High Court dismisses appeal where pension trustees failed to challenge known pay cut facts before Ombudsman.

Neutral Citation: [2013] IEHC 352

THE HIGH COURT

[2012 No. 250 MCA]

IN THE MATTER OF THE PENSIONS ACT 1990 AND IN THE MATTER OF AN APPEAL PURSUANT TO THE PROVISIONS OF SECTION

140 OF THE PENSIONS ACT 1990 (AS AMENDED)

BETWEEN

JOE WILLIS, PAUL KELLY, JOHN WALSH, GERRY O’DWYER, NESSAN RICKARD AND JOE CAMPBELL AS THE TRUSTEES FOR THE

TIME BEING OF THE IRISH BLOOD TRANSFUSION SERVICE SUPERANNUATION FUND

APPELLANTS

AND

THE PENSIONS OMBUDSMAN

RESPONDENT

AND

EMER LAWLOR

NOTICE PARTY

JUDGMENT of Kearns P. delivered on the 22nd day of July, 2013

This is an appeal brought by the appellants from a determination made by the respondent on a complaint made by Dr. Emer Lawlor,

the notice party, concerning the calculation of her pension entitlements under the Irish Blood Transfusion Service (IBTS) pension

scheme.

The appellants are the trustees of the pension fund and the notice party herein was employed by the IBTS from 1st December, 1988

until her retirement on 7th October, 2011.

On or about 1st January, 2010, the remuneration of the notice party was reduced by 15% in line with the Financial Emergency

Measures in the Public Interest (No. 2) Act 2009 FEMPI (No.2). The relevant section (s. 2) provided, inter alia, that a “relevant

provision”, in this case a contractual provision, setting the remuneration of a “public servant” would be amended with effect from 1st

January, 2010.

However, s. 3 of the Act provided that pay cuts applied pursuant to s. 2 of the Act were to be disregarded in certain circumstances

for persons retiring before a particular date for the purposes of calculating the pension entitlements of a person to whom s. 2 applied.

The notice party, who retired after the Act came into operation but before the relevant date, claims she has been deprived of the

benefit of that provision as a result of an adjudication made by the appellants. Her complaint was upheld by the respondent. The

appellants, the trustees of the Irish Blood Transfusion Services Superannuation Fund, have appealed that determination to this Court

on a net point of legal interpretation but have also sought to annul the decision of the respondent on the basis of a number of

subsidiary matters arising from the manner in which he investigated and determined the matter.

LEGISLATIVE FRAMEWORK

Section 1 of FEMPI (No. 2) defines a “public servant” as:-

“(a) a person who is employed by, or who holds any office or other position in a public service body”

Section 1 further defines what constitutes a public service body for the purpose of the Act as:-

“(a) the Civil Service,

(b) the Garda Síochána,

(c) the Permanent Defence Force,

(d) a local authority for the purposes of the Local Government Act, 2001,

(e) the Health Service Executive,

(f) a vocational education committee established under section 7 of the Vocational Education Act 1930,

(g) a body (other than a body specified or referred to in the Schedule) established –

(i) by or under an enactment (other than the Companies Acts),

or

(ii) under the Companies Acts in pursuance of powers conferred by or under another enactment, and financed

wholly or partly by means of money provided, or loans made or guaranteed, by a Minister of the Government or

the issue of shares held by or on behalf of a Minister of the Government, in respect of which a public service

pension scheme exists or applies or may be made”

The IBTS was established pursuant to the Blood Transfusion Service Board (Establishment) Order 1965 (S.I. 78 of 1965) and thus

meets the definition of a public service body within the context of (g) above. The IBTS is not listed in the schedule to the Act.

Section 2 of FEMPI (No 2) provides:-

“(1) A relevant provision that fixes the remuneration, or any part of the remuneration, of a public servant shall be taken

to have been amended, with effect on and from 1 January 2010, in accordance with this section.

(2) Where the remuneration of a public servant is fixed by a relevant provision, then, subject to subsections (3) and (4),

the relevant provision shall be taken to have been amended so that the remuneration is—

(a) in the case of persons to whom Table 1 to this section relates, reduced in accordance with that Table, and

(b) in any other case, subject to subsection (7), reduced in accordance with Table 2 or Table 3 (as the case

requires) to this section.

(3) Where the remuneration of a public servant, other than a person to whom Table 1 to this section relates, is fixed by

a relevant provision and that remuneration includes a fixed periodic allowance which is not a reimbursement of any

expense actually incurred, then the relevant provision that fixes each such allowance shall be taken to have been

amended so that the allowance is, subject to subsection (7), reduced in accordance with Table 4 to this section.

(4) Subject to subsection (7), where a public servant is entitled as part of his or her remuneration to the payment of an

allowance and the allowance—

(a) is not reimbursement of any expense actually incurred,

and

(b) is expressed as a specified percentage or specified proportion of another part of the remuneration (referred to

in this section, including the Tables, as “basic salary”) of a public servant to whom the relevant provision applies,

then the public servant’s basic salary, for the purposes of calculating the amount payable as the allowance, is his or her

basic salary reduced in accordance with subsection (2) and Table 2 or Table 3 (as the case requires) to this section.

(5) Nothing in this section affects any allowance or payment which is a reimbursement of an expense actually incurred.

(6) This section has effect notwithstanding—

(a) any provision by or under—

(i) any other Act,

(ii) any statute or other document to like effect of a university or other third level institution,

(iii) any circular or instrument or other document,

(iv) any written agreement or contractual arrangement,

or

(b) any verbal agreement, arrangement or understanding or any expectation.”

Section 3 of the Act then provides:-

“(1) This section applies to—

(a) a person who was at some time before 31 December 2009 a public servant but is on 1 January 2010 in receipt

of a pension or has a preserved benefit in a public service pension scheme, and

(b) a person who was a public servant on 1 January 2010, but ceases to be a public servant on or before—

(i) 31 December 2010, or

(ii) a later date specified by the Minister by order in accordance with subsection (3).

