Secretary of State for Health v Marshall

This is an appeal by the Secretary of State for Health against a determination made on 11^th September 2007 by the Deputy Pensions Ombudsman (Mr Charlie Gordon) upon a complaint of maladministration made by Mrs Alison Marshall pursuant to section 146 of the Pension Schemes Act 1993 (“the 1993 Act”).

Mrs Marshall was employed for substantial parts of the period 1985 to 1991 by two different health authorities in England (the Gloucestershire and the South Warwickshire Health Authorities), having previously been employed between 1974 and 1979 by the Angus Health Board in Scotland. The nub of her complaint of maladministration was that, due to a failure by the English National Health Service Business Services Authority - Pensions Division (“NHS Pensions”) as the person responsible for the management of her pension scheme (within the meaning of section 146(1) of the 1993 Act) to provide her with information about her right to re-purchase pensionable service which had been refunded to her when she left the Scottish scheme in 1979, she failed to effect such a repurchase within the requisite time, and was subsequently denied it when she discovered her rights for the first time in 2001. The relevant right to repurchase earlier periods of refunded service needed to be exercised within 12 months of joining the English scheme (if the cost was to be met by a single payment) or by the member’s next birthday (if funded by a higher salary deduction). In relation to service before 6 April 1978, it could be repurchased at half cost. Accordingly, Mrs Marshall’s case was that she suffered injustice as a result of a failure by NHS Pensions to inform her about that right in time.

The Ombudsman broadly upheld that complaint, and directed that NHS Pensions provide her with a calculation identifying the sum which, together with accrued interest, would have been sufficient to enable her to repurchase additional pensionable service equal to her service with the Angus Health Board, taking into account her right to do so at half cost in relation to service prior to April 1978 and, should she elect to pay for the purchase of one or more additional years, he directed NHS Pensions to arrange for that additional service to be allocated to her.

In order for the Secretary of State’s grounds of appeal to be intelligible, it is necessary to describe the relevant history in a little more detail and, in particular, an extraordinary aspect of the procedural history which arose during the determination of Mrs Marshall’s complaint.

I have already described how Mrs Marshall was employed originally in Scotland from 1974 to 1979, and then in England from 1985 until 1991 (with a break between June 1988 and January 1989). In 1991 she briefly resumed NHS employment in Scotland. In 1991 her pensionable service within the English scheme was transferred to the equivalent Scottish pension scheme, which is separate and distinct from the English scheme, and managed by the Scottish Public Pensions Agency (“the SPPA”).

When in 2001 Mrs Marshall discovered her right to repurchase, and sought to exercise that right in correspondence with NHS Pensions, she was told that she had been sufficiently informed of that right at the relevant time and had lost the right to repurchase by failure to exercise it within the prescribed period. The effect of exercise of the right within time would have been that the additional service repurchased (by reference to her employment by Angus Health Board between 1974 and 1979) would have been added to her pensionable service with the NHS in England and then transferred to the Scottish scheme in 1991.

Mrs Marshall made her complaint to the Pensions Ombudsman in or about July 2005, as a complaint against NHS Pensions. While determination of her complaint was pending, she recommenced employment in Scotland, rejoined the Scottish scheme and then pursued a request to repurchase the refunded service for the period 1974 to 1978 with the SPPA. On 9^th June 2006 she was offered a repurchase for a single payment of £5,107.59. A letter to her from the SPPA dated 15^th September 2006 shows that this repurchase transaction had by then been completed. Subject to possible issues as to the basis of calculation of the price, she had therefore by negotiation with the SPPA substantially obtained the repurchase of the relevant three years’ additional service of which she complained that she had been deprived by maladministration on the part of NHS Pensions.

It is evident from the Ombudsman’s determination dated 11^th September 2007 that he remained completely unaware that this had occurred a year previously. The effect of his directions was that Mrs Marshall should be entitled to repurchase the same three years’ service from NHS Pensions, and have them transferred to her service under the Scottish scheme. In the light of the facts as they stood by September 2007, those three years had already been repurchased, and could not be allocated to her twice.

