A F Blakemore & Son Ltd v Machin & Anor

An appeal on a question of law may succeed where a decision-maker addresses the wrong issue, rejects credible evidence without adequate reasons, or makes a finding unsupported by the evidence. A compromise agreement settling claims arising from employment does not ordinarily extinguish separate rights against pension scheme trustees, although it may extinguish claims against the employer which require the employer to fund those rights. Where credible witness evidence is materially unchallenged, rejection of it without an oral hearing and cross-examination may be unlawful. The matter should be remitted for reconsideration of the correct issues, including any estoppel by convention.

The employer and trustees appealed against two decisions of the Pensions Ombudsman concerning complaints by two former employees under the A F Blakemore & Son Ltd Staff Retirement Benefit Scheme. The complaints concerned the calculation of pension benefits by reference to earnings, including bonuses.

The Ombudsman upheld the complaints. The appellants contended that the complaints were barred by compromise agreements, that oral agreements made in 1989 excluded bonuses from pensionable earnings, and that the respondents were estopped from relying on the Scheme’s terms. The central issues were whether the compromise agreements affected the respondents’ rights, whether the alleged oral agreements had been properly addressed, and whether the Ombudsman had made an error of law.

1. The appeal succeeded on the issue concerning the alleged oral agreements. An appeal to the High Court lay only on a question of law, but the court could intervene where the decision-maker’s finding contradicted the only true and reasonable finding available on the primary evidence, failed clearly to state or explain the finding, or rejected plainly credible evidence without adequate reasons.

2. The compromise agreements settled claims against the employer and its officers arising from employment and its termination. They did not extinguish rights against the pension scheme trustees. The reasoning in Lewis v The Pensions Ombudsman [2005] EWHC 103 was consistent with that distinction: a clause could extinguish a claim against the employer requiring it to fund an enhanced pension, without extinguishing a claim against another person.

3. The Ombudsman addressed whether the respondents knew of an agreement that bonuses were non-pensionable, rather than the material question whether the alleged oral agreements had been made. There was credible evidence supporting the agreements and no evidence contradicting it. The Ombudsman could not properly reject that evidence without an oral hearing and cross-examination. The decisions therefore could not stand.

4. The Ombudsman was directed to reconsider whether the respondents suffered injustice through maladministration, including the existence of the alleged oral agreements and any estoppel by convention. The court indicated that, if the respondents were contractually entitled to calculation by reference to bonuses and no legal or equitable defence existed, denial of that entitlement would constitute maladministration occasioning injustice. A separate contention based on breach of trust should not be raised by a side-wind and had not been sufficiently raised for determination.

5. The rehearing was to be expedited. No order was made as to the costs of the appeal.

• High Court (Chancery Division): Appeal against two Pensions Ombudsman decisions dated 3 January 2007. The decisions could not stand because of an error of law in addressing the wrong issue and rejecting credible evidence without an oral hearing. The matters were remitted for reconsideration.