(2) The amendments taken to have been made by section 2 shall be disregarded for the purpose of calculating any

pension entitlement (including an entitlement to a lump sum and an entitlement to periodic payments of pension) of a

person to whom this section applies.

(3) For the purpose of making an order pursuant to subsection (1)(b)(ii), the Minister shall take into account such legal,

superannuation and personnel management issues affecting public service bodies as he or she considers appropriate,

and shall consult with any person or body that he or she considers appropriate.”

The later date specified by Ministerial Order was 29th February, 2012. Upon her retirement in October 2011, the notice party’s

pension entitlements were calculated by reference to her reduced salary and thus the notice party contends that she was not

afforded the protections provided for in section 3 (2) of the Act.

The notice party raised the issue with the appellants, arguing that same had been miscalculated in that the trustees had not taken

into account s. 3 (2) of FEMPI (No.2) which ought to have been applied to her benefit. This complaint was addressed by the trustees

through the Superannuation Scheme Internal Dispute Resolution Procedure and it was determined on 30th November, 2011 that the

trustees had no authority under the rules of the superannuation fund to disregard the salary cut that had been imposed upon the

notice party’s salary in that the provisions of s. 3 (2) of the Act did not apply to her because she was not a person with a preserved

benefit in a public service pension scheme.

The definition of a ‘public service pension scheme’ is contained at s. 1 of the Financial Emergency Measures in the Public Interest Act

2009 FEMPI (No.1) as:-

“an occupational pension scheme or pension arrangement, by whatever name called for any part of the public service which –

(a) is provided for under –

(i) the Superannuation Acts 1834 to 1963, or

(ii) any other enactment or administrative measure for the like purpose and to the like effect as those Acts, or

(b) is made by a relevant Minister or has been approved or requires the approval or consent, however expressed, of

either or both a relevant Minister and the Minister, but does not include such a scheme or arrangement in respect of a

body specified or referred to in the Schedule.”

PROGRESS OF THE COMPLAINT

In her submission of complaint which she furnished to the trustees in September, 2011 the notice party stated:-

“It is not possible for the IBTS to apply section 2 of the No. 2 Act but not to apply Section 3 on preserving certain

pension rights. The two sections go together. Anyone who is a public servant for the purpose of the salary cuts under

section 2 is automatically also a public servant for the purposes of section 3 and it is then a question of whether the

public servant retires before the deadline of 29 February 2012.”

On 19th January, 2012 the notice party referred her complaint to the Pensions Ombudsman, the respondent in these proceedings,

stating in her Complaint Form:-

“My complaint is that the trustees have calculated my pension and lump sum by reference to the reduced remuneration

which I was receiving at the date of my retirement on 7 October, 2011 and have refused to comply with section 3(2) of

the Financial Emergency Measures in the Public Interest (No 2) Act 2009. This provides that, as I retired before 29

February 2012, the 15% reduction in my remuneration ‘shall be disregarded for the purpose of establishing any pension

entitlement’.”

The case made to the Ombudsman on behalf of the appellants appears from an appendix attached to a letter sent to the Ombudsman

on 15th February, 2012. It appears in the following terms:-

“Section 3(2) of Financial Emergency Measures in the Public Interest (No. 2) Act 2009 (the “2009 Act”) provides that the

salary cuts imposed on public servants under section 2 of that Act shall be disregarded in calculating the pension

entitlements of persons to whom section 3 applies. Broadly, section 3 of the 2009 Act applies to:

(a) A person who was, prior to 31 December 2009, a public servant and was in receipt of a pension under a public

service pension scheme on 1 January 2010.

(b) A person who was a public servant on 1 January 2010 but ceased to be a public servant on or before 29 February

2012 and is entitled to payment of a pension under a public service pension scheme, including former public servants

who will become entitled to receive a benefit under a public service pension scheme before 29 February 2012.

(c) A person who becomes entitled to payment of a public service pension as a spouse, civil partner or child of a former

public servant to whom paragraphs (a) or (b) above applied.

The main pre-condition which must be satisfied in order for Dr. Lawlor to get the protection of section 3(2) is that she

must be a ‘public servant’ as defined by the 2009 Act.

The 2009 Act defines a ‘public servant’ as a person who is employed by, or holds any office or other position in a public

service body. It also includes judges, members of the Houses of the Oireachtas, local authorities, European Parliament

and the holders of certain Ministerial and other official offices which are not relevant for the purposes of this analysis.

A public service body is defined in the 2009 Act as including the Civil Service, Gardaí, defence forces, local authorities,

the HSE, VECs, a body established under an enactment in respect of which a public service pension scheme exists,

applies or may be made and a body wholly or partly funded directly or indirectly out of money provided by the

Oireachtas in respect of which a public service pension scheme exists, applies or may be made.

The Irish Blood Transfusion Service (the ‘IBTS’) is a body established under a statutory instrument made pursuant to

powers conferred on the Minister for Health by the Health (Corporate Bodies) Act 1961. As a result, in order for the IBTS

to be considered a public service body under the 2009 Act, it must be a body in respect of which ‘a public service

pension scheme exists or applies or may be made’.

The 2009 Act defines ‘public service pension scheme’ by reference to the definition of that term as contained in the

Financial Emergency Measures in the Public Interest Act, 2009. It is defined within that Act as an occupational pension

scheme or a pension arrangement for any part of the public service which is:

• provided for under the Superannuation Acts 1834-1963 or any other enactment or administrative measure for the like

purpose and to the like effect as those Acts, or

• made by a relevant Minister or has been approved or requires the approval or consent of either or both a relevant

Minister and the Minister for Finance.

