England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE Case No: CCRTF 97/0715/C

(HIS HONOUR JUDGE GREEN QC )

Royal Courts of Justice

Strand, London, WC2A 2LL

B e f o r e :

HUTCHINGS Appellant

v.

LONDON BOROUGH OF ISLINGTON Respondent

(Handed down transcript of

Smith Bernal Reporting Limited, 180 Fleet Street

London EC4A 2HD, Tel: 0171 421 4040

Official Shorthand Writers to the Court)

MR JONATHAN HOWARD (instructed by Messrs O H Parsons) appeared for the Appellant (Plaintiff).

MR TIMOTHY BRENNAN and MRS PATRICIA HAITINK (instructed by the London Borough of Islington) appeared for the Respondent (Defendant).

J U D G M E N T

(As approved by the court)

©Crown Copyright

LORD JUSTICE EVANS: The appellant is Patrick Hutchings, now aged 54. He was employed by the Council, the respondents, as a caretaker, from 1979 until 1995 and from 1989 he was a Caretaking Superintendent. In 27 March 1995, he was informed by letter that the Council had authorised his premature retirement by reasons (sic) of redundancy. The letter continued :-

"Your last day of service will be 31st March 1995. You will be paid twelve weeks in lieu of notice to which you are entitled by law. This is being paid to you as compensation for the immediate termination of your contract of employment".

He has since been paid a pension under the Local Government Superannuation Scheme. He has also received (1) a payment in lieu of notice in respect of the twelve-week period, and (2) a payment of holiday pay which was due to him when he retired.

He alleges in these proceedings (1) that the amount of his salary at retirement has been under-calculated for the purposes of the Superannuation Scheme; (2) that the payment in lieu of notice should take account of the same, higher, salary figure, and (3) that he was entitled to a greater figure in respect of holiday pay.

The dispute as to the amount of salary arises as follows. He was required by the terms of his employment to occupy a resident caretaker's flat which is a property owned by the Council themselves. He did not live there rent-free, but he was granted a 35 per cent reduction in the amount of rent that he paid, together with a similar reduction in his monthly payments for water and for Council tax. These three items, for rent, water and council tax, were together called his emolument charge, and he alleges that the total reduction was treated as part of his salary for the purpose of computing the amount which he was required to pay as his contribution to the Scheme.

This 35 per cent figure was not taken into account as part of his salary for the purpose of calculating his pension entitlement or the payment in lieu of notice. He submits that it should have been, and he claims (1) a declaration that the amount of his monthly pension should be greater than it is, and (2) judgment for the balance of the sum which he says is due in respect of the twelve-week notice period.

The dispute with regard to holiday pay is separate. A payment for 30 days was due. The Council has paid 30 times his daily rate of salary, calculated as 1/365th of the annual figure. The appellant submits that he is entitled to receive 30 times the amount which he received for each working day, which is 1/260th of the annual amount (52 weeks at 5 days each week : the calculation makes no allowance for public holidays), or alternatively, a total of six weeks or 42 days at the daily figure of 1/365th, because the 30-day leave entitlement represented six working weeks and therefore a further 12 non-working days representing weekends, for which he would also have been paid, should be included also.

I shall deal shortly with the claim for additional holiday pay. The judge dismissed it, and so would I. The entitlement was to receive 30 days' pay. Naturally, the notional days would be working days. The number of days cannot be increased, in my judgment, by adding a number of non-working days, for which he would also have been paid. The correct daily rate is 1/365th of the annual salary, not 1/260th or some other proportion based on the number of working days during which the annual salary would have been earned.

This is borne out by the decision of the Employment Appeal Tribunal in Thames Water Utilities v. Reynolds [1996] IRLR 186, and in addition, on the special facts of this case, by the fact that Mr Hutchings was a resident caretaker and which makes it difficult for him to contend that his annual salary took no account of weekends.

Should the salary figure include the 35% emoluments (rent etc.) discount ?

There is no doubt what the figures were, when Mr Hutchings retired. He was paid an annual salary on a monthly basis, together with allowances, from which was deducted the monthly emolument charge which represented 65% of the figure which would otherwise have been charged for rent, water and council tax. The balance of that figure, namely, the 35 per cent reduction, was never paid to him, although he alleges that it was added to his salary for the purposes of calculating the amount of his own pension contributions as an employee.

Whether that additional amount should be included in the payment made in lieu of notice depends, in my judgment, on what was agreed as the basis on which he accepted the offer of early retirement. The agreement was on the terms

set out in the Council's letter, referred to above. The undertaking was to pay "twelve weeks in lieu of notice" without specifying whether this was limited to salary or also included the amount by which his rent etc. was reduced.

In fact, he continued to occupy the same flat, although he was no longer required to do so, and from the date of his retirement he paid the full amount of rent.

The judge held that the Council's undertaking on the true construction of the letter was to pay the amount of his salary, not his salary together with what the judge called "fringe benefits", meaning the 35 per cent rent etc. allowance in question.

I agree with the judge on this question of construction. The rent reduction was linked with the appellant's occupation of the flat, and the requirement that he should live there ceased when the contract came to an end. The Council's undertaking was to "pay twelve weeks" and the natural meaning of these words is that the payments of salary would become due in respect of that period.

