England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM UPPER TRIBUNAL (ADMINSTRATIVE APPEALS CHAMBER)
Judge R.C.A.White
CP10142011 and [2013] UKUT 0300 (AAC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		04/12/2014

Lord Justice McCombe:

(A) Introduction

1. This is an appeal by the Secretary of State for Work and Pensions ("the Minister") from the order of the Upper Tribunal (Administrative Appeals Chamber) (Judge R.C.A. White) of 26 June 2013 ([2013] UKUT 0300 (ACC)), deciding that the Respondent, Mr John Garland ("Mr Garland") is entitled to a Category D retirement pension pursuant to his claim made on 27 February 2009. Permission for the Minister to appeal to this court was refused by the Upper Tribunal but was granted by order of Lord Justice Laws of 19 February 2013.

(B) Factual Background

2. Mr Garland is a British national, born in Dublin, Ireland on 30 May 1928. He turned 80 years old, therefore, on 30 May 2008. He set out for the Tribunal the military history of his father, uncle and other relatives, all of which is rehearsed uncontroversially before us. Mr Garland lived and worked in the United Kingdom from December 1948 to 31 July 1950. In August 1950 he was engaged by the UK Colonial Service and was employed in the police force in Kenya. He remained in Kenya until 1963, taking up to three months' leave in the United Kingdom in 1954, 1957 and 1961. He returned to the UK on 7 October 1963 and stayed until 28 November 1964 when he departed for Australia. He resided there until 8 December 1968. From 1969 to 1971 he was engaged in the Army of the Sultan of Oman and between 1972 and 1983 worked variously in Africa and Saudi Arabia. In 1983 he moved to Ireland again, initially so he told us to care for sick relatives. He lived there until 31 July 1994. On that date he moved to live in the Isle of Man where he was resident until 2 June 2003. Since that time he has lived in Gibraltar.
3. So far as pensions to date are concerned, I take from the Upper Tribunal's judgment the following. In 1995 he was awarded a 30% Isle of Man pension, (from 3 December 1993) at the weekly rate of £17.46. He was awarded an Irish "pro rata" pension from 5 May 2000, based upon 80 contributions up to December 1948 and 262 Australian contributions aggregated under bilateral arrangements, at the initial rate of 21.60 euros per week, rising to 36.60 euros in 2008. He paid UK class 3 national insurance voluntary contributions for the years 1984/5 to 1992/3 (while living in Ireland). On 2 April 2009 he was awarded a UK Category A pension of £16.76 per week from 2 November 1993, amounting to a 28% "pro rata" pension.
4. Mr Garland made the claim to the Category D pension now in issue on 27 February 2009. The Minister rejected that claim by a decision dated 8 April 2010. The decision was reviewed internally within the department and was affirmed on 14 October 2010. His appeal against the decision was dismissed by the First Tier Tribunal (Social Security) on 15 February 2011 which granted permission to appeal to the Upper Tribunal on 7 March 2013, that appeal being allowed by the Upper Tribunal by the order now under appeal by the Minister to this Court.

(C) The Law

5. To explain the issue in the present case it is necessary to set out at some length the labyrinthine provisions of domestic and EU legislation governing the present problem.
6. Entitlement to a Category D pension is governed by section 78 of the Social Security Contributions and Benefits Act 1992 ("the Act"). By section 78(3) it is provided as follows:

"(3) A person who is over the age of 80 and satisfies such conditions as may be prescribed shall be entitled to a Category D retirement pension at the appropriate weekly rate if –

(a) he is not entitled to a Category A, Category B or Category C retirement pension; or

(b) he is entitled to such a pension, but it is payable at a weekly rate which, disregarding those elements specified in subsection (4) below, is less than the appropriate weekly rate."

The prescribed conditions are to be found in the Social Security (Widow's Benefit and Retirement Pensions) Regulations 1979 ("the 1979 Regulations") which provide in regulation 10 as follows:

"10. Conditions for entitlement to a Category D retirement pension.

