In the trustees we trust

This month I would like to consider Sampson and others v Hodgson and others [2008], a decision of the High Court upholding an appeal against a determination by the pensions ombudsman.

It concerns the ombudsman's power to interfere with trustees' discretionary powers - in this instance, to suspend an ill-health pension - and giving guidance as to how trustees should consider evidence during a two-stage internal dispute resolution procedure.

Mr H was a member of the TWIL Group Pension Fund (the Scheme). The Scheme's rules provided that the Trustees could stop an ill health early retirement pension if, in their opinion, the member's health is such that he is able to resume employment with the employer or to take up any other gainful employment which the Trustees consider is suitable for the member's circumstances.

Mr H’s service with the TWIL Group ended in January 1994 on medical grounds and was granted an internal dispute resolution procedure pension. In 2000, the trustees of the Scheme (the Trustees) commissioned a report by a chartered physiotherapist which concluded that Mr H could return to full-time sedentary work. On this basis, the Trustees decided that he was capable of work as envisaged under the Scheme's rules above and exercised their power to stop his pension. Stage 1 internal dispute resolution procedure.

By stage 2 of the Scheme's internal dispute resolution procedure, the Trustees had available to them several letters and reports from Mr H's GP and his consultant orthopaedic surgeon supporting his claim that he was unfit to return to any work. The trustees refused to reinstate the internal dispute resolution procedure pension. Mr H complained to the ombudsman who directed that it be re-instated.

Referring to well-established legal principles, the court held that the ombudsman cannot substitute its own decision for that of the Trustees in these circumstances. Provided that the Trustees had taken into account all relevant evidence, the weight to be given to that evidence was entirely a matter for them, not the ombudsman or the court. Nor was the Trustees' decision perverse, in the sense of being one which no reasonable trustees could have reached.

It also came to light during the hearing that certain letters supporting Mr H's claim had come into existence after the first stage internal dispute resolution procedure decision but, despite being available to the Trustees at the time of the second stage internal dispute resolution procedure, were not considered by them at all, rather than not being given sufficient weight.

The court held that the only relevant internal dispute resolution procedure decision for the purpose of the complaint to the ombudsman, and the corresponding appeal to court, was the first-stage decision. Consequently, at the second stage of an internal dispute resolution procedure, trustees need only consider the evidence that was available at the first stage.