I therefore would hold that the judge was correct to dismiss the claim in this respect also.

The calculation of salary for the purposes of pension entitlement raises a different issue. This depends on the terms of employment and of the Scheme. And there is a preliminary issue, because the judge held that he had no jurisdiction, sitting in the County Court, to entertain this claim.

The terms of employment were set out in Particulars dated 20.3.92. Under the heading "Pension", the employee was given an option to join, or to remain a member of, the Local Government Superannuation Scheme, and this provision was followed by :-

"The position with regard to Local Government Superannuation benefits is set out in the Council's Superannuation Scheme. An explanatory booklet is available for reference in your department and advice on the Local Government scheme can also be sought from the Superannuation Section of the Finance Department .....".

The statutory Scheme is set out in The Local Government Superannuation Regulations 1986 (1986 S.I. No. 24 : these were later amended, in November 1995). Part E specifies the amount of benefits to which pensioners are entitled, e.g. :-

"E.2 (1) .... when a person ceases to hold a local government employment he becomes entitled in relation to that employment to an annual retirement pension ....

E.3 (1) ..... the annual rate of a person's retirement pension is one eightieth of his pensionable remuneration multiplied by the length in years of his reckonable service."

"Pensionable remuneration" is defined in regulation E.22 :-

"E22 (1) ...... a person's pensionable remuneration in relation to a local government employment is his remuneration for so much of the relevant period as he is entitled to reckon as reckonable service in relation to that employment".

Part N is headed "Decisions and Appeals". First, by way of general introduction, it should be said that, although it is a national Scheme, the responsibility for making payments and, to a certain extent as set out in the Regulations, for administering the Scheme rests upon the local authority concerned. So, by regulation N.1, "any question concerning the rights or liabilities under these regulations .... shall be decided in the first instance by the body concerned", and by regulation N.5 :-

"(1) Any question whether a person is entitled to a benefit under these regulations is to be decided by the body who last employed the person in respect of whose employment the question arises",

and by regulation N.6 :-

"(1) Where a person is entitled to a benefit which is or may become payable out of their superannuation fund, an administering authority are to decide the amount of the benefit".

Regulation N.7 requires the body concerned, as soon as is reasonably practicable after deciding any question, to notify their decision to the persons concerned, and the written notification has to include

"(2)(c).... a conspicuous statement directing the person's attention -

(i) .....

(ii) to his right under regulation N8 to serve notice of appeal on the Secretary of State."

Regulation N8 provides :-

"(1) where the body concerned have decided .... any such question .... and written notice of appeal is served on the Secretary of State the question shall .... be determined by him and his determination shall be final".

In summary, therefore, the Regulations provide a comprehensive Scheme, under which all questions as to a person's entitlement to benefit and the amount of benefit are to be decided, first , by "the body concerned", and secondly, on appeal to him, by the Secretary of State.

"Remuneration" is not defined in the Regulations, but the following Notice was given to the appellant by the Council on some date in 1982 :-

"..... I have to notify you that you are a pensionable employee under the Regulations and as such entitled to participate in the benefits of the Superannuation Fund maintained under the above Act.

The following particulars will be recorded and will apply in your case :-

(a) You are a Pensionable Employee from 25.1.1982 .....

(f) Remuneration on which contributions are payable - all the salary, wages, fees, poundage and other payments paid or made for his or her own use including, (sic) money value of any apartments, allowances in kind ......".

The substantive issue between the appellant and the Council is whether his "remuneration" during his period of service and therefore his "pensionable remuneration" under reg. E22 included the amount of the 35 per cent. reduction in the emolument charge which was made for rent, water and council tax in respect of the council property in which he lived. As stated above, he alleges that this was included in the calculation of his own pension contributions as an employee.

Nevertheless, there have been, or it is accepted that there have been, decisions by the Council, as "the body concerned", which are adverse to the appellant's claim that the amount of his pension should be based on the higher figure for "remuneration" for which he contends. The Council's submission, which was accepted by the judge, is that the Court has no jurisdiction to determine what the correct figure was. The only avenue open to him, it is submitted, is an appeal to the Secretary of State, whose decision will be final and subject only to the High Court's power of judicial review, now governed by Order 53 of the Rules of the Supreme Court.

The judge held that the appellant's pension rights "are not rights in contract but statutory rights. It follows that the County Court's jurisdiction to hear claims in contract can have no relevance to a claim relating to pension rights of this kind". Counsel for the plaintiff (appellant) had argued that the County Court had concurrent jurisdiction, but "In my view, I have no such jurisdiction, whether in contract or whether by way of appeal, from the local authority's adjudication".

The judge added "I consider the contrary to be quite unarguable", and Mr Nicholas Randall's original skeleton argument for the Council submits that the judge's conclusion was plainly and unarguably correct.

The Council's submission, as it has been developed by Mr Brennan before us, is really two-fold. First, the reason for declining jurisdiction given by the judge : that this is not "an action founded in contract or tort" over which the County Court has jurisdiction under s.15(1) of the County Courts Act 1984. Secondly, no Court, whether county court or high court, has jurisdiction over the plaintiff's claim. The amount of the pension to which he is entitled can only be decided by the body concerned or, in the event of an appeal, by the Secretary of State, in accordance with the Regulations. Their decisions are subject only to the supervisory jurisdiction of the High Court in the exercise of its powers of Judicial Review.