The conditions for entitlement to a Category D retirement pension shall be that the person concerned-

(a) was resident in Great Britain for a period of at least 10 years in any continuous period of 20 years which included the day before that on which he attained the age of 80 or any day thereafter; and

(b) was ordinarily resident in Great Britain either-

(i) on the day he attained the age of 80; or

(ii) if he was not so ordinarily resident on that day and the date of his claim for the pension was later than that day, on the date of his claim, so however, that where a person satisfies this condition under this head he shall be deemed to have satisfied it on the date that he became so ordinarily resident.

The continuity of the 1979 Regulations to the present time, through to the Act, has been effected by the provisions of ancillary legislation placed before us. It is common ground that by section 43 of the Act a person in Mr Garland's position can be entitled to a Category A pension and to a Category D pension, but the amount of the latter is reduced by the amount of the former.

7. Neither Gibraltar nor the Isle of Man is part of the United Kingdom: a fortiori neither is part of Great Britain. Entitlement to the Category D pension, therefore, turns upon Mr Garland's qualifying residence in those other countries under reciprocal arrangements or, as Mr Garland argues, upon the residence requirements in the domestic legislation as a whole being incompatible with the law of the European Union ("EU"). No part of the findings or decisions of the Tribunals turned below upon Mr Garland's period of residence in Ireland and no Respondent's Notice has been served raising that matter on this appeal. Thus, the only "candidates" for satisfying the 1979 Regulations have been the periods spent by Mr Garland in Gibraltar and the Isle of Man. If either of these periods fall out of account, Mr Garland's claim to the pension must fail.
8. Paragraph 2 of the Family Allowances, National Insurance and Industrial Injuries (Gibraltar) Order ("the Gibraltar Order") provides this:

"2. Modifications of Acts.

The provision contained in the Letters set out in the Schedule to this Order shall have full force and effect, so far as they relate to England, Wales and Scotland and provide for reciprocity with the Government of Gibraltar in any matters specified in either section 105(1) of the National Insurance Act 1965, as extended by section 22(1) of the Family Allowances Act 1965, or section 84(1) of the National Insurance (Industrial Injuries) Act 1965; and the Family Allowances Acts 1965 to 1969, the National Insurance Acts 1965 to 1973 and the National Insurance (Industrial Injuries) Acts 1965 to 1973 shall have effect subject to such modifications as may be required therein for the purpose of giving effect to any such provisions."

The Schedule (which sets out the letters referred to in paragraph 2) goes on to provide, in paragraphs 2 and 3, as follows:

"2.

(a) Any person shall have the same rights and liabilities in relation to social security other than family allowances, as he would have had if the United Kingdom and Gibraltar had been separate Member States of the European Economic Community.

(b) For the purpose of giving effect to paragraph (a) above the same procedures shall so far as is practicable be adopted in relation to the person and benefit concerned as would have been applicable had the United Kingdom and Gibraltar been such separate Member States.

3. For the purpose of the right to receive payment of a pension for old age, widow's benefit, guardian's allowance, child's special allowance or dependency benefits in respect of any such pension, benefit or allowance, under the legislation applicable to either the United Kingdom, or Gibraltar, any period during which a person, not subject to paragraph 2, was present or ordinarily resident in the other territory shall be treated as a period during which he was present or ordinarily resident, as the case may be, in the territory to which the legislation applies."

9. The Social Security (Isle of Man) Order 1977 ("the IoM Order") also provides for modification of UK legislation in accordance with provisions contained in an agreement set out in its Schedule. Paragraph 2(1) of that schedule is in these terms:

"2.

(1) Subject to paragraph (5) of this Article, for the purposes of all or any of the provisions of the systems of social security established by the Acts-

(a) acts, omissions and events and in particular residence, presence, employment (including employment as a mariner or airman), the occurrence of an industrial accident or the development of any prescribed disease, the payment, crediting or treating as paid of contributions (including graduated contributions and payments in lieu of graduated contributions), the refund of contributions paid in excess of the annual maximum amounts payable and the claiming or payments of benefit; and

(b) the operation of any provisions as to exception form liability to pay contributions,

having effect for all or any of those purposes in one territory shall have corresponding effect for all or any of those purposes in the other territory."

