The High Court has overturned a decision by the Pensions Ombudsman which required the Police and Crime Commissioner for Greater Manchester (Commissioner) to pay a bridging pension from its own funds to a former employer of its predecessor the Greater Manchester Police Authority (GMPA).

The Ombudsman ruled on the case in April 2016, when he partly upheld the claim from Catherine Butterworth against the Commissioner. Butterworth had been an employee of the GMPA since 1996, and in 2008 was given a six year fixed term position as HR and development director.

On conclusion of this role, the GMPA has promised to use its “best endeavours” to allow Butterworth to retire early with “maximum augmentation” of her pensionable service in “so far as the pension regulations in force at the time allow the force to do so.”

However, in early 2011 the employment relationship broke down to such an extent that Butterworth and the GMPA negotiated an agreement to resolve the situation. This was a compromise agreement dated 18 May 2011, which under clause 4.2 of the agreement stated that she would be allowed to access her pension without reduction at the age of 55, to the extent that it remains lawful for the employer to allow this.

Therefore, in anticipation of her 55 birthday in 2014, Butterworth requested an unreduced pension from the GMPA’s successor, the Commissioner, but she was told that the award of an unreduced pension required not only the employer's consent, but also a determination that "on compassionate grounds" the pension should not be reduced. The Commissioner therefore said that there were no sufficient, compassionate grounds and the unreduced pension would not be awarded.

Butterworth complained to the ombudsman, who investigated the complaint and issued two preliminary decisions before giving his final determination on 21 April 2016. In his final determination, the Ombudsman held that clause 4.2 was void and unenforceable because it amounted to an unlawful letter on the exercise of a public authority of its own discretion.

He went on to find that nonetheless a contractual estoppel had arisen, the effect of which was that the Commissioner could not go back on the promise to provide the benefit. On that basis, the Ombudsman directed the Commissioner to pay, from its own funds, a bridging pension equivalent to the unreduced benefit with retrospective effect from the claimant's 55 birthday. He also directed the Commissioner to pay £2,000 for the distress and inconvenience caused to the claimant as a result of the GMPA's maladministration in promising to confer on her a benefit which was not in its power to provide.

However, the Commissioner, represented by law firm Gowling WLG, appealed on five grounds, relating to the ombudsman’s reliance on the estoppel which they claimed was “misconceived”; the correct interpretation of clause 4.2; the circumstances of this case did not give rise to any contractual estoppel; the ombudsman's direction required the Commissioner to commit an ultra vires act, in that he had no power to make pension payments, or their equivalent, from his own funds; and, the award of £2,000 for maladministration was misconceived.

As part of the appeal, the Ombudsman provided written and oral submissions on some of the issues raised by the Commissioner. He also asked the Court to uphold the determination on a new ground (namely, that clause 4.2 was not, as a matter of private law, unenforceable) or alternatively to remit the matter back to him to consider a new point (namely, whether the claimant had a complaint based on legitimate expectation).

High Court deputy judge Jonathan Crow held that the Ombudsman had misinterpreted clause 4.2 of the compromise agreement. He decided that by clause 4.2 the GMPA had irrevocably agreed to give the claimant access to an unreduced pension at age 55, but only to the extent it was lawful for the GMPA to perform that commitment when the time for performance arrived. As such, the Commissioner had not breached the contractual commitment in 4.2 when he refused the claimant's request for an unreduced pension.

The High Court therefore didn't need to expressly consider whether the Ombudsman should be allowed to introduce into the appeal a new argument which he had not identified in producing his determination.

In relation to the ombudsman's finding of a "contractual estoppel", the High Court found that the necessary elements of this were missing. There was no warranty by the GMPA that it was, or would be, legally empowered to facilitate guaranteed access to an unreduced pension at age 55. In fact, the commitment in clause 4.2 was expressly contingent on its ability, lawfully, to provide such access when the relevant time arrived.

Separately, the High Court found that the determination was flawed because it mandated a result which was entirely different from the contractual commitment (a bridging pension paid from the employer's own funds instead of a pension from the pension fund).

Finally, the High Court overturned the finding of maladministration (and the order to pay £2,000 compensation) and declined to remit the matter back to the Ombudsman to investigate a new issue (legitimate expectation) which had not been raised by the claimant at any point. This would amount to substantially "re-litigating" the matter on new grounds.

Gowling WLG partner Ian Gordon noted that the case has “numerous interesting features”.

“Having been given permission to intervene in the appeal, and consistent with his stated aim of seeking to assist the Court, it was notable that the Ombudsman made written and oral submissions to the Court which he accepted were contrary to the legal analysis he had adopted in the determination being appealed.

“Accordingly, parties wishing to appeal from the ombudsman's determinations should be mindful of the possibility that, on appeal, the Ombudsman may seek to run arguments which did not form the basis of his original decision.

“However, the Ombudsman will no doubt have observed (in considering in future whether to intervene in appeals) that the High Court ordered him to pay the costs the Commissioner had incurred in bringing the appeal.”

At the time of publication, no one at the Pensions Ombudsman was available to comment.

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