The appellant's original (1982) terms of employment included "4. Your position with regard to pension is set out in the Council's Superannuation Scheme .... ". This was replaced in the terms dated 20.3.1992 (the printed form is dated August 1989) with the more elaborate clause quoted above. That clause gives the employee an option not to join the Scheme, but when the option is not exercised the effect in my judgment is the same. The Council undertakes to provide the employee with the benefits of the national Scheme. Under that Scheme, the employee "becomes entitled to ... an annual retirement pension" (Reg. E.2). The Council decides whether he is entitled to a benefit because it was his last employer (Reg. N.5 (1)) and, as I understand the Regulations, it is the "administering authority" which decides the amount of his benefit, because the benefit "is or may become payable out of their superannuation fund". It seems clear, therefore, that the obligation to pay the benefits rests upon the respondent under the Scheme.

In my judgment, the appellant's right to claim payment of his pension benefit is a private law right enforceable by action against the Council. The case is closely analogous with Roy v. Kensington and Chelsea and Westminster Family Practitioner Committee [1992] 1 AC 624 where the plaintiff was a general practitioner who claimed that the defendant had wrongly withheld payment from him of part of the allowance to which he was entitled. The House of Lords held that he was entitled to enforce his rights as to the level of fees payable under the relevant statutory regulations by ordinary action as distinct from proceedings for judicial review. The Court of Appeal had held that he was employed by the Committee under a contract for services (per Lord Lowry at 634D) but the House of Lords was not satisfied that there was such a contract (see 649D). Nevertheless, he was entitled to bring the action to enforce his private law right "whether contractual or statutory" (653E, 654A). Lord Bridge said this :-

"It is appropriate that an issue which depends exclusively on the existence of a purely public law right should be determined in judicial review

proceedings and not otherwise. But where a litigant asserts his entitlement to a subsisting right in private law, whether by way of claim or defence, the circumstance that the existence and extent of the private right asserted may incidentally involve the examination of a public law issue cannot prevent the litigant from seeking to establish his right by action commenced by writ or originating summons, any more than it can prevent him from setting up his private law right in proceedings brought against him."

One feature of Roy's case was that the type of claim and other claims for remuneration might involve disputed issues of fact, although the particular one did not (per Lord Lowry at 654B, para. (3)). That weighed in favour of private law proceedings, because a claim for judicial review even if successful would not result in a money payment order, and because judicial review proceedings are less convenient for the resolution of disputed issues (650C).

The underlying principle was stated by Lord Wilberforce in Davy v. Spelthorne B.C . [1984] AC 262 and approved in Roy (page 653) :-

"Before the expression "public law" can be used to deny a subject a right of action in the court of his choice it must be related to a positive prescription of law, by statute or by statutory rules. We have not yet reached the point at which mere characterisation of a claim as a claim in public law is sufficient to exclude it from consideration by the ordinary courts : to permit this would be to create a dual system of law with the rigidity and procedural hardship for plaintiffs which it was the purpose of the recent reforms to remove." (page 276F).

The question in the present case therefore is whether there is a "positive prescription of law by statute or by statutory rules" which prohibits the appellant from enforcing his right to receive pension benefits by action against the Council. No such "positive prescription" has been identified to us, and I can find none. It seems to me that the action is not an ´abuse of process' as the proceedings in Roy were alleged to be. I shall consider this further in relation to the second of the respondent's two objections below. The first is whether the action is "founded on contract [or tort]" and so within section 15(1).

It is not clear from the pleadings that the respondent objected to the Court's jurisdiction on this ground. The Particulars of Claim alleged that the plaintiff was entitled to a pension calculated by reference to his pensionable salary, which (he said) included the 35 per cent. rent allowance. That was the basis on which he had been required to make his own contributions to the Fund (paragraphs 10-13). He was paid a lesser sum from his date of retirement until the proceedings were begun (paragraph 18) and he claimed, first, the amount of the shortfall (para. (3)) and secondly, a Declaration that his monthly entitlement was as he claimed it to be (para. 4). In the Defence, the Council denied that it had contracted to remunerate the appellant "for sums equivalent to 35% of rent as alleged" and that any allowance it had made formed part of his pensionable pay (paragraph 8 and 9). It denied that the plaintiff had made his own contributions on that basis (paragraph 10). It further denied that the pension entitlement should be calculated as the plaintiff alleged (paragraph 11) and it averred that the Council's calculation of it was correct and that the correct amounts had been paid (paragraph 14). The pleading continued with averments that the Council was an employer for the purposes of the statutory Scheme and that any appeal against its decision should be made to the Secretary of State ; no such appeal had been made (paragraphs 15-17).

I do not see here any objection to the Court exercising its jurisdiction over the dispute. Nor was there any assertion that the appellant has no right of action in the Courts. Moreover, the Counsel accepted that the correct calculation of the appellant's pension entitlement was to be determined "in accordance with the contract of employment" (per Defence, paragraph 14).

