Westminster City Council v Haywood 2

Reference: (1996) OPLR 95, (1997) OPLR 61

Mr Haywood worked for the appellant City Council and was a member of the Local Government Superannuation Scheme ("LGSS"). When, at the age of 49, he was being considered for voluntary redundancy he obtained the Council's agreement that he should not leave until his 50th birthday when he became eligible for an immediate pension and lump sum payment. He also became eligible for compensation payments which were funded from the general rate fund rather than from the fund used to pay LGSS Pensions. The compensation payments also included both lump sum and periodical payments. The Council did not draw any distinction between these the two funds or the two types of payment when communicating with employees.

Mr Haywood retired on 12 April 1992. In February 1993, in accordance with the Court of Appeal decision in Allsop -v- North Tyneside Metropolitan Borough Council [1992] 1 CA 639, the Council wrote to Mr Haywood informing him that his "gross pension" would need to be reduced. In fact this reduction related only to the compensation payments and not to the LGSS pension payments. Whilst subsequent regulations permitted the Council to reintroduce part of these payments, this did not fully compensate Mr Haywood for the reductions that he had suffered.

The Ombudsman directed that Mr Haywood receive full reinstatement of the periodical compensation payments together with a payment of GBP 1,000 as compensation for distress and inconvenience.

On 28 January 1997 the Court of Appeal overturned the decision of Robert Walker J on appeal by the Council. The court held that the Ombudsman had no jurisdiction to investigate a complaint relating to redundancy compensation arrangements, qualifying service for which was entirely separate to pensionable service under the LGSS. Mr Haywood was not entitled to long service benefits under the compensation arrangements and so was never in pensionable service. As such, he could not bring an Ombudsman claim. Given that the only payments to Mr Haywood which were reduced related to the compensation arrangements, the Ombudsman had no jurisdiction to order the reinstatement of those payments. The court held that there was no evidence that the LGSS and the compensation arrangements were administered as one and that it was beyond dispute that they were originally established as distinct schemes.

Millett LJ went on to state that, even if the Ombudsman had had jurisdiction in relation to this complaint, the reduction in Mr Haywood's benefits to the maximum which the Council could lawfully pay could not be deemed to be maladministration. Even if the earlier promise to pay a greater amount did amount to maladministration, there was no financial loss resulting from the lawful reduction in those payments. This form of maladministration did not cause Mr Haywood any pecuniary loss nor anxiety or distress. Whilst his expectation of an enhanced benefit was ultimately disappointed, this was more than compensated for by the preceding overpayments. Thus the award of compensation to Mr Haywood ought to have been set aside.

Westminster City Council appealed both against the orders made by the Ombudsman and against his jurisdiction to deal with this complaint. Robert Walker J held that, whilst the LGSS and the compensation arrangements were paid from separate funds and operated under separate legislation, they were part of a single occupational pension scheme as defined by PSA 1993, s1. This was evidenced by the fact that the Council did not itself distinguish between them either in communications with the employees or by the procedures used for payment of benefits. The judge noted that the Ombudsman's jurisdiction was limited by regulations in relation to public service pension schemes solely to consider complaints of maladministration and not to hear disputes of fact or law. However, Robert Walker J held that it was for the Ombudsman himself to determine how the classification was to be applied in each particular case. He suggested that most matters are capable of being classified as complaints even where they raised issues of fact or law.

On the substantive issues, the judge held that a complainant will only succeed in a maladministration claim if they can also show injustice. Whilst on the facts it appeared that the Council had taken an incorrect view of the law which could amount to maladministration, there was no evidence that Mr Haywood had suffered any quantifiable loss as he had received those benefits to which he was legally entitled. No matter how culpable the Council had been, it was not possible for the Ombudsman to order a payment to a pensioner to be larger than that to which they were legally entitled. Thus the direction of the Ombudsman that Mr Haywood be reinstated with his full benefits was overturned. However, the award of compensation for distress and inconvenience was upheld. Whilst PSA 1993 did not expressly permit the Ombudsman to make such an award of compensation, Robert Walker J held that many complainants would be left without an effective remedy were such a power not to be available. He expressed the view that the award of GBP 1,000 was rather high although it was not to be so excessive as to be wrong in law. Thus, it was not for the judge to overturn it. In setting the level of compensation payment, the Ombudsman must consider upon whom the ultimate burden of paying that compensation will fall. In particular, where a scheme was inadequately funded and in the process of being wound up, any order of compensation would come from the fund and in effect benefit one member at the expense of all his co-members.