Regina (Bradley and Others) v. Secretary of State For Work and Pensions

[2009] 114
1 QB
Court of Appeal
Regina (Bradley and others) v. Secretary of State for Work and Pensions (Attorney General intervening)
[2007] EWHC 242 (Admin)
[2008] EWCA Civ 36
2007 Feb 7, 8, 9;21 Bean J

2007 July 25, 26, Wall LJ, Blackburne J, Sir John Chadwick
27;
2008 Feb 7
Parliament - Parliamentary Commissioner for Administration - Investigation of complaint - Commissioner investigating

complaints of Government maladministration - Commissioner making findings of maladministration and recommendation
that compensation be considered - Secretary of State rejecting findings and recommendation - Whether commissioner's
findings binding on Secretary of State unless quashed on judicial review or otherwise irrational - Whether Secretary of
State entitled to prefer his own view - Whether Secretary of State's rejection of commissioner's findings rational - Whether
to be quashed - Parliamentary Commissioner Act 1967 (c 13) (as amended by Domestic Violence, Crime and Victims Act
2004 (c 28), s. 47, Sch. 7, paras 1, 5), ss. 5, 10
Pursuant to section 5 of the Parliamentary Commissioner Act 19671, the Parliamentary Commissioner for Administration
conducted an investigation into the circumstances in which many final salary occupational pension schemes had been wound
up underfunded after the coming into force of the Pensions Act 1995. The commissioner published a report of the results of her
investigation, pursuant to section 10 of the 1967 Act, in which she found, inter alia, that (i) information provided by the
Government about the security which members of final salary occupational pension schemes could expect from the minimum
funding requirement, introduced by the 1995 Act, had been potentially misleading and amounted to maladministration; (ii) such
maladministration had caused injustice to those who had lost all or part of their pensions on the winding up of their pension
schemes; and (iii) the Department of Work and Pensions' decision in 2002 to approve a change to the minimum funding
requirement had been taken with maladministration. The commissioner recommended that the Government consider whether it
should make arrangements for the restoration of the core pension and non-core benefits promised to all those who had been
caused financial injustice by the maladministration. The Secretary of State for Work and Pensions rejected the commissioner's
findings and her recommendation, claiming that he was not bound by them. The claimants, who were members of pension
schemes which had been wound up underfunded, sought judicial review of the Secretary of State's decision. The judge, having
first decided that the court would place reliance on neither the commissioner's evidence to a parliamentary select committee nor
the committee's report since the former would inhibit freedom of speech in Parliament in contravention of article 9 of the Bill
of Rights (1689)2 and the latter would usurp the role of the court to decide whether the Secretary of State had acted unlawfully,
held that findings of fact made by the commissioner were binding on the Secretary of State unless they were objectively shown
to be flawed or irrational or there was genuine fresh evidence to be considered. He accordingly
Parliamentary Commissioner Act 1967, s. 5: see post, first judgment, para 36.
S 10, as amended: see post, first judgment, para39.
2 Bill of Rights (1689), art 9: see post, first judgment, para 28.
[2009] 115
1 QB R (Bradley) v Work and Pensions Secretary
quashed the Secretary of State's rejection of the commissioner's finding that there had been maladministration in
the provision of official information, holding that that finding was not irrational, upheld the Secretary of State's
rejection of the commissioner's other two findings, holding that they were logically flawed, and directed the
Secretary of State to reconsider the recommendation in the light of his judgment. The Secretary of State appealed
against the quashing of his decision to reject the first finding and the claimants appealed against the upholding of
the Secretary of State's decision to reject the other two findings.
On the appealsâ€”
Held, (1) that there was no general rule that findings of fact made in the course of a statutory investigation could only be
impugned on the grounds that they were irrational; that findings of maladministration made by the Parliamentary
Commissioner for Administration following an investigation under section 5(1) of the Parliamentary Commissioner Act 1967
were not binding on the relevant minister, and nothing in that Act required the minister to obtain relief by way of judicial
review before rejecting them or precluded him, when he was called to account before either House, from explaining, as part of
his justification for deciding to provide no remedy in respect of the complaint, his reasons for rejecting such findings; and that,
therefore, where the minister had been the subject of a finding of maladministration he was entitled to reject it in favour of his
own view, provided that his decision to do so was not irrational having regard to the legislative intention underlying the 1967
Act that those bodies for whose actions there was a minister capable of being called to account by Parliament were to be
subject to investigation by the commissioner (post, Court of Appeal judgments, paras 41, 44,49, 51,70-71, 132,133, 135-
136,143).
R v Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617, CA and R v Secretary of State for the Home
Department, Ex p Danaei [1998] INLR 124, CA applied.
R v Local Comr for Administration for the South, the West, the West Midlands, Leicestershire, Lincolnshire and
Cambridgeshire, Ex p Eastleigh Borough Council [1988] QB 855, CA distinguished.
(2) Dismissing the Secretary of State's appeal and allowing the claimants' appeal in part, that the Secretary of State's
decision to reject the commissioner's finding that Government information had been potentially misleading and amounted to
maladministration had been irrational and the judge had therefore been correct to quash it; that, although the Secretary of
State's decision to reject the commissioner's finding that such maladministration had been a significant contributory factor
towards the causation of financial losses to individuals had not been irrational, it had been irrational of the Secretary of State to
reject her finding that the maladministration had caused some injustice, and the judge had therefore erred in upholding the
Secretary of State's rejection of that finding; and that the Secretary of State's decision to reject the commissioner's finding
regarding the 2002 decision to change the minimum funding requirement had not been irrational and the judge had therefore
been correct to uphold it (post, Court of Appeal judgments, paras 95, 108,111, 126, 131,132, 133,143).
Decision of Bean J, post, p 119C; [2007] EWHC 242 (Admin) reversed in part.
The following cases are referred to in the judgments of the Court of Appeal:
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223; [1947] 2 All ER 680, CA
Blanco Callejas v Spain (Application No 64100/00) (unreported) given 18 June 2002, ECtHR
McDonnell v Congregation of Christian Brothers Trustees [2003] UKHL 63; [2004] 1 AC 1101; [2003] 3
WLR 1627; [2004] 1 All ER 641, HL(E)
Pepper v Hart [1993] AC 593; [1992] 3 WLR 1032; [1993] 1 All ER 42, HL(E)
[2009] 116
R v Her Majesty's Treasury, Ex p Smedley [1985] QB 657; [1985] 2 WLR 576; [1985] 1 All ER 589, CA
R v Local Comr for Administration for the South, the West, the West Midlands, Leicestershire, Lincolnshire
and Cambridgeshire, Ex p Eastleigh Borough Council (1987) 86 LGR 145; [1988] QB 855; [1988] 3 WLR 113;
[1988] 3 All ER 151, CA
R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124, CA
R v Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617, CA
Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816; [2003] 3 WLR 568; [2003] 4 All
ER 97, HL(E)
The following additional cases were cited in argument in the Court of Appeal:
B v Secretary of State for Work and Pensions [2005] EWCA Civ 929; [2005] 1 WLR 3796, CA
Bielectric Srl v Italy (Application No 36811/97) (unreported) given 4 May 2000, ECtHR
Blecic v Croatia (2004) 41 EHRR 185
Carltona Ltd v Comrs of Works [1943] 2 All ER 560, CA
Denimark Ltd v United Kingdom (2000) 30 EHRR CD 144
Dennis v Ministry of Defence [2003] EWHC 793 (QB); The Times, 6 May 2003
Draon v France (2005) 42 EHRR 807, GC
Ezeh and Connors v United Kingdom (2003) 39 EHRR 1, GC
Gayduk v Ukraine (Application No 45526/99) (unreported) given 2 July 2002, ECtHR
Hamilton v Al Fayed [2001] 1 AC 395; [2000] 2 WLR 609; [2000] 2 All ER 224, HL(E)
Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862
James v United Kingdom (1986) 8 EHRR 123
Jankovic v Croatia (2000) 30 EHRR CD 183
Kopecky v Slovakia (2004) 41 EHRR 944, GC
Lithgow v United Kingdom (1986) 8 EHRR 329
Lloyd v McMahon [1987] AC 625; [1987] 2 WLR 821; [1987] 1 All ER 1118, HL(E)
Lord Advocate v Dumbarton District Council [1990] 2 AC 580; [1989] 3 WLR 1346; [1990] 1 All ER 1,
HL(Sc)
Mann v Germany (1996) 22 EHRR CD 157
Marckx v Belgium (1979) 2 EHRR 330
Maurice v France (2005) 42 EHRR 885, GC
Mellacher v Austria (1989) 12 EHRR 391
MÃ¼ller v Austria (1975) 3 DR 25
Nerva v United Kingdom (2002) 36 EHRR 31
Ã–neryildiz v Turkey (2002) 39 EHRR 253
Pine Valley Developments Ltd v Ireland (1991) 14 EHRR 319
Prebble v Television New Zealand Ltd [1995] 1 AC 321; [1994] 3 WLR 970; [1994] 3 All ER 407, PC
R v Comr for Local Administration, Ex p Croydon London Borough Council [1989] 1 All ER 1033, DC
R v Comr for Local Administration, Ex p S (1999) 1 LGLR 633
R v Inland Revenue Comrs, Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545; [1990] 1 All ER 91, DC
R v Local Comr for Administration for the North and East Area of England, Ex p Bradford Metropolitan City
Council [1979] QB 287; [1979] 2 WLR 1; [1979] 2 All ER 881, CA
R v Local Comr for Administration in North and North-East England, Ex p Liverpool City Council [2001] 1
All ER 462, CA
R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213; [2000] 2 WLR 622; [2000] 3 All
ER 850, CA
R v Parliamentary Comr for Administration, Ex p Balchin [1998] 1 PLR 1
[2009] 117
R v Parliamentary Comr for Administration, Ex p Balchin (No 2) (2000) 2 LGLR 87

R v Parliamentary Comr for Administration, Ex p Dyer [1994] 1 WLR 621; [1994] 1 All ER 375, DC
R v Parliamentary Comr for Standards, Ex p Al Fayed [1998] 1 WLR 669; [1998] 1 All ER 93, CA
R v Restormel Borough Council, Ex p Corbett [2001] EWCA Civ 330; [2001] 1 PLR 108, CA
R v Secretary of State for Education and Employment, Ex p Begbie [2000] 1 WLR 1115, CA
R v Secretary of State for the Environment, Ex p Hammersmith and Fulham London Borough Council [1991] 1
AC 521; [1990] 3 WLR 898; [1990] 3 All ER 589, HL(E)
R v Secretary of State for the Environment, Ex p Nottinghamshire County Council [1986] AC 240; [1986] 2
WLR 1; [1986] 1 All ER 199, HL(E)
R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC
349; [2001] 2 WLR 15; [2001] 1 All ER 195, HL(E)
R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696; [1991] 2 WLR 588; [1991] 1
All ER 720, HL(E)
R v Secretary of State for the Home Department, Ex p Oladehinde [1991] 1 AC 254; [1990] 3 WLR 797;
[1990] 3 All ER 393, HL(E)
R (Carson) v Secretary of State for Work and Pensions [2003] EWCA Civ 797; [2003] 3 All ER 577, CA
R (Confederation of Passenger Transport UK) v Humber Bridge Board [2003] EWCA Civ 842; [2004] QB
310; [2004] 2 WLR 98; [2004] 4 All ER 533, CA
R (Doy) v Comr for Local Administration [2001] EWHC Admin 361; [2002] JPL 342
R (Sinn FÃ©in) v Secretary of State for Northern Ireland [2007] EWHC 12 (Admin), DC
R (Trailer and Marina (Leven) Ltd) v Secretary of State for the Environment, Food and Rural Affairs [2004]
EWCA Civ 1580; [2005] 1 WLR 1267, CA
R (Westminster City Council) v National Asylum Support Service [2002] UKHL 38; [2002] 1 WLR 2956;
[2002] 4 All ER 654, HL(E)
Rowland v Environment Agency [2003] EWCA Civ 1885; [2005] Ch 1; [2004] 3 WLR 249, CA
Rudzinska v Poland (Application No 45223/99) (unreported) given 7 September 1999, ECtHR
Seddon Properties Ltd v Secretary of State for the Environment (Note) (1978) 42 P & CR 26
Smith v East Elloe Rural District Council [1956] AC 736; [1956] 2 WLR 888; [1956] 1 All ER 855, HL(E)
South Bucks District Council v Porter (No 2) [2004] UKHL 33; [2004] 1 WLR 1953; [2004] 4 All ER 775,
HL(E)
Stec v United Kingdom (2005) 41 EHRR SE 295, GC
Steele Ford & Newton v Crown Prosecution Service (No 2) [1994] 1 AC 22; [1993] 2 WLR 934; [1993] 2 All
ER 769, HL(E)
Stretch v United Kingdom (2003) 38 EHRR 196
Toussaint v Attorney General of Saint Vincent and the Grenadines [2007] UKPC 48; [2007] 1 WLR 2825;
[2008] 1 All ER 1, PC
Wendenburg v Germany (2003) 36 EHRR CD 154
The following cases are referred to in the judgment of Bean J:
Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223; [1947] 2 All ER 680, CA
Blanco Callejas v Spain (Application No 64100/00) (unreported) given 18 June 2002, ECtHR
[2009] 118
Hamilton v Al Fayed [1999] 1 WLR 1569; [1999] 3 All ER 317, CA

Marckx v Belgium (1979) 2 EHRR 330
Pepper v Hart [1993] AC 593; [1992] 3 WLR 1032; [1993] 1 All ER 42, HL(E)
Prebble v Television New Zealand Ltd [1995] 1 AC 321; [1994] 3 WLR 970; [1994] 3 All ER 407, PC
R v F [2007] EWCA Crim 243; [2007] QB 960; [2007] 3 WLR 164; [2007] 2 All ER 193, CA
R v Local Comr for Administration for the South, the West, the West Midlands, Leicestershire, Lincolnshire
and Cambridgeshire, Ex p Eastleigh Borough Council [1988] QB 855; [1988] 3 WLR 113; [1988] 3 All ER 151,
CA
R v Local Comr for Administration in North and North-East England, Ex p Liverpool City Council [2001] 1
All ER 462, CA
R v Parliamentary Comr for Administration, Ex p Balchin [1998] 1 PLR 1
R v Parliamentary Comr for Standards, Ex p Al Fayed [1998] 1 WLR 669; [1998] 1 All ER 93, CA
R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696; [1991] 2 WLR 588; [1991] 1
All ER 720, HL(E)
R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124, CA
R v Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617, CA
R (Carson) v Secretary of State for Work and Pensions [2003] EWCA Civ 797; [2003] 3 All ER 577, CA
Robins v Secretary of State for Work and Pensions (Case C-278/05) [2007] ICR 779; [2007] All ER (EC) 648,
ECJ
Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816; [2003] 3 WLR 568; [2003] 4 All
ER 97, HL(E)
The following additional cases were cited in argument before Bean J:
Mann v Germany (1996) 22 EHRR CD 157
Ã–neryildiz v Turkey (2002) 39 EHRR 253
R (Doy) v Comr for Local Administration [2001] EWHC Admin 361; [2002] JPL 342
CLAIM for judicial review

By a claim form dated 14 June 2006 the claimants, Henry Bradley, Robin Duncan, Andrew Parr and Thomas
Waugh, sought judicial review of the decision of the Secretary of State for Work and Pensions of 15 March 2006 to
reject the findings of maladmnistration made against his department by the Parliamentary Commissioner for
Administration ("the ombudsman") in relation to maladministration in the protection of members of occupational
pension schemes. The grounds for the claim were that (1) the Government's rejection of the finding of
maladministration merely masked misleading information provided by it about pension protection; (2) rejection of
the ombudsman's first recommendation was unlawful, inter alia, because it ruled out any restoration of individuals'
funds and was based on erroneously analysed figures for the cost of public compensation; and (3), in present
circumstances, the Government's failure to restore the claimant's pension entitlements breached their rights to
property guaranteed by article 1 of the First Protocol to the Convention for the Protection of Human Rights and
Fundamental Freedoms. The ombudsman was joined as an interested party. The Speaker of the House of
Commons was permitted to make representations under CPR r 54.17 as to whether the use in the proceedings of the
ombudsman's evidence to the Public Administration Select Committee and of the committee's report which was
based in part on
[2009] 119
1 QB R (Bradley) v Work and Pensions Secretary Bean J
that evidence would infringe article 9 of the Bill of Rights (1689) and parliamentary privilege.
The facts are stated in the judgment.
Clive Lewis QC and Ben Hooper (instructed byTreasury Solicitor ) for the Speaker of the House of Commons.
Dinah Rose QC and Tom Hickman (instructed byBindman & Partners ) for the claimants.
Philip Sales QC and Daniel Stilitz (instructed bySolicitor, Department of Work and Pensions ) for the Secretary
of State.
The court took time for consideration.

