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Cite as: [1996] EWHC Admin 13

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JOHN SEIFERT v. PENSIONS OMBUDSMAN; E KURAL; P HELM; A LYNCH; FAIRMOUNT TRUSTEE SERVICES LIMITED; SEIFERT LIMITED; GUARDIAN ASSURANCE PLC CO-4328-95 ANTHONY LYNCH; PHILIP HELM v. JULIAN FARRAND and ERDOGAN KURAL [1996] EWHC Admin 13 (1st June, 1996)


IN THE HIGH COURT OF JUSTICE CO-6-96
QUEENS BENCH DIVISION
CROWN OFFICE LIST

B e f o r e:

MR JUSTICE LIGHTMAN
- - - - - - -
JOHN SEIFERT
- v -
(1) THE PENSIONS OMBUDSMAN
(2) E KURAL
(3) P HELM
(4) A LYNCH
(5) FAIRMOUNT TRUSTEE SERVICES LIMITED
(6) SEIFERT LIMITED
(7) GUARDIAN ASSURANCE PLC


CO-4328-95

(1) ANTHONY LYNCH
(2) PHILIP HELM

- v -

(1) JULIAN FARRAND
(2) ERDOGAN KURAL

- - - - - -
(Handed Down Transcript of Smith Bernal Reporting Limited,
180 Fleet Street, London EC4A 2HD
Tel: 0171 831 3183
Official Shorthand Writers to the Court)
- - - - - -

MR D REES (instructed by Messrs Jacobsens, London, WC2) appeared on behalf of the
Appellant, Mr Seifert.

MISS J HAYES (instructed by Messrs Sacker and Partners, London, EC4) appeared on behalf of the Appellant, Fairmount Trustee Services Limited.

MISS C FURZE (instructed by Messrs Halls, London, WC2) appeared on behalf of the Appellants, Mr Lynch and Mr Helm.

- - - - - -
J U D G M E N T
(As Approved by the Court )
Crown Copyright
- - - - - - -





MR JUSTICE LIGHTMAN:

I. INTRODUCTION

1. The Social Security Act 1990, Section 12(1) and Schedule 3, now consolidated in Section 145-152 of the Pensions Schemes Act 1993 ("the Act"), created the office and jurisdiction of the Pensions Ombudsman ("the Ombudsman"). His statutory function under the Act (as extended by the Personal and Occupational Pension Scheme (Pensions Ombudsman) Regulations 1991) is (a) to investigate written complaints made to him of injustice in consequence of maladministration in connection with any act or omission of the trustees or managers of, and of employers in relation to, an occupational pension scheme or personal pension scheme; and (b) to investigate and determine any dispute of fact or law. The Ombudsman investigated and on the 5th December 1995 made a determination ("the Determination") upholding a complaint by Mr Kural of maladministration by Mr Lynch, Mr Helm and Mr Seifert ("the Appellants"), the three trustees of the Seifert Group Pension and Life Assurance Scheme ("the Scheme"). On these two appeals from the Determination, one by Mr Lynch and Mr Helm, and the other by Mr Seifert, the Appellants contend that the Determination is vitiated, not merely by errors of law, but also by "maladministration" by the Ombudsman i.e. the unjust way he reached that decision. In my view both complaints are well made out. I think that the Determination is also objectionable for the failure, contrary to Section 151 of the Act, to set out the reasons in language which is clear and meaningful i.e. for unintelligibility.


II. SPECIAL PROCEDURE IN THIS CASE

2. Neither Mr Kural nor the Ombudsman was represented by counsel at the hearing of this appeal on the 25th June 1996. Mr Kural attended in person and the Ombudsman attended by a solicitor. Neither made any representations, though invited to do so. Prior to the hearing the Ombudsman sent to the Court a letter dated the 21st June 1996 ("the June Letter") seeking to assist on the issues raised on the appeal. With the June letter was enclosed an important letter from Mr Kural to the Ombudsman dated the 4th August 1995 ("Mr Kural's Letter") which had not previously been disclosed to any of the other parties. In the circumstances at the hearing I thought it right to give leave to the Appellants to raise as an additional ground on the appeal the failure of the Ombudsman to disclose Mr Kural's Letter before he made his Provisional Determination ("PD") or the Determination. I also myself at the hearing raised the question whether the Determination was objectionable on the grounds of unintelligibility. As the Ombudsman was not represented at the hearing by counsel in the light of the importance of the issue relating to Mr Kural's Letter, I resolved after preparing a provisional draft of this judgment to send a copy to the Ombudsman and all the other parties and to give the Ombudsman an opportunity to make representations in writing and the parties thereafter the opportunity to make their comments in writing on his representations. I made it clear to all that (to save costs) there would be no further hearing unless the Ombudsman or a party gave sufficient reason why there should be one.


3. The Ombudsman made his representations by letter dated the 10th July 1996 ("the July Letter") His representations were not confined to the effect of non-disclosure of Mr Kural's Letter, but included (amongst others) the issue of unintelligibility; and the parties (including Mr Kural) made their comments in writing on these representations. No application has been made for a further hearing. I accordingly give judgment today confident that the parties (and in particular the Ombudsman) have been given a fair opportunity to say what they wish on the various grounds on which this appeal is being decided.


III. FACTS

4. Mr Kural was a director as well as for 27 years an employee of Seifert Limited ("Seifert"), a company providing architectural services. He attained his 60th birthday on the 23rd May 1991. Seifert as the Principal Employer had its own final salary pension and life assurance scheme, namely the Scheme, of which the Appellants until the 18th August 1992 were the trustees. The Assurer was Guardian Assurance plc ("Guardian"). The members of the Scheme who were entitled to deferred benefits under it included Mr Lynch, Mr Helm and Mr Kural. These three (together with Mr Seifert) were directors of Seifert. Mr Helm was the finance director. The Scheme included as clause 21 of the Definitive Deed dated the 12th August 1971 ("Clause 21") a provision to the following effect:-

"Without prejudice to the powers and discretions vested in the Trustees by the other provisions hereof the Trustees shall be entitled to all the indemnities conferred on trustees by law and shall not be liable for acting on the advice of the Auditor or the Actuary appointed hereunder or on any other professional advice nor shall any Trustee be liable for any acts or omissions not due to his own wilful neglect or default."

5. During 1991, Seifert (as all the directors, including Mr Kural, well knew) fell in severe financial difficulties, and for this reason by letter dated the 9th December 1991 Mr Kural was given notice expiring on the 8th June 1992. He was made redundant, but it was agreed that for pension purposes he should be treated as having taken early retirement under the Scheme. Under the Rules Mr Kural was in these circumstances entitled to elect whether to take an early retirement pension in lieu of a preserved pension.


6. On the 17th February 1992, Seifert provided Mr Kural with a quotation prepared by the Guardian for the retirement benefits to which he was entitled under the Scheme. The quotation was either an annual personal pension of £17,327.40 or a tax free lump sum payment of £29,240.86 and a reduced annual personal pension of £14,676.36. In either case there was to be a widow's annual pension of £8,663.76. The quotation included the following note:-

"Note that the assumed outgoing exceeds the amount reserved for this member under the scheme. If the date by which the scheme's long term liabilities are fully funded is not to be deferred, an extra contribution of £75,300 will be needed. This could be covered by a single premium payment."

7. This payment of £75,300 could not be made by Seifert: its bankers would not have allowed it and the directors knew that such a payment by Seifert might be open to challenge as a wrongful preference.


8. On the 7th April 1992 Mr Kural wrote to Mr Helm as Seifert's finance director (inter alia) asking for confirmation of the details in the quotation on the basis of his taking the maximum lump sum payment and that Guardian would pay the £14,676.36 by monthly instalments into his bank account. Certain discussions thereafter proceeded (to which Mr Kural was not a party) regarding a switch of pension arrangements from final salary to money purchase. In the course of considering these proposals Guardian on the 18th May 1992 wrote to Mr Helm to the effect that the Scheme was under funded on a discontinuance basis and that on a current funding position £132,803 (which was 63% of the pension to which Mr Kural was entitled under the Scheme) fairly represented Mr Kural's share of the assets of the Scheme, whilst £260,467.43 would be required to secure the proposed early retirement pension to which Mr Kural was entitled under the Scheme.


9. On the 28th May 1992, Mr Helm sent Mr Kural a memorandum dated the 20th May 1992 to the effect that the trustees would make available to him the sum of £132,800 and were currently seeking quotations in respect of the benefits which this sum would purchase. On the 3rd June 1992 Mr Helm sent Mr Kural these quotations. On offer was an annual pension of £10,901.52 or a lump sum of £29,240.86 and a reduced annual pension of £8,481.12. In both cases there was a widow's annual pension of one half of Mr Kural's pension. On the 8th June 1992 Mr Kural's notice expired. Mr Kural's final pension arrangements were still under negotiation and accordingly he was not in receipt of a pension when on the 30th June 1992 the Scheme formally went into wind up. On the 8th July Seifert went into administrative receivership. On the 18th August 1992 pursuant to Section 57C of the Social Security Pensions Act 1975 (now Section 119 of the Act) the administrative receivers appointed Fairmount Trustee Services Limited ("Fairmount") as independent trustee to act in winding up the Scheme. On the 14th October Mr Seifert and Mr Lynch retired as trustees of the Scheme. On the 8th October 1992, Guardian made a valuation of the Scheme assets ("the 1992 Valuation") in which they calculated (without making any of a number of provisions which they said required to be made) that the Scheme funds only covered 83% of its liabilities. This deficit brought into play Scheme Rule 16.3 under which (in short) the assets of the Scheme had first to be applied in ensuring existing pensioners continued to receive their pensions and only the balance of the assets was available to provide benefits for all other members at their Normal Retirement Date (and that included Mr Kural, as well as Mr Lynch and Mr Helm).


