Case No: CH/2015/0433
Neutral Citation Number: [2016] EWHC 1574 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE PENSIONS OMBUDSMAN

Royal Courts of Justice
The Rolls Building, London WC4A 1NL

Date: 30/06/2016

Before :

HHJ DAVID COOKE

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Between :

	Michael N McShee	Appellant 	
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	MMC UK Pension Fund Trustees Ltd	Respondent 	

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The Appellant   appeared in person 
The Respondent made written submissions but did not appear and was not represented

Hearing date: 10 March 2016 

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Judgment
HHJ David Cooke: 
1.	Mr. McShee appeals, with the permission of Henderson J, against the decision of the Pensions Ombudsman dated 31 July 2015 refusing to uphold his complaint against the respondent to the effect that he is entitled to a deferred pension from the MMC UK Pension Fund ("the MMC Scheme") in respect of his service as an employee of Duncan C Fraser & Co ("DCF") between about April 1973 and 26 September 1978. Mr McShee's case is that he was a member of the Duncan C Fraser Staff Pension Scheme ("the DCF Scheme"), to which the MMC Scheme is a successor, and that he is entitled to a deferred pension under the rules of the DCF Scheme. 
2.	The appeal lies to the High Court under s 151(4) Pension Schemes Act 1993 and is expressly limited to points of law. This means, among other things, that insofar as the Ombudsman has made determinations of fact it is not open to the court on appeal to overturn those determinations, unless there was no material before him on which he could properly reach the conclusions he has. I state the facts from the decision of the Ombudsman and the opinion of the investigator he appointed, as referred to below.
3.	Mr McShee has no records of his employment with DCF (though the fact of employment in the period he claims is accepted) or of his membership of the DCS Scheme other than a scheme booklet, produced in 1978 for employees, which is prefaced as follows:
“The Firm has operated a Staff Pension Scheme for its employees for many years. After the passage into law of the Social Security Pensions Act 1975, the Partners have given much time and thought as to what revisions should be made to the Scheme, in the best interests of the Firm and the staff.
Consultation has also taken place with the staff and this booklet summarises the Scheme as it will be (from 1 April, 1978) after those revisions.”
It is apparent from this and the other provisions of the booklet that the scheme was already in existence, but was to be modified with effect from the 1 April, 1978. Although, perhaps curiously, the booklet does not expressly state what the name of the scheme is, it is I think the common assumption that it was throughout called "The Duncan C Fraser Staff Pension Scheme", which is the name that appears on the front of the booklet. Section 1 of the booklet states that "The Scheme is administered by Pension Trustees Ltd … The Scheme is constituted and governed by a Trust Deed and Rules which will contain full details of all its provisions. In the event of any inconsistency between that this booklet and the provisions of the Trust Deed and Rules, the latter shall prevail." These words clearly imply that there is already a definitive Trust Deed in existence, but that it was to be modified to provide for the revised scheme referred to in the booklet. Unfortunately, no one has been able to locate a copy of such a deed, whether dating before or after 1978.
4.	DCF was of course a very well-known firm of actuaries. Mr McShee was employed by it as an actuary and is therefore an experienced and very knowledgeable pensions professional. He left in September 1978 to take up employment with a different company in the United States. His evidence is that he did not consider at the time that he was entitled to a deferred (or "preserved") pension because he did not think that he satisfied the statutory requirements for preservation. He did not therefore keep any records or make any enquiries until after his retirement in 2011, when he reviewed the copy of the DCF Scheme booklet that he had retained and came to the view from its terms that he was so entitled.
5.	In 1986 the business of DCF was acquired by Marsh & McLennan group ("MMC"). With effect from the 1 April, 1987, the assets and liabilities of the DCF Scheme were transferred to a scheme run by Mercer, a subsidiary of MMC, which in turn transferred its assets to form the "Mercer Section" of the MMC Scheme in 2000. The Respondent is the trustee administering that scheme. It has records of a number of former employees of DCF from the 1970s who are entitled to deferred pensions and for whom a transfer payment was made from the DCF Scheme, but there is no mention of Mr McShee. The respondent's position is that on the basis of the available evidence Mr McShee has not shown that he is entitled to a deferred pension, and the likelihood is that because he failed to meet the requirements for preservation he was paid a refund of contributions when he left employment in September 1978. If he had been a member of the DCF Scheme it would not have retained any records for him if he was no longer entitled to any potential benefit.