It is equally apparent that NHS Pensions were unaware of Mrs Marshall’s successful negotiation with SPPA, at any time prior to the Ombudsman’s determination, but it was discovered shortly thereafter. A request on 21^st September 2007 by NHS Pensions to the Ombudsman to reconsider the decision was rejected on 25^th September, on the grounds that, having made a final determination, the Ombudsman had no power to reconsider or reopen it.

In the meantime, Mrs Marshall had emigrated to Southern India and, upon being notified of this appeal by email in November 2007, her husband replied on her behalf on 4th December stating that it would be impossible for her to attend. His email included the following passage:

“All of this comes as a complete shock since we believed the matter to have been concluded. The Pensions Ombudsman was told during a telephone conversation around the time the service was repurchased that it appeared we would be able to do that. It was our belief that the issuing of the report would simply conclude a matter which has been ongoing for several years. Since we had already repurchased the service in question we did not expect to be able to purchase it again.”

The natural inference from Mr Marshall’s email (and I have no reason to doubt its truth) is that a communication failure occurred in the Ombudsman’s office, leading to Mr Gordon being personally unaware that Mrs Marshall had achieved, by self-help from the SPPA, substantially the remedy which she had earlier sought to achieve by her complaint against NHS Pensions.

It might have been thought that, upon the discovery of this simple but unfortunate error, there would have been an end to the matter, since it is evident that Mrs Marshall’s complaint was determined upon a mistaken assumption of fact. Unfortunately, the combined effect of the absence of any provision for review in the statutory scheme for determination by the Pensions Ombudsman, coupled with the limited right of appeal on a point of law only conferred by section 151(4) of the 1993 Act has led to this matter coming before me, rather artificially, by way of appeal on a point of law, rather than being dealt with in some much cheaper and simpler way.

That said, the Secretary of State wishes to pursue this appeal not merely because, now the facts are known, Mrs Marshall suffered no enduring injustice, but because it is desired to challenge the finding that there was any maladministration in the first place. That the court will in an appropriate case entertain such an appeal even where there has been a finding of no injustice is apparent from the decision of Lightman J in Westminster City Council v. Haywood (No 2) [2000] LGR 526. I turn therefore to the grounds of appeal advanced on behalf of the Secretary of State.

At the material time, the Occupational Pensions Scheme (Disclosure of Information) Regulations 1986 (“the Disclosure Regulations”) required certain specified information about the NHS English scheme to be given as of course to everyone who became a member of that scheme, within 13 weeks of becoming a member (see Regulation 5). The information required to be given (“the specified information”) did not include information about how a member might voluntarily increase benefits under the scheme, in particular by means of the repurchase of refunded service.

The normal method by which NHS Pensions discharged that obligation was by including the specified information in a members’ explanatory booklet (“the Booklet”) which, incidentally, also included non-specified information such as the right to repurchase refunded service.

In its submissions to the Ombudsman (recorded in paragraph 15 of the Determination), NHS Pensions accepted that members of the English scheme should automatically have been issued with the Booklet.

The Ombudsman decided as a matter of fact that Mrs Marshall had not been supplied with the Booklet at the material time, notwithstanding submissions by NHS Pensions designed to persuade him that he should find to the contrary, by way of inference from the fact that her employers (the South Warwickshire Health Authority) had supplies of the Booklet and instructions to make it available to all new members. It was however common ground that Mrs Marshall had received a letter from South Warwickshire Health Authority which referred to the English scheme and continued: “details of the Scheme are given in the Scheme Guide (a reference to the Booklet) which is available from the General Office at the hospital”.

After summarising those facts, the Ombudsman concluded, at paragraph 16 of the Determination that:

“In my view, the failure to provide a member with an explanatory booklet is maladministration.”

He gave no further reasons for that conclusion.

For the Secretary of State, Miss Laing QC submitted that, taking the determination as a whole, the Ombudsman must have wrongly elided the statutory obligation on NHS Pensions as managers of the English scheme to provide the specified information with a supposed but non-existent obligation to provide the non-specified information about additional benefits, such as the right to repurchase refunded service. It was, she submitted, irrelevant that a failure to provide Mrs Marshall with the Booklet may incidentally have given rise to a breach of the obligation to provide the specified information, since it was the non-provision of the additional information about repurchase that formed the basis of her complaint.