The pension schemes of certain commercial semi-State bodies, such as Bord Gáis, RTE and others, are excluded from

the scope of this definition by a separate schedule within the Act. The IBTS is not one of the excluded bodies referred to

in that schedule.

Based on the recitals within the current trust deed and rules governing the Scheme, we understand that it was

established under an interim deed dated 18 May 1963 by the IBTS under its then name, the Blood Transfusion Service

Board. There is no reference in the recitals to the current deed governing the Scheme of it having been established or

approved by a Minister.

Under the terms of the Scheme’s amendment power, Ministerial approval is not required to amend the Scheme.

Similarly, the Minister has no role in determining how the employer contribution rate is set. From that perspective, the

Scheme operates as a normal self-financed private sector pension fund and cannot be said to be ‘made by a relevant

Minister or has been approved or requires the approval or consent … of either or both a relevant Minister’ and the

Minister for Finance for the purposes of the definition of ‘public service pension scheme’.

We have reviewed the statutory instrument under which the IBTS was established (S.I. No. 78/1965) and other relevant

statutory instruments relating to the IBTS. Those instruments do not ‘provide for’ a superannuation scheme. The only

provision within S.I. No. 78/1965 which comments on the terms and conditions of IBTS staff states that:

‘The Board shall determine the remuneration and conditions of service of each officer and each servant of the

Board and may, from time to time, alter the remuneration or conditions of service of any officer or servant.’

For the purposes of the definition of ‘public service pension scheme’ we do not see how this provision could be

interpreted as meaning that the Scheme is ‘provided for under … any other enactment or administrative measure’.

We have also reviewed the Superannuation Acts 1834-1963 and they do not ‘provide for’ the Scheme.

The Superannuation Acts 1834-1963 govern pension arrangements for established civil servants and other officials. The

Superannuation Acts also contain provisions relating to the basis upon which civil servants’ pension benefits are

calculated.

There is no enactment or administrative measure that provides for the Scheme which is for the ‘like purpose and to the

like effect as’ the Superannuation Acts. We have identified no statute which either establishes or makes provision for the

Scheme in the same way as the Superannuation Acts do for civil servants.

Based on this analysis, the Scheme is not a ‘public service pension scheme’ under the 2009 Act. We understand that the

IBTS does not operate any other pension arrangement which could be categorised as a ‘public service pension scheme’.

As a result, the IBTS is not a public service body and Dr. Lawlor cannot therefore be categorised as a public servant

given that she does not work for a public service body as defined in the 2009 Act. Accordingly, Dr. Lawlor is not in our

view entitled to the protection provided to certain public servants pension entitlements under section 3(2) of that Act.”

The respondent took the advices of counsel before he issued his determination on 22nd June, 2012, upholding the complaint of the

notice party and in which he concluded as follows:-

“6.1 The decision reached by the trustees in this case has the effect of defeating the purposes of ss. 2 and 3 of the

FEMPI (No.2) Act and is thus both incorrect and unfair. This is because the fact that the complainant in this case has

already been penalised under s. 2 means that the trustees should not go behind this, but rather should give effect to the

purposes of the Act by affording her the protection contained in s. 3 in the manner in which the Oireachtas intended.

6.2 I therefore determine that the trustees must restore Dr. Lawlor’s pension to a level calculated by reference to the

salary which she enjoyed prior to the application of the cut in pay mandated by s. 2 of the Act and I direct the trustees

forthwith to pay her the appropriate arrears of pension and lump sum payable with effect from the date of her

retirement.”

The determination of the Ombudsman runs to some 17 pages, but for present purposes the Court will confine itself to setting out the

reasoning applied by the Ombudsman in reaching his determination, which appears at s. 5 thereof as follows:-

“5.1 For Dr. Lawlor to receive the protection of s.3 of the Financial Emergency Measures in the Public Interest (No. 2)

Act 2009 (hereinafter called ‘the Act’) she must fall within either of the two protected categories named in that section.

She must be ‘(a) a person who was at some time before 31st December 2009 a public servant but is on 1st January

2010 in receipt of a pension or has a preserved benefit in a public service pension scheme, and (b) a person who was a

public servant on 1st January 2010, but ceases to be a public servant on or before –

(i) 31st December 2010, or

(ii) A later date specified by the Minister by order in accordance with subsection (3).

5.2 The Public Service Pensions Rights Order 2011 (S.I. No. 80/2011) fixed the later date mentioned in subsection (1)(b)

(ii) as 29th February 2012. As she was due to retire and did so retire in October 2011, she falls under paragraph (b) – if

she was a public servant.

5.3 It appears that Dr. Lawlor was considered a public servant for the purpose of reducing her remuneration under s. 2

of the Act. The term ‘public servant’ has the same meaning throughout the Act and it does not appear possible that a

person can be a public servant for the purposes of one section, and not for another. Section 3 does not stand alone, as

it is clearly aimed at providing protection for certain persons in terms of their pension entitlements, from the effects of

section 2, the reduction in remuneration.

5.4 Counsel was of the view that Dr. Lawlor’s argument that she either comes within s. 3, or is due a refund of amounts

deducted from her salary pursuant to s. 2, has a lot of merit. Reimbursement would, of course, present difficulties and

this would not fall within the remit of this Office in any event; but it was not the question that was referred to me.

5.5 The trustees would not have been the body which decided that Dr. Lawlor’s remuneration was to be reduced under

the terms of s. 2 of the Act and it could be argued that the interpretation of the term ‘public servant’ by either a

government department or by the employer itself did not bind them as trustees, and that they were required to satisfy

themselves as to the meaning of the term as defined by the Oireachtas.

5.6 However it is arguable that the trustees, in coming to the decision that Dr. Lawlor was not a public servant, should

have had regard to the fact that others had already considered her a public servant for the purposes of s. 2 of the Act.

