Hamar v Pensions Ombudsman 2

Reference: (1996) OPLR 55, (1997) OPLR 105

The appellants were the trustees of a small self-administered scheme. Mr French left employment with the principal employer on 30 May 1989. On 15 October 1990 he wrote to the trustees to request a transfer to a scheme to be set up by his new employer. He requested that this application be backdated to the date of removal as trustee in the preceding December. Approximately 91 per cent of the total assets of the scheme were invested in a single property which was leased to the principal employer. The trustees would have had to sell this property to meet the transfer request and declined to do so as they believed that this course would disadvantage the other beneficiaries of the fund. The trustees did nothing to carry out Mr French's transfer despite a further request being made on 24 August 1991. In fact, at the date of that subsequent request, the fund to which the transfer was to be made had not been created and it did not receive Inland Revenue approval until 10 April 1992. Mr French complained to the Ombudsman alleging that the failure to pay the transfer caused him injustice as a result of maladministration on the part of the trustees.

The Ombudsman found that the trustees should have acted upon the transfer request made on 15 October 1990 with effect from that date. Failure to do so amounted to maladministration causing injustice. He found that that the protection of the other beneficiaries was not a reasonable excuse for the delay and ordered that Mr French was entitled to have his cash equivalent increased to take account of the delay in making the transfer.

The issue of the validity of the transfer request was not raised by the trustees before the Ombudsman. The Court of Appeal held that the trustees were therefore precluded from raising that issue before the High Court. The trustees of a pension scheme were entitled to waive certain of the requirements of PSA 1993, s95 and treat the complainant's transfer request as being valid. In this instance, the trustees had done so by implication. As the trustees had failed to argue otherwise before the Ombudsman, the determination of the Ombudsman had not been wrong in law. The Court of Appeal reinstated the determination holding that, even though the complainant had not argued in the High Court that the trustees could not raise the issue of the validity of the transfer request, they were free to do so before the Court of Appeal.

Collins J held that the Ombudsman's decision was wrong on a point of law. Neither Mr French's original application nor his subsequent application were "relevant applications" within PSA 1993, s95. The fund to which the transfer was proposed to be made had not been approved and therefore did not fulfil the requirements of the relevant regulations. The transfer request was invalid and the trustees had no power to effect the transfer. Therefore Mr French had no statutory rights to an increased cash equivalent. The judge also held that the trustees had no duty to advise the beneficiary on how to make a valid transfer request.

Collins J did not consider the trustees' investment policy, holding that it was irrelevant as they had no duty to act on the invalid transfer request. The Judge could have referred the matter to the Ombudsman for reconsideration. However, as the complaint only related to maladministration by delay, and there had been no delay, the complaint was dismissed. The trustees were held to be litigating for their own benefit and were not awarded an indemnity for costs out of the trust fund.