6.	The only other contemporary evidence comes from the records of HMRC. In view of the lack of records held by either party, the respondent made enquiries as to whether HMRC held any records that would show that Mr McShee was a member of an occupational pension scheme, and if so which scheme and for what period. There were various delays and false starts in these enquiries. Mr McShee it appears considered that this was deliberate and accused the respondent of "engineering" an adverse response, but the Ombudsman has not upheld that allegation and it has not been pursued before me. On 27 March, 2015 HMRC wrote saying:
“Our records show only one period of contracted-out scheme membership for Mr McShee. This is with the Hayward & Partners Limited Pension Scheme (S0601271T) and covers the period 6 April 1978 to 26 September, 1978. A Contributions Equivalent Premium (CEP) of £186.58 has been paid to reinstate Mr McShee into the additional state pension.”
7.	By way of explanation, as Mr McShee told me, legislation enabling occupational schemes to contract out of SERPS (the State Earnings Related Pension Scheme or "additional state pension") came into effect on 6 April, 1978. A contracted out member was entitled to a reduction in National Insurance contributions and, in lieu of benefit under SERPS, was required to be provided with an element of benefit under the contracted-out scheme known as the Guaranteed Minimum Pension or GMP. If he left service and was entitled to a preserved pension, the GMP would be paid as part of that pension. If he was not entitled to a preserved pension, the scheme was entitled to pay a lump sum to the state (the CEP) to buy the member back into SERPS, which would then provide him an additional state pension equivalent to that he would have earned had he not been contracted out.
8.	Thus, it is not surprising that although Mr McShee had been employed since 1973, the only records of contracted-out service begin on 6 April 1978. A CEP can only be paid in respect of a member who is not entitled to a preserved pension on leaving service, so it must be the case that the administrators of the contracted-out scheme considered at that time that he was not entitled to a preserved benefit. Mr McShee is receiving an additional state pension as a result of the CEP paid for him, amounting to £2.49 pw.
9.	There was no information available to the Ombudsman about the Heywood & Partners scheme. Mr McShee says that Heywood & Partners Ltd was a limited company owned by DCF (which was itself a partnership) and used by the partners to transact some parts of their business. He was not, he says, an employee of that limited company and so far as he is concerned he was a member of the DCF Scheme. He has no knowledge of the Heywood scheme and was not, he says, a member of it. The respondent has no record of any member entitled to preserved benefits on transfer from the Heywood scheme, which presumably must be either because there were no such transferring members, or no member who transferred was considered to be entitled to a preserved benefit.
10.	At the time, the relevant legislation required schemes to provide a preserved benefit if a member satisfied certain qualifying conditions. Relevantly to Mr McShee, these included a requirement that he must have a period or periods of pensionable service amounting in total to 5 years or more (Sch 16 Social Security Act 1973). The respondent's position is that Mr McShee would not satisfy this condition, because the terms of the DCF Scheme, as set out in the booklet that he provided, provide that "pensionable service means continuous service with the Firm whilst a member of the Scheme", and by paragraph 1.3 headed "Eligibility" that "it will be a condition of service that… employees become members of the Scheme on the first day of the month following… the day on which they complete one year's service…". Thus it is said that Mr McShee would not have become a member of the scheme until one year after he commenced service, so that by the time he left employment he had only four and a half years pensionable service and not five and half years.
11.	The Ombudsman appointed a Senior Investigator to investigate Mr McShee's complaint, Mr Barry Berkengoff. Mr Berkengoff delivered an opinion dated 23 July, 2015, stating his view that Mr McShee's complaint should not be upheld. Mr McShee made further submissions to the Ombudsman in response to that opinion, and in his determination the Ombudsman said:
“ My decision is that this complaint should not be upheld.