If a party competent to do so had already determined that Dr. Lawlor was a public servant and had applied s. 2 of the

Act against her, it does not appear reasonable that the trustees could then purport to deprive her of the protection that

s. 3 was intended to give her in those circumstances. Such an approach would defeat the legislative purpose of the Act

and it would appear highly unlikely that the Oireachtas envisaged a situation in which a person could be a public servant

for the purpose of one section of the Act, and not for another.

5.7 The trustees stated that they did not have any discretion in the matter of the pension payable to Dr. Lawlor, since

the scheme rules provided that her pension is based on a final salary at the point of retirement. This, of course, raises

the question as to what ‘final salary’ means in this context. The Act is an emergency measure, to bring about a

temporary reduction in a person’s normal salary. It was not intended to be permanent and under s. 7 of the Act the

Minister is obliged to undertake an annual review of the ongoing necessity of the Act. The point of s. 3 was to ensure

that, regardless of any reduction in salary made under the terms of s. 2, pension rights would be preserved for persons

who satisfied either of the definitions contained in section 3.

5.8 In one sense, the question is whether the trustees can refuse to apply the law of the land if they think it conflicts

with the rules of their scheme. This has not been tested in the courts as yet but I do not believe that trustees could

ignore the law of the land or take measures that would frustrate the clear purpose of that law.

5.9 The trustees determined that Dr. Lawlor did not fall under the definition of ‘public servant’ because the scheme of

which she was a member was not a ‘public service pension scheme’. This calls into question the definition of a public

servant, which appears to depend upon the definition of ‘public service pension scheme’. In section 1 of a different

enactment, the Financial Emergency Measures in the Public Interest Act 2009 (which was passed earlier in that year and

to which I shall refer to as the ‘No. 1 Act’) provides that a ‘public service pension scheme’ means an occupational

pension scheme or pension arrangement, by whatever name called, for any part of the public service which

(a) is provided for under

(i) The Superannuation Acts 1834-1963, or

(ii) Any other enactment or administrative measure for the like purpose and to the like effect as those

Acts, or

(b) is made by a relevant Minister or has been approved or requires the approval or consent, however expressed,

of either or both a relevant Minister and the Minister [for Finance],

but does not include such a scheme or arrangement in respect of a body specified or referred to in the Schedule

[Commercial State Bodies].

5.10 The IBTS Scheme was not made by any Minister, does not require the approval of any Minister and is certainly not

provided for under the Superannuation Acts 1834-1963, so the question is whether it falls under the latter part of the

definition – ‘any other enactment or administrative measure for the like purpose and to the like effect’. The term

‘enactment’ includes a statutory instrument (s. 2, Interpretation Act 2005).

5.11 Dr. Lawlor’s contract of employment and any reference to it in the scheme, were provided for by “any other

enactment”, viz., the Blood Transfusion Service Board (Establishment) Order, 1965 (S.I. No. 78/1965), already referred

to at 4.5 above.

5.12 Regulation 22 (4) of that statutory instrument states that ‘The Board shall determine the remuneration and

conditions of service of each officer and may, from time to time, alter the remuneration or conditions of service of any

officer or servant’. There is no doubt that a person’s pension entitlements form part of his/her remuneration and Dr.

Lawlor’s remuneration is therefore granted pursuant, not to a private law contract, but to an enactment.

5.13 That is not to say that the scheme itself was provided for under an enactment or administrative measure as it

appears to have been constituted by a deed of May 1963, which predates the statutory instrument already named and

the interim deed appears to have been made by a predecessor body, the National Blood Transfusion Association, which

made a resolution for its own winding up on 9th April, 1965, as recited in S.I. No. 78 of 1965. …

5.14 The scheme was originally established under an interim deed and, in accordance with the practice then prevalent

for securing the approval of the Revenue Commissioners under the terms of the Finance Acts 1921 and 1958, that would

be followed at some temporal distance by a definitive deed and rules. It is not clear when the definitive deed and rules

of the scheme were made. It would normally be provided for within a standard interim deed of that period that a

definitive deed should be made within two years. In practice, however, the interval between interim and definitive deeds

was usually much longer than that. It is therefore likely that the definitive deed which contained details of the full

powers and duties of the trustees, together with the detailed rules of the scheme, was adopted after the establishment

of the Blood Transfusion Service Board in 1965. Moreover, these instruments would have had to be amended in

considerable detail following the passing of the 1972 Finance Act, which laid down a deadline of 5th April 1980 for such

amendment, in order for the scheme to enjoy continuing approval of the Revenue Commissioners.

5.15 I therefore determined that the administrative measure establishing the scheme was an act of the Blood

Transfusion Service Board itself and the scheme in its present form is undoubtedly the product of one or more

administrative measures taken by IBTS or its predecessor over the years. And I have no doubt whatever that IBTS, as it

is now known, is a public body.

5.16 It then falls to be determined whether the administrative measure was ‘to the like purpose and effect’ as the

Superannuation Acts.

5.17 The experience of this Office in dealing with complaints brought by members of superannuation schemes in the

wider public service confirms that it was indeed the intention of the Oireachtas to capture as many pension schemes as

could conceivably be achieved, for the purpose of applying the pension levy imposed by the No. 1 Act of 2009. Not only

that, but that pension levy is actually being applied to the employees of IBTS. It is not tenable that the scheme should

be a public service pension scheme for the purpose of one financial emergency measure and cease to be a public

service pension scheme for the purpose of another financial emergency measure passed in the same year.

5.18 The purpose of the Superannuation Acts 1834-1963 is to set the terms and conditions of the superannuation of

established civil servants and certain other officials. The 1834 Act established the principle of awarding pensions in

respect of service given, by promising a pension at retirement based on years of service completed. I have absolutely

no doubt that the pension scheme established by IBTS and its predecessors is ‘to the like purpose and effect’.”