It appears from the judgment that Mrs Haitink, counsel for the respondent, took the jurisdiction issue, presumably at the outset of the trial (judgment page 29). The question whether it was too late for her to do so, or whether there has been a submission to the jurisdiction by agreement within section 18 of the County Courts Act, was not recognised.

The submission must have been limited, as it seems to me, to the claim for a declaration with regard to future pension rights, because the claim for past shortfall (paragraph (3)) appears to come within section 16 of the Act (´Money recoverable by statute') if it is not a contractual claim.

Nevertheless, the question remains whether the judge was correct to decline jurisdiction because the action, insofar as the plaintiff sought a declaration as to the amount of pension to which he was entitled, was not "founded on contract" within section 15(1). I would hold that he was wrong to do so. My reasons shortly are these : (1) the parties, correctly in my view, treated the issue as arising from the terms of the contract of employment ; and (2) even if the appellant's pension rights under the Scheme strictly should be categorised as statutory, nevertheless he enjoys them by virtue of his contract of employment. As a matter of common sense, and in law also in my opinion, his claim to enforce them is "founded on" that contract for the purposes of section 15(1). That phrase may be a term of art in English law : see the divergence of judicial opinion between Bramwell L.J. and Brett L.J. in Bryant v. Herbert (1878) 3 C.P.D. 389 (described as a "curious conflict" in Stroud's Judicial Dictionary (3rd ed.) Vol. 2 page 1154), but even if it is, the present action falls within it :-

"The rule .... that : if the action is one for the successful maintenance of which it is necessary for the plaintiff to rely on, or prove a contract, then the action is founded on contract" (per Smith L.J. in Turner v. Stallibras [1898] 1 QB 56 at 58).

The appellant cannot "found" his claim without alleging and proving what his terms of employment were. It therefore falls within the scope of section 15(1) as so defined.

I note also that the commentary on actions against ´public bodies' under section 15 in the County Court Practice (1996 page 18) does not suggest that the County Court has no jurisdiction in such a case as the present. It may also be relevant that the Court has a parallel jurisdiction over money claims under section 16 of the Act, but this aspect has not been argued before us. The claim for a declaration is for a discretionary remedy (as regards the future) which could well be regarded as ancillary to a money claim (for sums already due) which is the situation here.

It does not follow from the fact that the County Court has jurisdiction under section 15(1) that the Council does not have a defence based on the failure to appeal to the Secretary of State. This rather than any question of jurisdiction seems to have been what pleader of the Council's Defence had in mind. The defence allegation is that the appellant has no right to assert his pension rights until the amount has been fixed by the appropriate statutory body - here, because an appeal is necessary, by the Secretary of State. This is essentially a contractual dispute. The appellant has no right except to claim an amount which has been fixed in accordance with the statutory regulations. Before us, counsel for the respondent, Mr Brennan, raised a further contractual argument. The council's only obligation, he submitted, was to procure the benefits of the Scheme for the appellant and that has been done. His main submission was that the amount of those benefits can only be fixed in accordance with the Scheme, which makes it necessary for the appellant to appeal to the Secretary of State, whose decision can only be challenged in High Court proceedings for judicial review.

In support of his submission, Mr Brennan relied upon two recent judgments of this Court in L.B. Haringey v. Cotter (unreported - CCRTI 95/1420/G, 21 November 1996) and Trustees of The Dennis Rye Pension Fund v. Sheffield C.C . [1997] 4 All E.R. 747.

Neither of these authorities, in my judgment, bears upon the questions which arise in the present case. In the former, the Court held that a landlord has no right to claim from a housing authority the amounts of any housing benefit which the authority has provided to his tenant. The statutory scheme did not "confer on a claimant or any other person, such as a landlord, a private law right of action for breach of [statutory] duty in relation to the payment of housing benefit" (per Mummery L.J. at 7G). The Regulations:-

"Provide a detailed, self-contained and exhaustive procedure for enforcing the duties of the appropriate local authority in relation to the determination and payment of housing benefits. Until a determination is made under that procedure, there is no duty on the appropriate authority to make a payment of housing benefit either to the claimant entitled to it or any other person.

If there is any dissatisfaction with a determination which has been made, the appropriate procedure for challenging that determination is that laid down in the 1987 Regulations. It is not possible to discern either in the primary legislation or in the detailed regulations a legislative intention to confer on a claimant or, a fortiori, any other person, a right to enforce by an ordinary private law action a claim for breach of statutory duty in the determination of entitlement to payment of housing benefit." (page 10B).

The judgment cited R. v. Northhaven D.C. ex. p. Palmer (1995) 27 H.L.R. 576 as authority that in such a case the public law decision making function must be concluded before any public or private law duty could be established. Roy's case was distinguished because there "Dr. Roy ..... had an enforceable private law right based with or on contract or statute. The critical issue, ultimately resolved in his favour, was whether he could proceed to enforce his private law right by ordinary action when it also involved a collateral challenge to a public law act or decision" (page 11E).