Miss Laing sensibly acknowledged that NHS Pensions could not regard itself as entirely free from any obligation in relation to notifying scheme members of the additional information. On the contrary she accepted that NHS Pensions had an obligation to take reasonable steps to bring additional information about a member’s pension rights to his or her attention. But she submitted that, on the facts found, NHS Pensions had taken reasonable steps to that end by providing a sufficient supply of the Booklets to the employer health authorities, by instructing them to make them available to new members, and by the notification of the availability of the Booklet from the hospital General Office contained in the South Warwickshire Health Authority’s standard form letter to new employees.

Implicit in her submissions was the proposition that a failure by the employing health authority to take reasonable steps to comply with the instruction to make the Booklet available to new employees could not be laid at the door of NHS Pensions, the employer being a separate legal person from the Secretary of State, and from the department of which NHS Pensions forms part.

I reject those submissions. In my judgment the Ombudsman did not make any inappropriate elision between the statutory obligation to provide the specified information, and the “reasonable steps” obligation in relation to additional information such as the repurchase right. At paragraph 4 of the Determination the Ombudsman made clear his understanding that the Disclosure Regulations did not themselves require disclosure of information about the voluntary increase of benefits, such as the relevant repurchase rights. I do not read paragraph 16 of the Determination as including any simple assumption that the failure to notify Mrs Marshall of those rights constituted a breach, without more, of the Disclosure Regulations.

In my judgment the correct analysis is as follows. First, there is generally implied into the contractual relationship between an employer and an employee an obligation on the employer to take reasonable steps to bring to the attention of the employee the existence of valuable rights which are contingent upon the employee acting in a particular way, of which the employee could not be expected to be aware unless specifically notified: see Scally v. Southern Health and Services Board [1992] 1 AC 294, an appeal from Northern Ireland concerning rights of a broadly similar nature to those the subject matter of this appeal.

In the present case the Secretary of State was not at any time Mrs Marshall’s employer, but the management of that aspect of her rights as an employee consisting of her pension rights was, under the English scheme, imposed by statute upon NHS Pensions rather than her employing health authority. It is for that reason that NHS Pensions had control of the form and content of the Booklet, and considered itself entitled to give instructions to the Health Authorities as to its dissemination to new members of the scheme.

While it is perfectly understandable that, in connection with a scheme conferring benefits (so I was informed) upon more than a million members, NHS Pensions delegates to individual health authorities the practical administration of aspects of its management, such as the bringing to the attention of members information about their rights, it by no means follows that a careless failure by a health authority to communicate those rights to a particular member, by sending her a copy of the Booklet, is not conduct for which NHS Pensions bears vicarious administrative responsibility.

In my judgment the Ombudsman was perfectly entitled to conclude, in the absence of any evidence to the contrary, that the failure by Mrs Marshall’s employing health authorities to send her a copy of the Booklet in accordance with clear instructions from NHS Pensions to do so must have arisen from a lack of care. Although he did not in his Determination spell out that analysis as the basis for his reasoning, nothing in the Determination is inconsistent with it and, if that was indeed his reasoning, it was in my judgment correct in terms of the application of legal principle to the facts which he had found.

In any event, the Ombudsman’s Determination was based on a finding of maladministration rather than either breach of statutory duty (i.e. breach of the Disclosure Regulations) or negligence. Maladministration is not a statutorily defined term, and may include aspects of faulty or incompetent administration falling short of the breach of any legal duty or obligation: see Tolley’s Pensions Law at section J1.7. In my judgment, the Ombudsman’s conclusion that an unexplained failure by her employing health authority to provide Mrs Marshall with a copy of the Booklet, so as to inform her of (inter alia) her repurchase rights under the English scheme was maladministration for which NHS Pensions was responsible was correct.

In the original Grounds of Appeal the Secretary of State’s case under this heading was simply, and only, that the Ombudsman was wrong to find that the maladministration which I have so far identified caused any injustice to Mrs Marshall, on the ground that any chain of causation was broken by a new act of maladministration by the SPPA.