By paragraph 1(1) of the Schedule, the term "the Acts" is defined thus:

"(1) In the present Agreement, unless the context otherwise requires:

"the Acts" means, in relation to the United Kingdom, the Social Security Act 1975 and the Social Security (Northern Ireland) Act 1975 in each case as amended, modified, adapted, extended, supplemented, replaced or consolidated by such subsequent enactment or by any instrument and, in relation to the Isle of Man, any applied legislation relating to social security; but does not include any enactment made for the purpose of giving effect to the provisions of any agreement applying to one of the territories and providing for reciprocity with a scheme of social security in force outside the United Kingdom and the Isle of Man;"

10. Article 10.1 of Council Regulation (EC) No. 1408/71 (relating to social security schemes) (as amended) ("the EU Regulation"), being the regulation in force at the date of the Minister's decision, provides:

"Waiving of residence clauses – Effect of compulsory insurance on reimbursement of contributions

1. Save as otherwise provided in this Regulation invalidity old-age or survivors' cash benefits, pension for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in the territory of a Member State other than that in which the institution responsible for payment is situated."

Article 45.1 of the same regulation is in these terms:

"1. Where the legislation of a Member State makes the acquisition, retention or recovery of the right to benefits, under a scheme which is not a special scheme within the meaning of paragraph 2 or 3, subject to the completion of periods of insurance or of residence, the competent institution of that Member State shall take account, where necessary, of the periods of insurance or of residence completed under the legislation of any other Member State, be it under a general scheme or under a special scheme and either as an employed person or self-employed person. For that purpose, it shall take account of these periods as if they had completed under its own legislation."

11. Article 1 (h), (r) and (sa) of the EU Regulation define "residence", "periods of insurance" and "periods of residence" respectively as follows:

"(h) residence means habitual residence;

…….

(j) legislation means in respect of each Member State statutes, regulations and other provisions and all other implementing measures, present or future, relating to the branches and schemes of social security covered by Article 4 (1) and (2)…..

……..

(r) periods of insurance means periods of contribution or period of employment or self-employment as defined or recognized as periods of insurance by the legislation under which they were completed or considered as completed, and all periods treated as such, where they are regarded by the said legislation as equivalent to periods of insurance….

……

(sa) periods of residence means periods as defined or recognized as such by the legislation under which they were completed or considered as completed."

12. Mr Garland further relied upon the transitional provision in Article 94.4 of the EU Regulation which is in these terms:

"4. Any benefit which has not been awarded or which has been suspended by reason of the nationality or place of residence of the person concerned shall, on the application of the person concerned, be awarded or resumed with effect from 1 October 1972 or the date of its application in the territory of the Member State concerned or in a part of the territory of that State, provided that the rights previously determined have not given rise to a lump sum payment."

13. The EU Regulation was replaced by Regulation 883/2004 which came into force on 1 May 2010. Mr Garland sought before us to rely upon certain provisions of this later Regulation. However, as the Upper Tribunal stated (paragraph 59 of the judgment) the lawfulness of the Minister's decision falls to be determined by reference to the legislation in force at the time it was made.
14. It was accepted by the Minister before the Upper Tribunal (see paragraph 27 of the judgment) and before us (paragraphs 28 and 33 of the skeleton argument for the Minister) that the condition of residence in Great Britain (in regulation 10 (b) of the 1979 Regulations) on the 80^th birthday or the date of claim (if later) cannot be applied to deny entitlement to persons resident in other Member States of the European Union: see Stewart v Secretary of State (CJEU) 21.07.2011 C-503/09. It is not accepted, however, that the decision in Stewart renders the requirement in paragraph 10(a) of the 1979 Regulations incompatible with EU law.

