East Lancashire Primary Care Trust v Leach & Anor

A Pensions Ombudsman dealing with maladministration must award an appropriate remedy for the injustice caused. Where incorrect pension information induced early retirement, compensation should ordinarily reflect the loss caused by that decision, assessed by reference to the position the complainant would have occupied had correct information been given.

The Ombudsman cannot treat incorrect information as creating an entitlement to benefits unavailable under the pension scheme, or award compensation by simply putting the complainant in the position that the incorrect information appeared to promise. The appropriate course following an error of law is normally to set aside the determination and remit the matter for reconsideration.

The East Lancashire Primary Care Trust appealed against a determination of the Pensions Ombudsman upholding Mrs Leach’s complaint that misleading pension information had caused her to retire early rather than transfer to an outsourced service provider.

The Ombudsman directed that her pension be increased retrospectively to the level shown in the misleading estimates. The Trust and the NHS Pensions Agency argued that this applied the wrong measure of compensation and awarded benefits outside the applicable NHS pension scheme. The central issues were the proper measure of redress for maladministration and whether the matter should be remitted to the same or a different Ombudsman.

1. The appeal was allowed to the extent that the Pensions Ombudsman’s determination and award were set aside. The matter was remitted to the Ombudsman to reconsider the appropriate measure of compensation.

2. The governing principles were those identified in East Sussex County Council v Jacobs [2003] EWHC 3323 (Ch). The purpose of a remedy for maladministration causing injustice is to provide an appropriate remedy for the injustice sustained. Compensation must be assessed by reference to the loss resulting from the maladministration, not by treating incorrect information as correct.

3. Under section 146 of the Pension Schemes Act 1993, the Ombudsman may investigate and determine complaints of injustice caused by maladministration. Under section 151(2), he may direct the scheme trustees or managers to take specified steps. Those powers permit compensation for the loss caused by maladministration, but do not create an entitlement to pension benefits outside the scheme.

4. Where correct information would have led a complainant to delay retirement, the Ombudsman may assess compensation on the basis of the net income that would have been received until the later retirement date together with the pension that would then have been payable, subject to the facts and mitigation. The present determination had instead awarded benefits at the level of the misleading estimates and therefore disclosed an error of law.

5. The matter was not a totally flawed decision or a case involving bias, partiality, prejudgment or complete mishandling. Guidance concerning remission in Sinclair, Roche and Temperley v Heard [2004] IRLR 763, referred to in Barke v Seetec Business Technology Centre Ltd [2005] EWCA Civ 578, supported leaving the identity of the person reconsidering the matter to the Ombudsman’s discretion. The court made no direction requiring reconsideration by a different Ombudsman.

• Pensions Ombudsman: On 30 March 2012 the Ombudsman upheld Mrs Leach’s complaint against East Lancashire Primary Care Trust and directed an increase in her pension and compensation for non-financial injustice.
• High Court (Chancery Division): The determination was set aside for error of law in the measure of compensation and remitted to the Pensions Ombudsman for reconsideration.