“The Deputy PPF Ombudsman is currently Ms Jane Irvine. The PPF Ombudsman is Mr Tony King. The Deputy Ombudsman has the same powers and fulfils the same functions as the Ombudsman. This appeal concerns a decision of the Deputy Ombudsman; for simplicity no distinction is drawn between the two roles and the Ombudsman is referred to as a female.”
“(5) The Board must, before the beginning of each financial year, determine in respect of that year– (a) the factors by reference to which the pension protection levies are to be assessed, (b) the time or times by reference to which those factors are to be assessed, (c) the rate of the levies, and (d) the time or times during the year when the levies, or any instalment of levy, becomes payable.”
“(3) The Board must in respect of the levy (a) determine the schemes in respect of which it is imposed, (b) calculate the amount of the levy in respect of each of those schemes, and (c) notify any person liable to pay the levy in respect of the scheme of the amount of the levy in respect of the scheme and the date or dates on which it becomes payable.”
“There are thousands of scheme employers. The Board has neither the expertise nor the resources to undertake such a task, and could only put itself in a position to do so by turning itself into a soi-disant credit reference agency, at great cost to the pension schemes which have to pay the administration levy. Therefore, it has always been a feature of the Levy Determination that it adopts, as one of the factors in the levy calculation, an insolvency probability based upon the so-called “failure score” assigned to the employer in question by a commercial provider of information on creditworthiness. Such a provider is engaged under contract to supply the Board with failure scores. The provider is selected through a competitive procurement process. So far, it has always been Dun & Bradstreet (UK) Ltd.”
“Correction by the Board B2.1 When could data be corrected? This Rule B2.1 applies if it appears to the Board that either: (1) the information supplied for or used in the calculation of the Levies is incorrect in a material respect; … B2.2 Correction of the data (1) Where Rule B2.1 applies, the Board may calculate the Levies on the basis of information which appears to it to be correct for the purposes of these Rules. Where the Levies have already been calculated in respect of a Scheme, the Board may review and revise the amount of the Levies calculated in respect of a Scheme on the basis of information which appears to it to be correct but it shall not be under an obligation to act. (2) The Board is under no obligation to take into account corrected information merely because the Scheme has been disadvantaged by the failure of the trustees or those acting on its or their behalf to supply correct information at the proper time. (3) For the purposes of Rule B2.1(1), information is not incorrect where it is correct and legitimate in itself, but it would have been open to the person supplying it to supply some different or additional information which might have caused these Rules to be applied differently. (emphasis added) B2.1 When could data be corrected? This Rule B2.1 applies if it appears to the Board that either: B2.2 Correction of the data (b) Rule E2: “How to calculate [Assumed Probabilities of Insolvency] … E2.2 Non-UK Failure Scores (1) This Rule E2.2 applies where DBUK is unable to assign a UK Failure Score to an Employer, but DBUK or one of its associated undertakings is able to assign a Non-UK Failure Score. … (3) The Non-UK Failure Score which applies to an Employer shall be the value which DBUK or, where applicable, the relevant associated undertaking informs the Board that it has assigned to that Employer as its non-UK Failure Score. For the avoidance of doubt, Non-UK Failure Scores to be provided to the Board are, subject to Rule E2.3 (Severe risk parents), to be the normal non-UK failure score which was assigned to that Employer by DBUK (or the relevant associated undertaking, as the case may be) in the ordinary course of its businesses as at the Measurement Time, (or, if different, the score which would have been assigned if account had been taken of all data that was received by DBUK or the relevant associated undertaking, as the case may be, at least 24 hours before the Measurement Time).”
“DBUK appeals E3.1 When does this Rule E3 apply? This Rule E3 can only apply in relation to a decision of DBUK, where DBUK informs the Board that: (1) It has made a decision under either of Rules E3.3 or E3.4; (2) that decision was made for a reason in Rule E3.5; … E3.3 DBUK may act if the score is incorrect DBUK may decide for a reason in Rule E3.5 that the Failure Score or other measure applied in accordance with Rules E2.1 to E2.7 inclusive assigned to an Employer as at the Measurement Time, was incorrect. … E3.5 The reasons applicable for Rule E3.3 and E3.4 DBUK may only act if it decides that its original decision was based upon information which, as at the Measurement Time, was incorrect or incomplete by comparison with the information which should normally have been taken into account by DBUK in assigning a Failure Score or other measure at that date: … (2) because DBUK did not apply the procedures for assigning the Failure Score or other measure as they should normally have been applied.”