In the second authority on which Mr Brennan relies, Trustees etc. v, Sheffield C.C., the Court held, in the words of the headnote :-

"When performing its role under the 1989 Act in relation to the making of grants, a local authority was in general performing public functions which did not give rise to private rights : however, once an application for a grant had been approved a duty to pay it arose on the applicant fulfilling the statutory conditions, and that duty would be enforceable by an ordinary action. In the instant case, although there was a dispute as to whether those conditions had been fulfilled, any challenge to the local authority's refusal to express satisfaction would depend on an examination of issues largely of fact and did not require the special expertise of a Crown Office judge. Moreover, the remedy sought of the payment of a sum of money was not available on an application for judicial review. It followed that an ordinary action was the more appropriate and convenient procedure and consequently that the plaintiff's actions were not an abuse of process".

The judgment of the Master of the Rolls, in my respectful view, is entirely consistent with the principle established in Roy and recognised in L.B. Haringey v. Cotter . Statutory provisions may confer on an individual a private law right which he is entitled to enforce by ordinary action, unless the statute expressly provides ("positive prescription") that he shall not do so. The right may not arise until statutory procedures are fulfilled ( Trustees etc. v. Sheffield C.C .). Even when they are, no private law right may arise ( L.B.Haringey v. Cotter ). The Court should not be astute to hold that an action is an abuse of process because what is technically the wrong form of procedure has been adopted (Roy) ; Trustees etc. v. Sheffield C.C .). To this I would add that when the action is "founded on contract" the correct form of action should not depend on the strict classification of the private law right which the plaintiff asserts as "contractual" or "statutory". In my judgment, Roy supports this view.

This too is consistent with the judgment of the Court of Appeal in Mihlenstedt v. Barclays Bank International Ltd . [1989] IRLR 522 upon which Mr Howard also relied, though that was not in the context of statutory rights.

I would hold that the Regulations give the appellant a private law statutory right to receive a pension in accordance with the Scheme - indeed, the contrary seems scarcely arguable -and the remaining question is whether he can assert that right, when the amount has been fixed by the respondents as the appropriate authority, without first going through the appeals procedure to the Secretary of State. The answer depends upon the interpretation of the Regulations. Trustees etc. v. Sheffield C.C. shows that a statutory right may arise, but not until all necessary procedures have been complied with. On the other hand, in Roy the plaintiff was entitled to challenge the Committee's decision in the Courts. Here, the respondent relies on Reg. N.8 (quoted above) which provides that [if] written notice of appeal is served on him the Secretary of State's determination shall be final.

The narrow point can be taken that there is no provision in the Regulations which prevents the Court from determining whether the responsible authority's decision is correct nor any to the effect that an appeal to the Secretary of State is the only remedy which is open to the former employee. I prefer, however, to rest my decision on somewhat wider grounds.

On the correct interpretation of the Regulations, as it seems to me, the authority is required to pay the amount which the former employee is entitled to receive by virtue of his pensionable remuneration and years of reckonable service. The amount does not lie in the discretion either of the authority or of the Secretary of State. They are required to determine what the correct amount is, but that means a determination in accordance with the law and one which is based in particular upon a proper view of what the contractual terms of remuneration were. There is no express provision which precludes the Courts from determining what they were and what their legal effect was, nor from making a Declaration in an appropriate case. The present case is one where the only relevant issue is a question of law : should the 35 per cent. rent allowance be taken into account when determining the amount of the appellant's "pensionable remuneration" when he retired? The answer to that question will fix the amount of pension which he is entitled to be paid. It is unnecessary to express any final view as to what the position would be, if there were issues of fact which also had to be resolved before the amount of pensionable remuneration could be fixed. In the circumstances of the present case, I would hold :-

(1) that the Regulations do not exclude the jurisdiction of the Court to determine what the amount of the pensionable remuneration was, as a matter of law ;

(2) it is not an abuse of process for the appellant to claim a declaration and an order for payments of what he alleges is a shortfall in the amount of pension already paid ;

(3) the judge was wrong to hold that the County Court does not have jurisdiction under section 15(1) of the County Courts Act 1984 ; and

(4) the matter should be remitted to the County Court for determination of that issue of law. The Court will also be concerned with what may be an estoppel argument, based on the amount of the contributions which the appellant was required to pay before he retired. There, both facts and law may be in dispute. That is a further ground, in my judgment, for rejecting the respondent's contentions that only the Secretary of State, or the Secretary of State in the first instance, can determine what the correct amount is, as a matter of law.

I would allow the appeal as regards the pension entitlement issues, but dismiss it as regards the claims for remuneration in lieu of notice and holiday pay. The appropriate form of Order, as it seems to me, will provide for the former issues to be remitted for further hearing in the County Court.

LORD JUSTICE PILL: Differences have arisen between the London Borough of Islington (“the Council”) and their former employee Mr Patrick Hutchings (“the appellant”) as to how much the appellant should be paid by way of holiday pay, payments during the period of notice and pension. On the first two issues I agree with Evans LJ and consider only the question of entitlement to pension.