My reasons are essentially the same as in Barry Berkengoff's opinion of 23 July, 2015 …
I will, for completeness address the points raised by Mr McShee, and my additional comments are also set out below. ”
12.	The Ombudsman therefore adopted Mr Berkengoff's reasons, as amplified by his own set out in the determination letter. 
13.	In its written submissions to me, the respondent asserts that Mr McShee has the burden of proof in establishing the facts of his complaint. It is apparent both from the way both Mr Berkengoff and the Ombudsman approached the matter that they proceeded on this basis. Mr Berkengoff said "it was not an unreasonable request for the Fund Administrators to ask Mr McShee to prove his entitlement under the MMC fund. He said it was poor record-keeping on their part not to have information dating back to the 1970s but there is no evidence of poor record-keeping." In my view, this is clearly right, in circumstances in which there is no documentary evidence at all of Mr McShee's entitlement under the Fund. It must be for him to establish that entitlement; a pension scheme cannot be expected to provide proof of the negative proposition that an individual of whom it has no record is not a member. It may be otherwise if the complainant is accepted to be a member, but is unable to prove the amount of his entitlement because of the absence of records that the scheme would be expected to have kept. That is not the position here. The operation of this burden is not quite as it would be in court proceedings, since the Ombudsman has an investigative function that the court does not (see section 145ff of the 1993 Act). Mr McShee would of course be entitled to rely on any information that the Ombudsman discovered in the course of his investigation which showed that he was a member of the DCF Scheme.
14.	The facts of the case clearly raise two different questions:
i)	was Mr McShee a member of the DCF Scheme? And
ii)	if so, what were the terms of that scheme as they applied to him?
15.	Mr Berkengoff's opinion does not, it seems to me, clearly separate out these two points. He makes reference to the first issue in places, for instance:
“ The evidence shows Mr McShee was a member of the Heywood & Partners Ltd Pension Scheme, a limited company with direct business links to DCF (not the DCF Scheme itself)…
Irrespective of the link to the Heywood & Partners Ltd Pension Scheme it seems reasonable to conclude that his CEP and refund of contributions were in fact related to his employment with DCF...”
16.	The logic of this would seem to be that the terms of the DCF Scheme would be irrelevant and Mr McShee would have no complaint against the MMC fund unless he showed that it arose from his participation in the Heywood scheme. The booklet would only be relevant if it were found that the same terms applied to the Heywood scheme. Mr Berkengoff does not however say that; he goes on to consider Mr McShee's contentions in relation to the terms set out in the booklet.
17.	The Ombudsman's decision letter also addresses the terms of the booklet and Mr McShee's submissions in relation to them. Briefly, those submissions were:
i)	He was entitled to be credited with five and a half years pensionable service because even if he did not become a member of the DCF Scheme until a year after joining, the terms of that scheme as they applied to members prior to 1978 were that pensionable service ran from the commencement of employment. The definition of "Pensionable Service" in the booklet referred to above continues "for all employees in service on 31 March, 1978 Pensionable Service includes service since the date of joining the Firm."
ii)	He was in any event entitled to a deferred pension, whether his pensionable service was four and a half or five and half years. Section 5 of the booklet, headed "Benefits on Leaving Service" provides:
“5.1 If a member ceases to be an employee of the Firm before becoming entitled to an immediate pension then a deferred pension will be granted…
5.6 A member who leaves the service of the Firm before completing five years' Pensionable Service (including service with the Firm before first of April 1978) may elect to receive a refund of his own contributions without interest as an alternative to a deferred pension…”.
iii)	He did not make any election to receive a refund of contributions in lieu of a deferred pension, and it would be incredible to suggest that he would have done so, given that the value of the preserve benefit would have been much greater. Accordingly, the administrators of the scheme at the time must have processed his leaving incorrectly by assuming that he was only entitled to such a refund and, on that basis, paying the CEP. There is no information to suggest that he received any additional amount by way of refund of contributions, but, it is said, that may be accounted for by the fact that the administrators would have been entitled to deduct the CDP from any refund due to him, and there may have been no surplus.
