Philip Freeman Mobile Welders Limited v The Pensions Regulator

Evidence was given first by Cathy Doherty, a Compliance & Enforcement Manager at Capita plc, to whom the respondent outsources its bulk correspondence. This includes receiving replies in response. Her witness statement sets out that capital uses a customer relationship management system to facilitate the sending of notices. The CRM tracks and records all written and telephone communications with employers subject to automatic enrolment in order to provide an audit trail. Both the respondent and Capita describe the engagement with these employers as a “journey”. That journey begins with reminder letters and emails advising employers of their obligations, including the staging date, and the date when a Declaration of Compliance must be submitted, and where necessary continues right up to the point of enforcement by means of compliance and penalty notices.

The CRM automatically decides which employers ought to be sent which notice, working from data provided by the respondent and a system of rules that reflect the respondent’s desired approach. For example, if the CRM detects that a particular employer has not complied with its obligations, that a set period of time has passed since a Compliance Notice was sent, there is no special flag or suspension recorded, and no pending review or Tribunal proceedings, then it will issue a Fixed Penalty Notice. This is all done without any human input. The details and template for the notice is sent to another contractor, which I shall call CIC, that runs a mail merge to produce, print and send the notice by first class post. CIC then sends a daily email to Capita containing the numbers of letters and notices issued for each type of communication, so that this this can be reconciled against the expected numbers produced by the CRM. PDF copies of the notices sent are saved together with the date of issue.

Despite all that, the record available to Capita does not produce an explicit date of postage. Instead it shows the ‘end date’, meaning the date on which the automated process for sending a notice – including electronic record keeping – is complete. In some cases, and indeed in this case, the end date does not precisely match the date the notice was issued in posted. In others, it is not populated at all. Capita is nonetheless confident that whenever its CRM identifies that a notice should be sent, it is received by CIC and then posted within 24 hours. This confidence derives from a series of checks and reconciliations described in Ms Doherty’s evidence. Where there have been errors, these have always been picked up in time to still maintain compliance with that 24 hour period. Ms Doherty concludes:

Because the system is automated as described, the chances of a letter or notice not being generated – once the system identifies a letter or notice needs to be sent an triggers it to be created and despatched – are nil. Once a document is created, it is always sent out to an employer as the process does not rely on any manual or human intervention for letters to be printed and despatched. We have never found an error whereby the system shows a letter has been generated but it has not been despatched.

Ms Doherty also describes how Capita’s performance is subject to Operating Service Levels with the respondent, and should its system fail it would incur a financial penalty. This has never happened.

With reference to the appellant, Ms Doherty produces records to show that:

Heather Prescott is the Automatic Enrolment Data Strategy and Services Lead for the respondent. She gave evidence about the process for when post is returned by Royal Mail. All returned mail is scanned into an electronic queue in the CRM and allocated to the relevant employer’s record. Where it is a formal notice, the Respondent then attempts to find an alternative address where possible, via other records on the CRM, Companies House, ‘open-source checks’ or by simply calling the employer to ask. If appropriate, the returned notice is then revoked by the respondent using a section 43(10)(b) review on its own initiative. If another address cannot be found, then a review is opened on the CRM and further enforcement suspended until the situation is resolved. She had checked the relevant records and no items of post sent to the appellant had been received.

I find that the systems employed by the respondent and its contractors for sending notices by post are reliable and robust. The evidence given by Ms Doherty and Ms Prescott was confirmed by statements of truth, explored and challenged in significant detail during the hearing, and substantiated by extracts from the relevant records. It was credible and straightforward. The respondent has proved that the notices were properly addressed, enveloped and posted by first class mail.

I make the above finding subject to three qualifications:

The burden therefore moves to the appellant to prove that the notices were not delivered. This brings in the relevance of the unreturned telephone calls and unanswered emails argued by the respondent – if the appellant did not properly deal with those, then it becomes more likely that the notices were delivered but similarly ignored.

The appellant has not come to this appeal armed only with a bare denial, and its evidence can be divided first into that which describes how post, telephone and email messages would have been received in its office, and second into that describing regular problems with local Royal Mail delivery.

The appellant was founded in 1996 by Philip Freeman, who is now in his eighties. He still works, and attended the hearing, but has left the running of the business in the hands of Ms Freeman. She described the company’s financial compliance with evident pride. It always paid its PAYE liabilities and VAT to HMRC early, including during the pandemic when the option was available to defer payment, always paid its suppliers and had never been taken to court. Even the FPN in the sum of £400 would have been promptly paid or challenged on receipt, never mind such a serious piece of correspondence as the EPN, imposing a penalty of £500 per day. The first that anyone had known of the respondents enforcement action was when a Sheriff Officer add attended on 28 May 2019 attempting to recover a total of £14,481.16.

Ms Freeman has always candidly accepted that two early letters from the respondent were received, dated 20 April 2015 and 18 December 2015, informing the appellant that auto-enrolment would be required in the future and, she says, stating that the respondent would write to her again with more information. She also accepts that the appellant was under a legal obligation to enrol its employees and submit details to the respondent regardless of whether or not the enforcement notices were received, and that it did not comply with its obligations under the relevant legislation. It had, in fact, enrolled its employees in a pension on 20 April 2018, but failed to submit a declaration of compliance to the respondent. This was done the day after the Sheriff Officer attended.