21 February 2007. BEAN J handed down the following judgment.
1 On 15 March 2006 the Parliamentary Commissioner for Administration ("the ombudsman"), Ms Ann
Abraham, published a special report to Parliament entitled Trusting in the Pensions Promise: Government Bodies
and the Security of Final Salary Occupational Pensions (HC 984). The report found that the Department for Work
and Pensions ("the DWP"), and its predecessor the Department of Social Security, had been guilty of
maladministration which was one of a number of factors that had caused injustice to over 75,000 people who had
lost all or part of their final salary occupational pensions on the winding up of their pension schemes. Among her
recommendations was that the Government should consider arrangements for the restoration of the core pension
entitlements of these individuals. In a written statement to Parliament of 15 March and a more detailed oral
statement by the Secretary of State in the House of Commons on 16 March the Government rejected all but one of
the ombudsman's findings and recommendations. The present claim is for judicial review of the decision to reject
two of the findings and one of the recommendations which lie at the heart of the report.
The Pensions Act 1995
2 Before the passing of the Pensions Act 1995 there was no comprehensive legislative regime for the regulation
of occupational pensions. Occupational pension schemes were governed essentially by the law of trusts. Following
the activities of the late Robert Maxwell in diverting the assets of the pension schemes of his companies' employees
it was widely recognised that additional protection for scheme members was required.
3 Part I of the 1995 Act was concerned specifically with occupational pensions. The principal innovations
included the following: the establishment of the Occupational Pensions Regulatory Authority ("OPRA") to oversee
the trustees of pension schemes; the requirement for member-nominated trustees; the imposition of a range of
statutory duties and responsibilities on trustees; the requirement for a scheme auditor and a scheme actuary to
provide professional advice to the trustees; the introduction of a statutory minimum funding requirement ("MFR"),
and the establishment of a statutory system of priorities for the application of a scheme's assets in the event of the
scheme being wound up with insufficient assets to meet its liabilities in full.
[2009] 120
4 Section 56(1) of the 1995 Act, establishing the MFR, required that the value of the assets of a defined benefit
occupational pension scheme should not be less than the amount of the liabilities of the scheme. Since both assets
and liabilities would inevitably fluctuate in value, the statute required assumptions to be made from time to time
about whether the assets held were sufficient to meet liabilities falling due well into the future. Detailed provisions
as to the method of calculation of the MFR were prescribed in the Occupational Pension Schemes (Minimum
Funding Requirement and Actuarial Valuations) Regulations 1996 (SI 1996/1536). Regulation 3(2)(c)(ii) provided
that it should be assumed that liabilities in respect of members will be so secured that the benefits of active and
deferred members will be "reasonably likely" to be equal in value to those payable in respect of their accrued rights
under the scheme.
5 Section 73 of the 1995 Act, headed "Preferential liabilities on winding up", provided for the order of
priorities where on a scheme being wound up the assets were insufficient to satisfy the liabilities of the scheme in
full. In summary the order was: (a) liabilities derived from the payment of voluntary contributions; (b) pensions
paid to members who have retired, and on their death to their dependants (including at that time, though not since
2004, increases in such pensions); (c) liabilities for pensions to members who have not yet retired.
6 On 3 January 1996 the Department of Social Security published a leaflet ("PEC3") entitled The 1995
Pensions Act, running to 21 pages. Its contents were strongly criticised by the ombudsman in her report. She was
also critical of certain later literature, in particular an edition of leaflet PM3, called Occupational Pensions: Your
Guide, which appeared on 7 May 2002.
7 From time to time amendments were made to the level of the MFR. In response to advice from the actuarial
profession that the MFR was stronger than intended the Government twice reduced its level, in May 1998 and
March 2002. The latter decision was the subject of an adverse finding by the ombudsman. The profession also
twice advised (in 2001 and 2003) that the level was weaker than intended but on both occasions the Government
decided not to increase it.
8 A revised legal framework was created by the Pensions Act 2004, the principal relevant provisions of which
came into force on 6 April 2005.
The complaints to the ombudsman
9 The ombudsman's report records (para 1.44) that she had received more than 200 complaints referred to her
by Members of Parliament of all political parties and from all parts of the United Kingdom on the subject of
pension losses. The complaints which formed the basis of her investigation had four elements. (1) First, it was
alleged that the legislative framework during the relevant period (which she defined as being from commencement
of the 1995 Act to commencement of the 2004 Act) had afforded inadequate protection to the pension rights of
members of final salary occupational schemes. (2) Secondly, it was alleged that on a number of occasions ministers
and officials had ignored relevant evidence when taking policy decisions related to the protection of pension rights
accrued in such schemes. (3) Thirdly, it was alleged that the information and advice provided by a number of
government departments and other public bodies about the
[2009] 121
degree of protection that the law provided to accrued pension rights had been inaccurate to the extent that it had
amounted to the misdirection of the members and trustees of such schemes. (4) Fourthly, it was alleged that public
bodies were responsible for unreasonable delays in the process of winding up the schemes. (This final element was
the subject of a finding and recommendation by the ombudsman which was accepted by the Government and
formed no part of the case before me.)
The Financial Assistance Scheme
10 On 14 May 2004 the then Secretary of State for Work and Pensions announced that the Government would
be providing Â£400m of public money to be paid over 20 years, to create the Financial Assistance Scheme ("FAS")
to provide assistance to those who had lost part or all of their pension rights due to their scheme winding up
underfunded and who were within three years of the scheme's pension age at 14 May 2004. In December 2006, by
which time this litigation was already under way, the FAS was significantly extended so as to be available to people
within 15 years of their scheme's pension age, though on a tapering basis for those in the bracket of 7 to 15 years
from that age. The FAS is not available to assist members of pension schemes which have been wound up by a
solvent employer.
The claimants
11 Mr Bradley worked at Irish Fertiliser Industries Ltd for 27 years until that company went into liquidation in
2002. He paid into the pension scheme throughout, and his evidence is that he was assured by others that it was
safe. Following the insolvency he learned that he could only expect to receive a fraction of his expected pension
from the company's scheme. His case is that he would have made different plans and choices, had the true security
of the scheme been properly publicised. A colleague of Mr Bradley described as "Mr J" is one of the paradigm
cases considered by the ombudsman in her report. Irish Fertiliser Industries Ltd was based in Belfast, but it is not
suggested that this fact deprives the Administrative Court of jurisdiction.
12 Mr Duncan worked for British United Shoe Manufacturers Ltd for 36 years. As a shop steward and
convenor, and a member-nominated trustee of the company pension scheme, he actively promoted it to colleagues,
believing it to be safe and secure. He states that he formed this belief on the basis of departmental and OPRA
publications which he not only read and relied upon personally, but disseminated to others. He made substantial
additional voluntary contributions to the fund. Following the insolvency of British United Shoe Manufacturers Ltd
he is likely to obtain no more than about 10% of his expected pension from the company scheme. He has sold his
house because of the financial circumstances in which he and his wife found themselves. He now works long hours
as a night-shift driver for Royal Mail. His is one of the paradigm cases mentioned in the ombudsman's report,
where he is described as Mr B.
13 Mr Parr worked for 20 years at Allied Steel and Wire until that company's insolvency. He too claims that
he relied upon and disseminated information from Government literature to others, though since Allied Steel
[2009] 122
and Wire was non-unionised this was done through a staff consultative committee. Despite ill-health including a
cardiac arrest he has been forced to continue working because, notwithstanding the company scheme being funded
beyond the MFR requirement, there were insufficient funds to meet the liabilities to him and other non-pensioner
members at insolvency.
14 Mr Waugh worked for Burgess Agricultural Engineers Ltd for 26 years. The company continues to trade,
but the scheme was wound up at a time when its assets were insufficient to meet its liabilities to non-pensioner
members in full. Mr Waugh's expected pension has been reduced by about two thirds. He is ineligible for
assistance from the FAS since the employer remains solvent.
The ombudsman's report
15 The ombudsman's report, the product of a lengthy and careful investigation, is 254 pages long. A summary
of the relevant findings and recommendations is necessary for the purposes of this judgment but must inevitably
omit the detailed narrative of the evidence leading up to them. The ombudsman begins her findings in chapter 5 by
noting (at paras 5.7-5.18) that throughout the period relevant to her investigation (1995-2005) the Government:
"5.7 â€¦ saw itself as actingâ€”and told the public that it was doing soâ€”in partnership with others both to
promote the benefit of occupational pension schemes and to remind individuals that where they could, they had
an obligation to save for their retirement."
"5.10 â€¦ the Government recognised throughout the relevant period that pensions were complex and often not
a topic that was generally understood and that, consequently, there was a need for greater financial education,
for improved awareness of pensions, and for clearer information about the various savings options."
"5.12 â€¦ the Government saw itself as having a key role in promoting such better education, awareness and
information about pensions and saving for retirementâ€”and told others that it would do so."
"5.14 â€¦ the Government said at the relevant time that the information leaflets and other official public
publications issued by public bodies were an integral component of the promotion of the benefits of saving for
retirement and aimed to assist people to make informed choices about various pensions options."
"5.18 â€¦ the Government accepted at the relevant time that it had certain obligations in relation to the
accuracy, completeness, clarity and consistency of its publications."
16 In paras 5.67-5.68, after an extensive review of official publications issued by the Department and its own
formal internal guidance, the ombudsman wrote:
"5.67 I have seen nothing that would make me doubt that the Government's intention behind the MFR was
always that it could only provide a limited degree of security to non-pensioner membersâ€”which was apparent
from its designâ€”and I have seen that the discussion behind closed doors within and between the public bodies
responsible for occupational pensions policy generally reflected this.
[2009] 123
"5.68 However this was not properly disclosed to those most affected by such an intention. I consider that the
official information given to the public about the degree of security provided by a scheme being funded to the
MFR level: (i) was, prior to September 2000, misleading, incomplete and inaccurateâ€”in that it gave
assurances which were incompatible with the design and purpose of the MFR as prescribed by
Governmentâ€”and with its practical operation. These assurances were that the MFR was designed to ensure
that schemes had sufficient assets to meet their liabilities and that a scheme funded to the MFR level would be
able to pay cash transfers of accrued rights to non-pensioners. In addition, no disclosure or even mention was
made of risks to accrued rights or of the potential effects of the statutory order of priority on wind up; (ii) was,
between September 2000 and April 2004 deficientâ€”in that it lacked any degree of consistency of what might
be expected from the MFR. Some official statements and publicationsâ€”especially those aimed at the general
publicâ€”continued not to mention risk and to give a misleading impression as to the security of pension rights,
while others began to explain the true position; and (iii) was only broadly accurate from April 2004 onwards."
She summarised her finding of maladministration relating to official information (part of what was described
in argument before me as the first finding) as being, at para 5.164:
"that official informationâ€”about the security that members of final salary occupational pension schemes
could expect from the MFR provided by the bodies under investigationâ€”was sometime s. inaccurate, often
incomplete, largely inconsistent and therefore potentially misleading, and that this constituted
maladministration â€¦"
17 The ombudsman also found, at para 5.164, ("the third finding") that a decision in 2002 by the DWP to
approve a change to the MFR basis was taken with maladministration. I return to this topic later in the judgment.
18 Having determined that maladministration did occur, the ombudsman turned to consider whether individuals
had suffered injustice as a result. She noted, at para 5.166, that those who had complained to her claimed to have
suffered injustice in four respects: lost opportunities to make informed choices about pensions and savings options
or to take remedial action in relating to the funding position on their scheme; financial loss of a considerable
proportion, in some cases all, of their expected pension once the wind up of the scheme was triggered; a sense of
outrage because public bodies responsible for the framework of pensions law and regulations did not provide
adequate protection or accurate information about the level of protection provided by that framework; and distress,
anxiety and uncertainty caused to them and their families by the effects of the above. She was satisfied that the
complainants had indeed suffered injustice in all these respects, and that the FAS as then in force had not remedied
it. She then turned to assess what were the causes of the injustice she had outlined, noting first that it must be
common ground that the trigger for the financial losses incurred by the complainants was the winding up of their
schemes with insufficient funds.
19 She found, at para 5.186, that her first category of injustice (lost opportunities) was caused by "the
incomplete, inconsistent, unclear, and
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often inaccurate information given to scheme members, trustees and sponsoring employers through official
sources". She found that the sense of outrage and distress that the complainants had suffered was caused to a
significant degree by the shock that they felt when what they never knew might happen to their pensions did occur,
and when they realised that the official assurances that they had trusted had proved to be misplaced.
20 Finally, in paras 5.198-5.246, she turned to the critical question of how the financial losses were caused.
She noted, at para 5.199, that the trigger for the lossesâ€”the winding up of schemesâ€”"clearly was not caused by
deficiencies in official information about pension security". She noted that it was not until 2005 that all pension
schemes were able in law to seek to recoup the full costs of buying out pension liabilities from sponsoring
employers. The position prior to this was that even where an employer had discharged in full its legal liabilities in
relation to scheme funding there might nevertheless have been significantâ€”but lawfulâ€”shortfalls. The statutory
framework was also relevant. The 1995 Act and subordinate legislation governing the MFR established a context
in which financial loss was quite lawfully able to occur. The statutory priority order prescribed how the assets of a
scheme should be distributed on wind up. The legal provisions which allowed employers to take "contribution
holidays" during periods when the scheme funding was strong were also, in her view, relevant. So too were some
discretionary policy decisions taken by Government, such as the abolition in 1997 of the system of tax credits given
to pension schemes. Some of these policy decisions were and are controversial, but the ombudsman correctly noted
that it was not for her to question whether they were appropriate. She was satisfied, however, that such decisions
"played a significant contributory role in the context in which the financial losses suffered by complainants
occurred".
21 The ombudsman found, at para 5.232, that had official information about the degree of protection afforded
by the MFR and the resulting risks to members' pension rights been accurate, complete and consistent, certain
actions could have been taken which "might well have ameliorated the financial position of schemes and would
therefore most probably have led to lesser, if any, financial loss of this type". Such actions could have included a
changed investment strategy by scheme trustees so as to maximise employers' contributions; pressure by scheme
members on employers to increase contributions; and additional arrangements for increased contributions made by
sponsoring employers. The ombudsman concluded her findings as follows, at paras 5.239-5.246:
"5.239 But what of whether that maladministration caused injustice? It seems to me that the financial losses
suffered by complainants did not come about as a result of the workings of a system about which individuals
had been properly informedâ€”and where the risks inherent in that system had been highlighted to them clearly
by those responsible for it.
"5.240 On the contrary, the financial losses incurred by complainants were crystallised before those
individuals even knew that such an eventuality might befall them and in a context where they had had no
warning to enable them to take remedial action or to otherwise protect their position.
[2009] 125
"5.241 That seems to me to be a clear injustice. Not only did those individuals trust the information they were
provided with about the framework put in place by Government to protect their pensions, they were unable to
properly consider their financial position or to make fully informed choices about their pension options.
"5.242 They were also unable to consider what action they could take to remedy the financial weakness of
their scheme, as the official information given to them was deficient.
"5.243 Official information effectively distorted the reality of the position in which scheme members found
themselves. As a result, they were wholly unaware that their pension rights were dependent on the ongoing
security of the employer sponsoring their scheme.
"5.244 That constitutes an injustice which was caused by maladministration. While I cannot say that
maladministrationalone caused the financial loss suffered by complainants, I do consider that it was a
significant factor in creating the environment in which those losses were crystallised.
"Injustice: summary of findings
"5.245 I have found that injusticeâ€”in the forms of a sense of outrage, lost opportunities to make informed
choices or to take remedial action, and distress, anxiety and uncertaintyâ€”was caused by maladministration.
"5.246 I have also found that the maladministration I have identified was a significant contributory factor in
the creation of the financial losses suffered by individuals, along with other systemic factors. A further
consequence of that maladministration was financial injusticeâ€”the distortion of the reality facing scheme
members so that they were wholly unaware that their pension rights were dependent on the ongoing security of
their employer." (Ombudsman's emphases.)
22 The ombudsman's first recommendation related to remedying financial injustice. She considered that it
should apply not only to those who had complained to her but also to those in a similar position, that is to say all
those individuals: (1) who were members of final salary schemes which commenced wind up from 6 April 1997 to
31 March 2004; where (2) the scheme wound up with insufficient assets to secure pensions in payment and to pay
cash equivalent transfer values in respect of fully accrued pension rights to all non-pensioner members or to secure
the full liabilities for each non-pensioner in other ways; and where (3) the scheme was not eligible for the pensions
compensation scheme, because it had not suffered losses wholly attributable to fraud or other unlawful behaviour;
and where (4) the individual had incurred an actual financial loss because of the shortfall in the pension promised in
respect of, inter alia, the contributions made by them and/or their employer to the scheme. The number of people
within this definition is estimated by the parties to be between 75,000 and 125,000.
23 The ombudsman's first recommendation was in these terms, at para 6.15:
"I recommend that the Government should consider whether it should make arrangements for the restoration
of the core pension and non-core benefits promised to all those whom I have identified above are fully covered
by my recommendationsâ€”by whichever means is most
[2009] 126
appropriate, including if necessary by payment from public funds, to replace the full amount lost by
those individuals."
24 On 21 December 2005 the ombudsman sent a draft of her report to the Permanent Secretary at the DWP.
He replied on 27 January 2006 rejecting her findings and recommendations. Further exchanges of correspondence
took place during February 2006. The final report was published on 15 March 2006. Its findings and
recommendations (save on the delay issue) were rejected in a written statement of 15 March 2006 by the Minister
of State, amplified in an oral statement by the Secretary of State the following day. In June 2006 the DWP
published a detailed response to the report.
25 Following the laying of the report before Parliament, the matter was considered by the Public
Administration Select Committee ("PASC") of the House of Commons, which reported on 30 July 2006. The
committee heard oral evidence from the ombudsman, and considered both the report and the Government's
response. The PASC's report was critical of the Government in some respects. The committee considered that in
rejecting the findings of maladministration the Government was being "at best naive and at worst misleading". It
regarded the line of argument that it was for trustees and employers to provide information to members and
potential members as "unsustainable". On the other hand, in a passage relied on by the Secretary of State, it
expressed the view that for the Government to ask a court to review the ombudsman's findings would effectively
make matters which are currently not justiciable subject to judicial decision. The committee considered that when
there are disputes between Government and the ombudsman, Parliament is the proper place for them to be debated.
The Speaker's intervention
26 At the outset of the substantive hearing Mr Clive Lewis, instructed by the Attorney General on behalf of the
Speaker of the House of Commons, applied pursuant to CPR r 54.17 for permission to make representations.
Neither Ms Dinah Rose for the claimants nor Mr Philip Sales for the Secretary of State opposed this procedural
application and I accordingly heard Mr Lewis before the main submissions at the hearing got under way. In
deference to the importance of the subject matter of the intervention I shall deal with it in full, although it has not in
the event proved decisive of any issue in the case.
27 Mr Speaker's concern was the use to which the report of the PASC, and evidence given by the ombudsman
to that committee, were apparently to be put in the course of the case, which it was submitted might infringe article
9 of the Bill of Rights (1689) and parliamentary privilege. Mr Lewis was at pains to point out that Mr Speaker was
not seeking to intervene in or comment upon the substance of the dispute between the claimants and the Secretary
of State, which he recognised was a matter properly for the court to adjudicate upon.
28 Article 9 of the Bill of Rights provides: "That the freedom of speech and debates or proceedings in
Parliament ought not to be impeached or questioned in any court or place out of Parliament." As Lord Browne-
Wilkinson observed in tendering the advice of the Judicial Committee of
[2009] 127
the Privy Council in Prebble v Television New Zealand Ltd [1995] 1 AC 321, 332:
"In addition to article 9 itself, there is a long line of authority which supports a wider principle, of which
article 9 is merely one manifestation, viz that the courts and Parliament are both astute to recognise their
respective constitutional roles."
29 The claimant in Prebble's case sued the defendant company for defamation in respect of a television
programme alleging that he was corrupt. The pleaded defences included justification. The particulars of
justification relied mainly on statements and actions outside Parliament, but alleged that the claimant and other
ministers had made statements in the House of Representatives which were calculated to mislead the House, or
were otherwise improperly motivated. An order striking out the particulars in so far as they relied on statements in
the House was upheld by the New Zealand Court of Appeal and by the Privy Council on the basis, at p 332, that the
courts "will not allow any challenge to be made to what is said or done within the walls of Parliament in
performance of its legislative functions and protection of its established privileges".
30 The ratio of the case, in my view, is to be found at p 337:
"their Lordships are of the view that parties to litigation, by whomsoever commenced, cannot bring into
question anything said or done in the House by suggesting (whether by direct evidence, cross-examination,
inference or submission) that the actions or words were inspired by improper motives or were untrue or
misleading. Such matters lie entirely within the jurisdiction of the House â€¦ However, their Lordships wish to
make it clear that this principle does not exclude all references in court proceedings to what has taken place in
the House. In the past, Parliament used to assert a right, separate from the privilege of freedom of speech
enshrined in article 9, to restrain publication of its proceedings. Formerly the procedure was to petition the
House for leave to produce Hansard in court. Since 1980 this right has no longer been generally asserted by the
United Kingdom Parliament and their Lordships understood from the Attorney General that in practice the
House of Representatives in New Zealand no longer asserts the right. A number of authorities on the scope of
article 9 betray some confusion between the right to prove the occurrence of parliamentary events and the
embargo on questioning their propriety â€¦ their Lordships wish to make it clear that if the defendant wishes at
the trial to allege the occurrence of events or the saying of certain words in Parliament without any
accompanying allegation of impropriety or any other questioning there is no objection to that course."
31 The difficulty in Prebble's case arises from the citation, at p 333, of section 16(3) of Australia's
Parliamentary Privileges Act 1987:
"In proceedings in any court or tribunal, it is not lawful for evidence to be tendered or received, questions
asked or statements, submissions or comments made, concerning proceedings in Parliament, by way of, or for
the purpose ofâ€” (a) questioning or relying on the truth, motive, intention or good faith of anything forming
part of those proceedings in Parliament; (b) otherwise questioning or establishing the credibility,
[2009] 128
motive, intention or good faith of any person; or (c) drawing, or inviting the drawing of, inferences
or conclusions wholly or partly from anything forming part of those proceedings in Parliament."
Their Lordships went on to say that that Act declared what had previously been regarded as the effect of article
9 of the Bill of Rights and that section 16(3) contained "the true principle to be applied" in the case.
32 Paragraphs (a) and (b) of the section cited from the Australian statute are uncontroversial. But paragraph
(c), if read literally, is extremely wide. It would seem to rule out reliance on or a challenge to a ministerial
statement itself on judicial review of the decision embodied in that statement (which was permitted in R v
Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, and to which no objection has been
raised in the present case), or to resolve an ambiguity in legislation ( Pepper v Hart [1993] AC 593), or to assist in
establishing the policy objectives of an enactment ( Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816). It
would also prohibit reliance on reports of the Joint Committee on Human Rights, which, as Mr Lewis's submissions
rightly state, have been cited in a number of appellate cases in this jurisdiction: a very recent example is R v F
[2007] QB 960, para 11. As Lord Nicholls of Birkenhead observed in Wilson's case [2004] 1 AC 816, para 60:
"there are occasions when courts may properly have regard to ministerial and other statements made in
Parliament without in any way 'questioning' what has been said in Parliament, without giving rise to difficulties
inherent in treating such statements as indicative of the will of Parliament, and without in any other way
encroaching upon parliamentary privilege by interfering in matters properly for consideration and regulation by
Parliament alone."
I therefore do not treat the text of paragraph (c) of the Australian statute as being a rule of English law.
33 In Hamilton v Al Fayed [1999] 1 WLR 1569, 1586 Lord Woolf MR, giving the judgment of the Court of
Appeal said that:
"the vice to which article 9 is directed (so far as the courts are concerned) is the inhibition of freedom of
speech and debate in Parliament that might flow from any condemnation by the Queen's courts, being
themselves an arm of government, of anything there said."
The case went to the House of Lords but their Lordships' speeches do not appear to cast doubt on the accuracy
of Lord Woolf MR's observations.
34 I consider that in deciding this case I should place reliance on neither the ombudsman's evidence to the
PASC nor the committee's report itself, but for quite different reasons. I agree with Mr Speaker that to allow the
evidence of a witness to a select committee to be relied on in court would inhibit the freedom of speech in
Parliament and thus contravene article 9 of the Bill of Rights. It would have been open to the ombudsman, who
was served with this claim as an interested party, to have put the substance of the observations she made to the
select committee into a witness statement, a letter or a public statement which could be adduced in evidence by
either side. But she has not done so, and has (entirely properly) decided not to take an active part in these
proceedings. I should not, therefore, allow her oral evidence to the select committee to be relied upon in court.
[2009] 129
35 Turning to the PASC report, however, I do not consider that citation from it would inhibit freedom of
speech in Parliament, or otherwise infringe article 9 of the Bill of Rights. The report of a select committee bears no
resemblance to a minister answering supplementary questions or a member of either House speaking in debate. It is
a written document published after a draft report has been placed before and approved by the committee, or at least
a majority of its members. It seems to me unlikely that a committee would be inhibited from expressing its view,
whether critical or supportive of the actions of government, by the thought that its report might be referred to in
support of a party's submissions in civil litigation. My view is that I should not place reliance on the PASC report
for an entirely different and more fundamental reason, which is that, in the words of the Privy Council in Prebble's
case [1995] 1 AC 321, the courts and Parliament are both astute to recognise their respective constitutional roles. It
is for the courts, not the select committee, to decide whether the Secretary of State has acted unlawfully in rejecting
the findings and recommendations of the ombudsman in this case. I note and respect the views of the select
committee but in the end they are not of assistance on the questions of law which I have to determine.
The 1967 Act
36 The Parliamentary Commissioner Act 1967 establishes the office of Parliamentary Commissioner for
Administration. Section 1(3) of the 1967 Act, as amended by regulation 49(1) of and paragraphs 3, 4 and 6 of
Schedule 8 to the Employment Equality (Age) Regulations 2006 (SI 2006/1031), gives the commissioner, during
the fixed term of her appointment, the same security of tenure, subject to removal on an address from each House of
Parliament, as High Court judges have enjoyed since the Act of Settlement 1701 (12 & 13 Will 3, c 2). Section 5,
so far as material, provides:
"(1) Subject to the provisions of this section, the commissioner may investigate any action taken by or on
behalf of a government department or other authority to which this Act applies, being action taken in the
exercise of administrative functions of that department or authority, in any case whereâ€” (a) a written
complaint is duly made to a member of the House of Commons by a member of the public who claims to have
sustained injustice in consequence of maladministration in connection with the actions so taken; and (b) the
complaint is referred to the commissioner, with the consent of the person who made it, by a member of that
House with a request to conduct an investigation thereon.
"(2) Except as hereinafter provided, the commissioner shall not conduct an investigation under this Act in
respect of any of the following matters, that is to sayâ€” (a) any action in respect of which the person aggrieved
has or had a right of appeal, reference or review to or before a tribunal constituted by or under any enactment
or by virtue of Her Majesty's prerogative; (b) any action in respect to which the person aggrieved has or had a
remedy by way of proceedings in any court of law: Provided that the commissioner may conduct an
investigation notwithstanding that the person aggrieved has or had such a right or
[2009] 130
remedy if satisfied that in the particular circumstances it is not reasonable to expect him to resort or
have resorted to it."
37 Section 7, "Procedure in respect of investigations", provides, as amended by section 47 of and paragraphs 1

and 3 of Schedule 7 to the Domestic Violence, Crime and Victims Act 2004:
"(1) Where the commissioner proposes to conduct an investigation pursuant to a complaint under section 5(1)
of this Act, he shall afford to the principal officer of the department or authority concerned, and to any person
who is alleged in the complaint to have taken or authorised the action complained of, an opportunity to
comment on any allegations contained in the complaint.
"(2) Every investigation under this Act shall be conducted in private, but except as aforesaid the procedure for
conducting an investigation shall be such as the commissioner considers appropriate in the circumstances of the
case; and without prejudice to the generality of the foregoing provision the commissioner may obtain
information from such persons and in such manner, and make such inquiries, as he thinks fit, and may
determine whether any person may be represented, by counsel or solicitor or otherwise, in the investigation."
"(4) The conduct of an investigation under this Act shall not affect any action taken by the department or
authority concerned or the person to whom the complaint relates, or any power or duty of that department,
authority, or person to take further action with respect to any matters subject to the investigation â€¦"
38 Section 8, "Evidence", provides, as amended by section 47 of and paragraphs 1 and 4 of Schedule 7 to the
2004 Act:
"(1) For the purposes of an investigation under section 5(1) of this Act the commissioner may require any
minister, officer or member of the department or authority concerned or any other person who in his opinion is
able to furnish information or produce documents relevant to the investigation to furnish any such information
or produce any such document.
"(2) For the purposes of any investigation under this Act the commissioner shall have the same powers as the
court in respect of the attendance and examination of witnesses (including the administration of oaths or
affirmations and the examination of witnesses abroad) and in respect of the production of documents.
"(3) No obligation to maintain secrecy or other restriction upon the disclosure of information obtained by or
furnished to persons in Her Majesty's service, whether imposed by any enactment or by any rule of law, shall
apply to the disclosure of information for the purposes of an investigation under this Act; and the Crown shall
not be entitled in relation to any such investigation to any such privilege in respect of the production of
documents or the giving of evidence as is allowed by law in legal proceedings."
(Section 8(4) makes an exception for the Cabinet or its committees.)

39 Section 10, "Reports by commissioner", provides, as amended by section 47 of and paragraphs 1 and 5 of
Schedule 7 to the 2004 Act:
[2009] 131
"(1) In any case where the commissioner conducts an investigation under the Act or decides not to conduct
such an investigation, he shall send to the member of the House of Commons by whom the request for
investigation was made (or if he is no longer a member of that House, to such member of that House as the
commissioner thinks appropriate) a report of the results of the investigation or, as the case may be, a statement
of his reasons for not conducting an investigation.
"(2) In any case where the commissioner conducts an investigation under section 5(1) of this Act, he shall also
send a report of the results of the investigation to the principal officer of the department or authority concerned
and to any other person who is alleged in the relevant complaint to have taken or authorised the action
complained of."
"(3) If, after conducting an investigation under section 5(1) of this Act, it appears to the commissioner that
injustice has been caused to the person aggrieved in consequence of maladministration and that the injustice
has not been, or will not be, remedied, he may, if he thinks fit, lay before each House of Parliament a special
report upon the case."
40 Section 12(3) provides:

"It is hereby declared that nothing in this Act authorises or requires the commissioner to question the merits of
a decision taken without maladministration by a government department or other authority in the exercise of a
discretion vested in that department or authority."
41 Schedule 2 to the 1967 Act, as substituted by the Parliamentary Commissioner (No 2) Order 2005 (SI
2005/3430), lists the public bodies who are subject to investigation by the ombudsman. Her remit is by no means
confined to government departments. The list includes bodies as diverse as the Advisory Council on Historical
Manuscripts, the British Potato Council, and the Horniman Public Museum and Public Park Trust. In short, as Lord
Woolf MR said in R v Parliamentary Comr for Standards, Ex p Al Fayed [1998] 1 WLR 669, 673, the
ombudsman is concerned with the "proper functioning of the public service outside Parliament", with the exception
of local authorities, which are covered by a different statutory regime to which I shall shortly turn.
42 Since this claim is concerned with both findings and recommendations of the ombudsman it is important at
this stage to note the difference between them. Section 5 enables the commissioner to investigate a complaint that
an individual has "sustained injustice in consequence of maladministration"; and, where she does conduct such an
investigation, section 10 requires her to report its results. The results of the investigation, therefore, will consist of
findings by the ombudsman on whether maladministration has occurred and, if so, whether injustice has been
caused by it. That is as much as the statute requires her to do. But it is open to her to make recommendations for
the remedying of the injustice she has identified, and Mr Sales does not submit otherwise. It is a matter for the
ombudsman whether she makes such recommendations or not. She can simply say: "Here is maladministration
caused by injustice, you sort it out." And it is plain that the 1967 Act gives the ombudsman no power to issue
mandatory orders.
43 Ms Rose accepts, rightly in my view, that recommendations of the ombudsman cannot be binding on the
Secretary of State, and that I cannot
[2009] 132
order the Secretary of State to carry them out. She submits, however, that findings of the ombudsman are binding;
that the Secretary of State was wrong to reject them in this case; and that the ombudsman's first recommendation
should accordingly be reconsidered on a proper basis. Before considering these submissions I will set out the
relevant provisions of the Local Government Act 1974, which form an important part of Ms Rose's argument on
this issue.
The Local Government Ombudsman
44 Part III of the Local Government Act 1974 established a Commission for Local Administration in England.
(The Act also established a Commission for Local Administration in Wales, but the statute has been significantly
amended under the devolution legislation and I say no more about the Welsh commission.) The Parliamentary
Commissioner is herself a member of the English commission. The other members are known as local
commissioners. The term "local government ombudsman" ("LGO") is often used to describe the chairman of the
local commissioners, or alternatively to describe any of the local commissioners carrying out an investigation. I
shall use the abbreviation "LGO" in the latter sense. Section 26(1) of the 1974 Act provides that the LGO may
investigate a complaint in writing "made by or on behalf of a member of the public who claims to have sustained
injustice in consequence of maladministration" in connection with action taken by or on behalf of a relevant local
authority. The usual vehicle is a complaint by a councillor on behalf of a constituent, although unlike his
parliamentary counterpart proceeding under section 5 of the 1967 Act the LGO, under the 1974 Act as amended,
may receive a complaint direct from a member of the public, and under the 1974 Act in its original form had a
discretion to do so where a councillor had been asked to refer the case and refused or failed to refer it. Section 28
provides for a procedure corresponding to that laid down in section 7 of the 1967 Act; and section 29 of the 1974
Act gives the LGO powers to require the attendance and examination of witnesses and production of documents
corresponding to those in section 8 of the 1967 Act.
45 Section 30 of the 1974 Act, concerned with the LGO's report on his investigation, is similar to section 10 of
the 1967 Act, but there are some differences. The report is to be sent to the complainant, the referring councillor (if
any) and to the authority concerned. Since the report is sent to the authority concerned in all cases, there is in
section 30(3) a presumption, except where subsection (3A) or (3AA) (inserted by section 32(1)(b) of the Local
Government and Housing Act 1989 and section 74(1)(5) of the Greater London Authority Act 1999) applies, that
the complainant and other individuals involved are to remain anonymous in the report unless after taking into
account the public interest as well as the interests of the complainant and of persons other than the complainant, the
LGO considers it necessary to "name names".
46 Under the parliamentary scheme the ombudsman, if she considers that an injustice which has occurred in
consequence of maladministration will not be remedied, may by section 10(3) of the 1967 Act lay a special report
before Parliament (such as the report in this case), but that is the end of the line. Section 31 of the 1974 Act went
further. As originally enacted, and as it stood at the time of R v Local Comr for Administration for the
[2009] 133
South, the West, the West Midlands, Leicestershire, Lincolnshire and Cambridgeshire, Ex p Eastleigh Borough
Council [1988] QB 855, it provided:
"(1) If in the opinion of the local commissioner, as set out in the report, injustice has been caused to the person
aggrieved in consequence of maladministration, the report should be laid before the authority concerned, and it
shall be the duty of that authority to consider the report, and to notify the local commissioner of the action
which the authority have taken, or propose to take.
"(2) If the local commissionerâ€” (a) does not receive any such notification within a reasonable time; or (b) is
not satisfied with the action which the authority concerned have taken; (c) does not within a reasonable time
receive confirmation from the authority concerned that they have taken action, as proposed, to the satisfaction
of the local commissioner, he shall make a further report setting out those facts; and section 30 above shall
apply, with any necessary modifications, to that further report."
Were the findings of the ombudsman binding on the Secretary of State?

47 Ms Rose submits that unless subsequently found by a court to be flawed in law or Wednesbury
unreasonable (see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223), a finding by
the ombudsman that maladministration has occurred and has caused injustice is binding on the public authority
against which it is made, either (a) absolutely, or (b) unless it can be objectively shown to be flawed or
unreasonable. Mr Sales, for his part, submits that the Secretary of State is entitled to reject the ombudsman's
findings on the basis of a bona fide difference of view, and that unless the rejection is itself flawed in law or
Wednesbury unreasonable judicial review should not be granted.
48 In Ex p Eastleigh Borough Council [1988] QB 855 a local commissioner had made findings against the
claimant borough council which were held to be beyond his powers. The council's application for judicial review
was successful. Lord Donaldson of Lymington MR said, at p 867:
"The parliamentary intention was that reports by ombudsmen should be loyally accepted by the local
authorities concerned. This is clear from section 30(4) and (5), which require the local authority to make the
local report available for inspection by the public and to advertise this fact, from section 31(1), which requires
the local authority to notify the ombudsman of the action which it has taken and proposes to take in the light of
his report and from section 31(2), which entitles the ombudsman to make a further report if the local authority's
response is not satisfactory. Whilst I am very far from encouraging councils to seek judicial review of an
ombudsman's report, which, bearing in mind the nature of his office and duties and the qualifications of those
who hold that office, is inherently unlikely to succeed, in the absence of a successful application for judicial
review and the giving of relief by the court, local authorities should not dispute an ombudsman's report and
should carry out their statutory duties in relation to it."
[2009] 134
49 The interpretation of the last few words of this passage was the subject of much argument before me; in
particular, as to whether Lord Donaldson of Lymington MR meant that in the absence of judicial review local
authorities are bound only by the findings of the LGO or by his recommendations as well. Mr Sales submits that
Lord Donaldson of Lymington MR intended to refer to recommendations as well as findings: and since it is
conceded on behalf of the claimants that recommendations of the Parliamentary Commissioner are not binding, Mr
Sales uses this distinction as the foundation of a submission that Ex p Eastleigh Borough Council is of no
assistance in the present case.
50 It is clear to me that Lord Donaldson of Lymington MR, in saying that local authorities should "loyally
accept" an LGO's report, only intended to refer to findings that maladministration and injustice have occurred and
not to recommendations. The 1974 Act, like the 1967 Act, gives the ombudsman no power to make mandatory
orders. It would be extraordinary if an LGO could do so by the back door in the form of recommendations.
Suppose, for example, that the LGO made a recommendation which the local authority declined to carry out for the
reason that it was too expensive. It is difficult to see on what established ground for judicial review the court could
intervene to quash the recommendation: yet the allocation of budgets and the establishment of spending priorities
are classic issues for the elected body's discretion. The reference to the council's statutory duty means the duty to
publish a response pursuant to section 31(1) of the 1974 Act, not a duty to accept the LGO's recommendations as if
they were directions.
51 Ex p Eastleigh Borough Council , therefore, is authority for the proposition that in the absence of a
successful application for judicial review thefindings of an LGO are binding on the relevant local authority. Mr
Sales, however, submits that there are differences between the two statutory schemes which render Ex p Eastleigh
Borough Council distinguishable. In particular, he points to section 10(3) of the 1967 Act which provides that,
where the public body concerned refuses to provide a satisfactory remedy, the ombudsman's only recourse is to lay
a special report before Parliament, after which the matter passes into the political domain. The ombudsman, he
submits, is not there to make binding findings of fact. The function for a section 10(3) special report is no more and
no less than to provide a stimulus to political debate.
52 I reject this submission. As it happens, the present case is about a decision of a Secretary of State
announced in an oral statement to the House of Commons, affecting many thousands of people, and concerning a
significant issue of public policy. But much of the ombudsman's work concerns decisions of non-departmental
public bodies or "quangos" affecting a single individual or family. If Mr Sales's submission is correct, the non-
binding nature of the findings of fact would apply equally in such a case. If the case were raised in the House of
Commons, for example in a parliamentary question or an adjournment debate, the ministerial reply might well be
that the Government has no power to do anything about it.
53 Members of Parliament can and regularly do raise in the House alleged acts of maladministration by local
authorities. Nevertheless the effect of Mr Sales's submission, if it is correct, must be that an elected local authority
such as Birmingham City Council, in the absence of a successful
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application for judicial review, must loyally accept the findings of an LGO ( Ex p Eastleigh Borough Council );
whereas a quango such as the British Potato Council is free simply to disagree with any adverse findings of the
ombudsman unless its disagreement is itself flawed in law or Wednesbury unreasonable, which would be for the
complainant to establish by an application for judicial review. I can see neither logic nor constitutional principle in
such a distinction.
54 Mr Sales, while accepting that there is jurisdiction to grant judicial review of a public body's rejection of
findings by the ombudsman, submits that the remedy should be closely confined because it operates as an
impediment to the activation of the political process (although the PASC were not impeded from taking evidence
and issuing a report on the present case after the issue of proceedings, and so far as I am concerned there is no
reason why they should have been). But in any event judicial review is only likely to be a temporary impediment,
and its purpose is simply to require the decision-maker to consider the ombudsman's recommendations on a proper
basis.
55 The Court of Appeal in Ex p Eastleigh Borough Council were not considering whether there are any
exceptions to the binding nature of the findings of an LGO. In R v Warwickshire County Council, Ex p Powergen
plc (1997) 96 LGR 617 the issue was whether a highway authority, whose road safety objections to a proposed
development had been rejected on appeal by a planning inspector, could nevertheless maintain its original view.
The Court of Appeal held, at p 626, that "the inspector's conclusion on that issue, because of its independence and
because of the process by which it is arrived at, necessarily becomes the only properly tenable view on the issue of
road safety and thus is determinative of the public benefit"; but they indicated that this was in the absence of new
facts or changed circumstances. In R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124
the question was whether the Home Secretary was entitled to depart from the findings of fact of an adjudicator as to
whether or not the claimant, an applicant for asylum, had committed adultery. Simon Brown LJ said, at p 133:
"On an issue such as this it does not seem to me reasonable for the Secretary of State to disagree with the
independent adjudicator who has heard all the evidence unless only: (1) the adjudicator's factual conclusion
was itself demonstrably flawed, as irrational or for failing to have regard to material considerations or for
having regard to immaterial onesâ€”none of which is suggested here; (2) fresh material has since become
available to the Secretary of State such as could realistically have affected the adjudicator's findingâ€”this too
was a matter we considered in Powergen ; (3) arguably, the adjudicator has decided the appeal purely on the
documents, or if, despite having heard oral evidence, his findings of fact owe nothing whatever to any
assessment of the witnesses. This third scenario seems unlikely and I express no concluded view as to whether
in this event the Secretary of State could properly ignore the fact that the adjudicator is an independent tribunal
whereas he is not."
56 Judge LJ said, at pp 134-135:

"The desirable objective of an independent scrutiny of decisions in this field would be negated if the Secretary
of State were entitled to act merely
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on his own assertions and reassertions about relevant facts contrary to express findings made at an
oral hearing by a special adjudicator who had seen and heard the relevant witnesses. That would
approach uncomfortably close to decision-making by executive or administrative diktat. If
therefore the Secretary of State is to set aside or ignore a finding on a factual issue which has been
considered and evaluated at an oral hearing by the special adjudicator he should explain why he has
done so, and he should not do so unless the relevant factual conclusion could itself be impugned on
Wednesbury principles, or has been reconsidered in the light of further evidence, or is of limited or
negligible significance to the ultimate decision for which he is responsible."
57 Mr Sales seeks to distinguish these two authorities by pointing to the contrast between planning inspectors
or immigration judges on the one hand and the ombudsman on the other. The inspector and the judge exercise
adjudicative functions following an oral adversarial hearing; whereas the ombudsman, in the words of Sedley J in
R v Parliamentary Comr for Administration, Ex p Balchin [1998] 1 PLR 1, 11 is "an investigative officer, not an
adjudicative tribunal".
58 It is true that the ombudsman does not generally, and did not in this case, conduct her investigation as
though it were a tribunal hearing. That is because by section 7 of the 1967 Act she has a very wide discretion (save
for the stipulation that the investigation shall be conducted in private) to adopt such procedure for conducting an
investigation as she thinks fit. She may allow any person or public body to be legally represented in the
investigation. She may require witnesses to attend and be examined on oath. She has powers, more extensive than
those of the courts, to compel production of documents. She must give the department complained against the
opportunity to comment on any allegations contained in the complaint. She may, and in the present case did, send a
draft report to the Permanent Secretary with an invitation to comment. All this provides a substantial degree of due
process. A public adversarial hearing is not the only fair way of finding facts, and it is not the way that Parliament
has required to be followed under either the 1967 Act or the 1974 Act. Nevertheless the Court of Appeal in Ex p
Eastleigh Borough Council [1988] QB 855 made it clear that the findings of fact by the LGO are binding on local
authorities, subject in my view to the exceptions identified in Ex p Danaei [1998] INLR 124, namely where the
findings are objectively shown to be flawed or irrational, or peripheral, or there is genuine fresh evidence to be
considered. The same in my judgment applies to findings of the ombudsman.
The first finding: maladministration
59 The ombudsman's first finding, at para 5.164, was that official information about the security that members
of final salary occupational schemes could expect from t he MFR was "sometimes inaccurate, often incomplete,
largely inconsistent therefore potentially misleading". Her report deals with a number of official publications, but
the one that attracted most criticism in oral argument was leaflet PEC3, The 1995 Pensions Act, issued in January
1996 by the Department of Social Security. Ms Rose drew attention to the following passages in particular. (a) On
p 1, the question is asked "why was the Pensions Act needed?" Four reasons are given, the first
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being that "the Government wanted to remove any worries people had about the safety of their occupational
(company) pension following the Maxwell affair". (b) On p 14, under a heading "Trustees' duties", PEC3 states that
"trustees will still be responsible for running schemes and investing in the money for the benefit of the
members. But they will also have to talk to the employer before deciding how to invest the money. The
trustees must make sure that the scheme keeps to the law, including the rule that a scheme must be funded to a
certain level (the 'minimum funding requirement'â€¦ )."
(c) On p 15, under the heading "New minimum funding requirement for salary related schemes", the leaflet
states:
"The Pensions Act introduces a new rule aimed at making surethat salary related schemes have enough money
in them to meet the pension rights of their members. If the money in the scheme is less than this minimum
level, the employer will need to put in more money within time limits. The minimum funding requirement is
intended to make sure that pensions are protected whatever happens to the employer. If the pension scheme
has to wind up, there should be enough assets for pensions in payment to continue, and to provide all younger
members with a cash value of their pension rights which can be transferred to another occupational pension
scheme or to a personal pension." (Emphasis added.)
60 Mr Sales points out that on the back page of PEC3 the reader is warned that: "This leaflet gives general
guidance only and should not be treated as a complete and authoritative statement of the law." This, of course, is
correct as far as it goes. The Pensions Act 1995 contains 181 sections and 7 Schedules, and no one could expect a
22-page leaflet to be comprehensive. Mr Sales also submits that the leaflet made it clear that primary responsibility
for looking after the interest of scheme members rested with the trustees.
61 Para 97.4 of the skeleton argument on behalf of the Secretary of State warrants quotation in full:
"The description of the MFR was, in the context of a general information leaflet, accurate and adequate. The
description is couched in qualified, non-technical language. Thus the MFR is described as being 'aimed' at
making sure schemes have enough money. It 'is intended' to ensure schemes are protected. Adherence to the
MFR entails that there 'should' (not 'will') be enough assets. Nowhere does the leaflet state or imply that
adherence to the MFR provides a guarantee that all liabilities will be met. The description of the MFR was
appropriate given that what was being described was a new protective measure, in circumstances where there
had been no such protective measure prior to the introduction of the 1995 Act." (Emphasis in original.)
62 Such minute textual analysis of a pamphlet aimed at the general public can in my view only give comfort to
those who consider that it is unwise to believe anything one reads in a government publication. It is particularly
ironic when applied to a leaflet whose back cover boasts that
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it has been awarded a Crystal Mark for clarity by the Plain English Campaign. PEC3, especially p 15, gives the
clear impression that following the enactment of the new law scheme members can be reassured that their pensions
are safe whatever happens. I have no doubt that this is what it was designed to do. I agree with the ombudsman
that it was inaccurate and misleading.
63 Ms Rose also relies on the ombudsman's finding that only six weeks before the issue of this leaflet, in a
letter dated 22 November 1995 cited in the ombudsman's report at para 4.64, the then Government had instructed
the actuarial profession that they should devise an actuarial basis for the MFR that would only deliver a "reasonable
expectation", defined as "at least an even chance", that non-pensioner members would receive a cash value that,
when invested elsewhere, would replicate the pension that they would have received had their scheme not wound
up: in other words, there could be an even chance of a scheme complying with the MFR at the time of being wound
up not meeting its liabilities in full. There is no mention of this 50% chance in PEC3. It is right to say that the
"even chance" policy is not contained in the statute, and that the Regulations with the phrase "reasonably likely"
followed in 1996; but a description of the intended effect or aim of the MFR as being to make "sure" that members
received the pensions due to them, in an official publication by the same department that devised the policy, was
plainly inaccurate and misleading. It was not even the intended effect, still less the actual effect, of the MFR.
64 Another publication which attracted criticism from the ombudsman and from Ms Rose was the May 2002
edition of leaflet PM3, Occupational Pensions: Your Guide. This was, as Mr Sales rightly submits, a publication at
the highest level of generality. Nevertheless it makes no mention of the risks to accrued pension rights should a
scheme be wound up with insufficient funds to meet all of its liabilities; nor is anything said about the statutory
order of priorities. On one page there is a heading, "How do I know my money is safe?" This is answered
obliquely with two columns of information about the duties of trustees and the laws about eligibility to be a trustee
and like matters, but nothing is said to warn members that despite these legal precautions their money maynot be
safe after all.
65 It is not an answer to this point, in scrutinising a general publication directed to lay people, to say that
everyone knows that there is no certainty in life; that the value of shares may go down as well as up; and that if
your employer goes out of business you are likely to lose your job. A member of the general public between 1995
and 2005 could indeed be assumed to have known these facts of life without being told them in an official
publication; but not that if his employers went out of business just before he reached retirement age he might get no
occupational pension at all, despite the contributions he had made from his earnings over many years, and despite
the existence of people called "trustees" who he thought were there to protect his interests.
66 I do not consider that it is necessary to go through each item of official information which was scrutinised
by the ombudsman. It is sufficient to say that in my view her finding that official information was "sometimes
inaccurate, often incomplete, largely inconsistent and therefore potentially misleading" was well open to her on the
evidence. Indeed, in the case of leaflet PEC3, I consider that no reasonable Secretary of State could
[2009] 139
rationally disagree with that view. I therefore quash the rejection by the Secretary of State of the ombudsman's
first finding of maladministration.
The first finding: causation of injustice
67 There was no challenge in the claimant's grounds to the separate rejection by the Secretary of State of the
ombudsman's first finding of causation of injustice. But the subject is raised in the skeleton argument for the
claimants, and no objection was taken to it being argued before me. I have set out above a summary of the
ombudsman's findings in this respect. They culminate in para 5.244: "While I cannot say that
maladministrationalone caused the financial loss suffered by complainants, I do consider that it was a significant
factor in creating the environment in which those losses were crystallised." (Emphasis in original.) Similarly, in
para 5.246 she finds that the maladministration she had identified was "a significant contributory factor in the
creation of the financial losses suffered by individuals, along with other systemic factors".
68 Section 5(1)(a) of the 1967 Act makes it clear that the ombudsman's task is to investigate and report on
whether the complainant has suffered injustice in consequence of maladministration. It may not be necessary to
establish causation on the balance of probabilities in each individual case; but even on a flexible approach to the
issue it must be necessary to show at least a material increase in risk, or the loss of a chance of a better outcome,
caused by maladministration in the individual case. Maladministration is not defined in the Act, and it is common
ground that the ombudsman has a wide discretion to define it. But I do not consider that the ombudsman has a
similar discretion to define the circumstances in which it can be said that X has occurred in consequence of Y.
69 The difficulties inherent in this issue cannot be surmounted by saying, as Ms Rose does in para 137 of her
skeleton argument, that "ombudsmen routinely apply more flexible principles of causation than the courts". The
only authority cited for that submission is the decision of the Court of Appeal in R v Local Comr for Administration
in North and North-East England, Ex p Liverpool City Council [2001] 1 All ER 462, paras 17 and 47. That case
concerned bias in the grant of a planning application for a new stand at Liverpool FC's Anfield ground. Henry LJ
said, at para 47, that while there is a substantial overlap between maladministration and unlawful conduct, the two
terms are not synonymous:
"So there is no reason in principle why the considerations which determine whether there has been
maladministration should, necessarily, be the same as those which determine whether there has been unlawful
conduct. The commissioner's power is to investigate and report on maladministration; not to determine
whether conduct has been unlawful. So there is no reason why, when exercising the power to investigate and
report, (which has been conferred on him by the 1974 Act) he should, necessarily, be constrained by the legal
principles which would be applicable if he were carrying out the different task (for which he has no mandate)
of determining whether conduct has been unlawful."
This is, with respect, clearly correct, and indeed binding on me; but Henry LJ was not, as I understand his
judgment, suggesting that all legal principles,
[2009] 140
including causation, could be set aside. He was confining his remarks to the differences between
maladministration and unlawful conduct.
70 If the first finding had been limited to the causation of injustice to any scheme member who had read the
offending leaflets, or who relied on advice from colleagues or others who in turn relied on the leaflets, it would not
be open to challenge. But I cannot follow the logic of the ombudsman's finding that everyone who between 1995
and 2005 suffered losses on the winding up of their pension scheme was the victim of injustice in consequence of
maladministration, whether or not official misinformation had anything to do with it and whether or not there were
any remedial steps open to them. I therefore conclude that even on the claimant's case in law (i e that the
ombudsman's findings bind the Secretary of State subject to the exceptions identified in Ex p Danaei [1998] INLR
124) this finding is logically flawed and in that sense unreasonable. If the correct legal approach were as submitted
by the Secretary of State the position would be a fortiori. I therefore decline to quash the Secretary of State's
rejection of the first finding on the issue of causation.
The third finding
71 The third finding was that the department's decision in 2002 to approve a change to the MFR basis was
taken with maladministration. This was not originally the subject of challenge but by an amendment for which
Collins J gave permission on 18 October 2006 it was added to the claim.
72 On 5 September 2001 the Faculty and Institute of Actuaries wrote to the DWP recommending a reduction in
the dividend yield figure for the equity market value adjustment factor used in MFR valuations from 3â€¢25% to
3%, and providing reasons for that recommendation. The profession had indicated in previous communications
with the DWP that it was minded to make this recommendation.
73 The DWP asked the Government Actuary's Department ("GAD") to consider and give an opinion on the
recommendation. The GAD responded on 25 September 2001 endorsing the profession's view without
qualification.
74 The DWP then considered whether there were any overriding policy reasons why it should not accept the
recommendation; and, in particular, whether the recommended change was sufficiently straightforward to allow its
implementation before the MFR was expected to be replaced. It concluded that the proposed change could be
implemented quickly and without due costs to pension schemes. The change was therefore approved and took
effect from 7 March 2002.
75 In making her third finding that the DWP thereby acted with maladministration, the ombudsman noted, at
para 5.106, that it was "clearly not the case that the decision-making approach taken by the DWP was consistent in
relation to each recommendation from the actuarial profession"; she referred to recommendations in 2000 and 2003
which were not implemented. The department's response, in a letter from the Permanent Secretary of 28 February
2006 commenting on a draft of the report, was in these terms:
"In the department's view it would have been far more vulnerable to justified criticism if it had substituted an
alternative judgment in the face
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of clear and consistent advice from the actuarial profession and from the Government Actuary's
Department without good reason, such as applied in the case of the recommendations made by the
actuarial profession in 2000 and 2003. Both of those recommendations involved more complex
changes which would have required long administrative lead-in times. In both cases the minimum
funding requirement was expected to have been abolished by the time the changes would have had
much, if any, practical effect."
76 It is not clear to me from chapter 5 of the ombudsman's report whether she considers that this explanation of
the apparent inconsistency was genuine or not.
77 Returning to the substance of the 2002 decision, the ombudsman wrote, at paras 5.124-5.125:
"5.124 As with any decision, I should say that I do not consider that advice or a recommendation from the
actuarial professionâ€”or from GAD or any other professional adviserâ€”absolved DWP from seeking to
establish all of the relevant facts before making their decision.
"5.125 A decision-maker, although acting with the benefit of professional advice, retains responsibility for
their decision. Regard should be had to all relevant considerations and those that are not relevant should be
ignored. It should also be ensured that any decision taken is made on an adequate evidence base and the
reasons for any decision can be demonstrated subsequently."
78 She concluded that this decision was taken with maladministration as there was insufficient documentary
evidence that explained its rationale. She had doubts, at para 5.149, about the reliance of the DWP on professional
advice which seemed to her "not to have been sufficient in itself to enable DWP to come to a decision that took
account of all relevant considerations and which ignored irrelevant ones". She notes in particular that the only
documentary proof of advice from the GAD on this subject is contained in two sentences of a single e-mail.
79 As with the topic of causation in relation to the first finding, I regret that I cannot accept that the third
finding is logically sound. The department had a clear recommendation from the leading professional body and the
concurrence of its own specialist adviser, the GAD. The ombudsman was in effect expecting the Secretary of State,
who is not an actuary, to keep a watchdog (the GAD) and then bark himself. The fact that additional evidence
might have been sought in support of the actuarial profession's considered view is not equivalent to
maladministration. Indeed, the Government actuary, in an observation quoted in the DWP's response document of
July 2006, has commented that the evidence based for the 2002 decision was "extremely strong and much stronger
than for many (probably most) of the decisions that have to be taken by government". While I am conscious of the
substantial research and thought which lies behind the ombudsman's conclusion on this issue, I decline to quash the
department's rejection of the third finding. If there had been any disagreement between the faculty and the GAD, or
any qualification in the endorsement given by the GAD, the position would have been quite different.
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The first recommendation

80 The Secretary of State puts forward four grounds on which it was argued he was entitled to reject the first
recommendation. First, by the scheme of the 1967 Act such recommendations are not binding. I have already
noted that this is common ground. Secondly, since he was entitled to reject each of the relevant findings, it follows
that he was entitled not to act on the first recommendation. Thirdly, even if any of the findings of
maladministration is binding on him, causation of injustice is unproven and perhaps unprovable. Fourthly and in
any event, he is entitled to take the view that taxpayers should not have to foot such a large bill.
81 Taking the last point first, some complaint is made in the grounds of the use, by the Prime Minister among
others, of the figure of Â£15 billion as being the cost of implementing the first recommendation in full. The
department's evidence makes it clear that this is the estimated total to be paid over several decades; the present-day
actuarial cost is in the region of Â£3-3â€¢5 billion. The difference is important as a matter of presentation, but is
not in truth a difference of substance. A more telling point is that neither figure takes account of the tax that would
be payable by the recipients of pensions if full payments are restored, nor the benefits that have to be paid to those
who have lost all or most of their occupational pensions on winding up. But the department's rejection of the
recommendation is not based on the exact cost, gross or net, which involves an element of speculation in any event.
On any view it is a large sum of money.
82 Ms Rose also submits that the department has misinterpreted the first recommendation as being that the
taxpayer should foot the entire bill, whereas the recommendation is that the Government should "consider making
arrangements" to restore the lost pensions, "including if necessary" payments from public funds. She submits that
the department failed to give proper consideration to alternative sources of funds. She points to the fact that
voluntary particulars of what alternatives had been considered were only served shortly before the substantive
hearing of this claim, and argues that they constituted an ex post facto rationalisation.
83 I cannot accept this argument. I do not consider that the department misunderstood the first
recommendation, or failed to notice that it was not a simple request for the Treasury to write a cheque. On the
contrary, I accept that on receipt of the draft report they did indeed consider whether there were any practicable
alternatives, and concluded that there were not. A levy on solvent pension schemes to pay for insolvent ones, for
example, was understandably regarded as unacceptable. The rejection of the first recommendation was not
unlawful on the ground that it was misunderstood.
84 The other, and very important, ground for rejecting the first recommendation was causation. The
department has consistently argued, in the manner of a formal pleaded defence to a claim in the civil courts, that,
even if maladministration is proved in this dispute, causation is not. For example, the Permanent Secretary's letter
of 27 January 2006 complains that "the draft report does not show that, but for having been misled by the alleged
maladministration, the complainants would have taken steps to protect their accrued rights and that this action
would have been effective in preventing the losses". Mr Sales argued that in the event of my upholding the first
finding of maladministration but not the corresponding finding on
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causation, which is what I have done, the rejection of the first recommendation would be unaffected.
85 As Ms Rose said in reply, this would be a winning argument if I were considering a claim for negligence,
but political decisions are different. Mr Sales has throughout submitted that the question of whether to follow the
first recommendation is political rather than legal. If it is reconsidered on the basis that maladministration occurred,
but that causation in individual cases has not so far been established, the resultmay be the same, but will not
necessarily be the same. I therefore quash the Secretary of State's rejection of the first recommendation and direct
that it be reconsidered in the light of the ombudsman's first finding of maladministration and of this judgment.
The Human Rights Convention claim
86 This is a claim under section 6 of the Human Rights Act 1998; because of time pressures both counsel asked
me to deal with it on the basis of their written skeleton arguments. It is freestanding, in the sense that it does not
(and does not need to) rely, except as supporting evidence, on the report of the ombudsman. It is not to be confused
with the proceedings in the Court of Justice of the European Communities at Luxembourg brought by colleagues of
Mr Parr who suffered losses on the winding up of the Allied Steel and Wire pension scheme, relying on the
provisions of Council Directive 80/987/EEC on the protection of employees in the event of the insolvency of their
employer: Robins v Secretary of State for Work and Pensions (Case C-278/05) [2007] ICR 779.
87 The claimant's case is that the refusal of the Government to restore the pension entitlements of members of
wound up occupational pension schemes is contrary to article 1 of the First Protocol to the European Convention
for the Protection of Human Rights and Fundamental Freedoms ("A1P1"). So far as material this provides:
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be
deprived of his possessions except in the public interest and subject to the conditions provided for by law â€¦"
88 It is submitted that an entitlement under an occupational scheme is a "possession", and that the Government
owed all scheme members a positive duty to take reasonable and appropriate steps to protect them from loss of
those "possessions". Ms Rose argues that this duty arose because the DWP had created a risk to such pensions, or
at least had special knowledge of it; assumed responsibility for providing impartial information; encouraged people
to join and remain in such schemes; and created a legitimate expectation of full recovery in the event of winding up.
By publishing information that was sometimes inaccurate and misleading as to risk, and by failing to warn properly
of the risk, the Government failed to comply with that positive duty. Accordingly they are obliged to provide
proportionate compensation. Even the extended FAS does not reimburse losses in full, and the fourth claimant, Mr
Waugh, whose employer is still trading, is excluded from it altogether.
89 Mr Sales argues that although the making of payments into a pension scheme is capable of giving rise to a
right safeguarded by A1P1, that right consists merely of a beneficiary's entitlement to any payments made by
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the scheme, not to a payment of a particular amount. Even where the state had taken positive steps whose effect
was to reduce an individual's pension, the European Court of Human Rights found no breach of A1P1: Blanco
Callejas v Spain (Application No 64100/00) (unreported) given 18 June 2002. No right to acquire possessions
arises under A1P1: Marckx v Belgium (1979) 2 EHRR 330, cited by Laws LJ in R (Carson) v Secretary of State
for Work and Pensions [2003] 3 All ER 577, para 18. I accept these submissions.
90 I also accept Mr Sales's argument that a positive obligation on the state to intervene and protect against
financial loss is most unlikely to arise where the risk is to a large class of individuals whose pensions schemes were
not under the Government's direct control. And even if there can be a freestanding A1P1 claim based on legitimate
expectation, which is itself contentious, it is difficult to see that the legitimate expectation could be one of full
reimbursement for all losses sustained, given the difficulties of causation some of which have featured earlier in this
judgment. Finally and similarly, though only as regards the first three claimants: even if a breach of A1P1 had been
proved, the Secretary of State contends that the FAS, in particular as recently extended, provides a proportionate
response as a matter of human rights law, given the wide margin of appreciation which the Strasbourg
jurisprudence gives to the judgment of member states' governments on socio-economic issues.
91 I therefore reject the A1P1 claim. Strictly speaking this makes it unnecessary to rule on the Secretary of
State's submissions that the claim is time-barred under section 7(5) of the Human Rights Act 1998, and that
although there is a discretion to extend time where that would be equitable, I should not do so. But in case the
matter should go further it may be of assistance to state my view on this issue. I consider that the A1P1 claim is
indeed outside the one-year time limit under section 7(5); but, if I had found it to have substantive merit, I would
have granted the necessary extension of time to allow the claim to have been brought on the grounds that it would
be equitable to do so, having regard to the desirability of allowing the claimants and others in a like position to
pursue the alternative remedy of a complaint to the ombudsman, and to await her report and the Government's
response to it before resorting to litigation. Since, however, I do not consider the claim well founded, I refuse an
extension of time and dismiss the claim.
Conclusions
92 In summary, therefore: (a) the Secretary of State's rejection of the ombudsman's first finding of
maladministration (consisting of the provision of misleading official information) is quashed; (b) the Secretary of
State's rejection of the ombudsman's first finding, in so far as it went on to conclude that the maladministration
which she had identified had caused injustice to all those individuals who had suffered losses on the winding up of
their occupational schemes during the relevant period, is upheld; (c) the Secretary of State's rejection of the
ombudsman's third finding of maladministration (relating to the change in the minimum funding requirement in
2002) is upheld; (d) the freestanding claim under article 1 of the First Protocol to the European Convention for the
Protection of Human Rights and Fundamental
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Freedoms is dismissed; (e) the Secretary of State is directed to reconsider the ombudsman's first recommendation
in the light of this decision.
Claim allowed in part.

Secretary of State's decision on first finding
quashed.
Direction to Secretary of State to reconsider first
recommendation.
Permission to appeal.
DDGM
By an appellant's notice dated 14 March 2007 the Secretary of State appealed against the judge's decision to quash
his rejection of the ombudsman's first finding of maladministration on the grounds that the judge had erred (1) in
holding that a finding of the ombudsman made pursuant to an investigation under section 5(1) of the 1967 Act was
binding upon the body or bodies subject to that investigation; and (2) in going on to hold no reasonable Secretary of
State could rationally disagree with the ombudsman's conclusion that leaflet PEC3 was inaccurate and misleading
so as to amount to maladministration.
By a respondent's notice the claimants sought to uphold the judge's decision on that issue on the further or
additional grounds that it had been irrational for the Secretary of State to reject the ombudsman's findings save in
the limited circumstances set out in R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR
124, and that the reasons given by the Secretary of State for rejecting the ombudsman's first finding did not include
and could not rationally have included any of those circumstances.
By an appellant's notice dated 14 March 2007 the claimants appealed against the judge's decision to uphold the
Secretary of State's rejection of the ombudsman's first finding, in so far as it related to the causation of injustice, and
her third finding, and to dismiss their claim under article 1 of the First Protocol to the European Convention for the
Protection of Human Rights and Fundamental Freedoms. The grounds of the appeal in relation to the upholding of
the ombudsman's findings were, inter alia, that (1), absent any application for an order in judicial review
proceedings quashing the findings in the ombudsman's report, the judge ought to have found that the Secretary of
State was bound by those findings; (2) the judge had erred in finding that the Secretary of State had rejected the
ombudsman's findings on the grounds that it was irrational for her not to limit her findings to those people who had
read or relied upon the assurances in the leaflets; (3) the judge had erred in treating the ombudsman's finding as
only a finding that maladministration was a significant contributory factor in the creation of financial losses
suffered by individuals; (4) the judge had failed to have regard to the fact that the Secretary of State had, in another
case, accepted an approach to causation analogous to that adopted by the ombudsman in the present case; (5) the
judge had failed to appreciate that the ombudsman's third finding was a failure of process and that the ombudsman
had been entitled to hold that this failing subsisted irrespective of whether the Government was entitled to act on the
advice of the Government Actuary's Department; and
[2009] 146
1 QB R (Bradley) v Work and Pensions Secretary Argument
(6) the judge had erred in seeking to determine for himself the question whether the third finding amounted to
maladministration.
The facts are stated in the judgment of Sir John Chadwick.
Philip Sales QC, Daniel Stilitz and Holly Stout (instructed by Solicitor, Department of Work and Pensions ) for
the Secretary of State.
Where it appears to the ombudsman that an injustice has been done as a consequence of maladministration
which is unlikely to be remedied, she may lay a special report before each House of Parliament although she is
precluded from questioning the relevant department without first finding maladministration in its decision: see R v
Local Comr for Administration for the North and East Area of England, Ex p Bradford Metropolitan City Council
[1979] QB 287; Rv Local Comr for Administration for the South, the West, the West Midlands, Leicestershire,
Lincolnshire and Cambridgeshire, Ex p Eastleigh Borough Council (1987) 86 LGR 145; [1988] QB 855; R v Local
Comr for Administration in North and North-East England, Ex p Liverpool City Council [2001] 1 All ER 462 and
R (Doy) v Comr for Local Administration [2002] JPL 342.
In interpreting the Parliamentary Commissioner Act 1967 it is permissible to refer to the White Papers and
Hansard: see Pepper v Hart [1993] AC 593; R v Secretary of State for the Environment, Transport and the
Regions, Ex p Spath Holme Ltd [2001] 2 AC 349; R (Westminster City Council) v National Asylum Support
Service [2002] 1 WLR 2956; Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816; R (Confederation of
Passenger Transport UK) v Humber Bridge Board [2004] QB 310 and McDonnell v Congregation of Christian
Brothers Trustees [2004] 1 AC 1101. There is nothing in the 1967 Act which requires the Government to accept
the ombudsman's findings without reservation. The terms of section 10(3) of the 1967 Act are consistent only with
the ombudsman's findings and recommendations being non-binding in nature: see R v Parliamentary Comr for
Administration, Ex p Balchin [1998] 1 PLR 1 and R v Parliamentary Comr for Administration, Ex p Balchin (No
2) (2000) 2 LGLR 87. [Reference was also made to Prebble v Television New Zealand Ltd [1995] 1 AC 321;
Hamilton v AI Fayed [2001] 1 AC 395; R v Her Majesty's Treasury, Ex p Smedley [1985] QB 657; Steele Ford &
Newton v Crown Prosecution Service (No 2) [1994] 1 AC 22; Lord Advocate v Dumbarton District Council [1990]
2 AC 580; Ex p Eastleigh Borough Council [1988] QB 855; R v Secretary of State for the Home Department, Ex
p Danaei [1998] INLR 124 and B v Secretary of State for Work and Pensions [2005] 1 WLR 3796.]
The Secretary of State's position that the ombudsman's findings were irrational arises as part of his defence
against the claimants' allegations that the Secretary of State himself acted unlawfully. The litigation over the
correctness or otherwise of the ombudsman's reasoning would, in a case where the ombudsman has taken into
account ministerial statements during the passage of legislation, offend against the wider principle of mutual
constitutional respect between Parliament and the courts: see Prebble v Television New Zealand Ltd.
The level of protection afforded to scheme members was a matter laid down by the Pensions Act 1995. Any
increase in the level of protection afforded would have required further legislation. The claim of breach of
[2009] 147
article 1 of the First Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms
amounts in substance to a complaint of a failure to introduce proposals for legislation in Parliament and/or a
complaint of a failure to enact primary legislation. That claim is precluded by section 6(3) and/or section 6(6) of
the Human Rights Act 1998, since failure to propose or introduce protective legislation cannot found a claim for
breach of section 6(1) of the 1998 Act. [Reference was made to Muller v Austria (1975) 3 DR 25; Jankovic v
Croatia (2000) 30 EHRR CD 183; Blanco Callejas v Spain (Application No 64100/00) (unreported) given 18 June
2002; Stec v United Kingdom (2005) 41 EHRR SE 295; Marckx v Belgium (1979) 2 EHRR 330; R(Carson) v
Secretary of State for Work and Pensions [2003] 3 All ER 577; Kopecky v Slovakia (2005) 41 EHRR 944; Nerva
v United Kingdom (2002) 36 EHRR 31; Draon v France (2005) 42 EHRR 807; Wendenburg v Germany (2003)
36 EHRR CD 154; Ã–neryildiz v Turkey (2002) 39 EHRR 253; Rudzinska v Poland (Application No 45223/99)
(unreported) given 7 September 1999; Gayduk v Ukraine (Application No 45526/99) (unreported) given 2 July
2002; R v Inland Revenue Comrs, Ex p MFK Underwriting Agencies Ltd [1990] 1 WLR 1545; R v North and East
Devon Health Authority, Ex p Coughlan [2001] QB 213; R v Secretary of State for Education and Employment, Ex
p Begbie [2000] 1 WLR 1115 and Maurice v France (2005) 42 EHRR 885.] In the cases in which a legitimate
expectation has been found to arise under article 1, such expectation has always attached to some underlying
property or tangible asset. [Reference was made to Pine Valley Developments Ltd v Ireland (1991) 14 EHRR 319;
Stretch v United Kingdom (2003) 38 EHRR 196 and Rowland v Environment Agency [2005] Ch 1.] There is no
right for the claimants for compensation against the department under article 1: see R (Trailer and Marina (Leven)
Ltd) v Secretary of State for the Environment, Food and Rural Affairs [2005] 1 WLR 1267; Ezeh and Connors v
United Kingdom (2003) 39 EHRR 1; Lithgow v United Kingdom (1986) 8 EHRR 329; Denimark Ltd v United
Kingdom (2000) 30 EHRR CD 144; Blecic v Croatia (2004) 41 EHRR 185; Mellacher v Austria (1989) 12
EHRR 391 and James v United Kingdom (1986) 8 EHRR 123.
Dinah Rose QC and Tom Hickman (instructed byBindman & Partners ) for the claimants.
On a proper construction of the 1967 Act, the defendant was not entitled to reject the ombudsman's findings
unless they had been successfully challenged by way of judicial review. Accordingly, the judge was wrong to
conclude that rejection of the findings was permissible in circumstances where an authority disagreed with an
ombudsman's findings but had not initiated judicial review proceedings: see Ex p Eastleigh Borough Council
[1988] QB 855. It is the function of the ombudsman, not the courts or other authority, to determine whether
maladministration has occurred and caused injustice: see R v Local Comr for Administration for the North and
East Area of England,, Ex p Bradford Metropolitan City Council [1979] QB 287, 311; R (Doy) v Comr for Local
Administration [2002] JPL 342; R v Local Comr for Administration in North and North-East England, Ex p
Liverpool City Council [2001] 1 All ER 462, para 28 and R v Parliamentary Comr for Administration, Ex p Dyer
[1994] 1 WLR 621. The Secretary of State is not entitled to rely on Hansard as an aid to the
[2009] 148
interpretation of the statute: see Pepper v Hart [1993] AC 593 and Ex p Spath Holme Ltd [2001] AC 349, 392.
The ombudsman is not an officer of Parliament: see R v Parliamentary Comr for Standards, Ex p Al Fayed
[1998] 1 WLR 669; R v Secretary of State for the Environment, Ex p Hammersmith and Fulham London Borough
Council [1991] 1 AC 521; R v Secretary of State for the Environment, Ex p Nottinghamshire County Council
[1986] AC 240 and South Bucks District Council v Porter (No 2) [2004] 1 WLR 1953. Where Parliament has
appointed an independent body to investigate questions of fact, the conclusions of that body become the only
properly tenable view, unless they are shown to be unreasonable: see Associated Provincial Picture Houses Ltd v
Wednesbury Corpn [1948] 1 KB 223; R v Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617
and R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124.
The contention of the Secretary of State that the ombudsman "impeached or questioned" the ministerial
statements in breach of article 9 of the Bill of Rights (1689) (1 Will & Mary, Sess 2, c 2) is incorrect. [Reference
was made to R v Parliamentary Comr for Administration, Ex p Balchin [2001] 1 PLR 253; Ã–neryildiz v Turkey
39 EHRR 253; Mann v Germany (1996) 22 EHRR CD 157; Bielectric Srl v Italy (Application No 36811/97
(unreported) given 4 May 2000 and Dennis v Ministry of Defence The Times, 6 May 2003.]
James Maurici (instructed by Beachcroft LLP ) for the Parliamentary Commissioner.
On a proper construction of the 1967 Act, the Secretary of State is not entitled to reject the ombudsman's
findings unless they have been successfully challenged by way of judicial review: see R v Parliamentary Comr for
Administration, Ex p Balchin [1998] 1 PLR 1; R v Local Comr for Administration for the North and East Area of
England, Ex p Bradford Metropolitan City Council [1979] QB 287 and Seddon Properties Ltd v Secretary of State
for the Environment (Note) (1978) 42 P & CR 26. The court must not usurp the ombudsman's statutory function to
determine whether there is injustice in consequence of maladministration. It is even more important that the
Secretary of State should not be permitted to usurp her function: see R(Doy) v Comr for Local Administration
[2002] JPL 342; R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124 and R v
Warwickshire County Council, Ex p Powergen plc . [Reference was also made to Smith v East Elloe Rural District
Council [1956] AC 736; R v Restormel Borough Council, Ex p Corbett [2001] 1 PLR 108; Carltona Ltd v Comrs
of Works [1943] 2 All ER 560; R (Sinn FÃ©in) v Secretary of State for Northern Ireland [2007] EWHC 12
(Admin); R v Secretary of State for the Home Department, Ex p Oladehinde [1991] 1 AC 254; Lloyd v McMahan
[1987] AC 625; R v Comr for Local Administration, Ex p Croydon London Borough Council [1989] 1 All ER
1033; R v Comr for Local Administration, Ex p S (1999) 1 LGLR 633; Lloyd v McMahon [1987] AC 625 and
Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862.]
Clive Lewis QC and Ben Hooper (instructed byTreasury Solicitor) for the Attorney General on behalf of the
Speaker of the House of Commons.
[2009] 149
Speeches, debates and proceedings in Parliament ought not to be impeached or questioned in any court or
place outside of Parliament: see article 9 of the Bill of Rights (1689); Prebble v Television New Zealand Ltd
[1995] 1 AC 321, 332; R v Parliamentary Comr for Standards, Ex p Al Fayed [1998] 1 WLR 669, 670; Hamilton
v Al Fayed [2001] 1 AC 395, 334, 408; R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC
696; Toussaint v Attorney General of Saint Vincent and the Grenadines [2007] 1 WLR 2825 and Wilson v First
County Trust Ltd (No 2) [2004] 1 AC 816. The Public Administration Select Committee acts as an organ of the
House of Commons, to whom it reports and from whom it derives its authority. It is wholly implausible to suggest
that a provision of the constitutional importance of article 9 of the Bill of Rights could be impliedly repealed by the
1967 Act. References to post-enactment statements are not admissible as aids to construction of an Act. The
statements made during the passage of the Bill were also not admissible as aids to construing the Act. Pepper v
Hart does not support the Secretary of State's case. [Reference was also made to R v Secretary of State for the
Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349 and McDonnell v Congregation
of Christian Brothers Trustees [2004] 1 AC 1101.]
Sales QC replied.
The court took time for consideration.