An appeal to this Court from the determination of the Ombudsman was then brought pursuant to s. 140 of the Pensions Act 1990 as

inserted by s. 5 of the Pensions (Amendment) Act 2002 which provides as follows:-

“(1) A party to an investigation before the Pensions Ombudsman under this part may appeal to the High Court from a

determination of the Pensions Ombudsman within 21 days from the date of the determination.

(2) The High Court, on the hearing of an appeal under this section, may, as it thinks fit, annul the determination

concerned, confirm the determination or confirm the determination subject to such modifications as it considers

appropriate.”

DISCUSSION

The IBTS was established as the Blood Transfusion Service Board by the Blood Transfusion Service Board (Establishment) Order 1965.

It is a non-profit self-financing public service body which is not in receipt of funding from the Exchequer. On its establishment, the

IBTS took over the property and assumed the responsibilities of the National Blood Transfusion Association which was a company

incorporated under the Companies Acts 1908 – 1959. The IBTS Pension Scheme was originally established under an interim deed of

18th May, 1963 made by the National Blood Transfusion Association. Since the making of that interim deed there have been 28

subsequent deeds dealing with variations to the rules of the IBTS Pension Fund and with the appointment of new trustees. The most

recent deed is the fifth definitive trust deed which was made on 24th May, 2010.

As one might expect, the purpose of the IBTS Pension Scheme is to provide members with the relevant benefits as defined in s. 770

of the Taxes Consolidation Act. Thus members of the IBTS Pension Scheme contribute to it during their working lives and as a

consequence of membership are entitled to a pension on retirement. The pension that each member is entitled to is calculated by

reference to their final salary at the date of retirement.

Given that the IBTS Pension Scheme was established pursuant to the first deed in 1963, it pre-dated the establishment of the IBTS

under the 1965 order. Pursuant to the terms of the 1965 order, the power to determine the remuneration and conditions of service of

officers and servants of the IBTS does not require the consent of the Minister. This is in contrast with other bodies established by

order, for example, the interim Health Executive, the National Treatment Purchase Fund Board, the National Haemophilia Council, and

the National Breast Screening Board, all of which were established by their respective orders which contained provisions such as:-

“The Board shall, subject to the approval of the Minister with the consent of the Minister for Finance, determine the

remuneration and conditions of service (including superannuation) of the members of staff.”

In the instant case the Ombudsman determined that the IBTS Pension Scheme is one which falls within the second category of the

definition of Public Service Pension Scheme as defined in FEMPI (No. 1) on the grounds that the administrative measure establishing

the scheme was an act of the BTSB itself and the scheme in its present form, in the view of the Ombudsman, was the product of one

or more administrative measures taken by IBTS or its predecessor over the years.

However, the statutory definition requires in addition that the measure be “to the like effect of those Acts” (being the

Superannuation Acts).

The Superannuation Acts provide for the payment of pensions out of public funds and such pensions are funded on an ongoing basis

from the Public Exchequer. The appellants argue that the same could not be said of the IBTS Pension Scheme which is analogous to a

private pension fund which is funded by contributions from employees with the assistance of the employer. This private pension fund

requires and is subject to the approval of the Revenue Commissioners. It is subject to the pension levy applied under the Finance Act

(No. 2) 2011 and is also subject to the provisions of the Pensions Act 1990 (as amended). It is subject to the minimum funding

standards prescribed by Part IV of the Pensions Act and can be wound up if necessary.

The trustees argue that it is therefore difficult to categorise the IBTS Pension Scheme as a Public Service Pension Scheme within the

meaning of FEMPI (No. 1), and it is this fact which drove the trustees to extrapolate further that the IBTS was not, in consequence,

a public body within the meaning of that Act (although it is for every other purpose) and that Dr. Lawlor is not a public servant within

the meaning of that Act (although she is for every other purpose) and to conclude that the trustees could not in consequence apply

the provisions of s. 3 (2) of FEMPI (No. 2) Act in calculating her pension entitlements.

However, the Ombudsman determined that, since other parties (namely, the IBTS, Dr. Lawlor’s employer) had applied s. 2 of the

FEMPI (No. 2) Act in reducing the remuneration of the notice party, and had applied to her also the pension levy under the FEMPI

(No.1) Act, the trustees were in consequence compelled to have regard to this fact and to apply for her benefit the provisions of

section 3. This was undoubtedly a fair and equitable approach to take, but one which, with considerable vehemence in this appeal,

the trustees contend was not open to the respondent to take on the law and on the facts.

The trustees’ position, putting it simply, is that the IBTS did not apply the 15% salary reduction to the notice party in reliance on s. 2

of the FEMPI (No. 2) Act. On the contrary, they did so in pursuance and on the basis of a circular emanating from the Department of

Health on 24th December, 2009. However, the terms of the circular state explicitly that the cut is being imposed as a direct

consequence of the provisions of FEMPI (No.2). It states from the outset:-

“I am directed by the Minister for Health and Children to convey the following instructions to all public sector employers

in relation to the application of pay reductions with effect from 1 January 2010 in accordance with the Financial

Emergency Measures in the Public Interest (No. 2) Act 2009……”

The reality is therefore that the pay cut of 15% suffered by the notice party was identical to the provision which, pursuant to FEMPI

(No.2) 2009, was applied across the board to the public service generally. It was applied to the notice party by her employers in

exactly the same way as the pension levy had been applied under FEMPI (No.1). The Department of Health is an emanation of the

State and it would have been surprising if the IBTS had not complied with the “instructions” received from the Department in this

regard to apply the cuts by reference to the FEMPI Acts. In fact, deductions have been made to the notice party’s remuneration by

her employers under both Acts and the proceeds are being held in escrow because the IBTS, although complying with the

instructions, took issue with their applicability to their employees as early as February, 2009.

