Universities Superannuation Scheme Ltd v Scragg & Ors

Under pension scheme rules, an employer’s opinion that a member is incapacitated does not bind the scheme trustee. The trustee must make its own determination, having regard to the defined medical opinion, as to whether the member has total incapacity, partial incapacity or no incapacity. The employer’s opinion remains relevant evidence, but its weight depends on the quality of the supporting evidence. Scheme rules are construed primarily from their wording, with due regard to practical consequences and the scheme’s proper operation. Express provisions that headings do not affect interpretation must be respected. On an appeal from the Pensions Ombudsman, a respondent cannot ordinarily introduce new medical-evidence challenges which were not raised through the scheme’s internal dispute-resolution process.

Universities Superannuation Scheme Ltd appealed under section 151(4) of the Pension Schemes Act 1993 from the Pensions Ombudsman’s determination of 23 March 2018. The Ombudsman had construed Rule 15.1.3 of the Scheme Rules as limiting the trustee to deciding whether an incapacity accepted by the employer was total or partial. He directed the trustee to reconsider the member’s entitlement to ill-health retirement benefits and to pay compensation for distress and inconvenience.

The trustee contended that it had to decide for itself whether any incapacity existed. The member also sought to uphold the Ombudsman’s determination on new grounds concerning the sufficiency and assessment of the medical evidence. The central issues were the proper construction of Rule 15 and whether those new issues could be raised on the appeal.

1. Appeal allowed. The trustee was not bound by the University’s opinion under Rule 15.1.2. Rule 15.1.3 required it to make its own determination, based on the defined medical opinion, whether the member suffered from total incapacity, partial incapacity or no incapacity.
2. The conditions in Rule 15.1 were not applied in a sequence which prevented the trustee from reconsidering the existence of incapacity. The University’s opinion was relevant evidence, including to the determinations under Rules 15.1.3 and 15.1.4, but its weight depended on the quality of the evidence supporting it.
3. The wording of Rule 15.14, requiring the trustee to determine matters having regard to medical opinion received from its appointed medical advisers, was inconsistent with treating the employer’s opinion as conclusive. The appointed doctors had to assess the available evidence on the balance of probabilities and could conclude that no incapacity existed.
4. The construction advanced by the member could create operational difficulties and undermine the protection of the Scheme’s enhanced benefits. The balance between employers and the funders also supported the trustee’s construction. The headings and sub-headings did not alter the result. Rule 1.2.2 expressly stated that they did not affect interpretation, and the headings were in any event inexact paraphrases.
5. The member’s additional challenges to the medical evidence could not properly be raised in the Respondent’s Notice. They had not been considered through the internal dispute-resolution procedure and would require an entirely different determination from that made by the Ombudsman. Regulation 3 of the Personal and Occupational Pension Schemes (Pensions Ombudsman) Regulations 1996 therefore prevented the court from investigating or determining those issues on this appeal. The Ombudsman’s directions fell away with the successful appeal.

• High Court (Chancery Division): The appeal from the Pensions Ombudsman’s determination dated 23 March 2018 was allowed: [2019] EWHC 51 (Ch). The Ombudsman’s directions fell away.