Hamilton v Monmouthshire County Council & anor

Mr Nicholas Hamilton appeals against a determination of Mr Charlie Gordon, a deputy Pensions Ombudsman dated 11 August 2008. By his decision the Ombudsman decided that Mr Hamilton was not entitled to an ill health pension under regulation 27 of the Local Government Pension Scheme Regulations 1997; but that he was entitled to elect for early payment of deferred benefits under regulation 31. The 1997 Regulations have been amended from time to time; and have now been superseded by The Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007. The appeal is brought under section 151 of the Pension Schemes Act 1993 which permits an appeal on a point of law.

The facts found by the Ombudsman were as follows. Mr Hamilton was born in 1947. He was employed by the Monmouthshire County Council under a fixed term contract which began on 5 May 1998 and was due to expire on 31 March 2001. He had previously been employed in local government since August 1969, although not by Monmouthshire. In his capacity as an officer of local government he was a member of the Local Government Pension Scheme. The terms of the scheme are contained in statutory instruments.

On 8 December 2000 Mr Hamilton went on sick leave suffering from dizziness and unsteadiness. He was referred to an ENT Consultant who diagnosed that he was suffering from benign paroxysmal positional vertigo. Mr Hamilton did not return to work before the expiry of his contract on 31 March 2001. The Ombudsman continued (§ 5):

“Consequently, his contract was not renewed and Mr Hamilton became a deferred member of [the scheme].”

Nearly four years later, on 26 January 2005, Mr Hamilton applied under regulation 31 of the scheme for early payments of his deferred benefits on the grounds of ill health. He said in his letter that for the previous four years he had been hoping to resume work, but that he now accepted that this was not going to happen. Regulation 31 provides so far as relevant:

“(1)

If a member leaves a local government employment (or is treated for these regulations as if he had done so) before he is entitled to the immediate payment of retirement benefits (apart from this regulation), once he is aged 50 or more he may elect to receive payment of them immediately.

(2)

An election made by a member aged less than 60 is ineffective without the consent of his employing authority or former employing authority (but see paragraph (6)).

(3)

If the member elects, he is entitled to a pension and retirement grant payable immediately

(4)

[provides for reduction of benefits]

…

(6)

If a member who has left a local government employment before he is entitled to the immediate payment of retirement benefits (apart from this regulation) becomes permanently incapable of discharging efficiently the duties of that employment because of ill health or infirmity of mind or body -

(a)

he may elect to receive payment of the retirement benefits immediately, whatever his age, and

(b)

paragraphs (2) and (4) do not apply.”

Monmouthshire referred Mr Hamilton to their occupational health department in March 2005 where he was examined. A review by a consultant was suggested. In the following month Mr Hamilton’s GP referred him to Dr Llewellyn, a consultant physician. Dr Llewellyn diagnosed Mr Hamilton as suffering from chronic fatigue syndrome and expressed the view that a return to work would not be possible. As a result Monmouthshire agreed to early payment of Mr Hamilton’s deferred benefits with effect from 8 July 2005. This was the date on which his permanent incapacity was established.

Mr Hamilton complained that his retirement benefits should be back-dated to 1 April 2001 (the day after his contract expired); but subsequently claimed that the benefits should be back-dated even further to 8 December 2000 (when he went on sick leave). This latter claim has since been abandoned, not least because Mr Hamilton continued to receive sick pay until the expiry of his fixed term contract. Monmouthshire reviewed his case under stage 1 of the Internal Dispute Resolution Procedure. In the course of the review Dr Llewellyn wrote a letter to say that with the benefit of hindsight it was possible to say that Mr Hamilton’s troubles started suddenly in December 2000; and that he had been suffering from chronic fatigue syndrome since that time. Monmouthshire’s review concluded that Mr Hamilton had not been dismissed on the grounds of incapacity due to ill health. His contract had ended naturally at the end of a specified period. This was essentially a conclusion of fact. Monmouthshire also took the view that early payment of deferred benefits would run only from the date of certification of permanent incapacity, as opposed to the date of onset of the illness. His complaint was therefore not upheld at stage 1 and the stage 1 decision was upheld at stage 2.

Mr Hamilton complained to the Ombudsman. In addition to pursuing his claim under regulation 31, he also advanced for the first time a claim to an ill health pension under regulation 27. That regulation (as amended) provides, so far as relevant:

“(1)

Where a member leaves a local government employment by reason of being permanently incapable of discharging efficiently the duties of that employment or any other comparable employment with his employing authority because of ill health or infirmity of mind or body, he is entitled to an ill health pension and grant.

(2)

The pension and grant are payable immediately.”