18.	The Ombudsman concluded that Mr McShee was only entitled to four and a half years pensionable service, and so did not satisfy the statutory minimum period of service to qualify for a mandatory preserved pension. There is however nothing to stop an employer offering more generous terms if it wishes to do so. Nevertheless the Ombudsman said: 
“Only a very generous (or misguided) employer would have deviated from the statutory preservation requirements in place at that time.
In my view the DCF booklet (which is the only piece of documentation Mr McShee has) is so far removed from the legislation in place at that time that it cannot be relied upon. I have serious doubts that the then administrators would have granted a deferred pension to someone with 12 months service. And conversely, it makes absolutely no sense for someone with 59 months service to walk away from a deferred pension and take a refund of contributions as an alternative.”
19.	So far as the interpretation of the terms of the booklet is concerned, in my view Mr McShee is right and the Ombudsman was in error. On the issue as to the length of pensionable service, the requirement for a one-year waiting period before joining the DCF scheme appears to be a change that was to be introduced with effect from 1978. The section on "Eligibility" begins "It will be a condition of service" that employees join the scheme after a year's service. The future tense implies that this is a change to the terms, and not a statement of the existing terms. The statement that for employees in service on 31st March 1978 pensionable service "includes service since the date of joining the Firm" must in my view mean that for such employees the preceding words ("whilst a member of the Scheme") are modified. One may speculate that this may have been because prior to 1978 employees were not required to wait a year before joining the scheme, or alternatively that if there was a waiting period, on joining the scheme they were credited with pensionable service back to the commencement of employment. It does not matter which; and although the booklet sets out the terms of the DCF Scheme as it was to be revised from April 1978 onwards, it seems to be clear that in this respect they acknowledge that different terms must have applied prior to that date and would continue to apply to existing members.
20.	On the issue of the availability of a deferred pension for members with less than five years service, it seems to me that the section of the book that I have quoted above is unambiguous. A deferred pension is available without regard to length of service. If this were not clear from paragraph 5.1 it is abundantly clear from paragraph 5.6; there would be no purpose in providing a refund of contributions "as an alternative to a deferred pension" if such a member was not entitled to a deferred pension.
21.	It may be that such terms indicate that DCF was a generous employer, but that in my view is not a proper basis for concluding that the clear statements in the booklet are "unreliable" as evidence of the terms of the scheme. Mr McShee was in my view right to submit that in the absence of any other evidence of those terms (such as a definitive deed setting out the rules of the DCF Scheme) it must normally be concluded that those terms were in accordance with the information provided to employees. It is true to say that the booklet states that in the case of any difference between the terms of a definitive deed and the booklet, the former will prevail. But if there were such a deed, one would expect it to have been kept by those responsible for the administration of the scheme and if they are unable to produce it, that cannot be held against the members of the scheme, nor can it be right to assume that its terms were less generous than the members had been led to suppose.
22.	That is not however the end of the case. The Ombudsman's decision letter concludes as follows:
“Mr McShee says that he was not aware of the Heywood & Partners Ltd Pension Scheme (the Heywood scheme) and says the pension arrangement he participated in was called the DCF Scheme. He conjectured that they Heywood scheme might have been a success scheme or a renaming of the DCF Scheme but there is no evidence of either.
Regardless of what the DCF booklet says or why Mr McShee has a copy of it, the fact remains that there is no evidence whatsoever that Mr McShee was a participating member of the DCF scheme. It is not that I disbelieve Mr McShee but there is simply no evidence to support his claim, and it is not evidence to say that somehow the employer, the pension administrator at that time and HMRC all got things wrong in 1978 when he left DCF.
It is of course difficult to ascertain with absolute certainty what events took place some 40 years ago, but the evidence suggests Mr McShee was a member of an associated pension arrangement called the Heywood scheme which was linked to his DCF employment.
Therefore I find that, on the balance of probabilities, there is no evidence that Mr McShee was entitled to a deferred pension benefit under the MMC Fund through any employment with DCF…”
23.	Mr McShee criticises this. It is not literally true that there was "no" evidence that he was a member of the DCF Scheme, because he had given his own evidence to that effect. It is in my view completely clear however from reading this passage that what the Ombudsman means is that there is no evidence to support what Mr McShee says, and that on balance he considers that to be outweighed by the documentary evidence recording that Mr McShee was a member of the Heywood scheme.