10. On the 24th February 1993, Fairmount wrote to Mr Kural informing him (1) that there was a shortfall in the assets of the Scheme, that there was in this regard a claim against Seifert, but that it was unlikely that the receivers would have surplus assets to pay into the Scheme; and (2) as to the effect of Rule 16.3. On the 19th October 1995, after making the necessary provisions referred to in their valuation dated the 8th October 1992 (but not provision for the costs of these proceedings) Guardian calculated the current funded position to be 71.6%.


11. On the 22nd January 1995, Mr Kural wrote to the Ombudsman making his complaint of maladministration, at that stage against Guardian only, and seeking his intervention to obtain a satisfactory settlement from Guardian. This complaint, and the complaint repeated in his subsequent letters dated the 31st January and the 28th March 1995, (a letter to Ms Herbert, an OPAS adviser) and as extended by a letter dated the 15th June 1995 so as to include Seifert and the Appellants amongst those against whom he made his complaint, was that the premium offered in June 1992 was only £132,800, which was 63% of his entitlement, when (as stated in Guardian's letter dated the 8th October 1992), funds were available to pay 83% of his entitlement. His claim was for payment of a premium equal to 83% of his entitlement and of the loss of 2½ years pension to date.


12. On the 22nd June 1995, the Ombudsman wrote to the Appellants setting out the complaints procedure, which included a provision requiring the Ombudsman to provide to the Appellants, as persons against whom complaints were made, the opportunity to comment on the allegations in the complaint. This provision reflects Section 149(1) of the Act:

"When the Pensions Ombudsman proposes to conduct an investigation into a complaint made or dispute referred under this part, he shall give -

(a) the trustees and managers of [and employers in relation to] the schemes concerned, and

(b) any other person against whom allegations are made in the complaint or reference,

an opportunity to comment on any allegations contained in the complaint or reference."



13. The Ombudsman supplied the Appellants with copies of the correspondence to which I have referred, and invited their answers to the complaint made. The Appellants did answer.


14. The Ombudsman then sent copies of the Appellants' answers to Mr Kural. Mr Kural in his reply, namely Mr Kural's Letter, did not confine himself to responding to the answers, but made far-reaching and damaging further complaints and allegations. These included that (1) all decisions at Seifert were made by 5 executive shareholders and Mr Helm: Mr Kural was a salaried director and not included in the decision-making body; (2) the Appellants as trustees were responsible for the deficit in Scheme funds by reason of their culpable failure to secure further contributions to the funds of the Scheme from Seifert and to transfer the funds from Guardian to another assurer; (3) Seifert, if unable to fulfil its financial obligations under the Scheme, was breaking the law by continuing trading and the Appellants (as well as being trustees) "also being employers were fully aware of the situation and they also failed to carry out their fiduciary duties"; and (4) in a number of respects Mr Helm was telling untruths. As I have already said, the Ombudsman never disclosed the existence of Mr Kural's Letter or its contents to any of the Appellants.


15. On the 12th October 1995 the Ombudsman communicated his Provisional Determination ("the PD") to the Appellants. In the PD, the Ombudsman upheld the complaint against Seifert for unreasonably denying Mr Kural the benefits to which he was entitled and declined to uphold the complaint against Guardian. As regards the Appellants he said:


"23. I further uphold the complaint against the [Appellants], who denied responsibility for a benefit which, in my judgment, had effectively been consented to. They were all senior officers of the Employer and as such it is, for present purposes, impossible to disentangle their knowledge and actions as trustees from their knowledge and actions in the former capacity. The Finance Director, who dealt directly with the matter, clearly bears the greatest responsibility, but the other trustees must be taken to have been aware of the events and I find their lack of interest and concern to be inconsistent with their fiduciary position."


16. His Directions were as follows:-

"25. Within one month of the date of this Determination the Independent Trustee and the remaining Individual Trustee (the "Present Trustees") are to obtain the Complainant's decision in writing as to the form in which he wishes to take his early retirement benefits, based on the Assurer's February 1992 quotation.

26. Within two months of the date of this Determination the Present Trustees are to commence payment of the benefits required by the Complainant with effect from 8 June 1992.

27. Interest is to be paid on benefits paid late, calculated on a daily basis at the Statutory Rate of Interest (as prescribed under the Supreme Court Act 1981) from time to time applying.

28. On any tax free cash sum elected by the Complainant interest is to be calculated from 8 June 1992 to the date of payment. On instalments of pension paid in arrears, interest is to be calculated from the due date of each instalment to the date of payment.

29. The deferred benefit rights of the two Individual Trustees who are members of the Scheme are to be reduced to the extent needed to fully fund the Complainant's benefits, the reduction being the same percentage in each case and based on the value, not the amount, of their benefit rights.

30. Within one month of the date of this Determination the Finance Director is to pay the Complainant £900 and the other two Individual Trustees £300 each in order adequately to compensate him for the upset and inconvenience constituting injustice sustained by him from the maladministration."


17. The Appellants thereupon made representations to the Ombudsman in respect of the PD. It is sufficient to refer to four of them:- (1) the finding did not represent or reflect Mr Kural's complaint made in the correspondence made available to the Appellants; (2) the entitlement of the Appellants under Clause 21 to exoneration from liability for any breach of trust and an indemnity in respect of the compensation directed was ignored; (3) the responsibility for non-payment to Mr Kural of his full entitlement lay with Seifert in failing fully to fund the Scheme, and not the Appellants; and (4) implementation of his directions would afford to Mr Kural a priority to which he was not entitled under the terms of the Scheme at the expense of other members.


18. The representations did not elicit any disclosure of Mr Kural's Letter, but on the 5th December 1995 the Ombudsman made the Determination which (save in two respects) was to the same effect as the PD culminating in paragraph 31 which is in the same terms as paragraph 23 of the PD. There was a minor adjustment to the direction in paragraph 29 of the PD to add the words "but adjusted so far as necessary between the two of them to ensure that their GMP rights are not prejudiced." And there were added paragraphs dealing with certain of the representations made. The relevant paragraphs read as follows:-


"22. A number of arguments were put to me in response to my provisional Determination. The first of these was that the complaint investigated is that it was impliedly represented to the Complainant that the Employer would pay the sum of £75,300 referred to in paragraph 4 and that this complaint was never made and cannot be made out from correspondence. Reference to the Complainant's letter of 22 January 1995 discloses at the top of the second page the pension he was told he would receive. Later paragraphs reveal the much lower pension he was expected to settle for. My investigation dealt with the basic issue of this apparent reduction.

26. It was then argued that I would be incorrect to attribute personal responsibility to the Individual Trustees and that true responsibility actually lay with the Employer for failing to fund the benefits. Obviously one of the likely causes of the deficiency in the Scheme was inadequate funding by the Employer but there may have been other contributory factors. The Complainant received a quotation for the early retirement benefits to which he was entitled under the rules of the Scheme but the Individual Trustees sought to reduce those benefits. The Individual Trustees were also directors of the Employer and in my view they allowed their knowledge of the Employer's financial state to influence their decisions about the Complainant's benefit rights from the Scheme.

27. It was next argued that the implementation of my directions would constitute a breach of Section 23 of the Pension Schemes Act 1993, which is concerned with priorities on wind up. I do not accept this argument. Had there been no maladministration, the Complainant would have retired in June 1992, before the Scheme's winding up date, with the benefits to which he was entitled under the rules. Since maladministration has occurred, the appropriate steps to be directed as redress must be to return the Complainant to the position he should have been in but for the maladministration. There is therefore no question of interference with winding up priorities and consequently no breach under Section 23 of the Act.



The effect of the Ombudsman's direction was to treat Mr Kural as in receipt of the full pension to which he was entitled under the terms of the Scheme on the 8th June 1992, and afford him the priority to which receipt would have entitled him at the expense of Mr Helm and Mr Lynch. The effect of his direction regarding the entitlement of Mr Helm and Mr Lynch is that Mr Helm's entitlement to £17,023.81 is reduced by £12,413.76, so that, after an under-funding reduction of £4,272.98, he is only entitled to an annual pension of £337.09; and that Mr Lynch's entitlement to £29,231.05 is reduced by £16,527.24, so that, after an under-funding reduction of £7,336.99, he is only entitled to £5,366.82. The effect of his direction as to payment of the compensation is that by virtue of Clause 21 this payment is borne by the Scheme's assets which are already in deficit.

III. DECISION
1. Compliance with Statutory Procedure and the Rules of Natural Justice.
On the 21st June 1996 in the June Letter, to assist the Court, the Ombudsman wrote to the Court setting out his observations on the issues in the appeal. In the course of his letter he wrote: "In order that the complete picture is given to the Court, I also attach a copy of Mr Kural's [Letter] received by my office on 7 August 1995." Mr Kural's Letter is indeed necessary to obtain a complete picture. Its significance lies in the fact that it is the missing link between on the one hand the letters disclosed to the Appellants and on the other the PD and the Determination. It explains how and why the PD and Determination focus, not on the subject matter of the complaint as revealed to the Appellants, but the matters taken up by the Ombudsman. For example, the terms (and indeed language) of complaint 3 in Mr Kural's Letter are reflected in paragraphs 23 of the PD and the corresponding paragraph 31 as well as paragraph 26 of the Determination. Mr Rees, counsel for Mr Seifert, submitted that the Determination cannot stand, having regard to the failure of the Ombudsman to disclose Mr Kural's Letter or its contents earlier to the Appellants.

Section 151 of the Act provides that the Ombudsman must send to the parties a written statement of the determination, including the reasons for the determination, and he is given power to:
"direct the trustees or managers of the scheme concerned [or the employers] to take or refrain from taking, such steps as he may specify".