“As D&B had itself conceded, the Trustees could not have been ‘reasonably expected to know’ that the D&B Luxembourg office did not collect such basic financial data – data which other D&B offices (including the UK) obtain without the need for action by the Trustees – particularly in circumstances where not only did the Board and D&B not warn trustees of this position, but where their publicly available material positively suggested the opposite.”
“34. The first [issue] centres on a lack of understanding by the trustees of D&B Luxembourg’s particular requirements to have public company accounts submitted to them, in contrast to D&B in the UK who take account of public accounts. I acknowledge that responsibility lies with the trustees to submit correct data and I accept that the PPF depends on the information supplied to it. There is therefore a balance to be struck in assessing where responsibility for the critical error might lie. Essentially this involves consideration of whether the trustees failed to comply with D&B Luxembourg’s requirements, having been told what they were, or the PPF failed to explain to the trustees that D&B Luxembourg did not collect financial information for PPF failure scores, instead requiring it to be submitted to D&B Luxembourg each year. 35. D&B Luxembourg is clearly instructed by the PPF. D&B Luxembourg had obtained financial statements for previous years, apparently for a different client giving different instructions. Therefore the question of what actions D&B Luxembourg took, or did not take, are within my remit as controlled by the PPF. 36. I am sure that the PPF would accept that it would not be a legitimate exercise of its powers to calculate a levy by unfair means (and that any interpretation of the [2010/11 Levy Determination] should be guided by this principle). There is a risk of this if the PPF takes the view that it is, itself, strictly bound by the terms of the Determination and to the information it receives from D&B Luxembourg.”
“…the Trustees cannot reasonably be penalised because they failed to guess that D&B operates differently whilst working for the PPF in different countries when equally the PPF failed to advise about a critical variation”.The variation to which she was referring was the variation in D&B’s policy for obtaining up to date financial statements in Luxembourg as compared with its policy in the UK and in at least some other countries; (b) Paragraph 44: “D&B agreed that the trustees could not reasonably be expected to know about its data collection policy in Luxembourg, but considered that it was for the trustees to find out. The PPF supported that view, but I cannot see how a public body, properly directing itself, can decide that a statutory levy can be imposed based partly on a procedure that the levy payer was unaware of”
“It is not for me to say what the failure score should be, or what range it should fall in. But, as a matter of public policy, I cannot support the Board’s insistence on using a failure score that it knows is not based on relevant data”
“In reviewing the amount of a levy, a number of factors may have to be considered, including D&B’s failure score. Of course the PPF cannot interfere in D&B’s calculations, but they can and do interfere in the way D&B operate for them. It follows that I do not agree with the [Reconsideration Committee’s] view that the Board was prevented by Section 207 of the [Act] from considering the particular circumstances surrounding D&B Luxembourg’s failure score here.”
“Rule B2 of the Board’s Determination allowed it to correct data if it appeared to the Board that information supplied for or used in the calculation of the levy was incorrect in a material respect. D&B Luxembourg’s failure score was incorrect in a material respect – it was based on out of date financial statements that were irrelevant to the 2010/2011 levy year – and so was not ‘correct and legitimate in itself’”
“I therefore determine that the Reconsideration Committee’s decision dated23 September 2011 was not reached correctly. Having done so, Regulation 16 of the [the PPF Ombudsman Regulations]makes it mandatory for me to determine what action the Board should take and remit the matter to the Board”
“52. The Board shall, forthwith, review and recalculate the Scheme’s [Risk Based Levy] for the 2010/11 year, based on D&B Luxembourg’s [Failure Score] for [the Scheme Employer] for that [Levy] year, calculated on the basis of the financial statements issued by the company up to the measurement date used by D&B Luxembourg in accordance with Rule A2.3 of the [2010/11 Levy Determination], which was 5pm on31 March 2009 . 53. As I have remitted the matter to the Board, interest for late payment of the [Levy] shall not be charged.”