Even more surprising is the fact – if fact it be – that the trustees were unaware of the “instructions” from the Department of Health

or failed in any event before adjudicating on the notice party’s complaint to ascertain the position for IBTS members of the pension

scheme in the aftermath of the two FEMPI Acts. Was there no liaison between the IBTS and the trustees? If not, that would indicate

a very strange state of affairs indeed. I feel compelled to ask the question because the appellants have suggested that the failure to

uncover or utilise this vital information during the complaint process is in some way a failure on the part of the respondent. The

respondent for his part says the trustees should have addressed this issue during the course of the proceedings before him and I

agree with him. Rounding off the unsatisfactory nature of the inter-departmental communications on this topic is the reference

contained in a letter dated 11th July, 2012 from the IBTS Chief Executive to the trustees which states:-

“The current advice available to IBTS continues to be that neither the FEMPI Act 2009 nor the FEMPI (No.2) Act 2009

apply to its employees. However this is not accepted by the Department of Health and the Department of Finance and

IBTS is actively engaged in discussions with both Departments to seek a resolution of the current impasse.”

DECISION

At the outset the Court should clarify that it is adjudicating only on the present case where particular considerations arise in the

context of an adjudication by an ombudsman on the complaint of a citizen who feels aggrieved by a decision of a pension provider. In

other words, has the notice party brought forward a legitimate complaint of unfair treatment in respect of which she can and should,

subject to the limitations of the Pensions Act, be provided with a remedy? The Court’s function is not to provide a definitive road map

for the resolution of ongoing differences of interpretation as between various State bodies and the IBTS.

A high threshold must be crossed by any appellant from a decision of a financial/pensions ombudsman. The Court has no difficulty in

accepting that the relevant test for a statutory appeal against a decision of the Pensions Ombudsman should be the same as that

provided for in respect of the Financial Services Ombudsman as laid down by Finnegan P. in Ulster Bank v. Financial Services

Ombudsman [2006] I.E.H.C. 323 where it was stated at p. 9:-

“To succeed on this appeal the plaintiff must establish as a matter of probability that, taking the adjudicative process as

a whole, the decision reached was vitiated by a serious and significant error or a series of such errors. In applying the

test the court will have regard to the degree of expertise and specialist knowledge of the defendant. The deferential

standard is that applied by Keane C.J. in Orange v. The Director of Telecommunications Regulation & Anor. and not that

in The State (Keegan) v. Stardust Compensation Tribunal.”

The appeal is a limited one and not a full de novo hearing. This approach was described by MacMenamin J. in Hayes v. Financial

Services Ombudsman & Ors., (Unreported, High Court, 3rd November, 2008), as “a well established and accepted test”. At p. 13 of

that judgment he continued:-

“While a statutory appeal (such as this) is not a judicial review, and where the decision maker is acting within his own

area of professional expertise, the test set out by Finnegan P. suggests it bears many of the features of a judicial

review. In particular, it is clear that there may be a permissible error if it is within jurisdiction, albeit only in so far as

that error falls short of being one which is serious and significant. … What has been established, therefore, is an

informal, expeditious and independent mechanism for the resolution of complaints. The respondent seeks to resolve

issues affecting consumers. He is not engaged in resolving a contract law dispute in the manner in which a court would

engage with the issue.

The function performed by the respondent is, therefore, different to that performed by the courts. He is enjoined not to

have regard to technicality or legal form. He resolves disputes using criteria that would not usually be used by the

courts, such as whether the conduct complained of was unreasonable simpliciter; or whether an explanation for the

conduct was not given when it should have been; or whether, although the conduct was in accordance with a law, it is

unreasonable, or is otherwise improper. He can also make orders of a type that a court would not normally be able to

make, such as directing a financial services provider to change its practices in the future. Thus, he possesses a type of

supervisory jurisdiction not normally vested in a court. These observations are to be borne in mind when considering

whether the decision made by the respondent was validly made within jurisdiction.”

The appellants for their part rest their case squarely within the parameters of the Supreme Court decision in Henry Denny & Sons

(Ireland) Ltd. v. Minister for Social Welfare [1998] 1 I.R. 34, in which Hamilton C.J. noted, at pp 36-37, that the courts:-

“… should be slow to interfere with the decisions of expert administrative tribunals. Where conclusions are based upon

an identifiable error of law or on unsustainable finding of fact by a tribunal, such conclusions must be corrected.

Otherwise it should be recognised that where tribunals which have been given statutory tasks to perform and who

exercise their functions, as is now usually the case, with a high degree of expertise and provide coherent and balanced

judgments on the evidence and arguments heard by them, it should not be necessary for the courts to review their

decisions by way of appeal or judicial review.”

Reliance is placed upon this judgment to argue that in all cases where the appeal consists of a pure issue of law, whether substantive

or procedural, the court has greater expertise than a tribunal and no need or obligation for curial deference arises.

The Office of the Pensions Ombudsman was established by the Pensions Act 1990 (as amended) and reference has already been made

to the statutory provisions contained in that Act whereby appeals from any decision of the Pensions Ombudsman can be brought to

the High Court.

Section 131 of the Act deals with the functions of the Pensions Ombudsman and provides:-

“(1) The Pensions Ombudsman shall be independent in the performance of his functions.

(2) The Pensions Ombudsman may investigate and determine the following complaints and disputes-

(a) a complaint made to him by or on behalf of an actual or potential beneficiary of an occupational pension

scheme, trust RAC or PRSA who alleges that he has sustained financial loss occasioned by an act of

maladministration done by or on behalf of a person responsible for the management of that scheme, trust RAC or

PRSA;

(b) any dispute of fact or law that arises in relation to an act done by or on behalf of a person responsible for the

management of the scheme or PRSA and that is referred to him by or on behalf of the actual or potential

beneficiary.”

Section 139 of the Act provides, inter alia:-

“(1) On the investigation of a complaint or reference under this Part, the Pensions Ombudsman shall make a

determination in relation to the complaint or dispute, and may in the determination give to the parties concerned such

directions as the Pensions Ombudsman considers necessary or expedient for the satisfaction of the complaint or the

resolution of the dispute.