The present dispute is essentially as to how the differences between the parties should be resolved. The appellant seeks a declaration in the County Court that he is entitled to a monthly pension of £866.67. Particulars are given as to how the sum is calculated. In their defence, the Council have also given particulars of how the lower sum they say is payable (and have been paying) is calculated. However, the Council also contend that the appellant’s remedy is by way of appeal to the Secretary of State for the Environment, under the Local Government Superannuation Regulations 1986 (SI 1986 No 24), from the determination of the Council under those Regulations.

As pleaded, the appellant’s claim entirely ignores the relevance and indeed the existence of the 1986 Regulations. That is unrealistic. As Evans LJ has pointed out, a document bearing the appellant’s name, dated 20 March 1992, and entitled “Statement of Terms of Employment for officer ( sic) staff” refers to the Local Government Superannuation Scheme. That is a scheme under the Regulations and the appellant’s belonging to it, as he plainly does, is inevitably a factor in the dispute. Differences may arise between a local authority administering a superannuation scheme set up under the Regulations and a pensioner as to the interpretation of the rules of the scheme or as to the employer’s obligation under the contract of employment to make pension arrangement for the employee or as to both.

The appellant puts his claim as, and only as, a contractual claim under the contract of employment. That contract was partly, if not wholly, a contract in writing and unfortunately the appellant does not in his Particulars of Claim, refer to the documents in which the terms are claimed to be set out or the written terms relied on. No reference is made to the 1992 statement of terms or to the terms of the superannuation scheme there referred to, or to a 1982 statement of terms and notice under the Local Government Superannuation Regulations 1974 (as amended), or as to how the documents are said to relate to each other. In paragraph 18 of his disclosed statement the appellant does state that: “My understanding is that the Local Government (Superannuation) Regulations 1986 would include accommodation payments as pensionable remuneration” but there is no further explanation.

Evans LJ has referred to the terms of the 1982 notice, under the 1974 Regulations (revoked by the 1986 Regulations, Regulation S3 and Schedule 20) in order to define what he regards as the issue between the parties. A notice given to an employee under Regulations which have been revoked, and which is not pleaded by either side as a contractual document, in context appears to me, with respect, to be a poor starting point for laying down in this Court what is the substantive issue between parties to litigation. It produces an issue the simplicity and comprehensivity of which may in the circumstances be illusory and which may work against the interests of the appellant upon a proper analysis. Evans LJ goes on to conclude that it is an issue appropriate for determination in the County Court.

I have no difficulty in concluding that circumstances may arise in which a claim by ordinary action is appropriate. It would arise if the Council declined to pay to the appellant the sum to which he is found to be entitled under a superannuation scheme. It would arise if an employer, in breach of an implied term in the contract of employment, failed to discharge his functions under a superannuation scheme in good faith and, so far as it lay within the employer’s power, to produce for the employee the benefit to which he is entitled under the scheme ( Michlenstedt v Barclays Bank International Ltd [1989] IRLR 522). It would arise, though the claim would be different in nature, upon a claim that the Council had failed to make the pension arrangement which they had contracted with the appellant to make. In that context the 1982 notice could be relevant. If the learned County Court Judge was holding, though I doubt whether he was, that a contractual claim determinable by ordinary action could not arise, I would respectfully disagree with him. However I agree with the judge’s conclusion that he should not determine the present claim as now made.

My difficulty is in identifying a pleaded claim which, under the above heads, or any other heads, is amenable to resolution in the County Court. I find the basis of the claim unclear. It is impossible to ignore the existence of the Regulations governing the superannuation scheme which the appellant has ignored in his pleaded claim. Once the relevance of the Regulations is recognised, it is necessary to consider whether the dispute is as to the construction and effect of the Regulations, which are extremely detailed and complex, on the one hand, or as to the failure of the Council to give effect to them or as to some other alleged contractual failure by the Council. That is not clear from a pleaded case which does not even identify the contractual terms by reference to documents.

In my judgment the appellant has not put the Court in a position to decide the future course of these proceedings, whether by ordinary action or judicial review, in this statutory context. In Trustees of the Dennis Rye Pension Fund v Sheffield City Council [1997] 4 All ER 747, it was held, following Roy v Kensington and Chelsea and Westminster FPC [1992] 1 AC 624, that an ordinary action was the more appropriate and convenient procedure. I may have gone somewhat farther along that route than did Lord Woolf MR in the judgments in that case. I do not however regard it either as appropriate or convenient to remit this case, as pleaded, to the County Court. The issue or issues have not been defined. Moreover superannuation schemes regulated by statute have many members with claims or potential claims to the fund concerned and the administering authority must ensure fairness between them. Many schemes are covered by these Regulations and consistency of interpretation is important.

It is in that context that the Regulations provide, by Regulation N8, a right of appeal to the Secretary of State for the Environment from the Council’s determination of the amount of benefit payable. The public interest which arises from the interests of other participants in the scheme in the proper administration of the fund and from the importance of consistency in the administration of funds point strongly towards the exercise of that right of appeal being a necessary step in the procedure when the meaning and effect of the Regulations is in issue. It does not preclude subsequent recourse to the Courts; I do not regard the presence of the expression “his determination shall be final” as excluding the jurisdiction of the Courts. The Secretary of State should first however have the opportunity to make a ruling.