“The third ground of challenge before the deputy judge was, as he observed, closely related to the second. It was that the criteria, since they constituted absolute rules, amounted to an unlawful fetter on the SIA’s discretionary power of decision. Reliance was placed on Lord Reid’s well known statement in British Oxygen Co Ltd v Board of Trade[1971] AC 610 , 625: ‘The general rule is that anyone who has to exercise a statutory discretion must not “shut [his] ears to the application” . . . What the authority must not do is to refuse to listen at all.’ This argument was misconceived and the deputy judge was plainly right ... Once the criteria were set, the SIA did not have to ‘exercise a statutory discretion’: in applying the criteria, it had no discretion. The British Oxygen case is not authority for the proposition that Parliament may not authorise the promulgation of an automatic prohibition or rule of disbarment. Such a proposition would be an affront to Parliament’s legislative supremacy. And on the true construction of section 7 of the 2001 Act Parliament has in fact authorised just such prohibitions. On this part of the case it is useful to compare the decision of the Court of Appeal in R (Elias) v Secretary of Statefor Defence[2006] 1 WLR 3213 , in which it was held that the formulation of ‘bright line criteria’ for a compensation scheme did not amount to an unlawful fetter of common law prerogative powers…”
“(1) The Audit Commission must from time to time produce a report on its findings in relation to the performance of English local authorities in exercising their functions. (2) A report under sub-section (1) must (in particular) categorise each English local authority to which the report relates according to how the authority has performed in exercising its functions.”
“... the social services star rating is not based on the subjective judgment of the Chief Inspector, but is arrived at by the application of a set of transparent and objective rules to those judgments. There is no discretion involved in translating those judgments into a star rating.” 27. This is, therefore, a very different case from Lavender. There the relevant Minister's policy was to allow his decision to be dictated by what another Minister decided in any individual case. Here the Audit Commission has in effect adopted as its own a series of weightings, produced by the CSCI, which result in a star rating in an entirely predictable way. In our view it is entitled to do that. It is not delegating its decision in any individual case to the CSCI, since the CSCI does not make any such individual decision once it has arrived at the “scores”
“The proper starting point is that the words in the expression ‘ordinary course of its... business’ are ordinary words of the English language which must be given the meaning which ordinary business people in the position of the parties to the facility agreement and the debentures would be expected to give them against the factual and commercial background in which those documents were made.”
“It is clear that section 175(5) of the 2004 Act prescribes that, before the beginning of each financial year, the Board must determine certain matters. These include ‘the factors by reference to which the pension protection levies are to be assessed’. There is no mechanism under the statute for review of such a determination. ... The [Levy Determination] is a detailed document, Part 3 of which is concerned specifically with the risk-based levy. Within that part are provisions concerned with the insolvency probability associated with an employer, including the use of a ‘Failure Score’. It is prescribed that the failure scores to be provided (by Dun & Bradstreet) to the Board ‘are to be the normal failure scores which were or would have been assigned to that employer by DBUK in the ordinary course of business ...’. That provision, which was capable of being applied to individual employers in the light of the relevant data at the relevant time, is clearly an integral part of the determination. As such it is not a reviewable matter under the statute. There is no provision for departing, on a discretionary or other basis, from the normal failure score. The calculation of the levy, which is a reviewable matter, proceeds on the basis of the assigned normal failure score, subject only to any correction made and intimated by DBUK. It is not disputed that the normal failure score assigned to Ormsary Farmers by Dun & Bradstreet in the ordinary course of its business (and not departed from by it) was 69. A challenge to the use of the normal failure score assigned to a particular employer is in effect a challenge to an integral part of the [Levy Determination]. Such a challenge cannot legitimately be made by a challenge to the calculation of the levy. In these circumstances it is clear, in our view, that the mechanism used by the appellants to challenge the failure score assigned to Ormsary Farmers is misconceived and that the appeal is on that basis also without foundation. It is unnecessary in these circumstances to express a view on the effect, if any, of section 6(2) of the Human Rights Act.”