7 February 2008. The following judgments were handed down.
SIR JOHN CHADWICK
1 The report of the Parliamentary Commissioner for Administration entitled Trusting in the Pensions Promise:
Government Bodies and the Security of Final Salary Occupational Pensions (HC 984) was published on 15 March
2006. As the title suggests, the report addressed the circumstances in which final salary schemes were wound up
underfunded and the role of government in that regard. The report was presented to Parliament under section 10(3)
of the Parliamentary Commissioner Act 1967.
2 The Parliamentary Commissioner for Administration (commonly known as "the Parliamentary and Health
Service Ombudsman" or, more shortly, as "the ombudsman") made three findings of maladministrati on in her
report. Those findings are summarised at para 5.164 of the report. The first and third findings are these:
"(i) that official informationâ€”about the security that members of final salary occupational pension schemes
could expect from the MFR provided by the bodies under investigationâ€”was sometimes inaccurate, often
incomplete â€¦ and therefore potentially misleading, and that this constituted maladministration â€¦ (iii) that the
decision in 2002 by DWP to approve a change to the MFR basis was taken with maladministration."
"MFR", in that context, means the minimum funding requirement introduced under Part I of the Pensions Act
1995. "The bodies under investigation" included the Department of Work and Pensions ("DWP") and its
predecessor, the Department of Social Security ("DSS"). As the
[2009] 150
1 QB R (Bradley) v Work and Pensions Secretary Sir John Chadwick
ombudsman found, responsibility within government for occupational pensions policy and for the framework of
law and regulation that relates to final salary schemes had, at all times relevant to her investigation, lain with those
departments.
3 Having determined that there had been maladministration, the ombudsman went on to consider whether
complainants had suffered injustice as a result. She expressed herself satisfied that complainants and their families
had "suffered financial loss, a sense of outrage, and considerable distress, anxiety and uncertainty": para 5.167 of
the report. She was satisfied, also, that complainants had suffered injustice "through an inability to make informed
choices or to take remedial action": para 5.168. And, further, that that injustice had not been remedied and that
there was no intention in government that it would be remedied: para 5.175. She concluded, at para 5.245, that
"injusticeâ€”in the forms of a sense of outrage, lost opportunities to make informed choices or to take remedial
action, and distress, anxiety and uncertaintyâ€”was caused by maladministration"; and, at para 5.246, that the
maladministration which she had identified "was a significant contributory factor in the creation of the financial
losses suffered by individuals".
4 On the basis of those findings the ombudsman made five recommendations. Those recommendations (which
are set out between paras 6.10 and 6.37 of the report) were made, as she said, to remedy the injustice which she had
found to have been caused by maladministration. The first recommendation, at para 6.15, was in these terms:
"I recommend that the Government should consider whether it should make arrangements for the restoration
of the core pension and non-core benefits promised to all those whom I have identified above are fully covered
by my recommendationsâ€”by whichever means is most appropriate, including if necessary by payment from
public funds, to replace the full amount lost by those individuals."
The reference, there, to "all those whom I have identified above are fully covered by my recommendations" is
to the individuals falling within para 6.9 of the report.
5 Those falling within para 6.9 of the reportâ€”and so fully covered by the ombudsman's
recommendationsâ€”were those who were members of final salary schemes which commenced wind up from 6
April 1997 to 31 March 2004 in circumstances where (a) their scheme wound up with insufficient assets to secure
pensions in payment and to pay cash equivalent transfer values in respect of fully accrued pension rights to all non-
pensioner members or to secure the full liabilities for each non-pensioner member in other ways, (b) the scheme
was not eligible for the pensions compensation scheme (because it had not suffered losses wholly attributable to
fraud or other unlawful behaviour) and (c) the individual had suffered an actual financial loss because of a shortfall
in the pension promised in respect of the contributions made by him, contracted-out national insurance
contributions that were rebated to the scheme or other benefits due (such as survivor benefits and life cover). The
first of the two dates (6 April 1997) which defined the period within which a final salary scheme must have
commenced wind up if its members were to be covered by the first recommendation was the date on which the
Occupational Pension Schemes (Minimum Funding
[2009] 151
Requirement and Actuarial Valuations) Regulations 1996 (SI 1996/1536) came into force. The second date (31
March 2004) reflected the ombudsman's view that, in April 2004, the DWP issued guidance on the operation of the
Pensions Act 1995 that was "broadly accurate".
6 On 16 March 2006 the then Secretary of State for Work and Pensions made a statement in the House of
Commons. He informed the House that the Government had reached the view that it could not accept any of the
findings of maladministration made in the report and that it had decided to reject the first four of the ombudsman's
recommendations.
7 Proceedings for judicial review were commenced in the Administrative Court by the issue of a claim form on
14 June 2006. The claimants were Mr Henry Bradley, Mr Robin Duncan, Mr Andrew Parr and Mr Thomas Waugh.
Their individual circumstances were described by Bean J at paras 11-14 of his judgment, ante. It is not, I think,
necessary to set them out in this judgment. The relief sought in the proceedings, after amendment on 21 September
2006, was an order quashing the decision of the Secretary of State, on behalf of the Government, to reject the
ombudsman's first and third findings and first recommendation, and for the matter to be remitted to the Secretary of
State for reconsideration.
8 By an order made on 21 February 2007 Bean J granted the relief sought in relation to the first finding of
maladministration (save as to the causation of injustice) and the first recommendation. The Secretary of State
appeals (under Court of Appeal reference 2007/0554) from the judge's decision to quash the Secretary of State's
rejection of the first finding of maladministration. The judge upheld the Secretary of State's rejection of the
ombudsman's finding that maladministration (the subject of her first finding) had been the cause of injustice; and he
dismissed the claim to relief in relation to the third finding of maladministration. He dismissed, also, a claim that
the Secretary of State had acted in breach of article 1 of the First Protocol to the Convention for the Protection of
Human Rights and Fundamental Freedoms. The claimants appeal (under reference 2007/0556) from those parts of
his order. The appeals are brought with the permission of the judge.
9 The court has been assisted at the hearing of these appeals by submissions on behalf of the ombudsman (as
interested party) and on behalf of the Attorney General, who intervened in the proceedings on behalf of the Speaker
of the House of Commons.
10 The first issue before the judgeâ€”and, to my mind, the principal issue on these appealsâ€”was whether the
findings of the ombudsman were binding on the Secretary of State. The judge summarised the respective
contentions at para 47 of his judgment:
"Ms Rose submits that unless subsequently found by a court to be flawed in law or Wednesbury unreasonable
(see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223), a finding by the
ombudsman that maladministration has occurred and has caused injustice is binding on the public authority
against which it is made, either (a) absolutely, or (b) unless it can be objectively shown to be flawed or
unreasonable. Mr Sales, for his part, submits that the Secretary of State is entitled to reject the ombudsman's
findings on the basis of a bona fide difference of view, and that unless the rejection is itself flawed in law or
Wednesbury unreasonable judicial review should not be granted."
[2009] 152
I should add that the judge noted that it was accepted by Miss Rose on behalf of the claimants that
recommendations of the ombudsman (in contrast to her findings) cannot be binding on the Secretary of State. The
court could not order the Secretary of State to carry out a recommendation. But, in the circumstances that his
decision to reject the first recommendation was based (in part at least) upon his rejection of the first and third
findings, it would follow that, if he were wrong to reject those findings, he could and should be ordered to
reconsider that decision.
The Parliamentary Commissioner Act 1967
11 In order to address the question whether the findings of the ombudsman were binding on the Secretary of
State it is necessary to have in mind that the office of Parliamentary Commissioner for Administration was
established by statute: the Parliamentary Commissioner Act 1967. The Act was enacted (as its long title declares)
"to make provision for the appointment and functions of a Parliamentary Commissioner for the investigation of
administrative action taken on behalf of the Crown, and for purposes connected therewith".
12 Section 5 of the 1967 Act confers the power to investigate. Section 5(1) is in these terms:
"Subject to the provisions of this section, the commissioner may investigate any action taken by or on behalf
of a government department or other authority to which this Act applies, being action taken in the exercise of
administrative functions of that department or authority, in any case whereâ€” (a) a written complaint is duly
made to a member of the House of Commons by a member of the public who claims to have sustained injustice
in consequence of maladministration in connection with the action so taken; and (b) the complaint is referred to
the commissioner, with the consent of the person who made it, by a member of that House with a request to
conduct an investigation thereon."
Section 5(2) restricts or excludes the power to investigate in cases where the person aggrieved has or had a
right of appeal or review before a tribunal or a remedy by way of proceedings in a court of law. That restriction is
not relevant in the present case.
13 The bodies whose actions may be the subject of investigation are the government departments, corporations
and unincorporated bodies listed in Schedule 2 to the Act: section 4(1) of the Act (as substituted by the
Parliamentary and Health Service Commissioners Act 1987, section 1(1)). The Department of Work and Pensions
is (or was at the relevant time) among the bodies listed in Schedule 2. Section 4(2) of the Act provides for other
bodies to be added by Order in Council; but the exercise of that power is subject to the restrictions in sections 4(3),
4(3A) (inserted by the Government of Wales Act 1998, Schedule 12, paragraph 6 and amended by the Public
Services Ombudsman (Wales) Act 2005, Schedule 6, paragraph 3) and 4(3B) (substituted by the Scotland Act 1998
(Consequential Modifications) (No 2) Order 1999 (1999/1820), Schedule 2, paragraph 39(2)). The effect of those
restrictions, read with Schedule 2 as enacted, is that bodies whose actions may be investigated under section 5(1) of
the Act may be expected to be bodies for whose actions a Minister of the Crown is answerable to the United
Kingdom Parliament.
[2009] 153
14 Section 6 of the Act makes provision for the persons or bodies by whom complaints may be made for the
purposes of the Act. It is important to have in mind that a complaint is not entertained by the ombudsman unless
first made to a member of the House of Commons and then referred on by a member of that House: there is no
power to investigate complaints which are not made through a member of the House of Commons. Section 7
provides for the procedure to be adopted in respect of investigations. Where the ombudsman proposes to conduct
an investigation she must afford to the principal officer of the department or authority concerned and to any person
who is alleged in the complaint to have taken or authorised the action of which complaint is made an opportunity to
comment on any allegations contained in the complaint: section 7(1) of the Act. Section 8(1) provides that, for the
purposes of an investigation under the Act, the ombudsman may require any minister, officer or member of the
department or authority concerned to furnish information or produce documents relevant to the investigation. But
that power does not extend to the proceedings of the Cabinet or of any Cabinet committee: section 8(4) of the Act.
15 Section 10 of the Act ("Reports by commissioner"), as amended by section 47 of and paragraphs 1 and 5 of
Schedule 7 to the Domestic Violence, Crime and Victims Act 2004, is in these terms, so far as material:
"(1) In any case where the commissioner conducts an investigation under this Act or decides not to conduct
such an investigation, he shall send to the member of the House of Commons by whom the request for
investigation was made (or if he is no longer a member of that House, to such member of that House as the
commissioner thinks appropriate) a report of the results of the investigation or, as the case may be, a statement
of his reasons for not conducting an investigation.
"(2) In any case where the commissioner conducts an investigation under section 5(1) of this Act, he shall also
send a report of the results of the investigation to the principal officer of the department or authority concerned
and to any other person who is alleged in the relevant complaint to have taken or authorised the action
complained of."
"(3) If, after conducting an investigation under section 5(1) of this Act, it appears to the commissioner that
injustice has been caused to the person aggrieved in consequence of maladministration and that the injustice
has not been, or will not be, remedied, he may, if he thinks fit, lay before each House of Parliament a special
report upon the case."
The judge's conclusion on the first issue: whether the findings of the ombudsman were binding on the
Secretary of State
16 The judge reached the conclusion, at para 58, that subject to exceptions identified by this court in R v
Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124â€”"namely where the findings are
objectively shown to be flawed or irrational, or peripheral, or there is genuine fresh evidence to be
considered"â€”the findings of the ombudsman were binding on the Secretary of State. His reasoning may, I think,
fairly be summarised as follows. (1) The decision of this court in R v Local Comr for Administration for the South,
the West, the West Midlands, Leicestershire, Lincolnshire and Cambridgeshire, Ex p Eastleigh Borough Council
[1988] QB 855â€”and, in particular the observations of Lord Donaldson of
[2009] 154
Lymington MR, at p 867â€”was authority for the proposition that, in the absence of a successful application for
judicial review, the findings of a Local Government Ombudsman are binding on the relevant local authority. (2)
Although there were differences between the scheme established under Part III of the Local Government Act
1974â€”under which a Local Government Ombudsman conducts investigations and make reportsâ€”and the scheme
established under the Parliamentary Commissioner Act 1967, those differences were not such as to render the
proposition established in Ex p Eastleigh Borough Council inapplicable to a case under the latter scheme. (3) The
proposition established in Ex p Eastleigh Borough Council must be read with the observations of this court in R v
Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617, and in Ex p Danaei [1998] INLR 124.
Although those observations were made in the context that the fact-finding exercise which had preceded the
relevant decisionâ€”in the first case, a planning inquiry and, in the second case, a hearing before an immigration
adjudicatorâ€”had been "the exercise of adjudicative powers following an oral adversarial hearing", the different
nature of the investigative process under the 1967 Act did not lead to the conclusion that those observations were
not in point.
The judge's reasons for upholding the first finding of maladministration
17 It followed from his conclusion that the findings of the ombudsman were binding on the Secretary of State,
subject to the exceptions identified in Ex p Danaei ,that the judge was bound to find that the decision to reject the
first finding of maladministration was wrong in law unless persuaded that that finding was, itself, demonstrably
flawed "as irrational or for failing to have regard to material considerations or for having regard to immaterial
ones": Ex p Danaei [1998] INLR 124, 133, per Simon Brown LJ.
18 The judge addressed the first finding of maladministration at paras 59-66 of his judgment. It is clear from
those paragraphs that the argument before him had focussed upon two official leaflets: (i) leaflet PEC3, The
Pensions Act 1995,issued in January 1996 by the DSS and (ii) the May 2002 edition of leaflet PM3, Occupational
Pensions: Your Guide. But the judge referred, also, at para 63, to a letter dated 22 November 1995â€”some six
weeks before the issue of PEC3â€”in which the DSS had explained to the actuarial profession what the department
saw as the intention underlying the MFR.
19 The judge had explained earlier in his judgment, at paras 3-5, that Part I of the Pensions Act 1995 had
(amongst other matters) introduced a minimum funding requirement ("MFR") in respect of occupational pension
schemes and had established priorities for the application of a scheme's assets in the event of the scheme being
wound up with insufficient assets to meet its liabilities in full. He had pointed out that detailed provisions as to the
method of calculation of the MFR were prescribed in the 1996 Regulations to which I have already referred; and
that, in particular, regulation 3(2)(c)(ii) of those Regulations provided that, in calculating the MFR, it should be
assumed that liabilities in respect of members would be so secured that the benefits of active and deferred members
would be "reasonably likely" to be equal in value to those payable in respect of their accrued rights under the
scheme. The order of priorities for the application of the scheme's assetsâ€”where those assets were insufficient to
satisfy the
[2009] 155
liabilities of the scheme in fullâ€”was established by section 73 of the 1995 Act: in summary, assets were to be
applied in meeting (i) liabilities derived from the payment of voluntary contributions; (ii) pensions paid to members
who had retired (and, on death, to their dependants); and (iii) liabilities for pensions to members who had not
retired.
20 At para 59, the judge drew attention to a paragraph at p 15 of PEC3:
"New minimum funding requirement for salary related schemes
"The Pensions Act introduces a new rule aimed at making sure that salary related schemes have enough money
in them to meet the pension rights of their members. If the money in the scheme is less than this minimum
level, the employer will need to put in more money within time limits. The minimum funding requirement is
intended to make sure that pensions are protected whatever happens to the employer. If the pension scheme
has to wind up, there should be enough assets for pensions in payment to continue, and to provide all younger
members with a cash value of their pension rights which can be transferred to another occupational pension
scheme or to a personal pension."
In particular, he emphasised, the word "sure" in the first and third sentences of that paragraph. He went on to
say, at para 62:
"PEC3, especially p 15, gives the clear impression that following the enactment of the new law scheme
members can be reassured that their pensions are safe whatever happens. I have no doubt that this is what it
was designed to do. I agree with the ombudsman that it was inaccurate and misleading."
21 In the letter of 22 November 1995 (to which the ombudsman had referred at para 4.64 of the report) the DSS
had explained that the intention underlying the MFR had been:
"to require schemes to have a level of assets which should as a minimum be sufficient, if the scheme were to
wind up, to enable it to pay in respect of each non-pensioner member a sum which if invested in an appropriate
alternative pension vehicle could reasonably be expected to generate a pension benefit at least equivalent to
that which the scheme would otherwise have paid in respect of rights accrued up to that point in time."
The letter continued: "By reasonable expectation we mean that there should be at least an even chance." The
judge pointed out, at para 63, that an expectation that there would be an even chance that a scheme complying with
the MFR at the time of being wound up would meet its liabilities implied an expectation that there would an even
chance that such a scheme would not meet its liabilities. He went on to say:
"There is no mention of this 50% chance in PEC3. It is right to say that the 'even chance' policy is not
contained in the statute, and that the Regulations with the phrase 'reasonably likely' followed in 1996; but a
description of the intended effect or aim of the MFR as being to make 'sure' that members received the
pensions due to them, in an official publication by the same department that devised the policy, was plainly
inaccurate and misleading. It was not even the intended effect, still less the actual effect, of the MFR."
[2009] 156
22 The judge observed, at para 64, that the May 2002 edition of PM3 made no mention of the risks to accrued
pension rights should a scheme be wound up with insufficient funds to meet all its liabilities; and that nothing was
said about the statutory order of priorities. There was a heading "How do I know my money is safe?"; but that
question was answered
"with two columns of information about the duties of trustees and the laws about eligibility to be a trustee and
like matters, but nothing is said to warn members that despite these legal precautions their money may not be
safe after all."
He said, at para 65:

"It is not an answer to this point, in scrutinising a general publication directed to lay people, to say that
everyone knows that there is no certainty in life; that the value of shares may go down as well as up; and that if
your employer goes out of business you are likely to lose your job. A member of the general public between
1995 and 2005 could indeed be assumed to have known these facts of life without being told them in an official
publication; but not that if his employers went out of business just before he reached retirement age he might
get no occupational pension at all, despite the contributions he had made from his earnings over many years,
and despite the existence of people called 'trustees' who he thought were there to protect his interests."
23 The judge concluded, without (as he said) finding it necessary to go through each item of official
information which was scrutinised by the ombudsman, that the finding that official information was "sometimes
inaccurate, often incomplete, largely inconsistent and therefore potentially misleading" was "well open to her on the
evidence": para 66. Given the test that he had held applicable, that was a sufficient basis for him to hold that the
Secretary of State was bound by the first finding of maladministration; and had been wrong to reject that finding.
So he quashed the Secretary of State's decision in that respect.
24 It is pertinent to have in mind, however, that the judge would have held that the Secretary of State had been
wrong to reject the first finding of maladministration even if he had been persuaded that the applicable test was that
for which Mr Sales had contended on his behalf: that the Secretary of State was entitled to reject the ombudsman's
findings on the basis of a bona fide difference of view. It is clear that the judge would have held (if he had thought
that that was the applicable test) that the Secretary of State's decision to reject the first finding of maladministration
was itself flawed in law or Wednesbury unreasonable. He said, in terms, at para 66, that, "in the case of leaflet
PEC3 â€¦ no reasonable Secretary of State could rationally disagree" with the view that the information which it
contained was inaccurate, incomplete and potentially misleading.
The judge's reasons for rejecting the challenge to the Secretary of State's decision in relation to causation
25 As I have said, the ombudsman found that the maladministration which she had identified in her first
finding had been a significant contributory factor in the creation of financial losses suffered by individual
complainants. The Secretary of State had rejected that finding of causation.
[2009] 157
The judge declined to quash that part of the Secretary of State's decision. He reached that conclusion for the
reasons expressed in para 70 of his judgment:
"If the first finding had been limited to the causation of injustice to any scheme member who had read the
offending leaflets, or who relied on advice from colleagues or others who in turn relied on the leaflets, it would
not be open to challenge. But I cannot follow the logic of the ombudsman's finding that everyone who between
1995 and 2005 suffered losses on the winding up of their pension scheme was the victim of injustice in
consequence of maladministration, whether or not official misinformation had anything to do with it and
whether or not there were any remedial steps open to them. I therefore conclude that even on the claimant's
case in law (ie that the ombudsman's findings bind the Secretary of State subject to the exceptions identified in
Ex p Danaei [1998] INLR 124) this finding is logically flawed and in that sense unreasonable."
He went on to observe that, if the correct legal approach were as submitted on behalf of the Secretary of
Stateâ€”that is to say, if the applicable test were that the Secretary of State was entitled to reject the ombudsman's
findings on the basis of a bona fide difference of viewâ€”"the position would be a fortiori".
The judge's reasons for rejecting the challenge to the Secretary of State's decision in relation to the third
finding of maladministration
26 The third of the ombudsman's findings of maladministration related to the decision of the DWP in March
2002 to approve a change to the MFR basis. The ombudsman had set out the background to that decision at paras
4.371-4.432 and 5.97-5.100 of the report. The judge summarised the position at paras 72-74 of his judgment:
"72. On 5 September 2001 the Faculty and Institute of Actuaries wrote to the DWP recommending a reduction
in the dividend yield figure for the equity market value adjustment factor used in MFR valuations from 3â€
¢25% to 3%, and providing reasons for that recommendation. The profession had indicated in previous
communications with the DWP that it was minded to make this recommendation.
"73. The DWP asked the Government Actuary's Department ('GAD') to consider and give an opinion on the
recommendation. The GAD responded on 25 September 2001 endorsing the profession's view without
qualification.
"74. The DWP then considered whether there were any overriding policy reasons why it should not accept the
recommendation; and, in particular, whether the recommended change was sufficiently straightforward to
allow its implementation before the MFR was expected to be replaced. It concluded that the proposed change
could be implemented quickly and without due costs to pension schemes. The change was therefore approved
and took effect from 7 March 2002."
27 At para 5.126 of the report the ombudsman had observed that, having examined the evidence, she was not
persuaded that the DWP's decision to implement the change recommended by the actuarial professionâ€”and
supported by the GADâ€”had been taken "after proper
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consideration of all the evidence that could have been available to it". She concluded, at paras 5.148-5.149:
"5.148 Regardless of what professional advice DWP had received, as this decision affected the funding of
many private sector final salary pension schemes and as it was related to the security of the pension rights of
many thousands of people, it seems to me that DWP should have done more to satisfy itself that it was right to
implement this recommendation.
"5.149 Did all of the above constitute maladministration? I consider that this decision was taken with
maladministration as there is insufficient documentary evidence that explains the rationale for the
decisionâ€”and as I have doubts about the reliance of DWP on professional advice which seems to me not to
have been sufficient in itself to enable DWP to come to a decision that took account of all relevant
considerations and which ignored irrelevant ones."
So, as she had said (at para 5.150 of the report), her third finding of maladministration was "predicated on
what I consider to be failings in the process through which DWP took the decisionâ€”and in the completeness of the
evidence considered by it in so doing".
28 The judge drew attention, at para 75, to the DWP's response to that criticism. In a letter dated 28 February
2006, commenting on a draft of the report, the Permanent Secretary had written:
"In the department's view it would have been far more vulnerable to justified criticism if it had substituted an
alternative judgment in the face of clear and consistent advice from the actuarial profession and from the
Government Actuary's Department without good reason â€¦"
The judge concluded that the third finding of maladministration was not "logically sound". He said, at para
79:
"The department had a clear recommendation from the leading professional body and the concurrence of its
own specialist adviser, the GAD. The ombudsman was in effect expecting the Secretary of State, who is not an
actuary, to keep a watchdog (the GAD) and then bark himself. The fact that additional evidence might have
been sought in support of the actuarial profession's considered view is not equivalent to maladministration.
Indeed, the Government actuary, in an observation quoted in the DWP's response document of July 2006, has
commented that the evidence based for the 2002 decision was 'extremely strong and much stronger than for
many (probably most) of the decisions that have to be taken by government'. While I am conscious of the
substantial research and thought which lies behind the ombudsman's conclusion on this issue, I decline to quash
the department's rejection of the third finding. If there had been any disagreement between the faculty and the
GAD, or any qualification in the endorsement given by the GAD, the position would have been quite
different."
The judge's reasons for quashing the Secretary of State's decision to reject the first recommendation
29 The judge acknowledged that the recommendation was not binding upon the Secretary of State. He
acknowledged the force of the submission,
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advanced on behalf of the Secretary of State, that implementation of the first recommendation would require a very
large commitment of public funds: the Government was entitled to take the view that "taxpayers should not have to
foot such a large bill": para 80. And he acknowledged that, as a matter of strict legal analysis, his rejection of the
challenge to the Secretary of State's decision that there was no sufficient causal link between the first finding of
maladministration and the finding that individual complainants had suffered injustice would lead to the conclusion
that the Secretary of State was entitled to reject the first recommendation notwithstanding that (as the judge had
held) the first finding of maladministration was binding upon him. But, as he observed at para 85, it had been
emphasised by counsel on behalf of the Secretary of State that the question whether to accept and implement the
first recommendation was a political rather than a legal question. He went on to say:
"If [that question] is reconsidered on the basis that maladministration occurred, but that causation in individual
cases has not so far been established, the result may be the same, but will not necessarily be the same. I
therefore quash the Secretary of State's rejection of the first recommendation and direct that it be reconsidered
in the light of the ombudsman's first finding of maladministration and of this judgment."
The judge's reasons for rejecting the claim under the Human Rights Act 1998
30 Although, perhaps, not directly linked to the ombudsman's findings of maladministration or to her
recommendation, the claimants' statement of grounds for judicial review of the Secretary of State's decision to
reject those findings and that recommendation included a section (paras 79 and 80) under the heading "Breach of
article 1 of the First Protocol to the European Convention on Human Rights". The article ("A1P1") provides, so far
as material:
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be
deprived of his possessions except in the public interest and subject to the conditions provided for by law â€¦"
It was said that the Government's refusal to restore the pension entitlements of members of wound-up
occupational pension schemes was contrary to article 1 of the First Protocol; with the consequence that the DWP
was in breach of section 6 of the Human Rights Act 1998.
31 The judge summarised the claimants' submissions in support of the claim under this head at para 88 of his
judgment:
"It is submitted that an entitlement under an occupational scheme is a 'possession', and that the Government
owed all scheme members a positive duty to take reasonable and appropriate steps to protect them from loss of
those 'possessions'. Ms Rose argues that this duty arose because the DWP had created a risk to such pensions,
or at least had special knowledge of it; assumed responsibility for providing impartial information; encouraged
people to join and remain in such schemes; and created a legitimate expectation of full recovery in the event of
winding up. By publishing information that was sometimes inaccurate and misleading as to risk, and by failing
to warn properly of the risk, the
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Government failed to comply with that positive duty. Accordingly they are obliged to provide
proportionate compensation."
32 The judge rejected that claim. He accepted the submission advanced on behalf of the Secretary of State that
"although the making of payments into a pension scheme is capable of giving rise to a right safeguarded by A1P1,
that right consists merely of a beneficiary's entitlement to any payments made by the scheme, not to a payment of a
particular amount": para 89. He noted that:
"Even where the state had taken positive steps whose effect was to reduce an individual's pension, the
European Court of Human Rights found no breach of A1P1: Blanco Callejas v Spain (Application No
64100/00) (unreported) given 18 June 2002."
He also accepted the submission that "a positive obligation on the state to intervene and protect against
financial loss is most unlikely to arise where the risk is to a large class of individuals whose pensions schemes were
not under the Government's direct control". And he went on to say, at para 90:
"even if there can be a freestanding A1P1 claim based on legitimate expectation, which is itself contentious, it
is difficult to see that the legitimate expectation could be one of full reimbursement for all losses sustained,
given the difficulties of causation some of which have featured earlier in this judgment. Finally and similarly,
though only as regards the first three claimants: even if a breach of A1P1 had been proved, the Secretary of
State contends that the [Financial Assistance Scheme], in particular as recently extended, provides a
proportionate response as a matter of human rights law, given the wide margin of appreciation which the
Strasbourg jurisprudence gives to the judgment of member states' governments on socio-economic issues."
33 In the circumstances that the judge was minded to reject the claim under the 1998 Act it was (as he
recognised) unnecessary to rule on the Secretary of State's submissions that the claim was time-barred under section
7(5) of that Act and that there was no sufficient reason to extend time.
The Secretary of State's appeal
34 As I have said, the Secretary of State appeals (under reference 2007/0554) from the judge's decision
(reflected in para 1 of the order of 21 February 2007) that the decision of the Secretary of State to reject the first
finding of maladministration in the report should be quashed. The primary grounds of appeal are: (1) that the judge
erred in holding that a finding of the ombudsman made pursuant to an investigation under section 5(1) of the 1967
Act was binding upon the body or bodies subject to that investigation (subject to the Ex p Danaei exceptions); and
(2) that the judge erred in going on to hold that (if, as the Secretary of State had contended, a body subject to an
investigation by the ombudsman is entitled to reject such findings on the basis of a bona fide and rational difference
of view) this was a case in which no reasonable Secretary of State could rationally disagree with the ombudsman's
conclusion that leaflet PEC3 was inaccurate and misleading so as to amount to maladministration. In the alternative,
it was said by way
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of appeal that, if (contrary to the Secretary of State's primary contention) the ombudsman's findings are binding
upon the body subject to the investigation unless that body can establish that the findings are flawed or irrational or
peripheral, then this was a case in which the first finding of maladministration was flawed and/or irrational and/or
peripheral.
35 Neither the appellant's notice filed on behalf of the Secretary of State, nor the grounds of appeal attached to
that notice, refer in terms to (or challenge) the judge's decision (reflected in para 5 of the order of 21 February
2007) to quash the decision of the Secretary of State to reject the first recommendation. That the omission is
deliberate is made clear at para 14 of the Secretary of State's consolidated skeleton argument (dated 14 July 2007):
"The Secretary of State does not appeal against the learned judge's findings in relation to the first
recommendation. Notwithstanding the present appeal, the Secretary of State has reconsidered the first
recommendation on the basis ordered by the learned judge (i e on the basis of the maladministration identified
in the first finding), as a result of which substantial additional financial assistance has been provided to scheme
members who have suffered losses."
36 We were told that the Secretary of State's reconsideration of the first recommendation is, itself, the subject
of challenge in further judicial review proceedings. Two of the claimants in these proceedings are claimants in
those proceedings. That challenge is not before this court. I should add, for completeness, that since the hearing of
these appeals, it has been widely reported that the Government has decided to commit substantial additional funds
for the purpose of compensating scheme members for whom provision had not already been made under the
arrangements, introduced in April 2005, for the Pension Protection Fund. Again, that is not a matter with which we
are concerned on these appeals.
The first issue: whether the Secretary of State was entitled to reject the ombudsman's findings on the basis of a
bona fide and rational difference of view
37 The principal question for this court on this appealâ€”as I indicated at the outset of this judgmentâ€”is
whether, in principle, the ombudsman's findings of maladministration are binding upon the Secretary of State,
unless themselves flawed or irrational; or whether the Secretary of State, acting rationally, is entitled to prefer his
own view. That, as it seems to me, is a question to be answered in the light of an understanding of the scheme and
purpose of the 1967 Act.
38 I accept the Secretary of State's submission that, as an aid to an understanding of the purpose of the 1967
Act, it is legitimate and helpful to have regard to the White Paper (1965) (Cmnd 2767) in which the Government's
reasons for introducing legislation for the appointment of a Parliamentary Commissioner were explained. Para 4 of
the White Paperâ€”The Parliamentary Commissioner for Administrationâ€”contains the following passage:
"In Britain, Parliament is the place for ventilating the grievances of the citizenâ€”by history, tradition and past
and present practice. It is one of
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the functions of the elected Member of Parliament to try to secure that his constituents do not suffer
injustice at the hand of the Government. The procedures of parliamentary questions, adjournment
debates and debates on supply have developed for this purpose under the British pattern of
parliamentary government; and members are continually taking up constituents' complaints in
correspondence with ministers, and bringing citizens' grievances, great or small, to Parliament,
where ministers individually and Her Majesty's Government collectively are accountable. We do
not want to create any new institution which would erode the functions of Members of Parliament
in this respect, nor to replace remedies which the British Constitution already provides. Our
proposal is to develop these remedies still further. We shall give Members of Parliament a better
instrument which they can use to protect the citizen, namely, the services of a Parliamentary
Commissioner for Administration."
The role of the individual member of the House of Commons was emphasised at para 6 of the White Paper:
"The commissioner will act only at the instance of a Member of the House of Commons, as the elected
representative body in Parliament, and on a complaint of personal injustice suffered by the complainant. It will
be for the Member to decide whether the complaint appears to be one appropriate for reference to the
Commission."
Para 9 explained that it was the Government's intention that the commissioner's procedure was to be as
informal as possible, "subject to the requirement that if he takes up a case he must give to the person against whom
the complaint lies the opportunity to comment on it". Legal representation was to be the exception, not the rule.
Legal aid was not to be available.
39 Paras 11-13 of the White Paper explained the role of the commissioner:
"11. The commissioner will be concerned with faults in administration. It will not be for him to criticise
policy, or to examine a decision on the exercise of discretionary powers, unless it appears to him that the
decision has been affected by a fault in administration. If he finds nothing wrong, he will inform the Member
of Parliament who has approached him. If he finds that there is justifiable cause for complaint and the
department responds to his invitation to put it right, he will inform the Member. So far as the commissioner is
concerned, this will be an end of the matter, save for a possible reference to the case in his annual report to
Parliament. If the department does not act to the commissioner's satisfaction, it will be open to him to report
his conclusion to Parliament ad hoc.
"12. It will be for Parliament to decide what arrangements to make to receive and act upon reports from the
commissioner. This will not be a matter for legislation. It may well be found convenient to establish a select
committee to take these reports in the first instance. This committee would have the usual powers of a select
committee to summon witnesses (including ministers) and to take evidence and report to Parliament.
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"13. It will be for Parliament, with the help of this committee (if one is appointed), to consider what action
should be taken on the reports of the commissionerâ€”whether the annual report, or reports ad hoc."
Para 16 of the White Paper identified "two important principles" to which the Government had had regard in
formulating its proposals:
"First, that this new institution should serve to develop and reinforce our existing constitutional arrangements
for the protection of the individual. Secondly, that the scope of the scheme must be made as clear as possible,
so that everybody may know as plainly as may be what cases the commissioner will be able to take up and
what their rights and obligations will be in relation to his inquiries."
40 There is nothing in those passagesâ€”or elsewhere in the White Paperâ€”which suggests that, in introducing
legislation for the appointment of a Parliamentary Commissioner, the Government intended that ministers (or the
complainant) should be bound by findings in any report which the commissioner might think it appropriate to make.
The purpose for which the legislation was introduced was to give Members of Parliamentâ€”in particular, members
of the House of Commonsâ€”access to the services of an independent and authoritative investigator as "a better
instrument which they can use to protect the citizen". But, the protection was to be afforded through "existing
constitutional arrangements". Those existing arrangements are identified in para 4 of the White Paper: they include
the procedures of parliamentary questions, adjournment debates and debates on supply, c orrespondence with
ministers, and the ability to bring citizens' grievances, great or small, to Parliament, "where ministers individually
and Her Majesty's Government collectively are accountable".
41 In this context, the Government's intentions in introducing the legislation were made clear in the final
sentence in para 11 of the White Paperâ€”"If the department does not act to the commissioner's satisfaction, it will
be open to him to report his conclusion to Parliament ad hoc"â€”read with the first sentence of para 13â€”"It will be
for Parliament â€¦ to consider what action should be taken on the [ad hoc] reports of the commissioner". The
establishment of a select committee was in contemplation as an aid to Parliament in its role in calling ministers to
account. The ad hoc report was to provide the basis for parliamentary and political accountability. The minister
whose department had, on investigation, been found by the commissioner to have been guilty of maladministration
must expect to have to justify, in the parliamentary arena, why his department has not put in hand arrangements to
provide a remedy in respect of the citizen's complaint. But there is, as it seems to me, no reason to think that it was
any part of the Government's intentions, in introducing the legislation, to preclude a minister who was called to
account before Parliament from explaining, as part of his justification for the decision to provide no remedy in
respect of the complaint, his reasons for rejecting the commissioner's finding of maladministration. The point is
well put in the Royal Institute of Public Administration publication The Parliamentary Ombudsman: A Study in the
Control of Administrative Action (1975), p 503:
"If he is prepared to take the consequences, and defend his position in Parliament, in the last resort a minister
who genuinely believes that he and
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his department have been unfairly criticised by the commissioner, clearly has the right to say so
â€¦"
To think otherwise would be to accept that it was the Government's intention that a minister who had
determined that he would seek to justify the decision to provide no remedy on the basis that he rejected the finding
of maladministration would, before advancing that case in Parliament, need to obtain in judicial review proceedings
an order quashing the commissioner's finding. For my part, I find it impossible to accept that that was the
Government's intention: to preclude a minister from giving a full and frank account to Parliament of the reasons
which had led to the decision to provide no remedy for the complaint (unless he had first obtained an order in
judicial review proceedings) is, in my view, wholly foreign to the purpose for which the legislation was introduced.
42 Before turning to the provisions of the 1967 Act itselfâ€”to examine whether there is anything in those
provisions which provides support for the view that, as enacted, the legislation went beyond the intentions of the
Government as revealed by the White Paperâ€”I should mention that we were referred to a number of ministerial
statements in Parliament made during the passage of the legislation and reported in Hansard. The claimants
objected to any use being made of those statements. The Attorney General, intervening on behalf of the Speaker of
the House of Commons, reminded us of the three requirements identified in Pepper v Hart [1993] AC 593, 640C-D.
Observations in the speech of Lord Browne-Wilkinson, at p 635B-Fâ€”which, if read out of context, might suggest a
wider relaxation of the exclusionary rule to which he had referred, at p 630Eâ€”must, it was said, be read with those
requirements in mind.
43 For my part, and to the extent only that ministerial statements made during the passage of legislation throw
light on the purpose for which the legislation was introduced (or, to use the more familiar phrase, serve to identify
the mischief at which it is aimed), I am not satisfied that the objection is well founded. Support for a wider
relaxation of the exclusionary rule is found, as it seems to me, in Wilson v First County Trust Ltd (No 2) [2004] 1
AC 816, paras 57-58, 60, 173 and in McDonnell v Congregation of Christian Brothers Trustees [2004] 1 AC 1101,
para 29. But I do not think it necessary to decide the point. I will not set out the ministerial statements in this
judgment. It is enough, I think, to say that I find little in those statements which, in the present context, adds to the
material in the White Paper; and nothing which leads me to think that the view as to the Government's intentions
which I have formed from the material in the White Paper is incorrect.
44 It is, I think, impossible to contend that there is anything in the 1967 Act which, in terms, requires the body
whose conduct is the subject of an investigation under section 5(1) to accept the commissioner's findings of
maladministration. Parliament could have enacted such a provision; but it did not. Had that been its intention, it
might have been expected to say so; if only because it would have been necessary to make it clear whether it
intended any element of reciprocity. If a finding that there had been maladministration was binding on the
departmentâ€”so as to preclude the minister from denying maladministration when called to account in
Parliamentâ€”was a finding that there had not been maladministration be binding on the Member of the House of
Commons who had referred the
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complaint to the commissionerâ€”so as to preclude him from asserting maladministration in debate? It is not
difficult to suppose a case in which the commissioner had found maladministration in one respect but rejected it in
another. The report in the present case provides examples.
45 In broad terms the provisions of the 1967 Act give effect to the proposals in the White Paper. In particular,
section 4 of the Act read with Schedule 2 as enacted, has the effect that the bodies whose actions may be
investigated under section 5 are bodies for whose actions a minister will be accountable in Parliament. In that
context it is pertinent to have in mind not only section 4(3) but also sections 4(3A) (as inserted and amended) and
4(3B) (as substituted)â€”which exclude from the purview of the commissioner matters in respect of which ministers
can be called to account in the Welsh Assembly or the Scottish Parliament. Section 5(1) gives effect to the
principle that members of the public are not given direct access to the commissioner: his powers are limited to the
investigation of complaints which are referred to him by Members of the House of Commons.
46 Section 10(1) of the Act provides for the commissioner to report to the Member of the House of Commons
by whom the complaint was referred (or, if he is no longer a member of the House of Commons, to such other
Member of the House of Commons as the commissioner thinks appropriate) either (i) the results of the investigation
or (ii) a statement of his reasons for not conducting an investigation. It is pertinent to note, first, that there is no
provision which requires the commissioner to report to the member of the public who made the complaint. And,
second, that if the Member of the House of Commons by whom the complaint was referred has ceased to be a
member, there is no obligation to report to him: the report must be made to another member of the House of
Commons. The provisions of section 10(1) emphasise the role of the commissioner as a servant of Parliament: his
report is sent to a Member of the House of Commons so that the Member can pursue the complaint in Parliament or
through parliamentary procedures.
47 Section 10(2) of the Act requires the commissioner (in a case where he has conducted an investigation) to
send a report of the results of the investigation to the permanent secretary of the department whose actions have
been the subject of the investigation. The report may disclose that the commissioner has held the complaint to be
misconceived (in whole or in part): either because the commissioner has not found maladministration or because
the commissioner has not found the complainant to have sustained injustice in consequence of maladministration.
But, if the report contains a finding that the complainant has sustained injustice in consequence of
maladministration, then (as it seems to me) it is plain from the structure of sections 10(2) and 10(3) of the Act that
the legislature intended that the department would have (and would take) the opportunity to consider whether any
(and, if so, what) remedy should be provided in respect of that injustice.
48 Section 10(3) of the Act has effect where (i) the commissioner has made a finding that the complainant has
sustained injustice in consequence of maladministration and (ii) it appears to the commissioner that the injustice has
not been, or will not be, remedied. When enacting sections 10(2) and 10(3) of the Act the legislature may, I think,
be taken to have expected that the opportunity for the department to consider whether any
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(and, if so, what) remedy should be provided in respect of the injustice identified in the section 10(2) report would
arise after it had been sent that report; and before a special report was laid before Parliament under section 10(3).
But, as the present case illustrates, the commissioner may be in a position to conclude not only that the injustice
which has been identified has not been remedied but also that it will not be remedied. Where the commissioner
takes the view that injustice has been caused to the complainant in consequence of maladministration and that the
injustice has not been, and will not be, remedied, then he may, if he thinks fit, lay a special report upon the case
before each House of Parliament. The provisions of section 10(3)â€”in common with those of section
10(1)â€”emphasise the role of the commissioner as a servant of Parliament. A special report under section
10(3)â€”in which the commissioner expresses his view that an injustice which has been caused by
maladministration has not been (and will not be) remediedâ€”is put before Parliament so that Parliament can
determine whether to call the minister to account.
49 Examination of the provisions of the 1967 Act itself provides no support for the view that, as enacted, the
legislation went beyond the intentions of the Government as revealed by the White Paper. I find nothing in the Act
to suggest that Parliament intended to preclude a minister who was called to account before either House from
explaining, as part of his justification for the decision to provide no remedy in respect of the complaint, his reasons
for rejecting the commissioner's finding of maladministration.
50 We were referred to post-enactment statements in Parliament (in 1968)â€”including statements of the then
Leader of the Houseâ€”as to the intention and effect of the legislation passed in an earlier session; and to the views
of the Public Administration Select Committee in 2005/2006. In reaching my conclusion as to the legislative
intention in enacting the 1967 Act, I have left those matters out of account. For the reasons advanced on behalf of
the Attorney General, I am satisfied that they are not admissible as legitimate aids to construction.
51 It follows that, unless compelled by authority to hold otherwise, I would conclude that the submissions
advanced on behalf of the Secretary of State in respect of the first issue are correct: the Secretary of State, acting
rationally, is entitled to reject a finding of maladministration and prefer his own view. But, as I shall explain, it is
not enough that the Secretary of State has reached his own view on rational grounds: it is necessary that his decision
to reject the ombudsman's findings in favour of his own view is, itself, not irrational having regard to the legislative
intention which underlies the 1967 Act. To put the point another way, it is not enough for a minister who decides to
reject the ombudsman's finding of maladministration simply to assert that he had a choice: he must have a reason
for rejecting a finding which the ombudsman has made after an investigation under the powers conferred by the
Act.
52 The judge was persuaded that observations in this court, in Ex p Eastleigh Borough Council [1988] QB
855, provided authority for the view that the Secretary of State was bound by the ombudsman's findings of
maladministration unless he could establish that those findings were, themselves, flawed by irrationality. The
claimantsâ€”as respondents to the Secretary of State's appealâ€”seek to uphold that conclusion.
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53 As the judge explained, at para 44 of his judgment, a Commission for Local Administration was established
under Part III of the Local Government Act 1974. As enacted, section 26(1) of the 1974 Act provided that, where a
written complaint was made by or on behalf of a member of the public who claimed to have sustained injustice in
consequence of maladministration in connection with action taken by or on behalf of an authority to which Part III
of the Act appliedâ€”that is to say, inter alios, any local authorityâ€”being action taken in the exercise of
administrative functions of that authority, a local commissioner might investigate that complaint. Section 34(3) of
the 1974 Act provided that nothing in Part III authorised or required a local commissioner to question the merits of
a decision taken without maladministration by an authority in the exercise of a discretion vested in that authority.
54 Section 30(1) of the 1974 Act provided that, where a local commissioner had conducted an investigation, or
had decided not to conduct an investigation, he was to send a report of the results of the investigation, or (as the
case might be) a statement of his reasons for not conducting an investigation, to the authority concerned. Section
30(4) required the authority to make copies of the report available for inspection by the public; and section 30(5)
required the authority to advertise that the report was so available. Section 31 of the 1974 Act (before amendment
by the Local Government Act 1988 and the Local Government and Housing Act 1989) was in these terms:
"(1) If in the opinion of the local commissioner, as set out in the report, injustice has been caused to the person
aggrieved in consequence of maladministration, the report should be laid before the authority concerned, and it
shall be the duty of that authority to consider the report, and to notify the local commissioner of the action
which the authority have taken, or propose to take.
"(2) If the local commissionerâ€” (a) does not receive any such notification within a reasonable time; or (b) is
not satisfied with the action which the authority concerned have taken; or (c) does not within a reasonable time
receive confirmation from the authority concerned that they have taken action, as proposed, to the satisfaction
of the local commissioner, he shall make a further report setting out those facts; and section 30 above shall
apply, with any necessary modifications, to that further report."
It can be seen that those provisions, in sections 30 and 31 of the 1974 Act, were similar to, but not the same as,
the provisions in section 10 of the 1967 Act. But that, as it seems to me, was to be expected. Under the 1967 Act
the role of the Parliamentary Commissioner is to report to Parliament the result of an investigation into action taken
by the executive: under the 1974 Act the role of the local commissioner is to report to the authority the result of an
investigation into action taken by the authority. There is no separation of powers in local government which
corresponds to the separation, in national government, between the powers of the executive and the powers of
Parliament.
55 In Ex p Eastleigh Borough Council [1988] QB 855 a Local Commissioner for Administration for the South
and other areas had investigated a complaint that the local authority, Eastleigh Borough Council,
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had failed properly to inspect a private foul sewer at the time of its construction. In his report he expressed the
view that the authority should carry out inspections at all stages when they received notice and especially at the
final stage when tests were carried out. He concluded that the sewer had not been thoroughly inspected, since no
test had been carried out to test the gradient of the sewer; and that the complainant had suffered injustice because of
maladministration by the local authority. The local authority took the view that the local commissioner had
exceeded his powers, in that he had directed his criticism to matters of policy, contrary to section 34(3) of the 1974
Act. Having (I think) complied with their obligation under section 30(4) of the 1974 Act to make the report
available to the public, the local authority sought by way of judicial review an order of certiorari to quash the local
commissioner's findings.
56 The proceedings came before Nolan J. He accepted the local authority's submission that the local
commissioner had exceeded his powers (1987) 86 LGR 145, 151. But he held that judicial review was not an
appropriate remedy. There was, he accepted, "no question of the remedy of certiorari â€¦ being available to quash a
report". And, further, a declaration that the report (in those respects in which the local commissioner had exceeded
his powers) was unauthorised in law would "have no practical or legal consequences". He went on to say, at p 152:
"It is true that the council and its officials have been publicly criticised in a manner which I consider to have
been unauthorised. But this is a free country, and even if the council has no remedy in the courts, there is
nothing to prevent them from responding to the report with equal publicity disputing the local commissioner's
findings and quoting if they so wish the legal advice which they have received."
It is clear, from that passage, that Nolan J did not take the view that the findings of the local commissioner
were binding on the authority: he envisaged the possibility that those findings could be challenged in the public
arena.
57 The authority appealed from the judge's refusal of relief; and the local commissioner cross-appealed from
the finding that he had exceeded his powers. The cross-appeal was dismissed (Lord Donaldson of Lymington MR
dissenting). The authority's appeal was allowed for the reasons given by Lord Donaldson of Lymington MR, with
whom (on this point) the other members of the court (Parker and Taylor LJJ) agreed. After referring to Nolan J's
suggestion that the authority had an adequate remedyâ€”in that they could issue a statement disputing the right of
the local commissioner to make the findings which he hadâ€”Lord Donaldson of Lymington MR said [1988] QB
855, 867:
"Such an action would wholly undermine the system of ombudsman's reports and would, in effect, provide for
an appeal to the media against his findings. The parliamentary intention was that reports by ombudsmen
should be loyally accepted by the local authorities concerned. This is clear from section 30(4) and (5), which
require the local authority to make the local report available for inspection by the public and to advertise this
fact, from section 31(1), which requires the local authority to notify the ombudsman of the action which it has
taken and proposes to take in the light of his report and from section 31(2),
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which entitles the ombudsman to make a further report if the local authority's response is not
satisfactory. Whilst I am very far from encouraging councils to seek judicial review of an
ombudsman's report, which, bearing in mind the nature of his office and duties and the
qualifications of those who hold that office, is inherently unlikely to succeed, in the absence of a
successful application for judicial review and the giving of relief by the court, local authorities
should not dispute an ombudsman's report and should carry out their statutory duties in relation to
it."
58 I have already referred to the difference between the role of the Parliamentary Commissioner under the
1967 Act and the role of the local commissioner under the 1974 Act; and to the fact that there is no separation of
powers in local government which corresponds to the separation, in national government, between the powers of
the executive and the powers of Parliament. It is important to keep those distinctions in mind when addressing the
question whether Lord Donaldson of Lymington MR's reasoning, in the passage which I have just set out, leads to
the conclusion that, when enacting the 1967 Act, Parliament intended to preclude a minister who was called to
account before either House from explaining, as part of his justification for the decision to provide no remedy in
respect of the complaint which has been the subject of investigation, his reasons for rejecting the Parliamentary
Commissioner's finding of maladministration. In my view the reasoning in Ex p Eastleigh Borough Council does
not lead to that conclusion.
59 I find support for that view in two factors. First, Lord Donaldson of Lymington MR's observation that "The
parliamentary intention was that reports by ombudsmen should be loyally accepted by the local authorities
concerned" was based on provisions in the 1974 Actâ€”section 30(4)(5) and section 31(1)(2)â€”which had no
parallel in the 1967 Act. Under the 1967 Act the report which corresponds most closely to that to which section
30(4)(5) and section 31(1) of the 1974 Act applied is the report to which sections 10(1) and 10(2) of the former Act
refer: it is not the special report (if any) made under section 10(3). There is nothing in the 1967 Act which requires
the department to which a section 10(2) report has been sent to make that report available to the public: indeed, as I
have said, there is no obligation on either the Parliamentary Commissioner or the department concerned to send a
copy of that report to the complainant. I have already expressed the view that, when enacting sections 10(2) and
10(3) of the 1967 Act the legislature may be taken to have expected that the opportunity for the department to
consider whether any (and, if so, what) remedy should be provided in respect of the injustice identified in the
section 10(2) report would arise after it had been sent that report; and before a special report was laid before
Parliament under section 10(3); but there is nothing in the 1967 Act which imposes on the department concerned
duties equivalent to those imposed on the authority by section 31(1) of the 1974 Act. And, although section 10(3)
of the 1967 Act provides that, if it appears to the Parliamentary Commissioner that injustice has been caused to the
person aggrieved in consequence of maladministration and that the injustice has not been, or will not be, remedied,
he may, if he thinks fit, lay a special report before each House of Parliament, there is nothing in the 1967 Act which
imposes on the Parliamentary Commissionerduties equivalent to those
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imposed on the local commissioner by section 31(2) of the 1974 Act. It is impossible to adapt the reasoning on
which Lord Donaldson of Lymington MR's observation, in Ex p Eastleigh Borough Council , that "The
parliamentary intention was that reports by ombudsmen should be loyally accepted by the local authorities
concerned" was expressed to be based to support a conclusion, in the present case, that "the parliamentary intention
was that reports by the Parliamentary Ombudsman should be loyally accepted by the department (or the minister)
concerned".
60 Second, Lord Donaldson of Lymington MR's concern that the issue of a statement by the local authority
disputing the right of the ombudsman to make his findings "would wholly undermine the system of ombudsman's
reports and would, in effect, provide for an appeal to the media against his findings" loses its force in the context of
a report under the provisions of the 1967 Act. As I have said, the 1967 Act does not require the department to make
a section 10(2) report available to the public; and so does nothing to provoke a public response. There should be no
need for the department to "appeal to the media" against the findings in a section 10(2) report. The 1967 Act
plainly contemplates that the opportunity to justify the decision to provide no remedy for the complaint will arise
when the minister is called to account in Parliament; following the laying before Parliament of a special report
under section 10(3). As it seems to me, the ability of the minister to justify the decision to provide no remedy for
the complaint by explaining why he does not accept the findings of maladministration does not undermine the
statutory purpose of the 1967 Act: rather, it promotes it. If the reason why no remedy is to be provided for the
complaint is that the Government does not accept that injustice has been caused by maladministration, then it is
difficult to see why that reason should not be put before Parliament and be the subject of debate. The legislative
purpose is served by the fact that the findings in the section 10(3) report will inform that debate.
61 The judge observed, at para 53 of his judgment, that the effect of the Secretary of State's contention, if
correct, must be that:
"an elected local authority such as Birmingham City Council, in the absence of a successful application for
judicial review, must loyally accept the findings of an LGO ( Ex p Eastleigh Borough Council ); whereas a
quango such as the British Potato Council is free simply to disagree with any adverse findings of the
ombudsman unless its disagreement is itself flawed in law or Wednesbury unreasonable, which would be for
the complainant to establish by an application for judicial review."
He saw "neither logic nor constitutional principle in such a distinction"; and so rejected the contention which
(as he held) would lead to such an anomaly.
62 The basis for the distinction, as it seems to me, is found in the legislative intention which underlies the 1967
Act. Para 7 of the 1965 White Paper contains the statement that "Except for some exclusions which are explained
later in this paper, the field for the commissioner will be the whole range of relationships between the private
person and the central Government". The paragraph contains a list of the bodies which, as proposed, were to be
subject to investigation by the commissioner. Schedule 2 to the 1967 Act, as enacted, incorporated the proposed list
with amendments (not material in the present context). It is plain that the
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legislative intention was that the bodies which were to be subject to investigation by the Parliamentary
Commissioner were those bodies (and only those bodies) for whose actions there was a minister capable of being
called to account in Parliament. Those bodies do not include elected local authorities.
63 As I have said, it seems to me that, once it is accepted (as it must be) that the legislative intention which
underlies the 1967 Act was that the bodies which were to be subject to investigation by the Parliamentary
Commissioner were bodies for whose actions there was a minister capable of being called to account in Parliament,
it is impossible to avoid the conclusion that Parliament did not intend to preclude that minister from giving a full
and frank account to Parliament of the reasons which had led to the decision to provide no remedy for the
complaint; including (if it were the case) the Government's reasons for rejecting the commissioner's finding of
maladministration. But, in a case where the body is one in respect of which there is no minister capable of being
called to account in Parliament, there is no basis for that conclusion: indeed, the conclusion would be meaningless.
With respect to the judge's view, it seems to me that logic leads to an expectation that there will be a distinction
between cases in which effect is to be given to the legislative intention underlying the 1967 Act and cases in which
that legislative intention has no application. Further, it may be said that the distinction accords with constitutional
principle: the courts must recognise and be sensitive to the principle of mutual respect explained by Donaldson MR
in R v Her Majesty's Treasury, Ex p Smedley [1985] QB 657, 666D: "It â€¦ behoves the courts to be ever sensitive
to the paramount need to refrain from trespassing upon the province of Parliament or, so far as this can be avoided,
even appearing to do so."
64 Para 7 of the 1965 White Paper goes on: "The list [of the bodies which are to be subject to investigation by
the commissioner] will need to be amended from time to time as the structure of the government machinery itself is
changed." Section 4(3) of the 1967 Act gave power to amend the list by Order in Council; but subject to the
limitations to which I have referred earlier in this judgment. The power has been used, since 1967, to add a large
number of non-departmental bodies, or "quangos", to the list in Schedule 2 to the Act. The question whether (and
to what extent) such bodies should be brought within the ombudsman jurisdiction was considered by the Select
Committee on the Parliamentary Commissioner for Administration in its Fourth Report: Non-Departmental Public
Bodies (October 1984). Para 16 of that report is of interest in the present context:
"The question of how the PCA's judgments could be enforced over non-departmental bodies was one that
exercised the minds of the PCA [Parliamentary Commissioner for Administration] and of the CSD [Civil
Service Department]. It is a desirable feature of any system for reviewing administration that there be some
practical sanction where maladministration is discovered. The difference in the proportion of justified
grievances ultimately unredressed after investigation by the PCA and CLA [Commission for Local
Administration] respectively is proof enough of this. The sanction behind the PCA's judgments is
parliamentary pressure, and this is most easily exercised through a responsible minister. If a body whose day-
to-day actions were not subject to ministerial control were to refuse the redress indicated by the PCA, the
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minister might have no recourse other than to dismiss the chairman, a remedy which the PCA
rightly described as 'a sledgehammer'. The CSD suggested that ministers might be given power to
order compliance with PCA judgments but felt that that would alter the characteristic relationship
between government and non-departmental body. We see no need for such provision. The
experience of the Health Service Commissioner suggests that compliance can be achieved without
anydirect sanction, the authority of the commissioner and the displeasure of Parliament, expressed
in the first instance through this committee, having always proved sufficient to secure the suggested
remedy. However, in case anyone should suggest to the contrary it is to be remembered that many
of these bodies receive money from public funds and that what Parliament customarily votes it can,
if moved thereto, withhold. The new financial procedure, whereby debates are regularly held on the
estimates would offer a suitable parliamentary opportunity for bringing unredressed
maladministration by non-departmental bodies to the attention of the House of Commons."
At para 20 of the report the Select Committee emphasised its desire "to retain the parliamentary connection by
limiting the PCA jurisdiction to those bodies over which Parliament has a continuing oversight". For my part I am
not persuaded that the concern which the judge expressed, at para 53, should lead this court to reject the Secretary
of State's contention that it was open to him to reject findings of fact made by the ombudsman on the basis of a
bona fide and rational difference of view.
65 The judge found support for his conclusion in the judgments of this court in R v Warwickshire County
Council, Ex p Powergen plc 96 LGR 617 and in R v Secretary of State for the Home Department, Ex p Danaei
[1998] INLR 124. The issue in Ex p Powergen plc was whether it would be a proper exercise of discretion for the
county council, as local highway authority, to refuse to enter into an agreement with the applicant, Powergen plc,
under section 278 of the Highways Act 1980 on the ground that the proposed arrangements for access to the
applicant's development would be detrimental to road safety; in circumstances where an appeal from the refusal of
Warwick District Council, as local planning authority, to grant planning permission for the development had been
allowed by an inspector following a local inquiry, at which the highway authority had given detailed expert
evidence, on the ground that the proposed access works did not present a sufficient threat to safety to justify refusal
of permission. This court, upholding the decision of Forbes J, decided that issue in favour of Powergen. Simon
Brown LJ (with whose judgment the other members of the court, Otton and Mummery LJJ, agreed) said 96 LGR
617, 624:
"Although both the judgment below and the arguments before us focused principally upon the scheme of the
legislation and whether the highway authority's approach to its section 278 discretion thwarted the policy and
objects of the two Acts here in questionâ€”see, for example, Padfield v Minister of Agriculture, Fisheries and
Food [1968] AC 997â€”I for my part prefer the broader Wednesbury analysis of the case. Indeed, so far from
this appeal raising â€¦ 'a short point of statutory construction', I see it rather as raising this simple question: is it
reasonable for a highway authority, whose road safety objections have been fully
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heard and rejected on appeal, then, quite inconsistently with the inspector's independent factual
judgment on the issue, nevertheless to maintain its own original view? To my mind there can be
but one answer to that question: a categoric 'No'."
Simon Brown LJ emphasised, at pp 624D-625B, that he had reached that conclusion not by reference to any
general question regarding the proper legal relationship between planning authorities and highway authorities upon
road safety issues but in the light of three basic considerations: (i) that the site access and associated highway
works, together with the road safety problems which they raised, had been (a) central to the particular planning
application and (b) considered in full detail rather than left to be dealt with as reserved matters; (ii) that the planning
permission had been granted following appeal to the Secretary of State and not merely by the local planning
authority itself; and (iii) that there were no new facts or changed circumstances following the inspector's
determination of the appealâ€”"the highway authority's continued refusal was based upon the identical
considerations that their witness had relied upon in seeking to sustain the planning objection before the inspector".
He concluded, at p 626:
"the inspector's conclusion on that issue, because of its independence and because of the process by which it is
arrived at, necessarily becomes the only properly tenable view on the issue of road safety and thus is
determinative of the public benefit."
66 Simon Brown LJ's reference, at p 624C, to "the broader Wednesbury analysis of the case" is explained by
his earlier citation, at p 623, of a passage from the judgment of Forbes J:
"In those circumstances, I accept [counsel's] submission that no reasonable highway authority would, on the
sole basis of the arguments as to road safety which had been fully considered and determined in the planning
process, refuse to enter into any necessary section 278 agreement on the grounds that to do so was not a benefit
to the public, thereby preventing the development from proceeding. I have therefore come to the conclusion
that the decision of the county council in this case to refuse to enter into the section 278 agreement in question
is both perverse and unreasonable in the Wednesbury sense. As [counsel] succinctly put it, it cannot be
reasonable for the highway authority to allow a decision of the Secretary of State to be implemented only if it
agrees with that decision."
Simon Brown LJ went on, at p 624A, to note that there had been some debate in the Court of Appeal whether
the judge's conclusion of Wednesbury irrationality was freestanding. He said:
"To my mind it was not: in truth there is here but one issue: who, as between the Secretary of State (or
inspector) on appeal and the highway authority, is to have the last word in deciding a road safety issue of this
nature?"
But that passage must be read with his expressed preference, at p 624C, for "the broader Wednesbury analysis
of the case". On a true analysis, as it seems to me, the basis upon which this court dismissed the appeal in
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Ex p Powergen plc was thatâ€”given the circumstances in which, and the statutory framework within which, the
inspector's conclusion on the issue of road safety had been reachedâ€”it was irrational for the county council to
continue to adhere to its own view on that issue: the inspector's view had become "the only properly tenable view"
on the issue of road safety: p 626A-B.
67 The issue in Ex p Danaei [1998] INLR 124 was whether, in exercising his discretionary power to grant
exceptional leave to enter or remain outside the Immigration Rules, the Secretary of State was bound to accept
findings of fact made in the immigrant's favour by a special adjudicator on a related, but unsuccessful, asylum
application. In short, the special adjudicator had accepted the immigrant's account of having committed adultery
with a married woman and of fleeing Iran because his life was in danger from an outraged husband. Nevertheless,
the Secretary of State maintained his view that the immigrant's account of an adulterous affair was a fabrication.
Collins J acceded to the immigrant's application for an order, by way of judicial review, setting aside the Secretary
of State's decision to refuse to grant exceptional leave to remain. He did so for the reason explained by Simon
Brown LJ in his judgment in this court, at p 129:
"Essentially â€¦ the judge found that it was Wednesbury unreasonable for the Secretary of State to have
maintained his own original view of the facts in the face of the adjudicator's contrary views formed upon the
respondent's related unsuccessful asylum appeal given that there was no material additional evidence on which
the Secretary of State could rely."
68 Simon Brown LJ (with whose judgment the other members of the court, Ward and Judge LJJ, agreed) noted,
at p 132, that it was common ground that "the Secretary of State's decision was a separate and discrete decision to
be taken by him alone"; that the Secretary of State's decision could only be challenged on Wednesbury grounds;
and that the Secretary of State was required to have regard to the adjudicator's findings of fact as a material
consideration. He went on: "Was he, however, in the circumstances of this case, then entitled to disagree with
them? That is the critical question." He answered that question in the negative, at p 133:
"In the present case â€¦ the primary fact in question is â€¦ whether or not the respondent was an adulterer. On
an issue such as this it does not seem to me reasonable for the Secretary of State to disagree with the
independent adjudicator who has heard all the evidence unless only: (1) the adjudicator's factual conclusion
was itself demonstrably flawed, as irrational or for failing to have regard to material considerations or for
having regard to immaterial onesâ€”none of which is suggested here; (2) fresh material has since become
available to the Secretary of State such as could realistically have affected the adjudicator's findingâ€”this too
was a matter we considered in Powergen ; (3) arguably, if the adjudicator has decided the appeal purely on the
documents, or if, despite having heard oral evidence, his findings of fact owe nothing whatever to any
assessment of the witnesses."
He observed that the third scenario seemed unlikely; and indicated that he was expressing "no concluded view
as to whether in this event the Secretary
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of State could properly ignore the fact that the adjudicator is an independent tribunal whereas he is not". But he
rejected, at p 134, in terms, the submission that
"the Secretary of State is free to come to a different factual conclusion to the adjudicator irrespective of the
advantages enjoyed by the latter through having heard oral evidence on the appeal and irrespective of whether
or not fresh evidence has come to light."
69 Judge LJ, after expressing his agreement with the conclusion reached by Simon Brown LJ "and the reasons
for it", added a short judgment of his own, at pp 134-135:
"His judgment demonstrates the essential independence of the special adjudicator within the statutory scheme
governing applications for asylum without undermining the ultimate responsibility of the Secretary of State for
deciding whether to grant an asylum seeker exceptional leave to remain. The desirable objective of an
independent scrutiny of decisions in this field would be negated if the Secretary of State were entitled to act
merely on his own assertions and reassertions about relevant facts contrary to express findings made at an oral
hearing by a special adjudicator who had seen and heard the relevant witnesses. That would approach
uncomfortably close to decision-making by executive or administrative diktat. If therefore the Secretary of
State is to set aside or ignore a finding on a factual issue which has been considered and evaluated at an oral
hearing by the special adjudicator he should explain why he has done so, and he should not do so unless the
relevant factual conclusion could itself be impugned on Wednesbury principles, or has been reconsidered in
the light of further evidence, or is of limited or negligible significance to the ultimate decision for which he is
responsible."
It is pertinent, in the present context, to note the importance which Judge LJ attached, in those observations, to
the role of the special adjudicator within the statutory scheme governing applications for asylum.
70 For my part, I think that the following principles can be derived from the judgments in Ex p Powergen plc
96 LGR 617 and Ex p Danaei [1998] INLR 124: (i) the decision-maker whose decision is under challenge (in the
former case, the local highway authority; in the latter, the Secretary of State) is entitled to exercise his own
discretion as to whether he should regard himself as bound by a finding of fact made by an adjudicative tribunal (in
the former case, the planning inspector; in the latter, the special adjudicator) in a related context; (ii) a decision to
reject a finding of fact made by an adjudicative tribunal in a related context can be challenged on Wednesbury
grounds; (iii) in particular, the challenge can be advanced on the basis that the decision to reject the finding of fact
was irrational; (iv) in determining whether the decision to reject the finding of fact was irrational the court will have
regard to the circumstances in which, and the statutory scheme within which, the finding of fact was made by the
adjudicative tribunal; (v) in particular, the court will have regard to the nature of the fact found (e g that the
immigrant was an adulterer), the basis on which the finding was made (e g on oral testimony tested by cross-
examination, or purely on the documents), the form of the proceedings before the tribunal (e g adversarial
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and in public, or investigative with no opportunity for cross-examination), and the role of the tribunal within the
statutory scheme.
71 Properly understood, as it seems to me, the two cases provide no support for the proposition that, as a matter
of law, it is not open to a body which has been the subject of a finding of maladministration by the parliamentary o
budsman to reject that finding; rather, the cases are authority for the proposition that it is open to such a body,
acting rationally, to reject a finding of maladministration. The cases provide helpful illustrations of circumstances
where, in other contexts, it was not rational for the decision-maker to reject findings of fact made by adjudicative
tribunals on the basis of a contrary (albeit rational) view which the decision-maker preferred. I do not, myself,
think that Judge LJ intended that his observationsâ€”directed, as they were, to the circumstances in which the
Secretary of State could properly set aside or ignore the finding of a special adjudicator made within the framework
of the asylum legislationâ€”were to be taken out of context and applied, more generally, to all circumstances in
which the body against whom facts have been found in the course of a statutory investigation not of an adjudicative
nature sought to dispute those facts. It is not, I think, a general rule that facts found in the course of a statutory
investigation can only be impugned on Wednesbury grounds: although, plainly, if the investigator can be shown to
have acted irrationally, that will be a powerful reason for rejecting his findings. The true rule, as it seems t o me, is
that the party seeking to reject the findings must himself avoid irrationality: the focus of the court must be on his
decision to reject, rather than on the decision of the fact-finder.
72 At para 119 of the skeleton argument filed in these appeals on behalf of the claimants, it is said (in the
alternative to the claimants' primary submission that the ombudsman's findings are binding on the Secretary of
State) that the test which the court should apply is whether a reasonable Secretary of State should have rejected the
ombudsman's findings having regard to: (a) the fact that the ombudsman is charged by Parliament with the task of
making findings of maladministration; (b) the fact that the ombudsman made her findings in this matter after a very
detailed and thorough investigation; (c) the content of official publications and (d) the "Key conclusions" set out at
paras 5.4-5.28 of the report. Para 120 of the skeleton argument is in these terms:
"For the avoidance of doubt, the relevant test is not whether a reasonable Secretary of State could himself
conclude that failure to disclose risks in official leaflets was [not] maladministrative. Such a test would fail to
take into account the fact that Parliament has conferred on the ombudsman the function of making findings of
maladministration and that the decision under review is a decision to reject that conclusion. The question is not
whether the defendant himself considers that there was maladministration, but whether in the circumstances his
rejection of the ombudsman's finding to this effect is based on cogent reasons."
I have added the second "not" in the first sentence: it seems to me that the sense requires that addition. I
suspect that the word was omitted from the text in error. Be that as it may, with the addition of that word, I would
agree with that statement of the test by which the court should determine whether
[2009] 177
the Secretary of State's rejection of the ombudsman's first finding of maladministration should be quashed.
The second issue: whether the judge erred in holding that no reasonable Secretary of State could rationally
disagree with the ombudsman's first finding of maladministration
73 I have referred, earlier in this judgment, to the judge's observation, at para 66, that "in the case of leaflet
PEC3 â€¦ no reasonable Secretary of State could rationally disagree" with the ombudsman's view that the
information which it contained was inaccurate, incomplete and potentially misleading. If the judge were correct to
take that view, then the Secretary of State's appeal must fail, notwithstanding that, as I have held, the judge was
wrong to decide the first issue as he did.
74 Leaflet PEC3, The 1995 Pensions Act, was issued by the DSS in January 1996. The expressed purpose of
the leaflet was to provide a brief summary of the changes introduced by the Pensions Act 1995. The leaflet posed
the question "Why was the Pensions Act needed?" Among the reasons given in answer to that question was the
following: "The Government wanted to remove any worries people had about the safety of their occupational
(company) pension following the Maxwell affair." The leaflet contained, on p 15, the paragraph under the heading
"New minimum funding requirement for salary related schemes" which I have set out earlier in this judgment (at
para 20). It is important to have that paragraph in mind; but unnecessary that I should set it out again. The
ombudsman's view was that the information in that paragraph (in common with much other information) was
inaccurate, incomplete and potentially misleading. She said, at para 5.43 of the report, that there was a "failure to
ensure that the most fundamental aspect of the MFRâ€”the policy intention that Government would adopt towards
what the MFR would actually provide in terms of security for scheme membersâ€”was included in the official
information"; that was "highly unsatisfactory" in the context of information "given to people to 'remove any
worries' they might have"; that readers of PEC3 were misled by "assurances that were never intended to be met". It
was (in part) that view which led her to make the first finding of maladministration. The judge agreed with her:
para 62 of his judgment.
75 In order to understand why both the ombudsman and the judge took the view that the information in PEC3
to which I have just referred was inaccurate, incomplete and potentially misleading it is necessary to have in mind
that, as the judge had explained, at paras 3-5, in addition to introducing the MFR in respect of occupational pension
schemes, Part I of the Pensions Act 1995 had established priorities for the application of a scheme's assets in the
event of the scheme being wound up with insufficient assets to meet its liabilities in full.
76 Section 73(3) of the 1995 Act, read with section 73(2), required that the assets of an occupational pension
scheme other than a money purchase schemeâ€”and so, typically, a salary related schemeâ€”were to be applied, on
the winding up of the scheme, in satisfying the liability for pensions in payment (and for the pensions of dependants
of pensioners whose pensions were in payment on death) before satisfying the liability for accrued rights to future
benefits of members whose pensions were not in payment. The effect was that the assets available "to provide â€¦
younger members with a cash
[2009] 178
value of their pension rights" (which they could transfer to another occupational pension scheme or to a personal
pension) would be the assets remaining after satisfying in full the pensions in payment. Members whose pensions
were not in payment were that much more vulnerable in the event that the assets of the scheme were not sufficient
to meet its liabilities. In describing the intended effect of the MFR (in the passage which I have just set out) leaflet
PEC3 does not draw attention to the differential treatment of pensioners and members whose pensions are not in
payment under the priority rules.
77 Section 56(1) of the 1995 Act is in these terms:
"Every occupational pension scheme to which this section applies is subject to a requirement (referred to in
this Part as 'the minimum funding requirement') that the value of the assets of the scheme is not less than the
amount of the liabilities of the scheme."
Section 56 (like section 73) applies to a salary related scheme. Section 56(3) of the Act is in these terms:
"For the purposes of this section and sections 57 to 61, the liabilities and assets to be taken into account, and
their amount or value, shall be determined, calculated and verified by a prescribed person and in the prescribed
manner." (Emphasis added.)
In that context "prescribed" means prescribed by regulations made by the Secretary of State: section 124(1) of
the Act. Regulations made for that purpose may provide for the amount of the liabilities of the scheme to be
calculated and verified in accordance with guidance prepared and from time to time revised by a prescribed body
and approved by the Secretary of State.
78 When section 56 of the 1995 Act is read with section 73(3)(c)(i) and section 124(2) of the Act, it is clear
(although not, I think, expressed in terms) that "the amount of the liabilities of the scheme" (or "the amount of the
scheme liabilities": section 56(5)(a)) includes the amount of the liabilities to members in service in respect of their
accrued rights to future benefits. The value of those accrued rights was to be determined on the hypothesis that the
member in service had opted, immediately before the time for determination, to terminate his service: section
124(2)(b) of the Act. It may be said (I think) that it would have been reasonably obvious to the sophisticated reader
of the PEC3 leaflet who was familiar with the provisions of the 1995 Act that the assurance in the passage to which
I have referredâ€”that, if the pension scheme were to be wound up, the MFR would "make sure" that there should
be enough assets in the scheme "to provide all younger members with a cash value of their pension rights" which
could be transferred to another occupational pension scheme or to a personal pensionâ€”was an assurance that (after
full provision had been made for pensions in payment) there would be sufficient assets to pay to members in service
the transfer value of their accrued rights: that transfer value being the value calculated by an actuary in accordance
with guidance and on the basis of assumptions approved by the Secretary of State. That is not, of course, to say that
the PEC3 leaflet was addressed only (or even primarily) to sophisticated readers who were familiar with the
provisions of the 1995 Act. The ombudsman found that it was intended for a much wider readership.
[2009] 179
The significance of the point is that (even if fully understood) the assurance had no greater value than the value put
on accrued rights by an actuary acting on assumptions approved by the Secretary of State. If the reader was misled
as to the policy underlying those assumptions, the assurance could not be relied upon.
79 The 1996 Regulations, when made on 12 June 1996, provided, at regulation 3(1), that the amount of the
scheme liabilities for the purposes of section 56 of the Act were to be calculated by the scheme actuary (that is to
say, the actuary appointed under section 47(1)(b) of the Act) in the manner specified in regulations 4 to 9, on the
general assumptions specified in paragraphs (2) and (3) of regulation 3 and in accordance with the guidance given
in mandatory guidelines (GN27) prepared and published by the Institute of Actuaries and the Faculty of Actuaries.
The assumptions included those in regulation 3(2)(c):
"that liabilities in respect of members will be so secured thatâ€” (i) the benefits of pensioner members will be
equal in value to those under the scheme; and (ii) the benefits of active members and deferred members will be
reasonably likely to be equal in value to those payable in respect of their accrued rights under the scheme â€¦"
In that context the expression "pensioner member" had the meaning given by section 124(1) of the 1995 Act: it
meant a person whose pension was in payment. "Active member" was a person in pensionable service under the
scheme. A "pensioner member" was a person other than an active or deferred member who had accrued rights
under the scheme. It is pertinent to note the difference in treatment between pensioner members on the one hand
and active and deferred members ("non-pensioner members") on the other hand. In the case of the former, the
actuary was to make the assumption, in calculating the amount of scheme liabilities for the purpose of forming an
opinion whether the MFR was met, that their benefits will be equal in value to those under the scheme: in the case
of the latter, the assumption was to be that their benefits will be reasonably likely to be equal in value to those
payable in respect of their accrued benefits under the scheme.
80 The 1996 Regulations had not been made at the date of leaflet PEC3. But (as the ombudsman pointed out at
paras 4.63 and 4.64 of the report) there had been the exchange between the actuarial profession and the DSS which
had led to the letter dated 22 November 1995 to which I have referred earlier in this judgment. For convenience, I
set out again the passage in that letter in which the DSS explained "the underlying purpose of the MFR":
"the intention underlying the MFR (which was clearly expressed by ministers during the passage of the
Pensions Bill) is to require schemes to have a level of assets which should as a minimum be sufficient, if the
scheme were to wind up, to enable it to pay in respect of each non-pensioner member a sum which if invested
in an appropriate alternative pension vehicle could reasonably be expected to generate a pension benefit at least
equivalent to that which the scheme would otherwise have paid in respect of rights accrued up to that point in
time. By reasonable expectation we mean that there should be at least an even chance."
[2009] 180
There may be room for argument whether the concepts expressed by the phrases "reasonably expected to generate
a pension benefit at least equivalent to â€¦", "at least an even chance [of generating a pension benefit at least
equivalent to] â€¦" and "benefits â€¦ reasonably likely to be equal in value to â€¦" reflect identical degrees of
possibility or probability. As the ombudsman pointed out, at para 5.51 of the report, a "reasonable expectation"
would not ordinarily be understood to mean "only a 50% chance". But, for my part, I do not think it is in doubt that
none of those phrases have a meaning which equates with "making sure" that there will be assets in the scheme on a
winding up which should be enough to provide for non-pensioner members (or members in service) a cash value of
their pension rights. Again, in describing the intended effect of the MFR, leaflet PEC3 does not draw attention to
the differential treatment in this respect of pensioner and non-pensioner members.
81 The ombudsman's findings in relation to leaflet PEC3 are set out at paras 5.40-5.43, 5.67 and 5.68 of the
report. After referring to the passage at p 15 of the leaflet, the ombudsman said:
"5.41 â€¦ No mention was made that the Government intended for non-pensioners that they would only have a
'reasonable expectation' that this [the provision of a cash value of their pension rights] would be the case, still
less that such an expectation meant only an 'even chance'.
"5.42 DSS had been given warnings that care had to be taken to ensure that scheme members did not
misunderstand the degree of protection that the new legislative framework would provide for their pension
rights. They had a responsibility to ensure that there were no significant omissions from any information they
chose to publish.
"5.43 Given this, I consider that the failure to ensure that the most fundamental aspect of the MFRâ€”the
policy intention that Government would adopt towards what the MFR would actually provide in terms of
security for scheme membersâ€”was included in the official information given to people to 'remove any
worries'they might have was highly unsatisfactory. It misled the readers of that leaflet by giving them
assurances that were never intended to be met."
And she returned to that point in the later paragraphs:

