Board of the Pension Protection Fund v Trustees of the West of England Ship Owners Insurance Services Ltd Retirement Benefits Scheme

Where the Board has promulgated detailed levy rules under section 175(5) of the Pensions Act 2004, the rules must be applied according to their proper construction when calculating an individual scheme’s levy. A review of that calculation cannot be used to challenge the policy or fairness of the rules themselves. A reference to the Ombudsman is confined by the relevant reviewable matter and cannot enlarge the Board’s powers. The phrase “normal non-UK Failure Score” assigned in the ordinary course of business requires a factual inquiry into the provider’s usual practice, not an evaluation of its fairness or rationality. Information is not materially incorrect merely because other, more up-to-date information existed. The Ombudsman may direct the substance of a replacement decision in an appropriate case, but should ordinarily remit a discretionary issue where the Board has not yet exercised its discretion.

The Board appealed under section 217 of the Pensions Act 2004 against a determination of the Deputy Pension Protection Fund Ombudsman concerning the 2010/11 risk-based levy payable by the Scheme.

The Ombudsman had concluded that the Board had calculated the levy incorrectly because the Failure Score supplied by D&B Luxembourg had not taken account of the Scheme employer’s most recent filed accounts. She remitted the levy calculation, directed that late-payment interest not be charged, and ordered the Board to contribute £10,000 towards the Trustees’ legal costs.

The appeal concerned construction of Rules E2.2(3) and B2 of the 2010/11 Levy Determination, the Ombudsman’s remission powers, interest, and costs.

The appeal was allowed. The Ombudsman’s determination was replaced by an order upholding the Reconsideration Committee’s decision.

1. Construction and review. The Board’s function under section 175(5) of the Pensions Act 2004 was discretionary and policy-based. Its function under section 181(3)(b), applying the published rules to an individual scheme, was non-discretionary. Once the hard-edged rules had been promulgated and were not successfully challenged by judicial review, they had to be applied according to their terms. The Ombudsman’s jurisdiction could be no broader than the Board’s.
2. Rule E2.2(3). “Normal” and “ordinary course of business” required an objective factual assessment of whether D&B Luxembourg had followed its ordinary business practice. They did not import value judgments about fairness, rationality or the appropriateness of that practice. The Failure Score was therefore the score which D&B Luxembourg normally assigned in the ordinary course of its business.
3. Rule B2. Information was materially incorrect where the Failure Score, or a component of it, was not based on information normally used by D&B in the ordinary course of business. It was not materially incorrect merely because further or more up-to-date information existed, or because the information used contained an underlying inaccuracy which D&B would ordinarily have used.
4. Remission. Regulation 16 gave the Ombudsman power, in an appropriate case, to direct the substance of a replacement decision. Where the Board had not exercised a discretion because it wrongly believed that none existed, the ordinary course was to remit the matter. In any event, the present case was unsuitable for the Ombudsman to determine the discretion herself.
5. Interest and costs. The decision whether to waive interest was a separate reviewable matter and had not been referred to the Ombudsman, so she lacked jurisdiction to direct that interest be waived. She had power to award compensation for certain costs incurred outside the reference itself, but breached natural justice by failing to give the Board an opportunity to respond to the Trustees’ later costs submissions.

Pension Protection Fund Ombudsman: The Ombudsman upheld the Trustees’ reference, remitted recalculation of the risk-based levy, directed that late-payment interest not be charged, and ordered a £10,000 contribution towards costs.

High Court (Chancery Division): The appeal under section 217 of the Pensions Act 2004 was allowed. The Ombudsman’s decision was replaced by an order upholding the Reconsideration Committee’s decision.