Factual and Procedural Background
This appeal arises from an order dated 21 March 2002 by Mr Justice Lightman concerning proceedings for judicial review brought by Company A, Company B, and Company C (collectively, the Companies) against a decision of the Pensions Ombudsman. The Ombudsman had asserted jurisdiction to investigate a complaint of maladministration against the Companies in relation to the Cheney Pension Scheme. The judge held that the Ombudsman lacked such jurisdiction. The Ombudsman appealed with permission granted on 30 April 2002.
Company B conducts unit linked long term insurance business, including business formerly carried on by a predecessor entity. Company C is an investment management company managing funds held by Company B, and Company A is the parent of Company C. The Cheney Pension Scheme trustees held two unit linked long term insurance policies issued by the predecessor insurer, including a key policy dated 28 March 1994.
Between April and October 2000, payments totaling approximately £2,980,165 were made by Company C on behalf of Company B to the Scheme trustees or their direction following requests to partially surrender the policy. It was alleged that these requests were made in breach of trust and that the monies were misapplied.
The central issue before the court was whether the Companies were acting as administrators of the pension scheme under the relevant regulatory provisions, which would determine the Ombudsman's jurisdiction to investigate the complaint.
Legal Issues Presented
- Whether the Companies were acting as administrators of the Cheney Pension Scheme within the meaning of regulation 2(1) of the Personal and Occupational Pension Schemes (Pensions Ombudsman) Regulations 1996.
- Whether the Pensions Ombudsman had jurisdiction to investigate a complaint of maladministration against the Companies based on their role in handling payments under the policy.
Arguments of the Parties
Pensions Ombudsman's Arguments
- The Companies were knowingly party to a breach of trust in making divestments under the Scheme's policy.
- The Companies failed to comply with their own procedures regarding divestments and had inadequate procedures concerning the security of Scheme assets.
- The Companies acted with disregard for the security of Scheme assets, contrary to fiduciary obligations and were negligent in processing divestments.
- The implementation by the Companies of trustees’ instructions to dis-invest assets constituted acts of administration concerned with the Scheme, thereby conferring jurisdiction on the Ombudsman.
Companies' Arguments
- The Companies were not concerned with the administration of the Scheme but only administered their own assets and contractual obligations under the policy.
- The relationship between the Companies and the Scheme was contractual, not fiduciary.
- The Companies did not provide administration services to the Scheme trustees, who did not accept the offer of such services at an additional charge.
- The payments made were pursuant to contractual surrender rights under the policy, not acts of scheme administration.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Ewing v Arthur Cox [2000] PBLR (7) |
Distinction between performing administrative acts connected to a pension scheme and being concerned with its administration. |
The court relied on this precedent to reject the Ombudsman's view that carrying out administrative acts equated to being concerned with scheme administration. The precedent clarified that mere agency or carrying out instructions does not amount to administration of the scheme. |
| Century Life Plc v The Pensions Ombudsman [1995] Pensions Law Reports 135 |
Definition of persons concerned with administration of a pension scheme under section 146(3) of the Pensions Schemes Act 1993. |
The court cited this case to support that an insurance company providing full or partial administration services may be considered concerned with scheme administration. However, it found that in the present case the Companies did not provide such services. |
Court's Reasoning and Analysis
The court conducted a detailed examination of the statutory framework governing the Pensions Ombudsman's jurisdiction, particularly Part X of the Pensions Schemes Act 1993 and the 1996 Regulations made under it. It emphasized the distinction between persons responsible for the management of a pension scheme (trustees, managers, employers) and those who might be concerned with its administration.
The court noted that the 1996 Regulations limited the Ombudsman's jurisdiction to persons concerned with the administration of the scheme, excluding those concerned only with financing or provision of benefits. The Companies were found to be administering their own assets—the Pensions Managed Fund—and managing contractual obligations under the policy, not administering the Scheme itself.
The court rejected the Ombudsman's reasoning that carrying out a trustee's instruction to divest assets amounted to administration of the Scheme. It relied on the precedent in Ewing v Arthur Cox to highlight that performing administrative acts in connection with a scheme does not necessarily mean one is concerned with its administration.
Evidence showed that the Companies did not provide administration services to the Scheme and that the trustees did not accept the Companies' offer to provide such services for an additional fee. The Companies lacked involvement in record-keeping, benefit calculations, member communications, and other administrative functions of the Scheme.
Accordingly, the court upheld the lower court's conclusion that the Companies were not administrators of the Scheme for the purposes of the 1996 Regulations, and thus the Ombudsman lacked jurisdiction to investigate the complaint against them.
The court also addressed an alternative reasoning by the lower court concerning maladministration allegations, clarifying that jurisdiction depends on whether the complainant alleges maladministration by the administrator themselves, not merely the presence of maladministration by others.
Holding and Implications
The appeal is dismissed.
The court's decision directly affects the parties by confirming that the Pensions Ombudsman does not have jurisdiction to investigate complaints against the Companies in the absence of their status as administrators of the pension scheme. No new precedent was established beyond affirming the proper interpretation of the statutory framework limiting the Ombudsman's jurisdiction to persons concerned with scheme administration.