24.	That was a conclusion of fact, and it was in my judgment one which was plainly open to the Ombudsman to take on the material before him. It was for him to assess the relative weight of Mr McShee's statement as against the documentary record, and although because of the lack of records there is currently no explanation for why Mr McShee would have been a member of the Heywood scheme rather than the DCF Scheme, it is not at all incredible that a large employer would have more than one scheme, or that some employees would be members of one scheme and others of another. The Ombudsman was entitled to conclude that the mere possession of a copy of the DCF Scheme booklet was not itself evidence that Mr McShee was a member of that scheme.
25.	If Mr McShee was a member of the Heywood scheme, he has not claimed, still less established, that this gives rise to any entitlement under the MMC scheme. There does not appear to be any information about the terms of the Heywood scheme so there is no reason to conclude that they were the same as the terms of the DCF Scheme, or that any error was made by the administrators of the Heywood scheme in treating Mr McShee as leaving service without entitlement to a deferred pension. Even if there was, that would not give rise to any claim against the MMC scheme unless the MMC Scheme is a successor to the Heywood scheme. Mr McShee has not claimed that it is, and on the basis of what the respondent says, that does not seem likely.
26.	Accordingly, although in my view Mr McShee is right that the Ombudsman was in error in interpreting the terms of the DCF Scheme, that does not avail him because the operative reason for the Ombudsman's determination was his finding that Mr McShee was not a member of that scheme. That was a finding of fact open to the Ombudsman, and therefore not a matter which could be interfered with by this court on appeal.
27.	Mr McShee's grounds of appeal include an allegation of serious procedural irregularity in that, he says, the Ombudsman failed to investigate what the Heywood scheme was and whether, for instance, it was another name for, or a successor to, the DCF Scheme. This was not however a matter which he pursued in his oral submissions to me, and in any event it is not made out on the basis of the documents before me. It is apparent from Mr Berkengoff's opinion that he asked questions of the respondent about the Heywood scheme and whether it had any link to the DCF Scheme, and that no further information was available. The respondent has no record of any category of members deriving from the Heywood scheme. There was nothing in the evidence before the Ombudsman to suggest that it was a renaming of the DCF Scheme and indeed the indications would appear to be that it was not, since there is reference in the documentation of the Mercer scheme to members in respect of whom transfer payments were made by the DCF Scheme. It may be unsatisfactory that there are no documents available to show what the Heywood scheme was or what happened to it, but there was nothing raised in argument before me, or said to have been available to the Ombudsman at the time, to suggest that the Ombudsman could have made any further enquiries than he did, or that if he had made any further enquiries, additional material would have emerged.
28.	It is, as both the Ombudsman and Mr Berkengoff noted, difficult to be certain now about matters that happened nearly 40 years ago in the absence of contemporary records. Clearly, at the time, Mr McShee did not consider that he was entitled to a deferred pension. It is not possible, at this distance in time and without records, to know whether he was wrong at the time about the nature of his own entitlements (though that would be surprising considering his profession and expertise) or whether he was right at the time, for a reason which he has now forgotten. Whatever the explanation, and whatever sympathy one may have for his position, he has not shown any error of law in the Ombudsman's determination that he had not made out his complaint against MMC, and his appeal must be dismissed.
29.	I will list a date for this judgment to be formally handed down in Birmingham. There need be no attendance on that occasion.
Postscript: Further evidence
30.	This judgment was circulated in draft on 24 March 2016 with the intention that it be handed down on 5 April. On 31 March Mr. McShee contacted the court to say that he had since found on the Gov.UK website under pages headed "Find Pension Contact details" an entry for the Heywood and Partners Ltd Pension scheme stating that its previous name was "The Duncan C Fraser & Co Staff Pension Scheme". At my suggestion he first sent this to the Trustees to see whether it caused them to change their position and I agreed to hold back handing down judgment in case it led to a resolution or, if not, pending any application he might make. No agreement has been reached and Mr. McShee then applied for that document, and 3 further documents he has since located relating to his former employment, to be admitted as fresh evidence on the appeal and for the draft judgment to be reconsidered including it. He is content for that application to be determined without a hearing. Had I been minded to admit the evidence I should have called for submissions in response from the Trustee. In the event I have decided that the further material should not be admitted, for the reasons below.