“A ‘normal’ failure score provided in the ‘ordinary course of business’ must contain an objective element, so as to be a score which is the product of a proper and customary, as well as merely a regularly carried out, procedure.At a minimum, in order to ensure that the Board is not making a decision as to the risk-based levy which is irrational or procedurally flawed, it must be satisfied (where objection is taken) that the score does not suffer from a defect in its genesis or computation such that its adoption would be unfair or irrational”
“It is convenient to approach the matter in a two-stage process; (3) first, to ascertain, as a matter of fact, whether an objective observer, with knowledge of the company, its memorandum of association and its business, would view the transaction as having taken place in the ordinary course of its business”
“[Gault J] further observed that the determination is to be made objectively by reference to the standard of what amounts to the ordinary course of business. It must be such that it would be viewed by an objective observer as having taken place in the ordinary course of business”
“… there is an objective element to this analysis: even if the process applied by D&B when calculating the failure score was its usual practice, if that practice was, objectively considered, inappropriate or unreasonable, it could be said not to be ‘normal’ business practice”
“D&B Luxembourg’s failure score was incorrect in a material respect – it was based on out of date financial statements that were irrelevant to the 2010/11 levy year – and so was not ‘correct and legitimate in itself’”
“…I have concluded that [recalculating the Levy] is the only safe course of action. It is not for me to say what the failure score should be, or what range it should fall in.” (b) Second, paragraph 50: “Although I accept that some of these factors may in part have been considered by the PPF, there is not sufficient evidence for me to conclude with any degree of certainty that all relevant and no irrelevant matters were taken into account. [The] reasons given here do not evidence this. As the PPF says its usual practice is to consider this range of factors, I consider this to be a further reason why the matter should be remitted back to the PPF Board for reconsideration”
“If she concludes that the decision was incorrect, she has power to direct the Board how to re-take the decision; her jurisdiction is not confined to setting aside the incorrect decision and remitting it. In this sense, she has a full appellate function and not merely a review function: she can direct the terms of the fresh decision the Board must make, in effect replacing their decision with hers.”
“There is no free service, such as the Pensions Advisory Service or Citizen’s Advice, available to assist the trustees pursuing redress with the PPF. Therefore it is understandable that trustees may wish to obtain professional advice, and depending on the circumstances of the case it may be appropriate for me to make directions in respect of the cost of this. I am persuaded that such a direction needs to be made for this referral. The matters to be put to D&B and the Reconsideration Committee were not straightforward, and legal analyses and research was required. Moreover, professional representation was not unreasonable for the PPF and D&B’s appeal processes. D&B’s process was somewhat tortuous, consisting of five stages, as I have noted PPF reasoning has not been full, and the amounts at stake justified using lawyers as representatives in the PPF appeal. Accordingly whilst I do not think the full legal costs claimed can be awarded, especially because part of the Trustees’ arguments have failed or been made in the D&B process which is outside my jurisdiction, I consider the PPF should contribute£10,000 towards the legal costs incurred.”
“4. Award all costs incurred by the Scheme in the appeal process to date, including the costs of the PPF review, the D&B appeal and the application to the PPF Ombudsman”; 8. If unable to direct the PPF as requested above, to compensate the Scheme for the increased levy and the costs it has incurred as a result thereof”
“I have to mention the subject of professional fees, as you have requested that the Ombudsman make an award of costs. This office provides a free service, free from the risk of costs inherent in court proceedings. Our procedures are designed to be used without professional assistance. Therefore it is most unlikely that the Ombudsman will make an award for costs, even if he considered that he had the power to do so”. (d) Before any reply to that letter could be sent, Mr O’Brien followed up with a further letter to the Trustees’ solicitors dated2 May 2012 , in which he stated that “Following a conversation with the Ombudsman about this referral, I am writing to correct the paragraph in my previous letter about awards for costs”
“The Pensions Ombudsman does not have any express statutory power to award costs (even in respect of oral hearings). But, like the PPF Ombudsman, his jurisdiction is widely expressed: he can direct a person responsible for the management of the scheme to which the complaint relates ‘to take, or refrain from taking, such steps as he may specify’ (s.151(2) Pension Schemes Act 1993 ). The Pensions Ombudsman does not usually make an award of costs, but has on occasion done so (see, by way of example only, the Pensions Ombudsman’s determinations in Hopwood (81492/1) at §38 and LyndonStanford (73999/2) at §22).”
“Where an oral hearing is held and the PPF Ombudsman is of the opinion that - (a) the applicant, the Board, any person notified of the reference under regulation 5(1)(b) or any person to whom notice of the hearing was sent under regulation 11(2)(c) actedvexatiously; (b) the conduct of the applicant in making or pursuing the reference wasunreasonable; or (c) the conduct of the Board in opposing the reference wasunreasonable, he may direct the person who acted, as the case may be, vexatiously or unreasonably to pay any such person as is mentioned in paragraph (2)(a) to (e) [this list includes the referral applicant] such amount as the PPF Ombudsman considers is reasonable in respect of the costs and expenses reasonably incurred by that person, with the prior approval of the PPF Ombudsman, in connection with that person's attendance at the hearing”