Duffield v Pensions Ombudsman 2

United Kingdom

Reference: (1996) OPLR 149

Mr Duffield was, along with Messrs Pearson and Wilson, a trustee of a pension scheme set up in 1984. Mr Duffield was also an executive director of the principal employer. Mr Duffield ceased to be a trustee on 23 June 1986, when he was replaced by a Mr Burke. The employer went into receivership in October 1986 whereupon it became apparent that the pension scheme was underfunded. The benefits of deferred pensioners were reduced to 50 per cent of their full entitlement. Accordingly, a number of those deferred pensioners complained to the Ombudsman.

The Ombudsman initially sent a summary of complaint to the then current trustees - Messrs Pearson, Wilson and Burke. Mr Duffield was not contacted by the Ombudsman until December 1993 whereupon the Ombudsman simply asked for background information. Having supplied that information, Mr Duffield received a letter dated 13 December 1993 from the Ombudsman thanking him for his help and adding that he hoped that it would not be necessary to disturb him further. A revised summary of complaint was sent to the current trustees in December 1994. However, on 22 February 1995 the Ombudsman issued his provisional determination. This included criticism of Mr Duffield and alleged recklessness and wilful neglect. These allegations were made on the basis of information provided by Mr Pearson. A copy of the provisional determination was sent to Mr Duffield who was given three weeks to respond to the criticism. At his request, Mr Duffield was sent copies of the 189 relevant documents. He said he had previous knowledge of only seven. Having been granted an extension of time to finalise his submissions, Mr Duffield provided a detailed response to the provisional determination on 3 April.

The Ombudsman's final determination upheld the complaints of maladministration. He found that the trustees prior to 23 June 1986 (which included Mr Duffield but excluded Mr Burke) were guilty of wilful neglect in failing to ensure that contributions were paid to the scheme. The Ombudsman attributed 50 per cent of the responsibility for the underfunding to the employer. However, the trustees were held to be jointly and severally responsible for the remaining 50 per cent, of which Mr Duffield was attributed 7.5 per cent. The Ombudsman held that the trustees were guilty of wilful default and could not therefore rely on the exoneration clause contained in the scheme rules. As a result, the trustees were directed to pay more than GBP 300,000 into the scheme.

Mr Duffield alleged that the Ombudsman had not complied with PSA 1993, s149(1) (which required him to provide an opportunity for those complained about to comment on the allegations) and had failed to act in accordance with natural justice. Carnwath J upheld the appeal. The first that Mr Duffield had heard of the complaint against him was in a document which was effectively a draft judgment finding him guilty. In addition, the judge held that the Ombudsman had a duty to give reasons for his findings. Whilst it was not necessary to decide this issue, the judge suggested that the Ombudsman's reasoning was open to serious question. It was also doubted, although not decided, that the Ombudsman had power to make compensatory awards in relation to matters that at the time they took place did not give rise to any legal liability - in effect, before the office of Pensions Ombudsman was created.