(2) A direction under subsection (1) shall not require either-

(a) an amendment of the rules of a scheme, trust RAC or the conditions of a PRSA contract, or

(b) the substitution of the decision of the Pensions Ombudsman for that of the trustees of a scheme, trust RAC in

relation to the exercise by the trustees of a discretionary power under the rules of the scheme, trust RAC.

(3) Subject to subsection (4), the Pensions Ombudsman may under subsection (1) order such redress, including financial

redress, for the party concerned as he considers appropriate having regard to all the circumstances and to the

provisions of this Part.

(4) Any financial redress under subsection (3) shall be of such amount as the Pensions Ombudsman deems just and

equitable having regard to all the circumstances but shall not exceed any loss of benefit under the scheme or PRSA.”

It seems to me that the critical provision is that which imposes upon the Pensions Ombudsman the obligation to give “such directions

as the Pensions Ombudsman considers necessary or expedient for the satisfaction of the complaint or the resolution of the dispute”.

I accept, as I must, that in this context the Pensions Ombudsman could not, regardless of the merits of the case, legitimately make a

decision which the law did not permit. But subject only to that consideration he enjoys a significant discretion to allow and achieve a

fair outcome in relation to a complaint.

The reasoning for his decision appears at paras. 5.12 – 5.18 of his determination which I have set out in full at an earlier part of this

judgment. Far from setting out to ignore the law he set out comprehensive reasons why the IBTS Pension Scheme was a public

service pension scheme and how that inference can be derived from the words “administrative measure for the like purpose and to the

like effect of those Acts (i.e. the Superannuation Acts 1831 – 1963)”. It is unnecessary to repeat the reasons here and I am satisfied

that this Court should only step in to set aside his conclusions (being those of an expert in this area) where a clear and serious legal

error may be demonstrated. No such error has been demonstrated and there can be no doubt but that his decision achieved a fair

result insofar as this particular complainant was concerned.

I am also of the view that he would have been entitled to reach the same conclusion under and by virtue of s. 5 of the Interpretation

Act, 2005 when the same is applied to the provisions of the FEMPI Acts, 2009.

Counsel for the notice party referred the Court to s. 5 of the Interpretation Act 2005 which provides:-

“(1)-In construing a provision of any Act (other than a provision that relates to the imposition of a penal or other

sanction) –

(a) that is obscure or ambiguous, or

(b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of-

(i) in the case of an Act to which paragraph (a) of the definition of ‘Act’ in section 2 (1) relates, the

Oireachtas, or

(ii) in the case of an Act to which paragraph (b) of that definition relates, the parliament concerned,

the provision shall be given a construction that reflects the plain intention of the Oireachtas or parliament concerned, as

the case may be, where that intention can be ascertained from the Act as a whole.”

The first of the FEMPI Acts 2009 refers in its recitals to the serious disturbance in the economy which in consequence has brought

about a serious deterioration in the revenues of the State and significant and increasing Exchequer commitments in respect of public

service pensions. The recitals further recite the necessity to cut current Exchequer spending and note that the burden of job losses

and salary reductions in the private sector has been very substantial, in consequence whereof “it is equitable that the public sector

should share that burden”.

The Act then proceeded to authorise a deduction to be made from the remuneration of public servants to provide for the payment of

a contribution by persons in the public service who are members of an occupational pension scheme (i.e., “the pension levy”).

Notwithstanding the definition of “public service pensions scheme” contained in the Act, it has not been in issue in these proceedings

but that the notice party was a person to whom such a reduction was applied. She was a public servant as far as the State and its

emanations were concerned.

FEMPI (No. 2) Act 2009 was expressed to be “an Act, in the public interest, to provide for the reduction of the remuneration of

certain persons in the public service (including members of the Houses of the Oireachtas and certain office holders), and to provide

for related matters”.

The recitals to this Act recorded that it was necessary to reduce State expenditure to maintain international confidence and to

protect the State’s credit ratings and in that regard to take urgent steps to help restore the State’s competitiveness, resulting in the

necessity for the State to achieve significant savings in its expenditure, both directly and indirectly from remuneration of persons in

the public service.

Notwithstanding the non reference to employees of the IBTS, those reductions were applied to them also. The FEMPI (No. 2) Act,

2009 came into effect on 20th December, 2009, a few days before the circular issued by the Department of Health which explicitly

demanded and required the imposition of the pay cut on Dr. Lawlor and other employees of the IBTS under FEMPI (No.2). The notice

party and her colleagues were again identified as public servants working in a public service body and treated accordingly.

I ask rhetorically: can it really have been the intention of the legislature that employees of the IBTS were to be singled out uniquely

for cuts in remuneration which were not to be contextualised and mitigated by reference to s. 3 of FEMPI (No. 2)? I find it impossible

to believe that such a radical departure from all considerations of fairness and justice was in contemplation, or should be allowed to

prevail in the absence of express statutory authorisation. There is a complete absence of any evidence of intent or official statement

from any branch of government stating that either or both the FEMPI Acts were intended to have such an effect, an effect which

might be seen as offending the principles of equality and very possibly entering the realms of unconstitutionality.

I would be unsurprised to discover that the historic anomaly whereby the IBTS Pension Fund was first established by trust deed was

something not taken into account by the legislators in defining ‘public servant’, ‘public service body’ and ‘public service pension

scheme’, perhaps because of the very emergency circumstances in which these particular pieces of legislation were enacted. The

fact that inter-Departmental exchanges indicate that the issue remains unresolved even up to the present day tends to support such

a suspicion.