19. The determination and any direction given by him are final and binding, subject only to an appeal to the High Court on a point of law only. They have the force of a County Court judgment. A determination by the Ombudsman can damage or destroy reputations, as well as impose financial penalties. In these circumstances, (a) it is mandatory that the Ombudsman comply with the statutory procedure contained in Section 149(1) designed to ensure fairness; and (b) further the Ombudsman must comply with the principles of natural justice (see Duffield v. Pensions Ombudsman, Carnwath J, 2nd April 1996). These require of him: (i) that he make quite clear to the Appellants the specific allegations made in the complaint and to be investigated and of any amendment of the allegations for which he gives leave. It is not open to the Ombudsman to make a determination save in respect of the allegations in the complaint (or any authorised amendment) of which he has given notice to the Appellants. It is highly desirable that the Ombudsman, rather than merely transmitting copies of his correspondence with the complainant, (save in simple and obvious cases) expresses in his own words in plain and simple language what he perceives to be the substance of the allegation. This will limit the risk of misunderstanding; and (ii) he disclose to the Respondents all potentially relevant information obtained by him in exercise of the power conferred by Section 149(4), and most particularly all evidence and representations received by him from the complainant. The Respondents must know at least the gist of what he has learnt, so as to enable them to have a fair crack of the whip and a fair opportunity to provide any answer they may have. Whilst the procedure before the Ombudsman is intended to be quick, inexpensive and informal, these are the minimum requirements for fairness and accordingly for a decision that can be allowed to stand.


20. In my view the Ombudsman was obliged to disclose Mr Kural's Letter as soon as it was received and in any event whilst the investigation was still at a formative stage and before the PD. His failure to disclose it even after the PD and prior to the Determination renders the Determination fundamentally flawed.

21. In the July Letter the Ombudsman accepted that the non-disclosure was a serious mistake of which he personally had never been aware. He went on however to explain the decision of his office not to disclose Mr Kural's Letter as "apparently unduly influenced by the statement by Mr Seifert's solicitor in a letter dated the 25th July 1995:


´We cannot justify further expenditure to our clients by examining further documents just in case something is disclosed in them.'"


22. Nothing in Mr Seifert's solicitor's letter could have given any grounds for belief that Mr Seifert (leave aside the other Appellants) would not have wished to see Mr Kural's Letter. I find this explanation more disturbing than reassuring. The Ombudsman however does go on to say that he has taken administrative steps to prevent such mistakes occurring in the future.


2. Errors of Law
(a) The Complaint

23. In my view, the finding in paragraph 31 of the Determination is not of the allegation made in the complaint nor are the directions appropriate to the complaint made.


24. The complaint was that there were sufficient scheme funds to pay 83% of Mr Kural's entitlement, but that he had only been offered 63%. This is the crux of Mr Kural's complaint in his recent comments in writing. He there says that the valuation of the fund in Guardian's letter dated the 18th May 1992 was wrong, the true value was as set out in the 1992 Valuation, and that the Appellants were in breach of fiduciary duty in putting forward to him for consideration the quotations based on 63% rather than 83% of his entitlement as representing his share of the assets of the Scheme. The finding by the Ombudsman in this regard is practically unintelligible. If it amounts to anything, it appears to amount to a finding which accepts the criticism in Mr Kural's Letter that the Appellants, as directors of Seifert, should at all times have known of the shortfall but showed a lack of interest and concern in this regard and failed to ensure that it was made good. The Determination is regretfully permeated by a failure to distinguish between the duties of the Appellants as directors to Seifert (and not Mr Kural), of Seifert as his employer to Mr Kural, and of the Appellants as trustees to Mr Kural. It is not permissible to roll up these various duties and find a breach by the Appellants of some generalised fiduciary duty to Mr Kural.


25. The primary objection taken by the Appellants to the findings in the PD (that they did not reflect the complaint) is totally ignored in the Determination. Paragraph 22 of the Determination merely deals with a secondary objection to the PD made by the Appellants in case the primary objection failed. The June Letter to the Court is scarcely more helpful on this issue: it says nothing, though it goes on to say:

"In particular I stress that it is the way in which a decision is reached and not the content of the decision itself which amounts to maladministration. ... I considered that the way in which matters had been handled as opposed to the contents of the decisions themselves amounted to maladministration."

26. But the subject matter of the complaint as made was the decision to offer less than 83%, when 83% was available for this purpose, and the complaint as found appears to have been the existence of the deficit in the fund for which the Appellants were to be held responsible. In the July Letter the Ombudsman goes further and says that his understanding of the complaint was that, if Mr Kural's case had been handled properly by the Appellants, he would have retired before the wind up date and would then have been classed as an existing pensioner enjoying a priority entitling him to the continuing receipt of his full pension entitlement. I find this understanding somewhat surprising. It is in my view a quite untenable understanding which finds no expression or support in the correspondence, the PD, the Determination or the evidence, and only underlines the importance (to which I have already made reference) of the Ombudsman stating in writing to all parties exactly what is his understanding of the complaint he is investigating.


27. Not content with upholding a complaint that was not made, the relief granted was not the relief claimed, i.e. payment of 83% of Mr Kural's entitlement, but 100%. There can be no possible basis for the grant of this relief against the Appellants. The Determination must be set aside for both these reasons.


(b) Substance of Complaint

28. There is no substance in the complaint made by Mr Kural: the figure of 83% was merely an estimate and, whether it was a correct estimate or not, all Mr Kural can be entitled to is the percentage of his entitlement arrived at when the final figure (after making all appropriate provisions) is arrived at. His loss is attributable to the shortfall in the Scheme funds aggravated by the fortuitous happening that he was not in receipt of his pension at the date of wind up.


29. Nor is there any substance in paragraphs 26, 27 or 31 of the Determination. Paragraph 26 (so far as it is intelligible) appears to criticize the Appellants in respect of the lack of full funding of the Scheme. Leaving aside the fact that this was not an issue raised by the complaint and accordingly not to be addressed by the Appellants, the Appellants were not guarantors of the sufficiency of the Scheme's Assets to pay Mr Kural his entitlement nor could they consistently with the trusts and their obligations to other members pay Mr Kural more than his fair share of his entitlement at the expense of other members of the Scheme. Further there is no reason (let alone evidence) to support the suggestion that there was anything effective which the Appellants could have done about the deficit. There is no evidence that Seifert could, at any time when the Appellants were aware of the deficit, have made it good. As regards paragraph 27, under the Rules, (as the Ombudsman accepted), since Mr Kural was not yet in receipt of a pension, he was not entitled to any priority, and no act of the Appellants (let alone an act of maladministration) was the occasion for the fact he was not in receipt of a pension. Receipt of a pension on his part was delayed beyond the date of wind up by a combination of the shortfall and protracted considerations as to the form which Mr Kural's pension should take. In the circumstances, Mr Kural, Mr Lynch and Mr Helm ranked equally in terms of priority in respect of provision for their pensions out of the available Scheme funds. The interference with the established priorities between Mr Kural on the one hand and Mr Lynch and Mr Helm on the other effected by the Ombudsman's direction that Mr Kural be given priority at their expense (a priority to which he was not entitled under the Rules), is objectionable. As regards paragraph 31, the Appellants have, as it seems to me, quite properly refused to pay Mr Kural his full entitlement because, and only because, of the deficit in the Scheme assets, and in view of the deficit it was their duty to do so, since their overriding obligation was to act fairly between all members of the Scheme and in accordance with its Rules.


(c) Clause 21

30. Quite remarkably, the Ombudsman has in both the PD and the Determination totally ignored Clause 21 which (save in case of wilful default) exonerates the Appellants from any liability for breach of trust and entitles them to an indemnity in respect of any compensation ordered to be paid. The Ombudsman in the July Letter pointed out that the representations to him referred to the exoneration clause in an earlier trust deed which is differently, but not materially differently, worded. I am not clear whether the Ombudsman did so because he thought there was any significance in this error by the Appellants: he has not pointed to any and I can see none. The Ombudsman also points out that there is no English authority as to whether former trustees, rather than the current trustees, are able to rely on such a clause. If there was no authority, there now is such authority. Clause 21 and clauses to like effect constitute part of the terms on which a trustee accepts his appointment and provide protection in respect of his conduct as a trustee. If his acts whilst a trustee cannot give rise to liability because of Clause 21, they cannot subsequently do so merely because he ceases to be a trustee. (I may add that if the Ombudsman in his report had wished to take some such point and draw such a distinction between existing and retired trustees in the application of Clause 21, I would expect some reference to it in the Determination: again there is none). There has never been any suggestion of wilful default nor could there be. The penalties imposed on Mr Lynch and Mr Helm, in the form of postponement of their interests under the Scheme until after full satisfaction of Mr Kural's entitlement, is a form of award of compensation for breach of trust or maladministration which is totally incompatible with Clause 21 and is accordingly objectionable on that ground also.


31. There is authority at first instance binding me to hold that the Ombudsman has jurisdiction to award compensation for maladministration, but it is a jurisdiction to be exercised with great caution. The remedy for injustice awarded by the Ombudsman must be appropriate and proportional, and not such as to risk creating some new injustice: Westminster CC v. Haywood [1996] 2 All ER 467 at 480 h-j. Regard in particular must be had to the identity of the person on whom the cost will ultimately fall. If by reason of a provision to the effect of Clause 21 it will fall on the Scheme fund and accordingly other (innocent and unrepresented) beneficiaries, that is a fact to be borne in mind; and if it will fall on a trust fund that is already in deficit, that is a matter of the highest importance, for it will mean that it will be a cost borne by beneficiaries already penalised by the deficit. "Robbing Peter to Pay Paul" (to use the graphic language of Carnwath J in Miller v. Stapleton [1996] 2 All ER 449 at 466B) in this way only solves one injustice by creating another. The Determination makes no reference to these considerations, and the Ombudsman must be taken to have given no, or no proper, weight to these relevant considerations and the Determination is objectionable on this ground also.