"5.67 I have seen nothing that would make me doubt that the Government's intention behind the MFR was
always that it could only provide a limited degree of security to non-pensioner membersâ€”which was apparent
from its design â€¦
"5.68 However, this was not properly disclosed to those most affected by such an intention. I consider that the
official information given to the public about the degree of security provided by a scheme funded to the MFR
level: (i) was, prior to September 2000, misleading, incomplete and inaccurateâ€”in that it gave assurances
which were incompatible with the design and purpose of the MFR as prescribed by Governmentâ€”and with its
practical operation. These assurances were that the MFR was designed to ensure that schemes had sufficient
assets to meet their liabilities and that a scheme funded to the MFR level would be able to pay cash transfers of
accrued rights to non-pensioners. In addition, no disclosure or even mention was made of risks to accrued
rights or of the potential effects of statutory priority orders on wind up â€¦"
[2009] 181
It was those findings which led the ombudsman to conclude (at para 5.71 of the report) that official information
about the MFR "was not clear, complete, consistent or always accurate". In that respect, the DWP (and its
predecessor, the DSS) did not conform to the standards which it had set itself (para 5.72); or the standards which
the ombudsman would, herself, have expected in official information "about such important matters": para 5.73.
For those reasons, she found that "the deficiencies in the relevant official information that I have identified
constituted maladministration".
82 In reaching those conclusions the ombudsman had had the opportunity to take account of representations
made in two letters (dated, respectively, 27 January 2006 and 28 February 2006) from the Permanent Secretary at
the DWP. It is, I think, fair to say that the first of those letters does not refer to leaflet PEC3 in terms; and does not
seek to meet the criticisms made in the specific paragraphs of the report to which I have just referred. The response
in that first letter is limited (in this context) to the short statement (at para 7(iii) of the letter) that: "all of the leaflets
to which the draft report refers carried a general health warning making clear that they were not complete
explanations of the law and were for general guidance only. As such they could not be absolutely relied upon."
There are further comments in Annex B: to the effect (i) that publications are not to be "regarded as
maladministrative simply because they fall short of the standards set down in internal guidance" and (ii) that
"it cannot be maladministrative simply for the department to have taken a decision, with regard to what should
be covered in a leaflet, that was different from the assessment which the ombudsman would have made: two
reasonable people can make different decisions based on the same evidence."
The ombudsman set out the text of that first letter at Annex D to the report.
83 At para 8 in the second letter (dated 28 February 2006) it was asserted that the information given in leaflets
(including, by inference, the information in PEC3) was "general and high level"; but that was said to be appropriate
for those publications. It was said that the DWP did not accept that "because they did not give a detailed
explanation of the MFR (which as the report acknowledges is a complex, technical subject), this makes them
incomplete or inaccurate". In para 9 it was said that the report placed
"insufficient weight on the fact that all of the leaflets â€¦ considered contained warnings (that the information
given is for guidance only and is not a complete statement of the law) to alert the reader very clearly to the
limitations of the information being provided."
Para 10 developed that point:

