Revenue and Customs Commissioners v Kearney

Whether ignorance or error resulted from a failure to exercise due care and diligence is fact-sensitive. Relevant considerations include the contributor’s knowledge of the scheme, contribution history, benefits claimed, and information received about liabilities and entitlements. Due diligence does not invariably require positive enquiries of the National Insurance authorities. Enquiries of an employer or trade union may suffice, and inactivity may be reasonable where incorrect information has been supplied or the contributor is wholly ignorant of the scheme. However, an uninduced assumption that public employment will safeguard pension rights, without making enquiries, cannot constitute due care and diligence. Action taken after the critical payment period may establish ignorance or error, but does not explain why the error occurred.

The Revenue and Customs Commissioners appealed against a decision of the General Commissioners allowing John Joseph Kearney’s appeal. The Commissioners had accepted that his failure to pay voluntary National Insurance contributions while working abroad was attributable to ignorance or error, and directed that late payments for the relevant period be treated as paid on time.

The issue before the High Court was whether that ignorance or error was attributable to his failure to exercise due care and diligence under the applicable National Insurance legislation.

1. Appeal allowed. The General Commissioners had addressed why Mr Kearney was ignorant of his entitlement, but had not adequately addressed whether that ignorance resulted from a lack of due care and diligence.
2. The National Insurance authorities had no duty to chase a person who was abroad and merely entitled, rather than obliged, to pay contributions. They also had no duty to explain the consequences of going abroad when they had no way of knowing that the departure would occur.
3. Due care and diligence cannot be defined exhaustively. The relevant assessment depends on all the circumstances. Potentially relevant factors include the person’s knowledge of the scheme, contribution history, the point at which the person entered the scheme, whether benefits had been claimed, and what information was received about liabilities and entitlements and from whom.
4. Enquiries need not necessarily be made of the National Insurance authorities. Depending on the circumstances, enquiries of a responsible employer or trade union may satisfy the requirement. Conversely, reliance on an assumption that a Government servant would be looked after, without enquiries and without positive inducement, could not amount to due care and diligence.
5. The Commissioners’ reliance on Mr Kearney’s prompt attempts to remedy the position was immaterial to the second issue. Those attempts might support the conclusion that the failure resulted from ignorance or error, but they did not explain why the original error had occurred.
6. The answer to the question stated was no. The appeal was therefore allowed.

High Court (Chancery Division): The Revenue and Customs Commissioners appealed from the General Commissioners’ decision allowing Mr Kearney’s appeal. The High Court allowed the appeal.