(D) The rival contentions

15. On the Minister's case, Mr Garland's claim to a Category D pension remains dependent upon his "residence" for 10 years in the qualifying period of 20 years falling within the periods from 29 May 1988 to 27 February 2009 (the date of the claim): see paragraph 25 of the Upper Tribunal's judgment. At the beginning of this 20 year period he lived in Ireland. From 1994 to 2003 he lived in the Isle of Man. From 2003 to 2009 (and thereafter) he lived in Gibraltar. The Upper Tribunal held that, by a combination of the Act, the Gibraltar Order, the IoM Order and the EU Regulation, Mr Garland's periods of residence in the Isle of Man and Gibraltar fell to be aggregated to make up the 10 years residence required by paragraph 10 of the 1979 Regulations, giving rise to his qualification for, and entitlement to, the Category D pension.
16. In his oral submissions before us Mr Garland did not confine himself to arguing that the Upper Tribunal's decision was correct for the reasons it gave, but argued rather that the residence provisions as a whole in the 1979 Regulations are incompatible with EU law, namely Article 10 of the EU Regulation as applied in the Stewart case (supra). There was no Respondent's Notice raising this point either, but Mr Kennelly for the Minister did not object to the argument being raised.
17. The Minister submits that neither the domestic enactments properly construed nor EU law lead to the result for which Mr Garland contends. Regulation 10(a) of the 1979 Regulations, he argues, remains unaffected and Mr Garland's case does not come within that provision.

(E) Discussion

18. If Mr Garland is correct, that the residence requirements of regulation 10 of the 1979 Regulations as a whole are incompatible with EU law, then his entitlement to the pension in issue is established simply by his having attained the age of 80 and having established a "genuine link" with this country: see below. Mr Garland's case is that the decision in Stewart renders all residence requirements in this type of case unlawful. In order to examine that submission it is necessary to consider the precise ambit of the Stewart case.
19. The benefit in issue in Stewart was incapacity benefit, and in particular "incapacity in youth" benefit, also governed by the Act of 1992. As the European Court observed, incapacity benefit in most cases is conditional upon the claimant's record of contributions. However, those incapable of work in their youth are entitled (under section 30A(2A) of the Act) to incapacity benefit without a record of contributions, if the claimant:

"….(a) …is aged 16 or over on the relevant day;

(b) ..is under the age of 20 or, in prescribed cases, 25 on a day which forms part of the period of incapacity for work;

(c) …was incapable of work throughout a period of 196 consecutive days immediately preceding the relevant day, or an earlier day in the period of incapacity for work on which he [or she] was aged 16 or over;

(d) on the relevant day …satisfies the prescribed conditions as to residence in Great Britain, or as to presence there; and

(e)….is not, on that day, a person who is receiving full-time education."

The "prescribed conditions" are to be found in regulation 16 of the Social Security (Incapacity Benefit) Regulations 1994 as follows:

"…The prescribed conditions for the purposes of section 30A(2A)(d) of the [SSCBA] as to residence or presence in Great Britain in relation to any person on the relevant day shall be that on that day:

(a) he is ordinarily resident in Great Britain;

(b) he is not a person subject to immigration control within the meaning of section 115(9) of the Immigration and Asylum Act 1999 or he is a person to whom paragraph 5 applies;

(c) he is present in Great Britain; and

(d) he has been present in Great Britain for a period of, or for period amounting in aggregate to, not less than 26 weeks in the 52 weeks immediately preceding that day."