In argument before me, Miss Laing relied upon two further grounds. The first was that since Mrs Marshall had already repurchased the relevant three years’ service direct from the SPPA, it was wrong in law for the Ombudsman to have ordered NHS Pensions to make those years available a second time. Recognising the improbability that the Ombudsman was personally aware of Mrs Marshall’s direct repurchase from the SPPA, the error of law was alleged to consist of his failure, contrary to section 149(1)(b) of the 1993 Act, to give the SPPA an opportunity to respond to the allegation that it was also guilty of maladministration. Had this been done, Miss Laing submitted, the Ombudsman would have discovered in good time that Mrs Marshall had already obtained directly that which her complaint was designed to obtain indirectly, namely the relevant three years’ additional service. This ground was the subject of a draft amendment to the Grounds of Appeal, and fully deployed in Miss Laing’s skeleton argument on the basis that permission to amend would be sought at the hearing.

The third ground relied upon by the Secretary of State arose directly from the exchange of emails to which I have referred, which suggest that the Ombudsman’s office was in fact informed by telephone prior to the date of the Determination that Mrs Marshall had obtained, or was about to obtain, by repurchase the relevant three years’ additional service, direct from the SPPA. Miss Laing’s argument was that notification to the Ombudsman’s office should be treated as notification of the relevant fact to the Deputy Ombudsman himself, such that on facts which included Mrs Marshall’s repurchase of the relevant three years’ service direct from the SPPA, a finding that she had suffered any continuing injustice, and a direction that those three years’ service should now be made available by NHS Pensions, must have involved a serious error of law.

This third and final ground for the “no injustice” part of the appeal was not identified, whether by way of amended grounds of appeal, or skeleton argument. The result was that it was deployed by Miss Laing at a time when neither the Ombudsman who attended by a member of his staff (with a watching brief) nor Mrs Marshall, who for good reason did not attend, had any inkling that this additional point was to be advanced. It arose from materials available to the Secretary of State by December 2007.

At the very least, it seemed to me that this new ground, involving as it did an allegation of incompetence on the part of the Ombudsman’s office, and a question of law whether knowledge of a relevant fact by a member of his staff was to be attributed to him, required the Ombudsman to be given notice of this additional ground, so as to have time to consider whether, and if so how, to respond to it. After the short adjournment, I was told by Miss Laing that, understandably, the Ombudsman’s representative at court wished to have time both to look into the matter, to obtain the relevant file and to take instructions. It became clear that if this further ground were to be pursued it would require a significant adjournment. Furthermore Miss Laing made plain that her instructions were that, if successful on this appeal, she would be seeking an order for costs against Mrs Marshall personally.

In those circumstances I refused Miss Laing permission to re-amend her Grounds of Appeal to add this further ground. I did so for the following reasons:

I turn therefore to the outstanding grounds of appeal against the finding of injustice. As to the first (breaking the chain of causation) I consider the argument to be unsupported by the facts. On the basis that it is implicit in the Ombudsman’s conclusions (albeit nowhere expressly so stated) that in failing to provide Mrs Marshall with a Booklet when she rejoined the Scottish Scheme in 1991, the SPPA were also guilty of maladministration, it by no means follows that this second failure broke the chain of causation constituted by the earlier failure of NHS Pensions. On the facts found by the Ombudsman, Mrs Marshall’s apparent inability to repurchase the relevant three years’ service arose from her ignorance as to her rights both in 1989 (when she joined the English Scheme) and in 1991 when she rejoined the Scottish Scheme. It was ignorance for which both NHS Pensions and the SPPA were responsible by way of maladministration. In the language of tort they were joint tortfeasors. In the language of maladministration they were, I suppose, joint maladministrators.

There are of course cases where a subsequent wrongful act by a third party relieves the earlier wrongdoer from liability, on the basis that the later act deprived the earlier wrong of its causative effect. No hard and fast rule of law emerges from them: see McGregor on Damages (17^th ed.) at para 6-046 et seq for a full discussion of the problem. But here Mrs Marshall’s loss arose from ignorance caused by two wrongful omissions. If either NHS Pensions or the SPPA had informed her of her repurchase rights, then on the Ombudsman’s findings, she would have exercised them. The earlier omission by NHS Pensions was no less causative of her ignorance than the later omission by the SPPA. The case is analogous with a loss making transaction by a client following successive negligent failures to advise against it by two separate professionals, where competent advice from either of them would have led the client not to proceed. The earlier adviser cannot in general avoid liability merely because the other professional’s advice (or omission to advise) came later.

