liabilities derived from the payment of voluntary contributions; (b) pensions paid to members who have retired, and on their death to their dependants (including at that time, though not since 2004, increases in such pensions); (c) liabilities for pensions to members who have not yet retired.

6

On 3 January 1996 the DSS published a leaflet ("PEC3") entitled "The 1995 Pensions Act", running to 21 pages. Its contents were strongly criticised by the Ombudsman in her Report. She was also critical of certain later literature, in particular an edition of leaflet PM3, called "Occupational Pensions: Your Guide", which appeared on 7 May 2002.

7

From time to time amendments were made to the level of the MFR. In response to advice from the actuarial profession that the MFR was stronger than intended the Government twice reduced its level, in May 1998 and March 2002. The latter decision was the subject of an adverse finding by the Ombudsman. The profession also twice advised (in 2001 and 2003) that the level was weaker than intended but on both occasions the Government decided not to increase it.

8

A revised legal framework was created by the Pensions Act 2004, the principal relevant provisions of which came into force on 6 April 2005.

The complaints to the Ombudsman

9

The Ombudsman's Report records (paragraph 1.44) that she had received more than 200 complaints referred to her by Members of Parliament of all political parties and from all parts of the United Kingdom on the subject of pension losses. The complaints which formed the basis of her investigation had four elements:—

(1) First, it was alleged that the legislative framework during the relevant period (which she defined as being from commencement of the 1995 Act to commencement of the 2004 Act) had afforded inadequate protection to the pension rights of members of final salary occupational schemes;

(2) Secondly, it was alleged that on a number of occasions Ministers and officials had ignored relevant evidence when taking policy decisions related to the protection of pension rights accrued in such schemes;

(3) Thirdly, it was alleged that the information and advice provided by a number of government departments and other public bodies about the degree of protection that the law provided to accrued pension rights had been inaccurate to the extent that it had amounted to the misdirection of the members and trustees of such schemes;

(4) Fourthly, it was alleged that public bodies were responsible for unreasonable delays in the process of winding up the schemes. (This final element was the subject of a finding and recommendation by the Ombudsman which was accepted by the Government and formed no part of the case before me.)

The Financial Assistance Scheme

10

On 14 May 2004 the then Secretary of State for Work and Pensions announced that the Government would be providing £400 million of public money to be paid over 20 years, to create the Financial Assistance Scheme (FAS) to provide assistance to those who had lost part or all of their pension rights due to their scheme winding up underfunded and who were within three years of the scheme's pension age at 14 May 2004. In December 2006, by which time this litigation was already under way, the FAS was significantly extended so as to be available to people within 15 years of their scheme's pension age, though on a tapering basis for those in the bracket of 7–15 years from that age. The FAS is not available to assist members of pension schemes which have been wound up by a solvent employer.

The Claimants

11

Mr Bradley worked at Irish Fertiliser Industries Ltd for 27 years until that company went into liquidation in 2002. He paid into the pension scheme throughout, and his evidence is that he was assured by others that it was safe. Following the insolvency he learned that he could only expect to receive a fraction of his expected pension from the company's scheme. His case is that he would have made different plans and choices, had the true security of the scheme been properly publicised. A colleague of Mr Bradley described as "Mr J" is one of the paradigm cases considered by the Ombudsman in her report. IFI was based in Belfast, but it is not suggested that this fact deprives the Administrative Court of jurisdiction.

12

Mr Duncan worked for British United Shoe Manufacturers Ltd for 36 years. As a shop steward and convenor, and a member-nominated trustee of the company pension scheme, he actively promoted it to colleagues, believing it to be safe and secure. He states that he formed this belief on the basis of Departmental and OPRA publications which he not only read and relied upon personally, but disseminated to others. He made substantial additional voluntary contributions to the fund. Following the insolvency of BUSM he is likely to obtain no more than about 10% of his expected pension from the company scheme. He has sold his house because of the financial circumstances in which he and his wife found themselves. He now works long hours as a night shift driver for Royal Mail. His is one of the paradigm cases mentioned in the Ombudsman's Report, where he is described as Mr B.

13

Mr Parr worked for 20 years at Allied Steel and Wire until that company's insolvency. He too claims that he relied upon and disseminated information from Government literature to others, though since ASW...

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1 books & journal articles
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