"We remain firmly of the view that it is reasonable to expect people to obtain more detailed information about
the specific pension scheme they were joining (or had joined) rather than relying on brief, general and
introductory material such as was issued by the department. It is unrealistic to maintainâ€”as the report
appears toâ€”that individuals had no responsibilities beyond reading the general leaflets issued by the
department. For example nobody could, in our view, have read a leaflet which opens with a phrase saying that
it provided 'a brief summary of the changes' arising from the 1995 Pensions Actâ€”as PEC3 didâ€”and went on
[2009] 182
to say that 'more detailed information will be published later', and have concluded that they had the
full picture. The leaflet concerned covered the whole of the provisions of the Pensions Act 1995 in
20 pages and the MFR in just four sentences. Nobody could believe that they were being provided
with an unqualified and complete understanding of the MFR; that occupational pension schemes
were absolutely safe; and that they could, therefore, join (or remain in) one without making further
inquiries."
I find nothing in that second letter which seeks to respond to the specific criticisms summarised in para 5.68(i)
of the report. It was, if I may say so, obvious that the ombudsman was not suggesting that leaflet PEC3 was apt to
provide, or purported to provide, the reader with "an unqualified and complete understanding of the MFR": the
thrust of the criticism (which the DWP made no attempt to meet) was that the assurances which were given in
PEC3 as to the purpose and effect of the MFR were incompatible with the Government's intentions.
84 The ombudsman laid the report before Parliament on 15 March 2006. On the following day, in an oral
statement in the House of Commons, the Secretary of State indicated that the Government could not accept any of
the findings of maladministration; and that he would publish a full response within a few weeks. The formal
response was published in June 2006. It is in that document ("the DWP response") that one may expect to find the
Government's considered reasons for rejecting the first finding of maladministration.
85 In para 11 of the DWP response it was accepted that
"The MFR was never intended to require schemes to hold sufficient assets to ensure that all members' benefits
could be fully secured should the scheme wind up (by purchasing annuities and deferred annuities from an
insurance company)."
It is said that:
"Instead it was intended to ensure that a scheme which was fully (i e 100%) funded on the basis of the MFR
should have sufficient assets, in the event of it winding up, to protect fully pensions already in payment (by
buying annuities), and to give younger members a cash amount which, if placed in a personal pension would
allow them a reasonable expectationâ€”but not a guaranteeâ€”of achieving, at retirement, benefits equivalent
to those lost." (Emphasis added.)
There was, therefore, no suggestion that the ombudsman was wrong to reach the conclusion which she did as
to the Government's intentions in relation to the protection which the MFR was to provide for non-pensioner
members. On the basis that she was correct to reach that conclusion, it might have been expected that the DWP
response would seek to meet the criticismâ€”clearly expressed in the paragraphs of the report to which I have
referredâ€”that the assurances given were incompatible with the Government's intentions; or, as the point was put in
para 5.43, that PEC3 was misleading in that it gave assurances which it was never the Government's intention to
meet.
86 Any expectation that the DWP response would seek to meet that criticism would have been disappointed.
The only references to leaflet PEC3
[2009] 183
in that document are at para 21 (which does no more than identify the leaflet) and para 22.1 (which repeats the
point made in the letter of 28 February 2006: that the leaflet was intended to be "a brief summary of the changes"
and covers the MFR "in just four sentences"). The thrust of the DWP response, in relation to the first finding of
maladministration, is found in para 36 of that document:
"The â€¦ more general information which the Government provided in its leaflets was intended only to provide
basic information and its limitations were made clear. The Government does not accept the finding that this
information was potentially misleading and, thus, maladministrative."
87 As I have said, the judge agreed with the ombudsman that the description of the intended effect or aim of
the MFR (at p 15 of leaflet PEC3) as being to make "sure" that members received the pensions due to them was
plainly inaccurate and misleading. And he went on say, at para 66, that no reasonable Secretary of State could
rationally disagree with that view.
88 The Secretary of State's challenge to that conclusion is summarised at ground 4 in the grounds of appeal
attached to his appellant's notice:
"[The judge] ought to have held that such a view [disagreeing with the ombudsman's finding in relation to
PEC3] was rationally open to the Secretary of State in the light of (a) the very general purpose of leaflet PEC3;
(ii) the context in which it was published; (iii) the express caveat to which the leaflet was subject; and (iv) its
informal and general language."
That challenge is expanded at paras 120-128 of the appellant's consolidated skeleton argument. It is said, at
para 128, that "the fundamental question in relation to PEC3 â€¦ is whether a reader of the leaflet would be misled
into thinking that the MFR provided a guarantee that all occupational pensions were safe and secure in all
circumstances".
89 The appellant's consolidated skeleton argument sets out, at para 127, five reasons why it is said that the
Secretary of State's view that leaflet PEC3, taken in context, was not in any way inaccurate or misleading. Those
reasons may, I think, fairly be summarised as follows: (i) the leaflet was a high level and general guide to a lengthy
and complex new piece of legislation in relation to which choices had to be made about what to include and what to
exclude, "bearing in mind the objective of encouraging someone to read a short, non-technical document"; (ii) the
leaflet contained a clear and express disclaimer to the effect that it "should not be treated as a complete and
authoritative statement of the law"; (iii) the leaflet made it clear that the primary responsibility for looking after the
interests of scheme members rested with the trustees of the scheme, from whom a member should seek advice; (iv)
the description of the MFR was couched in qualified, non-technical language, appropriate to the circumstances in
which the MFR was introduced as a new protective measure where there had been no such protection before the
1995 Act; (v) the ombudsman's criticism of the failure to mention the "reasonable expectation" test was misplaced
in that "to go down to such a level of technical detail would have been wholly inappropriate in what was the most
general of introductions to a wide-ranging and complex piece of legislation".
[2009] 184
90 On the basis of those reasons it is submitted that the Secretary of State "was rationally entitled to conclude"
that the reader of leaflet PEC3 would not be misled into thinking that the MFR provided a guarantee that all
occupational pensions were safe and secure in all circumstances. If he was entitled so to conclude, then (it is said)
he was entitled to reject the ombudsman's finding on that point.
91 For my part, I am not persuaded that that is the correct approach: I am not persuaded that the Secretary of
State was entitled to reject the ombudsman's finding merely because he preferred another view which could not be
characterised as irrational. As I have said, earlier in this judgment, it is not enough that the Secretary of State has
reached his own view on rational grounds: it is necessary that his decision to reject the ombudsman's findings in
favour of his own view is, itself, not irrational having regard to the legislative intention which underlies the 1967
Act: he must have a reason (other than simply a preference for his own view) for rejecting a finding which the
ombudsman has made after an investigation under the powers conferred by the Act. It is, to my mind, a striking
feature of the history which I have set out that the Secretary of State has not, even in this court, sought to meet the
ombudsman's finding that the assurances given on p 15 of leaflet PEC3 were incompatible with the Government's
intentions.
92 In that context, it is, I think, helpful to look again at the assurances (in relation to the MFR) that were given
in leaflet PEC3. The passage is set out at para 20 of this judgment. It was said, first, that the 1995 Act introduced a
new rule "aimed at making sure that salary related schemes have enough money in them to meet the pension rights
of their members". If section 56(1) of the Act is read out of context (and without a proper understanding of what is
meant by the phrase "the amount of the liabilities of the scheme"), that does, indeed, appear to be its aim: the
minimum funding requirement is that "the value of the assets of the scheme is not less than the amount of the
liabilities of the scheme". It is correct, also, to say that "If the money in the scheme is less than this minimum level,
the employer will need to put in more money within time limits". And, subject to a proper explanation of what is
meant by the phrase "pensions are protected", it would be correct to say that "The minimum funding requirement is
intended to make sure that pensions are protected whatever happens to the employer". The vice, as it seems to me,
is that, unless the reader has knowledge of the detailed provisions of the 1995 Act, and of the Government's
intentions as set out in the letter dated 22 November 1995 and subsequently disclosed in the 1996 Regulations, he is
likely to be misled into thinking that "pensions are protected" means that (provided the MFR has been maintained in
respect of his scheme) his pension rights will not be at risk if the scheme is wound up. That belief would be
encouraged by the statement that "If the pension scheme has to wind up, there should be enough assets for pensions
in payment to continue".
93 That statementâ€”"there should be enough assets for pensions in payment to continue"â€”is, of course,
directed to the position of pensioner members: that is to say, those whose pensions are in payment at the date when
the scheme is wound up. The ombudsman made no finding that, in relation to pensioner members, the assurances
given in leaflet PEC3 were misleading. Her criticisms (in this context) are confined to the assurance given to non-
pensioner members (and, in particular, to members in service)
[2009] 185
by the statement that "if the scheme has to wind up there should be enough assets to provide all younger members
with a cash value of their pension rights". Her finding was that that statement, read with the assurance that the aim
of the MFR was to make sure that schemes have enough money in them to meet the pension rights of their members
and to make sure that pensions are protected whatever happens to the employer, would lead members in service to
think that "the cash value of their pension rights" would be of an amount that would, on transfer to another scheme,
provide future benefits equivalent to those to which they had become entitled in the existing scheme. If that was
what members in service were led to think, the assurance was misleading. It was misleading because the
Government's intention was not that the cash value would be of an amount which would provide, or would be more
likely than not to provide, benefits equivalent to those under the existing scheme: the intention was that the amount
would be such as to give an "even chance" of equivalent benefits.
94 The Secretary of State did not, at the time when he decided to reject the ombudsman's first finding, seek,
and has not since sought, to challenge the ombudsman's view that an assurance that the aim of the MFR was that the
cash value of accrued rights would be of such amount that members in service would be protectedâ€”in the sense
that, on transfer to another scheme, that amount would provide benefits equivalent to those under the existing
schemeâ€”is not the same as an assurance that the aim was that the amount would provide an even chance of
equivalent benefits. Rather, the basis for the decision to reject is said to be (a) that the reader of leaflet PEC3 would
not have understood the assurance in the sense which led the ombudsman to make the finding that she did and (b)
that to explain that the aim was to provide no more than an even chance of equivalent benefits would have
introduced an unacceptable degree of complexity into leaflet PEC3. In my view, neither proposition can withstand
scrutiny. As to (a), it is impossible to suggest that the reader of leaflet PEC3 would not have been led to think that
both pensioner members and members in service were to be provided with the same degree of protection: the
protection would be provided in a manner which reflected the difference between rights to a pension in payment
and future rights but the degree of protection would be the same in respect of each class of members. The
assurance in relation to pensioner members was that there should be enough assets "for pensions in payment to
continue": there was nothing to indicate to the reader that members in service were to have some lesser degree of
protectionâ€”comparable to an even chance that pensions in payment would continue. As to (b), the suggestion that
to explain that the aim was to provide no more than an even chance of equivalent benefits would have introduced an
unacceptable degree of complexity cannot be sustained in the light of the explanation that was actually given, in
September 2000, when the DSS published a press notice to accompany the consultation document Security for
Occupational Pensions. As the ombudsman pointed out, at para 4.319 of the report, para 4 of Annex 1 to that press
notice explained that
"The objective of the MFR is that a scheme fully funded according to its requirements would, if the employer
became insolvent, protect fully pensions in payment, and provide younger members with a transfer value that
would give them a reasonable expectation of replacing scheme benefits if they transferred to another pensions
vehicle."
[2009] 186
Save that the equivalent passage in a document published in January 1996 might more appropriately have referred
to "an even chance" rather than "a reasonable expectation", there is nothing to explain why the explanation as to the
aim of the MFR which was given in September 2000 could not have been given in January 1996.
95 As I have said, the judge observed, at para 66 of his judgment, that no reasonable Secretary of State could
rationally disagree with the ombudsman's view that the information in leaflet PEC3 was incomplete and potentially
misleading. I am satisfied that the judge was correct in that observation; but, for my part, I prefer to say that, in the
circumstances of this case, it was irrational for the Secretary of State to reject the ombudsman's finding to that
effect. For that reason I would hold that the judge was correct to conclude that the Secretary of State's decision to
reject the first finding of maladministration should be quashed. It follows that I would dismiss the Secretary of
State's appeal.
96 I should add that, in the context of the Secretary of State's appeal, it has been unnecessary to consider (and I
have not considered) whether, in rejecting the ombudsman's first finding of maladministration, it was irrational for
the Secretary of State to refuse to accept the ombudsman's view on other matters which led her to make that finding.
It is unnecessary to do so, first, because the judge made no findings of irrationality in respect of those other matters
from which the Secretary of State is concerned to appeal.
97 Second, although the claimants filed a respondent's notice in the Secretary of State's appeal (2007/0554) in
which it is asserted, in general terms, (i) that it was irrational for the Secretary of State to reject the ombudsman's
findings save in the limited circumstances set out in Ex p Danaei [1998] INLR 124 and (ii) that the reasons given
by the Secretary of State for rejecting the ombudsman's first finding did not include and could not rationally have
included any of those circumstances, they do not identify in that notice any particular information or matter in
relation to which it is said that the judge ought to have found (but did not find) irrationality. Nor is any such
information or matter identified, in terms, in the relevant section (paras 125-140) of the claimants' skeleton
argument; although it is said, at para 123, that "to respond to the ombudsman's detailed and comprehensive analysis
by considering two leaflets (PEC3 and PM3) in isolation is manifestly inadequate" and that that, of itself, should
lead the court to conclude that the Secretary of State had failed to provide rational and cogent reasons for rejecting
the first finding. In those circumstances it does not seem to me necessary or appropriateâ€”both because it would
be irrelevant to the outcome of the Secretary of State's appeal and because it would add substantially to the length
of this already lengthy judgmentâ€”for this court to attempt to identify for itself other matters in relation to which
the Secretary of State can be said to have acted irrationally in rejecting the first finding of maladministration. I
should not be taken to have decided that it would not be possible to do so.
The claimants' appeal
98 The claimants appeal (under reference 2007/0556) from the judge's decision (reflected in paras 2 and 3 of
the order of 21 February 2007) that the decisions of the Secretary of State to reject the first finding of
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maladministration in the report (in so far as that finding related to causation) and to reject the third finding of
maladministration were lawful. Their appellants' notice included an appeal from para 4 of the order (dismissing the
claim for breach of article 1 of the First Protocol to the Human Rights Convention); but we were told by counsel in
the course of argument that that appeal was not pursued. The primary ground of appeal in respect of both para 2 of
the order (ground 2) and para 3 (ground 7) is that, absent any application for an order in judicial review proceedings
quashing the findings in the report, the judge ought to have found that the Secretary of State was bound by those
findings. For the reasons which I have already explained, I reject that contention. The relevant question for the
judge, in each case, was whether the Secretary of State had acted rationally in rejecting the ombudsman's findings.
The findings as to causation of injustice
99 The remaining grounds of appeal in respect of para 2 of the order are: (i) that the judge erred in finding that
the Secretary of State had rejected the ombudsman's findings on the grounds that it was irrational for her not to limit
her findings to those people who had read or relied upon the assurances in the leaflets (ground 3); (ii) that the judge
erred in treating the ombudsman's finding as only a finding that maladministration was a significant contributory
factor in the creation of financial losses suffered by individuals (ground 4); and (iii) that the judge failed to have
regard to the fact that the Secretary of State had, in another case ("the inherited SERPS case"), accepted an
approach to causation analogous to that adopted by the ombudsman in this case (ground 5). In order to address
those grounds (in particular, grounds 3 and 4) it is necessary to examine the structure of that part of the report in
which the causation of injustice is discussed.
100 The ombudsman had summarised her findings of maladministration at para 5.164 of the report. At paras
5.165-5.168 she considered whether individuals had suffered injustice. At paras 5.167 and 5.168 she said:
"5.167 It is clear to me from the evidence I have reviewed about the personal circumstances of all those who
have complained to me that they and their families have suffered financial loss, a sense of outrage, and
considerable distress, anxiety and uncertainty.
"5.168 I am also satisfied that they have suffered injustice through an inability to make informed choices or to
take remedial action."
She then turned to consider whether that injustice had been remedied (paras 5.169-5.175); and found that it
had not been remedied and that it was not intended that it would be remedied. And she went on to consider what
had caused that injustice: paras 5.176-5.244.
101 The ombudsman addressed that question in relation to each of the three heads of injustice which she had
identified in paras 5.167 and 5.168: first, in relation to inability to make informed choices and to take remedial
action (at paras 5.179-5.186); second, in relation to outrage and distress (at paras 5.187-5.191); and, third, in
relation to financial loss (at paras 5.192-5.244). Her conclusions in relation to the first and second of those heads
are summarised at para 5.245:
[2009] 188
"I have found that injusticeâ€”in the forms of a sense of outrage, lost opportunities to make informed choices
or to take remedial action, and distress, anxiety and uncertaintyâ€”was caused by maladministration."
In summary, the remedies which, as she held, would have been open to members included the following: (i) to
choose not to transfer into the scheme the value of accrued rights from other schemes; (ii) to choose not to make
voluntary contributions to the scheme, but to invest their moneys elsewhere; and (iii) to seek to coerce employers to
raise their contributions: paras 5.229, 5.230 and 5.233(ii). Trustees could have opted for a "gilts-matching"
investment policy (para 5.233(i)); and sponsoring employers could have sought to make arrangements to enable
them to increase their contributions: para 5.233(iii).
102 The ombudsman's conclusion in relation to the third of those heads (financial loss) was in less absolute
terms. It was summarised at para 5.246:
"I have also found that the maladministration I have identified was a significant contributory factor in the
creation of the financial losses suffered by individuals, along with other systemic factors."
And she added:

"A further consequence of that maladministration was financial injusticeâ€”the distortion of the reality facing
scheme members so that they were wholly unaware that their pension rights were dependent on the ongoing
security of their employer."
103 The "other systemic factors" to which the ombudsman referred at para 5.246 of the reportâ€”delays in the
winding up process, the actions of some employers, the nature of the relevant legal framework and some of the
Government's policy decisionsâ€”were discussed at paras 5.200-5.222: at para 5.223 she turned to consider
"whether maladministration played any role in bringing about financial loss". She noted, at para 5.234 of the report,
that she had found that the Government had provided "incomplete, inconsistent, misleading or inaccurate
information about the degree of protection that the law provided". That had led to "members of the schemes and
others being unaware of the need to take any of the possible forms of remedial action" (para 5.235) that she had
outlined in paras 5.229-5.233. At para 5.236 she held that those lost opportunities were the result of the
maladministration which she had identified and contributed directlyâ€”with other factorsâ€”to the situation in
which the loss of pensions and other benefits which were to be derived from the members' contributions to their
scheme were able to occur. At para 5.239 she posed the question: "But what of whether that maladministration
caused injustice?" In answer to that question she held, at para 2.243, that:
"Official information had effectively distorted the reality of the position in which scheme members found
themselves. As a result, they were wholly unaware that their pension rights were dependent on the ongoing
security of the employer sponsoring their scheme."
That constituted an injustice which was caused by maladministration.

