Corsham & Ors v Police and Crime Commissioner for Essex & Ors

A scheme administrator may be liable for negligent misstatement where it knows, or ought to know, that a member is being re-employed shortly after retirement, ought to know that the re-employment will make pension payments unauthorised, and states that the payments are tax free. Liability depends on the particular relationship, assumption of responsibility, proximity, foreseeability and whether it is fair, just and reasonable to impose liability. Reasonable reliance and causation must also be established.

The narrow principle in Scally v Southern Health Board does not impose on a chief constable a duty to warn a police officer of tax consequences external to the quasi-employment relationship, particularly where the chief constable neither administers the pension scheme nor employs the officer in the new role.

Five retired police officers appealed against a decision of the Pensions Ombudsman dismissing complaints concerning substantial tax charges on pension lump sums and annual payments. Each had retired before age 55 and had taken civilian employment with a police authority within one month of retirement. The appellants alleged that the relevant police authorities and chief constables should have warned them that this would cause loss of their protected pension age and make the payments unauthorised under the Finance Act 2004.

The Ombudsman had made incomplete findings of fact and had misunderstood the police authorities’ role as sub-scheme administrators. The central issues were whether the police authorities were liable for negligent misstatements or breach of a duty of care, whether the chief constables owed a comparable duty, and what disposal was appropriate.

1. Avon and Somerset. The appeal was allowed against the Avon and Somerset Police and Crime Commissioner. The police authority knew that the appellants were to be re-employed within one month of retirement and ought to have known the relevant provisions of the Finance Act 2004. It therefore ought to have appreciated that the lump sums and pension payments would be unauthorised.
2. The statements that the lump sums would be tax free were misleading. Applying the approach in Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181, the police authority assumed responsibility for the statements. The relationship was sufficiently proximate, harm was foreseeable, and it was fair, just and reasonable to impose liability. The appellants reasonably relied on the statements and would have postponed re-employment had they been given the correct information.
3. The relevant loss was the additional tax payable on the lump sums and annual pension payments before age 55. The Avon and Somerset Police and Crime Commissioner, as successor to the police authority, was liable.
4. Essex. The appeal against the Essex Police and Crime Commissioner was remitted unless the Commissioner accepted that equivalent findings could be made. The Pensions Ombudsman was to determine whether the Essex police authority knew, when it sent the relevant letters, of the intended re-employment and its likely start date, and then apply the legal principles in this judgment.
5. Chief constables. The appeals against both chief constables were dismissed. Scally v Southern Health Board [1992] 1 AC 294 concerned a narrow implied contractual term relating to a valuable contractual right of which the employee could not reasonably be expected to be aware. The appellants’ pension rights were known and enjoyed; the adverse tax consequences arose externally to the quasi-employment relationship. Extending Scally to impose the proposed duties would be a major and unjustified development of the law.

1. High Court (Chancery Division): appeals from the Pensions Ombudsman’s decision dated 21 August 2018. The Ombudsman had dismissed all eight complaints.
2. The High Court allowed the Avon and Somerset appeals against the Police and Crime Commissioner, remitted the Essex appeals subject to acceptance of equivalent findings, and dismissed the appeals against the chief constables.