20. The relevant question before the European Court was whether, as an invalidity benefit, the first sub-paragraph of Article 10(1) of the EU Regulation was to be interpreted as precluding a Member State from making the award of the benefit subject to conditions requiring the claimant's ordinary residence or past residence in that Member State.
21. The Court divided its consideration of the domestic legislation into three parts: first, it considered "the ordinary residence condition"; secondly, it examined "the past presence condition"; finally, it looked at "the condition of presence on the date on which the claim is made".
22. It held that the ordinary residence condition was incompatible with the first sub-paragraph of Article 10(1).
23. The court's decision on the past presence condition was more nuanced. It held that such a condition could be equivalent in practice to a habitual residence condition but was not necessarily so. The condition had to be examined by reference to other requirements of the law and in particular the Treaty right of freedom of movement. It found that a provision requiring past presence, such as that in issue, was likely, by its very nature, to deter the exercise of freedom of movement. However, the Court said that it was recognised in its jurisprudence that it is legitimate for a national legislature to seek to ensure that there is a "genuine link" between a claimant to a particular benefit and the Member State concerned (citing D'Hoop [2002] ECR I-6191 paragraph 38 and Collins [2004] ECR I-2703) paragraph 67.
24. The Court found that the rules requiring specific periods of presence were "too exclusive in nature". It held that to make the acquisition of the right to short-term incapacity benefit in youth subject to a condition of past presence, to the exclusion of any other element enabling the existence of a "genuine link" between the claimant and the Member State to be established, went beyond what was necessary to obtain the objective pursued and therefore amounted to an unjustified restriction of freedom movement guaranteed by the TFEU, Article 21(1).
25. The condition of presence on the date of claim was also found to be in conflict with Article 21 of the Treaty.
26. Mr Garland argues that this decision resolves the present matter in his favour and that he is entitled to the Category D pension simply by reason of having attained the age of 80 and by having "the genuine link" to this country which (on the facts) the Upper Tribunal found established by his life history which I have already set out above.
27. However, as Mr Kennelly points out, Article 10.1 is subject to the important qualifying opening words, "Save as otherwise provided in this Regulation…". In Stewart there was nothing "otherwise provided" in the EU Regulation to govern the claimant's case. She was not, for example, within the ambit of Article 38 governing the consideration (in invalidity benefit claims) of periods of insurance or residence completed under legislation to which the employed or self-employed are subject for the purpose of the acquisition, retention or recovery of benefits. Regulation 38 is a provision under which a relevant claimant's periods of residence are expressly the subject of the EU Regulation and, therefore, Article 10.1 would yield to it, in so far as periods of residence or insurance expressly have to be taken into account. The claimant in Stewart had never worked and thus had never been employed or self-employed so as to fall within the express provisions of Article 38. Had she done so the result of the case may well have been different.
28. In contrast to Stewart, Mr Garland's case falls within the ambit of Article 45 of the EU regulation governing periods of residence or insurance completed under "legislation" to which an employed or self-employed person is subject. Under that Article periods of qualifying residence/insurance are expressly recognised as existing under the legislation of individual Member States and qualifying periods of residence or insurance in any other Member State are specifically required to be taken into account. However, as the Minister recognises, residence on a specific birthday or on the date of claim is not sanctioned by the EU Regulation and does fall foul of Article 10.1 and the decision in Stewart. Thus, the Minister makes the concession he does with regard to Regulation 10(b) of the 1979 Regulations.
29. It is only in cases where residence provisions are not permissible that it becomes necessary to examine whether the alternative qualifying criterion (of "genuine link" to the Member State concerned) is satisfied. That is not this case. Accordingly, no question of ascertaining a "genuine link" with this country arises, beyond the requirements of qualifying and completed periods of residence within the meaning of Article 45 of the EU Regulation.
30. In the present case, therefore, it remains necessary for Mr Garland to meet the requirements of regulation 10(a) of the 1979 Regulations. The Upper Tribunal found that he did so and the Minister contends that it was wrong so to find.
31. The Upper Tribunal reached its result by finding that Mr Garland's periods of residence in Gibraltar and the Isle of Man were to be aggregated so as to achieve the necessary 10 years in the continuous period of 20 years specified in regulation 10(a).
