London Borough of Barking and Dagenham v Watts

An appeal from the Pensions Ombudsman lies only on a point of law. The court should not reargue facts or subject the Ombudsman’s determination to minute criticism. Maladministration concerns the decision-making process, not merely the correctness of the decision. A long-standing pension payment may shift the evidential burden to the authority to establish unlawfulness. In assessing whether a local authority’s long-service award is lawful, the court must consider its purpose and the perspective at which it was adopted. An award may be a lawful inducement to recruit or retain staff where it reflects anticipated future service and value, rather than being merely a device to inflate retirement benefits.

The London Borough of Barking and Dagenham appealed against a determination of the Pensions Ombudsman concerning Miss Watts’s enhanced pension. The enhancement arose from a long-service award made in 1969 and had been paid for almost 30 years before the Council withdrew it in 2000 after receiving advice that such awards might be ultra vires.

The Ombudsman ordered reinstatement of the enhancement, arrears and interest, and awarded £250 for maladministration. The appeal concerned whether the award and enhanced pension were unlawful, whether the Ombudsman had applied the correct evidential burden, and whether the Council’s decision-making amounted to maladministration.

1. Appeal on a point of law. Under Pension Schemes Act 1993, s.151(4), the court could intervene only for an error of law. This included misapplication of a legal principle, misconstruction of a statutory provision, or a conclusion that no reasonable Ombudsman could reach. The court should avoid treating factual challenges as legal appeals and should construe the Ombudsman’s determination benevolently.
2. Maladministration. Maladministration concerned the decision-making process rather than the merits of the decision. The Council had acted carefully, obtained legal advice and attempted to obtain authorisation to continue payment. Its mistaken conclusion on the law did not, without a defect in process, amount to maladministration. The Ombudsman’s award of £250 was therefore erroneous.
3. Burden and proof of unlawfulness. The legal burden of proving entitlement lay on Miss Watts. Once she showed that the enhanced pension had been paid continuously and without challenge for nearly 30 years, the evidential burden shifted to the Council to establish error or unlawfulness. The context made that a heavy burden, because the Council alleged that its own conduct had been unlawful for many years.
4. Lawfulness of the award. Hinckley & Bosworth BC v Shaw concerned one-off arrangements made at departure principally to enhance redundancy and retirement benefits. It did not necessarily govern a policy adopted, viewed prospectively, as an inducement to recruit and retain employees. The evidence permitted the Ombudsman to find that Miss Watts’s award had been made on her individual merit and was not shown to be routine or ultra vires. The Council therefore failed to meet the high threshold of showing perversity.
5. The appeal was dismissed on the lawfulness of the enhanced pension but allowed in relation to the finding of maladministration.

• Pensions Ombudsman: Determination dated 23 July 2002 ordering reinstatement of the enhanced pension, arrears and interest, and £250 compensation for maladministration.
• High Court (Chancery Division): Appeal allowed in relation to maladministration but dismissed on the principal issue concerning the enhanced pension.