32. It is to be noted that in the June Letter, the Ombudsman now accepts that by reason of Clause 21 the Determination should not impose personal liabilities on trustees entitled to the benefit of exoneration clauses.


(d) Disproportionate Liability

33. The Ombudsman has not drawn any distinction between the relevant culpability of the Appellants in respect of the alleged acts complained of, but has directed that the "losses" suffered by Mr Kural should be borne by Mr Lynch and Mr Helm alone out of their interests under the Scheme, and Mr Seifert has been required to contribute nothing. It is plain that the incidence is determined by the fortuitous circumstance that Mr Lynch and Mr Helm are members of the Scheme, and Mr Seifert is not. The Ombudsman has sought to justify this course in the July Letter as an application of the rule of equity that, where a trustee who is also a beneficiary commits a breach of trust, his beneficial interest may be impounded to make good his breach of trust: see Snell's Equity, 29th ed p. 289. But the rule of Equity merely provides the trust with a form of security: it does not require, let alone justify, the exculpation or exoneration from liability for breach of trust of the co-trustees who do not have a beneficial interest. The Ombudsman has plainly misdirected himself in law in giving this direction.


(e) Unintelligibility

34. Section 151 requires the Ombudsman to give reasons, and this means give reasons which in clear and unambiguous terms explain the line of reasoning which leads him to make his finding and give his directions. The Determination is not to be minutely examined as though it were a statute. Nor should the examination be unduly legalistic. If its meaning can fairly and properly be extracted from the language used, it may not matter that such language is ill-adapted or chosen to express that meaning. But it is to be borne in mind that the Ombudsman is a lawyer and his determinations have the effect and consequences of County Court judgments, and a sensible meaning must be expected and required. The Determination in this case falls well below the standard required to convey in a meaningful way the Ombudsman's thought processes, and is objectionable on this ground also.


35. The Ombudsman in the July Letter expresses the hope that the Court will appreciate that "my role is often not straightforward and involves taking decisions and drafting determinations which involve subjective considerations". Beyond the fact that the Ombudsman has to exercise his own judgment in accordance with law in making decisions and determinations, I do not understand what place there is for "subjective considerations". Whilst the difficulty of his role is fully appreciated, the standard of his determinations must be maintained if justice is to be done and to be seen to be done by those who fall within his jurisdiction.


IV. SUMMARY

36. I regretfully reach the conclusion that the Ombudsman has gone seriously astray, not merely in the contents of the Determination, but also in the way his investigation was handled and the decision reached and expressed. I accordingly allow the appeals and discharge the directions made by the Ombudsman. I do so with considerable sympathy for Mr Kural whose hopes and expectations raised by the Determination must now be dashed. There can be no doubt that he is the victim of an injustice: he is not to receive the pension benefits to which he is entitled. But that is the consequence of the default on the part of Seifert in properly and sufficiently funding the Scheme, the insolvency of Seifert and the unforeseen accident of timing that he was not yet in receipt of his pension when the wind up commenced. It is not the consequence of any maladministration by the Appellants.


37. This is not necessarily the end of the matter. I have a discretionary jurisdiction under RSC Order 55 r.6(3) to remit this matter to the Ombudsman for reconsideration. After anxious consideration, I have reached the conclusion that there can be no justification for making any such order, for two reasons:- (1) as a matter of law it would not be open to the Ombudsman on such a remit to make any direction in favour of Mr Kural against the Appellants for the reasons set out in this judgment, not least because of Clause 21; and (2) it would not be just to subject the Appellants to a further hearing.


38. The deficiencies in respect of the Determination have occasioned the Scheme funds (already substantially in deficit) the additional heavy burden of costs of this appeal. In the circumstances, I have given the Appellants leave to apply for an order that the Ombudsman pay the costs of this appeal.











39. MR JUSTICE LIGHTMAN: For the reasons set out in the judgment which I have handed down, I shall allow this appeal. The outstanding question is the matter of costs. It seems to me, leave aside the question for the moment as regards costs, how far that should be borne by the Ombudsman, it appears to me clear that all costs ought to come out of the Scheme. They should include the costs of the applications of the two appeals heard together. Does anybody dissent to me making that order?


(No response)

40. I think the costs of all parties ought to come out of the Scheme on an indemnity basis. It seems to me quite unfair that they should have to bear any element of costs out of their own pockets.

41. That only leaves the question whether the Ombudsman should pay the costs. Mr Nugee, in relation to costs, on the basis that costs are only to be ordered in an exceptional case, is this point not exceptional? As I understand the July letter somebody in the office of the Ombudsman, made a decision that Mr Kural's letter should not be disclosed to the appellants.


42. MR NUGEE: My Lord, I think that might be putting it a little too high but, basically, that is correct.


43. MR JUSTICE LIGHTMAN: I must admit I find it very, very unsatisfactory the way the Ombudsman has dealt with this episode in the July letter. He seeks to avoid personal responsibility, but then he goes on to say that somebody in his office apparently was influenced by the view expressed by Mr Seifert that he did not want to have too many documents to look at.

44. I can only read that as a deliberate decision by somebody in his office.


45. MR NUGEE: My Lord, I have no further instructions other than what is stated.


46. MR JUSTICE LIGHTMAN: With all due respect, Mr Nugee, I do think that if in so far as that is not what he is saying, it is a very unsatisfactory letter to send. Indeed, I am very unhappy about the language of that letter. I cannot see why he cannot make the position absolutely clear and say "Mr So and So in my office made a mistake", if that is what he wants to say. On the language used, it appears to be deliberate decision not to disclose the letter by somebody in the office, on grounds which appear to me to be absolutely hopeless.


47. MR NUGEE: My Lord, I do not seek to defend that.


48. MR JUSTICE LIGHTMAN: On that basis, that is the most exceptional failure to comply with statutory procedure which, of itself, must result, whatever happens, in his determination being set aside. I cannot see why that is not of itself enough to make this one of those exceptional cases where an order should be made that he should pay the costs.


49. MR NUGEE: My Lord, could I just take instructions?


MR JUSTICE LIGHTMAN: Yes.

50. MR NUGEE: The most assistance I can give to your Lordship is this. It appears that a decision was made in the office not to send this letter out, not because of a desire to conceal anything but because of a view that once one has exhausted the statutory requirements set out in the procedure rule, which had been complied in this case, at some stage there has to come a stop to the exchange of correspondence because at some stage the matter must be ready for determination.


51. MR JUSTICE LIGHTMAN: Could you just pause for a moment,

52. Mr Nugee. I am very troubled by what you tell me. That is not what is in the Ombudsman's letter.


53. MR NUGEE: My Lord, I asked to take instructions.


54. MR JUSTICE LIGHTMAN: Yes. I am grateful. I am not criticising you. What I do criticise is the Ombudsman's letter. What troubles me is that it is obscure in the extreme in this regard where it ought to be pellucid. You have given me an explanation. I entirely accept that.


55. MR NUGEE: I have given my Lord half an explanation. I was going to carry on and say that in this particular case the office decided that point had been reached. In taking that decision, one of the factors taken into account and one of the factors which influenced the office was the clear statement in Jacobsens' letter that their client did not want to be troubled with more documents. I put that forward, not as a justification: of course, I entirely accept, as the Ombudsman accepted in his letter, that to be influenced in that way, in reaching that decision as to where the cut off point should be, is to be unduly influenced, it was wrong. The Ombudsman has accepted it was wrong. He has accepted that it was a mistake. He has put in place procedures to ensure it does not happen again. That is an explanation of what has happened. There has at some stage to be a cut off. In this case the selection to cut off was taken at too early a stage by somebody in his office, apparently unduly influenced by the statement in Jacobsens' letter. That is the explanation.


56. MR JUSTICE LIGHTMAN: My difficulty is that there are no references in the letter to the belief that there should be a cut off period.


57. MR NUGEE: My Lord, that is true.


58. MR JUSTICE LIGHTMAN: Secondly, he gives no explanation of why that letter from Mr Seifert's solicitors should have anything to do with not supplying a copy to the other two.


59. MR NUGEE: My Lord, I do not attempt to support it at all.


60. MR JUSTICE LIGHTMAN: I just do not understand the explanation. That is my difficulty.


61. MR NUGEE: My Lord, all I can do is to try and give your Lordship such assistance as I can.


62. MR JUSTICE LIGHTMAN: Excuse me for battering you about this but, at the moment, as I am sure you appreciate, I take a very serious view of this. What I am trying to elicit from you is to see whether there are any mitigating circumstances which you can put forward on behalf of your client. Do not take it as a personal attack on you or anybody else.


63. MR NUGEE: My Lord, no. The mitigating circumstances are that this was an isolated example of a mistake in the procedure which the Ombudsman has taken steps to prevent happening again. It is not some systematic failure, some regular misapplication of the principles of natural justice, some failure by the Ombudsman to recognise the importance of seeing that those against whom he is investigating a claim should know what the complaint is that they have to meet. My Lord, I do say that without any statutory requirement it has always been his procedure to send draft determinations to all parties before making final determinations precisely for that very reason.

