This case is of interest to schemes providing DB benefits. The High Court has partially allowed a member’s appeal against a determination of the Pensions Ombudsman (TPO) in which TPO had ruled that the cut-off date for limitation purposes was the date on which the administrator of the Teachers’ Pension Scheme (the Scheme) had first sought recovery of an overpayment to Mr Webber in November 2011.
The Court held that the cut-off date should instead be the later date of December 19, 2011 when TPO had received the response from the Scheme that it opposed Mr Webber’s allegations. The Court reasoned that this date was analogous to “action brought” by the Scheme’s administrator under the Limitation Act 1980 (LA 1980).
Background and timeline
The rules of the Scheme provided (broadly) that if a member became entitled to a teacher's pension and then went back to work as a teacher, his pension would be reduced (if necessary to nil), to ensure that the salary from his new employment and his pension combined did not exceed the salary last earned, adjusted for inflation. Mr Webber worked as a teacher and was a member of the Scheme.
Below is chronological outline of events:
April 1, 1997 - aged 50, Mr Webber took early retirement. He was then re-employed as a full-time teacher in September 2001 and completed a further period of pensionable service in the Scheme until August 2010. During 2001, he submitted the required “certificate of re-employment” to the administrator, Teachers’ Pensions (the Administrator) but he did not submit any further certificates in subsequent years.
November 24, 2009 – the Administrator wrote to Mr Webber informing him that his earnings and pension combined had exceeded his index-linked salary of reference in each tax year from 2002/3 to 2008/9. His pension should have been abated over this period and, as a result, there had been a net overpayment of £36,282 (the November Letter). The Administrator wrote to Mr Webber again in June 2010 informing him that there had been a further overpayment in 2009/10, bringing the total net overpayment figure to £41,034.
August 3, 2010 - Mr Webber repaid to the Administrator £3,775, which was his calculation of the amount of pension overpayment in 2009/10. The Administrator acknowledged this payment, but stated that it had been “offset” against the total overpayment sum, leaving an overpaid balance of £37,259.
April 18, 2011 - having been through the IDRP of the Scheme, Mr Webber complained to TPO. The form was dated 2 April 2011 and stamped as received on 18 April 2011.
November 2011 – having reviewed the complaint and established that TPO had jurisdiction to investigate it, the Administrator was informed of Mr Webber’s complaint.
December 19, 2011 - the Administrator replied by letter opposing the allegations.
June 26, 2012 - the Deputy Pensions Ombudsman (DPO) published her determination that Mr Webber should have been aware that he was required to complete a certificate of re-employment in each tax year if he received a salary increase and rejected Mr Webber's complaint that he had changed his position in reliance of the overpayment.
November 22, 2012 – Asplin J upheld Mr Webber’s appeal to the High Court (for reasons immaterial to the limitation question) and the matter was remitted back to TPO for reconsideration.
January 24, 2014 – the DPO published her second determination and again rejected Mr Webber’s complaint. According to the DPO, Mr Webber had “turned a blind eye, for whatever reason” in the hope that the overpayment would go unnoticed. She again rejected Mr Webber's defence based on change of position. In addition, she rejected his argument that the Administrator’s claim for recovery of the overpayment was statute-barred and held the Administrator could not, with reasonable diligence, have discovered its mistaken overpayments any earlier than it did.
Mr Webber appealed to the High Court for a second time.
December 2014 - Nugee J in the High Court agreed with the DPO that Mr Webber had no change of position defence but allowed his appeal in relation to limitation. Nugee J held that the Administrator could, with reasonable diligence, have discovered its mistaken overpayments at some point during the 2002/3 tax year and the six-year limitation period started running from that date. As a result, Mr Webber had a limitation defence for the recovery of any overpayments made more than six years before the relevant date when the limitation period was to be regarded as having stopped (which Nugee J referred to as the “cut-off date”).
Nugee J did not hear arguments on the point but expressed a provisional view that the cut-off date was likely to be the date on which Mr Webber brought his complaint to TPO, stating that he was “firmly of the view that the closest analogy to the issue of a claim form is the formal bringing of the complaint by Mr Webber to the Ombudsman because at that point the question of the recovery of overpayments was in issue between the parties before the Ombudsman…”.
However, Nugee J invited the parties to agree the cut-off date between themselves, as well as the amount of the overpayment that should be recovered. The parties failed to reach agreement and the issues were remitted to TPO.
