Pension overpayments, unjustified enrichment and change of position?
Some long-standing unjustified enrichment amongst public sector pensioners including members of the judiciary came to light on 15 December 2008.
The Government admitted following questions raised by LibDem MP Vince Cable during the Queen’s Speech debate that about 5% of public sector pensioners (around 95,000 of them, including former armed service and NHS workers as well as judges, teachers and civil servants), had been overpaid on their pensions, in some cases apparently since 1978. The mistake arose as a result of “incorrect indexation”. Chancellor Alastair Darling indicated that the Government would be taking no direct action to recover the overpayments but would instead make adjustments to what the pensioners involved would be receiving from April 2009. The Scottish Government declared, however, that the pensions of former council, fire and police staff, over which it has devolved authority, would not be adjusted in this way, pointing out further that the UK Treasury was refusing to do likewise for the retired armed services personnel, judicial staff and civil servants, for which it was responsible. No doubt more will be heard about this in the new year; but Scots Law News wonders whether the Treasury will factor into its adjustments the “change of position” defence which both the Scots law of unjustified enrichment and the English law of restitution would bring to bear in case like this. In the simple terms of a basic textbook on the subject:
A party who has spent, consumed or otherwise disposed of an enrichment, and is, therefore, no longer enriched, may be able to escape liability to restore or pay for it, in whole or in part. The approach to be taken is outlined by Lord Kyllachy in Credit Lyonnais v George Stevenson & Co Ltd (1901) 9 SLT 93 at 95: "The defenders, in order to establish such a defence, would require to show (1) that they had reasonable grounds for believing that the money was; and (2) that having that reasonable belief, they acted upon it so as to alter their position in such manner as to make repetition unjust. (MacQueen, Unjustified Enrichment Law Basics (2004), p.46)
There should also be defences of prescription, given that in many of the cases more than five years will have elapsed since any obligation to restore the enrichment became enforceable (Prescription and Limitation (Scotland) Act 1973 Sch 1 para 1(b); NV Devos Gebroeder v Sunderland Sportswear Ltd 1990 SC 291; McCafferty v McCafferty 2000 SCLR 256).