In paragraph 21 of his determination the Ombudsman said:

“There is no evidence that MCC considered Mr Hamilton for ill health retirement before he left their employment. Nor is there any suggestion that Mr Hamilton himself raised the question of ill health retirement at that time. Mr Hamilton was not referred to MCC’s [Occupational Health Unit] between December 2000 and March 2001, and there is no contemporaneous medical evidence to suggest that his condition had reached the point at which he would have been permanently unable to discharge efficiently the duties of his employment. In fact, in January 2000, Mr Hamilton had not then been diagnosed with chronic fatigue syndrome as it was thought that he was suffering from Benign Positional Vertigo. Mr Hamilton’s employment came to an end naturally at the end of his fixed term contract and, having regard particularly to the timescale and lack of medical evidence, I am satisfied that MCC should not now be required to consider whether Mr Hamilton satisfied the criteria under Regulation 27 in 2001.”

Mr Hamilton had relied on the decision of Lightman J in Spreadborough v Wandsworth LBC [2004] Pens LR 231. The Ombudsman distinguished that case on two grounds:

On the claim under regulation 31 the Ombudsman held that a member only becomes entitled to benefits when he makes an election and permanent incapacity has been accepted. It was not possible to back-date benefits earlier than the date of the election. However, he held that Monmouthshire were wrong in taking the view that benefits could not be back-dated to a date earlier than the date on which permanent incapacity was actually certified. The Ombudsman decided that once an election had been made and permanent incapacity had been certified, entitlement dates back to the date of the election or, if later, the date when the member becomes permanently incapable. Monmouthshire have accepted this part of the decision.

However, Mr Hamilton appeals the Ombudsman’s decision on regulation 27. He also challenges the Ombudsman’s decision on regulation 31 if unsuccessful on his appeal in relation to regulation 27. He says that regulation 31 permits the back-dating of benefits to the date of incapacity even if that date is earlier than the date on which an election to receive immediate payment was made.

Regulation 27 as applied to Mr Hamilton is brought into play where a member leaves a local government employment by reason of being permanently incapable of discharging efficiently the duties of that employment because of ill health. The coincidence of leaving employment and permanent incapacity is not enough. The leaving of employment must have been caused by the permanent incapacity. Although this appeared at one stage to be controversial, Mr Halden, appearing for Mr Hamilton, accepted that this was the correct interpretation of the regulation. It is therefore essentially a question of fact: why did Mr Hamilton leave Monmouthshire’s employment?

In my judgment the Ombudsman has answered this factual question adversely to Mr Hamilton in paragraph 21 of his determination. He found first that there was no evidence that Monmouthshire had considered Mr Hamilton for ill health retirement before he left. If they did not even consider his ill health it is most improbable that they refused to renew his fixed term contract on the ground of his ill health. He found second that Mr Hamilton did not himself raise the question either. It is therefore most improbable that ill health was the reason that Mr Hamilton left. These two findings led the Ombudsman to his third, and crucial, finding that Mr Hamilton’s employment came to an end naturally at the end of his fixed term contract. In other words he left Monmouthshire’s employment because his fixed term contract had expired. Since this is a question of fact, an appeal limited to a point of law faces difficulty.

Mr Hamilton argues that this third finding is inconsistent with the Ombudsman’s earlier statement in paragraph 5 of his decision that Mr Hamilton did not return to work before his contract expired and consequently his contract was not renewed. Thus it is argued that his contract was not renewed as a consequence of (or because of) his ill health and that, in retrospect, his ill health can now be seen to amount to permanent incapacity. I do not consider that this single word will bear the weight that Mr Hamilton seeks to place upon it. The Ombudsman’s findings in paragraph 21 are in the section of his decision headed “Conclusions” and not in his summary of the background facts, which includes paragraph 5. When he had to decide the reason why Mr Hamilton left, he did so in a full paragraph, not in a single word. In addition his recitation of the chronology also included the statement at the stage 1 review that Monmouthshire did not dismiss Mr Hamilton on the grounds of ill health but that his contract ended naturally at the end of a specified period. This is language very close to the Ombudsman’s third and crucial finding in paragraph 21 and, in my judgment shows that he accepted that factual conclusion of the stage 1 review. I might also add that in his witness statement, which was before the Ombudsman, Mr Hamilton did not actually allege that his contract had not been renewed because of his ill health. Had he wished to challenge Monmouthshire’s factual conclusion at the stage 1 review, there ought to have been some evidential basis for the challenge. But there was not; so it is difficult to see how the Ombudsman could have concluded on the evidence that the cause of Mr Hamilton’s leaving his employment was his ill health (whether or not his ill health was known at the time to amount to permanent incapacity). As Mr Reed submitted, the Ombudsman’s job is to decide disputes informally, quickly and cheaply. His determinations should not be pored over as if they were Acts of Parliament. I do not consider that it can be said that there is any real inconsistency in the Ombudsman’s findings of fact or that the findings of fact he made in paragraph 21 of his decision are so flawed that they reveal an error of law.