February 2, 2016 - TPO ruled that the cut-off date for limitation purposes was the date of the November Letter (November 24, 2009). This was the date on which the Administrator first sought repayment of the overpayment. As a result, the Administrator was able to recover overpayments which were made up to six years before that date, which TPO fixed at approximately £18,000.
In arriving at this conclusion, TPO commented that Nugee J's view was simply a provisional one. Noting that Nugee J did not hear any submissions on the point, TPO suggested that fixing the cut-off date as the date when the complaint was made to his office could encourage members who had been overpaid to delay resolution of a matter, and could lead to different outcomes according to the duration of an IDRP process.
Mr Webber appealed to the High Court on the limitation issue. (He also appealed on the issue of maladministration, but this was dismissed by the High Court on the basis that the issues had already been adjudicated and had not been remitted to TPO).
October 14, 2016 – Mr Bartley Jones QC, acting as Deputy Judge in the High Court, allowed Mr Webber's appeal on the limitation issue, albeit identifying a slightly different cut-off date than that claimed by either party. He ruled that the cut-off date for limitation purposes was the date of receipt by TPO of the Administrator’s written response to the notice of complaint dated 19 December 2011. It was receipt of this letter which was “action brought” by the Administrator by analogy with civil court action under the Limitation Act 1980 (LA 1980).
In arriving at this decision, the Deputy Judge considered Nugee J's judgment and concluded that it contained two separate propositions:
Proposition 1 – that the closest analogy to the issue of a claim form (under the Civil Procedure Rules (CPR)) is some step in the complaint procedure (because the complaint procedure equates, by analogy, with proceedings commenced by a claim form); and
Proposition 2 - for the purposes of the first proposition, it is the bringing of a complaint by Mr Webber that is the relevant step.
The Deputy Judge favoured Proposition 1. Underlying the judgment of Lewison J in Arjo Wiggens was the requirement to equate, so far as possible, a complaint before TPO (other than a complaint of pure maladministration) with the resolution of a dispute by the Court. Therefore, some event in the complaints process to TPO must be the cut-off date for limitation purposes by analogy with the LA 1980.
Although “deeply reluctant” to depart from the views expressed by Nugee J, the Deputy Judge considered that Proposition 2 was more difficult since the complaint was brought not by the Administrator, but by Mr Webber.
In Barnes v St Helens MBC  the Court of Appeal (CA) held that a claim is “brought” for the purposes of the LA 1980 when the claimant's request for issue of a claim form is delivered to the Court office. The Deputy Judge considered that underpinning the CA's reasoning was the expectation that the expiry of the limitation period should be linked to a unilateral act of the claimant. One of the difficulties with Proposition 2 was that the act which stops time running was not the act of the claimant, but the act of the defendant.
The Administrator’s argument that the November Letter should be taken as the relevant cut-off date for limitation purposes was rejected as, ultimately, it was up to the overpaid pensioner whether and when to bring a claim. The November Letter could not have constituted “action brought” for LA 1980 purposes had there been an action in Court, therefore to treat it as “action brought” for the purposes of a complaint to TPO would produce a different answer on liability for Mr Webber depending on whether he was sued in Court or whether the matter was referred to TPO. This would create fundamentally new principles of limitation applicable only to complaints to TPO.
Consequently, the Deputy Judge held that the cut-off date for limitation purposes was the date of receipt by TPO of the Administrator’s letter of 19 December 2011. He concluded by stating that, in the circumstances, he hoped that “[the Administrator] would take a highly charitable view of any modest but sensible repayment programme put forward by Mr Webber”.
The Deputy Judge’s view that the cut-off date should be one analogous with that applying to the process under the CPR seems logical on the face of it. The ruling should serve as a warning to trustees and scheme administrators to be alert to the possibility of overpayments and when recovery may be time-barred. This is particularly the case in schemes (such as the Teachers’ Scheme) where the rules allow members to retire and then resume employment, and make provision for pension payments then to be reduced. A scheme audit could produce information that suggests overpayments are being made, and where this is the case, prompt investigation should be carried out.
Failing to take prompt action to recover overpayments may result in the trustees losing their recovery rights on limitation grounds. Broadly speaking, there is a six-year window for overpayments to be recovered. This case shows that a long period of time can pass before a complaint is submitted to TPO, and that TPO’s investigation process itself can be lengthy. Overpaying trustees will be keen to ensure that a significant period of time does not pass before the clock stops running for limitation purposes, as this will affect the amount that may fall to be repaid.