31.	I drew Mr. McShee's attention to Ladd v Marshall [1954] EWCA Civ 1 and the conditions set out therein for admission of new evidence on appeal; in particular the first  requirement that it must be shown that the evidence could not have been obtained with reasonable diligence for use at the hearing appealed against. Mr. McShee accepts that the website entry evidence could have been obtained before with ease; he himself discovered it by a simple Google search. But that should not be held against him, he says, because part of his grounds for appeal against the Ombudsman is of error by the Ombudsman in failing adequately to investigate his complaint. The Ombudsman cannot have investigated properly if he did not discover this himself when Mr. McShee was able to do so.
32.	I agree with him to the extent that Ladd v Marshall was decided in the context of an appeal against a judgment at trial, when the question for the appeal court is normally whether the trial judge was in error on the basis of the evidence presented to him or her at that trial. A party who had the opportunity to produce evidence at that hearing faces, on policy grounds, a stiff hurdle if he wishes to rely on some material he could have produced at trial but did not. The tests it sets out cannot however be applied without modification in an appeal against the decision of a body such as an Ombudsman whish has a duty to investigate, ie to go beyond (or at least consider going beyond) the material provided by a complainant. The objection that the appellant could have provided the evidence at an earlier stage plainly loses much of its force if the appellant's case is that the error alleged is in failing to uncover that very material. The appellant must be allowed to make his case on appeal that such a failure can be demonstrated by showing that there was relevant material available to be found and arguing that it was within the scope of the duty of investigation to look for it.
33.	But there remains the more general point of principle that a party seeking to put his case at any level, including on appeal, should set it out in good time and in accordance with any directions of the court so that it can be fairly responded to by the other parties. Insofar as it was Mr. McShee's case that the Ombudsman had not sufficiently investigated, he should have set out the basis of that allegation (including any submissions as to what further steps he could and should have taken) before the appeal hearing so that the respondent could deal with it. Seeking to introduce new material at a late stage amounts to a change in his case. Such changes may be allowed if they can be fairly responded to, even at a very late stage if there is a good reason for the delay, but not invariably and the later they are sought the more difficult it will be, in general, to persuade the court that they should be allowed. 
34.	In this case the application is very late indeed. Mr. McShee seems to have been prompted to make further investigations by receipt of the draft judgment, but as he says himself the website could easily have been discovered at any time. There is no good reason for his delay. There is no explanation at all of how he has now come across the other employment documents he wishes to introduce- he simply says they have "emerged" since the appeal hearing. The assumption must be that he did not look for them himself beforehand. He does not suggest the Ombudsman could or should have found them.
35.	I do not consider that the employment documents advance Mr. McShee's case materially. They go to the period of his employment by DCF, but that was accepted. The web page may have been a prompt to further investigation, but is not necessarily decisive- I note it gives a contact address at Heywood Ltd, not the trustees of the MMC scheme, so it may indicate that the Heywood scheme it refers to still exists and has not been merged in the MMC scheme, in which case any claim Mr. McShee had under it may not now lie against the MMC scheme. 
36.	Allowing the new material in now would require submissions from both parties as to its significance as evidence and whether the Ombudsman could or should have looked for it as part of his investigation. That, it seems to me, would very likely require a further hearing, at a possibly significant cost to the respondent in circumstances in which it took the view that it need not appear at the original hearing but relied only on written submissions. It would essentially start the appeal from scratch in circumstances when it was virtually concluded, with a reserved judgment about to be delivered, when Mr. McShee chose to look further. It would not be fair to the respondent, or consistent with the overriding objective of the CPR or the public policy of finality in litigation (which Ladd v Marshall serves) to permit Mr. McShee that indulgence.