Unusually, in a recent case the Court required trustees to stand by an incorrect statement about death benefits payable from a pension scheme.
A member asked the trustees of her pension scheme whether her unmarried partner would receive a spouse’s pension if she died, or whether the pension would be paid only if they were legally married.
A Personnel Services Specialist replied and told her that a spouse included “a person... who is living with the member as his spouse” (her emphasis). The member subsequently died, and it transpired that her partner was not entitled to a spouse’s pension under the Rules. (The definition quoted above was used in a different context). Accordingly, the Trustees did not pay a spouse’s pension to the member’s partner.
The member’s partner made an application to the Pensions Ombudsman, which was denied, so he then appealed to the High Court. The Court found that, on the balance of probabilities, the member and her partner would in fact have married if they had known the true position, and that it would be “unconscionable now, when the [member] is no longer alive...for the Trustees to assert as against [her partner] that he is not to be treated as a spouse.”
Given the judge’s conclusion that the member and her partner would have married had they known the true situation, perhaps his decision to award the partner a spouse’s pension is not surprising. However, the legal analysis the judge applied in this case – based on what is technically called “estoppel by representation” – is more surprising, and represents a break from the last 20 years of case law. Normally, where one person acts in reliance on an accidental misrepresentation by someone else and suffers a loss as a result, the court remedies the loss by trying to put the victim in the position they would have been in if they had been given the correct information in the first place. But the remedy for estoppel by representation, which the judge applied here, is to require whoever made the incorrect statement to stick by it, and to put claimants in the position they would have been in if the incorrect statement had been true.
In the circumstances of the case, the two remedies might well have the same effect. (If the correct information had been given, the member would have married her partner and so he would have received a spouse’s pension on her death). But this case serves to remind trustees that, in an extreme case where any other result would seem “unconscionable”, the courts can in fact require a scheme to pay the benefits that members have mistakenly been told would be payable. Trustees should be all the more vigilant about any representations that may be made to members on their behalf.