News type:
News
Date:
Thu 10 Nov 2016

Technical statement on appeal ruling in Butterworth v Police and Crime Commissioner for Greater Manchester (the Commissioner)

In July this year we announced that The Pensions Ombudsman (the Ombudsman) would be more proactive in intervening in appeals of determinations where, for example, there is an issue of wider impact on the pensions industry or where his participation is necessary to properly present and argue the points. The central purpose of the Ombudsman’s participation in such cases is to seek to assist the court hearing the appeal.

After careful consideration the Ombudsman took the decision to provide assistance to the court hearing the Commissioner’s appeal of the determination made by the Ombudsman, Anthony Arter, on 21 April 2016.

In his determination the Ombudsman found that the Commissioner’s predecessor made a commitment to Mrs Butterworth, following settlement negotiations at the termination of her employment, to provide her with an unreduced pension when she reached age 55 and that there was no justification for the Commissioner to subsequently renege on that commitment. Broadly, the Commissioner argued that as a matter of construction the commitment made to Mrs Butterworth by its predecessor did not bind it in the circumstances and that, even if it did bind it, it was not within its powers to provide such a benefit.

The High Court has today handed down its judgment in the matter. The Deputy Judge hearing the case, Jonathan Crow QC, allowed the Commissioner’s appeal and overturned the Ombudsman’s determination.

Deputy Judge Crow found that the clause containing the commitment was worded in such a way that in the circumstances the Commissioner was not contractually bound to give Mrs Butterworth access to an unreduced pension at age 55.

Mrs Butterworth was not represented in the appeal. The Ombudsman had hoped that in participating he would obtain clarity as to whether the Commissioner, as a public authority, could avoid the effect of its contractual commitment to Mrs Butterworth on the ground that making the commitment lay beyond its powers. The Ombudsman sought clarity on this point because the legal position is uncertain and because it is a matter of potential relevance with regard to a significant number of complaints that he receives. The Ombudsman’s view is that the effect of the current uncertainty is that an inequality arises between public and private sector pension schemes. In private sector schemes, employers who make pension commitments to members would not ordinarily be able to rely on a lack of power to deny a liability to fulfil such commitments. By contrast, it seems that the legal principles applying to public sector employers can produce a different outcome for members.

However, as Deputy Judge Crow found, as a matter of construction, that the wording of the clause containing the commitment did not bind the Commissioner to provide the benefit, unfortunately, he had no need to tackle the issue head-on; but he acknowledged that “whether a public authority can avoid the ostensible effect of a contractual commitment on the ground that making the commitment lay beyond its powers” was a “vexed question on which the law remains uncertain” (paragraph 25 of the judgment). The Ombudsman hopes that, in the interests of providing clarity, this difficult issue will come before the courts for consideration in the near future.

Deputy Judge Crow did, however, reassert the principle that the Ombudsman is “much better suited than the court to determine whether maladministration has occurred in any given case” (paragraph 39 of the judgment).

Anthony Arter said “The judgment is largely disappointing. We had hoped that the issue outlined above would have been addressed so as to provide clarity for our service, and others, going forward. Furthermore, on the particular facts of Mrs Butterworth’s case, it is disheartening that the court was not able to remedy the underlying injustice here that (as it was accepted by the Commissioner’s advisers) Mrs Butterworth “probably was encouraged to think that she would receive an unreduced pension at age 55” (paragraph 4 of the judgment). Nevertheless, I cannot fault the legal reasoning adopted by Deputy Judge Crow in this complex case.”