Mr Reed, who appears for Monmouthshire, took me through Mr Hamilton’s medical notes (which were also before the Ombudsman). He did so in an attempt to show that Dr Llewellyn’s evidence (that Mr Hamilton’s chronic fatigue syndrome had a sudden onset in December 2000) was inconsistent with those notes; and to persuade me that when the Ombudsman said in paragraph 21 that “there is no contemporaneous medical evidence to suggest that his condition had reached the point at which he would have been permanently unable to discharge efficiently the duties of his employment” he must implicitly have rejected Dr Llewellyn’s evidence to the contrary. I am not persuaded that that is what the Ombudsman did. First, he did not say that there was no medical evidence: he said that there was no contemporaneous medical evidence. Dr Llewellyn’s evidence was not contemporaneous: it was an ex post facto diagnosis. So the Ombudsman’s statement does not lead to the conclusion that he rejected Dr Llewellyn’s evidence. Second, if the Ombudsman had rejected the only expression of opinion by a medical practitioner in favour of evidence derived from the contemporaneous medical notes, I would have expected him to have said so in terms. In paragraph 21 the Ombudsman was concentrating on the reason why Mr Hamilton’s employment was terminated; and in that context the fact that there was no contemporaneous medical evidence of incapacity shed light on why his fixed term contract was not renewed. Even if Mr Hamilton was permanently incapacitated when his contract ended, that was not the reason why it was not renewed. I do not think that his finding can be taken to extend any further. Although Mr Reed’s submissions based on the medical notes were powerful, they were directed to a question of fact on which I have no power to reverse the Ombudsman.

I do not, therefore, consider that the Ombudsman made any error of law in rejecting Mr Hamilton’s claim under regulation 27.

The Ombudsman then turned to regulation 31. He distinguished Spreadborough and decided that benefits under regulation 31 were payable from the date of the election under that regulation or the date of permanent incapacity, whichever was the later. Mr Hamilton says that the position is in effect governed by the decision of Lightman J in Spreadborough, and that the Ombudsman was wrong to distinguish it. He says that benefits are payable as from the date on which the permanent incapacity arose, even if that date is earlier than the date of the election and even if the diagnosis of that incapacity is retrospective.

In Spreadborough Lightman J noted that there were two issues. The first was procedural: was it open to Mr Spreadborough to seek to establish that the onset of his permanent incapacity was prior to the date of determination of his earlier unsuccessful application? The second was whether, assuming that it was open to Mr Spreadborough to seek to establish that the onset of his permanent incapacity was in or before 1990, Mr Spreadborough had established that this was so. On the first issue Lightman J held (§ 15) that:

“… common sense and good administration require that a member of the Scheme shall not be entitled to contend that a previous final or unappealed decision was wrong on the evidence then adduced; but that he may be entitled to revive an earlier failed claim on new evidence in exceptional circumstances where justice so requires. Justice may so require when important new evidence comes to light or a relevant development has taken place in medical knowledge or understanding. Caution may be required in revisiting earlier decisions made on the basis of contemporary material, but the need for caution is not the same thing as permitting a different conclusion to be reached (as the Secretary of State appears to have thought) only if “conclusively” established as opposed to established on the conventional balance of probabilities, still less as ruling out such an exercise altogether.”

The judge held that developments in the understanding of ME (which is the former name for chronic fatigue syndrome) meant that Mr Spreadborough was entitled to rely on new evidence to re-open his claim. I agree with the Ombudsman that this part of Lightman J’s decision was not relevant to the claim before the Ombudsman. Mr Hamilton was not seeking to re-open a claim that had been decided against him. He was seeking to advance a new claim upon which no one had decided upon before.

On the second question Lightman J held that Mr Spreadborough was entitled to rely on a retrospective diagnosis to support his claim. As the judge put it (§ 16):

“For this purpose incapacity by reason of permanent ill health or infirmity means incapacity in respect of which there is no reasonable prospect of recovery, taking account of the available treatment and the various possible courses that a condition may take and the potential outcomes. A reliable diagnosis may require the decision to be deferred over a period of time, and the eventual diagnosis may or may not be retrospective or prospective.”

