Canada: Police And Crime Commissioner In High Court Win After Pensions Ombudsman's Intervention

Last Updated: November 16 2016
Article by Hannah Beacham and Ian J Gordon

Most Read Contributor in Canada, October 2018

The High Court has today overturned a Determination of the Pensions Ombudsman (PO-6773) in the case of Catherine Butterworth and Police and Crime Commissioner for Greater Manchester and the Pensions Ombudsman (as intervener) which had directed the Police and Crime Commissioner for Greater Manchester (the "Commissioner") to pay a "bridging pension" from its own funds to the claimant.

Gowling WLG acted for the Commissioner.

The claimant was formerly employed by the Commissioner's predecessor, the Greater Manchester Police Authority (the GMPA). She left the GMPA's employment in 2011 pursuant to a compromise agreement. The present case turned on clause 4.2 of this compromise agreement which said:

"To the extent that it is and remains lawful for the Employer to do so and upon receipt of a written request from the Employee in accordance with the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 (or any other provision having similar effect which is in force at that time in relation to the Scheme) the Employer will allow the Employee to access her Greater Manchester Pension Fund pension without reduction or abatement when she reaches 55 years of age on 22 February 2014..."

In anticipation of her 55th birthday in 2014, the claimant requested an unreduced pension. The Commissioner notified her that the GMPA had not been legally entitled to give the commitment contained in clause 4.2 because, under the relevant Local Government Pension Scheme (LGPS) regulations, the award of an unreduced pension required not only the employer's consent, but also a determination that "on compassionate grounds" the pension should not be reduced. The Commissioner said that, having considered the arguments advanced by the claimant, there were no sufficient, compassionate grounds and the unreduced pension would not be awarded.

The claimant complained to the Pensions Ombudsman, who investigated the complaint and issued two Preliminary Decisions before giving his final Determination on 21 April 2016.

In his final Determination, the Ombudsman held that clause 4.2 was void and unenforceable because it amounted to an unlawful fetter on the exercise of a public authority of its own discretion. He went on to find that nonetheless a contractual estoppel had arisen, the effect of which was that the Commissioner could not go back on the promise to provide the benefit. On that basis, the Ombudsman directed the Commissioner to pay, from its own funds, a bridging pension equivalent to the unreduced benefit with retrospective effect from the claimant's 55th birthday. He also directed the Commissioner to pay £2,000 for the distress and inconvenience caused to the claimant as a result of the GMPA's maladministration in promising to confer on her a benefit which was not in its power to provide.

The Commissioner appealed on five grounds:

  1. the Ombudsman's reliance on estoppel was misconceived because (i) a party cannot achieve by estoppel what it could not achieve by express agreement, and (ii) in any event estoppel has no role to play in public law;
  2. on the correct interpretation of clause 4.2, the GMPA had in any event not contracted to do anything that was unlawful;
  3. the circumstances of this case did not give rise to any contractual estoppel (assuming the doctrine was in principle capable of applying);
  4. the Ombudsman's direction required the Commissioner to commit an ultra vires act, in that he had no power to make pension payments, or their equivalent, from his own funds;
  5. the award of £2,000 for maladministration was misconceived.

The claimant did not participate in the appeal but the Ombudsman was given permission to intervene (pursuant to a more activist policy announced on 27 July this year).

The Ombudsman provided written and oral submissions on some of the issues raised by the Commissioner. He also asked the Court to uphold the Determination on a new ground (namely, that clause 4.2 was not, as a matter of private law, unenforceable) or alternatively to remit the matter back to him to consider a new point (namely, whether the claimant had a complaint based on legitimate expectation).

Jonathan Crow QC, sitting as a Deputy Judge of the High Court, held that the Ombudsman had misinterpreted clause 4.2 of the compromise agreement. He decided that by clause 4.2 the GMPA had irrevocably agreed to give the claimant access to an unreduced pension at age 55, but only to the extent it was lawful for the GMPA to perform that commitment when the time for performance arrived. As such, the Commissioner had not breached the contractual commitment in 4.2 when he refused the claimant's request for an unreduced pension.

The High Court therefore didn't need to expressly consider whether the Ombudsman should be allowed to introduce into the appeal a new argument which he had not identified in producing his determination.

In relation to the Ombudsman's finding of a "contractual estoppel", the High Court found that the necessary elements of this were missing. There was no warranty by the GMPA that it was, or would be, legally empowered to facilitate guaranteed access to an unreduced pension at age 55. In fact, the commitment in clause 4.2 was expressly contingent on its ability, lawfully, to provide such access when the relevant time arrived.

Separately, the High Court found that the Determination was flawed because it mandated a result which was entirely different from the contractual commitment (a bridging pension paid from the employer's own funds instead of a pension from the pension fund).

Although it was strictly unnecessary for him to do so, the Deputy Judge also expressed the following views:

  • contractual estoppel could not be used to give effect to a commitment which the GMPA had no power to give;
  • the GMPA had no power to make pension payments from its own funds; and
  • the Ombudsman's direction to pay a bridging pension from the Commissioner's own funds was unlawful because the Ombudsman has no power to order public authorities to make pension payments that they have no lawful power to make.

Finally, the High Court overturned the finding of maladministration (and the order to pay £2,000 compensation) and declined to remit the matter back to the Ombudsman to investigate a new issue (legitimate expectation) which had not been raised by the claimant at any point. This would amount to substantially "re-litigating" the matter on new grounds.

What it means

The case has numerous interesting features. Having been given permission to intervene in the appeal, and consistent with his stated aim of seeking to assist the Court, it was notable that the Ombudsman made written and oral submissions to the Court which he accepted were contrary to the legal analysis he had adopted in the determination being appealed.

Accordingly, parties wishing to appeal from the Ombudsman's determinations should be mindful of the possibility that, on appeal, the Ombudsman may seek to run arguments which did not form the basis of his original decision.

However, the Ombudsman will no doubt have observed (in considering in future whether to intervene in appeals) that the High Court ordered him to pay the costs the Commissioner had incurred in bringing the appeal.

Find out more about Gowling WLG's pensions services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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