Government was defeated in Judicial Review

by Dr. Ros Altmann

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The government should be pressed in parliament to answer the question whether they now accept that the information that they provided to the public was misleading, and that they were responsible for maladministration. Or are they still maintaining the position which the judge has said that no reasonable secretary of state could rationally adopt?

WHAT WE ESTABLISHED IN YESTERDAY’S RULING

1. Government is guilty of maladministration by providing inaccurate information about the security of final salary pensions
2.  Its information for the public misled people into believing their pensions were safe, when they weren’t
3. The Government’s decision to reject the Parliamentary Ombudsman’s finding of maladministration was unlawful
4. The Secretary of State’s reasons for rejecting the finding of maladministration were not reasonable or rational, so this decision was unlawful
5. The Government must reconsider its rejection of the Parliamentary Ombudsman’s recommendation to compensate people and restore their full pensions
6. The Government agreed to pay all the costs of the case and also the costs of any future appeals

WHAT WE DID NOT WIN ON – The Government’s figleaf!

1. The judge said that, in law, he could not accept that compensation must be paid to ALL victims of failed pension schemes, because they have not ‘so far’ ALL established that they relied on the official information
2. The judge said he was not convinced that the decision to weaken the MFR in 2002 was taken with maladministration
3. The judge did not agree that the Government has violated the Human Rights Act

My comments on these points are as follows (also checked with the barrister):

1.  On causation, the court has made the (in my view correct) point (which is certainly correct in law, even if it does not apply to the financial services and Ombudsman systems) that it is hard to see how it could be said that everyone who lost pension rights between 1997 and 2004 has suffered injustice in consequence of maladministration.  For some people, official misinformation may have had nothing to do with it, and they may not have had remedial steps open to them (paragraph 70). However, at paragraph 85 he goes on to say that the first recommendation must be reconsidered on the basis that “maladministration occurred, but that causation in individual cases has not so far been established”. This is crucial and helpful. The point is that it remains open to individuals to establish causation. They can do this by explaining how they read leaflets themselves, in hard copy or on line, or that they were told that their money was safe by others who had read leaflets – such as trustees who had read the OPRA leaflets – or that they understood from press reports (also influenced by misleading press releases and the 1996 leaflet) that their money was safe. They would then need to just explain how they at least lost chances of remedial action as a result (for example they could have diversified their savings, tried to negotiate higher contributions from their employer, retired at the first opportunity, not put AVCs into their scheme etc etc).  In theory, all 100,000 or so could lodge individual claims for compensation with the DWP on this basis. This will be impossible for DWP to process. Therefore, there is a strong incentive for DWP to reach a global deal – as they did in the inherited SERPS case, where the causation issues were closely comparable. The key point we need to stress on causation is that the judge has said that the recommendation for full compensation must be reconsidered on the basis that causation has not yet been established in each individual case – in other words, he is not saying that it could not be.

2.  The rejection of the Ombudmsan’s finding about the 2002 MFR decision is not really relevant – the ombudsman made it clear that her recommendations for redress did not turn on the third finding in any event. In any case, I am quite sure that we would win on Appeal on this issue too, it is just that we did not spend time explaining the detail of how the MFR calculations worked, since it was not crucial to our case.  Unfortunately, as the judge says in his ruling (point 76) he found the Ombudsman unclear on this matter.  The explanation we would give is that the decision to weaken the MFR in 2002 was taken on the basis of only looking at the investment markets and the effect of those on the MFR calculation assumptions for ONGOING schemes, but failed to check what would happen on wind-up to members’ for a 100% MFR-funded scheme.  Given that the original intention of the MFR was to protect members’ pensions ON WIND-UP (this was admitted by John Hutton in his response to the Ombudsman report) the fact that the Government did not bother to check what was happening to annuity rates, nor consider the impact of the priority order and cost of annuities on pensions of non-pensioner members on wind-up, is clearly maladministrative.  We never went into that detail for the judge in this case, because firstly the lawyers were keen to focus more on the points of public law, secondly the lawyers felt they did not want to get too technical and confuse the judge and thirdly it was not such an important point anyway.

3. The Human Rights Act point was not relevant to us at all really and I would not want to appeal it.  The lawyers wanted to test it out as it was an interesting point of law!