Nothing in Miss Laing’s oral or written submissions persuaded me that the present case should be viewed in any other way. Furthermore, so far as I can ascertain, the point was not put to the Ombudsman by NHS Pensions in advance of his Determination. The question whether the second of two successive wrongs which each caused the relevant loss, or part of it, breaks the chain of causation between the loss and the first wrong is generally a fact- intensive issue. In the present case, there is not a factual basis on which an appeal on a point of law on this ground can now be pursued, not least because it was neither raised nor argued at first instance.

Turning to the second ground (failure to give the SPPA an opportunity to respond) it is in my judgment misconceived. Section 149 of the 1993 Act provides as follows:

“(1)

Where the Pensions Ombudsman proposes to conduct an investigation into a complaint made or a dispute referred under this Part, he shall give−

(a)

any person (other than the person by whom, or on whose behalf, the complaint or reference was made) responsible for the management of the scheme to which the complaint or reference relates, and

(b)

any other person against whom allegations are made in the complaint or reference,

an opportunity to comment on any allegation contained in the complaint or reference.”

In the present case Mrs Marshall’s written complaint was directed solely at NHS Pensions. It did not refer to, still less make any complaint about, maladministration by the SPPA. Nor for that matter did NHS Pensions make any allegation of maladministration against the SPPA in its response to Mrs Marshall’s complaint. It follows in my judgment that the SPPA was not a person against whom allegations were made in the complaint, and the matter determined by the Ombudsman arose upon a complaint rather than a reference. Even if it had arisen by way of a reference, there was still no allegation made against the SPPA by any party to the proceedings.

If follows that the substratum for this ground of appeal is entirely missing. There was, quite simply, no breach of section 149(1)(b) at all by the Ombudsman. But even if there had been, it does not seem to me that the statutory purpose of section 149(1)(b) (in sharp contrast with sub-section (a)) is intended to confer a right upon any person to complain of a procedural error by the Ombudsman, other than the person thereby entitled to an opportunity to comment, in the present case the SPPA. It is nothing to the point that, if the SPPA had been given an opportunity to comment, it might have drawn to the Ombudsman’s attention the fact that Mrs Marshall had in the meantime been able to repurchase the relevant three years’ relevant service. That would merely have been an adventitious outcome of the performance of a duty designed to protect the SPPA rather than NHS Pensions. If NHS Pensions wished to make a case that liability for its maladministration depended on an analysis of the conduct of the SPPA, it was its responsibility to make the relevant enquiry of the SPPA, not that of the Ombudsman. It follows that this ground of appeal fails as well.

A similar argument to the last one was advanced in Miss Laing’s Skeleton Argument, on the basis that as a decision maker governed by public law, the Ombudsman should in any event have made his own enquiries of the SPPA, as a result of which the repurchase would have emerged. I am not persuaded by that argument either. The Ombudsman sought and obtained NHS Pensions’ response to the complaint, which did not invite enquiry of the SPPA, and NHS Pensions could, and in my judgment should, have made that enquiry itself.

The consequence of the above analysis is that all the grounds raised in the Secretary of State’s Grounds of Appeal fail, and this appeal is therefore dismissed.

I make it plain however that on the facts now known to this court, this was not a case in which, by the time of the Determination, Mrs Marshall was affected by a continuing significant injustice. Since however this arose merely because she had obtained her remedy from another person (the SPPA) without recourse to proceedings, in circumstances which would make it impossible for her now to enforce the directions given in her favour by the Ombudsman, the dismissal of this appeal leaves the Secretary of State exposed to no continuing liability to Mrs Marshall even if, contrary to her husband’s unequivocal assertion in correspondence, she had the slightest intention to enforce those directions. It was simply unnecessary for the Secretary of State to appeal, in order to reap the advantage of Mrs Marshall’s self help.

The only practical consequence of the dismissal of the appeal is that the finding of maladministration stands. For reasons which I have given, that was a finding which the Ombudsman was correct to make.