64. There is this difficulty with the nature of the Ombudsman's job which is purely something which one cannot get away from. On the whole the complainants are unrepresented, some have advice, but most of them are unable to afford advice. They write to the Ombudsman, as indeed Mr Kural did in this case, not in legalistic terms, but in general terms, "Please help me, I am having problems with my pension." It falls to the office and the Ombudsman to extract from the material that he is given and very often the scope of the investigation widens as more matters come to light, to extract what in his view is a real analysis of what part of the problem is. It is inevitable that with a moving target like that, without formal pleadings, without formal representation, without legal advice, there will be cases where the Ombudsman's analysis of what the true part of the dispute is, by the time he has carried out all the investigations, which can take quite some time, he often gets information in dribs and drabs, one trustee gives him one thing and another trustee gives him an extract from the Deed and so on. There is no process of formal discovery. It is not like a trial when by the time everyone gets to court everything is before the decision maker. It is not at all surprising that in a process of that type with little formal procedure; a. mistakes might happen, things can slip through the net and b. that it does act as a safety net at the end day for the Ombudsman to say, "This is what I think I investigated. This is what I think the complaint is. This is what I am minded to make as a determination. But, precisely because it is an elementary principle of natural justice, that those against whom determinations are to be made, know precisely what it is that I had investigated and regarded as a complaint and intend, at the moment, provisionally, to say I am going to send them a copy to send them so they can say to me, "Well, wait a minute, that is not the complaint which was investigated or, wait a minute you appear to rely on something I have not seen'."

65. I do say that if one takes into account the nature of the investigation, the difficult job the Ombudsman has to do, the very little assistance he usually gets from the complainant, the procedures he has put in place, which are not confined to statutory proceedings, indeed when he started making determinations there were no statutory proceedings at all, the procedure only came into force in May 1995, his own decision to adopt a practice of setting out provisional determinations for this very purpose, to act as a safety net in case there has been some mistake in the operation of the procedures. Those are circumstances which do go to mitigate what I fully acknowledge and what the Ombudsman himself has fully acknowledged to be a serious doubt in this particular case.


66. MR JUSTICE LIGHTMAN: Can you help me on two other matters? I am troubled that however uncertain the position might be regarding exoneration clauses at the time that he gave his decision, there is no reference to the exoneration clause or these problems in his determination.


67. MR NUGEE: My Lord, again, the law has become a great deal clearer. We now know and he now accepts that exoneration clauses are directly relevant to the determinations he makes. The view he apparently took at the time, which was a view that in my submission was not an untenable one, although now it seems to be wrong, was that his statutory role to investigate complaints of injustice which had arisen from maladministration was something outside the Trustee/Beneficiary relationship in which the exemption clauses were relevant.


68. MR JUSTICE LIGHTMAN: Was that his view? I did not get that impression from the letter or from the decision. I got the impression the law was regarded quite unclear at the time. I do not think he had any particular view one way on the other on it.


69. MR NUGEE: If your Lordship looks at page 6 of the letter:


"At the time at which I made my determination I did consider that such a clause was irrelevant."

70. My Lord, that is my understanding. He is not present in court. That is my understanding of his view.


71. MR JUSTICE LIGHTMAN: I am still puzzled why you say,"the decision, in my view, is not complainable."


72. MR NUGEE: My Lord, it would have been better if he had done so. I do not dissent from that, but, having taken the view that clause 21 is not relevant and what he has to administer is a statutory jurisdiction to remedy injustice to which the clause is not relevant, that is the view which finds its result in the determination which he makes. It obviously would have been possible for him and it obviously would have been better if he exhaustively set out every possible argument to the contrary and dealt with it. An Ombudsman's determination is not to be equated in all respects with a judgment of a judge, where it is incumbent upon the judge to deal seriatim with the arguments put to him. The Ombudsman has to make up his own mind, as a result of the investigation, taking into account the observations. I do not think I can take that any further. Your Lordship sees what I say there.


73. MR JUSTICE LIGHTMAN: The other exceptional factor which may be put against you is my finding that the relevant paragraph in his determination was unintelligible.


74. MR NUGEE: That is obviously a matter of regret. It is unfortunate that your Lordship should have come to that conclusion. There is this difficulty in that, having for the reasons your Lordship understands I hope, decided not to be represented on appeal, Mr Kural not being represented on appeal, it falls to your Lordship, unaided, except for the help that your Lordship gets from the appellants' counsel, to try and understand what the Ombudsman thought he was doing. I had to accept your Lordship's finding that he did not express himself in a way which was sufficiently clear. I do ask your Lordship to accept that he did have a clear view as to what he was doing and that although it could undoubtedly have been more reasonably expressed, it was not perhaps obvious to him that what he was saying was incomprehensible.

75. My Lord, I have attempted in my skeleton to put forward what I understand to be what he meant to say in his determination which, in my submission, although wrong, is not an irrational view to have held. If

one approaches it in that way one can, in my submission, see how he came to express himself as he did. Although he could have undoubtedly have expressed himself more clearly. All I can do is to apologise for the fact that it was not more clearly expressed, remind your Lordship, as I am sure your Lordship is aware, of what has already been said by Robert Walker J that one does have to give a little bit of latitude.

76. MR JUSTICE LIGHTMAN: I say right away I think the Ombudsman's job is the most unenviable there is. There is no question of underestimating the problems of his office. One has to bear in mind the decision has the effect of a judgment and that creates enormous consequences.


77. MR NUGEE: My Lord, I do appreciate that. It has the effect of a judgment in the sense that it is registerable as a County Court judgment. Therefore it can be enforced as a judgment. 'Judgment' is of course an ambiguous word. It can mean the order of the court or the reasoned decision of the court. Of course his determination has the effect of a judgment in the sense of an order is registered at the County Court. His reasons do not have quite the same effect as a judgment. They are not public. They are not publishable as such. He publishes summaries of his decisions, but anonymously in his annual reports. He does not publish, I think this is right, named determinations. In that respect there is a difference between a determination and a judgment but I appreciate for the parties the effect of his determination is to make a judgment against them which is enforceable against them. The main reason for the reasons is not to assist the development of the law but is to enable the parties to know why he has made the determination the way he has and to enable them to appeal if they think fit.


78. MR JUSTICE LIGHTMAN: Can you tell me which passage you have in mind in Chadwick J's judgment?


79. MR NUGEE: My Lord, it starts at page 6. I do not know whether your Lordship wishes to read it or whether you would wish me to take your Lordship through it?


80. MR JUSTICE LIGHTMAN: You can take it I have read over

pages 6 and 7. I am looking for the guidance where the Ombudsman does not appear.

81. MR NUGEE: This is all in relation to a case where the Ombudsman is not here.


82. MR JUSTICE LIGHTMAN: ... and how jurisdiction should be exercised in regards to an order for costs?


83. MR NUGEE: That is the entirety of this judgment.


84. MR JUSTICE LIGHTMAN: I follow. I have read so far up to page 8. Where does he deal with the principle on which one should order costs?


85. MR NUGEE: My Lord, those are the principles.


86. MR JUSTICE LIGHTMAN: He says at page 7D:


"It is only in exceptional cases that an order for costs will be made against it."

87. MR NUGEE: Then at page 8D he says:


"Those principles should guide me in the exercise of my discretion in the present case."

88. MR JUSTICE LIGHTMAN: He says at page 10:


"Having regard to the circumstances in my mind it is impossible to form the conclusion that Parliament intended to impose on the Pensions Ombudsman costs of all successful appeals against his determination irrespective of whether he made himself a party."

89. Is he saying that you cannot in any case make an order for costs against him if he does not appear on the appeal?


MR NUGEE: No, my lord.

90. MR JUSTICE LIGHTMAN: Where is the guidance on that? That is what I am looking for. The circumstances where an order can be made.


91. MR NUGEE: If your Lordship goes back to page 7, just below letter D:


"In circumstances where the tribunal does not appear and does not take part, it is only in exceptional cases that an order for costs will be made against it."

92. Then he refers to the statement of principles in relation to justices in the judgment of the Divisional Court in the Newcastle-under-Lyme case. There is set out in that case a summary of those principles.


93. MR JUSTICE LIGHTMAN: What I am saying is that he does not actually set out the principles himself.


94. MR NUGEE: I can show your Lordship the Newcastle-under-Lyme case. What he says over the page is that applies to the learned justices of tribunals, see what Lord Goddard says in the rent tribunal case if there be no appearance by the tribunal. Those principles should guide me. He is adopting, as he was invited to do, the applicability of what the Divisional Court had said in the Newcastle-under-Lyme case which itself summarised a whole lot of previous cases.


95. MR JUSTICE LIGHTMAN: Can I glance at that case?


96. MR NUGEE: Yes, certainly. The case can be found in [1994] 1 WLR 1664 at page 1684. This case was in relation to Magistrates who had been committing people to prison for failure to pay the community charge and their decisions were impugned in judicial review proceedings. If I could take your Lordship to the principles which Chadwick J is referring to. They are at page 1691, just below the letter G. The principles are set out. Under (i) is there is jurisdiction. There is no dispute about. Under (ii) is a dictum taken from what Lord Bridge said in Holden & Co. v. Crown Prosecution Service that not in every case can a successful litigant expect to recover his costs against anyone. Under (iii) justices who merely file affidavits and do not appear before the Divisional Court or the High Court will not, without more, normally be visited with a costs order. Under (iv) it is said that Justices should not generally appear before the Divisional Court or the High Court unless their bona fides are called into question or there are other exceptional circumstances etc. Paragraph (v) is the relevant one which says that if they do not appear, an order for costs in relation to the merits of the application or appeal is only likely to be made against them in the exceptional circumstances identified by Lord Goddard C.J. and reiterated by Lord Parker C.J. That is not very helpful to your Lordship because your Lordship has to go back and see what Lord Goddard and Lord Parker said. What Lord Goddard said is cited in this judgment at page 1689. This was in a case called R. v. Willesden Justices, ex parte Utley . Your Lordship will see a quotation from that at page 1689 at letter F.