While there is no obscure or ambiguous wording in the definition of “public servant”, “public service body” or “public service pension

scheme”, I am satisfied that any interpretation of all three definitions which would deprive the notice party of the benefit of s. 3 of

the FEMPI (No. 2) Act 2009 would be absurd and furthermore would, taking both Acts as a whole, fail to reflect the plain intention of

the Oireachtas to take all public service employees into the ambit of pay reduction with the concomitant saver for those encouraged

to retire or who did retire before a particular date.

This is not the first case in which an anomaly of the same sort has arisen. In Unite the Union & Anor v. The Minister for Finance &

Ors. 2010 [IEHC] 354 (Unreported, High Court, 8th October, 2010), the decision under challenge before this Court was that of the

Minister for Finance not to exempt certain employees of the Central Bank and Financial Services Authority of Ireland (the CBFSAI)

from deductions authorised by s.2 of FEMPI (No.1). The applicant was Unite, a trade union representing 75% of the staff of the

CBFSAI, whose members contributed to their own pension scheme and it was argued that they were entitled to be treated differently

from other public service employees, notwithstanding that the legislation expressly included the Central Bank. In rejecting that

proposition I stated:-

“It is clear that the purpose of the legislation is more than just reducing the level of current Government spending.

Therefore the fact that the CBFSAI pension is a self-funded pension and does not make any demands on the Central

Funds does not preclude employees from CBFSAI being brought within the scope of the Act. There are other

considerations which may justify a requirement that CBFSAI employees pay a contribution as required by s.2 of the Act,

chief of which is the fact that the CBFSAI pension scheme is clearly and undeniably modelled on the public service type

pension scheme which is ‘significantly and markedly more favourable’ than the pension schemes operating in the private

sector.”

I am also attracted by the further submission advanced on behalf of the notice party that if remuneration was not reduced by

reference to s. 2 of FEMPI (No. 2) Act 2009, then it necessarily follows that alterations to her contractual entitlements, including

remuneration and superannuation entitlements, were implemented without her consent and were unlawful. A unilateral alteration of a

contract, be it a contract of employment or otherwise, is impermissible in the absence of agreement on both sides. The notice party

in this case never agreed to any reduction in her remuneration. If it was “unlawful” then surely the trustees should not have had

regard to an “unlawful reduction” when calculating her remuneration for the purpose of establishing her pension entitlements? It would

in my view have been open to the ombudsman to devise some other remedy or solution to the notice party’s difficulty by taking this

route had he chosen to do so.

Having reached my conclusions for the particular reasons which I have, I do not find it necessary to address in any detail the

subsidiary matters adumbrated by counsel on behalf of the appellants during the course of the hearing. They were admitted by

counsel on behalf of the appellants to be subsidiary to the main issue but for the sake of completeness I will deal briefly with them.

The first of these is the suggestion that the respondent based his findings on an erroneous basis of fact, namely, that he believed the

IBTS applied the 15% cut relying on s. 2 of FEMPI (No. 2). This submission relies for its substance on a letter dated 11th July, 2012 to

the trustees from the IBTS in which the IBTS stated:-

“IBTS assumed that the Department were correct in their determination that the cut applied to all IBTS staff and

implemented the Circular according to IBTS’s standard processes for implementing such Circulars without reference to

the underlying legislation.”

In asking this Court to have regard now to this letter is effectively asking the Court to receive fresh evidence not before the

respondent. Except in exceptional circumstances this is not permissible. Besides, I do not believe the letter in question accurately

reflects what was outlined in the Circular from the Department of Health in December, 2009 which is quite explicit in its reliance on

FEMPI (No.2).

The appellants then complain that this supposed “factual error” should have been uncovered if the ombudsman had carried out his

investigation more thoroughly. It seems to me however that this supposed “factual error” could and should have been well known to

the trustees themselves. The issue had arisen for the IBTS as far back as February 2009 in the context of FEMPI (No. 1). The

trustees during the investigation did not challenge the assumption that the notice party was subjected to s.2 of FEMPI (No.2) and

based their defence instead on the “public pension scheme” argument.

A further complaint is made that certain e-mails relating to standardised annual leave arrangements across the public service which

came to the attention of the respondent were not disclosed to the trustees. However these did not relate to the central theme of

the trustees’ defence and were in my view of peripheral importance. Similarly, the trustees’ complaint about not obtaining sight of the

counsel’s opinion obtained by the respondent in circumstances where, although they were aware it was being sought, they never

asked for sight of it is singularly unimpressive. In fact the trustees made no complaints of any procedural unfairness during the

investigation even after 19th June, 2012 when they were advised that the respondent was now proceeding to a final determination.

Even less impressive is the allegation that the respondent pre-judged the matter. This submission stems from a passage in a letter

written by the respondent to the notice party on 14th March, 2012 in which he states:-

“…I confirm that I have received from the Trustees the detail of the legal advice on which they rejected your complaint

under the internal disputes resolution process.

I disagree with a number of the detailed points raised in the course of that advice.

I have therefore decided to ask Counsel’s opinion from Dr. Paul Anthony McDermott in this matter… and my conviction

that the IBTS is wrong is strengthened by the confirmation that you gave me that the Public Service Pensions Levy has

in fact been deducted from members of the IBTS Superannuation Scheme.”

In the informal context in which the respondent conducts his work, and in addition the bizarre situation into which the notice party

was cast, I do not believe the contents of this letter mean anything more than that the respondent felt the appellants had a case to

answer. It is a communication furnished at a very early stage of the process and the appellants were in no way hindered or precluded

from advancing every conceivable argument or point which they wished to raise as matters progressed towards the final

determination of this matter in June. His comprehensive ruling and determination evinces no sign of bias or pre-judgment of any sort.

Further, none of these subsidiary points now raised by the appellants had any bearing of relevance on the reasoning which led to the

decision arrived at by the respondent. It was in my view open to him to reach the same conclusion in the other ways addressed in

this judgment.

I will therefore dismiss the appeal.