104 The basis on which the Secretary of State rejected the ombudsman's findings as to causation of injustice is
to be found at paras 48-57 of the
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DWP response of June 2006. At paras 48-51 it is emphasised that the immediate cause of financial loss was the
winding up of schemes at a time when the assets held were not sufficient to meet the liabilities: key contributory
factors were "the sustained downturn in world stock markets in 2000/2001" and the substantial increase in the cost
of purchasing annuities to secure pensions in payment caused by "unanticipated increases in longevity and falls in
interest rates" which left less to be shared between non-pensioner members. Nevertheless, the response went on, at
paras 53-56, to explain why the Government rejected the ombudsman's conclusion that there was a causal link
between the official information supplied in leaflets and the actions taken by scheme members; or that scheme
members would necessarily have acted differently had the official information been above criticism. It is
convenient to set out the relevant paragraphs in full:
"53. Crucially, a number of the schemes covered by the report would not have had an MFR valuation before
they went into wind up. In these cases, self-evidently, members, even if properly advised about the limitations
of the MFR, could not have taken account of such a valuation. Other schemes, which had a valuation, would
have been found to have been underfunded against this test. Even if the members of these schemes had
believed that, if their scheme was funded up to the MFR, they were fully protected, they could not have
believed this protection applied to their scheme if underfunded. Therefore, any decision they made to join or
stay in that scheme in these circumstances could not have been influenced by a belief that their scheme was, in
some way, 'safe'.
"54. Where their scheme had been the subject of a MFR valuation and had been found to comply with it, it is
clearly more plausible that the scheme's members might have sought to act differently if they had had a fuller
explanation of what safeguards this did, and did not, provide. Even in those circumstances, however, and
leaving aside the issue of the responsibility for any such lack of a fuller explanation, it is the Government's
view that any action that could have been taken by members, either individually or collectively, would have
been unlikely to have protected a greater part of their accrued rights, much less protected all of them. Indeed
many possible actions would have exposed them to potentially greater risks.
"55. For example, taking some of the possibilities raised in the ombudsman's report, it would have been very
difficult to persuade an employer to inject more money into a scheme when that company was itself in serious
financial difficulties. In addition it would have been surprising if the employer in such circumstances would
have been able to find another company willing to take it over and fund the pension deficit.
"56. Where individuals wanted to transfer their money out of their occupational pension scheme and to remain
working for the sponsoring employer, their only realistic option would have been to have transferred their share
of the fund (which might have been reduced by the scheme) into a personal pension. This would, however,
have left them still exposed to the risk of stock market movements and the general economic situation, as well
as having to pay management costs and is likely to have deprived them of the employers' contribution. How
much they would have lost or gained from such a transfer would be dependent on the
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company from which they chose to buy their personal pension and would not have been known
until they reached retirement age."
The principal points made in those paragraphs may, I think, fairly be summarised as: (i) that, in cases where
either there had been no MFR valuation at the time their scheme commenced winding up or the MFR valuation had
shown their scheme to be underfunded, scheme members could not claim that any decision to join (or remain in) the
scheme was influenced by a belief that they had the protection which they might have been led to believe the MFR
would provide; (ii) that, in cases where the scheme was funded in accordance with the MFR, there was little (if
anything) that a member could do, in practice, towards achieving protection for his pension rights which was
greater than that actually provided by the MFR, other than transferring the value of his accrued rights to a personal
pension fund; and (iii) that a transfer into a personal pension fund would leave the scheme member exposed to the
same factors (stock market movements and the general economic situation) which had led to the shortfall in the
scheme.
105 As I have said, the judge declined to quash the Secretary of State's decision to reject the ombudsman's
findings as to causation of injustice for the reasons expressed in para 70 of his judgment. He held, in effect, that it
was open to the Secretary of State to take the view that a finding that
"everyone who between 1995 and 2005 suffered losses on the winding up of their pension scheme was the
victim of injustice in consequence of maladministration, whether or not official misinformation had anything to
do with it and whether or not there were any remedial steps open to them" was irrational.
106 In those circumstances, I am not persuaded that the claimants have made out ground 3 in their grounds of
appealâ€”that the judge erred in finding that the Secretary of State had rejected the ombudsman's findings on the
grounds that it was irrational for her not to limit her findings to those people who had read or relied upon the
assurances in the leafletsâ€”in respect of the first limb of the finding in para 5.246 of the report. In my view it is
clear from the DWP response that the Secretary of State did reject the finding that maladministration was a
significant contributory factor in the creation of financial losses suffered by individuals on the ground that that
finding could not be supported in the case of individuals who could not have relied on the leaflets as a basis for
their decisions whether to join (or remain in) their schemes: para 53 of the response. The judge held that it was
irrational for the ombudsman to find that financial losses suffered in circumstances where it could not be said that
"official misinformation had anything to do with it" did, of themselves, give rise to "injustice in consequence of
maladministration". He was correct to do so. He was correct, also, to take the view that that was a ground on
which the Secretary of State was entitled to reject the ombudsman's finding.
107 It is no answer to contend (as the claimants do contend at para 179 of their skeleton argument) that the
finding in relation to the causation of injustice "was carefully limited only to those individuals who had complained
to the ombudsman, who submitted evidence of their circumstances and their knowledge of the Government
information". Although the ombudsman makes it clear, at para 2.2 of the report, that she
[2009] 191
was concerned to decide "whether maladministration has caused injustice to those who have complained to
meâ€”and to those in a similar position to those complainants", she does not (and, it may be, could not) say whether
all those who had complained (in excess of 200 in number: para 1.44) were in schemes which (i) had had an MFR
valuation before commencing wind up and (ii) were fully funded in accordance with that MFR. Of the four
representative complainants whose circumstances are described at paras 2.4-2.32 of the report, two (Mr G and Mr
B) satisfy that test; and two (Mr J and Mr D) were in schemes which were underfunded: paras 2.6 and 2.21.
108 I am persuaded, however, that there is force in ground 4 in the claimants' grounds of appeal: that the judge
erred in treating the ombudsman's finding as only a finding that the maladministration was a significant
contributory factor in the creation of financial losses suffered by individuals. I can find nothing in the DWP
response to suggest that the Secretary of State questioned the ombudsman's conclusion that (if there were
maladministration as identified in her first finding) that maladministration caused injustice in the forms of outrage,
distress, anxiety and uncertainty: para 5.245 of the report. And, although the judge set out the ombudsman's finding
in that respect (at para 21 of his judgment), it does not seem to have been in his mind when he came to address the
challenge to the ombudsman's finding as to causation at paras 67-70. Neither the Secretary of State, nor the judge,
challenged the ombudsman's view that the concept of injustice was wide enough to cover a sense of outrage,
distress, anxiety and uncertainty; nor that the concept would cover the loss of opportunities to make informed
choices or to take remedial action (para 5.245) and "the distortion of the reality facing scheme members so that they
were wholly unaware that their pension rights were dependent on the ongoing security of their employer": para
5.246. And, in that context, it seems to me to be no answer to say that there was no real prospect that remedial
action would avoid financial loss. The ombudsman's finding included a finding that injustice was caused by the
loss of the opportunity to make informed choices.
109 At para 8 of the letter dated 27 January 2006, to which I have referred earlier in this judgment, the DWP
had noted that "less than half of the respondents to your survey said that they had seen the publications in question".
The ombudsman responded to that point at paras 7.56 and 7.57 of the report:
"7.56 First, while it is true that only approximately one-half of those complainants who responded to my
survey can nowdemonstrate that they had seen the official information that I consider to be deficient, I think
that it cannot be forgotten that a considerable time has passed since many of the leaflets were issued and read.
Nor is it the case that all of those who cannot now demonstrate it did not see such information in the past.
"7.57 I do not consider that it is reasonable to expect all individuals to now provide evidence in the form of
copies of leaflets that were read many years ago. Such an expectation does not accord with the approach that
my office has taken in previous similar casesâ€”nor is it one that DWP accepted in those cases."
[2009] 192
It is to that point that the claimants refer in ground 5 of their grounds of appealâ€”that the judge failed to have
regard to the fact that the Secretary of State had, in the inherited SERPS case, accepted an approach to causation
analogous to that adopted by the ombudsman in this case: para 186 of their skeleton argument.
110 The claimants are correct to point out that the judge did not refer to that point; and may, therefore, be taken
to have failed to take it into account or to have given it no weight. But I am not persuaded that the point is of any
assistance to the claimants in their appeal. The Secretary of State's reasons for rejecting the ombudsman's findings
in relation to the causation of injusticeâ€”as set out in the DWP responseâ€”did not include an assertion that
complainants had not read the official leaflets. The Secretary of State's point was a different one: that, given that a
number of the schemes either had no MFR valuation or were underfunded by reference to the MFR, complainants
who had been in those schemes could not be said to have relied on any misleading information about the MFR
which was contained in a leaflet which they did read. It may be said that, when the judge observed, at para 70 of
his judgment, that "If the first finding had been limited to the causation of injustice to any scheme member who had
read the offending leaflets", he did not appreciate that, on the basis of the Secretary of State's view, it would not
assist a complainant who was in an underfunded scheme to establish that he had read a leaflet which would have
given him no comfort; but that does not lead to the conclusion that the judge was wrong to hold that the Secretary
of State was entitled to reject the finding as to causation in relation in the first limb of para 5.246 of the report.
111 For those reasons I would allow the claimants' appeal against para 2 of the order of 21 February 2006 in so
far as it relates to para 5.245 and to the second limb of para 5.246 of the report; but dismiss that appeal in so far as it
relates to the first limb of para 5.246.
The third finding of maladministration
112 The 1996 Regulations had provided, at regulation 7(7) that, for the purposes of calculating the liabilities of
a scheme in respect of non-pensioner members, it was to be assumed (save in a case where the scheme had a gilts-
matching policy for liabilities in respect of deferred members) that those liabilities would be met (a) to the extent
that they related to any time before the switch-over period, from investment in equities and (b) to the extent that
they related to the switch-over period, from investments in both gilt-edged securities and equities, in the respective
proportions indicated by the guidance in GN27 to which I have referred earlier in this judgment. For the purpose of
that regulation, the switch-over period, in relation to a member, was the period of ten years ending with the date on
which the member would first become entitled under the provisions of the scheme to receive a full pension on
retirement: regulation 7(10). In order to calculate the liabilities of a scheme in respect of non-pensioner members
(in the context of determining the MFR) it was necessary for the actuary to make an assumption as to the yield from
investment in equities. The guidance note GN27 provided for that assumption to be based on a concept known as
the equity market value adjustment ("MVA"). The adjustment was expressed as a ratio to the dividend yield on the
FTSE Actuaries All-Share Index.
[2009] 193
113 When the 1995 Act and the 1996 Regulations came into force, that ratio was 4â€¢25 to the gross dividend
yield; in 1998 the ratio was changed to 3â€¢25 to the net dividend yield; in March 2002 the ratio was changed,
again, to 3â€¢00 to the actual dividend yield: paras 3.132 and 3.136 of the report. Those changes were made with
the approval of the DWP (or of its predecessor, the DSS). The ombudsman referred to the advice which she had
received as to the significance of those changes, at paras 3.141-3.143:
"3.141 [My advisers] advise me that the 15 June 1998 change reduced the value of the MFR liabilities for
members more than ten years away from their MFR pension age by 9â€¢4%.
"3.142 I am also advised that the 7 March 2002 change to the formula reduced the value of the MFR liabilities
for members more than ten years away from their MFR pension age by 7â€¢7%.
"3.143 Thus, the effect of the combined changes, compared to the original 1997 basis, was a weakening in the
MFR basis of approximately 17% â€¦"
She noted, at para 3.146, that she had been advised that, after the March 2002 change, the MFR transfer values
had only just above a 35% chance (for members aged up to 45) of providing the member's pension.
114 The March 2002 change is the subject of the third finding of maladministration: the finding that "the
decision in 2002 by DWP to approve a change to the MFR basis was taken with maladministration": para 5.164(iii)
of the report.
115 The circumstances which led to the March 2002 change were described by the ombudsman at paras 4.371-
4.435 of the report and summarised by the judge at paras 71-74 of his judgment. It is, I think, sufficient to refer to
the following.
(1) In March 2001 the Government had published its proposals for the reform of the MFR, following
publication (on the previous day) of a report commissioned by the Government (the Myners Report) which
(amongst other recommendations) had recommended replacement of the MFR by an alternative funding standard.
On 5 September 2001 the chairman of the Pensions Board of the actuarial profession wrote to the Head of Private
Pensions at the DWP to propose that an interim change should be made prior to the reform of the MFR. The
interim change proposed was the lowering of the dividend yield in the MVA: para 4.371 of the report. In that letter
the chairman referred to factors which would, on the one hand, indicate the need to weaken the basis of the MFR (in
particular, the uncertainties that dividend payments would be maintained at past levels) and, on the other hand,
indicate the need to strengthen that basis (increased longevity). The letter included the following passage:
"The extent to which these two effects cancel each other out in terms of the total for the MFR liabilities will
depend on the maturity of each particular scheme. We are of the view, however, that the overall position has
changed sufficiently to require a lowering of the dividend yield in the MVA from 3â€¢25% to 3%."
(2) On 25 September 2001 the Government Actuary's Department ("GAD") responded to the DWP's request
for views on (inter alia) whether "the DWP should accede to the request from the actuarial profession that the
[2009] 194
MFR equity MVA should be amended, by replacing the assumed long-term dividend yield of 3â€¢25% with 3%:
para 4.388 of the report. The response (para 4.391 of the report) was in these terms:
"In our view, recent eventsâ€”in and of themselvesâ€”do not undermine the thrust of the argument of the
actuarial profession. Accordingly GAD would agree that the change to the equity MVA proposed by the
profession is justified as a simple change which adjusts the MFR to a level of protection consistent with that
applying when the equity MVA was last adjusted in June 1998."
(3) On 23 October 2001 the DWP replied to the letter of 5 September 2001 indicating (para 4.393 of the
report) its view that a change to the equity MVA should not be made in isolation, "but should be considered as part
of a coherent and balanced package arising out of the current consultation".
(4) On 11 January 2002 ministers were invited, by officials within the DWP, to approve the recommendation
of the actuarial profession that the equity MVA factor be reduced from 3â€¢25% to 3%: paras 4.409-4.415 of the
report. The DWP submission to ministers referred to GAD's advice; and pointed out that the change would lead to
a reduction in MFR liabilities of 7â€¢7% in respect of scheme members who were more than ten years below
pension age. It was said that "This returns things to the level when the MFR was introduced": para 4.414.
(5) In February 2002, the DWP published a summary of responses received to the consultation document The
Minimum Funding Requirement: The Next Stage of Reform (published in September 2001) and on draft regulations
which had been an attachment to that document. In the course of that summary (while recognising that the
recommendation in the letter of 5 September 2001 had formed no part of the draft Regulations) the Government
announced that it had accepted the recommendation from the actuarial profession "to amend the MFR equity market
value adjustment from 3â€¢25% to 3%": (para 4.420 of the report). It was said that
"This change would take account, in a simple and straightforward way, of the overall impact on the strength of
the MFR test caused by reductions in dividend payments made by companies, and of mortality improvements,
and align the strength of the MFR test more closely with its original intended strength."
(6) Regulations to put the interim changes to the MFR basis into effectâ€”the Occupational Pensions Schemes
(Minimum Funding Requirement and Miscellaneous Amendments) Regulations 2002 (SI 2002/380)â€”were made
on 22 February 2002. In a note to the press notice issued when those Regulations were laid before Parliament (on
26 February 2002) the DWP confirmed that it had approved the recommendation of the actuarial profession that the
MVA be reduced: para 4.426 of the report. On the same day the actuarial profession released a press statement
(which had been seen by the DWP in draft) in which it welcomed the fact that its recommendation of a change to
the MVA had been accepted: para 4.432. It was said that the recommendation had been made "to recognise current
market conditions and the lower dividend payouts in recent years"; that the change "eases the burdens on employers
â€¦ to meet the MFR"; but that
[2009] 195
"it also reduces the amount of minimum transfer values for people changing schemes".
116 At paras 5.77-5.81 of the report the ombudsman had considered the decision to change the MFR basis, in
June 1998, by amending the MVA. She concluded that there was no evidence that that decision was taken with
maladministration. As she put it, at para 5.78:
"Not only was the decision taken after DWP had regard to the available options, it was taken after full
consideration of the advice of the actuarial professionâ€”which was supported by further evidence and statistics
to back that advice up."
She did not take the same view of the decision taken in respect of the change in March 2002.
117 The ombudsman's reasons for her third finding of maladministration may, I think be fairly summarised as
follows.
(1) The 2002 decision to change the MFR basis could not be said to have been taken properly simply because
it rested on a recommendation from the actuarial profession (in the letter of 5 September 2001): para 5.110. That
conclusion was based on two factors: (i) that the actuarial profession had made recommendations on four occasions,
each "aimed at ensuring that the MFR remained aligned with the level intended by Government" (para 5.102); and
(ii) that, in choosing to implement two of those recommendations but to reject the others, the Government's
response to those recommendations demonstrated that "It was clearly not the case that the existence of a
recommendation from the actuarial profession â€¦ was sufficient cause for DWP to agree to change the MFR basis":
para 5.104.
(2) Given that there was nothing in the material which she had seen which satisfied her that the 2002 decision
was "taken within a consistent framework of implementing the recommendations of the actuarial profession to
ensure alignment of the MFR with its original policy intention", it was necessary to inquire "on what basis was this
decision taken?": para 5.112. But, in that context it was not necessary to come to a view as to whether the advice
received from the actuarial profession was soundly based: the relevant inquiry was whether the decision was taken
"with regard to a properly documented evidence base and â€¦ with a full assessment of relevant considerations but
without regard to irrelevant considerations": para 5.113.
(3) The evidence did not satisfy that test (para 5.126): in particular, she could not accept that "advice or a
recommendation from the actuarial professionâ€”or from GAD or any other professional adviserâ€”absolved DWP
from seeking to establish all of the relevant facts before making their decision" (para 5.124). The advice from the
actuarial profession was "insufficient in itself to enable DWP to come to a 'considered and balanced' assessment as
to whether to change the MFR basis" (para 5.127); and "the advice provided by GAD to DWP was [not] sufficient
in itself to enable DWP to ensure that the evidence base on which it took its decision was properly documented and
that the reasons for its decision were set out clearly": para 5.129.
(4) The advice from the GAD could be read as being limited in a significant way: it was not clear whether it
was limited as an assessment of whether events in the two weeks following 11 September 2001 ("recent
[2009] 196
events") had undermined the rationale behind the actuarial profession's recommendation; or whether it provided the
confirmation (which the DWP had sought) that the actuarial profession's proposal was in principle appropriate: para
5.137. The GAD's advice "gave no clear basis on which the DWP could be satisfied that the rationale put forward
by the actuarial profession in relation to the effect of events in the period prior to 5 September 2001 was in itself
reasonable"; nor was that advice supported by analysis other than that carried out by the profession: para 5.140.
(5) "Regardless of what professional advice DWP had received, as this decision affected the funding of many
private sector final salary pension schemes and as it was related to the security of the pension rights of
many thousands of people â€¦ DWP should have done more to satisfy itself that it was right to implement
this recommendation": para 5.148.
118 On the basis of those reasons the ombudsman concluded, at para 5.149 of the report, that the decision to
change the basis of the MFR in March 2002 was taken with maladministration
"as there is insufficient documentary evidence that explains the rationale for the decisionâ€”and as I have
doubts about the reliance of DWP on professional advice which seems to me not to have been sufficient in
itself to enable DWP to come to a decision that took account of all relevant considerations and which ignored
irrelevant ones."
As I have said, at para 5.150 she emphasised that the finding was predicated "on what I consider to be failings
in the process through which DWP took the decisionâ€”and in the completeness of the evidence considered by it in
so doing". Nevertheless, she acknowledged, at para 5.226, that "had the decision-making deficiencies not occurred,
this would have made no material difference to the degree of knowledge that scheme members had â€¦ That
decision would still have been takenâ€”only on a proper basis".
119 At Annex D to the report the ombudsman set out the response of the DWP in the letter dated 27 January
2006 to which I have referred earlier in this judgment; and included a submission made by the Government Actuary
in support of that response. The Government Actuary's submission contained the following paragraphs:
"The statement made [in para 5.129 of the report] fails to recognise that GAD had been aware of, and closely
involved in, the development of the profession's thinking on the MFR over many months and so GAD was
fully aware of the context and scope of the profession's work when the department's request for advice was put
to us in September 2001. Furthermore our e-mail of 25 September 2001 was in confirmation of earlier
discussions with DWP and so not the only component of our advice. Nor was our advice limited in any way,
and particularly not in the way suggested [in para 5.130]. The context of that advice was the overall question
of how the strength of the MFR basis might have changed since it was last reviewed.
"We do not agree that our advice was limited in the way suggested [in para 5.130]. Neither do we agree that
we failed to answer the question that DWP had put to us. This is a completely distorted interpretation of the
GAD advice, exemplified by the unacceptable description of one paragraph of that advice as being the 'full
advice'.
[2009] 197
"The statement made [in para 5.138] does not recognise that, throughout its involvement in professional
affairs, GAD had had access to the detailed work carried out by the Technical Support and Research
Committee of the Pensions Board of the actuarial profession, the committee that undertook the analysis leading
to the profession's 5 September 2001 recommendation.
"Once again, [para 5.142] does not recognise the context of continuing discussions on the replacement of the
MFR, involving GAD, the department and the actuarial profession, over the period between September 2001
and January 2002."
"Moreover â€¦ the evidence base [for DWP's decision] was not insufficient since it was based on strong advice
from the actuarial profession, which had been developed by a committee containing leading technical experts
from most of the major firms of actuaries, and supplemented by GAD as a further independent source of
advice. The evidence base for this decision was in fact extremely strong and much stronger than for many
(probably most) of the decisions that have to be taken by Government."
120 The Secretary of State rejected the third finding of maladministration for the reasons set out the DWP
response: in particular, at paras 40-47 of that response. At para 41 it was said that the 2002 decisionâ€”in common
with earlier decisions in 1998 and 2000â€”was based on a judgment on two issues: (i) whether the change would
restore the MFR to its original level and (ii) whether the change was sufficiently straightforward to allow it to be
implemented before planned changes to the MFR were expected to be introduced. The four steps in the decision-
making process were described at para 44: (i) there was a clear recommendation from the actuarial profession,
"which had been developed by a committee containing leading technical experts from most of the major firms of
actuaries"; (ii) the GAD was asked to consider and give an opinion on that recommendationâ€”which they endorsed
without qualification; (iii) the DWP then considered whether there were any overriding policy considerations why
the recommendation should not be acceptedâ€”in particular, whether the change was sufficiently straightforward to
allow for it to be implemented before the MFR was expected to be replaced; and (iv) whether the change to the
MFR could be implemented quickly and without undue cost to the schemes. Para 47 of the DWP response
summarised those reasons in these terms:
"The Government received a recommendation from the UK actuarial profession (as part of its role in
continually monitoring the actuarial basis for the MFR) which was backed by the GAD and acted upon it â€¦
The Government Actuary, in commenting to the ombudsman on this issue â€¦ has said that he considers that the
evidence for this decision was 'extremely strong and much stronger than for many (probably most) of the
decisions that have to be taken by government'. The Government â€¦ would have needed strong grounds to
justify not acting on the recommendation. No such grounds were apparent at the time."
121 The judge declined to quash the Secretary of State's rejection of the third finding of maladministration. He
set out his reasons at para 79 of his judgment, to which I have already referred. He was impressed by the point
[2009] 198
made in the Government Actuary's submission and emphasised at para 47 of the DWP response. He made the
telling observation that "The ombudsman was in effect expecting the Secretary of State, who is not an actuary, to
keep a watchdog (the GAD) and then bark himself". He observed that "The fact that additional evidence might
have been sought in support of the actuarial profession's considered view is not equivalent to maladministration".
122 As I have said the primary ground of appeal in respect of para 3 of the order of 21 February 2006 (ground
7) is that, absent any application for an order in judicial review proceedings quashing the findings in the report, the
judge ought to have found that the Secretary of State was bound by those findings. I have already explained why I
reject that contention. The remaining grounds under this head are (i) that the judge failed to appreciate "that the
ombudsman's third finding was a failure of process (para 5.150) and that the ombudsman was entitled to hold that
this failing subsisted irrespective of whether the Government was entitled to act on the advice of the Government
Actuary's Department" (ground 8); and (ii) that the judge erred in seeking to determine for himself the question
whether the third finding amounted to maladministrationâ€”that, it was said, was a matter for the ombudsman to
decide (ground 9).
123 I am not persuaded that there is any substance in the contention that the judge failed to appreciate that the
third finding of maladministration was a failure of process: that is to say, a finding of deficiencies in the process by
which the DWP (and, in particular, the relevant minister) reached the decision to approve the recommendation for a
change in the MVA made by the actuarial profession in the letter of 5 September 2001. The judge had observed, at
para 78:
"[The ombudsman] concluded that this decision was taken with maladministration as there was insufficient
documentary evidence that explained its rationale. She had doubts, at para 5.149, about the reliance of the
DWP on professional advice which seemed to her 'not to have been sufficient in itself to enable DWP to come
to a decision that took account of all relevant considerations and which ignored irrelevant ones'. She notes in
particular that the only documentary proof of advice from the GAD on this subject is contained in two
sentences of a single e-mail."
It seems to me clear that the judge had well in mind that it was the process by which the DWP reached its
decision to approve the changeâ€”rather than the substance of that decisionâ€”that was the subject of criticism by
the ombudsman.
124 Further, it is important, in my view, to keep in mind that the finding of maladministration was directed to
"the decision in 2002 by DWP to approve a change to the MFR basis". There was no finding of maladministration
in the GAD's decision to endorse the recommendation that the actuarial profession had made in the letter of 5
September 2001. The ombudsman took the view that the GAD was, in that respect, outside the scope of her
investigation: para 1.51 of the report. But given the evidence of the Government Actuary (in the submission set out
in Annex D to the report) that
"GAD had been aware of, and closely involved in, the development of the profession's thinking on the MFR
over many months and so GAD was
[2009] 199
fully aware of the context and scope of the profession's work when the department's request for
advice was put to us in September 2001,"
that
"throughout its involvement in professional affairs, GAD had had access to the detailed work carried out by
the Technical Support and Research Committee of the Pensions Board of the actuarial profession, the
committee that undertook the analysis leading to the profession's 5 September 2001 recommendation"
and that there was a "context of continuing discussions on the replacement of the MFR, involving the GAD,
the department and the actuarial profession, over the period between September 2001 and January
2002"â€”statements which the ombudsman does not rejectâ€”it is difficult to see how such a finding could have
been made in any event.
125 Nor am I persuaded that there is any substance in the contention that the judge usurped the role of the
ombudsman in seeking to determine for himself whether the decision which was the subject of the third finding
could amount to maladministration. At para 75 of his judgment the judge had set out the DWP's view, stated in its
letter of 28 February 2006, that it would have been
"far more vulnerable to justified criticism if it had substituted an alternative judgment in the face of clear and
consistent advice from the actuarial profession and from the Government Actuary's Department without good
reason."
He observed, at para 76, that there was no suggestion in the report that the ombudsman did not accept that that
was, indeed, the view held by the DWP at the relevant time. When the judge referred (at para 79 of his judgment)
to the ombudsman "in effect expecting the Secretary of State to keep a watchdog (the GAD) and then bark himself",
he was plainly rejecting the proposition that (in a matter as technical as the proposed change to the MVA) it was for
the DWP (rather than the GAD) to seek out further evidence to support the actuarial profession's considered view as
to the need for the proposed change. The judge was entitled to reject that proposition for the reason which he gave.
Given that it was not for the DWP to seek out further evidence to support the profession's view, the fact that there
might have been further evidence which the GAD could have sought cannot support a finding of maladministration
against the DWP. As I have said there was no finding of maladministration in respect of the GAD's decision to
endorse the profession's recommendation.
126 For those reasons I am satisfied that the decision of the Secretary of State to reject the third finding of
maladministration cannot be held to be irrational. I would dismiss the claimants' appeal from para 3 of the order of
21 February 2006.
The ombudsman's submissions
127 The ombudsman has appeared by counsel at the hearing of these appeals as interested party; and we have
been assisted by the extensive and detailed written submissions filed on her behalf. She has explained to the court
that she thought it appropriate to participate in the appeal (having
[2009] 200
taken no part in the hearing before the judge) because of her concern that the judge had misunderstood the content
of the report, her concern that the submissions of the Secretary of State misrepresented the content of the report; the
collateral attack which (as she perceived) the Secretary of State had launched on the legality/validity of the report
and because (as she put it) "the case raises important legal and constitutional issues, particularly as regards the
relationship between the ombudsman and the bodies whose administrative actions it is her statutory function to
investigate". She has emphasised that her principal concern is to respond to what she sees as a collateral attack on
her report; and that she does not seek to make common cause with the claimants. Nevertheless, it is inevitable that
the submissions made on her behalf travel over much of the ground raised by the claimants on their appeal.
128 I am conscious that the conclusion which I have reached as to "the relationship between the ombudsman
and the bodies whose administrative action it is her statutory function to investigate" differs from the view which
has been advanced on her behalf. In particular, I have rejected the submission that the decision of this court in Ex
p Eastleigh Borough Council [1988] QB 855 is authority for the proposition that the body under investigation is
bound by the ombudsman's findings of maladministration unless and until those findings are set aside in judicial
review proceedings. I do not think it would be useful to add to the reasons which I have already given.
129 I have sought to make it clear that, in dismissing the claimants' appeal from part of para 2 of the order of
21 February 2006 (the first finding in relation to the causation of injustice), and from para 3 of that order (the third
finding of maladministration) I have not found it necessary to hold that the ombudsman was not entitled to make the
findings that she did. Rather, I have held that, in rejecting those findings, the Secretary of State cannot be said to
have acted irrationally. This judgment should not be seen as a judgment upholding a "collateral attack" on the
validity of those findings in the report. On the view which I have taken as to the correct approach to the question
whether the Secretary of State's decision to reject certain of those findings should be set asideâ€”which is the
question raised in these proceedingsâ€”the validity of those findings is not an issue which the court needs to decide.
The claim under article 1 of the First Protocol
130 As I have said, we were told that the claimants are not pursuing an appeal from para 4 of the order of 21
February 2006. In those circumstancesâ€”and without the need to express any view as to the claim under article 1
of the First Protocolâ€”the claimants' appeal from that paragraph should be dismissed.
Conclusion
131 I would dismiss the Secretary of State's appeal (2007/0554). I would allow the claimants' appeal
(2007/0556) from para 2 of the order of 21 February 2006 in so far as it relates to para 5.245 of the report and to the
second limb of para 5.246; but dismiss that appeal in so far as it relates to the first limb of para 5.246. I would
dismiss the claimants' appeals from paras 3 and 4 of that order.
[2009] 201
1 QB R (Bradley) v Work and Pensions Secretary Blackburne J
BLACKBURNE J
132 I have had the advantage of reading Sir John Chadwick's judgment in draft. I agree with it, and do not feel
there is anything I can usefully add.
WALL LJ
133 Like Blackburne J, I too have had the advantage of reading Sir John Chadwick's judgment in draft. I also
find myself in complete agreement with it. I have taken some time to consider whether or not I should add a
substantive judgment of my own, but have come to the clear view that Sir John has covered the ground so fully, that
little would achieved by expressing identical conclusions in different words.
134 I wish, accordingly, to make only a few short points, most of which are simply reiteration and
reinforcement of what is already contained in Sir John Chadwick's judgment.
135 By far the most important, in my judgment, is Sir John Chadwick's rejection of the proposition that the
decision of this court in R v Local Comr for Administration for the South, the West, the West Midlands,
Leicestershire, Lincolnshire and Cambridgeshire, Ex p Eastleigh Borough Council [1988] QB 855 is authority for
the proposition that the Secretary of State is bound by the parliamentary ombudsman's findings of
maladministration and must treat them as correct unless and until they are quashed in judicial review proceedings.
This is, in my judgment, a fundamental point, and in para 5 of her written reply (undated, but received by the court
on 14 August 2007, after the conclusion of the argument) the ombudsman stated:
"Before considering the issues raised by the cross-appeal, it should be noted that the court only needs to
consider these issues if it rejects the written submissions of the ombudsman on the main legal issue. The
ombudsman submits that in considering the report and what action to take in respect of it, the Secretary of State
must proceed on the basis that the ombudsman's findings of injustice caused by maladministration are correct
unless they are quashed in judicial review proceedings. If this is accepted then that is the end of the matter as
no application for judicial review has been made seeking to quash the report. The proper, and indeed it is
submitted the only, place for the lawfulness of the ombudsman's report to be questioned is in judicial review
proceedings aimed at quashing that report."
136 For the reasons which Sir John Chadwick sets out in paras 37-71 of his judgment, and with great respect to
the ombudsman, I am unable to agree with para 5 set out above. Like Sir John, I find nothing in the Parliamentary
Commissioner Act 1967 or in the antecedent White Paper to support the proposition that the Secretary of State is
bound by the parliamentary ombudsman's finding of maladministration, or that it was Parliament's intention in
passing the 1967 Act to require a minister to obtain relief by way of judicial review before rejecting such an
allegation.
137 Ex p Eastleigh Borough Council was, of course, a case brought under a different statute, the Local
Government Act 1974. Quite apart from the different statutory provisions, however, what strikes me as a broader
consideration is the clear difference between the remedies provided by the two statutes. Thus under the 1967 Act, a
minister who rejects the
[2009] 202
1 QB R (Bradley) v Work and Pensions Secretary Wall LJ
ombudsman's findings of maladministration will have to defend him or herself in Parliament, and will be subject to
parliamentary control. The ultimate remedy for aggrieved citizens such as the complainants in the instant case,
whose complaints to their Members of Parliament have led to the ombudsman's report, willâ€”ultimatelyâ€”be
through political action rather than judicial intervention.
138 In making these observations, I have not lost sight of the fact that the decision of the minister/Secretary of
State to reject the parliamentary ombudsman's findings of maladministration is itself, capable of being judicially
reviewed on conventional public law grounds. However, in this context, the remedyâ€”if the application for
judicial review is successfulâ€”is procedural rather than substantive. The decision is quashed as unlawful, and the
minister must think again. The limitations on judicial review as a remedy do not need to be spelled out.
139 In cases involving the local government ombudsman ("LGO"), the citizen who has invoked his assistance
hasâ€”in lawâ€”no substantive remedy against the local authority concerned if that authority rejects the LGO's
conclusion. It is true that the citizen could apply for judicial review of the local authority's decision not to
implement the LGO's findings, but the system, as I understand it, depends upon the convention that local authorities
will be bound by the findings of the LGO. It must follow inexorably that if a local authority wishes to avoid
findings of maladministration made by a LGO, it must apply for judicial review to quash the decision.
140 This, in my judgment was what Ex p Eastleigh Borough Council [1988] QB 855 was about and why, with
respect, Lord Donaldson of Lymington MR was right to hold, at p 867, that in the context of the 1974 Act, the
parliamentary intention was that "reports by ombudsmen should be loyally accepted by the local authorities
concerned". As is self-evident, this court in Ex p Eastleigh Borough Council was discussing the work of LGOs
and the 1974 Act, and I see nothing in Ex p Eastleigh Borough Council which would mean that a similar
consideration applied to reports by the parliamentary ombudsman.
141 I raise the point, however, because it is clear to me that this case comes as close as it is possible to come to
the clear line which divides the areas in which political and judicial decisions hold sway. Nobody reading the
papers in this case could have anything but the utmost sympathy for the plight of the complainants, all of whom, it
seemed to me, were decent, hardworking people who, through no fault of their own, had beenâ€”or were at serious
risk of beingâ€”deprived of that for which they had worked throughout their lives, namely a modestly comfortable
retirement. But in my judgment, judicial review principles apart, their remedy is political, not juridical. There were
times during Miss Rose's able submissions when it seemed to me that she was, in effect, inviting this court to put
additional pressure on the Secretary of State to provide the claimants with a remedy. Self-evidently, however, that
is not the function of this court.
142 In my judgment, the role of the ombudsman under the 1967 Act is not only to report to Parliament, but,
where appropriate, vigorously to alert Parliament to an injustice which has occurred through maladministration. It
is, therefore, for Parliament to provide the remedy, subject only to the role of the courts in ensuring that the acts of
the ombudsman herself and the
[2009] 203
1 QB R (Bradley) v Work and Pensions Secretary Wall LJ
role of the relevant departments in responding to her reports are themselves lawful.
143 In my judgment, Sir John Chadwick has skilfully and correctly steered the argument between the difficult
political and jurisdictional shoals and eddies presented by the case, and, as I have already said, I find myself in
complete agreement with him. I would therefore wholly endorse the conclusion which he expresses in para 131 of
his judgment.
144 I would only wish to make two further observations. The first is to express my appreciation of the judge's
lucid and careful judgment. The fact that we have disagreed with him on some points does not, in my judgment,
detract from its quality.
145 My final observation is to record my concern at the ombudsman's feeling, recorded in para 1 of her written
reply that
"notwithstanding the unpleaded, wide-ranging and constantly changing attack made to her report by the
Secretary of State on appeal, she had only very limited, inadequate time to make oral submissions on these
matters including by way of response to the additional points raised by the Secretary of State in the course of
the hearing. This is a matter of real concern because, it is submitted that, in a number of regards the written
and oral submissions of the Secretary of State have misrepresented, and continue to misrepresent, the content
of the report."
146 I very much hope that the ombudsman will not retain these concerns when she has had the opportunity to
read Sir John Chadwick's judgment. In my view, the care which has plainly gone into the writing of the judgment
and its content both demonstrate a mastery of the vast amount of documentation with which the court was faced,
and make it clear beyond peradventure that every word written by the ombudsman, both i n her report and
elsewhere, has been read and carefully analysed. Although this court has rejected one of the ombudsman's principal
submissions (that her report was binding on the Secretary of State absent a successful challenge by way of judicial
review) it was, as I understood the matter, common ground that the work of the parliamentary ombudsman
generally was both highly valued and entitled to respect. Nothing in this court's judgment should be taken as
detracting from that proposition.
Secretary of State's appeal dismissed.

Claimants' appeal allowed in part.
KM
[2009] Q.B. 114

Regina (Bradley and Others) v. Secretary of State For Work and Pensions

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[2009] 114

[2007] EWHC 242 (Admin)

[2008] EWCA Civ 36

2007 Feb 7, 8, 9;21 Bean J

Parliament - Parliamentary Commissioner for Administration - Investigation of complaint - Commissioner investigating

R v Parliamentary Comr for Administration, Ex p Balchin (No 2) (2000) 2 LGLR 87

Hamilton v Al Fayed [1999] 1 WLR 1569; [1999] 3 All ER 317, CA

CLAIM for judicial review

The court took time for consideration.

37 Section 7, "Procedure in respect of investigations", provides, as amended by section 47 of and paragraphs 1

(Section 8(4) makes an exception for the Cabinet or its committees.)

40 Section 12(3) provides:

Were the findings of the ombudsman binding on the Secretary of State?

56 Judge LJ said, at pp 134-135:

The first recommendation

Claim allowed in part.

The court took time for consideration.

He said, at para 65:

And she returned to that point in the later paragraphs:

Para 10 developed that point:

And she added:

That constituted an injustice which was caused by maladministration.

Secretary of State's appeal dismissed.

[2009] Q.B. 114

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