97. Lord Goddard said:


"It is the rarest thing for this court to give costs against the justices. The only case is when justices have done something which calls for strong disapproval by this court."

98. What Lord Parker said, which is the other reference, appears in my skeleton at page 3. I do not think it is cited in the Newcastle-under-Lyme case but the reference is to the case called R. v. Liverpool Justice, ex parte Roberts . Lord Parker said:


"... If they have acted improperly, that is to say, perversely or with some disregard for the elementary principles which every court ought to obey, and even then only make if it was a flagrant instance."

99. My Lord, the headnote states:


"Certiorari - Costs - Party not appearing - Costs not awarded against party who does not appear."

100. Your Lordship will see that the court granted an order of certiorari against the Justices who did not appear and were not represented. Lord Parker said:


"Counsel for the applicant, who has now successfully applied for certiorari, asks for costs. So far as costs against the magistrates are concerned, it has been the practice not to grant costs against magistrates or tribunals merely because they have made a mistake in law but only if they have acted improperly, that is to say, perversely or with some disregard for the elementary principles which every court ought to obey, and even then only if it was a flagrant instance. In the present case the court is satisfied that the denial of justice here was a pure mistake and was not a flagrant instance; indeed, counsel has not asked for costs against the magistrates."

101. MR JUSTICE LIGHTMAN: What you are saying is that there

was here, as I have found, a disregard to the elementary principles of natural justice, but it was not flagrant.

102. MR NUGEE: Yes, my Lord. It was a mistake. We have accepted it was a mistake.


103. MR JUSTICE LIGHTMAN: It is on the question of flagrancy.


104. MR NUGEE: Yes, my Lord. It was not a decision,

"Let's conceal this from the other party." Your Lordship knows what my instructions are and how that came about. My Lord, that reference to Lord Parker is in the Newcastle-under-Lyme case at the top of page 1690 at letter B.

105. MR JUSTICE LIGHTMAN: That is quoted. That is also in the Newcastle case on this question of flagrancy?


106. MR NUGEE: Yes, my Lord. I say because that makes it clear that when, in the summary of principles the Divisional Court refers to the exceptional circumstances identified by Lord Goddard and reiterated by Lord Parker, it was those words which they had in mind.


107. MR JUSTICE LIGHTMAN: Can you help me on two other matters?


MR NUGEE: Yes, my Lord.

108. MR JUSTICE LIGHTMAN: Did your client proceed on the basis that he was going to appear and then change his mind at the last moment or was the position taken throughout that you would appear at the appeal? I think it was a point taken on the skeleton on the other side.


109. MR NUGEE: Yes. It is the argument of Mr Lynch and

110. Mr Helm. My Lord, again, could I take instructions on that? I was not involved at all with this appeal at the early stages.


MR JUSTICE LIGHTMAN: Yes.

111. MR NUGEE: My Lord, I think it is entirely accurate to say that at an early stage of this appeal, in January and February, letters were written indicating that the Ombudsman at this stage did intend to be represented at the appeal. Between then and the hearing, the position was reviewed and a final decision was made after a conference with counsel, shortly before the hearing and then the letter was written.

112. My Lord, I can say this. The extent to which the Ombudsman ought to appear on appeals against his decisions is a matter where judicial thinking and his experience and his thinking has developed quite rapidly and is still developing quite rapidly. I happen to know there is this very question being debated in front of the Court of Appeal this morning by somebody else. It started off with Turner J in the Dolphin Packaging case encouraging the Ombudsman or rather blessing the Ombudsman taking a part in statutory appeals. As time has gone on, he has come to the view, more and more, that it is only in cases where there is some point of general importance or some point which concerns him particularly that it is appropriate to do that. That is a developing experience. Obviously, he takes into account guidance he is given by judges, from time to time, including guidance recently given by Chadwick J

in the Ayres case. That is the long answer. The short answer to your Lordship's question is that, at an early stage, I think I have been shown some letters at an early stage. My Lord, on 16th January he wrote to the appellants' solicitor:

"The Pensions Ombudsman intends to be represented on the substantive appeal."

113. Again, on 20th February:


"I shall be instructing Mr Nicholas Randall to appear on behalf of the Pensions Ombudsman."

114. It is factually correct to say that at an early stage he indicated that he did intend to be represented. That position was reviewed and the final decision was made shortly before the hearing.

115. My Lord, in terms of whether that has increased a cost award of the appellants, in my submission, the answer is plainly, "No". It is entirely irrelevant in the determination of the appeal whether the appellant expects to be opposed by the Ombudsman or expects merely to have to make his case out to the judge except in the case, which does not happen very much in practice, where the complainant is persuaded to consent to a disposal of the appeal. The only case where that has happened, as far as I am aware, is a case where the complainant had the benefit of legal advice himself, most complainants do not. Unrepresented complainants are unlikely to consent. In those circumstances, the appellant has to make out his case regardless of whether the Ombudsman is there or not. He has to prepare the case on the basis that he will have to persuade the court regardless of whether he is to be opposed or not. Morever, saying that one intends to be represented at the appeal is not the same as saying that one intends to oppose the appeal. This is a significant point. There is, running through the applications on behalf of the appellants, an assumption that the Ombudsman was the unsuccessful party in the sense that he was opposing the appeal and lost. My Lord, that is a mischaracterisation of the Ombudsman's position. He is not a party to the underlying dispute. He is the decision maker. He uses, with the encouragement of Turner J in the Dolphin Packaging Materials case, as his role to assist the court. That may mean putting forward explanations as to what considerations caused him to reach a decision he reached. It may mean putting forward arguments which occur to him which look as if they are answers to grounds of appeal. Equally it may mean, and in this case it did, accepting, in the light of subsequent decisions, that certain aspects of the determination cannot stand and should not be upheld. It is therefore simplistic to view a statement by the Ombudsman that he intends to be represented at the appeal as if it was a statement which he intended to oppose the appeal. It is not until he has had an opportunity of considering the matter with counsel and forming a view as to what role he should take in any particular appeal that anybody could know.


116. MR JUSTICE LIGHTMAN: Your letters merely indicate that you intend to be represented, not that you would be opposing.


117. MR NUGEE: Yes, my Lord. There is not much correspondence but if the clip of correspondence can be handed up.


118. MR JUSTICE LIGHTMAN: If that is common ground, there is no point me looking at it.


119. MR NUGEE: I do not know whether that is common ground.


120. MISS FURZE: My Lord, hopefully has the correspondence as I sent a copy over this morning. It is common ground.


121. MR JUSTICE LIGHTMAN: I shall take it as common ground unless somebody takes me to letters indicating the contrary.


122. MISS FURZE: My Lord, it is common ground.


123. MR NUGEE: My Lord, the particular point which the correspondence related to was the application to consolidate. In one of the letters he says:


"The position which the Ombudsman adopts in this application is one of total impartiality and considers this is a matter to be argued out between the applicants and the second respondent who are parties to this appeal effected by a stay. It is for this reason that he is not prepared to assume that he has the power to order a stay. It is a matter of indifference to my client whether there is or there is not a stay."

124. Indeed, in relation to a subsequent application for consolidation there is a letter saying:


"I believe that I have mentioned before that my client takes a non-partisan role in applications of this nature. He considers the issues are between the parties and ones in which he should not become involved."

125. My Lord, my point is the one which your Lordship has, a statement which he intends to be represented does not convey anything to the other parties as to what position he intends to take in the appeal. That is why he writes the letter when he does to explain that he has decided, after on consideration with counsel, that he does not wish to be represented. He does not consider there to be a point of general importance which requires his presence. He accepts, in some respects, that the determination stands and in other respects he comments on the grounds of appeal in a way that is not intended to be a substitute for appearing by counsel and making the points, it is intended to be of assistance to the court who, as I said in my skeleton, otherwise has to assume the burden of testing the merits of the appellant's case without any assistance from the Ombudsman at all. That is what the letter is intended to do. My Lord, I could go on at length.


126. MR JUSTICE LIGHTMAN: Counsel normally can.


127. MR NUGEE: I think your Lordship knows my position. I hope that I have made the position clear in my skeleton. I am willing to answer any more questions.


128. MR JUSTICE LIGHTMAN: Thank you for your help. Who is going to go next?


129. MR REES: My Lord, have you received a letter from Fairmounts?


130. MR JUSTICE LIGHTMAN: Yes. I have read that letter. Fairmounts' position is that they are content, as I understand it. In regard to costs out of the Fund, they have no opposition to that. They are not being represented, save costs, but they are very concerned. Their representation is perfectly justified.


131. MR REES: I have no points to make. I only raise the issue ...


132. MR JUSTICE LIGHTMAN: I have taken that into account. I do not think it takes us very far forward on what I have to decide today.


133. MR REES: My Lord, I raise it merely to ensure the court has everything in front of it. I am not sure if your Lordship has read my skeleton?


134. MR JUSTICE LIGHTMAN: I have read all the skeletons. The obstacle in your way is Chadwick J's judgment, applying the judgment of Parker J comes to this. There has to be some flagrant, as opposed to mere serious, disregard to the elementary principles or other unsatisfactory features in the decision.


135. MR REES: Flagrancy is the word used in that decision. Your Lordship was also taken to the case of Willsden Justices, ex parte Utley .


136. MR JUSTICE LIGHTMAN: What word do they use there? Where do I find that case?


137. MR REES: That is quoted at page 1689 of the Newcastle-under-Lyme case. There at letter F is a quotation from Lord Goddard there is a case when the Justices have done something which causes strong disapproval in court.


138. MR JUSTICE LIGHTMAN: Does the flagrancy test appear as well?


139. MR REES: I am not sure that is quoted. I do not have a copy of that case.


140. MR JUSTICE LIGHTMAN: Yes it is. It is over the page at B.


MR REES: Yes, my Lord.

