Downe v Universities Superannaution Scheme (USS) & Anor

On an appeal from a Pensions Ombudsman determination, the court must apply the scheme’s own definition of redundancy. Where employment is terminated under a pension scheme rule referring to termination by reason of redundancy, the inquiry is whether: (1) employment terminated; (2) the employer’s requirements for employees to carry out work of a particular kind had ceased or diminished, or were expected to do so; and (3) the termination was wholly or mainly attributable to that change.

The analysis is distinct from asking who instigated the termination, whether the employee was coerced, or whether a formal redundancy process had begun. A compromise agreement describing a payment as enhanced redundancy pay, while expressly made without admission of liability, may be neutral and provide no assistance on causation.

Ms Downe appealed under section 151(4) of the Pension Schemes Act 1993 against a determination of the Pensions Ombudsman dated 18 July 2018. The Ombudsman had concluded that Rule 11.2 of the Universities Superannuation Scheme Rules was not satisfied because Ms Downe had instigated the termination of her employment and had not been coerced.

The appeal concerned whether the termination was by reason of redundancy within Rule 11.2.1 and the definition in Rule 1.1. The permitted grounds were that the Ombudsman had applied too narrow an interpretation of redundancy and had failed to give proper effect to the compromise agreement.

1. The appeal was allowed on ground (a), but dismissed on ground (b), and the complaint was remitted to the Ombudsman.

2. The relevant definition in USS Rule 1.1 required three questions: whether employment had terminated; whether the employer’s requirements for employees to carry out work of a particular kind had ceased or diminished, or were expected to cease or diminish; and whether termination was wholly or mainly attributable to that actual or expected cessation or diminution. The latter two questions corresponded to the factual questions identified in Murray v Foyle Meats.

3. The Ombudsman had treated the question whether termination occurred at SCONUL’s instance, or whether Ms Downe had been coerced, as effectively determinative. That was a legal error. The heading of Rule 11 did not add an independent requirement that termination be instigated by the employer. The USS Rules used “terminated”, not “dismissed”, and did not incorporate the dismissal requirement in section 139 of the Employment Rights Act 1996.

4. The absence of a formal redundancy process did not answer whether the substantive definition was met. Overall employee numbers could remain unchanged while the employer’s requirements for work of a particular kind diminished. The Ombudsman had not reasoned through the intended reorganisation, the work Ms Downe was performing, the effect of outsourcing or restructuring, or the causal connection between those matters and the termination.

5. The compromise agreement was neutral. It stated that the contract was to be terminated, referred to possible claims for redundancy, and provided for enhanced redundancy pay without admission of liability. It neither compelled nor permitted a finding that the employment had ended by reason of redundancy.

6. The October reorganisation documents supported the possibility that the redundancy test was met but did not determine the issue. The relevant factual and causation questions therefore had to be determined by the Ombudsman on the evidence as a whole.

• High Court (Chancery Division): appeal under section 151(4) of the Pension Schemes Act 1993 allowed on ground (a), dismissed on ground (b), and complaint remitted to the Pensions Ombudsman.
• Pensions Ombudsman: determination dated 18 July 2018, Ref: PO7946, declined to uphold the complaint and concluded that Rule 11.2 was not satisfied.