Reference to the Secretary of State will in any event assist in identifying the issue or issues and may provide a result acceptable to the parties. It is the sensible as well as the appropriate course in my view. It is not tactical manoeuvring of the kind depreciated by Lord Woolf MR in Dennis Rye but a rational approach to a practical problem and should precede any further recourse to the courts in this case. It is recourse to the County Courts which on the present state of the case is likely to produce arid arguments or lack of focus or both.

Like Evans LJ, I of course accept that the right to receive a pension in accordance with the scheme may be enforced. There is also a contractual entitlement to a determination in accordance with the Regulations. It must first be determined, under the statutory procedure, what the entitlement under the Regulations is. In this case, not only has there been no finding by the Secretary of State as to what the entitlement is but it is not clear whether it is the extent of that entitlement which is in issue or some alleged anterior or collateral breach of obligation by the Council under the contract of employment. Remission to the County Court at this stage would in my judgment be neither appropriate nor convenient.

I would allow the appeal only to the extent of staying the action, pending an appeal to the Secretary of State, rather than dismissing it.

LORD JUSTICE WARD: I have had the opportunity to read in draft the judgments of my Lords. For reasons given by Evans L.J. , with which I entirely agree, I too would allow the appeal as regard the pension entitlement issues, but dismiss it as regards the claims for remuneration in lieu of notice and holiday pay.

The statement of particulars of terms of employment given on 20. 3. 1992 include:-

"Pension

If you are aged 16 years or over and work 30 hours or more per week, you will join the Local Government Superannuation Scheme automatically upon appointment. However, after you have commenced employment and provided you work for 15 hours or more per week, you will have the following options with regard to Superannuation Benefits.

(I) Joining the Local Government Superannuation Scheme or...

The position with regard to Local Government Superannuation Benefits is set out in the Council’s Superannuation Scheme..."

It was thus a term of his employment that he join and there is no dispute but that he elected to take the benefits of the Local Government Superannuation Scheme as regulated by the Local Government Superannuation Regulations 1986. There is no dispute about the fact that he is entitled to a lump sum payment under that scheme and to a pension. There is no dispute that the person obliged to pay the pension is the Council. By this action the plaintiff claims the benefits to which he says he is entitled and seeks a declaration as to his future entitlement.

The judge held:-

"In my view the County Court for this purpose is solely a creature of statute. No statute gives it powers to deal with the appeals from the decisions of Local Authorities on pension rights. Under the statutory instrument above the sole remedy by way of appeal is to the Secretary of State. The plaintiff’s pension rights are not rights in contract but statutory rights. It follows that the County Court’s jurisdiction to hear claims in contract can have no relevance to a claim relating to pension rights of this kind....Mr Hogarth, who appears for the plaintiff, submits that the County Court has concurrent jurisdiction with the Secretary of State to determine the amount of pension entitlement by way of the determination of a claim for breach of contract against the Local Authority. In my view I have no such jurisdiction, whether in contract or whether by way of appeal, from the Local Authority ‘s adjudication."

The judge based his decision on want of jurisdiction. He was not considering an abuse of process arising from the election to begin an ordinary action rather than avail of the remedy given by the Regulations to appeal to the Secretary of State and if necessary to proceed by judicial review if the result of that appeal was to be challenged.

The jurisdiction of the County Courts is conferred by Section 15 of the County Courts Act 1984. It provides:-

"General jurisdiction in actions of contract and tort

(1) Subject to Subsection (2), a County Court shall have jurisdiction to hear and determine any action founded on contract or tort."

Was this an action founded on contract? That requires an analysis of the pleadings.

Paragraph 9 of the particulars of claim pleads that it was an express term of the plaintiff’s contract of employment that the plaintiff was entitled to receive by way of remuneration a contribution towards the costs of his accommodation equal to 35% of the rent payable in respect of that accommodation. The defence denies that the defendant contracted to remunerate the plaintiff for sums equivalent to 35% of the rent as alleged. Paragraph 10 of the particulars of claim then alleges that it was an express term of the plaintiff’s contract of employment that the 35% of his rent formed part of his pensionable pay for the purposes of calculating any pension entitlement which he might have. That is denied by the defence and it is denied that any allowance made to the plaintiff in respect of payment of rent formed a part of the plaintiff’s pensionable pay for the purpose of calculating the plaintiff’s pension entitlement or otherwise. Paragraph 11 pleads that it was an express term of the contract of employment that the plaintiff be required to contribute to his pension by a payment of a proportion of his pensionable pay and that he was obliged to make such payments in respect of the 35% rent allowance. Paragraph 12 alleges that he duly made such contributions. Those paragraphs are denied and it is denied that the plaintiff was required by contract or otherwise to make any contributions to his pension by payment of sums in respect of any allowance towards payment of rent and it was further denied that he made any such contributions to his pension. Further and better particulars were then sought and given of that allegation in the defence and in those particulars the defendant asserts that pension scheme was not a money purchase scheme and that accordingly,

"the calculation of the plaintiff’s pension entitlement is not based on the value of all pension contributions made by the plaintiff during the period of his membership of the scheme but is based on the calculation of the plaintiff’s final year’s pensionable pay....Details of the calculation of the figure of £28,302.75 as the plaintiff’s final years pensionable remuneration have already been provided to the plaintiff’s solicitor... by letter dated 8th November 1995 (copy attached)."

