The Pensions Regulator v Strathmore Medical Practice (Decision of the Upper Tribunal, 2018)


The Upper Tribunal (Administrative Appeals Chamber) (“the UT”) has upheld an appeal by TPR. The First-tier Tribunal had held that TPR’s decision to issue a fixed penalty notice should be set aside.

Background

The Pensions Act 2008 and underlying regulations impose a number of legal duties on employers in relation to automatic enrolment. Amongst these, is that an employer must submit a “declaration of compliance” to TPR within five months of its staging date. If an employer fails to comply with these requirements, TPR may issue it with a fixed penalty notice.

 Facts

Strathmore Medical Practice (“Strathmore”) had enrolled its jobholders into pension saving by its staging date. However, it failed to submit the declaration of compliance on time and TPR issued a Compliance Notice warning that a fixed penalty may be issued if Strathmore did not file the document within six weeks. Strathmore did not meet this deadline, and the penalty was issued. Strathmore then completed its declaration the next day. Strathmore then sought a review of the penalty notice.

The First-tier Tribunal quashed TPR’s decision to issue the penalty notice, and remitted the matter to TPR for further review.

TPR had argued to the First-tier Tribunal that Strathmore had “no reasonable excuse” for the failure to complete the declaration of compliance in time. In particular, it argued that the member of staff being new did not absolve it of responsibility, neither did the failure of its internal processes or mislaying correspondence. It noted that thousands of employers had managed to comply with the timetable. TPR also noted that although, the practice manager said that she thought that she had complied with the requirements, there was no evidence to support that contention.

The First-tier Tribunal’s principal reason for overturning the penalty notice was that the legislation “makes no mention of the need to establish a reasonable excuse. It does give the [Regulator] power to carry out a Review and to confirm, vary or revoke the notice”. It observed that TPR “seemed to think that it had no discretion at the Review stage”. Concluding that TPR had “closed its eyes to the possibility of revoking the Fixed Penalty Notice”, the First-tier Tribunal held that TPR’s decision not to do so should be quashed, and the matter remitted for a further review by TPR.

TPR appealed to the UT.

Appeal to the Upper Tribunal

The UT found that the First-tier Tribunal had been entitled to find that there was evidence that the practice manager thought she had complied with TPR’s requirements.

However, the UT found that TPR was aware that it had the discretion to revoke the penalty notice, and that it had not closed its eyes to the possibility of doing so. It held that “The finding made by the First-tier Tribunal on this point did not accord with the undisputed evidence that was before it and was made in error of law.”

In relation to the concept of “reasonable excuse”, the UT noted that the legislation is permissive – it provides that TPR “may issue”, and “may review”, a notice. It held that, although the legislation says nothing about reasonable excuse, it does not prevent TPR (or the First-tier Tribunal) from having regard to it. The UT did not “go so far as to say that they must always have regard to it – there might well be a case where that would not be appropriate – but it is certainly proper to take reasonable excuse into account […] To do so is entirely consistent with fairness and justice”. The UT therefore found that, in this matter, the criticisms of TPR made by the First-tier Tribunal were “entirely misplaced”.

The UT also found that TPR is entitled to enforce compliance with automatic enrolment duties as a matter of public interest. It highlighted the fact that the penalty notice “is an important tool” for TPR and that the “deterrent effect would be greatly diminished if the practice were to revoke [penalty notices] in all cases provided compliance is achieved at some point”. Whilst eventual compliance is something that TPR policy may take into account, each individual case should be considered on its own merits.

The UT therefore upheld the fixed penalty notice, and directed TPR to proceed accordingly.