Caldwell v TPR (First-tier Tribunal) – 14 June 2024

Summary

The First-tier Tribunal (“FTT”) has dismissed an appeal concerning TPR’s imposition of a penalty notice (“PN”) for failure to prepare a chair’s statement as required by the Occupational Pension Schemes (Scheme Administration) Regulations 1996.

Legislative background

Trustees of most DC pension schemes are required to prepare a chair’s statement within seven months of the end of each scheme year.

Where this requirement is breached, TPR “must” issue a PN of between £500 and £2000.

TPR may review that PN on the application of a trustee or of its own volition, following which the PN may be confirmed, revoked, varied or substituted. Trustees may refer to the FTT to challenge a PN, provided that a review has been carried out or TPR has declined an application for a review.

Facts

• The trustee failed to prepare a chair’s statement by the due date.
• TPR issued a PN to the trustee requiring him to pay £500.70 for this failure.
• The trustee appealed. Whilst he accepted the scheme had breached the chair’s statement requirement, he argued that TPR had not informed him of this requirement and had refused to engage with him on his grievance about the PN.
• TPR responded that the legislation wording meant it was obliged to impose a PN and the reason for any breach of the requirement, however compelling, is “strictly irrelevant”.

Decision

The judge dismissed the appeal on the grounds that:

• there was nothing in the trustee’s argument seeking to deny a breach of the chair’s statement requirement
• there was no “narrow or exceptional circumstance” which might preclude TPR from imposing a PN
• it is not open to the Tribunal to conclude that TPR erred in declining the trustee’s application for review.

The judge did not accept that the “mere use of mandatory language without more excludes from consideration any explanation offered for the breach, however compelling”. The judge’s view was that Parliament must have intended that a penalty should “ordinarily follow a beach” but that TPR would be precluded from imposing a PN where “wholly exceptional circumstances fully explained and excused their non-compliance and imposition of a penalty notice would be manifestly unjust”. He gave the example of a trustee being “bound and gagged for seven months” or “negligently or even maliciously misled by TPR as to time limits” for the chair’s statement.

The judge commented that TPR’s “somewhat absurd” argument would mean that “in the exceedingly rare case where wholly exceptional circumstances explained and excused the non-compliance, TPR would remain under an obligation to impose a PN, which it would immediately have to follow with a review and revocation”. This could not have been Parliament’s intention. He, therefore, disagreed with TPR about the stage at which to “take account of any truly exceptional explanation for non-compliance”, concluding it should be at the point of imposition of a PN, rather than at a subsequent review.

However, the judge concluded that, in this case, TPR was under an obligation to impose the PN, as TPR not drawing attention to the chair’s statement requirement was “a long way short of establishing any kind of misrepresentation”. Turning to the power of review, the judge held that this exists to “correct errors” and here there was no error to correct.

Comment

Although ultimately a victory for TPR, the judge made clear that he had “considerable sympathy” for the claimant.

TPR’s lack of discretion in this area has long been questioned. It will be interesting to see whether it will be addressed when the chair’s statement requirements are next reviewed.