32. The Tribunal held that EU law rules applied to Mr Garland's entitlement and, therefore (under paragraph 2 of the Gibraltar Order) that meant that his residence in Gibraltar was residence in Great Britain (paragraphs 65 and 66). The judge accepted the Minister's submission that a person with no period of residence in Great Britain could not rely upon the IoM Order to have a period of residence in the Isle of Man as a period of residence in Great Britain (paragraph 71). However, the judge went on to hold that, in the present case, the operation of the Gibraltar Order meant that a period of residence in Gibraltar was treated as a period of residence in Great Britain and provided "the necessary connection with Great Britain for the Isle of Man Order to apply" (paragraph 72). Thus, when the period of residence in the Isle of Man was added to the period of residence in Gibraltar (which was deemed residence in Great Britain) the 10 year qualifying period was satisfied.
33. For my part, I do not accept this analysis. Paragraph 2 of the Gibraltar Order only provides that a person shall have the same rights and liabilities in relation to social security as he would have had if the UK and Gibraltar had been separate Member States. That begs the question of what those rights are. Moreover, the order does not deem a person resident in Gibraltar to be resident in the UK.
34. One has to determine the rights of a person who has been physically resident in a Member State other than the UK who wishes to claim a Category D pension. Article 45 of the EU Regulation covers this situation. It says that where (as in the UK) the acquisition of a benefit is made subject to a condition of completion of periods of residence, then the UK must take into account periods of residence "completed under the legislation of any other Member State, be it under a general scheme or under a special scheme and either as an employed or self-employed person".
35. When applied to the period of Mr Garland's presence in Gibraltar one has to determine what period or periods of residence in Gibraltar under what Gibraltar legislation has to be taken into account, whether under a general or special scheme and whether as an employed or self-employed person, in calculating the necessary period of residence in domestic law. In fact, there are no such periods, because Mr Garland completed no relevant period of residence under any scheme, either as an employed or self-employed person. One of the known facts, appearing from the internal review decision of 14 October 2010 (paragraphs 5 and 6), is that Gibraltar operates a contributory insurance based scheme and Mr Garland had made no contributions. Accordingly, even assuming on the part of Mr Garland the same rights as if Gibraltar and the UK had been separate Member States of the EU, there are no periods of residence completed in Gibraltar within the meaning of Article 45 of the EU Regulation to be taken into account towards the required residence provision in Article 10(a) of the 1979 Regulations.
36. Without any qualifying period in Gibraltar there is nothing to add to any period of qualifying residence in the Isle of Man in order to supply the 10 years required by the 1979 Regulations, whatever may be the effect of the IoM Order in this context. It is not, therefore, necessary for our decision to consider the effect of the IoM Order further.
37. As already mentioned, it is clear from the decisions of each Tribunal that no issue was raised and no findings were made about Mr Garland's period of residence in Ireland between February 1988 and July 1994 as qualifying periods either under regulation 10(a) of the 1979 Regulations or regulation 45 of the EU Regulation. In my judgment, it is not possible at this late stage, in the context of this appeal, to inquire into that matter, which was mentioned only in passing at the hearing of this appeal.
38. In the paragraphs above, I have not addressed Mr Garland's point arising out the transitional provision to be found in Article 94.4 of the EU Regulation (quoted above). Mr Garland contends that this provision also renders conditions of residence incompatible with EU law in this area.
39. I do not accept that argument. It seems to me that this transitional provision (in force at the date of the decision in Mr Garland's case in April 2010) is dealing with cases where, prior to the coming into force of the EU Regulation on 1 October 1972, a benefit had not been awarded or had been suspended by reason of nationality or place of residence, it was to be awarded or resumed on the commencement date. In this case, no benefit had been refused or suspended on that ground prior to the commencement date.
40. As previously mentioned in paragraph 13 above, Regulation 883/2004 is not relevant to Mr Garland's claim. Accordingly, the point that he raised before us on the transitional provision to be found in Article 87.4 of that Regulation does not need to be considered further.

Conclusion

41. For these reasons, I would allow this appeal and would set aside the decision of the Upper Tribunal that Mr Garland is entitled to a Category D retirement pension pursuant to his claim made on 27 February 2009.

Lord Justice Floyd:

42. I agree

Lord Justice Richards:

43. I also agree.

Post Script:

Since distribution of the draft of this judgment, the Court has been informed by both parties that Mr Garland is not presently in receipt of an Isle of Man pension.