141. MR JUSTICE LIGHTMAN: Did they attend?


142. MR REES: My Lord, the justices did appear in the case.


143. MR JUSTICE LIGHTMAN: They did appear in Willesden?


144. MR REES: Yes. They appeared in Willesden.


145. MR JUSTICE LIGHTMAN: That appears to be the test when they appear, does it? When we go to look at page 1691 he talks about whether they can put in affidavits so they are participating pretty strongly, are they not, because they do not appear?


146. MR REES: Yes, my Lord. At page 1692 your Lordship has taken the point referred in the principles by Mr Nugee in the exceptional circumstances identified by Lord Goddard.


MR JUSTICE LIGHTMAN: Where is this?

MR REES: At (v).

147. MR JUSTICE LIGHTMAN: They seem to have approved both tests.


148. MR REES: Yes, my Lord. There is another judgment of Lord Goddard's at (iii) which is mentioned on page 1692 which is a case called ex parte Davies . However, that does not add anything to the test that the court should be applying in such circumstances. What Lord Goddard held in that case, the ex parte Davies case, was that:


"The justices were entitled, if they chose, to avail themselves ... (reads to the words) ... if they succeed in defeating the application."

149. That case does not add anything to the exceptional circumstances matter. The only judgment of Lord Goddard's which is relevant is this strong disapproval in Willesden.

150. My Lord, the principal submission I made in my skeleton argument was that the cumulative effect of the Ombudsman's two letters to the court, both the June letter and the July letter sent in response to your Lordship's draft judgment which dealt, not only with the question of compliance of natural justice and statutory rules but sought also to argue further issues which had been argued before the court at the original hearing which I understand, at that stage, chose not to argue, was to effectively make the Ombudsman a party before the court and for him to be deemed to have taken steps to defend his judgment, which is the test set out by Chadwick J at page 8 of the Ayres case. I set out the quotation at paragraph 3 of my skeleton. The Ombudsman chose not merely to reply on the question of compliance with natural justice but ...


151. MR JUSTICE LIGHTMAN: I must say that I have a problem, particularly in a case like this, where the Ombudsman does not appear, Mr Kural is not represented, how do I get balance? If I discourage the Ombudsman from writing letters, how am I going to get any sense of balance?

152. As a matter of policy one should be slow to categorise as making himself a party when he sends letters explaining the position? It seems to me a terribly narrow line between assisting the court and resisting a challenge.


153. MR REES: Yes, indeed. The Ombudsman's July letter dealt not only with some of the issues on which your Lordship might require balance but sought also to defend the way he conducted both his investigation and his determination. It sought to deal with your Lordship's finding of unintelligibility of this determination.

154. On that point the Ombudsman's submissions to your Lordship mean nothing more than representations to the court. They are not necessary for the question of balance. Equally, with regard to his explanations and for his decision to make disproportionate awards.

155. At paragraphs nine to eleven of my skeleton I set out that perhaps the test in relation to Justices is not necessarily the appropriate one in relation to the Ombudsman. The Ombudsman's role is investigative. He is not just a tribunal. He has to conduct an investigation. He then has to reach his determination and set out that determination clearly to all the parties. Throughout that procedure he obviously has to comply with the rules of natural justice. The role of a bench of magistrates is solely to act as a tribunal. Obviously, in this situation, the Ombudsman's duties are wider. Where the Ombudsman falls down in conducting his investigation is the same very strict rules that the courts have been applying in relation to magistrates and need not necessarily apply in those circumstances. In any event, I submit to your Lordship that the circumstances of this case are more than sufficient to fulfil either the strong disapproval test or indeed the flagrant test.

156. Here the Ombudsman has made several failings. The court must look to the cumulative effect of each of those failures rather than having regard to each one separately. The Ombudsman has taken a decision not to disclose an utterly vital letter to either Mr Seifert or to any of the other appellants. The explanation given that at some stage the Ombudsman has to reach a cut off point cannot justify a failure to disclose a letter which set out substantially new and substantially different complaints.

157. Mr Nugee has argued that the fact that the Ombudsman sends out a provisional determination to each of the parties should act as a mitigating feature. There is no mitigation in these circumstances. Your Lordship has found the final determination to be tainted because it is unintelligible. As your Lordship will recall the word "provisional determination" is to all intense and purposes identical to "final determination". A situation where my client is merely sent provisional determination which is unintelligible, which fails to set out the complaints to be made against him, cannot be used in mitigation for that failure. If the provisional determination had set out in clear language the complaints against Mr Seifert, Mr Helm and against

158. Mr Lynch which the Ombudsman understood Mr Kural had made, then there would be some grounds for arguing that the provisional determination went some way to mitigate the failure to disclose the August letter. The provisional determination did nothing of the kind and, as such, Mr Seifert was left grappling in the dark to try to understand what complaints were being made against him. This was made clear by the letters written by Jacobsens, Mr Seifert's solicitors, in reply to the provisional determination. That is a very, very serious failure on the part of the Ombudsman.

159. The court has also had the Ombudsman's determination on various grounds, the fact that the Ombudsman had upheld a complaint that was not actually made. Once again, there would be some mitigation if the Ombudsman had set out the complaints that he was proposing to investigate. That did not happen here.

160. Your Lordship has also held there was no substance in the complaint. The Ombudsman failed to take into account the exoneration clause. Again, that matter is not even mentioned in his determination. Then, having looked all those substantive failures in the determination, one has to look at the determination itself. Your Lordship has held that is unintelligible.

161. I would submit that the cumulative effect of all these failures are sufficient for this case to fall well within the situation where the court should have strong disapproval to the Ombudsman's action. He has failed to investigate the matter properly. He has failed to produce an intelligible determination. The determination itself is flawed in other ways. The determination is obviously a very serious matter to my clients. I understand that the Ombudsman does not, in general, publish these matters only under anonymity. The Ombudsman does have power under section 151 of the Pensions Schemes Act to publish these cases in any form or manner in which he we thinks fit. Subsection (7) gives the Ombudsman a privilege under the law of defamation. It is absolutely essential that the Ombudsman complies properly with the requirements of natural justice and in producing determinations that mean something. Unless your Lordship has any questions, those are my submissions.


162. MR JUSTICE LIGHTMAN: No. Thank you very much.


163. MISS FURZE: My Lord, on the question of the flagrancy point and whether the strong disapproval of the elementary principles test is satisfied, looking first at the question of the non-disclosure of Mr Kural's letter, it does appear that the mistake was deliberate. The fact that it might have been deliberate for what was perceived to be a good reason, in my submission, is irrelevant and certainly should bear the weight which Mr Nugee tried to give it. From the appellants' point of view, they did not see the letter, which they needed to see. It was not that it just was mentioned being sent out and they forgot. It was a conscious decision, apparently, not to send it to them. In my submission, that satisfies the test of flagrancy. I am bound to say that it is clear that it is an elementary principle which should have been set out. It has been recognised as a very serious mistake. I would also adopt your Lordship's view expressed in the judgment that the explanation given is rather more disturbing than reassuring. I would add that the position might have been put right for the future should not prevent the court from expressing its disapproval by making suitable award for costs for what has happened. It is all well and good that the Ombudsman might not let it happen again but the fact is that he let it or caused it to happen in the past. That, in my submission, is sufficient to satisfy the test.

164. The second point that the appellants' rely upon as satisfied the flagrant or perversity test is the matter of unintelligibility. I would submit it is an elementary principle that the determination has to be intelligible. I would adopt your Lordship's description of

it, "falling well below the standard required". The Ombudsman attempted to explain his way of asking a question of not reading it like a statute. Your Lordship's interpretation of it as being well below the standard is, in my submission, very damning on the determination and takes it within the disregard for an elementary principle test. Also, my Lord, until today, there has been no hint of recognition or regret from the Pensions Ombudsman to the effect that the determination is unintelligible. He sought to justify it rather than to accept that there is a problem.

165. The third issue relied upon is the matter of the exclusion clause, the failure to consider clause 21. Again, it appears that that admission was deliberate. The Pensions Ombudsman says that he did not think that it was relevant. It is not a question of he meant to refer to it and forgot, it is a question that he decided that he did not have to address the argument. From the point of view of the appellants, it was obviously a matter which caused great concern to them. They thought they had a exclusion clause which protected them. They put forward that argument to the Pensions Ombudsman in response to the determination and it was just ignored. I would submit it is an elementary principle that a point such as that should be answered, even if it is only answered in the sense of "I have considered this but it is irrelevant". That is, I would suggest, at the very least that justice would require from the point of view of the appellants. Otherwise they are not to know that he has even read or taken on board the submissions which have been made to him.

166. Further, my Lord, as the appellants did point out in their letter to the court of 15th July 1996, they do have some difficulty in accepting the explanation that the Ombudsman simply did not consider his principles to be relevant. They do know of least one other determination where the exclusion clause was considered in late 1995. I accept it was not until the decision in the Pensions Ombudsman v. Wilde (as translated) case that it was clear that the exclusion clauses were definitely relevant but that need not have stopped the Ombudsman from referring to the point.

167. Those three matters, all of them very serious on their own, are sufficient to take the appellants within the test set out by Lord Parker and I would say that the fact that two out of those three matters, the question of non-disclosure of the letter and the failure to consider clause 21, were deliberate, conscious, decisions by the Ombudsman to justify your Lordship as categorising them as flagrant instances.

168. My Lord, on the other issue, the question of whether or not the Ombudsman has made himself a party to the list, one of the points made by my learned friend was the fact that the Ombudsman had stated that he was going to appear had not increased the cost of the appellants at all. In my submission, that is perhaps not entirely accurate. When the Ombudsman withdraws at such a late state it is inevitably going to be more costly than if he withdraws from the very beginning.