The Ombudsman in that case had held that the date on which a member became permanently incapacitated was the date on which that member’s medical condition was “found to have met that criteria”, rather than the date on which the incapacity first occurred. On appeal it was common ground that the Ombudsman was wrong, and so the point did not arise for decision by Lighman J. It was thus common ground that Mr Spreadborough was entitled to his pension from the actual date of onset of his permanent incapacity. However Lightman J said (§ 19):

“…. assuming that the first issue is decided in favour of Mr Spreadborough, the critical issue is indeed the date of onset of permanent incapacity: the date that this condition was diagnosed is very much of secondary significance.”

The real question, as it seems to me, is whether the Ombudsman was right to distinguish this part of the decision on the ground that the regulations that Lightman J was considering differed from those applicable to Mr Hamilton.

The regulations that Lightman J considered were those contained in the Local Government Pension Scheme Regulations 1995. The relevant regulation was regulation D11 which provided so far as relevant:

“(1)

If a member who ceases to hold local government employment —

(a)

is not entitled under regulation D5, D6, D7 or D9 to retirement benefits which are payable immediately on his ceasing to hold that employment; and

(b)

he fulfils one of the following requirements, namely —

(i)

he has a statutory pension entitlement; ….

then, subject to regulation D13, he becomes entitled in relation to that employment to a standard retirement pension with a standard retirement grant payable from the appropriate date; and in these regulations benefits to which a person becomes entitled under this paragraph by virtue of fulfilling one of the requirements mentioned in paragraph (b) and which have not yet become payable are called ‘preserved benefits’.

(2)

For the purposes of paragraph (1) ‘the appropriate date’ in relation to any person, is his 65th birthday, or if earlier, the earliest of the following —

….

(b)

any date on which he becomes incapable, by reason of permanent ill health or infirmity of mind or body, of discharging efficiently the duties of the employment he has ceased to hold ….”

The condition which brings regulation D11 into play is that a member has ceased to hold local government employment. There is no mention of the reason why he has ceased to hold government employment. If he satisfies that condition, one must then go on to enquire whether he has a statutory pension entitlement. If so, then he is entitled to pension benefits from “the appropriate date”. With one immaterial exception there is no need for him to make an election to that effect; his entitlement is automatic. Regulation D11 spells out the date from which payment is to be made. That date, in the case of a person who becomes incapable of discharging his duties, is the date of his actual incapacity. In the context of Regulation D11 Lightman J’s statement that the pension should be back-dated to the date of the onset of permanent incapacity is therefore plainly correct.

Regulation 31 is more limited. First, there is no automatic right to payment under that regulation. The right to payment only arises when an election is made. Second, the right to payment is not said to be a right to payment from a specified date; it is a right to be paid “immediately”. The contrast in regulation 31 is a contrast between an entitlement to retirement benefits which are not yet payable immediately (i.e. benefits which will become payable later) and an election to make them payable immediately (i.e. now) if the member is incapacitated. As Mr Reed submitted, the word “immediately” is inapt to describe a back-dated payment. “Now” does not mean “yesterday”. The word “immediately” means without any intermediary period or intervening delay. Delay after what? The only possible answer is that it is without any delay after the member has made his election. An election under regulation 31 has the effect (and the only effect) that benefits that would have been payable in the future become payable at once. I do not consider that Spreadborough can be taken to have laid down any general principle that, whatever the form of the contractual or statutory entitlement to accelerated benefits on the ground of permanent ill health, payment must always be back-dated to the onset of the medical condition giving rise to the permanent incapacity. I accept Mr Reed’s submission that Lightman J was construing regulation D11 and that his remarks must be seen in that context. Of course, even if an election is made, a member is only entitled to immediate payment if he is in fact permanently incapacitated. The date at which a member became permanently incapacitated may only be ascertainable by retrospective diagnosis. That is permissible, but the retroactive payment of benefit cannot in my judgment take effect earlier than the date of the election. It follows that the Ombudsman was right to say that benefits are payable from the later of the election and the onset of permanent incapacity.

In my judgment, therefore, the Ombudsman was correct in his interpretation of regulation 31. Mr Hamilton is entitled to benefits under that regulation back-dated to the date of his election but no further. Mr Halden submitted that such a construction would encourage protective elections under regulation 31 from any early leaver who was in any way ill just in case the ill health turned out to be permanent. On the other hand, Mr Reed submits that if construed in the way that Mr Hamilton says it should be construed, regulation 31 will impose on local government pension schemes (and ultimately either on council tax payers or active scheme members) potential liabilities of enormous proportions which may not surface for years after they had been incurred.

Any construction may lead to unsatisfactory results one way or another. The only thing a court can do is to interpret the words in their proper context. For the reasons I have given I interpret the words of regulation 31 in the same way as the Ombudsman.

I dismiss the appeal.