The Ombudsman had received complaints that individuals had suffered injustice through maladministration on the part of the Government’s Actuary’s Department and the public bodies responsible for the prudential regulation of the Society. After an extensive inquiry carried out over four years, the Ombudsman’s final report found ten counts of maladministration, of which six, she said, amounted to injustice. In addition, the Ombudsman made two recommendations. Firstly, that an apology be made by the public bodies involved, and secondly, for the Government to provide “appropriate compensation” through a compensation scheme.
The Government did not accept all of the Ombudsman’s conclusions. Only four findings of maladministration had, said the Government, resulted in injustice for policyholders. As regards compensation, it rejected the recommendations for a compensation scheme stating that ex gratia payments were acceptable.
The first question for the Court to determine was the extent to which the Government could lawfully elect to depart from the findings of the Ombudsman. Relying on the earlier case of R (Bradley) v Work and Pensions Secretary [2008], the Court held that government can lawfully reject the findings of an Ombudsman that there has been maladministration, but only on the basis of objectively justifiable, cogent reasons. Applying this test, the Court went on to consider whether the decision of the Secretary of State to reject some of the Ombudsman’s adverse findings “lacked cogency“. In certain respects, the Court concluded that it did. The Ombudsman had conducted an inquiry spanning four years, aided by financial experts and actuaries, and had permitted the regulators every opportunity to comment on her findings whilst still provisional. The Court found that findings had been rejected without equivalent detailed consideration of the underlying facts or any clear explanation being given by the Secretary of State regarding his reasons for reaching a different view.
With respect to the question of remedies, the Court rejected the claimant’s argument that a general compensation scheme should be established, not an ex gratia scheme limited to those who had been disproportionately impacted by the regulatory failures. The Court held that the question of establishing a compensation scheme and the limits of such a scheme were matters for Government, reporting to Parliament and were not reviewable in the courts save on conventional irrationality grounds. The criticisms by the claimant action group, fell short of making out a case of irrationality.