169. Skeletons are, I would suggest, inevitably going to be more comprehensive if the appeal is going to be argued on the other side. Similarly, brief fees are likely to be higher. Further, in this case, I would suggest there was no need for the Independent Trustee to have appeared if it had been known the Ombudsman was not going to play any part. The point which is raised as to the fact that all the Ombudsman said that he was going to appear, not that he was going to oppose the appeal, is a nice technical analysis. My Lord, the reality is that these appeals are opposed by the Ombudsman who turns up represented and that is the main opponent that the appellants have to have in mind. The complainant, as in this case, was unrepresented. If the Ombudsman is not going to turn up, the appellants know they are going to have a much easier job of it than they will do if he is going to turn up.

170. My Lord, although it is common ground that in the first two letters referred to all the Ombudsman says is he is going to appear and not going to oppose the appeal. He did take an active role at the interlocutory stage. He did support the application for consolidation of the two appeals. He moved from a position of being neutral to a position of supporting consolidation over the space of a couple of days. It is not possible for him to say, I would submit that he remained completely neutral and then withdrew at the last minute.

171. My learned friend, Mr Rees, has put perhaps most of the points which can be put on the question of the June and July letter. Your Lordship raised a concern as to the balance which is needed for your Lordship to hear both sides of the story. My Lord, that is why, in my submission, the Ombudsman will need to appear, will need to be represented, or will need to take part. That fact should mean that he is liable for costs when we does take part. That is his role and that is his function. By getting it wrong to start with, he has caused the need for the proceedings and the costs. If he is not certain he has got it wrong and he wants to assist the court and explain the issues then, in my submission, he has to take part and he has to make himself liable for an award of costs against him. If he looks at the determination again and says "Oh, no I have missed something obvious. It is completely wrong." Then he can take no part in the very beginning and be projected against an order for costs against him.

172. My Lord I would re-emphasise what my learned friend Mr Rees has said which is that the Ombudsman did not only assist the court in the June letter. Would your Lordship also look at the July letter. He put his arguments forward in the June letter. He took a positive position in the June letter. He was arguing for the matter to be remitted to him rather than simply to be set aside. He was not content just to leave it at that. He had another opportunity. He argues all over again on issues which we has not been asked to comment on and which were not new on the appeal. In my submission the test cannot be whether or not he appears by counsel at the appeal it has to be whether he takes any other active steps in the determination. I do not want to repeat what my learned friend has said. Unless your Lordship has any further questions?


MR JUSTICE LIGHTMAN: No. Thank you.


- - - - - - -
IN THE HIGH COURT OF JUSTICE CO/6/96
QUEEN'S BENCH DIVISION
CROWN OFFICE LIST
Royal Courts of Justice
Strand
London WC2

Tuesday 30th July 1996

B e f o r e:

MR JUSTICE LIGHTMAN
- - - - - - -
JOHN SEIFERT
-v-
PENSIONS OMBUDSMAN and ORS
and
ANTHONY LYNCH
PHILIP HELM
-v-
JULIAN FARRAND
ERDOGAN KURAL

- - - - - -
(Computer Aided Transcript of the Stenograph Notes of

173. Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD
Tel: 0171 831 3183

174. Official Shorthand Writers to the Court)

- - - - - -

MR D REES (Instructed by Messrs Jacobsens, London, WC2) appeared on behalf of the Appellant, Mr Seifert.

MISS C FURZE (Instructed by Messrs Halls, London, WC2) appeared on behalf of the Respondent.

MR C NUGEE (Instructed by Messrs John Yolland, London, SW15) appeared on behalf of the Respondent, the Pensions Ombudsman.
- - - - - -
RULING ON COSTS
(As Approved by the Court )

175. Crown Copyright

- - - - - -



Tuesday 30th July 1996


MR JUSTICE LIGHTMAN:

INTRODUCTION

176. I have today allowed appeals by the appellants,

177. Mr Seifert, Mr Lynch and Mr Helm against a determination of the Ombudsman which upheld complaints and made directions against them as trustees or former trustees of the Seifert Group Pension and Life Assurance Scheme ("the Scheme"). The reasons for my decision are essentially five: (1) the failure of the Ombudsman to disclose a letter from the complainant ("the complainant's letter) which, in my view, constitutes the source and substance of the grounds on which the Ombudsman reached his decision; (2) the Ombudsman upheld a complaint which was not the complaint in fact made, and granted relief which was not claimed; (3) there was no substance in the complaint; (4) the Ombudsman ignored a clause exonerating the appellants as trustees or former trustees of the Scheme from any such liability as that which the Ombudsman imposed; and (5) the Ombudsman's failure to produce a intelligible determination.

178. The appellants and the current trustee Fairmount Trustee Services Limited ("Fairmount") now seek an order for costs against the Ombudsman. So far as costs are not recovered against the Ombudsman, those costs will have to be paid out of the scheme funds and they are already substantially in deficit. The question accordingly arises whether or not the Ombudsman can or should be held liable for costs.


II OMBUDSMAN'S ROLE ON APPEAL

179. Where the Ombudsman does not appear at the hearing of the appeal or otherwise take any part in resisting a challenge to his determination, exceptional circumstances have to be established to hold him liable for costs. Where he does appear at the hearing or otherwise takes a part in resisting a challenge to the determination, the court will be far more ready to hold him liable for costs. Accordingly the first question I have to consider is whether (as contended by the appellants) the Ombudsman took a part in resisting the challenge to his determination. The position is this. The Ombudsman initially intended to appear on the hearing of the appeal and in January and February 1996 by letters so notified the appellants. He did not say, however, what part he would take on the appeal and, in particular, whether he would oppose the appeal. He, however, finally decided, shortly before the hearing, not to attend the hearing and he did not do so. He did however send a letter ("the June letter") shortly before the hearing giving his explanation of the matters raised on the appeal by the appellants. After the hearing was concluded, I prepared a provisional judgment and sent a copy to the Ombudsman to give him an opportunity to comment on the ground of appeal first raised at the hearing that he had failed to disclose the complainant's letter, in order that I could be sure that I would hear anything he wished to say on this complaint. In response to that invitation he sent to me a further letter ("the July letter") which I took into account when I gave my final judgment.

180. The argument addressed on behalf of the appellants is that the Ombudsman, by taking the steps to which I have referred, took part in resisting the appeal. The Ombudsman wrote his two letters to the Court with the aim of assisting the court by setting out his understanding of the various matters raised by the appellants. I think the court should be very slow in categorising as an act of resistance to an appeal efforts by the Ombudsman to assist the court in this way, most particularly in a case such as the present where the complainant is not represented at the hearing. It is very very difficult for a judge to get (or feel sure that the has obtained) a balanced picture where he has only heard the appellants. It is most undesirable that the Ombudsman should be deterred from providing to the Court such assistance as he can, indeed assistance which he may be uniquely capable of providing, by the threat that by merely so doing he incurs the risk of being held liable for costs. It seems to me that one should only categorise his participation as an effort to resist the challenge to his determination if he can be seen to be seeking to influence rather than inform the Court or to make a partisan rather than a balanced presentation. The Court should be slow to find that the Ombudsman has crossed the line and entered the arena. Having full regard to the terms of the June and July letters, I do not think that the Ombudsman has crossed the line and done more than inform the court of matters which he reasonably considered it would be of assistance to the court to know.


II CIRCUMSTANCES JUSTIFYING EXCEPTIONAL ORDER

181. I now turn to the question what are the guidelines for deciding whether to hold the Ombudsman liable for costs where he has not taken any part in or resisted the appeal. Assistance is provided by the judgment of Chadwick J in the case of Providence Capital Trustees Limited . He there held that in such a situation it should only be in the most exceptional cases that the Ombudsman should be held liable for costs. He found guidance in the authorities considering whether persons (e.g. justices), when their decisions are challenged in judicial review proceedings, may be ordered to pay the costs of the judicial review proceedings. These authorities have held that the person whose decision is impugned should only be ordered to pay costs if, in the language of Lord Parker C.J. in R v. Liverpool Justices, ex parte Roberts [1960] 1 WLR 585 at 586-7, he acted perversely or with some disregard to the elementary principles which every court ought to obey and even then only if it was a flagrant instance. Lord Parker went on to say:


"In the present case the court is satisfied that the denial of justice here was a pure mistake and was not a flagrant instance."

182. Lord Goddard CJ in the case of R. v. Willesden Justices, ex parte Utley [1948] 1 KB 397 at 400 said:-


"it is the rarest thing for this court to give costs against justices. The only case is when justices have done something which calls for strong disapproval by this court."

In the case of R. v. Newcastle-under-Lyme Justices, ex parte Massey [1994] 1 WLR 1684 Rose LJ in giving the judgment of the Divisional Court approved those dicta of Lord Goddard and Lord Parker and said at page 1692 at D:
"If [the justices] do not appear, an order for costs in relation to the merits of the application or appeal is only likely to be made against them in the exceptional circumstances identified by Lord Goddard C.J. and reiterated by Lord Parker C.J."

183. I now turn to the question whether the decision and conduct of the Ombudsman in this case are so glaringly wrong and require the expression of the Court's disapproval in this manner. The matter which has occasioned me the gravest anxiety has been the failure of the Ombudsman to disclose the complainant's letter. It is clear from the July letter that the decision not to disclose it was made by a member of his office quite deliberately. The explanation given in that letter is that Mr Seifert's solicitors had previously indicated that they did not want to see further documentation. As I say in my judgment, I cannot believe that that statement should have induced or could have induced any reasonable person to believe that they would not wish to see a letter