Ms Freeman described the system for receiving post in the office, which I need not describe in detail. As noted in a reply to a telephone call from the respondent, she had taken a month off in around October 2017 for medical reasons. Debbie Shaw ran the office during that time. Ms Shaw has worked for the respondent for 23 years and Ms Freeman has absolute confidence in her abilities. Ms Shaw could deal with most enquiries but anything that needed looking at urgently or saving for Ms Freeman’s return was communicated to her, either by email or telephone. In evidence, it was suggested to Ms Freeman by Mr Thomas that the systems for passing on and actioning messages was ad hoc and informal, and may have broken down during Ms Freeman’s absence. This was certainly a point worth exploring in evidence; courts and tribunals are familiar with small family businesses that fail to cope when a key member of staff is suddenly away. With this business, however, I was impressed at the clear and organised way in which Ms Freeman described how she had instructed Ms Shaw to deal with matters in her absence and why she was confident that she had done so. It is also a familiar feature of a family business that someone in Ms Freeman’s position is never truly on leave, she described being updated on an almost daily basis on what was happening. No one listening to Ms Freeman could fail to be convinced that this small busy office was efficient and well run, even in her temporary absence. Ms Freeman accepted that two messages were taken saying that the respondent had called, but that the caller had not requested that they call back or that the matter was urgent. If they had, then they would have been called. I accept this.

As to delivery of post, the appellant is only one of several with the postal address “[Name], 7 Bertram Street.” These businesses are physically separated with separate letterboxes, despite all being (so far as Royal Mail are concerned) at number 7. The buildings are also intermingled with residential properties, other businesses at number 9 Bertram Street, and an automotive engineering company across the street at number 30. This presents a confusing picture to whoever delivers the post and there had been many problems over the years, With businesses receiving each other's post being a common occurrence.

To illustrate her point, Mrs Freeman produced a copy of a letter from the respondent itself to an entirely different company. She had resealed that letter and handed it back to the postman, but could not say that other companies would always extend the same courtesy. Complaints had been made to Royal Mail, who had responded that they experience local staffing problems so had to use agency carriers. The respondent had queried this, as the letter in question had never actually in fact been returned to them. As pointed out by Ms Prescott, this might mean that the postman had simply redelivered it. Mr Thomas put this forward as undermining the appellant’s case. I reject this, and the incident does provide support for the problems with post experienced by the appellant.

It is, again, a common experience for courts and tribunals to hear unsubstantiated assertions of poor local delivery. Ms Freeman’s evidence went much further than this, producing several mis-addressed letters and giving me a detailed and plausible description in oral evidence of how far back these concerns went. She also produced a letter signed by three nearby businesses confirming to the Tribunal that the local service is unreliable, that they receive other people’s post, and that they experience their own going missing. Mr Thomas took the point, rightly, that this letter was not in the form of a witness statement and that the position of the signatories was not clear. There was also no formal statement of truth. As is no doubt already becoming clear from these reasons, I found Ms Freeman to be a reliable and credible witness. Her evidence as to the problems with delivery and how she came to collect the signatures from the three local businesses emerged from Mr Thomas’s cross-examination intact, having remained consistent, detailed and plausible.

On the emails, the appellant called evidence from Duncan Fox, of Paragon Ecommerce. He had prepared a report for the appellant on whether the 10 emails that the respondent claims to have sent had ever been received. The main points of his report can be summarised as follows:

Mr Thomas challenged Mr Fox’s evidence as not properly constituting expert evidence. His report showed no indication that he understood the duties of an expert witness, nor did Mr Fox appear to have set out any qualifications in the relevant field. In cross-examination, Mr Fox happily accepted all these criticisms. He had never been to court before to give evidence about an IT system and had simply offered to prepare the report. Mr Thomas was right to submit that Mr Fox’s evidence should not be afforded significant weight as expert evidence. I agree, but in fairness to Mr Fox he has never purported to give conventional expert evidence. The appellant had asked him to search their email system to find if the appellant’s emails were there, and he did so according to a methodology that he clearly identified and that is comprehensible without the need for any particular expertise. Recognising that the formal rules of evidence do not apply, and in the particular circumstances of this appeal I am content to simply accept him as a witness of fact. There is no particular feature of his factual evidence put forward by Mr Thomas, or that is otherwise apparent, that undermines its reliability.

I take a step back and consider all the evidence to determine, on the balance of probabilities, whether the appellant has rebutted the presumption that the notices were delivered. In what must be a quite exceptional set of facts, I reach the conclusion that the compliance notice and the subsequent penalty notices were not delivered. This conclusion takes into account everything said by the respondent as to the previous receipt of correspondence, and the issues concerning telephone calls and emails. Having not received the notices or becoming aware of them until attendance of the Sheriff Officer, I find that there was a reasonable excuse for not responding to the compliance notice and the ongoing penalty notices should be set aside.

Finally, I apologise to the parties for the very significant delay in sending this decision. This was due to a combination of administrative errors together with pressure of other work in the Tribunal generally, as well as personally.