That letter was thus incorporated into the pleadings. In that letter the Council writes:-

"The Rent and Council Tax figures you mention do not form part of his pay..."

Paragraph 13 of the particulars of claim allege an express term of the contract that pension to which the plaintiff was entitled was based upon his pensionable salary, which salary was to be calculated in accordance with the figures set out in the first schedule to his pleading. That schedule includes figures for the rent allowance. Paragraph 14 pleads the termination of the employment “in circumstances in which he became entitled to receive an annual pension and a lump sum under the pension scheme.” Paragraph 15 alleges that that pension and lump sum fell to be calculated on the plaintiff’s pensionable pay “which pensionable pay included the 35% rent allowance to which he was entitled and which was otherwise calculated in accordance with the figures set out in the first schedule to his pleading. The defendant deals with those Paragraphs in this way: Paragraphs 13 and 15 were denied as was the entitlement to payment in accordance with the first schedule. Paragraph 14 was admitted. Paragraph 16 of the Particulars of Claim says that in breach of the terms of the plaintiff’s contract the defendants failed and refused to include as part of the plaintiff’s pensionable pay the 35% rent allowance which he received or to properly calculate it in accordance with the figures set out in his first schedule. Accordingly in Paragraphs 17 and 18 the alleged underpayments were claimed. Paragraphs 16 - 18 are denied and it is denied that the defendant had breached the plaintiff’s contract of employment as alleged or otherwise. The defence then makes this averment:-

"That the defendant has correctly calculated the plaintiff’s pension entitlement in accordance with the contract of employment. “ (My emphasis is added)

I regret that I do not share Pill L.J.’s difficulties in understanding the basis of the claim. The plaintiff’s entitlement to an annual pension and a lump sum under the pension scheme is admitted. The defendants aver that they have correctly calculated the plaintiff’s pension entitlement in accordance with the contract of employment. The issue that is joined is whether or not the rent allowance formed part of the plaintiff’s pensionable pay. The plaintiff alleges that it was a term of his contract that it did. The defendants contend that it was not. On the pleadings that is the issue, or certainly the main issue to be resolved. (There may be some other minor matters in dispute on a comparison of the plaintiff’s first schedule and the defendants’ letter of 8th November, for example whether or not increases in the heating and lighting allowance are correctly included but these are hardly complex issues if indeed they are still live issues at all.)

It is, however, plain to me that the pleaded case gives rise to a disputed contractually issue as to whether or not the rent allowance was an element of personable pay. That issue is one founded on contract. It was within the County Court’s jurisdiction and unless the claim was being struck out for some other reason such as abuse of process - which I do not think it was - the judge ought in my judgment to have heard and determined it.

I should not depart from the pleadings without examining how the Regulations were relied on by the defendants. The defence avers that:-

"It is provided by the said pension scheme Regulations, as amended, that any question concerning the liability of a Local Government Pension Scheme Employer shall be decided in the first instance by the Local Government Pension Scheme Employer and that any appeal against the decision on such question shall be made to Secretary of State."

It is then alleged that the plaintiff failed or refused to appeal the defendants decision on his pension entitlement. No other part of the Regulations is relied upon. The regulations under Part N may provide a means of resolving “the amount of the benefit”, but I do not see in them anything to make the decision of the “administering authority” or the determination by the Secretary of State a pre-condition of civil liability enforceable through the courts.

I readily appreciate and agree with the concern expressed by Pill L.J. that the administering authority must ensure fairness between the many members of the fund and that consistency of interpretation is important. If there were any hint of those problems or any technical investigation being required to be undertaken by the Secretary of State on the appeal from the decision of the Council itself, then I would have more sympathy for the Council’s stance. That, however, is not the position. As I understood the dispute to have been clarified in the course of argument, it became common ground that the benefits are calculated by reference to “pensionable remuneration” and, as defined in Regulation E22, “a person’s pensionable remuneration is his remuneration”. It was conceded that what the plaintiff’s remuneration was, depended entirely upon the terms of his contract and establishing those terms would establish whether or not the rent allowance was part of the remuneration package. There was, moreover, little or no complicated dispute as to the calculation of the amount of the 35% rent allowance. To insist upon that task being undertaken first by the Secretary of State and then possibly by judicial review,seems to me to be precisely the sort of tactical manoeuvring which Lord Woolf M.R. deprecated in Trustees of the Dennis Rye Pension Fund & another -v- Sheffield City Council [1997] 4 All ER 747, 749.

In the result, I do not share Pill L.J.’s concerns about the lack of clarity of the issues which arise. The real dispute is quite clear to my mind and the judge ought to have decided it. I so fully agree with the detailed reasons given Evans L.J. for allowing the appeal on the point that I do not feel it necessary to say more in concurring with the result he proposes.

Order: Appeal allowed on pension entitlement issues;

appeal dismissed on contractual issues;

issues raised by claim as to pension entitlements

and declaration be remitted for further hearing

to the county court; appellants to have two-thirds

of costs of appeal; costs order below set aside;

whole of costs incurred below be remitted to the

further hearing.